Book Description

The essential complement to the pathbreaking book Competitive Strategy, Michael E. Porter's Competitive Advantage explores the underpinnings of competitive advantage in the individual firm. With over 30 printings in English and translated into thirteen languages, this second volume in Porter's landmark trilogy describes how a firm actually gains an advantage over its rivals. Competitive Advantage introduces a whole new way of understanding what a firm does. Porter's groundbreaking concept of the value chain disaggregates a company into "activities," or the discrete functions or processes that represent the elemental building blocks of competitive advantage.

Now an essential part of international business thinking, Competitive Advantage takes strategy from broad vision to an internally consistent configuration of activities. Its powerful framework provides the tools to understand the drivers of cost and a company's relative cost position. Porter's value chain enables managers to isolate the underlying sources of buyer value that will command a premium price, and the reasons why one product or service substitutes for another. He shows how competitive advantage lies not only in activities themselves but in the way activities relate to each other, to supplier activities, and to customer activities. Competitive Advantage also provides for the first time the tools to strategically segment an industry and rigorously assess the competitive logic of diversification.

That the phrases "competitive advantage" and "sustainable competitive advantage" have become commonplace is testimony to the power of Porter's ideas. Competitive Advantage has guided countless companies, business school students, and scholars in understanding the roots of competition. Porter's work captures the extraordinary complexity of competition in a way that makes strategy both concrete and actionable. ... Read more

Reviews (24)

A classic to which one should now return
The second of the gospels according to Porter and the more useful of the two. This book gives a framework for allocating costs and assets among business activities which can then be used to seek drivers for cost advantage or differentiation. The later chapters may at first blush seem repetitive, but they are useful elaborations on the the basic search criteria for finding and exploiting value.If one had read this in 1995, their stock portfolio would have many fewer worthless e-commerce shares...

This book must be read by all strategists!
Porter has highlighted many important considerations for those who are pursuing possible strategies to employ for their organisation. In order to pursue generic strategies like cost, differentiation & quick response (recent), you would have to gear your value chain towards these options. Porter has shown how this may be done in his book which is a great reference for strategic formulation. However, in order to have the optimum strategy(s) for an organisation, you would have to consider the human side. Porter's book tends to sway towards the organisational design dimension. I recommend Miller & Dess's Strategic Management (McGraw-Hill Series in Management) for a complete overview of strategic management. Also look out for Warren Bennis's Organizing Genius for an insight into great teams.

The Porter Advantage
I am an MBA student and the book, Competitive Advantage, by Michael Porter is one of the best books I have read on the theory of sustaining competitive advantage. The text illustrates the five forces theory and the generic strategies which companies must use as analytical tools in designing the right strategy to maintain supremacy in their field.

I recommend this book to anyone interested in gaining fantastic insight into Michael Porter's theories of competition.

Excellent Book
I am an MBA student at a Top 10 Business School, and I found it very knowledgeable and insightful. It's definitely written for the intelligent business owner, not patronizing at all. It's definitely NOT, "Competitive Strategy for Dummies".

A definite read for any strategy or product executive.

An excellent reading - top level book
This book is the continuum to the first book of M. Porter: Techniques for analyzing industries and competitors. A must-be read book, in deep analysis proving an absolute mastery on this complex subject of strategy establishing, sustaining and improving. ... Read more

Reviews (34)

Keynes is by no means digging holes to fill them up again
Here's a book every economist and everybody interested in economics should read, it's not an easy to read book, but if read carefully, it can show us some problems we are still suffering from in the modern economies and practical ways of dealing with them. Much has been said about this author who has been derided for a long time now, but I bet few have read the man himself, and if he was labeled the greatest economist of the 20th century, he should be respected as such or at least be read before making any comment. Freedom of Choice shouldn't be irresponsible. Remember that the survival of laissez faire may be due to post-war keynesian policies.

Are We all Keynesians Now?
Are We All Keynesians Now?

Most educated Americans know something of John Maynard Keynes, the great British economist whose hugely influential work “T"The General Theory of Employment, Interest and Money", strongly influenced economic theory and practice during the last half of the twentieth century, particularly with regard to the role of government in stimulating and regulating a nation's’s economic life. Nevertheless it remains true that almost all of the "intelligentsia" in general, and most economists in particular, have never read the book, despite the fact that it is readily available in today’s mega-bookstores such as of course, Amazon.com (at a reasonable price and) in a good quality paperback.

Indeed, by a curious twist, the people who seem most to have made some attempt to read Keynes' oeuvre are those who appear most outraged by it and determined to revile it. If one is skeptical about this, (read the reviews), where veritable "frothing at the mouth" denunciations seem to dominate. These would hardly be worth reading except for the mindset they reveal, which goes far toward illuminating some of the attitudes of the 1930's otherwise inexplicable at the beginning of the twenty-first century. Their very virulence convinces one that Keynes was clearly on to something; if an author enrages half the world he must be at least half right.

Keynes detractors are right about one thing: "General Theory..." is a tough read, though not for some of the reasons they indicate. Keynes actually uses very little mathematics, the alleged prevalence of which is one of the points usually cited in criticism. He uses a little elementary algebra and a little differential calculus, hardly enough to swamp even the most modestly gifted sophomore who has been exposed to the subject.
He does not generally contradict himself, as some allege, beyond the level of ambivalence to be expected of anyone who realizes he is treating an inexact science where many conflicting views can hold some claim to legitimacy. Rather, what makes Keynes' work an ideal bedtime companion for those inflicted with insomnia is the obsessive care
the author takes to be absolutely precise, the somewhat antique 1930's British English
employed (though some, including the present reviewer, may see that as one of its charms)
and the regular use of Latin phrases familiar to Keynes and his contemporaries, such as, e.g., "ceteris paribus" (roughly translated "all things being equal", meaningless to American readers whose formative collegiate experience included little in the way of foreign languages of any kind, let alone classical ones. The trick in reading Keynes is to get beyond these inconveniences of packaging and unwrap the very real gift of ideas enclosed.

Keynes' economic prescriptions are now so generally accepted, even by most conservatives, certainly including "W", that many of us find it hard to recognize what the argument is all about. These days it is taken for granted that the government has a responsibility to stimulate the economy out of recession, at least to the extent of reducing interest rates, and modestly applying the brakes during overexuberant expansion. It is accepted that two of the factors exacerbating economic downturns are the fearfulness of investors in the face of declining corporate earnings and the reluctance of consumers to to put down money they suspect they may need later if they are laid off from their jobs. It was not always so.

