| Ruskin’s Paradox |
The idea that economic growth can harm societal well-being if it compromises higher values. |
| The Pareto Principle |
80% of effects come from 20% of causes, applied to wealth and productivity. |
| The Peter Principle |
People rise to their level of incompetence in hierarchical structures. |
| The Tragedy of the Commons |
Shared resources are overused when individuals act in self-interest. |
| The Prisoner’s Dilemma |
A game theory concept showing why two rational agents might not cooperate. |
| The Marshmallow Test |
A test of delayed gratification predicting future success. |
| The Broken Window Fallacy |
A fallacy suggesting breaking windows stimulates economic activity. |
| The Laffer Curve |
A curve representing tax revenue and tax rate relationships. |
| Gresham’s Law |
Bad money drives out good money in circulation. |
| The Invisible Hand |
Market self-regulation via individual self-interest. |
| The Law of Diminishing Returns |
Each additional unit of input yields less output over time. |
| Time Value of Money |
The principle that money today is worth more than the same amount later. |
| Compound Interest |
Earnings on earnings over time, growing wealth exponentially. |
| Opportunity Cost |
The cost of foregoing the next best alternative. |
| Sunk Cost Fallacy |
A bias to continue investing due to prior costs. |
| Loss Aversion |
Humans fear losses more than they value equivalent gains. |
| Behavioral Economics |
Examines psychological factors influencing financial decisions. |
| The Butterfly Effect |
Small changes can lead to significant consequences in systems. |
| The Cobra Effect |
Unintended consequences of incentives causing harmful behavior. |
| Moral Hazard |
Risk-taking increases when protection from consequences exists. |
| The Matthew Effect |
Wealth accumulates for those who already have more. |
| The Lindy Effect |
The longer something lasts, the longer it’s likely to exist. |
| The Ostrich Effect |
Avoidance of negative financial news or decisions. |
| The Endowment Effect |
People overvalue things they own, leading to irrational decisions. |
| The Halo Effect |
Positive impressions of one trait influence unrelated judgments. |
| The Peltzman Effect |
Regulations lead to riskier behavior due to overconfidence in safety. |
| The Abilene Paradox |
Groups agree on a course of action against individual preferences. |
| The Boiling Frog Syndrome |
Ignoring gradual financial changes until they become critical. |
| The Zeigarnik Effect |
Unfinished tasks are remembered better than completed ones. |
| Parkinson’s Law |
Work expands to fill the time available for completion. |
| The Law of Supply and Demand |
Price and quantity demanded are inversely related. |
| The Principal-Agent Problem |
Misaligned incentives between owners and managers. |
| Risk-Reward Tradeoff |
Higher returns require accepting higher risks. |
| The Barbell Strategy |
Balancing safety and high-risk investments for resilience. |
| The Efficient Market Hypothesis |
Prices reflect all available information under efficient markets. |
| Survivorship Bias |
Success stories survive, ignoring failures, skewing perceptions. |
| Confirmation Bias |
Preference for information confirming existing beliefs. |
| Anchoring Effect |
Relying heavily on the first piece of information encountered. |
| Reciprocity Norm |
A social norm where favors create obligations to return them. |
| The Scarcity Principle |
Limited availability increases perceived value. |
| The Rule of 72 |
Estimates time to double investments via compounding. |
| Diversification |
Spreading investments reduces risk. |
| Liquidity Preference Theory |
Preference for liquid assets during uncertainty. |
| The Velocity of Money |
Rate at which money circulates in the economy. |
| Fiscal Multiplier |
Government spending magnifies economic output. |
| Inflation Hedge |
Investments that protect against inflation’s impact. |
| Stagflation |
High inflation with stagnant economic growth. |
| Creative Destruction |
New innovations replace outdated industries and systems. |
| Capital Accumulation |
Building wealth through saving and investing. |
| The Law of Comparative Advantage |
Countries benefit from specializing and trading efficiently. |
| The Wealth Effect |
People feel richer when asset values rise. |
| The Utility Maximization Principle |
Consumers aim to maximize satisfaction from resources. |
| The Paradox of Thrift |
Saving too much reduces economic demand and growth. |
| The Snowball Effect |
Small consistent actions accumulate into significant changes. |
| The Multiplier Effect |
Initial spending multiplies through the economy. |
| Hyperbolic Discounting |
Preferring smaller immediate rewards over larger future ones. |
| The Law of Large Numbers |
Probability improves with larger sample sizes. |
| The Power Law |
Wealth distribution follows a predictable exponential curve. |
| Marginal Utility |
Additional consumption brings less satisfaction. |
| The Overconfidence Effect |
Overestimating one’s financial knowledge or skill. |
| Regret Aversion |
Avoiding decisions to prevent future regret. |
| The Decoy Effect |
Preference influenced by less attractive options nearby. |
| Mental Accounting |
Treating money differently based on its source or purpose. |
| Anchoring Bias |
Anchoring expectations based on an initial reference point. |
| Framing Effect |
How context or wording changes perceptions of choices. |
| The End of History Illusion |
Falsely assuming no future personal change. |
| The Wisdom of Crowds |
Aggregated opinions often outperform experts. |
| Cost-Benefit Analysis |
Weighing costs versus benefits for decisions. |
| Financial Leverage |
Using debt to increase potential financial gains. |
| The Winner’s Curse |
Overpaying due to limited information or competition. |
| The Diderot Effect |
Buying related items leads to unnecessary spending. |
| The Hedonic Treadmill |
Adapting to wealth without increased happiness. |
| The Law of Unintended Consequences |
Unexpected outcomes result from well-intentioned policies. |
| Price Elasticity of Demand |
How demand changes relative to price changes. |
| The Golden Handcuffs |
Golden handcuffs trap individuals in high-paying jobs. |
| The Law of One Price |
Identical goods cost the same in efficient markets. |
| The Equity Premium Puzzle |
Risk-free returns are inexplicably low compared to equity. |
| The Buyer’s Remorse |
Doubt or regret after making a financial decision. |
| The Ultimatum Game |
An ultimatum where fairness affects financial acceptance. |
| The Fairness Principle |
Morals influence decisions over strict economics. |
| Caveat Emptor |
Buyers must beware in financial transactions. |
| The Gambler’s Fallacy |
Mistaken belief in patterns in random events. |
| The Skin in the Game Principle |
Taking responsibility reduces moral hazard risks. |
