Standard economic theory is built on the assumption that human beings act rationally in their own self interest. But if rationality is such a reliable factor, why do economic models so often fail to predict market behavior accurately? According to Richard Thaler, the shortcomings of the standard approach arise from its failure to take into account systematic mental biases that color all human judgements and decisions. Economics assumes behavior is consistently rational, when it is, in fact, only partially, or quasi-rational.

The papers collected in Quasi-Rational Economics represent a significant sampling of this innovative approach, written by a leader in the field along with co-authors Thomas Russell, H. M. Shefrin, Daniel Kahneman, Jack Knetsch, Werner De Bondt, Eric Johnson, Charles Lee, and Andrei Shleifer. Thaler and his colleagues challenge established economic theories in such areas as consumer choice and financial markets, offering empirical evidence and alternate models based on behavioral research about how economic decisions are actually made.

Quasi-Rational Economics deals with a number of intriguing questions. Why do people have trouble ignoring sunk costs and recognizing opportunity costs? How do people’s preferences for already endowed possessions suppress trading volume and keep markets from clearing? What are the effects on market behavior of consumer attitudes about fairness? How do people’s mental accounting procedures lead them to behave in economically inconsistent ways? Why do investors’ tendencies to overreact to past trends cause losing firms to outperform winners in the stock market?

In offering answers to these questions, Quasi-Rational Economics provides an essential introduction to a new field. It mounts a trenchant critique of current practice in economics and calls for richer, more realistic approaches to formulating and testing economic theory. More than just a call for reform, this book provides numerous illustrations of how the call can be answered.

"Richard Thaler's book offers great evidence for the importance of quasi rational behavior in economic settings, thus stimulating the reader. Its broad coverage makes an interesting introduction to a new field, as well as informing about further applications and methods." —Kyklos

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. He is research associate at the National Bureau of Economic Research.

Though privately controlled, foundations perform essential roles that serve society at large. They spearhead some of the world’s largest and most innovative initiatives in science, health, education, and the arts, fulfilling important needs that could not be addressed adequately in the marketplace or the public sector. Still, many people have little understanding of what foundations do and how they continue to earn public endorsement. The Legitimacy of Philanthropic Foundations provides a thorough examination of why foundations exist and the varied purposes they serve in contemporary democratic societies.

The Legitimacy of Philanthropic Foundations looks at foundations in the United States and Europe to examine their relationship to the state, the market, and civil society. Peter Frumkin argues that unlike elected officials, who must often shy away from topics that could spark political opposition, and corporate officers, who must meet bottom-line priorities, foundations can independently tackle sensitive issues of public importance. Kenneth Prewitt argues that foundations embody elements of classical liberalism, such as individual autonomy and limited government interference in private matters and achieve legitimacy by putting private wealth to work for the public good. Others argue that foundations achieve legitimacy by redistributing wealth from the pockets of rich philanthropists to the poor. But Julian Wolpert finds that foundations do not redistribute money directly to the poor as much as many people believe. Instead, many foundations focus their efforts on education, health, and scientific research, making investments that benefit society in the long-term, and focusing on farsighted issues that a myopic electorate would not have patience to permit its government to address.

Originating from private fortunes but working for the public good, independently managed but subject to legal prescriptions, philanthropic foundations occupy a unique space somewhere between the public and private sectors. The Legitimacy of Philanthropic Foundations places foundations in a broad social and historical context, improving our understanding of one of society’s most influential—and least understood—organizational forms.

KENNETH PREWITT is Carnegie Professor of Public Affairs in the School of International and Public Affairs at Columbia University.

MATTEI DOGAN is senior fellow at the National Center for Scientific Research in Paris, and chair of the research committee on Comparative Sociology of the International Sociological Association.

STEVEN HEYDEMANN is director of the Center for Democracy and the Third Sector and political scientist in the Department of Government at Georgetown University.

STEFAN TOEPLER is assistant professor of nonprofit studies in the Department of Public and International Affairs at George Mason University.