Some imagine that Keynes work, along with the massive nineteenth century tomes of Karl Marx, constitute a response to Adam Smith's "Wealth of Nations" a work at least as misunderstood, often deliberately so, as "General Theory...". That is not the case; Keynes hardly ever, refers to Smith and, in any case, those who have read "Wealth of Nations" are well aware that Smith, a truly charming writer quite apart from his undeniable genius, is far more sympathetic to the average worker and much more critical of monopolistic business practices than imagined by those who have deified him but never read him. Instead, the dragons which Keynes sets forth to slay are those who later built a truly "Dark Tower" on Smith's rather benign foundation. Those dragons include, most notably, David Ricardo, Alfred Marshall and "Professor (A. C.) Pigou".

Keynes cannot help but admit to the suspicion that these economists' written views on the question of employment, or the more pressing question of unemployment, reflected their identification of the social classes most likely to buy their books; he never states it quite that baldly, of course. It seems almost incredible to us in this age that the prevailing opinion expressed in those writings is that all unemployment, at the organizational if not the individual level, is voluntary; that depressions and large scale unemployment result from the perverse refusal of workers or their labor union representatives to recognize their labor as just another good in the market, subject to a reduced price in the absence of demand occasioned by downturns in economic activity.
One wonders if some of the tolerance for Adolf Hitler manifested by large segments of the British upper and middle classes, and smaller segments of their American counterparts, in part reflected his action on accession to the Chancellorship to reduce German wages by one third all around. Whether that, by itself, increased German employment numbers or simply made economic room for a huge rearmament program that effectively eliminated labor redundancy is a good question ?but for some other essay.

Keynes argues quite persuasively that a perception of fairness is essential in a democratic society. (10 points to Adolf for fairness?) Wage reductions in capitalist economies tend to be spotty and opportunistic, rather than universal, typically affecting those who can least afford them. Keynes also argues that they do virtually nothing to solve the problems of the economy, partly because employers may very well decide not to decrease prices comparably and, more importantly, because of cascading effects on overall demand; workers on reduced wages don't rush out to buy new automobiles. Keynes's General Theory versus the classical-neo. theory
First,let's write down the core of the classical and/or neoclassical theory Keynes criticized in the General Theory.Let p equal the price level,w equal the money wage,MPL equal the marginal product of labor,mpc equal the marginal propensity to spend on consumption goods,mpi equal the marginal propensity to spend on investment goods(capital or producer goods like machinery,equipment or factories)and mps equal the marginal propensity to save .For the classical- neoclassical theory,the economy is at an optimal state on the boundary of both the static and dynamic production possibilities frontiers if the following equilibrium condition holds for the aggregate labor market:w/p=MPL.For Keynes the condition is w/p=MPL/(mpc+mpi).neoclassical theory is a special case where mpc+mpi=1.Keynes's GT is mpc+mpi Don't waste your money
Keynes has had a profound influence on economic policies without question. If youre curious about economic theories in general then you may want to add this book to your bookshelf along with works by Friedman,Ludwig von Mises and Adam Smith

For the most part however, Keynes brand of economics has been a dismal failure. One need to look no further than the stagflation of the 1970's to see this. Keynes work is outdated and discredited. If youre looking to gain a real understanding about economics I suggest you read "Basic Economics" by Thomas Sowell.

The savior of "capitalism" or corporatist liberalism?
I read Keynes' "General Theory" as a high-school sophomore in 1970. Even as a high-school student, I was able to see the central analytical error.

The key Keynesian argument is that there can be an imbalance between savings and investment: savers may try to save more than they invest, in effect taking money out of circulation and thereby throwing the economy into depression.

Of course, they have to do something with this money, presumably holding it as cash in some form. Therefore, if you follow through the analysis to the end, Keynes is saying that people are trying to hold more cash than is available: the demand of savers to hold savings in cash rather than as investments is what causes depressions.

Keynes and his followers accept this conclusion: the term which came to be used was that there was a "liquidity trap," the desire to hold more cash ("liquidity") than was actually supplied in the economy is what produces depressions.

However, as soon as the matter is phrased in terms of an imbalance between the supply and demand of money, anyone who passed economics 101 should remember that market economies are _very_ good at equilibrating supply and demand. If the current demand for a good is too high, then the current market value is too low, and a rise in the market value of that commodity will solve the problem.

It works for money, too. A rise in the value of money is called "price deflation," and economists have known for centuries that price deflation does indeed naturally occur in depressions. As the general price level falls, the existing supply of money becomes more valuable -- in effect, the real supply of money becomes greater. It becomes more tempting to spend one's cash on now cheaper goods or investments. Price deflation, if allowed to occur by governments, cures liquidity traps.

I figured this out for myself as a high-school student (there is an alternative but equivalent analysis based on "dimensional analysis" which, as a budding physicist, I found especially cogent).

I was not of course the first to work this out: even _before_ Keynes published the "General Theory," the British economist A. C. Pigou had worked through this analysis and the matter is often therefore referred to as the "Pigou effect." Since Pigou, various eminent economists have worked out the mechanism in great detail with careful mathematical analyses, but the basic idea is freshman economics. When I entered college, I found out that the advanced graduate-level "macro" books did indeed let the secret out that Keynes' analysis was wrong. It was only undergrads, politicians, and the general public that were expected to believe the Keynesian fallacy.

So why the decades of lying?

Just as the Communist governments of the old Soviet empire needed Karl Marx's goofy economics theories and laughable philosophical scribblings in order to prop up their own corrupt regimes, so also the rising mid-twentieth-century predatory military-university-government-industrial complex in Western nations needed an ideology to justify the corporatist-socialist regimes it was creating.

Keynes' prescriptions for monetary inflation, deficit spending, rejection of the gold standard, and high levels of government spending and taxation were tailor-made for the democratic-socialist welfare/warfare states then being erected in various Western nations.

As corporate liberals are so fond of saying, Keynes did indeed "save capitalism" if by "capitalism" one means not free-market capitalism but rather the corrupt crony capitalism under which we now all live.

Keynes himself knew this of course. The infamous statement he made in the introduction to the German translation of the "General Theory" ("theory of aggregate production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire") obviously does not prove that Keynes was sympathetic to Nazism. But it does show that Keynes rightly recognized that his proposals were of great potential value for the oppressive political regimes that were being created during the twentieth century.

