Licence to be Bad

Sharing my learnings from the book, Licence to be Bad by Jonathan Aldred

Licence to be Bad by Jonathan Aldred

Licence to be Bad tells the story of how a group of economics theorists changed our world, and how a handful of key ideas, from free-riding to Nudge, seeped into our decision-making and, indeed, almost all aspects of our lives. Aldred reveals the extraordinary hold of economics on our morals and values. Economics has corrupted us. But if this hidden transformation is so recent, it can be reversed. Licence to be Bad shows us where to begin.

• for the past 50 years, a handful of economists has drastically changed the way we think about economy. Ideas such as game theory, public choice theory and free-riding have been introduced to us
• many economists have defined economics as a hard science which means it deals in objective truths & cold, hard numbers. But that isn’t true. Economics isn’t as objective as economists would have us believe.
• a set of controversial, free market economic views have come to dominate our way of thinking 
  • Chicago school thinking – the free market should decide where money is made and spent, not public officials
  • free-rider thinking – the belief that because our own contribution to change is so minimal, it’s not worth doing at all
• free rider thinking & Chicago school thinking are far from objective truth but many people think about the economy and society that way
• game theory is the famous way of thinking that predicts people’s behavior based on rational decision making. 
  • Game theory encourages an atypically selfish view of the world.
  • game theory doesn’t always predict human behavior yet the mere existence of it encourages a particular, cold selfish view of the world
• Ronald Coase inadvertently inspired economists to put deal making on a pedestal.
• Coase had intended to show the importance of transaction costs. Yet a misinterpretation of his views had led to modern economics seeking to minimize them.
• many economic theories are unfairly harsh on government
• Ken Arrow’s Impossibility Theorem is a mathematical proof that shows that, under a strict set of conditions, no system of collective decision-making can produce a result that’s consistent with what everybody collectively wants.
• Arrow’s theory makes a number of assumptions that don’t always apply to the real world. One of these is that decision-making systems should produce a complete ranking of all possible outcomes from best to worst. Many of our elections just require a single winner. So Arrow’s conclusion doesn’t apply
• American economist James M. Buchanan developed public choice theory. Public choice theory states that everyone in politics – not just politicians but civil servants & voters is selfish. It suggests that there’s too much government regulation and that politicians are motivated mainly by their desire to get elected, rather than to do good
• free rider thinking seems tempting but can have devastating consequences
• we really do seem to think that our negative contributions don’t really matter because we’re part of a collective. This free rider thinking can have a terrible impact on the world we inhabit. Individuals are quick to point that the difference they can make is tiny but actually, individuals hold more power than free-rider thinking suggests
• if we all cooperate, then collective efforts really can make a difference. And if we don’t cooperate, we should all be held responsible 
• applying economic thinking to everyday life can take us in some strange directions
• since the 1980s, a movement led by Gary Becker aims to be making decisions based on efficient, economically optimal thinking
• it’s not just old-fashioned but strange to view the world in Becker’s terms. The problem is seeing everything through the coke, overly rational eyes of homo economicus hardly makes for a healthy way to live
• people don’t always respond to incentives like economists expect them to
• incentives and disincentives only work when they actually engage the people they’re aimed at. In the end, it’s not just about the money
• our models for calculating probability are fatally flawed.
• the most commonly used model when calculating probabilities is the normal distribution – the bell curve shape. 
• fractal distributions are scale-invariant – you can see the same patterns in them whether you zoom in or out
• it would do us much more good to be honest about the limits of probability – and to admit that there really are things we just don’t know
• modern economics is needlessly tolerant of extreme inequality 
• economic theories rarely reflect the wat that people truly are – so we should stop pretending that they do. We should start celebrating the fact that none of us is homo economicus