Book Review : Basic Instincts:Human Nature & The New Economics

Lunn takes apart the traditional economic models in an accessible and readable way. He explains the approach of Behavioural Economics, which uses data from various psychological studies to show that whilst some people behave selfishly more people are likely to value things like fairness, trust and familiarity above selfishness and are very uncomfortable with risk and uncertainty. In his enlightening illustration this type of person is labelled ‘Muddleton’. He also asks some challenging questions such as if firms’ primary goal was to maximise profit, why don’t they cut wages more often?

Pete Lunn, with his background in neuroscience, journalism and now an economist, is a strong supporter of good science, believing that conventional theorists are struggling to make the facts fit the theory and that current economic theories have poor predictive power. He argues that both are signs of a poor theory but that many economists are very resistant to change. Lunn believes a new theory of economics based on good science should emerge based on the facts of how people actually behave rather than an inaccurate set of assumptions. This approach is the closest we can get to the truth. He also throws in some other interesting ideas such as proposing that marketing should be taxed! Lovely, let’s do it!

A well written, interesting and lively read, aimed at economists and lay people, which questions traditional assumptions of human behaviour.