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I often find that my understanding of the world is strongly informed by a few key concepts. For example, I've repeatedly found the concept of opportunity cost to be a useful frame. My previous post on privileging the question is in some sense about the opportunity cost of paying attention to certain kinds of questions (namely that you don't get to use that attention on other kinds of questions). Efficient charity can also be thought of in terms of the opportunity cost of donating inefficiently to charity. I've also found the concept of incentive structure very useful for thinking about the behavior of groups of people in aggregate (see perverse incentive).
I'd like people to use this thread to post examples of concepts they've found particularly useful for understanding the world. I'm personally more interested in concepts that don't come from the Sequences, but comments describing a concept from the Sequences and explaining why you've found it useful may help people new to the Sequences. ("Useful" should be interpreted broadly: a concept specific to a particular field might be useful more generally as a metaphor.)
Thomas Schelling proposed a useful strategy: make small threats for small infractions, and then follow through on them. This gives credibility to your larger threats, without too much inconvenience for either party.
(And, of course, try to make the whole thing as predictable as possible; never be capricious with your own authority.)
From an article about the US justice system, but the relevance to misbehaving schoolchildren (or simply schoolchildren whose behaviour one doesn't like) is obvious:
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