January 16, 2008

Highlight Lowlight Cowen 1

Discover Your Inner Economist is an introduction to economics that shows how to build what is already within all of us. Tyler Cowen did a great job setting up the book by opening with the concepts in chapter one. One of the most important lessons of economics and in chapter one is how to cope with scarcity. “People can’t dwell on what they don’t have but rather the health and plenitude and not misery,” quoted from Adam Smith.
Many of the limitations of markets are rooted in the imperfections of the human mind. I don’t think Cowen is saying that it’s all human errors, but rather how these markets are perceived. In chapter one Cowen uses three principles for distinguishing good economies from bad; one the postcard test, the grandma test and the aha principle. The postcard principle is limiting the number of steps that an economic argument can contain. The second principle, the grandma test, keeping to the simple facts and tactics, and last the aha principle, should be clearly expressed, and it should be a revelation.
Mr. Cowen ends chapter one with a powerful statement; “we will see that there is much to be hopeful about. Small improvements in understanding can bring a much better use of incentives leading to much better decisions and much better lives. Human imperfections are not the end of the story, but rather the beginning of a search for all kinds of riches.” To think is what you will create, and to create is what you surround your life around.

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