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Summary:
Bestselling author Michael Shermer explains how evolution shaped the modern economy—and why people are so irrational about money How did we make the leap from ancient hunter-gatherers to modern consumers and traders? Why do people get so emotional and irrational about bottom-line financial and business decisions? Is the capitalist marketplace a sort of Darwinian organism, evolved through natural selection as the fittest way to satisfy our needs? In this eye-opening exploration, author and psychologist Michael Shermer uncovers the evolutionary roots of our economic behavior.
Drawing on the new field of neuroeconomics, Shermer investigates what brain scans reveal about bargaining, snap purchases, and establishing trust in business. He scrutinizes experiments in behavioral economics to understand why people hang on to losing stocks, why negotiations disintegrate into tit-for-tat disputes, and why money does not make us happy. He brings together astonishing findings from psychology, biology, and other sciences to describe how our tribal ancestry makes us suckers for brands, why researchers believe cooperation unleashes biochemicals similar to those released during sex, why free trade promises to build alliances between nations, and how even capuchin monkeys get indignant if they don’t get a fair reward for their work.
Customer Reviews:
Average Customer Rating:
It adds up!
Customer Rating:
Neuroscience says just like the rest of human anatomy has been shaped by evolution, so has the brain.
That branch of neuroscience focusing on economics is called neuroeconomics.
It's very fortunate that this book was written by Michael Shermer because not only is he well versed in neuroscience but he's also really coming more into his own as a writer.
In telling the story of neuroeconomics, Shermer begins by reciting the obvious and significant fact that humans have spent the greatest part of their evolutionary history living not in cities and advanced societies but rather in small hunter gatherer tribes. Accordingly, the inbuilt prejudices we have for what is and what is not fair are sometimes taxed by modern society.
How are Bill Gates and a criminal alike? According to Shermer both experienced their greatest drive to produce in their twenties and both did it for the same reason: to attract women. Shermer noted that it's fact that while women generally attract men by virtue of more physical qualities men have to resort to showing themselves capable of being financial producers using whatever talents they may have.
Though admittedly Shermer lets slip some of his more Libertarian economic philosophies later in his book (you get to hear a lot from the French Libertarian Frederick Bastiat) for the most part he keeps it scientific.
And in doing so he keeps it compelling.
Sure, we may be moving about our jobs and banks and malls but evolutionarily we're basically chimpanzees with wallets.
Mind of the Market
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Michael Shermer always has very informative sociological statistics and analysis, but would have liked a little more about the "market"
back to front
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If you find fascinating the author's tales of bicycle racing, then you're his mum or dad. If you find his summary of psychological experiments interesting, then join the club, but there's little new here. This is a very conceited book, fuller of references to his own less than groundbreaking work than of the usual suspects'. (Skiiner, Game Theory, etc.) There are some genuine and interesting puzzles about the market. Why do prices vary by marketplace? Is 'market failure' an aberration, a temporary madness, confined to some (public?) goods, an universal condition? Would better understanding of human nature avoid manias, panics and crashes? Why do banks always seem to bet the farm at the very worst moment (or do they)? Why is the return on capita cyclical? Why is the long run rate (smoothed for the cycle) so stable? Is Efficient Market Theory true, a useful proxy, an approximation, a crafted illusion? You can think of additional questions of your own. If you hoped for answers, forget it. This is a pop psychology book with 'market' tacked on the end. Despite discussing some titanic German bores (Hegel, Marx, Weber, et al) along with the genuine greats (Voltaire, Smith, Schumpeter, Hayek) J Z Muller's near identical title 'The Mind AND the Market' is a far better read. To be fair, for amateur psychologists the bibliography in Shermer's book is really quite good.
The Title a Bit Misleading
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The title of this book led me to believe that it would be an in-depth analysis of the psychology and behavior of the stock market. However, that is not really the subject of this book. Instead, the book advances a thesis regarding how to apply evolutionary principles to economic and political frameworks, and consisting mostly of a defense of free markets and democracy. Also, the author identifies some popular conceptions of evolution (social Darwinism, "nature red in tooth and claw," the "selfish gene") as "myths" that inaccurately characterize evolutionary concepts, and that he suggests that cooperative behavior is actually a more evolutionarily advanced strategy in species.
As I read the book, some questions occurred to me regarding the assertions made in the book:
1. The linkage of free market competitive ideology with evolutionary concepts and efficiency (Adam Smith's "invisible hand" paradigm) was developed in a era of continuous western expansion into new land frontiers, rich with resources and free land. This affected the relationship between "producers" and "consumers." The author suggests that free markets favor consumers over producers, and that favoring producers over consumers (via protectionism, tariffs, unionization, etc.) leads to stagnation and inefficiency. Whether or not this may be true, now that we live in a time of increasingly scarce material resources with fewer virgin frontiers to exploit, producers will necessarily gain greater power in the relationship with consumers (as with oil production, energy, technology, etc.) This skews the "free market" relationship the author describes and may therefore warrant governmental/outside regulation or mediation to keep the playing field level. This also has relevance to the tendency of some producers to gain a monopoly of resources, information, or access, which renders them effectively impervious to true competition and therefore causing consumers to be less likely to gain the benefits of free market competition in quality, price, etc.
2. The characterization of "producers" and "consumers" as separate entities may itself be somewhat inaccurate. Ideally, in our society all will possess both roles. Therefore favoring one over another, or speaking of them as opposed interests may inaccurately characterize our consideration of the topic of optimum structuring of markets.
It seemed to me that there were a number of ideological assertions made as statements of fact, with a lack of supporting evidence presented. However, I found the book to be interesting, engaging and thought-provoking, and would recommend it as stimulus for thought, reflection, and development of ideas.
(For another perspective on some of these concepts regarding free markets and democracy, I suggest "World on Fire" by Amy Chua.)
Shermer's "Blindspot": Certainty in Evolutionary Psychology.
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A few years ago, I read Shermer's "Science of Good and Evil," in which he explains how evolutionary psychology can explain human's moral natures. The issue I had with that book is very much the issue I have with this one, which uses evolutionary psychology to explain human economic behavior (particularly in markets).
The fact is that Shermer bases just about everything in both books on a very tenuous "science" of evolutionary psychology and where Shermer is very skeptical when it comes to many things, he is probably more accepting of evolutionary psychology explanations (which are generally "could be" propositions that Shermer takes as "is" propositions.) While I don't have any major qualms with evolutionary explanations for behavior, the problem is that evolutionary explanations of behavior are not empirical as are evoluitonary explanaitons of physical structures. (Many times in the book, Shermer says things like, "We know we have x tendency. The reason this strategy evolved IS..." instead of, "This could have evolved in humans because..." With every page, I had to ask myself why a careful skeptic like Shermer chose to write a book based on a very tenuous and tentative "science" that he unskeptically takes as unquestioned fact?
Beyond this, I must confess that the thesis of the book seems quite jumbled: sometimes, it seems like Shermer is suggesting an analogy between the market and biological evolution. Other times, it seems that Shermer is making the case that human psychology functions best in a market system. Other times, whole chapters are devoted to discussing asides like why humans are not quite the rational actors that "rational choice theory" has us believe, without so much as telling us where this ties in to Shermer's story.
The upside is that the book is very interesting. As usual, Shermer is a great popularizer and summarizer, interspersing theory with fascinating anecdoes (both personal stories and recounting others' experiments). In the end, though, I must caution readers against the book owing (a) to usually-skeptical Shermer's unquestioning reliance on the very tentative ideas of evolutionary psychology for the bulk of the book; and (b) to the book's lack of any real clear thesis, instead having a very disjointed and hurried feel.
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