Lessons on the Surge From Economics 101

Oliver R. Goodenough, on the U.S. occupation of Iraq:

Economics professors have a standard game they use to demonstrate how apparently rational decisions can create a disastrous result. They call it a “dollar auction.” The rules are simple. The professor offers a dollar for sale to the highest bidder, with only one wrinkle: the second-highest bidder has to pay up on their losing bid as well. Several students almost always get sucked in.

★ Wednesday, 12 September 2007