Book Notes: Maxims for Thinking Analytically by Dan Levy
I recently read a book which I liked. It is titled “Maxims for Thinking Analytically: The wisdom of legendary Harvard Professor Richard Zeckhauser” by Dan Levy.
Richard Zeckhauser, born in 1940, is a prominent American economist known for his extensive work in decision theory, risk management, and behavioural economics.
The book has several maxims that are very useful in the decision-making process. Here they are:
Thinking Straight
Maxim 1: When you are having trouble getting your thinking straight, go to an extreme case.
Maxim 2: When you are having trouble getting your thinking straight, go to a simple case.
Maxim 3: Don’t take refuge in complexity.
Maxim 4: When trying to understand a complex real-world situation, think of an everyday analogue.
Tackling Uncertainty
Maxim 5: The world is much more uncertain than you think.
Maxim 6: Think probabilistically about the world.
Maxim 7: Uncertainty is the friend of the status quo.
Making Decisions
Maxim 8: Good decisions sometimes have poor outcomes.
Maxim 9: Some decisions have a high probability of a bad outcome.
Maxim 10: Errors of commission should be weighted the same as errors of omission.
Maxim 11: Don’t be limited by the options you have in front of you.
Maxim 12: Information is only valuable if it can change your decision.
Understanding Policy
Maxim 13: Long division is the most important tool for policy analysis.
Maxim 14: Elasticities are a powerful tool for understanding many important things in life.
Maxim 15: Heterogeneity in the population explains many phenomena.
Maxim 16: Capitalize on complementarities.
Living Fully
Maxim 17: Strive hard not to be envious – see your friend’s success as your gain.
Maxim 18: Eliminate regret.
Maxim 19: Make pleasure-enhancing decisions long in advance, to increase the utility of anticipation.