Adam Stiles

The PMBA program includes Economics in One Lesson as a primer on basic economics. Its not your standard econ textbook. Hazlitt teaches through concrete examples and dismantling common economic fallacies.

Here's the main point, according to the author:

The central lesson is that we should try to see all the main consequences of any economic policy or development - the immediate effects of special groups, and the long-run effects on all groups (p 55).

Hazlitt argues against artificial price controls, minimum wages, subsidies, government-issued credit, high taxes, price-fixing and inflation because these policies benefit special interests to the detriment of society as a whole.

As I read this book and found myself trying to apply Hazlitt's reasoning to everyday buying decisions. Here's an example.

My wife and I like Noble Fir Christmas trees. These trees can be expensive. A large tree can cost $90 at a private tree lot. This year we found a great tree at our local Target store for only $40. In an efficient market, everyone would buy their tree at Target and the private sellers would go out of business. Is society better off because we can buy trees for $40 instead of $90? Hazlitt would argue yes.

I have an extra $50 to spend on a jacket if I buy a $40 tree. The private tree sellers might lose their jobs, but new jobs would be created when I spend my $50 savings (or even if I save it, but that's another matter). There is no net job loss, but I have acquired a tree and a jacket. My standard of living is higher and I am wealthier. If I had purchased a $90 tree, I would not have a jacket. I would have a lower standard of living and would be poorer. The lower prices and higher per-person productivity created by efficient free markets leads to wealthier societies with higher standards of living.

Hazlitt's arguments make sense on a large scale. But are they overly simplistic? What if markets aren't completely free? What if jobs don't transfer easily from a dying industry to a new one? Can anyone recommend further reading in this area?

Tags: personalmba, economics

Here's the first in what I hope will be a long series of mini-book-reviews I'm reading from the Personal MBA list.

Many "persuasion" books teach manipulation - here's how to make people do what you want them to do. Cialdini takes the opposite approach. As a self-described gullible consumer (in spite of being a psych professor), Cialdini explores how "compliance practioners" use the "weapons of influence" against people like him. After identifying each major tool, he teaches defensive techniques. Cialdini doesn't pontificate. He's one of us and falls for the same things we do.

This book was a quick and entertaining read. Here are a few of the topics covered:

• Reciprocation - why fundraisers give gifts, like address labels with your name on them, because accepting them will predispose you to return the favor with a gift
• Commitment and Consistency - why fraternities haze, why we'll do anything to reinforce a decision we've already made
• Social Proof - why so much of what we do is influenced by those around us. The suicide trends data reminds me of a similar chapter in Malcom Gladwell's The Tipping Point
• Liking - how we're more likely to be influenced by people we like
• Authority - why we do things authorities tell us to do
• Scarcity - how your gym gets you to sign up today by making great offers that expire if you don't sign on the spot

I'd recommend this book to just about anyone, not just people interested in the PMBA program. It will definitely remind you of times that you've fallen for the tricks of master persuaders. I bought my first suit this year (not bad, I made it to 32 before buying a suit). Now I know why it was so easy for the salesman to sell me shoes, a shirt, a tie, a belt, etc after I'd already committed to buy the suit. By contrast, the accessories seemed like little purchases next to the high-priced suit.

If you like this topic, here are a few related books on my shelf that I'd also recommend:

• Kevin Hogan's The Psychology of Persuasion: How to Persuade Others to Your Way of Thinking
• Paco Underill's Why We Buy: The Science Of Shopping
• Robert Levine's The Power of Persuasion: How We're Bought and Sold

Tags: personalmba, persuasion, sales,