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December 30, 2008

Best Ideas and Books of 2008

Catherine New
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We asked faculty members to look back at the year and give us their pick for the best idea or book of 2008. Here’s what they said.

Professor Joel Brocker
Best idea:
Behavioral economics and decision making
Why? “This year it’s been quite exciting to see the related fields of behavioral economics, behavioral finance and behavioral decision making coming into the popular domain,” said Brockner. “The fields refer to the psychological influences on decision making, and how people don’t always adhere to ‘economically rational’ views of decision making. There have been a number of books on this topic in recent years, such as Blink by Malcolm Gladwell, and in 2008, Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard H. Thaler and Cass R. Sunstein.”

Professor Eric Johnson
Best idea/book: Nudge: Improving Decisions About Health, Wealth, and Happiness by Richard H. Thaler and Cass R. Sunstein
Why? The book’s notion of choice architecture is very powerful for firms and policymakers because they can make changes within their organizations for almost no money, said Johnson, who reviewed the book for Science magazine earlier this year.

Professor Rita McGrath
Best books: The Game-Changer: How You Can Drive Revenue and Profit Growth with Innovation by A.G. Lafley and Enough: True Measures of Money, Business, and Life by John Bogel
Why? Both of these topics, growth and a reordering of business values, will be key in the coming year, according to McGrath. “There will be a structural shift and we’re seeing the early warnings that will happen,” said McGrath. “Financial innovation is not the only kind of innovation. It is a great time for innovators to be looking forward for two reasons. First, tough times mean we have no choice but to be creative; a lot of great companies started this way. Secondly, when resources are hard to come by, people have to behave with more discipline. They test assumptions and impose a more disciplined approach.”

Professor Ray Horton
Best book: John Maynard Keynes: Economist, Philosopher, Statesman by Robert Skidelsky
Why? “I read this book last August while capitalism as we’d come to know and love was melting down into what now looks like the most severe downturn since the Great Depression,” said Horton. “Keynes had been out of vogue among most economists and policymakers for more than a quarter-century, dating back to the ‘purification’ of capitalism by Milton Friedman and other monetarists. If anyone wants to understand why we’re all Keynesians now, to borrow a phrase from Richard Nixon, Skidelsky’s biography provides the answer: Capitalism is very unstable from time to time, and from time to time the state needs to bail it out in order to get it up and running again.”

Professor Paul Glasserman
Best idea:
The Federal Reserve’s managed sale of Bear Stearns
Why? “It was executed quickly (over a weekend) and creatively (given that Bear was not subject to regulation by the Fed). The Fed’s only exposure is a collateralized loan, backed by the type of mortgage-backed securities the TARP was later created to prop up,” said Glasserman. “Employees and shareholders suffered from Bear’s collapse, but the managed sale may have been the most effective step taken this year to try to limit the spread of the financial crisis.”

Professor Ray Fisman
Best book: Gomorrah: A Personal Journey into the Violent International Empire of Naples’ Organized Crime System by Roberto Saviano
Why? “The Camorra, Naples’ version of the Cosa Nostra, out-Godfathers The Godfather and out-Sopranos The Sopranos. Sometimes, as the saying goes, truth is stranger than fiction (and in this case it’s certainly a lot more violent). As a scholar of economic gangsterism, it is really striking how often Saviano emphasizes that Naples’ mob bosses are rational businessmen of crime,” said Fisman. “You’ll never look at a ball of mozzarella the same way again.”