Sunday, January 25, 2009

Five best books on irrational decision-making

For the Wall Street Journal, Jonah Lehrer, author of Proust Was a Neuroscientist and the forthcoming How We Decide, named a five best list of books on irrational decision-making.

One title on the list:
Extraordinary Popular Delusions and the Madness of Crowds
by Charles Mackay

There is nothing modern about financial bubbles. In this classic work, Charles Mackay compiled an exhaustive list of the "schemes, projects and phantasies" that are a recurring theme of economic history. From the tulip mania of 17th-century Holland, in which 12 acres of valuable land were offered for a single bulb, to the South Sea Bubble of 18th-century England, in which a cheerleading press spurred a dramatic spike in the value of a debt-ridden slave-trading company, Mackay demonstrates that "every age has its peculiar folly." He notes that even the most intelligent investors are vulnerable to these frenzies of irrational exuberance: Isaac Newton is reported to have lost a small fortune after the South Sea Co. went bust.
Read about all five books on Lehrer's list.

--Marshal Zeringue