Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist.

Hall, Joshua ; Wogsland, Rachel

Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist.

Tyler Cowen

Dutton, New York, 2007

Tyler Cowen's book Discover Your Inner Economist is a study of how individuals can make utility maximizing decisions, while taking into account the different social contexts they may find themselves in. The book explores the concepts of incentives, signaling and scarcity in order to provide instruction on getting the most out of everyday life.

Cowen emphasizes that the main concept in economics is not money, but rather incentives. Money can be a tool used to obtain things, but not everything can be bought with money. Incentives are always at work as we go about obtaining things. Money is one type of incentive, as is praise or approval or a smile. He also points out that not every transaction is as simple and straightforward as buying a banana. If a consumer wants a banana, he or she will go to the market and buy it. There aren't such simple markets for everything. As a result, we must often try to motivate others and ourselves to get what we want.

Discover Your Inner Economist provides the reader with insight on how to overcome the problem of motivation and as well as how to make more effective choices. In this respect, Cowen has written what might be regarded as an economics self-help book. To be able to understand the choices people make, and to make more effective decisions ourselves, we must understand how human beliefs and opinions change based on social context. We must consider questions like: does dressing casually for a job interview signal a weak and careless candidate or does it signal strength?

The second and third chapters of the book explore ways to "control the world" (by which Cowen means manipulate the circumstances around oneself), and they also instruct readers on knowing when to stop. In trying to cure parents of lateness when picking up their children from daycare, for example, one option would be to charge them late fees. Cowen points out, however, that in this context charging parents for being late will likely have unintended negative consequences. Parents will begin to assume that it is fine to be late because they are paying. This may cause them to be late more often, or to take advantage of extended and probably less expensive daycare services. If the goal is to get parents to pick up their children on time, late fees are probably a bad incentive.

In attempting to motivate one's dentist, an option might be to give the dentist a bonus when you think he or she has done an exceptional job during your visit. But Cowen asserts that this could yield a negative unintended consequence similar to the daycare scenario. A bonus will probably give the dentist an incentive to put the patient through as little pain as possible, telling them to ignore something like a fragmented tooth, in order to give the patient short term, rather than long term, satisfaction. Instead, Cowen's solution to motivating his dentist is to pretend he has no fear and tell his dentist he did a good job. This, he says, contributes to his self image as a good dentist, causing him to perform better. Chapter 4 is titled "Possess All the Great Art Ever Made," and it focuses on how to become a "cultural billionaire" (or, how to maximize your utility while exposing yourself to a maximum amount of culture). He instructs the reader on how to tour museums, choose and read books, watch movies, and eat out at restaurants. An important thing to keep in mind is the scarcity of time and attention. When touring a museum, we can become bored quickly. An effective technique that Cowen provides is bringing the "me" factor into the experience by making it all about oneself. In each room of the museum, he advises individuals to ask themselves which piece of art they would choose to take home. This causes the individual to have a critical, interactive experience with the art, as well as to create a kind of personal attachment to specific pieces.

Cowen also informs readers on how he "attacks" classic novels. Again, time and attention are scarce, and his goal is to keep his own interest. To achieve this, he often reads middle chapters or skips around. He even recommends reading Cliffs Notes to better understand literature that is written in a difficult style. Finally, if these among a few other techniques fail, Cowen is a proponent of giving up (a clear avoidance of the sunk cost fallacy) and moving on to the next book.

Similarly, Cowen walks out of many movies he doesn't like because he feels his time is too valuable to waste on a bad movie. If he doesn't like a movie, he'll walk out and go to another. This is one example however, of how certain techniques only work in certain circumstances. He does not employ this method when he is at the movies with his family (unless they share the same feelings he does and are willing to stop watching the film).

Here it is perhaps clearest that Cowen is moving beyond the standard microeconomics of maximizing utility subject to a monetary budget constraint. For him, the cost of multiple tickets or multiple books is not the problem. What is scarce is his attention. Thus for much of the current population who cannot afford to sample so easily, his insights might be less helpful. Furthermore, we think this technique is more applicable for individuals who do not find movie previews to be accurate.

Another interesting topic Cowen explores is eating out. At fancy, ethnic cuisine restaurants, he recommends ordering the most obscure food on the menu. The restaurant will likely have spent the most energy, time and money on this item, as it is a specialty item, and you probably won't be able to get it at as high a quality anywhere else. What's more, the restaurant probably spends less time and resources on more "normal" sounding dishes and you will probably not enjoy them as much. Cowen also suggests ordering many dishes, as we eat out not just to fill our stomachs, but to experience variety and new things. Therefore, his advice is to order a variety of dishes, take home what we don't eat, and cut back a little on consumption in other areas, in order to not waste a trip eating out.

The second to last chapter, entitled "How to Save the World," examines the act of charity. In one example, Cowen describes the dilemma he faced while visiting India in 2004 and whether or not he should give to beggars on the streets of Calcutta. He ends up advising the reader against it because of the supply response, to which many people do not give adequate consideration. Giving money increases the return to begging. This encourages additional entry into the begging market, perhaps making things worse in the long run. For example, beggars commonly have their limbs amputated in order to cause gangrene and gain additional sympathy and donations from those passing by. If we really want to help the poor while we're abroad in a place like India, Cowen says, we should give to people who aren't asking for it, such as people sleeping on the street. Giving to professional beggars only encourages professional begging and encourages the deliberate mutilation of children managed by criminal gangs.

From movie-going to daycare, to traveling abroad in a poor country to museum-going, to trips to the dentist, the situations Cowen describes in Discover Your Inner Economist are realistic, common occurrences of everyday life. We find most of his suggestions for utility maximization both plausible and feasible. While his suggestions might not be appropriate for everyone, even the areas of disagreement are useful because they cause the readers to reflect upon why their opinion is different than Cowen's. This book is not about how to do what Cowen does in a literal sense; instead, it is about how to apply one of the main principles of political economy to achieve a richer, more fulfilling life.