Even though Keynesian theories are now intellectually discredited "flat-earth" economics, they live on because they serve a political need. Even conservative politicians nowadays often spout Keynesian nostrums ("stimulating demand" via tax cuts or monetary growth) rather than make the painful acknowledgement that it is the corporate-socialist economic system under which we live which is the problem.

No regime lasts forever. Eventually, the present corporatist-collectivist regime will collapse, probably when the majority of the human race figures out how to free itself from the current American geopolitical hegemony. At that point, Keynes will be universally viewed as the economically incompetent charlatan that he actually was.

(For a more detailed analysis of the Keynesian system, I recommend Henry Hazlitt's classic "Failure of the New Economics" and the collection of critical essays Hazlitt edited, "Critics of Keynesian Economics." For an analysis that goes beyond Keynes in analyzing the process which causes the initial imbalance in the investment sector and the resulting liquidity crisis, see Murray Rothbard's "America's Great Depression." Keynes purported to believe that the triggering forces of the investment crisis were irrational and inexplicable "animal spirits." Rothbard shows that, on the contrary, these forces can be rationally explained and understood: in essence, it is incompetent financial policy, of the sort Alan Greenspan has provided in the last decade, which causes economic crises. Milton Friedman's and Anna Schwartz's famed "The Great Contraction" focuses solely on the monetary aspects of the Great Depression, thereby missing the causative process in the investment sector.) ... Read more

Book Description

Since the end of World War II, economists have tried to figure out how poor countries in the tropics could attain standards of living approaching those of countries in Europe and North America. Attempted remedies have included providing foreign aid, investing in machines, fostering education, controlling population growth, and making aid loans as well as forgiving those loans on condition of reforms. None of these solutions has delivered as promised. The problem is not the failure of economics, William Easterly argues, but the failure to apply economic principles to practical policy work.

In this book Easterly shows how these solutions all violate the basic principle of economics, that people--private individuals and businesses, government officials, even aid donors--respond to incentives. Easterly first discusses the importance of growth. He then analyzes the development solutions that have failed. Finally, he suggests alternative approaches to the problem. Written in an accessible, at times irreverent, style, Easterlys book combines modern growth theory with anecdotes from his fieldwork for the World Bank. ... Read more

Reviews (38)

No Easy Answers
An economist at the World Bank, Easterly looks back at the dismal economic record of the Third World over the last 40 years and distills lesssons to guide donors and policymakers in the future. He is at his best when dissecting failed policies such as population control or structural adjustment loans, which were embraced by development experts of the day but rested on faulty logic and flopped in practice. The rest of his book contains fascinating, nuanced discussions of how bad governance, "poverty traps," and plain bad luck (such as terms of trade shocks) can keep poor countries trapped in vicious cycles of poverty. Many myths are exploded, such as the belief that poor nations are destined to "catch up" with rich ones, or that international investment flows to capital-poor states in an effort to find higher returns. The text is clearly written and filled with wry humor. However, the failure to discuss how "Asian Tigers" such as Korea, Singapore, and Taiwan broke out of poverty and achieved industrial take off -- at one point, Easterly half-seriously cites "good luck" as a key explanation for their 30-year record of sustained economic growth! -- is a glaring hole and results in my rating of only four stars.

There are no easy answers to third world growth
For 5/6ths of the people of Earth, life is a daily struggle for basic needs: food, shelter, medicine. Infant mortality rates are high, women are oppressed, and individuals have limited opportunities to improve their lot.

William Easterly is a Senior Advisor in the Development Research Group of the World Bank. In his first book, he asks why trillion dollars of foreign aid to the countries of the "third world" since WWII have caused essentially no improvement in the quality of life for the people in these countries. I found the writing lucid and the many real stories of poverty and corruption both emotionally powerful and insightful.

Emphasizing a key mantra of economics -- people respond to incentives -- he details the long list of foreign aid tactics that have failed: capital investment (machines, factories, roads), education, birth control, loans, and loan forgiveness. Not that any of the tactics are bad, but rather they are ineffectual in a country lacking key social, political, and economic infrastructure.

Easterly then describes in detail the factors at play in driving growth: increasing returns (Leaks, Matches, Traps), creative destruction through technology, luck, governments kill growth, government corruption, and class and race conflicts.

Easterly shows that achieving economic growth is very difficult, but he does a great job of identifying the key systemic issues that poor countries must address.

Perhaps surprisingly, Easterly's model applies equally well to the economic disparities that exist within countries, even "rich" countries like the United States. The increasing returns model says that highly-skilled people will prefer to live and work with one another ("Matches"), as each of them will be more productive for being around other highly-skilled individuals. So this explains, for example, why areas like Silicon Valley, having once achieved critical mass, continue to grow. And why low-income inner-city and rural areas remain depressed ("Traps").

debunking myths and the east asian tigers
While Easterly's book may seem targeted for economists, it's actually a book for everybody - it's needed to debunk myths that continue to prevail in policymaking. It's important that we understand what doesn't work and through a process of elimination of cure alls, we might eventually come to a solution.

As for one of the reviewer's question about why Easterly attributes a lot of the East Asian Miracle to "luck"... well, being an East Asian, we don't want to admit it. It's a lot about factor accumulation or basically saving really hard for a rainy day. But there's been low productivity from technology change and all this rampant growth has tapered off. So in a sense we are "lucky" that we could save like crazy under favorable world economic conditions then... But we came undone through too much suspicious government meddling, corruption, cronyism and thinking that we were invincible.

A nice review of economic history
Easterly does indeed cover the history of economic development, and he magically creates the image of poor people who just never had the right incentives. I will not argue with his historical accuracy, this part of his book is straightforward enough. Indeed, any competent historian could have related an equivalent story. However, where Easterly falls short of his title of being an economist is in that of what to do next. People need the right incentives... ok what now. Martin Feldstien gave us his theory, Robert Solow threw his hat in the ring, and as such they are economists, however all Easterly is is an economic historian offering very little advice as to what is next.

Educational, readable and thought provoking
I found this book enjoyable reading. It uses many standard economic ideas, but does not assume the reader knows them and it explains them clearly and simply. For instance, his description of the "Luddite Fallacy" is one of the best I have seen.

