Anything that can go wrong, will Flashcards
Tragedy of the commons
Unintended consequences that arise when a lot of people choose something that is best for them individually, but the sum total of the decisions creates a worse outcome for everyone. Any shared resource is vulnerable to this tragedy.
Tyranny of small decisions
A series of small, individually rational decisions ultimately lead to a system-wide negative consequence.
Free rider problem
When some people get a free ride by using resource without paying for it.
Herd immunity
When enough people are immune from infection, say due to vaccinations, then the entire community is less susceptible to outbreaks of the disease.
Externalities
Consequences, good or bad, that affect an entity without his consent, imposed from an external source.
Spill over effect
When an effect of an activity spills over outside the core interactions of the activity. For example secondhand smoke, congestion to road YouTube buying a car.
Coase theorem
How a natural marketplace can internalize (make them pay) a negative externalities. It shows that the following conditions can successfully internalize an externality without regulation:
- Well defined property rights
- Rational actors
- Low transaction costs
Cap-and-trade Systems are in example of implementation of coase thoeram
Cap-and-trade systems
E.g emissions cap that companies can trade
Moral hazard
When you take on more risk, or hazard, once you have information that encourages you to believe you are more protected.
Principal-agent-problem
Self interest of the agent may lead to some optimal results for the principal
ASymmetric information
Causes moral hazard and principal agent problem. For example Real Estate agents have more information about the market that it could be hard to question their recommendation.
Adverse selection
When parties select transactions that they think will benefit them based on private information. For example buying insurance based on your risk profile
Goodhart’s law
When a measure becomes a target it ceases to be a good measure. Campbell’s law is similar- The more any quantitative social indicator is used for social decision making, the more subject it will be to corruption pressures and the more apt it will be to the store and grab the social processes it is intended to monitor.
Perverse incentives
Measures that create incentives causing behavior to solely focus on achieving that measure.
Cobra effect
An example of perverse incentive. Locals started breeding cobras to collect bounty that was intended to reduce the population of cobras.
Streisand effect
When you unintentionally draw more attention to something when you try to hide it. Comes from the example of Barbara Streisand who sued a photographer for displaying an aerial photo of her mansion.
Hydra Effect
From Greek Mythology, creature that grows two heads when one is cut off. Important to consider how people may respond when you try to change something.
Observer effect
There is an effect on some thing depending on how you observe it, or even who observe it. Examples tire pressure gauge, boss coming to town
Chilling effect
When people feel discouraged, or chilled, From freely exercising their rights, for fear of lawsuits or prosecution. Chilling effects are a type of observer effect where the threat of retaliation creates a change in behavior.
Collateral damage
Unintended consequences
Blowback
When collateral damage impacts the entity that inflicted the damage
Boiling frog
How a gradual change can be hard to react to, or even perceive.
Short terminal
Focusing on short term results at the cost of long-term results
Technical debt
Software industry term for short termism.
Path Dependence
Set of decisions, or paths, available to you now is dependent on your past decisions.
Preserving optionality
The idea to make choices that preserve future options. There may be a higher cost associated with this though.
Precautionary principle
When an action could possibly create harm of an unknown magnitude, you should proceed with extreme caution before enacting the policy. Similar to one-way door.
