Thursday, May 06, 2010

Wilkinson -An Introduction to Behavioural Economics

I received an inspection copy of Nick Wilkinson's "An Introduction to Behavioural Economics" earlier this week. I confess that I had not read this before and have been working on a book myself, largely to use with my behavioural economics classes. However, I am glad that I have largely changed the focus of that effort away from a textbook as such and more toward a primer for a wider group. Wilkinson's book works very well as a textbook in behavioural economics and I will use it in my courses next year. The book starts with basic ideas of behavioural economics in terms of defining it with relation to standard models, outlining the methodological principles and objectives of behavioural economics and giving some core applications. The second section (Foundations) gives a very useful summary of value, preferences and choices, a chapter on decision making under risk and uncertainty and a chapter on mental accounting. I think this section will be extremely useful in helping students to set the framework for how the empirical work relates to the models they already know. Section three covers intertemporal choices and, along with the Frederick  et al 2002 review, is a fantastic core introduction to intertemporal choice. Section 4 covers strategic interaction and is a more manageable summary of this area than the tougher Camerer et al book, which is perhaps better for graduate level. Section 5 concludes with a discussion of rationality and the future of behavioural economics.

If I could levy any criticism at the book, it is that it focuses very much on experimental work particularly in game theory and choice and neglects the large recent emphasis on behavioural field experiments. This is partly a function of the fact that the field experiment approach is very new and I expect that the author will work on this if there is a new edition. In my own course, I place heavy emphasis on the Libertarian Paternalism debate as I have found that this really brings many of the issues in behavioural economics to life. Wilkinson has largely steered clear of this debate and many of the policy issues that he raises at the end (e.g. are men with more brothers more likely to be gay?; is there a biological basis to war?) are more suited to an introduction to psychology textbook than a behavioural economics text and I would certainly not recommend to use this book without supplementing it with examples like Save More Tomorrow (Thaler and Benartzi 2004) and related work. Again, I think this is partly a function of the fact that the last two years have seen a huge surge of interest in the direct policy application of behavioural economics and therefore this aspect may have been overlooked by the author when he was writing the main body. Overall, I think this is a very welcome addition and is, as far as I can see, the first book that could really be used as a textbook for behavioural economics for upper undergraduate courses.

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