Basic Ideas

The starting point of this book is that to understand extremism, one has to look not only at individuals but at the interactions between them and between the individual and the group. In this chapter and the next, I consider a number of social problems, the solutions to which have traditionally vexed social scientists. The standard way of looking at these problems is individualistic. I change this by incorporating social interactions, which means incorporating the actions of others directly into the utility functions of individuals. In my view, this leads to a deeper understanding of these problems, and it sometimes changes the policy prescriptions used to deal with these phenomena. To illustrate this last point, consider some of the policy questions that have attracted attention in Canada, the United States, and the world over the past few years. Such a list might include the problem of crime, the Asian crisis of 1997–1998, and the persistence of poverty. There are, of course, other important problems such as terrorism, but we will deal with that in Chapters 4, 5, 6, and 9.

In each case, an individualistic approach leads to one set of prescriptions to solve the problem, usually involving prices. Consider the problem of crime. The standard approach in economics looks at an individual who might be contemplating a crime, and assumes he makes his decision based on the expected return (monetary or psychic) from the crime on the one hand and the probability of being caught and the size of the penalty if caught and convicted on the other.