Ariel Rubinstein is one of the important academic researches in the area of Game Theory, Econometrics and normative Decision Theory. In this book, Ariel claims that his deep understanding of the theoretical and normative models does not equip him with superior tools to deal with day-to-day economic related situations, and gives examples where real-world situations do not, cannot, or should not reflect the theoretical models. Ariel lays out his political and social views which are very remote from those that would have been expected from a normative economist. As far as I know this book has only appeared in Hebrew under the title אגדות הכלכלה. I assume that the reason for that is that the views and tales that are presented in the book are very local to the Israeli history, culture and conditions, or as the Hebrew saying goes “זר לא יבין זאת”.
In my academic research I chose to take sides with the descriptive school of decision theory and behavioral finance, rather than the normative school to which Ariel belongs. I found it to better fit my views and beliefs of how things really work in real world. It was interesting for me to find out that one of the important representatives of the normative school agrees that our daily decisions, behavior and actions do not follow the mathematical models that underlie the normative theories. These models should be looked at as a beautiful creation of the intellectual mind that seeks perfection, but when the same human mind deals with earthly matters, it does not perform as perfectly as the models anticipate. In my view we are lucky that this is the case, otherwise life would have been very boring.
I grew up at the same period as Ariel and our paths crossed at university, so many of the stories in this book raise pleasant memories. This fact added to my enjoyment from the book however, the stories that are intertwined between the the ideas only serve as a background and contribute to the thesis that Ariel tries to communicate: in real life we don’t behave rationally and we should not.
