Book Bits | 6 September 2014

Economics: The User’s Guide
By Ha-Joon Chang
Review via The Guardian
It is a mark of where we are in our political discourse that even to say “neoclassical economics is not the only school” seems radical. This is where Ha-Joon Chang starts, in a book that is more sober and less effervescent than his bestselling 23 Things They Don’t Tell You About Capitalism, but is just as page-turning.
Since no single economic theory has beaten the others, it follows, Chang writes, that there is no objective truth on which every economist is agreed. Economics can never be a science in the way that physics is; it cannot reach a consensus on its fundamental questions, let alone what the answers are. This isn’t some extended handwringing, a trashing of his discipline dressed up as a mea culpa. Chang isn’t looking for a formula: fundamentally, he argues, economics is politics. As such, we shouldn’t be thinking in terms of an ideal answer – the discussion should never close.

The Impulse Society: America in the Age of Instant Gratification
By Paul Roberts
Review via The Seattle Times
America in the 21st century is much like a spoiled child who wants everything right now — quick profits, the latest smartphone, entertainment on demand — with no consideration of long-term costs or consequences. This is the withering appraisal of Paul Roberts’ brilliant and thought-provoking new work, which is sure to become one of the most talked about books of the year.

The Illusion of Well-Being: Economic Policymaking Based on Respect and Responsiveness
By Mark D. White
Summary via publisher (Palgrave Macmillan)
The use of measures of economic output to guide policymaking has been criticized for decades because of their weak ties to human well-being. Recently, many scholars and politicians have called for measures of happiness or subjective well-being to be used to guide policy in people’s true interests. In The Illusion of Well-Being, Mark D. White explains why using happiness as a tool for policymaking is misguided and unethical. Happiness is too vague a term to define, and too general a concept, to measure in a way that captures people’s true feelings. He extends this critique to well-being in general and concludes that no measure of well-being can do justice to people’s true interests, which are complex, multifaceted, and subjective.

The Organized Mind: Thinking Straight in the Age of Information Overload
By Daniel J. Levitin
Summary via publisher (Dutton)
The information age is drowning us with an unprecedented deluge of data. At the same time, we’re expected to make more—and faster—decisions about our lives than ever before. No wonder, then, that the average American reports frequently losing car keys or reading glasses, missing appointments, and feeling worn out by the effort required just to keep up. But somehow some people become quite accomplished at managing information flow. In The Organized Mind, Daniel J. Levitin, PhD, uses the latest brain science to demonstrate how those people excel—and how readers can use their methods to regain a sense of mastery over the way they organize their homes, workplaces, and time.

Valuing Life: Humanizing the Regulatory State
By Cass R. Sunstein
Review via Publishers Weekly
Harvard professor Sunstein (coauthor of Nudge), who served as Administrator of the Office of Information and Regulatory Affairs (OIRA) from 2009 to 2012, argues that government must always consider the impact of proposed regulation on human life. Sunstein describes how the OIRA actually works, explains the role of break-even analyses in government regulation, and explores how the government might account for risk to nonquantifiable goods, such as privacy. Both insufficient and excessive regulation can be harmful, and Sunstein notes that regulators need to consider probability neglect—that is, regulators need to realize that people’s fear of unknowns, such as terrorism or environmental degradation, may have little to do with the likelihood that the feared event will occur. When dealing with probability neglect, the government must balance attention to public fears with caution about unnecessary regulation demanded by fearful people.

A Concise History of Economists’ Assumptions about Markets: From Adam Smith to Joseph Schumpeter
By Robert E. Mitchell
Summary via publisher (Praeger)
Nine narrative chapters and a conclusion provide an accessible history of key premises and assumptions in the mental models proposed by several major economists since the 1776 publication of Adam Smith’s The Wealth of Nations and show how—and why—those models and their underlying assumptions have changed over time. The book addresses the legacies of major economists, describes their historical and analytical influence, documents the interaction among various schools of thought as well as how they differ, and the implications that this history has for economics and the policy sciences in the decades ahead.

The Mathematics of Financial Models: Solving Real-World Problems with Quantitative Methods
By Kannoo Ravindran
Summary via publisher (Wiley)
Before financial problems can be solved, they need to be fully understood. Since in-depth quantitative modeling techniques are a powerful tool to understanding the drivers associated with financial problems, one would need a solid grasp of these techniques before being able to unlock their full potential of the methods used. In The Mathematics of Financial Models, the author presents real world solutions to the everyday problems facing financial professionals. With interactive tools such as spreadsheets for valuation, pricing, and modeling, this resource combines highly mathematical quantitative analysis with useful, practical methodologies to create an essential guide for investment and risk-management professionals facing modeling issues in insurance, derivatives valuation, and pension benefits, among others. In addition to this, this resource also provides the relevant tools like matrices, calculus, statistics and numerical analysis that are used to build the quantitative methods used.

Banking in Crisis: The Rise and Fall of British Banking Stability, 1800 to the Present
By John D. Turner
Summary via publisher (Cambridge)
Can the lessons of the past help us to prevent another banking collapse in the future? This is the first book to tell the story of the rise and fall of British banking stability over the past two centuries, shedding new light on why banking systems crash and on the factors underpinning banking stability. John Turner shows that there have only been two major banking crises in Britain during this time – the crises of 1825–6 and 2007–8. Although there were episodic bouts of instability in the interim, the banking system was crisis free. Why was the British banking system stable for such a long time? And, why did the British banking system implode in 2008? In answering these questions, the book explores the long-run evolution of bank regulation, the role of the Bank of England, bank rescues and the need to hold shareholders to account.