Summary of Dani Rodrik's Economics Rules
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Please note: This is a companion version & not the original book. Book Preview:
#1 Economists’ reliance on models is often criticized. Models are a source of pride for them, and they believe that their profession makes the mundane complex.
#2 Simple models are essential to understanding the workings of society. Their simplicity, formalism, and disregard of many aspects of the real world are precisely what make them valuable. When used well, they can illuminate the most relevant aspect of reality in a given context.
#3 Economists build models to capture salient aspects of social interactions. Models are simplifications designed to show how specific mechanisms work. They are not physical constructs, but they operate symbolically using words and mathematics.
#4 The prisoners’ dilemma is a cornerstone of much contemporary work in economics. It is a scenario in which two individuals face punishment if either of them makes a confession. When the two competing firms decide whether to have a big advertising budget, each has an incentive to advertise regardless of what the other does.
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