World Famous Comics: The Mind of the Market: Compassionate Apes, Competitive Humans, and Other Tales from Evolutionary Economics
The Mind of the Market: Compassionate Apes, Competitive Humans, and Other Tales from Evolutionary Economics
By: Michael Shermer Publisher: Times Books Average Rating: Binding: Hardcover Label: Times Books Number of Items: 1 Number of Pages: 336 Publication Date: December 26, 2007 Release Date: December 26, 2007
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.
Monkey See, Human Do? Shermer attempts to synthesize a wide range of findings about how humans often behave in a manner that refutes the idea of homo economicus, that is, a human being who makes rational economic decisions. Clearly, we often don't do that. Shermer gives many examples of this, most of which have been highlighted in a number of other works. Examples include: how we value something more once we posses it; how varied phrasing of identical choices leads to different behaviors; how we are generally unable to take future discounting into account.
Shermer weaves these findings from psychology, as well as numerous findings from primate behavior, into a story that claims that most of our aforementioned irrationality is the result of a mind that has not evolved quickly enough to meet current economic conditions. What worked well among hunter-gatherers millenia ago is just not suited to today's economic environment. While Shermer's theory is plausible, there are too many gaps to make it fully convincing. For example, in my opinion, the theory must apply universally to all aspects of human existence. By that I mean that if the "economic" brain did not evolve quickly enough, so then must other parts of brain have remained the same. If, for example, reading of print did not occur in history until relatively recently, why should our brains have evolved quickly enough to carry out that function, but not other functions? Shermer himself posits that we manage on many occasions to override our hunter-gatherer impulses; if so, what is the nature of this override feature and where did it come from?
Nevertheless, Shermer takes on a challenging topic with gusto, and provides enough interesting information on human behavior to make the book a worthwhile read.
Why Evolution Is Sound Economics Michael Shermer's "The Mind of the Market: Compassionate Apes, Competitive Humans, and Other Tales from Evolutionary Economics" is yet another insightful, and provocative book from him, making the best, most persuasive case why accepting evolutionary theory ought to be sound economics for my fellow conservatives. Shermer persuasively argues that Charles Darwin and Adam Smith were essentially looking at the same phenomena, observing that evolution via natural selection is basically nature's "marketplace" operating under laissez-faire principles as expressed in Smith's concept of the "Invisible Hand". Shermer makes his arguments primarily from biology and psychology, without relying much on economics, and yet they are quite convincing. Indeed conservatives ought to be delighted with his cogently argued reasons why government intervention into national economies is often doomed to failure, arguing instead that natural processes inherent in the marketplace are often the only - and best - remedy for economic malaise. He also explains why "Social Darwinism" is a gross distortion of Darwin's thought, misapplied to social engineering and economics, and that both Earth's biosphere and the market are highly organized complex systems that have arisen from simpler ones, giving the false illusion of "being designed" by some external, omnipresent "Intelligent Designer". Without question, "The Mind of the Market" is a most remarkable book which deserves ample readership from the broad body politic, from both liberals and conservatives.
Ecce Homo (Economicus) This was a very interesting book, but be aware that "Market" in the book's title refers to "marketplace" in general, not the stock market; and the book is about economic behavior in general, not investing. There is some discussion of investing behavior, of course, but not that much, so if you're looking for a book specifically about investing, you might want to look elsewhere.
The book uses the data and principles of complexity theory, game theory, evolutionary biology, behavioral psychology, and neuroscience to explain economic behavior (i.e., the allocation of scarce resources that have multiple uses). Shermer argues that today's economy is a complex adaptive system that evolved out of a much simpler system by adapting to historical contingencies. Adam Smith showed how national wealth and social harmony were unintended consequences of individual competition among people, and Darwin followed in his footsteps by showing how complex design and ecological balance were unintended consequences of individual competition among organisms.
Some of the data (such as the neuroscience data about the roles that different parts of the brain play in different behaviors) are a bit technical, and the jumping around from behavioral psychology to neuroscience to economic theory was hard to follow in some places, but the information was so interesting that it usually more than made up for those drawbacks. (It would have been nice to have had at least a basic diagram of the brain's anatomy though.)
It was particularly interesting reading about the animal behavior studies that showed our primate-relatives reacting to test situations so similarly to the way we ourselves react. The evolutionary implications are obvious, of course. It's fascinating to see that monkeys display the same sensitivity to changes in supply and demand as people, and even display loss aversion, one of the most powerful elements in all of human behavior.
Shermer spent quite a bit of time on primate social behavior. The connection to economic behavior seems a bit tenuous, but the stories and data were still pretty interesting. The studies done by de Wahl, Milgram, Zimbardo, and Asch were really thought-provoking, and the "Man in the Gorilla Suit" study was hilarious.
I wouldn't say this is a great book on economics, but it was certainly interesting.
