Priceless

William Poundstone's Priceless: The Myth of Fair Value (and How to Take Advantage of It) must be among the better books I've read despite its somewhat misleading title.

At first glance, one is led to believe that Priceless is fundamentally about price theory and how to make better pricing and/or purchasing decisions. On that score, it is and it isn't. To his credit, Poundstone's work indeed offers fascinating insights on pricing and economic decision-making. Yet outside of select chapters where these are explicitly spelled out, the book does so in a roundabout manner, leaving it mostly to readers to draw their own relevant inferences on the subject.

The reason for this is that Priceless is really two different books in one. The first part recounts the development of the field that would eventually become known as behavioral economics, from its roots in psychophysics to the contributions of two individuals who would become the field's oft-cited luminaries, Daniel Kahneman and Amos Tversky. Thereafter, the book shifts gears to discuss price psychology in a variety of different contexts, such as menu design, the real estate market, and jury-awarded punitive damages (to name but a few).

Personally, I enjoyed the book. To a large degree this owes to that course on experimental economics I took a couple of years back, where Kahneman and Tversky's research on Prospect Theory was required reading (and arguably the best thing I read all that semester). But apart from that, what's great about Priceless is that it is perhaps the most comprehensive reader on behavioral economics available today, chock full of stories about priming, anchoring, ultimatum games and other quirky economic experiments bound to catch the inquisitive reader's fancy.

It wouldn't surprise me if Poundstone's book quickly becomes required reading (and an instant classic) in the behavioral economics literature. That is, provided one knows she's getting something a little different than what she bargained for in Priceless.