PRICELESS

THE MYTH OF FAIR VALUE (AND HOW TO TAKE ADVANTAGE OF IT)

Bright analysis of the psychology of pricing.

Poundstone (Gaming the Vote, 2008, etc.) immersed himself in the young field of behavioral decision theory to write this engaging book about the many irrational factors that influence the prices of things. Founded by University of Michigan psychologist Ward Edwards in the early 1960s, the field has produced insights that are now widely used by price consultants who help corporations “extract the maximum willingness to pay from each consumer.” Prices are simply made-up numbers, writes the author, and most people are clueless about them. Experiments by psychologists at the Oregon Research Institute and elsewhere reveal the many ways to sway people who are estimating monetary values. For example, setting an absurdly high initial, or “anchor,” price on an item (or demanding an exorbitant cash settlement from a jury) will generally lead people to pay more than they might have. In retail stores, obscenely high-priced items (such as a $7,000 handbag) make everything else (such as similar $2,000 handbags) look affordable. Similarly, in another exploitation of the “contrast effect” in prices, more $800 shoes will be sold when $1,200 shoes are displayed next to them. After describing the field’s major researchers and their work, Poundstone devotes most of the book to explaining how behavioral decision-making plays out in the real world, where price numbers are influenced by many irrelevant factors. He explains how supermarkets are able to charge premium prices for “organic” and “green” products; how restaurant menus are designed to draw attention to profitable dishes; how rebates cast a magic spell on consumers, many of whom never submit claims or cash the checks that are sent out; and why the sky’s-the-limit prices charged for text messages are “possibly the greatest ongoing con job of American capitalism.” Online shoppers will be dismayed to learn how background images on websites can affect product choices, and Poundstone provides plenty of useful information for negotiators, car and home buyers, investors and others trying to figure out what to pay.

Readable and revealing.

Pub Date: Jan. 12, 2010

ISBN: 978-0-8090-9469-1

Page Count: 320

Publisher: Hill and Wang/Farrar, Straus and Giroux

Review Posted Online: June 24, 2010

Kirkus Reviews Issue: Oct. 15, 2009

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A declaration worth hearing out in a time of growing inequality—and indignity.

ECONOMIC DIGNITY

Noted number cruncher Sperling delivers an economist’s rejoinder to life, liberty, and the pursuit of happiness.

Former director of the National Economic Council in the administrations of Presidents Bill Clinton and Barack Obama, the author has long taken a view of the dismal science that takes economic justice fully into account. Alongside all the metrics and estimates and reckonings of GDP, inflation, and the supply curve, he holds the great goal of economic policy to be the advancement of human dignity, a concept intangible enough to chase the econometricians away. Growth, the sacred mantra of most economic policy, “should never be considered an appropriate ultimate end goal” for it, he counsels. Though 4% is the magic number for annual growth to be considered healthy, it is healthy only if everyone is getting the benefits and not just the ultrawealthy who are making away with the spoils today. Defining dignity, admits Sperling, can be a kind of “I know it when I see it” problem, but it does not exist where people are a paycheck away from homelessness; the fact, however, that people widely share a view of indignity suggests the “intuitive universality” of its opposite. That said, the author identifies three qualifications, one of them the “ability to meaningfully participate in the economy with respect, not domination and humiliation.” Though these latter terms are also essentially unquantifiable, Sperling holds that this respect—lack of abuse, in another phrasing—can be obtained through a tight labor market and monetary and fiscal policy that pushes for full employment. In other words, where management needs to come looking for workers, workers are likely to be better treated than when the opposite holds. In still other words, writes the author, dignity is in part a function of “ ‘take this job and shove it’ power,” which is a power worth fighting for.

A declaration worth hearing out in a time of growing inequality—and indignity.

Pub Date: May 5, 2020

ISBN: 978-1-9848-7987-5

Page Count: 384

Publisher: Penguin Press

Review Posted Online: Feb. 26, 2020

Kirkus Reviews Issue: March 15, 2020

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BEATING THE STREET

More uncommonly sensible investment guidance from a master of the game. Drawing on his experience at Fidelity's Magellan Fund, a high- profile vehicle he quit at age 46 in 1990 after a spectacularly successful 13-year tenure as managing director, Lynch (One Up on Wall Street, 1988) makes a strong case for common stocks over bonds, CDs, or other forms of debt. In breezy, anecdotal fashion, the author also encourages individuals to go it alone in the market rather than to bank on money managers whose performance seldom justifies their generous compensation. With the caveat that there's as much art as science to picking issues with upside potential, Lynch commends legwork and observation. ``Spending more time at the mall,'' he argues, invariably is a better way to unearth appreciation candidates than relying on technical, timing, or other costly divining services prized by professionals. The author provides detailed briefings on how he researches industries, special situations, and mutual funds. Particularly instructive are his candid discussions of where he went wrong as well as right in his search for undervalued securities. Throughout the genial text, Lynch offers wry, on-target advisories under the rubric of ``Peter's Principles.'' Commenting on the profits that have accrued to those acquiring shares in enterprises privatized by the British government, he notes: ``Whatever the Queen is selling, buy it.'' In praise of corporate parsimony, the author suggests that, ``all else being equal, invest in the company with the fewest photos in the annual report.'' Another bull's-eye for a consummate pro, with appeal for market veterans and rookies alike. (Charts and tabular material— not seen.)

Pub Date: March 1, 1993

ISBN: 0-671-75915-9

Page Count: 320

Publisher: Simon & Schuster

Review Posted Online: May 20, 2010

Kirkus Reviews Issue: Jan. 1, 1993

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