Journal of Economic Psychology 7 (1986) 387-391

North-Holland

387

BOOK REVIEWS

Jean H.P. Paelinck and Paulus H. Vossen, The quest for optima&y: issues in interdisciplinary studies I. Gower, Aldershot and Brookfield, VT, 1984. pp. V 8z 166, E15.95.

This book is the product of an interdisciplinary project on optimis- ation in the social sciences which was organised at Erasmus University, Rotterdam. The strategy of the working group was to invite each member to submit a presentation on the meaning and use of the term optimisation in their own respective discipline, while the editors shouldered the tasks of establishing a common framework for these different approaches. The papers are published in two parts; the former concerns theoretical issues and the latter the difficulties of applying optimisation concepts.

The questions raised within the study are interesting. In particular they draw attention to the concept of optimality, not simply as a solution to a specified model, but also in terms of the optimal model for dealing with problems. In part one of the book Schoemaker considers the degree of subjectivity inherent in the approach to opti- mality. He considers the option of selecting a teleological approach. For example, Fermat’s work on the angles of refraction when a stick is placed in water attributes to light the purpose of choosing the path of least travel time between specified points. The legitimacy and value of this intentional perspective are assessed. The discussion is followed in chapter two by a consideration of the framework for decision making. Paelinck and Vossen seek to show how alternative views on decision making may be integrated in a coherent framework but conclude that there is no one single best model for decision making. They consider three views on decision making to which particular disciplines have traditionally given different emphasis. The model-oriented view at- tempts to describe any decision making by providing a consistent formal expression of all components (e.g., objects, preferences, un- certainty, etc.). The problem-oriented view focuses on formulation and

0167-4870/86/$3.50 0 1986, Elsevier Science Publishers B.V. (North-Holland)

388 Book reviews

solution. The process-oriented view analyses the dynamic character of decision making.

In part two of the book theoretical models are criticised in terms of their applicability to the real world. Rinnooy Kan offers a critique of the mathematical programming format in operational research. Models are claimed to give undue emphasis to mathematics m~pulability rather than real world representation. Since objectives are difficult to model, the recommendations drawn from models are rejected. While certain aspects of human decision making defy theoretical description they cannot simply be ignored. Wesemann draws similar conclusions with respect to cost-benefit analysis. He describes a case study with reference to penal policy in The Netherlands. With traffic noise as an external cost, the optimal limit on traffic speed is sought. Theoretical deficiencies of cost-benefit analysis are related to questions that arise in instances when individual preferences are over-ridden (e.g., the provision of merit goods). Moreover, in practice, resource allocation proposals resulting from cost-benefit analysis may be rejected when other objectives (e.g., income distribution) predominate.

Arguably the best paper in this collection is the second contribution by Schoemaker which is a reprint of his article in the Journal of Economic Literature. It presents an assessment of the contribution of the expected utility model. The model is considered against four objectives: description, prediction, postdiction and prescription. An interesting survey of applied work finds the expected utility model failing in terms of either describing the decision process or predicting behaviour. Failure is explained as resulting from inadequate recogni- tion of various psychological principles. Given these failings, doubt is automatic~ly cast on its prescriptive role to improve decisions. The postdictive view is, however, an important consideration for the study of optimality. It suggests that all observed human behaviour is optimal when appropriately modelled. Such a defence implies that observed failings may be illusory but, at the same time, introduces the question of tautology. Bree considers this postdictive issue in his paper and rejects the view that people cannot but maximise their utility. He is concerned with the argument that the theoretically adopted approach to optimality is not justified as a representation of the use of the concept in real life decision making. A heuristic approach is claimed more realistic and, as such, decision trees, satisficing and the expert approach are more valid representations of decision making.

Book reviews 389

The editors conclude that precise reasons have been offered for advising care in the use of the concept of optimality. Yet while failings of techniques are made evident, more might have been expected in terms of a positive response. Also in considering optimality, greater emphasis might have been given to normative considerations. Social choice literature reflects upon the difficulties of determining a ranking of society’s preferences in order to identify an optimal outcome. Presentation in this book frequently suffers as a result of inadequate proof reading. Nevertheless, many of the arguments presented are thought provoking and worthy of further consideration.

Philip Jones School of Humanities

and Social Sciences University of Bath

Bath BA2 7AY, U.K.

Adrian Furnham and Alan Lewis, The economic mind. The social psychology of economic behaviour. Wheatsheaf, Brighton, 1986. E22.50 (cloth), E10.95 (paper).

The economic mind is a first textbook on economic psychology, psychological economics or, as the authors call it, the social psychology of economic behaviour. This gives the scope and the limitation of this book. The perspective is a social-psychological one with an emphasis on attribution theory (the explanations of unemployment, poverty and wealth). The limitation is almost necessary. It is simply impossible to cover all aspects of economic behaviour within a reasonably sized book.

The subjects covered are: economic socialization, money, poverty, wealth, unemployment, the protestant work ethic, saving, spending, gambling, consumer choice, and taxation. The book starts and ends with theoretical sections on economic beliefs, concepts and theories in economic psychology, and the future of both economic psychology and psychological economics. Not covered are topics, such as: inflation, credit, borrowing, and entrepreneurial behaviour.

Some subjects, such as consumer behaviour, are given only limited attention, while much more is known about it, e.g., on advertising or on