This is another book in the same mould as Predictably Irrational and A Mind of Its Own, covering the way we think and behavioural economics. The real difference is that this book is the collected wisdom of an octogenarian Nobel prize winner! As such, it's pretty much source material, rather than a pop science rehashing. It doesn't look to be a particularly long book, but looks are deceptive - it comes in at around 500 pages. I think they must be using special thin paper.
So, it's terribly worthy, at the very least. He very clearly knows his stuff, and is only slightly less entertaining than less academic writers. I found the first half of the book fascinating, where he discusses how our thought processes can be divided into an 'intuitive' automatic system, which really isn't rational, and a more logical thought system, which spends most of its time trying to avoid getting triggered! The second half was more the behavioural economics that builds on top of that, and this I found less exciting.
The part about the way we think has many interesting insights. It's a very associative system - you think about related things, and even when you think about the negations of things, that's an explicit association. In other words, our brains think like fuzzy Prolog. Just like Prolog, there's a confusion between a lack of evidence and an evidence of lack. It also seems very interesting that such an associative engine should be built on top of neural infrastructure, which is intrinsically associative. Of course, just because the bottom level infrastructure shows patterns which are also seen in the top level, it doesn't mean that they're actually the same mechanism, but it's certainly intriguing.
As these associations can be triggered subconsciously (see 'Priming'), and can affect your behaviour without your realisation, our thought processes are much more vulnerable than I'd realised. In a rational model of the world, advertising might give you factual information you need about products, or present a novel approach which piques your interest, or encourages you to associate a brand with a particular style or whatever. In the real world of humans, however, advertising is a bludgeon on our associative networks, invading our mental space, priming us with a pile of concepts and shovelling associations into our head whether we like it or not. In terms of abusing our mental facilities, advertising seems about as ethical as pushing addictive drugs, and I'm starting to think that advertising in public spaces should be illegal!
Alas, the second half of the book I found somewhat tedious to get through. It could have been that there were so many pages, or that I genuinely find behavioural economics a little more dull. Some of his explanations didn't really work for me, either.
For example, he has done experiments that show people intuitively over-weigh very small probabilities, and under-weigh very high probabilities. In lotteries, this is where the profit comes from. However, in other situations, I think this is much less irrational than he makes out. When someone actually calculates a long probability, they're prone to cock it up. See the number of one-in-a-million nuclear accidents that have happened, for example. So, it logically makes sense to overweigh small probabilities, if the result is drastic and the probability approximate.
A similar argument can be made to explain the 'endowment effect'. This effect is the way that people overvalue things they own - they would sell them for a higher price than they would otherwise buy it at. This sounds irrational. However, it is rational if there is uncertainty in the price - if I am uncertain of the value of something, but would buy and sell at the same (guessed) price, I am sure to get a bad deal from someone who knows the true value. Instead, I'll buy low and sell high - the standard bid-offer spread of markets!
I'm sure that my explanations aren't the real ones - there are genuine irrational effects going on in these situations. However, my sense of rationalisation thinks the advantages of the 'irrational' behaviour were underrated.
So, there you have it. A rather good, and thought-provoking book, albeit one whose second half bored me a bit. Worth a read if you can face the page count.