The subject that economists study, human interaction, is too complex to be a solved problem. Over the years there have been guesses that have not worked out. The theme of this book is based on the idea that people are entrepreneurial. If the developed world gives the less developed world a whole pile of money, then the entrepreneurial thing to do is to try and get some of it. Unfortunately, that will not necessarily be the use of the money that is best for the long term growth of the country.

There are a number of well meaning actions that the developing world has taken that have had unintended consequences and Easterly gives great examples of them. The question he asks and what he proposes is: what actions will incentivise people to do the things that will result in the best long term results?

Sometimes that might require toughlove, and as such may not be politically appealing, but it makes sense, as William Easterly so clearly shows in this readable and significant book. ... Read more

Book Description

Now nearing its 60th printing in English and translated into nineteen languages, Michael E. Porter's Competitive Strategy has transformed the theory, practice, and teaching of business strategy throughout the world. Electrifying in its simplicity -- like all great breakthroughs -- Porter's analysis of industries captures the complexity of industry competition in five underlying forces. Porter introduces one of the most powerful competitive tools yet developed: his three generic strategies -- lowest cost, differentiation, and focus -- which bring structure to the task of strategic positioning. He shows how competitive advantage can be defined in terms of relative cost and relative prices, thus linking it directly to profitability, and presents a whole new perspective on how profit is created and divided. In the almost two decades since publication, Porter's framework for predicting competitor behavior has transformed the way in which companies look at their rivals and has given rise to the new discipline of competitor assessment.

More than a million managers in both large and small companies, investment analysts, consultants, students, and scholars throughout the world have internalized Porter's ideas and applied them to assess industries, understand competitors,, and choose competitive positions. The ideas in the book address the underlying fundamentals of competition in a way that is independent of the specifics of the ways companies go about competing.

Competitive Strategy has filled a void in management thinking. It provides an enduring foundation and grounding point on which all subsequent work can be built. By bringing a disciplined structure to the question of how firms achieve superior profitability, Porter's rich frameworks and deep insights comprise a sophisticated view of competition unsurpassed in the last quarter-century. ... Read more

Reviews (28)

The best ABC book about Business Strategy
This book is a classic! It's concepts will last forever...Sun Tzu would have written a very similar book, if he would have written about businesses. If you want to introduce yourself to business strategy and understand the broad picture, this is the book you must read. The book lets you understand competitive forces within an industry and the strategic steps a company can take to enhance its competitive position. It also describes the main caractheristics of nacent, mature, and declining insutries and available strategies for each case. Although it is a easy to read (but not light) and is very well structured, you must first be familiar with some economics and business administration concepts. You CAN'T talk or even have an opinion (sounds exagerating but it's true... it's the ABC, remember?) about strategy if you have not read this book. A MUST for business analyst, strategist, managers and directors... (I think this phrase appears on the book, but it's true).

I bought the spanish version, which is not very good. For spanish speakers....buy the english version if you can.

Clasic for all time
As Adam Smith is to economics and capitalism, Porter is to business strategy within this market system.

This is THE seminal book for defining how businesses compete.

As technology fads and internet business models ("New economy") come and go, every company must still address the basics of competition as outlined within this book. The frameworks within the book outline:
-How to assess the competitive structure of your industry,
-Generic competitive strategies
-Competitor Analysis

-Effects of market signals on competitive behavior
-Competitive moves in response to your strategy
-Competitve strategy in a number of different market environments
-Impact of strategies such as Vertical integration, growth through new products, scale, and M&A
-... much more

You will use this book as a reference, and find it is timeless. It is no wonder the Mr. Porter is widely regarded as the preeminent strategist.

To put this in practice I recommend books on gaming theory.

A book that should be referred to over and over again.
This is one of the foundation books of the modern business education. Yes, it was written over twenty years ago and you cannot take a business course anywhere without the term "Porter's Five Forces" not at least being mentioned. But, really, this book is still completely relevant and should be on every businessperson's bookshelf, front and center.

For a concept that has so much a place in b-school discussions, you might think the book focuses on the 5-forces, but it is only a small part of the book. It outlines the Generic Competitive Strategies (again, a now well known topic), Competitor Analysis (extremely valuable), Market Signals, Competitive Moves, and so much more.

The book is in three parts, General Analytical Techniques, Generic Industry Environments, and Strategic Decisions. There is an appendix on Portfolio Techniques in Competitor Analysis, and a very useful appendix on How to Conduct an Industry Analysis.

I think a lot of times this book is not given as active a place in the pantheon as it deserves because so many books and articles are recycling a lot of what was in this book and most don't add much to the discussion. Honestly, this book is worth referring to over and over and over again. It is a tool or a weapon in your competitive war chest that needs to be kept active and in play.

A must have for beginners
A must have. Porter provides students with a great place to start for understanding strategy. While you must know the basics in this book to understand the foundation of strategy,it will not provide you with a dynamic and cutting edge strategic framework that many of today's industries need.

the bluest of the blue
Simply put, if you haven't read Competitive Strategy yet, you are unfit to talk about business strategy.

And only after reading it, are you fit to read the sequel, Competitive Advantage, which if you haven't read till now, makes you unfit to talk about business tactics.

These two books are the Old and New Testaments of business. ... Read more

Book Description

Governments use them to sell everything from oilfields to pollution permits, and to privatize companies; consumers rely on them to buy baseball tickets and hotel rooms, and economic theorists employ them to explainbooms and busts. Auctions make up many of the world's most important markets; and this book describes how auction theory has also become an invaluable tool for understanding economics.

Auctions: Theory and Practice provides a non-technical introduction to auction theory, and emphasises its practical application. Although there are many extremely successful auction markets, there have also been some notable fiascos, and Klemperer provides many examples. He discusses the successes and failures of the one-hundred-billion dollar "third-generation" mobile-phone license auctions; he, jointly with Ken Binmore, designed the first of these.

Klemperer also demonstrates the surprising power of auction theory to explain seemingly unconnected issues such as the intensity of different forms of industrial competition, the costs of litigation, and even stock trading 'frenzies' and financial crashes.

Engagingly written, the book makes the subject exciting not only to economics students but to anyone interested in auctions and their role in economics.

