Modern financial markets offer the real world's best approximation to the idealized price auction market envisioned in economic theory. Nevertheless, as the increasingly exquisite and detailed financial data demonstrate, financial markets often fail to behave as they should if trading were truly dominated by the fully rational investors that populate financial theories.

These markets anomalies have spawned a new approach to finance, one which as editor Richard Thaler puts it, "entertains the possibility that some agents in the economy behave less than fully rationally some of the time." Advances in Behavioral Finance collects together twenty-one recent articles that illustrate the power of this approach. These papers demonstrate how specific departures from fully rational decision making by individual market agents can provide explanations of otherwise puzzling market phenomena.

To take several examples, Werner De Bondt and Thaler find an explanation for superior price performance of firms with poor recent earnings histories in the tendencies of investors to overreact to recent information. Richard Roll traces the negative effects of corporate takeovers on the stock prices of the acquiring firms to the overconfidence of managers, who fail to recognize the contributions of chance to their past successes. Andrei Shleifer and Robert Vishny show how the difficulty of establishing a reliable reputation for correctly assessing the value of long term capital projects can lead investment analysis, and hence corporate managers, to focus myopically on short term returns.

As a testing ground for assessing the empirical accuracy of behavioral theories, the successful studies in this landmark collection reach beyond the world of finance to suggest, very powerfully, the importance of pursuing behavioral approaches to other areas of economic life. Advances in Behavioral Finance is a solid beachhead for behavioral work in the financial arena and a clear promise of wider application for behavioral economics in the future.

RICHARD H. THALER is Henrietta Johnson Louis Professor of Economics, and director of the Center for Behavioral Economics and Decision Research, Johnson Graduate School of Management, Cornell University.

CONTRIBUTORS: Lawrence M. Ausubel, Victor L. Bernard, Fischer Black, Navin Chopra, David M. Cutler, Werner F. M. De Bondt, J. Bradford De Long, Jeffrey A. Frankel, Kenneth R. French, Kenneth A. Froot, Josef Lakonishok, Charles M. C. Lee, James M. Poterba, Jay R. Ritter, Richard Roll, Hersh M. Shefrin, Robert J. Shiller, Andrei Shleifer, Meir Statman, Jeremy Stein, Lawrence H. Summers, Richard H. Thaler, Robert W. Vishny, and Robert J. Waldmann

Times Square, in its heyday, expressed American culture in the moment of vivid change. A stellar group of critics and scholars examines this transitional moment in Inventing Times Square, a study of the development of New York's central entertainment district. A fascinating visit to Times Square, from its christening in 1905 to its eventual decline after the Depression, the book explores the colorful configuration of institutions and cultural practices that propelled Times Square from a local and regional entertainment center to a national cultural marketplace.

Changes in the economy, in religion, in leisure culture, and in aesthetics gave birth to a geographical space that fostered Vaudeville and Tin Pan Alley, Flo Ziegfeld and Billy Rose, the spectacle of the Hippodrome and the bright lights of the Great White Way. Out of this same place eventually came national network radio and many Hollywood films. Though conceived as a public space, Times Square was quickly transformed into a commercial center. Power brokers wielded their influence on a public ready to succumb to consumerism. Theatrical entertainment  became a large-scale national business based in, and operated out of, Times Square. A new commercial aesthetic travelled with Joseph Urban from Vienna to Times Square to Palm Beach, bringing to society a sophisticated style that will forever say "Broadway."

Times Square as the "center of the universe" had its darker sides as well, for it was the testing ground for a new morality. The packaging of sexuality on the stage gave it legitimacy on the streets, as hotels and sidewalks became the province of female prostitution, male hustling, and pornography.

At the center of New York City, Times Square's commercial activities gave full rein to urban appetites and fantasies, and challenged and defied the norms of behavior that prevailed elsewhere in the city. Cultural history at its finest, Inventing Times Square portrays the vibrant convergence of social and economic forces on Forty-second Street.

WILLIAM R. TAYLOR teaches history at State University of New York at Stony Brook and is program director of the New York Institute for the Humanities at New York University.

CONTRIBUTORS: Jean-Christophe Agnew, Betsy Blackmar, Peter Buckley, George Chauncey Jr., Peter A. Davis, Lewis A. Erenberg, Richard Wightman Fox, Philip Furia, Timothy J. Gilfoyle, Gregory Gilmartin, David Hammack, Ada Louise Huxtable, Margaret Knapp, Eric Lampard, William R. Leach, Brooks McNamara, William Wood Register Jr., Laurence Senelick, Robert W. Snyder, William R. Taylor.

