Discover Your Inner Economist

In his delightfully witty and tragicomical watchword, Discover Your inside(a) Economist, Cowen takes the dry and serious subject of economic science from the mundane to the e rattlingday. He begins by subtly stating that economics is not active silver, but other accepts. The critical economic problem is scarceness, he says. specie is scarce, but in almost things the scarcity of time, attention, and caring is more important. In a mellowedly aimless, rambling style, Cowen tone downs the lecturer down many different paths from turn updoic to topic, covering everything from how to talk your spouse out of buying a warranty on a new purchase to why your miss depart not wash the dishes to why we do not ingest to eat sunk cost. Throughout the book, dickens themes argon clear. The first is that everyone is very self-centered, and motive is all about Me, or as Cowen calls it, the Me Factor. The adjacent motif, although highly correlated to the former, is discipline. Both themes encompass the concept of identifying motivation.The key to tapping your Inner Economist, Cowen explains, is the ability to identify peoples true incentives, which atomic number 18 usually more than bullion. Suppose you want your daughter to help out around the phratry by laundry dishes. Should you consecrate her? Bad idea, Cowen warns. If you explain that washing dishes is her family responsibility, she may not always obey, but at least shell notice some obligation. Bring payment into the picture, and her motivation changes. It becomes a market naturalize, writes Cowen, and the p arnt becomes a boss rather than an object of deserved loyalty. The bear down is that your daughter testament soon come to trustworthyize that she would rather work for someone else. Expect dirtier dishes, Cowen concludes. Motivation and incentives are clearly evoke to us all, whether we acknowledge it or not. In his book, Cowen send offers some unique theories on motivation and i ncentives. Big business is very interested in the concept of motivation as the goal of any business is to be most productive, and this requires make employees to become their most productive. It is the responsibility of managers to strive to motivate employees so that they leave make valuable contributions to the organization.Managers most frequently do this by go rewards to motivate people to share their talents with the company. Managers debatek to ensure that people are motivated to contribute important inputs to the organization, that these inputs are focused in the elbow room of high performance and that high performance results in employees obtaining the outcomes that they desire. Management theorists fill come up with many theories to explain what creates a motivated workforce. Cowen believes that humiliated improvements in understanding ordain bring a much weaken use of incentives (motivation).Cowen uses economic theory as the basis for using intention recognition to incentivize. His book does not offer management theory, however, the author focuses on learning how humans in general are motivated, and these theories can be applied to business, personal lives, and just ordinary living. Study and research shit proven that motivated employees are more productive than those employees who lack motivation. On this assumption, a look at some of the most widely cognize motivation theories may add some insight into the role of incentives as effective motivators. Frederick Herzbergs theory is based on two cistrons hygiene and Motivation.The hygiene factors are based on extrinsic values much(prenominal)(prenominal) as salary, working conditions, ergonomics, status, and company policies. These factors, according to the theory, do not lead to motivation, but the absence of positive hygiene factors causes dissatisfaction. Herzbergs other factor is motivation, which encompasses those work conditions that prompt intrinsic motivation. These factors inclu de job satisfaction, growth, achievement, and recognition. According to this theory, in order for employees to be motivated, thither must be low levels of dissatisfaction and high levels of motivational factors.Herzberg suggests these factors should be used to modernizeher to reduce dissatisfaction and increase motivation to achieve high productivity. Another famous motivation theory is Maslows Hierarchy of Needs. This theory is based on the concept of levels of needs in human beings. This theory suggests that each level of need must be satisfied before someone is motivated to achieve the next level. The last level is physiological, then safety, then love, esteem, and finally self-actualization. The following chart from Accel- police squad illustrates Maslows theory (Accel Team, 2007)From an economists point of view, in Cowens book, one economist, Colin Camerer took a poll at the Davos World Economics assemblage and polled big business gurus as their ideas on motivation. The numb er one and two answers were, respectively, Recognition and Respect, and Achievement and Accomplishment. Never mind that the sources may have been reasonably skewed, he was polling a particularly successful group of businessmen and not average employees, but the point is that money did not make the top two as far as incentives go. Cowen does provide money its halal place within the motivation/incentive model, however.He does not dismiss money as a primary motivator, he merely sets it aside as the single most obvious incentive to allow thought for other, equally motivating incentives. Cowen demonstrates by example how the idea of everything being up for market is repulsive to humans. He notes that there are some things that simply cannot be motivated finished with(predicate) monetary incentives. At the beginning of the book, as mentioned above, Cowen discusses the metro of his stepdaughter, Yana, to washing the dishes. later he and his wife resorted to paying her, she did them for about a week and then stopped, he says.I knew this could happen. I understood that there is such a thing as intrinsic motivation and that if you pay people, you susceptibility weaken that. What I didnt really get was the control issue. That when you start paying people to do a thing, they often see it as control. scarcely there was a happy ending After Yana read the book, she started doing the dishes. For free. Cowen believes that we are also consumed with the desire for control. Cowen argues that if you want to have more control of what happens around you, you need to know how to balance the kinds of incentives you offer.As far as good reading, unfortunately, there are not enough economic thaumaturgys that insure down neatly into interesting advice. When he discusses the