A book review.
''The Making of Behavioral Economics''
by Richard H Thaler
This is a recounting of the development of the field of behavioral economics. For the uninitiated, behavioral economics differs wildly from other fields of economics by bring the psychology of decision making into the picture. It was considered radical stuff at the outset, when psychologists started to pay attention to economics.
I read this book because understanding decision-making is a major facet of my work in risk management. I've read macro and micro economics to a certain extent, and found managerial accounting (formerly "cost accounting") to be a useful step along this path. But it seems that behavioral economics is the deep end of that pool. In fact it's such a fascinating field of study that if I had a time machine, I'd tell my young self to head into this field.
What works in this book is the narrative introduction to the concepts. There's so much here (e.g. by page 20 we've already covered the endowment effect) that I won't try to recount it all, but it's interesting that it took psychologists to deflate the stilted theories of the economists.
If there are any drawbacks to this book, one is the drumbeat of success stories recounted in some detail - especially when it comes to the times that people didn't follow the advice of the behavioral economists. A friend who's also in my line of work made an interesting comment on this book: "Toward the end, there's a lot of 'I told you so.'" And boy was he right.
But this was a fine introduction to the field. I plan to read more.