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Population

Population is a factor in market size. For some products whose consumers are potentially every walking person, the total population represents the customer base and a percentage of the population would be the target of sales efforts. For other products, the population size would need to have a denominator before a company can assess the market. In other words, the size of the population does not determine a market that a company can address economically and realistically reach. It is an onion of which the outer skins need to be peeled off. Read the rest of this entry »

So through a complicated, haphazard, and constantly readjusted web of economic, social, and moral  incentives, modern society does its best to militate against crime. Some people would argue that we don’t do a very good job. But taking the long view, that is clearly not true. Consider the historical trend in homicide (not including wars), which is both the most reliably measured crime and the best barometer of a society’s overall crime rate. These statistics, compiled by the criminologist Manuel Eisner, track the historical homicide levels in five European regions. Read the rest of this entry »

There are three basic flavors of incentive: economic, social, and moral. Very often a single incentive scheme will include all three varieties. Think about the anti-smoking campaign of recent years. The addition of a $3-per-pack “sin tax” is a strong economic incentive against buying cigarettes. The banning of cigarettes in restaurants and bars is a powerful social incentive. And when the U.S. government asserts that terrorists raise money by selling black-market cigarettes, that acts as a rather jarring moral incentive. Read the rest of this entry »

We all learn to respond to incentives, negative and positive, from the outset of life. If you toddle over to the hot stove and touch it, you burn a finger. But if you bring home straight A’s from school, you get a new bike. If you are spotted picking your nose in class, you get ridiculed. But if you make the basketball team, you move up the social ladder. If you break curfew, you get grounded. But if you ace your SATs, you get to go to a good college. If you flunk out of law school, you have to go to work at your father’s insurance company. But if you perform so well that a rival company comes calling, you become a vice president and no longer have to work for your father. If you become so excited about your new vice president job that you Read the rest of this entry »

Imagine for a moment that you are the manager of a day-care center. You have a clearly stated policy that children are supposed to be picked up by 4 p.m. But very often parents are late. The result: at day’s end, you have some anxious children and at least one teacher who must wait around for the parents to arrive. What to do?

A pair of economists who heard of this dilemma—it turned out to be a rather common one—offered a solution: fine the tardy parents. Why, after all, should the day-care center take care of these kids for free? Read the rest of this entry »

The Theory of Moral Sentiments in 1759, modern capitalism was just getting under way. Smith was entranced by the sweeping changes wrought by this new force, but it wasn’t only the numbers that interested him. It was the human effect, the fact that economic forces were vastly changing the way a person thought and behaved in a given situation. What might lead one person to cheat or steal while another didn’t? How would one person’s seemingly innocuous choice, good or bad, affect a great number of people down the line? In Smith’s era, cause and effect had begun to wildly accelerate; incentives were magnified
tenfold. The gravity and shock of these changes were as overwhelming to the citizens of his time as the gravity and shock of modern life seem to us today. Read the rest of this entry »

Knowing what to measure and how to measure it makes a complicated world much less so. If you learn how to look at data in the right way, you can explain riddles that otherwise might have seemed impossible. Because there is nothing like the sheer power of numbers to scrub away layers of confusion and contradiction. Read the rest of this entry »

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This book, then, has been written from a very specific worldview, based on a few fundamental ideas:

Incentives are the cornerstone of modern life. And understanding them—or, often, ferreting them out—is the key to solving just about any riddle, from violent crime to sports cheating to online dating.

The conventional wisdom is often wrong. Crime didn’t keep soaring in the 1990s, money alone doesn’t win elections, and—surprise— drinking eight glasses of water a day has never actually been shown to do a thing for your health. Conventional wisdom is often shoddily formed and devilishly difficult to see through, but it can be done. Read the rest of this entry »

This isn’t a book about the cost of chewing gum versus campaign spending per se, or about disingenuous real-estate agents, or the impact of legalized abortion on crime. It will certainly address these scenarios
and dozens more, from the art of parenting to the mechanics of cheating, from the inner workings of the Ku Klux Klan to racial discrimination on The Weakest Link. What this book is about is stripping a layer or two from the surface of modern life and seeing what is happening underneath. We will ask a lot of questions, Read the rest of this entry »