techniques for motivating your dentist, comparable big(a) them a bonus for cavities well filled, he ends with, I dont think I can control my dentist or contract the very best care. By giving up this que st for control, however, I might get care that is just a little separate than average. Is that really any advice, or just an economist plan of attacking to relate to real humans? Economics cannot tell you what the price of gold will be next week.But it can help you choose good restaurants, promises Cowen. The best sections of the book concern tactics for maximizing ones cultural consumption, (at least according to Cowens standards). Cowen explains that those of us who enjoy unique and tasty flavors in our meals should avoid restaurants located in fancy shopping malls or on major thoroughfares. These restaurants must pay high rents to occupy such locations and, therefore, they need customers in high volumes. Because these restaurants must appeal to large audiences, meals there will be more predictable and bland than those served in restaurants located off beaten paths.So if youre hankering for d inner(a) at a restaurant featuring uncivil or unusual tastes at a restaurant that se rves ethnic dishes that are truly authentic &8212 youll have better luck going to a Chinese or Ethiopian or Cajun (or whatever ethnic word form you crave) restaurant that is located on a side street or in a suburban strip mall. With lower rents to pay, such off-the-beaten-path eateries are more likely than are restaurants in high-rent locations to cater to serious foodies. Choosing a restaurant is just one of many important and surprising insights offered in Cowens book.He lists eight strategies for taking control of ones reading, which include ruthless skipping around, following one character while ignoring others, and even going at one time to the last chapter. Your eighth-grade English teacher would faint. But the principle here is valuing the scarcity of your own time, which people often fail to do. It works for movies, tooCowen will go to the multiplex and watch parts of three or quaternity movies, rather than just sit through one. Why wait for a highly predictable ending w hen a fabulous scene might be unfolding in the movie playing next brink?Cowen also offers advice for how to defeat the boredom that, despite our best intentions to be culturally literate, overtakes many of us minutes after we enter an art museum. How do we deal with this scarcity of attention? Pretend to be an art thief, he suggestsin every gallery, pick one picture that wed like to run off with. Sounds juvenile, admits Cowen, but it forces us to keep thinking critically rather than daydream about the snack bar. Cowen doesnt really attempt to offer serious advice. He does offer some interesting anecdotes, however.Among the most valuable insights that economics does offer about investing is to ignore anyone who announces publically that he knows what will happen to stock prices tomorrow. Anyone who sincerely believes himself to possess such knowledge will not give it away or handle it on the cheap. To do so would be like passing out hundred-dollar bills to strangers or offering to sell hundred-dollar bills for $25 apiece Very fewer people are so selfless. If I am confident that shares of, say, IBM will rise tomorrow, I dont want other people competing with me to scoop up IBM shares.But finding a good meal, well, thats a different story. The most interesting insight for me is that bygones are not always best treated as bygones. The mid-19th-century economist William Stanley Jevons famously wrote that bygones are forever bygones. Economists have overwhelmingly interpreted Jevons statement as advice to ignore sunk costs. This advice generally is sensible. Suppose youve dog-tired $10 million building a machine that can do nothing but produce chocolate-covered pickles. You discover soon afterward that no one wants to buy your product.Your wisest course from this point forward is to suck up the loss. Continuing to produce chocolate-covered pickles that no one wants to buy will only if deepen your losses, doing nothing to help you recover your investment. But C owen shows that bygones should not be treated as bygones in all areas of life. When our self-image is at stake, past choices &8212 costs that are irrevocable &8212 often remain relevant for guiding our decisions today. self deception is another theme through which Cowen offers examples of our Me First mentality.For example, many of us think of ourselves as physically fit. Because of this self-image, we often buy memberships in gyms. But on many an evening, after a long day at work, were typically tempted to relax at category rather than spend an mo exercising at the gym. The economically rational decision is to stay home and relax if thats what you prefer doing this evening. After all, whether you go to the gym or not, the money youve spent on your gym membership is already spent. Youll not get that money back if you dont use the gym this evening.So the fact that youve already paying(a) for a gym membership should not factor into your decision on whether to go to the gym today. But sometimes this fact does indeed matter. sometimes we think, Geez, Ive paying(a) for that gym membership. I should go. And we then summon our remaining energy and head off for some exercise &8212 even though if we hadnt paid for the gym membership, we definitely would avoid the gym this evening. Again, as a set apart economic matter, thats a silly thing to say and do. From a less-narrow sentiment its entirely reasonable.By going to the gym we reinforce our positive self-interest. And if the mental trick of pretending that sunk costs are relevant helps in this effort, its a worthwhile thing to think. For a wonderfully enjoyable and practically multipurpose read you can do no better than to discover your inner economist by reading Tyler Cowens new book. Tyler Cowen is a professor of economics at George Mason University. He is a prominent blogger at marginalrevolution, the worlds booster cable economics blog. He also writes regularly for The New York Times, and has written fo r Forbes, The border Street Journal, and The Washington Post.The book is a quirky, penetrating caper through everyday life that reveals how you can turn economic reasoning to your service&8212often when you least expect it to be relevant. Cowen aims to not hit the reader over the head with economic principles, but to offer an alternative vantage point of economics and how it really can improve anyones everyday life. change surface if you dont agree with all of Cowens cheerfully offered opinions, its a pleasure to accompany him through his various interests and obsessions.