"It is no doubt true that neoclassical economics has many splendid accomplishments to its name. But it is equally clear that the current type of analytical economics has failed to integrate a social perspective into its analyses, and that this prevents it from ultimately becoming a truly successful social science. It is in this situation that economic sociology comes into the picture. Economic sociology may be defined as the attempt to analyze economic phenomena as social phenomena or as resulting from human interaction, within the context of broader social structures."
-from the Preface

"This is an impressive volume. It is a compendium of most of the major research projects in the area of economic sociology in the 1990s. As such, it makes a significant contribution to the development of this reawakening field."
-Mitchel Abolafia, State University of New York at Albany

Since the mid-1980s, as public discourse has focused increasingly on the troubled economy, many social scientists have argued the need for more analysis of the social relationships that undergird economic life. The original essays in Explorations in Economic Sociology represent the most important work in this renewed field and employ a rich variety of research methods—theoretical, ethnographic, and historical—to illustrate its key concerns.

Explorations in Economic Sociology forges innovative social theories of such economic institutions as money, markets, and industry. Although traditional economists have identified markets as driven solely by the forces of supply and demand, social factors frequently intervene. Sales at auction are determined not simply by a seller's personal knowledge of customers. Shareholder attitudes and employee organization influence everything from the way firms borrow money to the way corporate performance is measured. Firms themselves operate in social networks in which trust is a crucial factor in settling the terms for cooperation or competition.

Throughout the essays in this volume, the contributors point the way to developing a more healthy economy by fostering productive industrial networks, avoiding disintegration at management levels, and anticipating the consequences of the shift from manufacturing to service industries. Explorations in Economic Sociology is a pioneering work that bridges the gap between social theory and economic analysis and demonstrates the importance of this union in achieving an effective understanding of economic issues. The book should stimulate new interest in economic sociology by bringing together many of its most fundamental voices.

RICHARD SWEDBERG is professor of sociology at the University of Stockholm.

CONTRIBUTORS: Ronald S. Burt, Mark Granovetter, Paul M. Hirsch, Mark Lazerson, Patrick McGuire, Marshall W. Meyer, Mark S. Mizruchi, Charles Perrow, Frank Romo, Charles F. Sabel, Michael Schwartz, Charles W. Smith, Linda Brewster Stearns, Richard Swedberg, Michael Useem, Harrison C. White, and Viviana A. Zelizer

"Using engaging descriptions of individual situations ... and careful analysis of data, Katherine Swartz draws attention to the problematic and growing prevalence of the uninsured in the middle class. The centerpiece of her book is a promising response to this important problem."
-The New England Journal of Medicine

"Katherine Swartz has written an unusual and valuable book, one that will serve well both in the classroom and in the world of politics. Students and their instructors should welcome perhaps the clearest exposition available of how the various markets for health insurance work-or don't work. Policymakers should be challenged-and, I hope will be persuaded-by her reasoned argument that government-financed reinsurance is a promising way to extend insurance coverage by making it affordable."
-HENRY J. AARON, senior fellow, The Brookings Institution

America's current system of health insurance, which relies almost exclusively on employer-sponsored coverage, is in danger of collapse, and this problem is not limited to the poor and working class. An increasing number of middle class Americans do not have employer-provided insurance and—due to skyrocketing premiums—cannot afford to purchase coverage for themselves. Reinsuring Health, by economist Katherine Swartz, examines this growing national crisis and outlines a concrete plan to make health insurance accessible and affordable for all Americans.

Reinsuring Health documents why the number of uninsured Americans—now 45.5 million people—has grown in the last twenty-five years. Swartz focuses on how labor market changes—such as the decline of domestic manufacturing, decreased unionization, and the growth of non-standard work arrangements—have led U.S. employers to retreat from providing health insurance for their workers. These trends, combined with the increasing costs of medical care, have led to an explosion in health insurance premiums and a decline in coverage, particularly among the middle-class. Since those who seek insurance as individuals are generally most likely to need health care, private insurers charge higher premiums in the individual (non-group) markets than to people who obtain group insurance. This makes individual health insurance less attractive to the young and increasingly unaffordable for middle-class Americans. Similarly, insurers charge higher per person (or per family) premiums to small firms than to large companies, so many small firms do not sponsor coverage for their employees. Reinsuring Health shows how these problems can be overcome if the federal government provides a new reinsurance program which would protect insurance companies that provide small group and individual health insurance against the possibility that their policy-holders will incur very high medical expenses. By assuming some of the risk that people will face extremely costly medical bills, the government will make insurers less hesitant to offer coverage to high-risk individuals, and will help drive down premiums for others. Reinsuring Health demonstrates that this form of government reinsurance has worked in the past, helping to establish smooth running private markets for catastrophe insurance and secondary mortgages.

