I’ve got a book recommendation: Misbehaving, the making of behavioral economics by Richard H. Thaler. The standard economics (that you may have learned in college) is based on the notion that markets are made up of rational actors who use all the publicly available information to make the best possible individual decisions. Everybody knows that’s not strictly true, but since the 1950s economists have held that it’s a good-enough assumption for making economic predictions.
Since the 1970s, Thaler’s career has revolved around poking holes in that worldview. In other words, he’s been looking for and documenting situations where the quirky decision-making of real human beings leads to results very different than the rational-actor models constructed by economists.
Not only is that an interesting topic that has all sorts of fascinating real-world applications (including the over-valuing of high draft picks in the NFL), but Thaler is a marvelous story-teller. His stories — of experiments in human decision-making, and of his attempts to introduce more realistic thinking into the stuffy and self-important world of academic economists — are consistently amusing. The book’s ongoing theme is that whether you are talking about contestants on Dutch game shows or University of Chicago business school professors choosing offices in a new building, people are funny — and you can’t really understand the world until you account for the predicable ways that people are funny.
The title has a wonderful double meaning: Economic models can fail when humans “misbehave” by not making the supposedly rational choices the model calls for. But by pointing out such embarrassing glitches, Thaler was also “misbehaving” according to the community standards of economists. So his career is a story of successful rebellion.
Finally, there’s political significance to the revolution Thaler has been leading: Idealizing markets, and exaggerating the powers of the people who participate in them, tempts a person to turn all of society’s decision-making over to “the Market”. For decades, economists’ false assumptions have biased their analysis in favor of market-based solutions. But people who are still making those simplistic Econ-101 arguments in favor of free markets are behind the times. They are, as Keynes observed, “slaves of some defunct economist”.
In the last few years, it’s become increasingly clear that food companies engineer hyperprocessed foods in ways precisely gear
From the New York Times:
In the last few years, it’s become increasingly clear that food companies engineer hyperprocessed foods in ways precisely geared to most appeal to our tastes. This technologically advanced engineering is done, of course, with the goal of maximizing profits, regardless of the effects of the resulting foods on consumer health, natural resources, the environment or anything else.
But the issues go way beyond food, as the City University of New York professor Nicholas Freudenberg discusses in his new book, “Lethal but Legal: Corporations, Consumption, and Protecting Public Health.” Freudenberg’s case is that the food industry is but one example of the threat to public health posed by what he calls “the corporate consumption complex,” an alliance of corporations, banks, marketers and others that essentially promote and benefit from unhealthy lifestyles.
Your cutting-edge jargon lesson for the day is "extractive institutions" versus "inclusive institutions".
This, from another book that looks like aYour cutting-edge jargon lesson for the day is "extractive institutions" versus "inclusive institutions".
This, from another book that looks like a must-read. Are they coming out more frequently these days?
Tidbits about it from around the web...
The authors have an extensive website at whynationsfail.com, including a bibliographic essay. You may not think so, but to me that's incredibly cool. I love trolling through annotated bibliographies, and the few and far between ones that actually discuss their sources at length are treasures. They also have a page dedicated to reviews, so the following is a bit redundant...
The GuardianUK has a very enthusiastic review here.
The Economist is positive overall, but expressing some disappointment at The Big Why.
David Brooks, the New York Times pet almost-a-conservative, claims about this book, “I’ll be shocked if there’s another book this year as important asDavid Brooks, the New York Times pet almost-a-conservative, claims about this book, “I’ll be shocked if there’s another book this year as important as Charles Murray’s Coming Apart.” Yeah, it looks seminal. See his review at The Great Divorce (I’m a little curious about whether there’s some hidden linkage to the C.S. Lewis book).
Brooks is an editorialist; so it isn’t surprising that the New York Times Sunday Book Review would also cover this book. The article, Tramps Like Them leads me to believe the book is even better than Brooks averred.
Unread, and maybe too big to really want to tackle.
The crisis in the economically dominant western states seems to me to be a symptom of a long termUnread, and maybe too big to really want to tackle.
The crisis in the economically dominant western states seems to me to be a symptom of a long term decline of economic hegemony. Many in the Anglo-American "core" are concerned that this signals a shift towards rising power principally to China.
I suspect that the similarity between European and American cultures has made the shifts of the past few hundred years relatively easy, but this will eventually be seen as a provident aberration. Cross-cultural hegemonic shifts require, I suspect, a radical "reset" in the economic system, the most recent of which we refer to as "the dark ages."
So my hypothesis is that the rise of China will be interrupted by a new dark ages, simultaneously brought upon by the deep cultural chaos implicit in such a shift as well as the economic crisis of climate change.
This thinking is crudely informed by my very brief exposure to World Systems Analysis, so I'd like to look more deeply into it, albeit not at an academic level. Giovanni Arrighi's book seems to be a plausible place to start.
But it isn't as if I don't already have too much reading I want to do....more
I don’t doubt that he’s correct. In a similar vein, Steven Pinker presented an argument on the myth of violence at TEDtalks in 2007 (see the 19-minute video). I’ve read quite a bit on how our brains aren’t quite as rational as we prefer to think they are, and several of those cognitive biases lead us to focus more on negative things and remember them better; the “infotainment” shows we turn to for “news” operate on the if it bleeds, it leads tactic, which further reinforces our beliefs that things are nasty.
Kenny alludes to this in his essay’s opening paragraph: “Given that our brains seem hard-wired to remember singular tragedy over incremental success, it's a hard sell to convince anyone that the past 10 years are worthy of praise.”
I still think the hurdles we’re facing in the next century give plenty of reasons to be pessimistic, but Kenny shrugs at the problems of climate change (“Stopping climate change has been a slower process. Nonetheless, in 2008, the G-8 did commit to halving carbon emissions by 2050.” Yeah, like that’s going to happen.) We’ll have to see whether his book tackles these tougher issues.
Left, G.D.P. Per Capita (Adjusted to 2005 dollars). Right, World Cereal Yield (Kilograms per hectare).
[I haven’t read it yet, but Kenny has an overview of his book on his blog, here] ...more
Much to my astonishment and delight, the professor I learned IPE from finally got around to writing this textbook after teaching the stuff for well ovMuch to my astonishment and delight, the professor I learned IPE from finally got around to writing this textbook after teaching the stuff for well over forty years. The class was so well taught and the complex material presented so clearly that I signed up to TA his class twice after taking it.
I've order a copy, but simply based on what I learned in his class, I'm giving this a tentative five-star review. After I get it I might discover some disappointment, but from the single review over on Amazon I infer that I won't.
The obvious question is: is this a biased recommendation? No: this text was written ten years after I left the university, which was the last time I spoke to the good professor.
We'll, yeah. This has been on my "currently reading" shelf for years. It's near the bottom of the stack on my bedside table. I keep it there on fond remembrance of the author, my professor in International Political Economy. I want to say that if anyone wants to understand, as deeply as *necessary*, our contemporary economics, this is a great textbook.
But since I haven't read the whole thing, I'm basing that conclusion on his classroom lectures. Is this that good? I hope it is......more