Anything that can go wrong, will

Question 1

Tragedy of the commons

Answer 1

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.

Question 2

Tyranny of small decisions

Answer 2

A series of small, individually rational decisions ultimately lead to a system-wide negative consequence.

Question 3

Free rider problem

Answer 3

When some people get a free ride by using resource without paying for it.

Question 4

Herd immunity

Answer 4

When enough people are immune from infection, say due to vaccinations, then the entire community is less susceptible to outbreaks of the disease.

Question 5

Externalities

Answer 5

Consequences, good or bad, that affect an entity without his consent, imposed from an external source.

Question 6

Spill over effect

Answer 6

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.

Question 7

Coase theorem

Answer 7

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:

1. Well defined property rights
2. Rational actors
3. Low transaction costs

Cap-and-trade Systems are in example of implementation of coase thoeram

Question 8

Cap-and-trade systems

Answer 8

E.g emissions cap that companies can trade

Question 9

Moral hazard

Answer 9

When you take on more risk, or hazard, once you have information that encourages you to believe you are more protected.

Question 10

Principal-agent-problem

Answer 10

Self interest of the agent may lead to some optimal results for the principal

Question 11

ASymmetric information

Answer 11

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.

Question 12

Adverse selection

Answer 12

When parties select transactions that they think will benefit them based on private information. For example buying insurance based on your risk profile

Question 13

Goodhart’s law

Answer 13

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.

Question 14

Perverse incentives

Answer 14

Measures that create incentives causing behavior to solely focus on achieving that measure.

Question 15

Cobra effect

Answer 15

An example of perverse incentive. Locals started breeding cobras to collect bounty that was intended to reduce the population of cobras.

Question 16

Streisand effect

Answer 16

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.

Question 17

Hydra Effect

Answer 17

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.

Question 18

Observer effect

Answer 18

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

Question 19

Chilling effect

Answer 19

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.

Question 20

Collateral damage

Answer 20

Unintended consequences

Question 21

Blowback

Answer 21

When collateral damage impacts the entity that inflicted the damage

Question 22

Boiling frog

Answer 22

How a gradual change can be hard to react to, or even perceive.

Question 23

Short terminal

Answer 23

Focusing on short term results at the cost of long-term results

Question 24

Technical debt

Answer 24

Software industry term for short termism.

Question 25

Path Dependence

Answer 25

Set of decisions, or paths, available to you now is dependent on your past decisions.

Question 26

Preserving optionality

Answer 26

The idea to make choices that preserve future options. There may be a higher cost associated with this though.

Question 27

Precautionary principle

Answer 27

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.