Today, growing numbers of middle class Americans lack health insurance. Protection against the possibility of falling ill or getting hurt and having to pay extraordinary health care bills should not be a luxury available only to the very rich and the very poor. Reinsuring Health proposes a straightforward solution that would bring health insurance back within the reach of the increasing ranks of the uninsured, particularly those who are in the middle class.

KATHERINE SWARTZ is professor of health policy and management at the School of Public Health, Harvard University

Two sociologists and a lawyer examine here the attitudes of both survivors and attorney on various problems surrounding inheritance—from will-making through estate settlement. Within a legal frame of reference, this book is a study of what happens within a family at death—and why. The authors use the "inheritance unit" as the basis for looking at the functions of inheritance in intergenerational family continuity and the general patterns of family relationship.

MARVIN B. SUSSMAN is professor and chairman of the Department of Sociology at Case Western Reserve University.

JUDITH N. CATES is research associate of the American Psychological Association.

DAVID T. SMITH is professor of law at the University of Florida.

Provides a directory of the rapidly expanding philanthropic foundations in Latin America, identifying over 750 foundations and presenting detailed information on 364 of them. In addition, the directory contains an introduction that analyzes historical data on Latin American foundations, a country-by-country summary of legal processes regarding foundations and pertinent tax laws, two essays by North and South American foundation presidents discussing the organization and management of private foundations, and an appendix with models of bylaws and financial statements of Latin American foundations.

ANN STROMBERG has participated in various community development projects in Latin America, taught in Latin American schools, and engaged in other sociological research projects. She is at the Pan American Development Foundation.

"A superb collection that paints a clear, if not especially bright, picture: Inequality is widening in America largely because our democracy isn't working as it should. Read Remaking America and commit yourself to doing something about it."
-ROBERT B. REICH, professor of public policy, University of California at Berkeley

"Remaking America is a remarkable collection featuring original contributions from many leading analysts of U.S. democracy and public policy. Far from the usual arid collection of prescriptions, this book gives us the big picture: how U.S. tax and social programs have been reconfigured over recent decades, and what difference the changes make for governance and participation. We learn that policies are not only the result of ongoing political struggles; they also reshape the capacities of government and the ideas and engagement of citizens and social groups. Unfolding policies and their political effects say much about the nation's capacity to react-or not-to the deleterious effects of rising socioeconomic inequality. Students, scholars, and members of the educated public have much to learn from this insightful volume."
-THEDA SKOCPOL, Victor S. Thomas Professor of Government and Sociology and dean, Graduate School of Arts and Sciences, Harvard University

Over the past three decades, the contours of American social, economic, and political life have changed dramatically. The post-war patterns of broadly distributed economic growth have given way to stark inequalities of income and wealth, the GOP and its allies have gained power and shifted U.S. politics rightward, and the role of government in the lives of Americans has changed fundamentally. Remaking America explores how these trends are related, investigating the complex interactions of economics, politics, and public policy.

Remaking America explains how the broad restructuring of government policy has both reflected and propelled major shifts in the character of inequality and democracy in the United States. The contributors explore how recent political and policy changes affect not just the social standing of Americans but also the character of democratic citizenship in the United States today. Lawrence Jacobs shows how partisan politics, public opinion, and interest groups have shaped the evolution of Medicare, but also how Medicare itself restructured health politics in America. Kimberly Morgan explains how highly visible tax policies created an opportunity for conservatives to lead a grassroots tax revolt that ultimately eroded of the revenues needed for social-welfare programs. Deborah Stone explores how new policies have redefined participation in the labor force—as opposed to fulfilling family or civic obligations—as the central criterion of citizenship. Frances Fox Piven explains how low-income women remain creative and vital political actors in an era in which welfare programs increasingly subject them to stringent behavioral requirements and monitoring. Joshua Guetzkow and Bruce Western document the rise of mass incarceration in America and illuminate its unhealthy effects on state social-policy efforts and the civic status of African-American men.

