Free Market Madness: Why Human Nature is at Odds with Economics--and Why it Matters (Hardcover)

~ (Author)
Key Phrases: bottomless soup bowls, combat obesity, behavioral economists, United States, Adam Smith, John Howard (more...)

Editorial Reviews

From Publishers Weekly

According to Ubel, physician and behavioral scientist at the University of Michigan, marketers exploit basic human irrationality to persuade people to consume dangerously unhealthy foods and spend more money than they have. Contending that capitalism inherently exploits its participants' vulnerabilities, Ubel posits that it's the government responsibility to guide people to act in their own self-interest with educational campaigns and, possibly, taxes or restrictions on advertising to children. The book explores why such measures have been criticized with a swift discussion on free-choice economics and modern-rationalist economists; equal time is devoted to the findings of scientists and psychologists that rebut such perspectives. While Ubel presents a nuanced treatment of issues often reduced to sound bites, his arguments can be difficult to follow; further, his disdain for everything from snack food to beer, television and expensive prescription drugs might strike some readers as sanctimonious.
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Review

"The American physician is causing quite a stir across the Atlantic…" --Times of London

"Ubel presents a nuanced treatment of issues often reduced to sound bites" --Publishers Weekly, 2008

"...intriguing..."--The New York Times

"an undeniable power to these examples" --Freakonomics blog, The New York Times

"a useful and stimulating book...loaded with information about the ways manufacturers, retailers and advertisers manipulate tastes and appetites." --Toronto Star

an undeniable power to these examples --Freakonomics blog, The New York Times

See all Editorial Reviews

Product Details

• Hardcover: 224 pages
• Publisher: Harvard Business School Press (January 20, 2009)
• Language: English
• ISBN-10: 1422126099
• ISBN-13: 978-1422126097
• Product Dimensions: 9.3 x 6.1 x 1.2 inches
• Shipping Weight: 1.2 pounds (View shipping rates and policies)
• Average Customer Review: 3.5 out of 5 stars  See all reviews (17 customer reviews)
• Amazon.com Sales Rank: #437,560 in Books (See Bestsellers in Books)

Customer Reviews

Most Helpful Customer Reviews

10 of 13 people found the following review helpful:

2.0 out of 5 stars There are far better books on the same topic; read those instead, December 31, 2008

By	Stephen R. Laniel (Cambridge, MA USA) - See all my reviews (REAL NAME)

Behavioral-economics books are thick on the ground nowadays. Violations of classical economic rationality are such a part of the mainstream that they've garnered a Nobel Prize and the ear of the president-elect. So it behooves the authors of such books to say something new and different. They can't just tell us about the endowment effect and handing out mugs, or about making 401(k) enrollment the default. Lots of people have trod this ground, and I doubt that anyone's going to do it better than Thaler and Sunstein did in Nudge, or than Kahneman and Tversky did in Choices, Values, and Frames.

Popularizers are always good, but again we have to compare any behavioral-economics popularizer to Nudge; it's plenty popular, written with great energy, and moreover written by one of the great fathers of the field. One would be hard-pressed to find anyone more qualified to write such a book than Thaler.

Peter Ubel's Free-Market Madness wants to go beyond the Nudge fellows, and I think that's where it goes astray. The Nudge guys, you may remember, describe themselves as `libertarian paternalists': they believe in the power of markets, but at the same time they realize that policymakers have to make choices about other people's lives. I mean `policymaker' broadly: when the HR administrator at your company decides whether to automatically enroll employees in the company's 401(k), she's making policy. Defaults matter very much. Almost none of Nudge is controversial, inasmuch as it just recommends flipping some defaults, but always allowing people the option of flipping back.

Professor Ubel is more controversial in Free-Market Madness. When people might systematically make bad choices about their own lives, he sees no problem in more-forcibly trying to sway them to the right side. Big Macs are bad for you? Tax them (similar to what New York's governor is proposing, as it happens). Advertisers are peddling junk food to kids on Saturday-morning television shows? Stop them from doing it.

