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The Logic of Life

Tim Harford

If you ask a large group of people to estimate how many coins are in a jar, you will get a very close answer - the 'wisdom of the crowd'. But if you auction it, you will likely get one bid higher than what everyone else thinks jar is worth - the 'winner's curse'.

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Turns out that addicts are more price-sensitive than light users. Light users can just reduce consumption, but an addict is more likely to use a price rise as a chance to quit altogether.

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Speed dating common stats - women propose to about one in ten of men they meet, men propose to twice as many, and get rejected twice as often. But although men say they don't want over-weight women, and women say they prefer taller men, both adjust their standards according to what's on offer. If there are only chubbies at the date, men will still find a couple to propose to, and if no tall men, shorter guys get a shot. People respond to slim pickings by lowering their standards.

The only thing they don't compromise on is an age mismatch - then they'll wait for the next event (usually given free ticket to next event if there's no-one you want to approach).

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The Marriage Supermarket: highly simplified model which ignores all the complex issues as to why people choose each other. Core issue is that most people prefer to be married, and what you get out of it depends on the supply of marriage partners.

To get married at the MS, you and a partner present yourself at the checkout and are given $100. Then all you have to do is decide how you'll split the money (and then go your separate ways). When 20 men and 20 women, very simple - everyone agrees on a 50/50 split and off they go. But interesting thing happens when only 19 men show up. The last guy is dead, or is gay, or is in prison - for whatever reason, he's not available.

This tiny imbalance ends up very bad news for the women, and very good news for the rest of the guys. Because one woman will go home empty-handed, it makes sense for the one without a partner to offer an uneven split. She offers a 40/60 split, and it then becomes a race to the bottom. The next woman who's going to miss out offers 30/70, and so it goes on until the base price is 1/99. But all the women have to accept that split - if they don't, they will be the one left on the shelf.

The shortage of just one man gives the rest a huge scarcity power.

IRL, the extreme example of this is New Mexico, where 30% of young black men are in prison. Being in a weak bargaining position, women have to bribe men to marry them, or increase their desirability. With birth-control, women can choose to offer sex-without-kids-commitment. If a woman refuses that, the men can find someone who will. And get a degree, to improve chances, as well as being a path to more financial security when you can't rely on a man to support you.

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Women prefer to live in cities, where there is a scarcity of well-paid men, than move to small towns where there is a surplus on men, though less well-paid. And the corollary of that is that in the cities there are plenty of women to do jobs that can be done by either sex, and so lower-wage men tend to move to lower cost-of-living small towns.

Black kids start out with a disadvantage, not because they are black, but because they are more likely to start from a difficult family background. Parents poorer, less educated, and there are fewer books in the home. But they continue to fall behind as get older, even when go to good schools. Facebook study suggested that they lose friends if try too hard. And suggest that this is analogous to an employer considering upskilling one of his workers - they might take their new skills elsewhere, and the training would be a waste of money. In the same way, your peers might see you as someone who is going to escape the 'hood, and will be too good for you, so why bother being friends with them ....

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Some cities, like Detroit and New Orleans, become poverty traps. If you can buy a house for less than it would cost to build one, there will be no house building in that city. And only low-income workers or beneficiaries want to live there, so industries that need high-skilled workers don't want to move there.

After Hurricane Katrina, there was enough federal money earmarked for reconstruction that they could have handed out $800,000 to each family of four, no strings attached, and let them resettle anywhere they chose.

US sugar policy boils down to taking $1.9 billion from consumers, giving $1 billion of that to the sugar industry, and throwing the rest away. Over a third of the benefits go to 33 sugar-cane farms. There are millions of voters who lose a little bit (about $6 each) from this, but rationally, there is no point in getting upset about it - none of the consumers are ever going to change their vote because of it. But the politicians get at least $3 million from the sugar industry lobby groups every election, so, rationally, they make sure the policy is unchanged.

Tropical diseases determined the government that countries ended up with. When the European powers realized that white people died quickly in places like Africa from malaria etc, they made the rational decision to send emigrants to Canada, US, Australia and NZ. So those countries imported the Western style of parliamentary government. The tropical countries were a resource only if you could extract the benefits without having to live there. And the easiest way to do that was to pay a small group of natives and hardy white men a commission on what they could extract. And that inevitably led to slavery and exploitative government.

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