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The Economics of Just About Everything

The Hidden Reasons For Our Curious Choices

Andrew Leigh

Australian emigration: First Fleet was settlers. Second Fleet was a commercial venture - contractors paid flat rate per convict they took on board. So naturally they packed in as many as they could - 1/3 died on the voyage. So for the Third Fleet, incentives changed - they got paid for the number who arrived in good health - death rate 1 in 11. This pattern repeats throughout humanity - people don't respond to ethics lectures - if you want to change their behaviour you have to change incentives.

Since 1970, Australian life expectancy at birth has risen from 72 to 82, while average income has risen from $30,000 to $60,000 pa. If you could have only one of those outcomes, which would you choose - an extra 10 years of life or the higher income?

Referee bias. In cricket, Aust umpires are more likely to give a foreign player out lbw than an Aust one. In AFL, refs award more free kicks to teams from their home state. In Super 14 rugby, teams are more likely to win when ref is from same nation. In each case, what seems to drive the bias is the size of the crowd - as the crowd dwindles, so does 'home bias' of the ref.

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If you want a job interview, attach the most flattering pic you can to CV. Or if you're plain, leave off the photo.

Women who read biographies of successful women did significantly better in a subsequent maths test.

Guns-rights activists fond of saying 'guns don't kill people, people do', which doesn't take us very far, given that you could say the same thing about poison gas, fragmentation grenades and surface-to-air missiles.

In the wake of the 1996 Port Arthur massacre, Australia instituted tougher gun control rules and a buy-back program. In the 10 years before Port Arthur, Australia averaged more than one mass shooting (5 or more people killed) per year. In the decade since, not a single one.

The person most likely to kill you with a gun is yourself. The next most likely is your spouse. The most likely after that are relatives and acquaintances. You are least likely to be killed by a complete stranger.

Locking up more people has a short-term impact on crime. (Like sports stars, criminals tend to have short careers, peaking in their late teens and early twenties). But long-term costs of unemployable unskilled ex-cons and children damaged by their father's absence. Need more innovative ideas, such as private prisons with major incentives, such as a bonus paid in proportion to the amount inmates earn after release.

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Donors worry about corruption and fraud when giving overseas aid. But studies usually find the amount of graft at less than 3%, which is less than Aust domestic welfare fraud, and local public works. Sometimes it may be better to tolerate a small amount to get a worthwhile project through.

The only function of economic forecasting is to make astrology look respectable (John Kenneth Galbraith).

Steven Levitt suggestion of 'Fail Fast'. Once you recognize that the world is an uncertain place, you shouldn't be afraid to try plenty of different things, and drop the ones that don't work out.

Asked 'How similar are you to others?' most will answer 'Not very.' But if ask 'How similar are others to you?' most will say 'Very'.

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