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The Tyranny of Small Decisions is an term in economics to describe a negative global impact to seemingly rational or harmless local decisions. The term implies that small changes in incentives such as taxes, regulations or subsidies can cause many individuals to change their decisions. In other words, the government plays a role in shaping the global result as individuals can't always be expected to see inadvertent consequences of seemingly rational choices. |
| Function | Economics | | Definition | Small decisions that appear rational at the local level but that collectively have a negative global impact. | | Theoretical Example | A city has commuters who drive or take the train. In a given year 60% decide to drive and 40% decide to take the train. The train operator needs 50% of commuters to fill trains to break even on the service. As a result, the train operator goes out of business and all commuters fill the highways resulting in serious traffic jams. | | Related Techniques | Tragedy Of The Commons |
Economics
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