In chapter 2 of Dan Ariely’s fantastic “Predictably Irrational”, he discusses how supply and demand are not the independent forces that drive prices in the market as usually described. Instead consumers are subject to anchoring and arbitrary coherence which nudges them towards higher or lower prices. Our first impressions have a large effect on later decisions so that too an extent, the market drives the consumer not the other way around. As Tom Sawyer discovered, people pay a high price for what is hard to get regardless of its supply or demand curve. Continue reading “Predictably Irrational Chapter 2 – The Fallacy Of Supply And Demand”
Predictably Irrational byDan Ariely is a fascinating and deeply insightful book that is a pleasure to read and full of gems. It is bursting with interesting and ground breaking experiments that completely debunk many of the assumptions of economics. It will reshape how you view economics and how consumers react in real life, as opposed to in economics textbooks. It is a book I would highly recommend and should be considered a behavioural economics classic. In fact it’s so great that I couldn’t fit all I wanted to say about it into one post (or three) so instead I will summarise my favourite chapters (which is most of them) and highlight the important points they make. What is particularly interesting is that the book is heavily based upon evidence and empirical studies, so no claim is made without being backed up. In fact Ariely does most of the experiments himself so you are really hearing it from the horse’s mouth.
I don’t normally do New Years Resolutions, but I thought there’s a first time for everything. I find that I’m more likely to do something if I’ve set myself a goal or target. So here are my four goals for 2013. Continue reading “New Year’s Resolutions”
There are many questions about this current recession. Why did the economy decline so much? Why are most economies stagnating? Why has low interest rates and quantitative easing not lead to recovery? I recently read Richard Koo’s The Holy Grail Of Macroeconomics which answers these questions. I found it deeply insightful, not only for its explanation of the current recession and the Great Depression but also because it was written before the crisis even happened. Koo accurately describes out current mess, what’s wrong and what we have to do to fix it. Continue reading “Balance Sheet Recession”
If you like epics, you’ll like The Casual Vacancy, author J.K. Rowling’s first book after the Harry Potter series. It is a story of a town rather than an individual. Rowling paints a broad canvass of many different intersecting lives set in a small English town. The plot revolves around the aftermath of the death of local councillor Barry Fairbrother. An election is held to fill his seat on the local parish council. It is set in a small town racked by division and conflict, between parents and children, husbands and wives, rich and poor. Then someone starts posting secrets onto the internet. . . Continue reading “Review Of The Casual Vacancy”
“The Road To Serfdom” by Fredrick Hayek is a disappointing book. Conservative bloggers often race about it claiming it has great insights into modern politics. While I disagree with the Austrian school of economics I read it to here the other point of view. I found it a boring, out dated book that didn’t have anything particularly original or insightful to say. It’s mainly concerned with saying a totalitarian state where the government controls everything doesn’t work (you don’t say). The book might have been relevant when it was published, but I am at a loss to see its use today.
I think to a large extent Hayek has been misunderstood. I have regularly heard people use Hayek to criticize the growth of the state or the Obama administration. Yet Continue reading “Misunderstanding Hayek And The Road To Serfdom”
A while ago I read Outliers by Malcolm Gladwell. It is a book about very successful people and tries to find out what makes them so special. Surprisingly, he does not conclude that it is due to superior skill or talent. In fact he argues that there is no such thing as natural talent, rather all skill derives from practice. Instead it is luck that allows people to achieve enormous success. People become successful because they were in the right place at the right time. Continue reading “In The Right Place At The Right Time”