CONTRIBUTORS: Helmut K. Anheier, Siobhan Daly, Peter Frumkin, Giuliana Gemelli, Kirsten A. Gronberg, Divid C. Hammack, Diana Leat, Rupert Graf Strachwitz, Steen Thomsen, Julian Wolpert.

Much like today, the early twentieth century was a period of rising economic inequality and political polarization in America. But it was also an era of progressive reform—a time when the Russell Sage Foundation and other philanthropic organizations were established to promote social science as a way to solve the crises of industrial capitalism. In Social Science for What? Alice O’Connor relates the history of philanthropic social science, exploring its successes and challenges over the years, and asking how these foundations might continue to promote progressive social change in our own politically divided era.

The philanthropic foundations established in the early 1900s focused on research which, while intended to be objective, was also politically engaged. In addition to funding social science research, in its early years the Russell Sage Foundation also supported social work and advocated reforms on issues from child welfare to predatory lending. This reformist agenda shaped the foundation’s research priorities and methods. The Foundation’s landmark Pittsburgh Survey of wage labor, conducted in 1907-1908, involved not only social scientists but leaders of charities, social workers, and progressive activists, and was designed not simply to answer empirical questions, but to reframe the public discourse about industrial labor. After World War II, many philanthropic foundations disengaged from political struggles and shifted their funding toward more value-neutral, academic social inquiry, in the belief that disinterested research would yield more effective public policies. Consequently, these foundations were caught off guard in the 1970s and 1980s by the emergence of a network of right-wing foundations, which was successful in promoting an openly ideological agenda. In order to counter the political in-roads made by conservative organizations, O’Connor argues that progressive philanthropic research foundations should look to the example of their founders. While continuing to support the social science research that has contributed so much to American society over the past 100 years, they should be more direct about the values that motivate their research.  In this way, they will help foster a more democratic dialogue on important social issues by using empirical knowledge to engage fundamentally ethical concerns about rising inequality.

O’Connor’s message is timely: public-interest social science faces unprecedented challenges in this era of cultural warfare, as both liberalism and science itself have come under assault. Social Science for What? is a thought-provoking critique of the role of social science in improving society and an indispensable guide to how progressives can reassert their voice in the national political debate.

ALICE O’CONNOR is associate professor of history at the University of California, Santa Barbara.

A Volume in the the Russell Sage Foundation's Centennial Series

Commitment is at the core of social life. The social fabric is woven from promises and threats that are not always immediately advantageous to the parties involved. Many commitments, such as signing a contract, are fairly straightforward deals, in which both parties agree to give up certain options. Other commitments, such as the promise of life-long love or a threat of murder, are based on more intangible factors such as human emotions. In Evolution and the Capacity for Commitment, distinguished researchers from the fields of economics, psychology, ethology, anthropology, philosophy, medicine, and law offer a rich variety of perspectives on the nature of commitment and question whether the capacity for making, assessing, and keeping commitments has been shaped by natural selection.

Game theorists have shown that players who use commitment strategies—by learning to convey subjective offers and to gauge commitments others are willing to make—achieve greater success than those who rationally calculate every move for immediate reward. Evolution and the Capacity for Commitment includes contributions from some of the pioneering students of commitment. Their elegant analyses highlight the critical role of reputation-building, and show the importance of investigating how people can believe that others would carry out promises or threats that go against their own self-interest. Other contributors provide real-world examples of commitment across cultures and suggest the evolutionary origins of the capacity for commitment.

Perhaps nowhere is the importance of commitment and reputation more evident than in the institutions of law, medicine, and religion. Essays by professionals in each field explore why many practitioners remain largely ethical in spite of manifest opportunities for client exploitation. Finally, Evolution and the Capacity for Commitment turns to leading animal behavior experts to explore whether non-humans also use commitment strategies, most notably through the transmission of threats or signs of non-aggression. Such examples illustrate how such tendencies in humans may have evolved.

Viewed as an adaptive evolutionary strategy, commitment offers enormous potential for explaining complex and irrational emotional behaviors within a biological framework. Evolution and the Capacity for Commitment presents compelling evidence for this view, and offers a potential bridge across the current rift between biology and the social sciences.

