Economics Is A Study Of Reality

Morality, it could be argued, represents the way people would like the world to work—whereas economics represents how it actually does work. (Page 11)

Pay Attention To Incentives

Incentives are the cornerstone of modern life. The conventional wisdom is often wrong. Dramatic effects often have distant, even subtle, causes. "Experts"—from criminologists to real-estate agents—use their informational advantage to serve their own agenda. Knowing what to measure and how to measure it makes a complicated world much less so. (Page 12)

All Conflict Is Driven by Internal Desire and Societal Norms

It is worth remembering that Adam Smith, the founder of classical economics, was first and foremost a philosopher. It wasn’t just the numbers that interested him. It was the human effect, the fact that economic forces were vastly changing the way a person thought and behaved in a given situation. Smith’s true subject was the friction between individual desire and societal norms.

Smith held that the answer lay in our ability to put ourselves in the position of a third person, an impartial observer, and in this way to form a notion of the objective merits of a case. (Page 13)

We Oversimplify To Save Mental Exhaustion

It was John Kenneth Galbraith, the hyper-literate economic sage who coined the phrase “conventional wisdom.” He did not consider it a compliment.

“Economic and social behaviors,” Galbraith continued, “are complex, and to comprehend their character is mentally tiring. Therefore, we adhere, as though to a raft, to those ideas which represent our understanding.” (Page 85)

Experts Are Deceived By Self-Interest

It may be sad but not surprising to learn that experts... can be self-interested to the point of deceit. But they cannot deceive on their own. Journalists need experts as badly as experts need journalists. Every day there are newspaper pages and television newscasts to be filled, and an expert who can deliver a jarring piece of wisdom is always welcome. Working together, journalists and experts are the architects of much conventional wisdom. (Page 87)

Listerine is Gross

Listerine... was invented in the nineteenth century as a powerful surgical antiseptic. It was later sold in distilled form as a floor cleaner and a cure for gonorrhea. But it wasn’t a runaway success until the 1920s, when it was pitched as a solution for chronic halitosis. Bad breath was not conventionally considered such a catastrophe. But Listerine changed that. In just seven years, the company’s revenues rose from $115,000 to more than $8 million. (Page 87)

People Don’t Fear Risks They Influence

Peter Sandman, a self-described “risk communications consultant,” made this point in early 2004 after a single case of mad-cow disease in the United States prompted an anti-beef frenzy.

“The basic reality,” Sandman told The New York Times, “is that the risks that scare people and the risks that kill people are very different.”

Risks that you control are much less a scourge of outrage than risks that are out of your control. Sandman’s control principle might also explain why most people are more scared of flying in an airplane than driving a car. Their thinking goes like this: Since I control the car, I am the one keeping myself safe; since I have no control of the airplane, I am at the mercy of myriad external factors. (Page 150)

Parents Matter Less Than Peers

Judith Rich Harris wrote The Nurture Assumption in which she argued that the top-down influence of parents is overwhelmed by the grassroots effect of peer pressure—the blunt force applied each day by friends and schoolmates. (Page 155)

Education Creates More Inequity Than Race

In examining the income gap between Black and white adults, scholars have found that the gap is virtually eradicated if the Black's lower eighth-grade test scores are taken into account. In other words, the Black–white income gap is largely a product of a Black–white education gap. (Page 161)

There is essentially no Black–white test score gap within a bad school in the early years once you control for students’ backgrounds. Perhaps educators and researchers are wrong to be so hung up on the Black–white test score gap. The bad school/good school gap may be the more salient issue.

ECLS data reveal that Black students in good schools don’t lose ground to their white counterparts, and Black students in good schools outperform whites in poor schools. (Page 167)