Understanding the Carrots

In his 1995 speech “The Psychology of Human Misjudgment” given at Harvard Law School, Charlie Munger said

“Well I think I’ve been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I’ve underestimated it. And never a year passes but I get some surprise that pushes my limit a little farther.”

Coming from Mr. Munger, incentives as the very first cause or bias in Human Misjudgment, learning about incentives is quite important. And now Tyler Cowen, an economist and author of very famous blog Marginal Revolution has written a complete book on incentives called “Discover your inner economist”

This 250 page book is quite an easy read and very accessible as Tyler has used the “Me factor” to fullest extent. For me the most interesting part was about the signaling concept. As an analytical mind it is very difficult to rationalize stuff like why spend extra money flowers on valentine’s or on diamonds. But when you consider signaling concept and what might be going in your partner’s mind it all makes sense 😀 thereby increasing your marital bliss.

If you live in a large metropolitan area like San Francisco bay area, Los Angeles, New York, London, Paris, Singapore or Delhi you would resonate a lot with the chapter on finding good restaurants. Next time you are looking for good food look for low rent areas and don’t order what you can make at home.

There are other parts in the book about visiting museums, going to movies, dating and even saving the world. I finished the book over a regular weekend and was quite happy to read it. Gives a lot of talking points to talk with one’s peers to make one look smart (again me factor). Before ending the review a tip for the author. In the book Tyler wonders if sending a Christmas Card to his dentist who happens to be a Hindu an effective incentive. I would say send it on the Diwali (It is on Nov 9th this year) and it might work better.