Rationality Gone Awry? Decision Making Inconsistent with Economic and Financial Theory

Subjects:

• Economics » Economic Theory
• Economics » Microeconomics
• Economics » Economics (General)
• Psychology » Social Psychology

Reviews:

• Professor Schwartz makes an important contribution to acquainting economists with the existing foundations of a behavioral theory of economics, particularly, but not exclusively, those originating in psychology.
  —Business Economics
• It is an excellent book and an enjoyable read.... [T]hroughout the book the reader is offered considerable direction for further reading. Citations are numerous and well considered, and there are two appendices and a detailed, annotated bibliography. It is thus an excellent reference on top of being... the best introduction to this literature that I have seen.
  —Journal of Economic Issues
• With this volume, Schwartz has lowered the entry barriers to studying behavioral economics for serious students and scholars. We can hope that they will respond rationally, or at least quasi-rationally, by reading and taking the argument to heart.
  —Journal of Economic Organization and Behaviour

• Endorsement From Herbert A. Simon
  Richard King Mellon University Professor
  Carnegie Mellon University
  Nobel Prize in Economics, 1978: Rationality Gone Awry? reviews a wide range of evidence about how people make economic decisions, revealing large discrepancies between this evidence and the assumptions of the reigning classical theory. It thereby provides a welcome guide for those who wish to inject into economic theory some of the realism it requires in order to describe the real world of economic affairs or to offer realistic advice to businessmen and policy makers.
• Endorsement From Robert H. Frank
  Goldwin Smith Professor of Economics
  Cornell University: Rationality Gone Awry? is at once the best and most effortlessly accessible primer on behavioral economics available in the marketplace. Readers will be especially pleased with Professor Schwartz's thoughtfully annotated bibliography. There is simply no better way to become acquainted with the ideas in this increasingly influential field.
• Endorsement From Catherine S. Elliott
  Professor of Economics
  New College of the University of South Florida: I believe that Rationality Gone Awry? will make an excellent supplement to economics and finance courses which seek to provide students with a balance between the standard neoclassical theories and the real-world of actual decision making. Economics enrollments have been declining nation-wide over the past few years, perhaps in part due to the ever-widening gap between theory and reality. I believe that books such as [this] may help reverse this trend as students seem particularly thirsty for "proof" that the disciplines of economics and finance are willing to change in response to the profusion of disconfirming evidence regarding the veracity of their models.

Table of Contents:

• Preface
• Introduction
• The Basic Argument
• The Overview
• Economic and Financial Decision Making: A Behavioral Approach
• Behavioral Considerations
• What Do Individuals and Enterprises Seek? The Objective(s) Underlying Economic and Financial Decisions
• Implementing the Objectives: Characteristics of the Process
• Major Anomalies and the Presumed Rationality of Financial and Economic Behavior
• Expectations and Expected Profits
• Behavioral Finance
• Possible Applications
• Guidelines for Decision Making
• Appendices
• Appendix A: Rules of Thumb (Heuristics)
• Appendix B: Entrepreneurial Response to Economic Liberalization and Integration
• Where To Go From Here: Bibliographical Suggestions
• Index