Economics

“If you understand opportunity costs and you have a ticket to a game that you could sell for $1,000, it does not matter how much you paid for the ticket. The cost of going to the game is what you could do with that $1,000. You should only go to the game if that is the best possible way you could use that money. Is it better than one hundred movies at $10 each? Better than an upgrade to your shabby wardrobe? Better than saving the money for a rainy day or a sunny weekend? This analysis is not limited to decisions that involve money. If you spend an afternoon reading a novel, then the opportunity cost is whatever else you might have done with that time.”

“How can I possibly know which of the nearly infinite ways to use $1,000 will make me happiest? The problem is too complex for anyone to solve, and it is unrealistic to think that the typical consumer engages in this type of thinking.”

Excerpt From: Richard H. Thaler. “Misbehaving: The Making of Behavioral Economics.”

“As a young man, according to a story Joseph Alois Schumpeter liked to tell later in life, he had three major goals. He wanted to be the world’s greatest economist, Austria’s top horseman and Vienna’s greatest lover. Schumpeter then liked to tease his listeners by adding: I achieved two of them; the part about the top horseman didn’t work out, unfortunately. But seen objectively, perhaps Schumpeter’s greatest achievement is the fact that he is admired by liberals and Marxists alike for the incisiveness and complexity of his analysis of industrial capitalism. And no other great economist of the twentieth century comes close to his flamboyant biography. Schumpeter’s dazzling career could have filled numerous ordinary lives and more.”

Excerpt From: Viktor Mayer-Schönberger. “Access Rules.”

“Over the recent decades, a vast and diverse flock of parenting experts has arisen. Anyone who tries even casually to follow their advice may be stymied, for the conventional wisdom on parenting seems to shift by the hour. Sometimes it is a case of one expert differing from another. At other times the most vocal experts suddenly agree en masse that the old wisdom was wrong and that the new wisdom is, for a little while at least, irrefutably right. Breast feeding, for example, is the only way to guarantee a healthy and intellectually advanced child—unless bottle feeding is the answer. A baby should always be put to sleep on her back—until it is decreed that she should only be put to sleep on her stomach. Eating liver is either a) toxic or b) imperative for brain development. Spare the rod and spoil the child; spank the child and go to jail.”

Excerpt From: Steven D. Levitt. “Freakonomics.”