... Read more

Book Description

Neoclassical Finance provides a concise and powerful account of the underlying principles of modern finance, drawing on a generation of theoretical and empirical advances in the field. Stephen Ross developed the no arbitrage principle, tying asset pricing to the simple proposition that there are no free lunches in financial markets, and jointly with John Cox he developed the related concept of risk neutral pricing. In this book Ross makes a strong case that these concepts are the fundamental pillars of modern finance and, in particular, of market efficiency. In an efficient market prices reflect the information possessed by the market, and, as a consequence, trading schemes using commonly available information to beat the market are doomed to fail.

By stark contrast, the currently popular stance offered by behavioral finance, fueled by a number of apparent anomalies in the financial markets, regards market prices as subject to the psychological whims of investors. But without any appeal to psychology, Ross shows that neoclassical theory provides a simple and rich explanation that resolves many of the anomalies on which behavioral finance has been fixated.

Based on the inaugural Princeton Lectures in Finance, sponsored by the Bendheim Center for Finance of Princeton University, this elegant book represents a major contribution to the ongoing debate on market efficiency, and serves as a useful primer on the fundamentals of finance for both scholars and practitioners.

... Read more

Reviews (45)

OUTSTANDING DEFENSE FOR FREEDOM IN SOCIETY
In this book, Dr Friedman makes the case why freedom, in the economic and social sense, is the best policy. Reading this book is a life changing experience for anyone who has not had much exposure to economics; Dr Friedman, alas, is arguably the top economist of our time.

The book offers not only a critique of developments in education, trade policy, workers rights, drug policy, among other economic and social issues, but he also offers solutions. He readily recognizes the difficulties of implementing his solutions (political mainly), but nonetheless he is searching for the best non-utopian alternative.

Dr Friedman will also demystify the image that economists are wholly consumed by growth and GDP. He is guided by the rule that each person knows best what they want and should be free to pursue it, within limits (of hurting others, etc.).

This is an easy to read book, a great intro to social issues or a great alternative view of the world. I hardly think it can be construed as liberal or conservative, these labels cannot encompass the true spirit of freedom as developed in the book. If I had to classify it, this book is about the rational improvement of society by letting each one pursue their own goals (again, a maxim espoused by the founding fathers and long forgotten). Overall, anyone interested in social issues should read this book; it may not convince you, but it will make you think.

A commonsense, prophetic defense of freedom and capitalism
This is a wonderful, concise, accessible, prophetic, commonsense defense of the free market for the lay person. Friedman lucidly explains how free markets operate to deliver goods and services in an efficient manner; how markets transmit information; and how well-intentioned government activity and regulation distorts market information and hampers the efficient delivery of goods and services.

Additionally, history has shown his advocacy of school vouchers and of privatizing government retirement programs, considered radical ideas in 1979, to be justified. Voucher programs have been instituted in Milwaukee and Cleveland and have been remarkably successful. Chile privatized it's "Social Security" system, among other Friedman-inspired reforms, and it's economy has grown at 7-8% over the course of the last decade.

My only criticism is fairly minor. The author assumes the premise that people should be "free to choose," that is, free to make purchasing decisions without government interference (coercion). This is the first principle of libertarian economic argument, a principle of which I am in full agreement. But what does it rest on? Why should people be free to make economic decisions free from coercion? I would argue, and I assume Frieman would agree, that we are endowed by our Creator with certain unalienable rights, among these are the rights to life, liberty and the pursuit of happiness. "Liberty" as understood by the Founding Fathers included economic freedom. At it's root, the case for a free market is a moral one. If we are to regain our economic freedom we must regain the profound, fundamental, first principles of our nation's founding.

Otherwise, a remarkable, influential book.

Highly recommended for the remaining Marxist professors leaching off the proletariat taxpayers at our government universities.

Excellent-A must read
An absolutely wonderful book. It should be required reading in all schools. If you're looking for something to upset the socialists and communists in your life, give them this book.

Economic Freedom
"Economic freedom is an essential requisite for political freedom". That quote from Milton and Rose Friedman is the essential reason why "Free To Choose" should be required reading for all Americans in high school! This book makes a powerful and persuasive argument in favor of a free market economy. Written in a very lucid style "Free To Choose" makes the usually dry subject of economics easily understandable and a pleasure to read. The "Power Of The Market" chapter shows how free markets work and why they are essential for human freedom. "Tyranny Of Control" chapter explains why trade restrictions and subsidies backfire. The "Freedom And Prosperity" chapter examines what the dramatic experience in Eastern Europe reveals about bureaucrats and markets. The "Created Equal" chapter shows how markets promote justice. Simply said, this book tackles economic issues that are as timely today as they were when the Friedman's wrote about them in 1979.

As a retired Army officer and student of political philosophy, I found "Free To Choose" a great book for anyone who wants to understand basic economic theory.

Excellent, What a Breath of Fresh Air
If only I and Trotsky had this book back in 1917, what a world of difference it could have made. I realize now after reading Adam Smith's The Wealth of Nations and Larry Elder's book The Ten Things You Can't Say In America that I was wrong. In that communistic and socialistic systems only contriubute to make the public poorer and worse off. Now if only we could convince all the Democrats and other Socialists of the their folly. ... Read more

Book Description

Economics has much to do with incentives--not least, incentives to work hard, to produce quality products, to study, to invest, and to save. Although Adam Smith amply confirmed this more than two hundred years ago in his analysis of sharecropping contracts, only in recent decades has a theory begun to emerge to place the topic at the heart of economic thinking. In this book, Jean-Jacques Laffont and David Martimort present the most thorough yet accessible introduction to incentives theory to date. Central to this theory is a simple question as pivotal to modern-day management as it is to economics research: What makes people act in a particular way in an economic or business situation? In seeking an answer, the authors provide the methodological tools to design institutions that can ensure good incentives for economic agents.

This book focuses on the principal-agent model, the "simple" situation where a principal, or company, delegates a task to a single agent through a contract--the essence of management and contract theory. How does the owner or manager of a firm align the objectives of its various members to maximize profits? Following a brief historical overview showing how the problem of incentives has come to the fore in the past two centuries, the authors devote the bulk of their work to exploring principal-agent models and various extensions thereof in light of three types of information problems: adverse selection, moral hazard, and non-verifiability. Offering an unprecedented look at a subject vital to industrial organization, labor economics, and behavioral economics, this book is set to become the definitive resource for students, researchers, and others who might find themselves pondering what contracts, and the incentives they embody, are really all about. ... Read more

Reviews (4)

Master Piece from the Master
The book provides a systhesis of contract theory at the phd level. It begins with basic idea of adverse selection and then its extension and followed by basic moral hazard model and its extension. The selected topics are presented here in a consistent fashion of the main ideas. Applications are well presented along the models.