RANDOLPH NESSE is professor of psychiatry and professor of psychology at the University of Michigan.

CONTRIBUTORS: Randolph Nesse, Eldridge S. Adams, Robert Boyd, Dov Cohen, Lee Alan Dugatkin, Robert H. Frank, Herbert Gintis, Oliver R. Goodenough, Jack Hirshleifer, William Irons, Peter J. Richerson, Michael Ruse, Thomas C. Schelling, Joan B. Silk, and Joseph Vandello.

A Volume in the Russell Sage Foundation Series on Trust

Every four years, the drama of presidential selection inspires a reassessment of our political parties. Central to this assessment are the delegates who gather at Democratic and Republican national conventions. Parties in Transition presents a richly modulated body of data of the changing attitudes and behaviors of these delegates—their ideologies and loyalties, their recruitment into presidential politics, their persistence in or disengagement from it. Covering three recent sets of conventions and involving over five thousand delegates, this comprehensive study makes an essential contribution to our understanding of American party politics.

"Richer and more authoritative than most of the best works in the field." —Election Politics

"A most important study of change in the American political scene....Richly deserves to be read." —John H. Kessel, Ohio State University

"[A] shrewd and sophisticated analysis....Both scholars and practitioners should read this book and ponder it."—Austin Ranney, University of California, Berkeley

WARREN E. MILLER is professor of political science at Arizona State University and research scientist at the Center for Political Studies at the Institute for Social Research, University of Michigan.

M. KENT JENNINGS is professor of political science at the University of Michigan and the University of California, Santa Barbara, and program director at the Center for Political Studies, University of Michigan.

"How to inform the judicial mind," Justice Frankfurter remarked during the school desegregation cases, "is one of the most complicated problems." Social research is a potential source of such information. Indeed, in the 1960s and 1970s, with activist courts at the forefront of social reform, the field of law and social science came of age. But for all the recent activity and scholarship in this area, few books have attempted to create an intellectual framework, a systematic introduction to applied social-legal research.

Social Research in the Judicial Process addresses this need for a broader picture. Designed for use by both law students and social science students, it constructs a conceptual bridge between social research (the realm of social facts) and judicial decision making (the realm of social values). Its unique casebook format weaves together judicial opinions, empirical studies, and original text. It is a process-oriented book that teaches skills and perspectives, cultivating an informed sensitivity to the use and misuse of psychology, social psychology, and sociology in apellate and trial adjudication. Among the social-legal topics explored are school desegregation, capital punishment, jury impartiality, and eyewitness identification.

This casebook is remarkable for its scope, its accessibility, and the intelligence of its conceptual integration. It provides the kind of interdisciplinary teaching framework that should eventually help lawyers to make knowledgeable use of social research, and social scientists to conduct useful research within a legally sophisticated context.

WALLACE D. LOH is professor of law and adjunct professor of psychology at the University of Washington.

A penetrating analysis of the Selective Service System: its recruiting services, the makeup and attitude of those who serve on local draft boards, the criteria for deferment or rejection from service, and the application of the principle of universality in the present draft laws. Using data from several sources, the study also explores the position of blacks with respect to military service. Comprehensive recommendations are set forth.

ROGER W. LITTLE is associate professor of sociology at the University of Illinois at Chicago Circle.

CONTRIBUTORS:  Harry A. Marimon, James W. Davis Jr., Gary Wamsley, Merrill Roff,  Charles C. Moskos Jr., Irvin G. Katenbrink Jr. 

Winner of the 2010 Best Book Award from the Rationality and Society Section of the American Sociological Association

As individuals’ ties to community organizations and the companies they work for weaken, many analysts worry that the fabric of our society is deteriorating. But others counter that new social networks, especially those forming online, create important and possibly even stronger social bonds than those of the past. In Social Commitments in a Depersonalized World, Edward Lawler, Shane Thye, and Jeongkoo Yoon examine interpersonal and group ties and propose a new theory of social commitments, showing that multiple interactions, group activities and, particularly, emotional attachment, are essential for creating and sustaining alignments between individuals and groups.

