Paul Monk

The Weekend Australian - Review - - Books -

Michael Lewis writes good books. They tend to be con­cise, highly read­able, im­mensely lu­cid and con­cerned with fas­ci­nat­ing mat­ters of hu­man con­fu­sion and how to find one’s way through it. He also tends to be highly in­ter­ested in thinkers who op­er­ate out­side the range or author­ity of pop­u­lar prej­u­dice and con­ven­tional in­tel­lec­tual wis­dom.

His first, Liar’s Poker (1989), was about his strange ex­pe­ri­ence in a Wall Street bank’s bond trad­ing depart­ment. Since then, he has writ­ten a string of best­sellers. Per­haps the most fa­mous of them have been Money­ball (2003) and The Big Short (2010), both turned into films.

His lat­est book, The Un­do­ing Project: A Friend­ship that Changed the World, is less thrilling — not be­ing about sport or the cor­rup­tions and stu­pidi­ties of Wall Street and the US gov­ern­ment — but it is a won­der­ful story and Lewis is a first-rate ra­con­teur.

The story is that of the ex­traor­di­nary in­tel­lec­tual friend­ship be­tween Amos Tver­sky and Daniel Kah­ne­man, which took cog­ni­tive psy­chol­ogy to new lev­els and ended up gen­er­at­ing the new dis­ci­pline of be­havioural eco­nom­ics, with pro­found im­pli­ca­tions for pub­lic pol­icy and the whole con­ver­sa­tion about choice and hu­man ra­tio­nal­ity.

As with the he­roes of Money­ball and Short, the he­roes of this story were highly in­tel­li­gent, some­what ec­cen­tric out­siders ad­dicted to ask­ing curly ques­tions and dig­ging re­lent­lessly for the an­swers.

Lewis uses as the epi­graph to his book a quip by Voltaire: ‘‘Doubt is not a pleas­ant con­di­tion, but cer­tainty is an ab­surd one.’’ One might add that a fog of con­fu­sion is the most com­mon hu­man ex­pe­ri­ence and that bring­ing about tol­er­a­ble clar­ity — to say noth­ing of cer­tainty — is an ex­act­ing task.

Yet our econ­o­mists ar­gued for a long time that hu­man be­ings were ‘‘util­ity-max­imis­ing ra­tio­nal­ists’’ and that this was why mar­ket economies worked — and worked bet­ter than com­mand economies. There is a lot to this, but …

Be­havioural eco­nom­ics, which re­lies on the in­sights of Kah­ne­man and Tver­sky, is based on a sub­stan­tial cor­rec­tion of that as­sump­tion. And, as Richard Thaler (one of the founders of that dis­ci­pline and an­other of Lewis’s out­siders) and Cass Sun­stein (a bril­liant for­mer pro­fes­sor of ju­rispru­dence and po­lit­i­cal sci­ence at Chicago Univer­sity) point out in Nudge: Im­prov­ing De­ci­sions About Health, Wealth and Hap­pi­ness (2009), if we want our cit­i­zens to make ra­tio­nal The Un­do­ing Project: A Friend­ship That Changed the World By Michael Lewis Allen Lane, 369pp, $45 (HB)

Amos Tver­sky, left, and Daniel Kah­ne­man in Stan­ford, Cal­i­for­nia, in the late 1970s

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