Nonverifiability, the mixed model of adverse selection and moral hazard and some dynamic aspects of the two are also incorporated in a great deal of details.

This is the text on incentive theory, not just introduction. Its comprehensive insights are useful and time-saving for readers. You need not to read a bulk of papers, after reading the book, you just complement it with some core papers of the topics. (such as multidimensional screening, random participation)

If there is some weakness, it would be that... the authors present some topics too short and some notation used are not well explained, particularly the extension of the core models and some selected topics.

Anyways, i found it helpful and complete for studying incentive theory but it requires deep understanding of optimization theory and some experience of economic-theorethic arguments.

This book is written by a major contributor of the field. It would be hard to write another book to compete with this one in the field. . .

excellent book
A very clear book on the topic of information theory; pretty much everything you need as a graduate student. Covers all topics in substantial detail but with models that capture only the effects that are relevant. A great buy.

Best book on the topic
This is a fabulous book, destined to become a classic reference summarizing some 30 years of research in a field that has now become mature and which has completely redefined and expanded the field of Modern Economics. Jean Jacques Laffont is a sure-bet future Nobel laureate for his contributions to the field (likely to be shared with that other Toulouse-based giant Jean Tirole). Martimort is a rising star in his own right.

This volume, the first in what is described as a two-volume survey, should be on the bookshelf of any serious economist or any graduate student trying to work her way through a serious first or second year microeconomic theory. It could also be used effectively to teach a first-year graduate or an advanced undergraduate course on asymmetric information and contracts.

What is so nice about the book pedagogically in my view is the way the authors have synthesized so many results by working with variants of simple models. It's the power of elegant simplicity. When looking at moral hazard for example, they start with the simplest two outcome, two action problem, with a risk-neutral principal and agent. Then they slowly and selectively complicate the same base model (e.g. adding a limited liability constraint, making the agent risk averse, allowing for more action levels and outcomes, adding more tasks, more agents, etc). Hence you get the essential insights without being overly burdened from the start with cumbersome notation. They have several nice graphical representations to accompany the very well written intuitive explanations. The end result is that you end up seeing with clarity how many results in the literature, that had previously seemed disparate, tie together very neatly and share a common mathematical structure.

The authors state in the introduction (which is a brilliant historical survey of ideas and the development of the field) that they plan a second volume on multi-agent contracts and mechanism design. It should also be fabulous and will hopefully help to popularize and democratize an area of economics that is packed with essential insights for understanding political economy and the behavior of groups, hiearchies and organizations, yet has mostly been left to mathematical economists.

There are other books out there like Macho-Stadler et al' "An Introduction to the Economics of Information: Incentives and Contracts" and Salanie's "The Economics of Contracts" which are targeted at a similar audience. These are quite good in their own right, but do not have the breadth and insight of this volume.

Fabulous!
This book is the best book I've ever met on principle-agency theory. The authors provide clear concept of incentive compatible scheme and detailed implications for each constraint. They successively clarified the trade-off effects related to adverse selection and moral hazard models. I'd like to recommend this book to whoever struggled with information economics as I did. I love the first chapter. It's alive. ... Read more

Book Description

Despite the vast research literature on topics relating to contract theory, only a few of the field's core ideas are covered in microeconomics textbooks. This long-awaited book fills the need for a comprehensive textbook on contract theory suitable for use at the graduate and advanced undergraduate levels. It covers the areas of agency theory, information economics, and organization theory, highlighting common themes and methodologies and presenting the main ideas in an accessible way. It also presents many applications in all areas of economics, especially labor economics, industrial organization, and corporate finance. The book emphasizes applications rather than general theorems while providing self-contained, intuitive treatment of the simple models analyzed. In this way, it can also serve as a reference for researchers interested in building contract-theoretic models in applied contexts.

The book covers all the major topics in contract theory taught in most graduate courses. It begins by discussing such basic ideas in incentive and information theory as screening, signaling, and moral hazard. Subsequent sections treat multilateral contracting with private information or hidden actions, covering auction theory, bilateral trade under private information, and the theory of the internal organization of firms; long-term contracts with private information or hidden actions; and incomplete contracts, the theory of ownership and control, and contracting with externalities. Each chapter ends with a guide to the relevant literature. Exercises appear in a separate chapter at the end of the book. ... Read more

Reviews (14)

An economic fable
Prof. Roberts, an economics professor, has created series on interesting little novels to teach his readers about libertarian economic thought.

In The Choice, Roberts borrows from Capra's "It's A Wonderful Life" to introduce his protagonist Ed Johnson to alternate worlds where free trade does and does not exist. Instead of Clarence the Angel, Ed is led around by David Ricardo, the economist who developed the Law of Comparative Advantages, which forms the foundations for supporting global free trade.

Throughout the novel, Ed raises questions based on his traditional thinking on protectionsim. Ricardo addresses each key concern in turn. The concepts debated include: loss of jobs, loss of our nation's economic status, national security needs, etc. More importantly, Ricardo convinvingly makes the point that total national economic self-sufficiency is a recipe for economic disaster/failure.

I found this to be an entertaining way to learn more about the debate on free trade and protectionism. This novel is easily more enjoyable than the typical economics text or article, and hence its message was delivered more effectively.

Economic Solace
This is a wonderful story for all in need of a little economic solace. Russ Roberts (who is wonderful in person) illustrates a world of free trade in a charismatic fictional story. Reminiscent of It's A Wonderful Life, the "angle" David Ricardo teaches an american tv manufacturer why free trade is so important even if it does destroy his business, so convincing is Roberts that I teared up on occasion and bought a copy for everyone I knew. The Choice is a book too compelling for anyone with any kind of education not to believe in the power of the Market.

Superb Book
I'll make this as brief and simple as does Mr. Roberts. This is, without question, a superb book. It is the title to which I refer almost everyone interested in the free trade debate. Thank you, Russell Roberts.

A complicated topic made simple
Roberts puts things in a language that all can understand. Simply said this book is a must read. Roberts provides in depth examples making it not only easy to follow but also easy understand. Roberts makes the basic foundation of economics simple. It's a great and easy read! A must have!

