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Maxims for Thinking Analytically

via Richard Zeckhauser

Thinking Straight

  1. When you are having trouble getting your thinking straight, go to an extreme case
  2. When you are having trouble getting your thinking straight, go to a simple case
  3. Don’t take refuge in complexity
  4. When trying to understand a complex real-world situation, think of an everyday analogue

Tackling Uncertainty

  1. The world is much more uncertain than you think
  2. Think probabilistically about the world
  3. Uncertainty is the friend of the status quo

Making Decisions

  1. Good decisions sometimes have poor outcomes
  2. Some decisions have a high probability of a bad outcome
  3. Errors of commission should be weighted the same as errors of omission
  4. Don’t be limited by the options you have in front of you
  5. Information is only valuable if it can change your decision

Understanding Policy

  1. Long division is the most important tool for policy analysis
  2. Elasticities are a powerful tool for understanding many important things in life
  3. Heterogeneity in the population explains many phenomena
  4. Capitalize on complementarities

Living Fully

  1. Strive hard not to be envious – see your friend’s success as your gain
  2. Eliminate regret
  3. Make pleasure-enhancing decisions long in advance, to increase the utility of anticipation.