Not as much as Michael Lewis thinksby John Kay / January 16, 2017 / Leave a comment
Published in February 2017 issue of Prospect Magazine
Michael Lewis is an outstanding writer. All his successful books have a characteristic template: the elucidation of complex subjects through the story of larger-than-life individuals. Lewis’s first book, Liar’s Poker (1989), gave an early insight into the growing influence of financial services, but is most memorable for its portrayal of the grotesque figures who stalked the trading floor of Wall Street investment bank Salomon Brothers. In Moneyball (2003), he described how Oakland Athletics manager Billy Beane transformed baseball by elevating statistical analysis over conventional sporting wisdom. The Big Short (2010) explained a key element of the 2008 financial crisis—the meltdown in the US “sub-prime” housing market—through the actions of a few misfits and nerds who saw through the orthodox analysis.
His new book, The Undoing Project, follows the same model, but with much less success. Its subtitle is “a friendship that changed the world.” The friends are two Israeli-American academics, Daniel Kahneman and Amos Tversky, and their achievement was to create the subject of behavioural economics. The problem, however, is that Kahneman and Tversky are not sufficient as characters to carry the story, and the claim that their work “changed the world” is a gross exaggeration. Indeed, the continuing failure of economics to grapple with the way that real human beings behave dogged the discipline right up to 2008—and beyond. In January, the Bank of England’s chief economist, Andy Haldane, warned that its continuing failure as a predictive science invited the sort of derision once heaped on weatherman Michael Fish for failing to foresee 1987’s great storm.