Lawler, Thye, and Yoon acknowledge that long-term social attachments have proven fragile in a volatile economy where people increasingly form transactional associations—based not on collective interest but on what will yield the most personal advantage in a society shaped by market logic. Although person-to-group bonds may have become harder to sustain, they continue to play a vital role in maintaining healthy interactions in larger social groups from companies to communities. Drawing on classical and contemporary sociology, organizational psychology, and behavioral economics, Social Commitments in a Depersonalized World shows how affiliations—particularly those that involve a profound emotional component—can transcend merely instrumental or transactional ties and can even transform these impersonal bonds into deeply personal ones.

The authors study the structures of small groups, corporations, economic transactions, and modern nation-states to determine how hierarchies, task allocation, and social identities help or hinder a group’s vitality. They find that such conditions as equal status, interdependence, and overlapping affiliations figure significantly in creating and sustaining strong person-to-group bonds. Recurring collaboration with others to achieve common goals—along with shared responsibilities and equally valued importance within an organization—promote positive and enduring feelings that enlarge a person’s experience of a group and the significance of their place within it. Employees in organizations with strong person-to-group ties experience a more unified, collective identity. They tend to work more cost effectively, meet company expectations, and better regulate their own productivity and behavior.

The authors make clear that the principles of their theory have implications beyond business. With cultures pulling apart and crashing together like tectonic plates, much depends on our ability to work collectively across racial, cultural, and political divides. The new theory in Social Commitments in a Depersonalized World provides a way of thinking about how groups form and what it takes to sustain them in the modern world.

EDWARD J. LAWLER is Martin P. Catherwood Professor of Industrial and Labor Relations and professor of sociology at Cornell Univeristy.

SHANE R. THYE is professor of sociology at the University of South Carolina.

JEONGKOO YOON is professor of business administration at the Ewha University, South Korea.

A scholarly gulf has tended to divide historians, political scientists, and social movement theorists on how people develop and act on their preferences. Rational choice scholars assumed that people—regardless of the time and place in which they live—try to achieve certain goals, like maximizing their personal wealth or power. In contrast, comparative historical scholars have emphasized historical context in explaining people’s behavior. Recently, a common emphasis on how institutions—such as unions or governments—influence people’s preferences in particular situations has emerged, promising to narrow the divide between the two intellectual camps. In Preferences and Situations, editors Ira Katnelson and Barry Weingast seek to expand that common ground by bringing together an esteemed group of contributors to address the ways in which institutions, in their wider historical setting, induce people to behave in certain ways and steer the course of history.

The contributors examine a diverse group of topics to assess the role that institutions play in shaping people’s preferences and decision-making. For example, Margaret Levi studies two labor unions to determine how organizational preferences are established. She discusses how the individual preferences of leaders crystallize and become cemented into an institutional culture through formal rules and informal communication. To explore how preferences alter with time, David Brady, John Ferejohn, and Jeremy Pope examine why civil rights legislation that failed to garner sufficient support in previous decades came to pass Congress in 1964. Ira Katznelson reaches back to the 13th century to discuss how the institutional development of Parliament after the signing of the Magna Carta led King Edward I to reframe the view of the British crown toward Jews and expel them in 1290.

The essays in this book focus on preference formation and change, revealing a great deal of overlap between two schools of thought that were previously considered mutually exclusive. Though the scholarly debate over the merits of historical versus rational choice institutionalism will surely rage on, Preferences and Situations reveals how each field can be enriched by the other.

IRA KATZNELSON is Ruggles Professor of Political Science and History at Columbia University.

BARRY R. WEINGAST is a senior fellow at the Hoover Institution and the Ward C. Krebs Family Professor in the Department of Political Science at Stanford University.

CONTRIBUTORS: Richard Bensel,  David W. Brady,  Charles M. Cameron, Jon Elster, John A. Ferejohn, Peter A. Hall,  James Johnson, Margaret Levi, James Mahoney,  Jeremy C. Pope.