Basic Instincts: Human Nature and the New Economics [Paperback]

This book is a simple, elegant and devastating critique of "traditional economics" without a formula in sight. As a writer Lunn has soft, cosy style which is the velvet glove that covers the iron fist of his ideas. According to Lunn traditional economics has based its work on the assumption that people (that's you and me folks) are selfish, rational things that seek to maximise all the happiness that we can manage and these assumptions are, well not to put too fine a point on it, wrong!

As a Behavioural Economist Lunn has this fetish for real world evidence which traditional economist have ignored as it kept screwing up their mathematical models. To help us understand the core differences in approach Lunn introduces us to two lands - the traditional economist Marketopia and the real world of Muddleton. The differences were so marked between the traditional models and what the evidence shows about people's real economic behaviour, I actually laughed out loud. (A rather hysterical scared laugh!) In Marketopia economic behaviour is clear, straight forward, and we are conscious of how to maximise our economic worth which makes it very easy to model, but in Muddleton economic behaviour is eccentric, sometimes selfless, and not very rational and often is not even a conscious act. It would, as Lunn points out, be wrong to think that such differences are quant academic novelties. The problem is that almost all economic policy is based on traditional economic models - which are wrong. This is serious stuff. Very serious!

An excellent book that made me reconsider not only the personal economic decisions I have made in a completely different light but also the economic policies of governments. I thought this book was much better than some of the other popular think books such as "Freakenomics" and was at least as good if not better than "Tipping Point". I would recommend this as both a good read and an easy introduction into the ideas of behavioural economics. I don't want to spoil the end for you - yes a think book that ends better than it starts - but I do want to say "Viva le revolution!"

This is a fascinating and entertaining book that has really changed the way I see all sorts of things ranging from the way we buy things in one shop despite the fact that they are cheaper in the shop next door, to whether money really is what makes us work hard, to why so many of us buy Gillette razors. While it is full of stories from the business world and accounts of strange experiments in which people have to hand over money to each other it is much more than a collection of economic anecdotes. The author's purpose is to explain a major battle going on in economics between believers in orthodox market concepts and so-called behavioural economists. The behaviouralists are using evidence from experiments and real world experience to question the traditional assumptions that we're all rational, selfish and well informed in our economic decisions and the outcome of this spat could have profound consequences for the way we run our society. It is written in a clear and refreshing style with no formulas or maths required, but it is not afraid to bring in difficult economic concepts. This is the perfect book if you spend time reading and listening to people talking about economics - the credit crunch, wage demands, forecasts of how the economy is going to do in the future - but have never really questioned what is going on behind it all. Great fun, challenging but easy to read.

The book starts with a great 'parable', the argument unfolds logically, the author tells personal stories that really suck the reader in. He also introduces terms like yucki, endian and witt and then refers to them through the book. These are very memorable and made the book easy to read and follow.

The core story 'Economists believe their sums not the truth' was a great tale. Its not unknown in science for modellers to get lost in their maths and forget the world they're describing but I don't know anything as widespread as the situation that the author describes for economists.

A couple of things came to mind as I was reading: I read somewhere that a paradigm breaking in science has 3 stages
(1) the traditionalists (who, to be fair to them, have spent their careers refining a model and training postgrads in the model to see it begin to crumble before their eyes) attack the new theory venomously.
(2) When some key people in the field being to support the new paradigm (and it is the support of people not of data that is usually important) grudgingly they admit that there is something in it
(3) They whole heartedly support it and always did so.

It seems from the book that economists are at (2) and spent a long, long time in stage (1).

Thoroughly good read, great story, go buy it.