For many disadvantaged Americans who used to look to government as a source of opportunity and security, the state has become increasingly paternalistic and punitive. Far from standing alone, their experience reflects a broader set of political victories and policy revolutions that have fundamentally altered American democracy and society. Empirically grounded and theoretically informed, Remaking America connects the dots to provide insight into the remarkable social and political changes of the last three decades.

JOE SOSS is the Cowles Professor for the Study of Public Service at the Hubert H. Humphrey Institute of Public Affairs, University of Minnesota.

JACOB S. HACKER is professor of political science at Yale University and resident fellow of the Institution for Social and Policy Studies.

SUZANNE METTLER is Clinton Rossiter Professor of American Institutions in the Government Department at Cornell University.

CONTRIBUTORS:  Andrea Louise Campbell, Richard B. Freeman, Joshua Guetzkow, Jennifer Hochschild,  Helen Ingram,  Lawrence R. Jacobs,  R. Shep Melnick,  Kimberly J. Morgan,  Frances Fox Pivens,  Paul Pierson,  Joel Rogers,  Sanford F. Schram,  Deborah Stone,  Vasla Weaver,  Bruce Western.  

"Amply documented and methodologically precise, this volume provides a definitive socioeconomic assessment of earnings inequality and racial divisions in Atlanta."
- Choice

"The Atlanta Paradox is among the most important contributions of the past decade to our understanding of racial patterns of economic disadvantage in U.S. metropolitan regions. If we rank metropolitan regions by how much we understand about such matters, Atlanta just moved to the top!"
- RONALD F. FERGUSON, Harvard University

"This is an important and rigorous book. It offers a unique statistical snapshot of the South's leading city in the late 20th century-demonstrating the extent of the Atlanta paradox and offering explanations for its persistence."
- Southeastern Geographer

Despite the rapid creation of jobs in the greater Atlanta region, poverty in the city itself remains surprisingly high, and Atlanta's economic boom has yet to play a significant role in narrowing the gap between the suburban rich and the city poor. This book investigates the key factors underlying this paradox.

The authors show that the legacy of past residential segregation as well as the more recent phenomenon of urban sprawl both work against inner city blacks. Many remain concentrated near traditional black neighborhoods south of the city center and face prohibitive commuting distances now that jobs have migrated to outlying northern suburbs.

The book also presents some promising signs. Few whites still hold overt negative stereotypes of blacks, and both whites and blacks would prefer to live in more integrated neighborhoods. The emergence of a dynamic, black middle class and the success of many black-owned businesses in the area also give the authors reason to hope that racial inequality will not remain entrenched in a city where so much else has changed.

DAVID L. SJOQUIST is professor of economics in the Andrew Young School of Policy Studies at Georgia State University.

CONTRIBUTORS: Ronald H. Bayor, Irene Browne, Obie Clayton Jr., Nikki McIntyre Finlay, Christopher R. Geller, Gary Paul Green, Roger B. Hammer, Truman A. Hartshorn, Cynthia Lucas Hewitt, Keith R. Ihlanfeldt, Sahadeo Patram, Travis Patton, David L. Sjoquist, Mark A. Thompson, and Leann M. Tigges

A Volume in the Multi-City Study of Urban Inequality

Capital of the American Century investigates the remarkable influence that New York City has exercised over the economy, politics, and culture of the nation throughout much of the twentieth century. New York's power base of corporations, banks, law firms, labor unions, artists and intellectuals has played a critical role in shaping areas as varied as American popular culture, the nation's political doctrines, and the international capitalist economy. If the city has lost its unique prominence in recent decades, the decline has been largely—and ironically—a result of the successful dispersion of its cosmopolitan values.

The original essays in Capital of the American Century offer objective and intriguing analyses of New York City as a source of innovation in many domains of American life. Postwar liberalism and modernism were advanced by a Jewish and WASP coalition centered in New York's charitable foundations, communications media, and political organizations, while Wall Street lawyers and bankers played a central role in fashioning national security policies. New York's preeminence as a cultural capital was embodied in literary and social criticism by the "New York intellectuals," in the fine arts by the school of Abstract Expressionism, and in popular culture by Broadway musicals. American business was dominated by New York, where the nation's major banks and financial markets and its largest corporations were headquartered.