These policy ideas are shoved toward the end of Free-Market Madness; it really seems as though Professor Ubel was embarrassed to include them. Consequently, there's no solid rationale for a lot of what he proposes. He arbitrarily tosses out the idea of a 10% tax on a certain extremely unhealthy burger, but where did that number come from? And wouldn't it in fact be a regressive tax, as Marion Nestle noted in the context of New York's proposed soda tax? Poor people eat worse than wealthy people; these taxes will harm them disproportionately.

These policies are disturbing for a couple reasons. First, Ubel hasn't exhausted the libertarian-paternalist policies that are available to him: nowhere does he consider helping poor people eat better; he only considers taxing them. Second and more disturbingly, Ubel's solution for failed regulation is more regulation. A nontrivial part of why this country's food supply contains so much corn is that the annual farm bill encourages it. Farmers grow corn "fencerow to fencerow," driving the price down; isn't it perverse to then tax corn-syrup-based beverages to make Americans less fat? Note that Ubel's examples of market failure are all focused on the United States. If he had stopped to ask why, say, the French aren't as fat as we are, his book might have said less about the supposed biological bases of American obesity, and more about poor regulation. But this would have then deep-sixed his own proposed regulations.

Finally, you don't need behavioral economics to understand why it makes sense to regulate food marketing. When you step into the grocery store, and your child tugs at your sleeve to insist that you buy the latest junk food he saw on TV, you know why marketing needs to be regulated. All the resources of some of the world's largest corporations are amassed against you. It's not a fair fight.

I know Ubel's heart is in the right place; he's a doctor, and he's seen too many of his patients make poor decisions about their own lives. For all that, I can't recommend that anyone read Free-Market Madness. If you're interested in behavioral economics, your time is better spent with Thaler and Sunstein. If you're interested in food marketing, and the industry's fight against the "junk food" label, read Marion Nestle's two essential books, Food Politics and What To Eat. For more about the regulation that got us into this pickle, read The Omnivore's Dilemma.

12 of 17 people found the following review helpful:

4.0 out of 5 stars When logical choices become illogical; introducing behavioral economics, January 1, 2009

By	S. McGee (New York, NY) - See all my reviews (TOP 500 REVIEWER)    (REAL NAME)

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America loves its free market heroes, as Peter Ubel admits. Just think of the West Berlin Coca-Cola manager who, on hearing that the Berlin Wall was coming down, headed off to the barrier with cases of the soft drink and offered a bottle to every East German crossing the border. Ubel doesn't for a second doubt that that act was a triumph for free markets and for Coca-Cola - but was it logical or in the best interests of the rest of society? "Was Coca-Cola the very best thing that the (free market's) invisible hand could bring to people just escaping from decades of communism? And should we, then, celebrate the increase in tooth decay and diabetes diagnoses now spreading through Eastern Europe?" In a perfectly free market, obesity, dying of emphysema after a lifetime of smoking or failing to save a dime for retirement may be seen as completely logical choices by libertarian economists and policymakers. But sometimes the best outcomes for free markets are not the best outcomes for the people within those markets - and then what do we do?

The factors that lead to such illogically logical (or logically illogical?) decisions are the focus of Peter Ubel's accessible, lively and very important discussion of the emerging field of behavioral economics. While there are numerous other books out there on the topic, this serves as a much-needed primer for readers who aren't ever going to read the scholarly works on the subject and who prefer a solid introduction to the topic itself before delving into policy issues that flow from it. The `what to do' element is the weakest portion of the book, but the rest is a fascinating introduction to the nature of the conundrums that policymakers face.

Ubel identifies and describes, with an eye for what will make the concepts most comprehensible, many of the paradoxes with which behavioral economics concerns itself. Why do people continue to overeat and overspend? These are some of the most vital economic and social question we face. When investors succumb to greed instead of making a rational decision, they lose money. (Just think back to the heady days of the dot.com stocks, or, more recently, to the irrational decisions made by home-buyers when it came to figuring out how much home they could afford or what kind of mortgage was the right one to select.) We postpone saving and accelerate consumption, sending our personal debt levels soaring. We don't exercise enough; we smoke and drink too much. And we eat too much - leading to epidemic levels of obesity. We are stubborn, we react based on emotions rather than reason and we really hate being told what to do, by our parents or anyone else in authority. All of which has ramifications not just for each of us individually, but for our society.