Not skeptical, but ideological I enjoy most of Dr. Shermer's work. His books Why Darwin Matters and Why People Believe Weird Things are two of my favorites. I subscribe to Skeptic magazine (his quarterly pub), and enjoy his lectures on DVD and in person. However, having said all this, I could not make it more than half way through this book. Dr. Shermer has traded in rational thought to join the narrow mindset and ideology of Libertarianism. Some aspects of this viewpoint are fine if taken on their own merits. However, when Dr. Shermer makes his arguments he presents only half the story that supports Libertarianism - this is the sort of thing he used to slam against cults and pseudoscientists. For example, MicroSoft was picked on by Dr. Shermer for supplying a free internet browser in United States v. Microsoft, 87 F. Supp. 2d 30 (D.D.C. 2000), as an example of picking on the producer, where Shermer agrues MS was just doing what was best for consumers by altruistically providing a free browser...so the DOJ should stay out of it. But the case was that MicroSoft had manipulated the built in OS APIs to benefit its browser over competitors- thus killing the competitive marketplace. We need more competition, as I really see now as I try to relearn MS office products now that everything under 2007 has changed from 2003. If they had a competitor maybe their latest products would read data files from earlier versions and be less expensive. Do you really believe that the DOJ looked at this because MS was just being nice and giving away free stuff?
Another example given in the book is Wal-Mart. Dr. Shermer says that the prices are great for consumers. But wait, are they the same products at a lower price? No. Producers are compelled to sell to Wal-Mart for volume, but given the mandate to lower cost every year, they turn to lower quality goods, and Chinese manufacturers that end up poisoning our pet food and putting lead paint on toys. I'm all for Global trade, but the lower priced goods at Wal-Mart are not the same goods I bought at a higher price before. Levi actually made a new jean with lower quality denim and less decorative rivets to sell at Wal-Mart. Read Charles Fishman's Wal-Mart Effect and/or China inc. for far better information on Wal-Mart and China. I'm not a hater, I shop at Wal-Mart but for specific products, and I know that items there are not the same as those sold at other stores. Similarly, do you think Outlet malls are selling the same stuff as department stores, but just last year's models? No, Polo and other soft goods retailers plan a whole line of cheaper material and less expensive to assemble goods just for outlets. It is fine to buy the stuff, but it is not benefiting consumers at Wal-Mart of Outlet malls IF they believe they are getting identical products, but at a lower price. That is pure marketing.
Dr. Shermer is making the same half-arguments as John Stossel does in Myths, Lies and Downright Stupidity - which I reviewed on Amazon too. I'm ok with authors or anyone believing whatever they want - but each part of the belief must stand on the evidence. The idea of freedom for the individual is fine, but misrepresenting facts about the "bad government" hurting poor little old Microsoft for just wanting to give away free products is wrong. The issue of entertainment value from this books comes in here. Stossel and Neal Boortz are funny to read because of how many logical fallacies they make (really, read their books and say to yourself, what? You left off the important side of that argument). But, Dr. Shermer has studied science enough to be closer to the mark in his more careful choice of words, although the errors are still present. This makes his work plain and boring.
The whole theme of his book is bottom up markets, similar to evolutionary forces, rather than top down. A nice premise, but I enjoyed Jared Diamond's Guns, Germs and Steel better for why farmers and traders dominated (there was a national geographic of this too). Also, Tim Harford's The Logic of Life and Undercover Economist, along with Levitt's Freakonomics are fascinating reads on the rationality of economics. Get your economics fix from these books instead. I usually enjoy Dr. Shermer's work, but this one was his worst - jumbled facts in support of an ideology versus true exploration of issues, and frankly a little boring to read (Harford and Levitt's books you can't put down). I will happily give his next book a try. Dr. Shermer should ask himself if he should be a 'libertarian' above all else or a 'curious character' above all else (props to Feynman).
A Look at Scientific Arguments in Favor of Libertarian Governance I don't recall a book that relies so heavily on scientific studies from so many fields to make a case for free markets with minimal government intervention. If you are not familiar with the latest in brain science and evolutionary biology, The Mind of the Market is a good review.
The main argument falters because clearly Mr. Shermer is doing his best to justify what he already believes. He draws the conclusion from the evidence that makes the best case for his ideas, rather than trying to sort out the good and the bad and the ugly from one another.
As an example, he hasn't seen a nongovernmental monopoly he doesn't like . . . and doesn't bother to mention the benefits that customers have gained when such monopolies have ended. To make his case for monopolies resulting from aggressive competition, he has to argue that only near-term dollars and cents for customers count . . . while leaving out the harm from the dislocations that occur in non-economic terms and the potential longer-term benefits of having more competitors. This suggests that predatory pricing to eliminate competitors is a jim-dandy idea even if it leads to artificially higher prices later on after there are no competitors left.
He also feels that biology is destiny. Apparently, we should not expect to behave better than what our bodies encourage. But if that were true, then almost everyone who can be addicted would be addicted . . . and would simply focus on supplying and abusing the addiction. But clearly, most people don't do that.
It's fun to read what he has to say . . . but don't take it seriously.
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