Financ Mark Portf Manag (2018) 32:235–237
Michelle Baddeley: Behavioral economics: a very short
Oxford University Press, 2017, 168 pages
Published online: 7 May 2018
© Swiss Society for Financial Market Research 2018
“We do not play chess like a grandmaster, invest like Warren Buffett, or cook like an
Iron Chef. Not even ‘as if.’ It is more likely that we cook like Warren Buffett (who
loves to eat at Dairy Queen).” This quote from economist and Nobel laureate Richard
illustrates the fundamental problem of traditional economics: It assumes that
everyone acts “as if” he or she were an expert. In reality, however, this is rarely the
case. Humans often rely on instincts, utilize stereotypes, and misjudge probabilities.
Behavioral economics aims to adjust for these inaccuracies.
In Behavioural Economics: A Very Short Introduction, Michelle Baddeley intro-
duces the reader to behavioral economics and outlines how it revolutionizes economic
models and methods. Thereby, she not only succeeds in providing the reader with an
excellent overview of the topic but also in sparking intrigue within the reader to dig
further into the subjects throughout the book.
Baddeley structures her short introduction in nine chapters. In the ﬁrst chapter,
Baddeley brieﬂy discusses the difference between traditional economics and behav-
ioral economics. She then proceeds to discuss different methodologies of the two and
outlines the constraints economic researchers face in studying human behavior. In this
ﬁrst chapter, Baddeley nicely manages the balance between depth and breadth and
provides the reader with a clear outlook of what will come in the subsequent chapters
without overwhelming new-to-the-ﬁeld novices.
Thaler, R. H. (2015). Misbehaving: The making of behavioural economics.
Swiss Institute of Banking and Finance (s/bf) of the University of St. Gallen, Unterer Graben 21,
9000 St. Gallen, Switzerland