Morality represents the ideal way of human world operation, while economics represents its actual operation. Economics is first and foremost a subject of evaluation. It contains a series of effective and widely used tools that can accurately evaluate a large amount of information such as employment, real estate, finance and investment to determine the impact of any factor, or even all impacts. This is the fundamental meaning of "economics".
Economics is not just a “blind analysis” in the eyes of nerds, nor is it an obscure book in the eyes of beginners. The rational use of economics can help us see through the essence of more things.
Steven Levitt, a curious economist, is known for his unique perspective and innovative research methods. He is not only a New York Times bestselling author, but also a contributing writer for The Economist. Professor Levitt is highly respected for his challenges to traditional economic theories and his deep insights into real-world problems. His works often break the rules, closely integrating economics with daily life, allowing readers to see the world around them from a whole new perspective.
Among them, the most impressive chapter is the fifth chapter, which is about how to deal with the so-called "IQ tax". One of the words I like is to think more rationally instead of blindly optimistic about other things. Levitt described a study on drug dealers at the University of Chicago. Stereotypically, in the eyes of most people, drug dealers are as "rich as a country" as in movies and TV shows. But this study subverts people's cognition. The study focuses on a drug trafficking organization in the south of Chicago. Through the analysis of the organization's financial records and operating methods, it reflects the extreme inequality of wealth distribution in drug trafficking organizations. Specifically, the income of most low-level drug dealers is extremely low, far below the minimum wage level, and the hourly wage may be only about $3, while only a very small number of senior leaders can obtain huge profits, but the so-called "huge" is only $500,000 a year (compared with the stereotype). Drug dealers are still willing to take risks to participate in drug trafficking because they hope to climb to the top of the organization and get rich rewards. This behavior can be explained by probability theory, that is, most drug dealers are in a low-probability, high-return environment, and they take huge risks for the small possibility of success. The life of drug dealers is not as luxurious as the outside world generally believes. The bottom-level drug dealers face high-risk work and extremely low returns, but they still participate in it because they have hope for possible high returns in the future.
Let's go back to economics and probabilistic thinking. In economics, I think people naturally follow the "law of large numbers." Especially in places with a large enough population, the "law of large numbers" can be used to infer many things, and the winning rate is not small. Combined with the previous example, it is common sense that drug dealers have low incomes and low cost-effectiveness in their work. Because from a skill point of view, the entry barrier to this industry is not high, and from a demand point of view, there has been no explosive growth. Therefore, the income from this industry will definitely not be too high, because as long as the income is high, many people will rush into this field and dilute the income. Therefore, when you find something that is particularly cost-effective and particularly cost-effective, you should involuntarily ask: "There are 1.4 billion people in China, why is it my turn?"
Therefore, stay calm and rational when encountering various things. You can draw a normal distribution graph for everything and think about the law of large numbers. This can definitely reduce the number of times you are deceived.