Worst-Case Economics: Extreme Events in Climate and Finance.

• Author: Jefferson, Michael
• Position: Book review

Worst-Case Economics: Extreme Events in Climate and Finance, by FRANJK ACKERMAN (Anthem Press, London (UK) and New York (USA), 2017)187 pages, ISBN 1783087072 and 9781783087075, hardcover.

Frank Ackerman's "Can We Afford the Future?" published in 2009, created a great deal of interest. Its sub-title: "The Economics of a Warming World," with its positive assessment of the Stern Review as: "much less wrong than many of the analyses that preceded it," found widespread support. His latest book: "Worst-Case Economics" seems to have attracted less attention and support. The reason, 1 suspect, is that although reviewers and other readers will often strongly agree with parts of it they have had a struggle to deal with other chapters.

Ackerman begins his assessment with a brief but sound critique of neoclassical economics and then moves on to the need to go beyond the standard notion of homo economicus. However, writing about the 2007/2008 financial crisis and its aftermath, should one rely solely on references to Michael Lewis's: "The Big Short"? Would it not be sensible to refer to such works as: Carmen Reinhart and Kenneth Rogoff: "This Time is Different: Eight Centuries of Financial Folly," 2009, Princeton University Press; David Graeber: "Debt: The First 5,000 Years," 2011, Melville House; and other non-fictional accounts of relevant events influencing the US economy in particular from the early 1970s?

Then Ackerman offers as a leading alternative to homo economicus the field of behavioural economics "that emerged in the 1980s, beginning with the work of Daniel Kahneman and Amos Tversky," backed up with a footnote referring to the origins of behavioural economics as assessed by Richard Thaler. Ackerman seems to be unaware that neither Kahneman nor Tversky were economists; that Thaler took some time to realise that Adam Smith had covered much of his thinking and work in "The Theory of Moral Sentiments" 250 years ago (as he acknowledged in "Misbehaving"); or that a number of psychologists were heavily involved in economics in the 19th Century, of whom Henry Sidgwick is probably the most familiar name nowadays. Indeed neither Kahneman nor Thaler appear to have been aware of the psychological school of economics in the early years of the 20th Century--associated with Zenas Clark Dickinson, Wesley Clair Mitchell, and other US economists. Even George Katona, whose published works spanned the years 1940-1980, never gets a mention in any of Kahneman's...