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  • Writer's pictureconnellyq

Jordan Peterson's Economics Lessons

Updated: May 22, 2020

A glimpse at some of the Canadian psychologist’s overlooked insights

Jordan Peterson’s “12 Rules for Life: An Antidote to Chaos” has become a cultural phenomenon. But one aspect of his work is underappreciated—economics.

Most of us hate making difficult decisions, but as Mr. Peterson sternly reminds us, life is full of tough trade-offs. Everyone has options, and making the most of those options is the essence of economics. Mr. Peterson shows how the right set of rules can guide our thinking, clarify our values and encourage us to take prudent action. Here are five of his economics lessons:

Signaling. Mr. Peterson’s Rule No. 1 is “Stand up straight with your shoulders back.” That illustrates the economic concept of “signaling,” which stresses the importance of credibly conveying information—in this case, confidence and competence—to others.

Moral hazard. Rule No. 2 is “Treat yourself like someone you are responsible for helping.” Moral hazard occurs when people behave irresponsibly because they don’t bear the consequences of their actions. Mr. Peterson notes we often take better care of others than of ourselves because we feel responsible for them.

Asymmetric information. Rule No. 9 is “Assume that the person you are listening to might know something you don’t.” Asymmetric information refers to a knowledge imbalance between two parties. Almost all economic transactions involve asymmetric information, because buyers and sellers often differ dramatically in terms of expertise. This principle applies to all kinds of professionals as well, including lawyers, physicians and engineers, who know much more than their clients, patients and customers.

Short-termism. John Maynard Keynes was correct when he observed that “in the long run we are all dead.” But as Mr. Peterson notes, this sort of shortsighted thinking can be used to justify absolutely anything and therefore “breeds nothing good.”

Future Value. Mr. Peterson instructs readers in Rule No. 7: “Pursue what is meaningful, not what is expedient.” He defines expedience as “the following of blind impulse.” Pursuing what is “meaningful” in this sense requires time and patience. While he doesn’t mention it explicitly, Mr. Peterson hints at a powerful economic concept: compound interest. You can let go of something valuable in the present for a greater reward in the future.

As Mr. Peterson puts it: “It’s the discovery of the future itself. It’s the most profound discovery of humankind.”

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