This NYT piece by Jared Diamond is remarkable for its clear real-world examples of the ways in which businesses will independently discover ways to conserve resources, simply because minimizing wastefulness is profitable.
From Pew Research, here’s a gem for those interested in real world examples of risk aversion:there are two people who prefer a secure job that pays less well for every one person who prefers a higher salary with the risk of job loss. Of course, you’d want to know what all of these people assume the ratio of risk of job less to salary increase is to really use this, but it’s promising.
Here is a fascinating piece on the Beauty Contest game being played by chess players.
There is a very interesting paper in the February 2009 issue of the Quarterly Journal of Economics on “Performance Pay and Wage Inequality”. It’s fascinating to think that 21% of the rise in wage inequality since 1980 might be attributable to increased use of performance pay schemes.
It may be difficult to say why the old method fails, but that it does fail, anyone can see. When is software delivered on time? Experienced programmers know that no matter how carefully you plan a program, when you write it the plans will turn out to be imperfect in some way. Sometimes the plans will be hopelessly wrong. Yet few of the victims of the plan-and-implement method question its basic soundness. Instead they blame human failings: if only the plans had been made with more foresight, all this trouble could have been avoided. Since even the very best programmers run into problems when they turn to implementation, perhaps it’s too much to hope that people will ever have that much foresight. Perhaps the plan-and-implement method could be replaced with another approach which better suits our limitations.1
The passage above is from Paul Graham’s wonderful book on advanced Lisp programming, On Lisp, but very few changes would be required to transform it into a passage you might find in one of Friedrich Hayek’s books on command-and-control economies. Hayek’s views on economics and Graham’s views on programming both give central place to their realization that we humans are simply not smart enough to grasp all of the details of the complex systems we are called upon to build. Most of the complex systems that function in our world exist because it was possible for trial-and-error work to produce them evolutionarily over time. As far as I can see, the level of complexity of a system that we can produce using pure theory is at about the level of complexity of an atomic bomb, which seems far less complex than the task of producing a system of wages and prices that optimally allocates resources in a population of heterogeneous agents.
Are you unsure if depressions are at least partly caused by a self-propagating group fear response? Maybe this piece of spam I just got will help to change your mind:
WACHOVIA CORPORATION NOTICE. Citigroup announced a buyout of Wachovia brokered by the FDIC. All Wachovia bank locations will be in the Citigroup merger to prevent failure of Wachovia. The Citigroup/Wachovia would focus on upgrading banks' security certificates. All Wachovia customers must fill the forms and complete installation of new Citigroup Standard digital signatures during 48 hours. Please follow the installation steps below: Read more>> Sincerely, Cecile Bowling. 2008 Wachovia Corporation. All rights reserved.