Saturday, June 6, 2015
Book Reviews: When To Rob A Bank – Steven Levitt and Stephen Dubner, Misbehaving – Richard Thaler
‘When To Rob A Bank’ is not, as some may have hoped, the fourth book of new ‘Freakonomics’ material from the writing team of economist Steven Levitt and journalist Stephen Dubner, but a collection of posts from their ‘Freakonomics’ blog. The good news is that, unless you’ve been following almost every post they’ve done, you’ll still find something new here. Levitt and Dubner’s subjects are as esoteric as ever: amongst other things Levitt argues why it is not in Pepsi’s interest to steal Coke’s formula, while Dubner rages war (perhaps quite rightly) on the penny. Some questions are left unanswered: Levitt can’t quite work out the reasons for a chicken shop’s rather unusual, and seemingly partly irrational, pricing strategy. Situations like that were slightly frustrating to me after the earlier ‘Freakonomics’ books, which ultimately always offered a (sometimes surprising) solution to their mysteries. Perhaps some of these mysteries were solved in the comments to the blog posts; alas for some these are completely absent from this collection.
Levitt and Dubner are always entertaining, but Richard Thaler’s recent ‘Misbehaving’ may be the better economics book. It doubles as both Thaler’s professional biography and a history of the emergence of the field of behavioural economics. Like Billy Beane in ‘Moneyball’ Thaler has encountered a fair amount of opposition along the way from those committed to the ‘old’ way of doing things – in this case, the economic ‘rationalists’ – which adds a trace of intriguing conflict to his story.
Daniel Kahneman’s ‘Thinking, Fast And Slow’ and Thaler’s own ‘Nudge’ (with Cass Sunstein) have already covered many of the concepts included in this book – in short, humans take short-cuts, particularly when decisions are difficult and made infrequently. But whereas Kahneman’s was a psychology book, and ‘Nudge’ was more a policy-oriented book, ‘Misbehaving’ is very much an economics and finance book. Since I’ve studied both economics and finance this type of focus was right up my alley, but I wonder how it will play to the less-economically inclined casual reader. (Even I skipped over the chapter on superannuation funds.) Hopefully though anyone with even a passing interest in economics will stick with this book, as it lays out what is likely to be the new mainstream for the discipline over the next twenty or thirty years.