Posts Tagged public policy

Book Review: Free Market Madness

Review of Peter A. Ubel (2009) Free Market Madness: Why human nature is at odds with economicsĀ  – and why it matters. Harvard Business Press, ISBN:9781422126097

Despite the title, this book sings the praises of the free market. However, it soundly debunks a libertarian free-market fundamentalism that draws its legitimacy from the rational-choice assumptions of economics.

The author is a medical doctor and decision scientist, not to mention an accessible writer. The book is based on many important scientific studies, including the author’s own research, so there’s a high fact-to-opinion ratio. In his medical work, Ubel sees first-hand the obesity crisis, the stressful conditions in which we make medical decisions and the inefficiency of a market medical system. This in turn shows the danger of believing that people always make decisions in their own best interest. Read the rest of this entry »

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Dan Ariely’s Predictably Irrational, and so are we

Review of Dan Ariely (2008) Predictably Irrational: The hidden forces that shape our decisions Harper Collins. ISBN: 978-0-00-725-652-5

This is a gem of a book: short, engagingly-written and connected both to the science and the policy implications. Ariely is a seasoned bias researcher (he sees himself as a behavioural economist rather than a psychologist) and this book runs through many of the experiments he has been involved in, as well as related research.

Unlike other introductions to bias, such as Sutherland’s Irrationality or Fine’s A Mind of Its Own, this is not a systematic review of different classes of bias but one person’s perspective on some experiments and their implications.

The main thrust of the book, as suggested by the title, is the economist’s idea of rational choice does not describe how we actually behave, because we are irrational in predictable ways (or, as I prefer to call it, biased). I was particularly interested in his attack on supply and demand curves, those central pillars of introductory economics. In place of the economic constructs, you can learn a set of ideas from psychology (e.g. contrast effects; arbitrary coherence; anchoring; “hot state” decisions) which more reliably fit how people behave.

The undermining of homo economicus has a number of implications for how we can live better and happier lives: we cannot leave it to the free market to fix things; we can achieve more by voluntarily restricting our choices; we need to self-police our selves to counter our tendency to rationalise immoral behaviour.

Ariely’s personality comes through as warm, humane and humourous, clearly concerned about the effects of irrational (or immoral choices but optimistic that by being aware of bias we can compensate for it.

I recommend anyone interested in the topic of bias taking this on a long train ride, and taking a lot longer to think about the implications.

My detailed notes on the book: not a substitute for reading it yourself.

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