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Thaler, Richard H., The Winner's Curse, Paradoxes and Anomalies of Economic Life, Princeton, NJ: Princeton University Press, 1992, 230 pp., $24.95.
The book is a revision of columns, many of which were co-authored, that originally appeared in the Journal of Economic Perspectives between 1987 and 1990. The primary author is an economics professor at the Johnson Graduate School of Management at Cornell University.
The 15 readable chapters focus on economic anomalies--observations that contradict economic theory. In chapter 1 two assumptions common to applications of economic theory are mentioned: rationality and self-interest. The practical limitations of the assumptions are discussed through examples of human error and cooperation, among others. The next 13 chapters focus on systematic limitations in economic predictions. Financial markets are emphasized because, according to the author, they have been presumed to be most efficient. The author's intent is to motivate improved theory that uses human strengths and recognizes our limitations: quite a challenge.
Each of the 13 groups of anomalies contains examples that are rich, sometimes humorous, and based on empirical research. Each chapter starts with...