By William K. Black
Some books have spectacularly bad timing, like Moral Markets: The Critical Role of Values in the Economy, which was published in 2008 as a celebration of market and their nourishment of high ethical values. The book has many interesting chapters and I recommend it, but even lifelong market apologists now refer to the “corrupt culture of banking.” Ian Ayres, a brilliant professor of law and economics at Yale, published his book Super Crunchers: Why Thinking-By-Numbers is the New Way To Be Smart to critical acclaim on August 28, 2007. Ayres’ book is an ode to how much better decision-making becomes when it is made empirically on the basis of very large data rather than through human judgment. There is a great deal of support in the literature for that thesis, and the result is one of the reasons why behavioral economics has become increasingly dominant. The general idea is that humans bring significant, unexamined biases to our decisions and that systems that rigorously examine the data are superior because they avoid these biases. That general idea continues to have considerable support and I have no personal problem with the general idea.