Useful Tools

Atanu Dey writes that “there is a small set of very powerful tools, or mental models, that can help us comprehend the dynamic world we live in.” Among them:

The tragedy of the commons. Want to figure out why the world is a mess, learn this one. It also will help you figure out a way out of the mess, with particular regard to population and pollution.

The Prisoners Dilemma. Nothing beats this one when it comes to understanding why we end up screwing up when a perfectly reasonable outcome is possible but unattainable. Understanding the PD (and all its variations) is the first step to solving some of our most pressing problems, from global disarmament to terrorism.

The Theory of the Second Best. Developed in the context of trade, it is an idea which has a much wider applicability. When you wonder how well-intentioned interventions go wrong, you can pull out this tool and figure out the real problem.

The Idea of Markets. The unreasonable effectiveness of markets for allocating resources is as astonishing as it is counterintuitive.

The Theory of Comparative Advantage. When I first learnt about it during a course in international trade, I was blown away by its simple profundity. But be warned that its simplicity is deceptive. It is a very tricky tool and is often clumsily wielded even by some otherwise sane people.

Published by

Rajesh Jain

An Entrepreneur based in Mumbai, India.