These laws were identified and developed by Carlo M. Cipolla who was Professor of Economics at UC Berkeley up his death in the year 2000. The full description and implication of these 5 basic laws can be read in his article
The 5 Basic Laws of Human Stupidity
The Basic Laws of Human Stupidity.
- Law 1: Underestimation Always and inevitably everyone underestimates the number of stupid individuals in circulation.
- Law 2: Independence The probability that a certain person be stupid is independent of any other characteristic of that person.
- Law 3: Loss A stupid person is a person who causes losses to another person or to a group of persons while himself deriving no gain and even possibly incurring losses.
- Law 4: Cost Non-stupid people always underestimate the damaging power of stupid individuals. In particular non-stupid people constantly forget that at all times and places and under any circumstances to deal and/or associate with stupid people always turns out to be a costly mistake.
- Law 5: Danger A stupid person is the most dangerous type of person.
The 4 Basic Categories of Human Action
If Dan does something that causes him loss, but gain to Sarah this is helpless. If Dan does something that causes gain to him and gain to Sarah, this is intelligent. If Dan does something that causes gain to him and loss to Sarah, this is bandit. Now… If Dan does something that causes loss to himself, and loss to Sarah… this is true stupidity.
In many economic theories a human is assumed to act rationally. In such theories, Dan would never knowingly cause loss to himself.
In real life we all regularly come into contact with Stupid Dan.
How can economists build models that take into account Stupid Dan? How can we predict if the person in front of us, our colleague, our boss is about to choose Stupid rather than Helpless, Bandit or Intelligent action?
How can we reduce the possibility of Stupid Action?