Insight without economic jargon
This book clearly states the case for free trade without falling back on dense economic theory and technical jargon. Especially with the protests and controversy surrounding globalization and trade today, it is more important than ever for people to understand that free trade makes us all better off. In fact, there is no better way to improve the lot of two countries (and their overall welfare) that to reduce trade barriers between them and allow each to concentrate more energy and resources on their comparative strengths. The Choice delivers this message clearly and articulately in the context of a fun and simple story that even the most protectionist leaning person would have difficulty refuting. ... Read more

Book Description

The purpose of this text is to introduce concepts for studying relationships between states and markets.The economy and the state are thus analyzed as networks of relationships between principals and agents, each occupying a particular position in the institutional structure. The book then analyzes systematically the effect of the organization of the state on the functioning of the economy. It isolates the conditions that trigger government's positive or negative responses to the economy. ... Read more

Book Description

Twenty years ago, behavioral economics did not exist as a field. Most economists were deeply skeptical--even antagonistic--toward the idea of importing insights from psychology into their field. Today, behavioral economics has become virtually mainstream. It is well represented in prominent journals and top economics departments, and behavioral economists, including several contributors to this volume, have garnered some of the most prestigious awards in the profession.

This book assembles the most important papers on behavioral economics published since around 1990. Among the 25 articles are many that update and extend earlier foundational contributions, as well as cutting-edge papers that break new theoretical and empirical ground.

Advances in Behavioral Economics will serve as the definitive one-volume resource for those who want to familiarize themselves with the new field or keep up-to-date with the latest developments. It will not only be a core text for students, but will be consulted widely by professional economists, as well as psychologists and social scientists with an interest in how behavioral insights are being applied in economics.

The articles, which follow Colin Camerer and George Loewenstein's introduction, are by the editors, George A. Akerlof, Linda Babcock, Shlomo Benartzi, Vincent P. Crawford, Peter Diamond, Ernst Fehr, Robert H. Frank, Shane Frederick, Simon Gächter, David Genesove, Itzhak Gilboa, Uri Gneezy, Robert M. Hutchens, Daniel Kahneman, Jack L. Knetsch, David Laibson, Christopher Mayer, Terrance Odean, Ted O'Donoghue, Aldo Rustichini, David Schmeidler, Klaus M. Schmidt, Eldar Shafir, Hersh M. Shefrin, Chris Starmer, Richard H. Thaler, Amos Tversky, and Janet L. Yellen.

... Read more

Book Description

Why do trends in human society sometimes change so suddenly?

The past three years show how quickly cultural shifts can occur, which makes answering the question above all the more urgent. In 1999, we were celebrating our heroes, the stock market had reached unprecedented heights - and many people believed that peace in the Middle East was at hand.

Three years later, the economy is weak, corporate executives are being thrown in jail, bloodletting between Israelis and Palestinians is daily ritual, India is testing missiles, North Korea is threatening the U.S. with nuclear destruction, the U.S. is at war with Iraq, European allies are deserting the U.S., a senator is calling for the resignation of the chairman of the Federal Reserve, and Americans are stocking supplies for terrorist attacks.

What changed? And why?

Is it possible that all of these events flow from the same cause?

Best-selling author Robert Prechter’s new two-book set, Socionomics: The Science of History and Social Prediction, proposes a startlingly fresh answer.

In Socionomics: The Science of History and Social Prediction, Robert Prechter spells a historical correlation between patterned shifts in social mood and their most sensitive register, the stock market. He also presents engaging studies correlating social mood trends to music, sports, corporate culture, peace, war and macroeconomic trends.

The new science of socionomics takes hundreds of popular notions about mass psychology, culture and the stock market and stands them on their heads.

Socionomics: The Science of History and Social Prediction includes a 2nd edition of the book that started it all, The Wave Principle of Human Social Behavior and the New Science of Socionomics as well as his new title, Pioneering Studies in Socionomics, an accessible collection of the essays that founded a new basis for social science.

Together, these books can transform your understanding of how our society works. It will change the way you read the newspaper. It will even show you how to predict news trends months in advance. Learn for yourself the science of social prediction. Order Prechter’s two-book set today. ... Read more

Reviews (2)

Only the beginning to a wonderful new science
The previous reviewer really says it all, but I felt I would add to the commentary by posting my own 5 star, because this new boxed set truly deserves it.
As a fellow "Elliottician" for a number of years now I can say with great confidence that (especially for the new reader) Prechter's new boxed set is simply the best study and most complete explanation to "how things really work" that is currently out there. (Until, of course, I publish *my* studies, ha ha, just kidding Bob)
As I've often noted in previous reviews on Elliott Wave, the biggest problem is...most people just don't "get it"... Elliott Wave and is SO MUCH MORE than the financial markets. The fundamental discoveries that govern the Wave Principle and thus the behavior of the financial markets are the very same fundamental forces at work throughout the entire universe! Who cares about making a few bucks in the stupid stock market when, if you have a deep understanding of the Wave Principle, Socionomics, and science in general, you can begin to see how everything around us all ties together to form this awesome grand scheme of life and existance. A deep understanding of Elliott Wave and Fibonacci is the key to opening a whole new world of knowledge, application, and the birth of a new science!
With the publishing of this boxed set, I hope more people can come to realize that the universe is indeed a truly beautiful place and man has a deep intimate connection with it.
This boxed set is only the beginning of the wealth of knowledge that can be mined in this area. You just have to know what to look for, and these books give you an excellent foundation.

Tomorrow's Headlines Today
It's been painfully obvious for over three years that the standard approach of economic forecasters, who examine every newly released government statistic to divine the next lurch of the stock market, has been less than stellar. Almost none of those who today talk about the "technology bubble" actually called for a top in 2000, the recession of 2001 wasn't recognized until it was half a year old, and in spite of a chorus of calls for an incipient recovery it seems plenty of skepticism remains about economic prospects. The reason for this forecasting disconnect is obvious, according to Robert Prechter, Jr.

Prechter's newest title, Socionomics: The Science of History and Social Prediction is a two-book set that offers voluminous support for a revolutionary concept. It reverses the direction of causality that underpins the entirety of orthodox market forecasting with a radical thesis: Instead of the economic statistics leading the market, the market (or more properly the aggregate social mood it measures) determines economic behavior that leads to the statistics.