In exploring New York's influence, the contributors also assess the larger social and economic conditions that made it possible for a single city to exert such power. New York's decline in recent decades stems not only from its own fiscal crisis, but also from the increased diffusion of industrial, cultural, and political hubs throughout the nation. Yet the city has taken on vital new roles that, on the eve of the twenty-first century, reflect an increasingly global era: it is the center of U.S. foreign trade and the international art market: The New York Times and The Wall Street Journal have emerged as international newspapers; and the city retains a crucial influence in information-intensive sectors such as corporate law, accounting, management consulting, and advertising.

Capital of the American Century provides a fresh link between the study of cities and the analysis of national and international affairs. It is a book that enriches our historical sense of contemporary urban issues and our understanding of modern culture, economy, and politics.

MARTIN SHEFTER is professor of government at Cornell University.

CONTRIBUTORS: James L. Baughman, Paul DiMaggio, Nathan Glazer, Miles Kahler, James R. Kurth, Martin Shefter, David Vogel, and Vera L. Zolberg.

"The authors' concerns resonate with current state and federal policy debates to reinstate more options for education and training. This book should encourage continuing examination of these policies and further research, development, and dissemination of policies that boost education outcomes."
-POLITICAL SCIENCE QUARTERLY

"Putting Poor People to Work is the best examination so far of 'work first,' the idea that poor individuals should simply go to work as the most direct way out of poverty .... In the end, their powerful analysis reveals a disturbing duality: at the same time that many policymakers and advocates are trumpeting the value of education, public policy has decided that the poorest among us deserve not education but mere palliatives."
-W. NORTON GRUBB, David Gardner Chair in Higher Education, University of California at Berkeley

"While the Clinton administration was promoting college attendance, welfare reform 'work first' requirements were simultaneously closing off college opportunities for the poor .... This book provides an important contribution to our understanding of this policy and its extensive implications for the poor, for community colleges, and for ideas about who gets educational opportunity in the United States."
-JAMES E. ROSENBAUM, professor of sociology, education, and social policy, Institute for Policy Research, Northwestern University

"Putting Poor People to Work is an important book that describes in devastating detail how over the past decade, and almost without notice, poor women lost the fragile foothold they had gained onto the first rungs of the education ladder-access to college-that other Americans climb to economic security."
-JULIE STRAWN, senior policy analyst, Center for Law and Social Policy

Today, a college education is increasingly viewed as the gateway to the American Dream—a necessary prerequisite for social mobility. Yet recent policy reforms in the United States effectively steer former welfare recipients away from an education that could further their career prospects, forcing them directly into the workforce where they often find only low-paying jobs with little opportunity for growth. In Putting Poor People to Work, Kathleen Shaw, Sara Goldrick-Rab, Christopher Mazzeo, and Jerry A. Jacobs explore this troubling disconnect between the principles of “work-first” and “college for all.”

Using comprehensive interviews with government officials and sophisticated data from six states over a four year period, Putting Poor People to Work shows how recent changes in public policy have reduced the quantity and quality of education and training available to adults with low incomes. The authors analyze how two policies encouraging work—the federal welfare reform law of 1996 and the Workforce Investment Act of 1998—have made moving people off of public assistance as soon as possible, with little regard to their long-term career prospects, a government priority. Putting Poor People to Work shows that since the passage of these “work-first” laws, not only are fewer low-income individuals pursuing postsecondary education, but when they do, they are increasingly directed towards the most ineffective, short-term forms of training, rather than higher-quality college-level education. Moreover, the schools most able and ready to serve poor adults—the community colleges—are deterred by these policies from doing so.

Having a competitive, agile workforce that can compete with any in the world is a national priority. In a global economy where skills are paramount, that goal requires broad popular access to education and training. Putting Poor People to Work shows how current U.S. policy discourages poor Americans from seeking out a college education, stranding them in jobs with little potential for growth. This important new book makes a powerful argument for a shift in national priorities that would encourage the poor to embrace both work and education, rather than having to choose between the two.

KATHLEEN M. SHAW is chair of the Department of Educational Leadership and Policy Studies and associate professor of urban education at Temple University.

SARA GOLDRICK-RAB is assistant professor of educational policy studies and sociology at the University of Wisconsin-Madison, and faculty affiliate of the Wisconsin Center for the Advancement of Postsecondary Education.

CHRISTOPHER MAZZEO is a New York City–based independent consultant.

JERRY A. JACOBS is Merriam Term Professor of Sociology at the University of Pennsylvania and editor of the American Sociological Review.

An Institute for Research on Poverty Affiliated Book on Poverty and Public Policy