The Mind of the Market: Compassionate Apes, Competitive Humans, and Other Tales from Evolutionary...

The Mind of the Market: Compassionate Apes, Competitive Humans, and Other Tales from Evolutionary Economics | Michael Shermer | A Look at Scientific Arguments in Favor of Libertarian Governance

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The Mind of the Ma...

	The Mind of the Market: Compassionate Apes, Competitive Humans, and Other Tales from Evolutionary Economics Michael Shermer Times Books, 2007 - 336 pages average customer review:based on 21 reviews view larger image
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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.

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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.

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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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reviews: page 1, 2, 3, 4, 5

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