How We Misunderstand Economics and Why it Matters: The Psychology of Bias, Distortion and Conspiracy

by David Leiser, Yhonatan Shemesh

This is the first book to explain why people misunderstand economics. From the cognitive shortcuts we use to make sense of complex information, to the metaphors we rely on and their effect on our thinking, this important book lays bare not only the psychological traits that distort our ability to understand such a vital topic, but also what this means for policy makers and civil society more widely.

Accessibly written, the book explores the mismatch between the complexities of economics and the constraints of human cognition that lie at the root of our misconceptions. The authors document and explain the gamut of cognitive strategies laypeople employ as they grapple with such complex topics as inflation, unemployment, economic crises, finance, and money in the modern economy. The book examines sources of misconceptions ranging from the intentionality fallacy, whereby economic phenomena are assumed to have been caused deliberately rather than to have come about by an interplay of many agents and causal factors, to the role of ideology in framing economic thinking.

Exposing the underlying biases and assumptions that undermine financial and economic literacy, and concluding with recommendations for how policies and ideas should be framed to enable a clearer understanding, this will be essential reading not only for students and researchers across psychology and economics, but also anyone interested in progressive public policy.

Visit the associated website for the book

Genres: Economics, Nonfiction, Psychology

178 pages, Kindle Edition

Published May 21, 2018

Reviews

[Malek Atia · Rating 5 out of 5]

This book brings to question a problem, how could we have a democracy if most of the people are not aware of the economic implication of their actions? it showed the likely causes of this problem and it opens the door to more research on how to bridge the gap between the economist and the lay person.

[Tobi Lawson · Rating 4 out of 5]

Lovely book. Gets at the heart of why we cognitively misuse and have trouble learning basic economic concepts. My simple critique is that there is a bit of over reliance on social psychology experiments. These studies may prove less informative or replicable in the future. Also the final part where they discuss educational remedies are not convincing. Good book all round. Everyone should read it.

[Henri Tournyol du Clos · Rating 4 out of 5]

That was a quick and informative read and I did learn a few things on a subject I once used to teach, which was really gladdening, BUT this is a very partial treatment (incidentally like in Boyer & Petersen's 2018 paper) of the matter, that leaves entirely out two of the four main biases that prevent people from thinking like economists (see Bryan Caplan, The Myth of the Rational Voter, 2008): innate xenophobia and the pessimistic bias. It also leaves out the frequent tendency to see economic growth as some sort of competition between nations and the pervasive thinking in terms of economic "might".