Reason to be Happy by Kaushik Basu: An economist's guide to happiness

..using game theory ofcourse :)

Why do our friends have more friends than we do? How do you book the best available seats on a plane? And if jogging for ten minutes adds eight minutes to our life expectancy, should we still go jogging?
Why do most attractive people tend to display themselves on a beach (or even gym)?

I have been fascinated with game theory since my IIMB days (prisoner's dilemma is still the most cringy experiment I often run on teenage kids 😺) - but using game theory principles to stay happy? Well, trust an economist to serve you a mixed cocktail 😄.

Former chief economist of the World Bank and leading economics professor, Kaushik Basu's new book 'Reason to be Happy' is a wonderful read on staying happy using the principles of game theory and clear thinking.

This book is meant to show both why we have reason to be happy, and why we must reason to be happy.

When dealing with the real world, it's often not enough to act logically - you must be able to put yourself in the shoes of a clever competitor and think about how they might respond.

Sharing 7 big ideas and 3 key practical TODOs from the book - exclusively available here!

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Game theory and logical reasoning are powerful but underused tools for achieving happiness and success in life. By applying strategic thinking to our everyday choices and interactions, we can make better decisions and find more contentment.

As Basu notes, "reasoning with ourselves, and trying to be completely honest when doing so" can be one of the most potent recipes for happiness.

Emotions Can Hinder Clear Thinking

Our ability to reason falters when we have to apply logic to emotive matters. In experiments, people struggle to assess the logic of statements involving sensitive topics, even when the logical structure is identical to neutral statements they can easily evaluate.

Becoming aware of our emotional blocks can help us think more clearly about important issues.

The moral intention is useful because it inspires us to step beyond the game and talk and campaign and change the rules and reach long-term agreements.

Seek Truth Objectively, Act Morally

We should strive to analyze facts and seek truth as objectively as possible, without letting our wishes or biases interfere.

However, when it comes to moral choices and actions, we may sometimes need to hide or not state certain truths to avoid needlessly hurting others.

As Bertrand Russell advised, "Never let yourself be diverted either by what you wish to believe, or by what you think would have beneficent social effects if it were believed."

Game Theory in Everyday Life

The Prisoner's Dilemma Reveals Pitfalls of Self-Interest

The famous Prisoner's Dilemma game shows how rational self-interest can lead to collectively suboptimal outcomes. When two prisoners each choose to confess to reduce their own sentence, they both end up worse off than if they had cooperated and stayed silent. This illustrates how pure self-interest does not always serve the common good.

Nash Equilibrium Predicts Stable Outcomes

John Nash's concept of equilibrium in games provides a powerful tool for analyzing strategic situations. A Nash equilibrium occurs when no player can unilaterally improve their outcome by changing strategy. This helps predict which outcomes are likely to be stable in competitive scenarios, from business to international relations.

Reason Can Replace Negative Emotions

Applying game-theoretic reasoning to life situations can help us avoid unproductive negative emotions like anger. Just as chess grandmasters stay calm and analytical even when losing, we can learn to respond strategically rather than emotionally to life's challenges. As Basu notes, "Anger and resentment about what others choose or do are, most of the time, pointless emotions."

The Arithmetic of Anxiety

Social Comparison Breeds Insecurity
Our tendency to compare ourselves to others, especially on social media, often leads to unnecessary anxiety and feelings of inadequacy. We see others' curated highlight reels and assume their lives are uniformly better than our own. Understanding the statistical biases in what we observe can help alleviate these insecurities.

Anger and resentment about what others choose or do are, most of the time, pointless emotions

The "South Beach Effect" Skews Perceptions

Just as only the most attractive people tend to display themselves on a beach, creating a skewed sample, we often see unrepresentative samples in many areas of life. This can lead us to incorrect conclusions about what is normal or average. Recognizing this effect can help us avoid faulty comparisons and unrealistic expectations.

Friends Paradoxically Have More Friends

Studies show that most people's friends have more friends on average than they do. This seemingly impossible fact arises from the mathematics of social networks. Understanding this can help alleviate feelings of social inadequacy.

As Basu explains, "At least some of our seemingly complex social and psychological problems are not social or psychological at all, but a matter of simple maths."

Philosophical Perspective Eases Anxiety

Adopting a philosophical perspective on the nature of reality and our place in it can provide comfort and ease anxiety. Recognizing that our perceptions may not reflect objective reality, and that even the existence of others is ultimately unprovable, can lessen the weight we give to social comparisons and external validation.

Embrace Uncertainty and Skepticism

A skeptical approach to knowledge claims and an acceptance of uncertainty can lead to greater equanimity. Recognizing the limits of what we can know for certain allows us to hold our beliefs more lightly and be open to new information. As Basu notes, "The only thing certain is how little we know."

Hidden Assumptions Shape Our Worldview

Many of our beliefs and theories rest on hidden assumptions we're not aware of. Identifying and questioning these assumptions can lead to breakthroughs in understanding. Just as non-Euclidean geometry arose from questioning the assumption of a flat plane, examining our implicit beliefs can open new perspectives.

Determinism is Compatible with Choice

The philosophical stance of determinism - that all events are caused by prior events according to natural laws - need not negate the concept of free will or moral responsibility. We can coherently believe both that our actions are predetermined and that we have meaningful choices that affect outcomes.

Paradoxes Reveal Limits of Reasoning

Logical paradoxes like Russell's paradox or the Traveller's Dilemma reveal the limits and potential flaws in our reasoning systems. Grappling with these mind-bending scenarios can sharpen our thinking and reveal new insights. As Basu suggests, "Paradoxes are a great way to become aware of our hidden assumptions."

Group Behavior Often Lacks Individual Agency

The behavior of groups, from corporations to nations, often cannot be attributed to the intentions of any individual member. As Basu notes, "When we see a group behaving badly, we must not assume that the outcome reflects what the individuals in the group desire." Understanding this can change how we approach collective action problems.

Moral Intentions Are Necessary But Not Sufficient

While having good moral intentions is crucial, it is not enough to ensure good outcomes in complex social situations. Strategic thinking and understanding of game theory are also necessary to translate moral aims into effective action. As Basu states, "The moral intention is useful because it inspires us to step beyond the game and talk and campaign and change the rules and reach long-term agreements."

Guilt Shelters Enable Unethical Behavior

Large organizations can act as "guilt shelters," allowing individuals to participate in unethical collective behavior without feeling personal responsibility. This mechanism helps explain how corporations and other large entities can engage in harmful practices despite being composed of mostly ethical individuals.

3 TODOS FOR YOU

• Apply strategic thinking to everyday life
  Start using game theory principles in your daily decisions and interactions. Before reacting emotionally to situations, pause and consider the long-term consequences of your choices and how others might respond. This can lead to better outcomes and increased happiness.

• Challenge your hidden assumptions
  Regularly question your beliefs and the assumptions underlying your worldview. Look for areas where you might be operating on unexamined premises. This practice can lead to new insights and more flexible thinking, helping you navigate complex problems more effectively.

• Expand your moral circle
  Make a conscious effort to consider the wider impacts of your actions, beyond just your immediate self-interest. Think about how your choices affect your community, future generations, and the global environment. Use this expanded perspective to guide your decision-making and civic engagement, working towards collective solutions to societal challenges.