Ubel doesn't address the financial markets often in his discussions, but the publication of this book is very timely from that perspective. Why do investors picking a mutual fund always select the one with the strongest recent track record, despite all the research that has shown that no fund manager can continue to outperform for very long and the warnings all the mutual funds are required to display on their prospectuses that past performance is no guarantee of future results? Certainly, no one can doubt that a free market was thriving during the subprime mortgage boom - why, then, were home buyers purchasing more house than they could afford and then financing those purchases (sometimes unnecessarily) with risky mortgage structures?

Ubel's perspective on behavioral economics is different from that of others who have written about it; he has to deal, day by day, with the fallout of many of the poor choices made by his own patients. No one sets out to become obese or addicted to tobacco or alcohol. Yet one of Ubel's alcoholic patients, he recounts, was so desperate for a "fix" that he drank the contents of three of the hospital's dispensers of hand-sanitizer and collapsed: an utterly irrational act. He shows how our innumeracy hinders our ability to correctly understand risk (most of us worry more when told we have a 130 in 1,000 chance of death than 13 in 100 - even though the risk is numerically identical). And when we do make rational decisions, these can lead to what most of us would admit are irrational and unintended outcomes. For instance, a family living near the poverty line and struggling to pay for groceries would actually fare better if they bought cookies instead of carrots with their scarce dollars; the former contain more calories per scarce dollar. Ubel even offers examples of supposedly rational individuals, from eBay auction participants to economists, behaving irrationally.

Unlike the handful of other accessible tomes revolving around decision-making and behavioral finance, Ubel is diagnostic rather than prescriptive. Were it not for the existence of books like Nudge: Improving Decisions About Health, Wealth, and Happiness, that would be a bigger weakness than it is. (The reality? That is primarily a policy book -- and a brilliant one -- while this is more general in nature. Works by Daniel Kahneman, some of which I have read, would logically replace Ubel's work for the specialist reader familiar with economics and scholarly writing, but they will be harder sledding for all but the most committed general reader.) Still given the relative newness of much of this material to the same general reader, I would recommend Ubel's work as a lively and knowledgeable general introduction to the many conundrums posed by unbridled free markets, as written by a passionate non-economist. Anyone interested in understanding the policy implications more deeply can then move on to Nudge.

I shared this book with two highly economics-resistant friends over the holidays and their comments ("oh, NOW I get what you're talking about....") earned it its four-star rating. I'm willing to bet that it will be hard for anyone who reads this book to not stop and think about its arguments whenever they next confront the temptation posed by a Krispy Kreme donut.

Recommended primarily for those new to the subject, or who aren't ready to tackle the nitty-gritty of the policy implications.

6 of 9 people found the following review helpful:

2.0 out of 5 stars If the individual is irrational why is the state rational?, February 12, 2009

By	Stick-In-The-Mud "Oldvannes" (San Francisco) - See all my reviews

This book is a glaring example of why Psychology is a long long way from being a science in the same sense as chemistry, physics or geology. The shoddy methodology of experimental design aside, his very argument: that the individual is irrational and thus easily manipulated by the marketer, seems to have missed the obvious. Who controls the state? The very irrational creatures who are manipulated by the market. Is it possible that these people could also be manipulated by group thinking, ideology, fashion, ambition, greed, envy, etc. So if I don't know better, hopefully someone or some group can better direct by desires, ambitions and behaviors? The whole point of an open and free society is that, even as imperfect creatures, we are ultimately responsible for our successes and our failures. We learn from our mistakes, we correct what we do wrong and improve our situation or we do nothing and suffer the consequences until, if ever, we learn our lesson. A heavy handed irrational state would, as it always has, make an imperfect situation much worse.