Though a simple statement, this is heady stuff when its full ramifications are considered. This is exactly what this set does, addressing both theory (Wave Principle of Human Social Behavior, 2nd ed.) and its application (Pioneering Studies in Socionomics, a new work). Its illustrations of this reversal of causality cannot be casually dismissed, nor should they be ignored by anyone who believes timing matters in business, politics, investing, or every other aspect of life.

Socionomics is Prechter's term for the application of Ralph Nelson Elliott's Wave Principle market model to a wider array of social phenomena (see reviews of Elliott Wave Principle). Prechter has taken this principle and, along with colleagues both within and without his Elliott Wave International market forecasting firm, developed it into an early stage science in its own right. Pioneering Studies in Socionomics is a compilation that represents their work, a series of related studies which run from the 1980s and forward to 2002. Most were published as part of Prechter's Elliott Wave Theorist newsletter. Sequential dating of some studies offers a particularly detailed timeline for their conclusions, allowing readers to assess the validity of the observations in retrospect. The result borders on amazing.

Pioneering Studies is quite a departure from Prechter's other recent work, Conquer the Crash. While the latter deals almost exclusively with the financial arena, this latest book leaves the world of finance and ventures out into the wider arena of human endeavor.

Noting that certain social outcomes occur against a backdrop of specific market behaviors, socionomics attempts to make objective forecasts for the kinds of events that should occur as the market and its social mood "Pied Piper" follow their tortuous path through time.

That "torturous path" is where the greater controversy rages. Adherents of Elliott Wave methodology believe that markets follow a fractal pattern and that the market's current position in the wave pattern can often be estimated with a significant level of confidence. Knowing "where you most probably are" gives tremendous guidance in discerning the likeliest path for future market action. Detractors observe that there are always multiple, correct interpretations of where in the pattern the current market resides, so they claim application of the process to forecasting is simply too subjective to be useful.

Prechter's socionomics hypothesis starts with the Wave Principle and so raises two separate questions. Does the stock market reflect aggregate social mood, which precedes and drives social outcomes as varied as fashion, war and peace, economic activity, and even sex, according to socionomics, or are all these social factors dependent upon outside influences like unemployment rates and durable goods orders that can be discerned and used for forecasting in the orthodox method? And even if social mood is the driver of social outcomes, is the social mood patterned and therefore subject to forecast by analyzing the stock indexes, or is the path a "random walk" that precludes accurate forecasting at all?

The answer to the first question, as far as economic forecasting is concerned, can be determined by simply turning to the article titled, "Socionomics in a Nutshell." If a picture is worth a thousand words, the graph found in figure 1 is a picture equal to the sum of all the words uttered each year by economists on TV and in print. It bears a graph of the Dow Jones Industrial Average from the late 1920s to 2000 with shaded bars depicting periods of recession. With one exception (1946, which supports neither case), every recession during the period coincides with or follows a significant decline in the Dow. With this single graph, Prechter shows that asking an economist to forecast the direction of the market using economic statistics is about as silly as asking a passenger to predict how hard the driver will press the accelerator pedal ten seconds in the future by watching the speedometer now. All that is needed is to watch the stock market. If it's rallying, economic expansion will follow, while persistent, larger-scale declines presage economic contraction.

Pioneering Studies addresses topics both light and serious, tracing the connections between the social mood as demonstrated by the stock market with the fortunes of horror films, professional sports, terrorism and war. Events such as 9/11 are addressed in a way that brings coherence to what otherwise looks like chaos.

Anyone who recognizes the value of timing in their endeavors would be wise to consider the message delivered by this latest from Elliott Wave's most articulate exponent. Our times appear to be getting more "interesting," in the sense of the age-old curse (May you live in interesting times) and Prechter's method, thoroughly addressed in this set, offers a unique and useful perspective. This two-volume set should also be the starting point for a broader investigation of socionomics, with an eye toward its establishment as a new field of study in its own right. ... Read more

Reviews (19)

Comprehensive intro to game theory.
In fact, the book may be too concentrated. I may have to re-read it to grasp all the principles therein. This is not to say that the book is hard to read. It is not. There is so much to take in, and unfortunately, they don't dwell on the examples for long. This should be a required text in any MBA program.

Shoot into the Air
Larry, Mo and Curly have undertaken a three-way duel. There will be two rounds. In the first round, each player gets one shot - first Larry, then Mo, then Curly. At the end of the first round, each survivor gets a second shot, in the same order. Larry is a poor shot, with a 30 percent success rate. Mo is better: he hits 50 percent. Curly never misses.

What should Larry do? The answer is that he should shoot into the air. By wasting his shot, he maximizes his chances of survival. Such is the analysis of the authors of this remarkable introduction to game theory.

One virtue of this book is its geniality: For Dixit and Nalebuff, game theory is full of anecdote and surprise, and they give you the sense that they like nothing better than to share their enthusiasm with others. (Geniality footnote: I probbly shouldn't noise this around, but one day I ran into a problem with an equation in a (different) Dixit book. I sent him an email; I got a response in an hour). A tradeoff for geniality is that they pay a price in structure: to get a coherent framework - even for some of their own best stories - you may have to go elsewhere (Professor Rappaport's textbook may be a good second choice). But it is hard to find any book that does better at conveying a sense of the excitement and challenge of game theory as a discipline).

Comparison shopper's note: I've used this in working with law students. Game Theory for Lawyers, by Baird, Gertner and Jackson, might seem closer on point. But it lacks those little four-block boxes that are a staple of game theory instruction, and for a beginner is bound to be pretty impenetrable without them.

A fun read
For anyone who enjoyed the movie A Beautiful Mind with Russel Crowe playing the Nobel prize winning Professor John Nash, this book does a great job explaining the principles behind Game Theory (prisoner's dilemma etc.) without being too mathematical. After reading you will see Strategy everywhere.

How to think differently
Winning takes good strategy. This book will help you to formulate a strategy like one would strategize in a chess game. The book will enable you to think differently about life's challenges and how to overcome them. It is a shame so many good books on strategy and winning are business books because the theories outlined in this book can be used in every aspect of one's life. If you believe logical processes and planning leads to a good winning strategy, then definitely buy this book. It will enable you to reach new heights in formulating a proper winning strategy.

Pop version of game theory
This book is a good read as far as story-telling goes. However, from the perspective of game theory, it leaves much to be desired, as it does not seek to define the major theories and it does not provide a reasonable explanation for the particular tools and their application.

It is clear that the book is written for those not interested in the more technical aspects of game theory, so if that is you, you should consider this book. It seems to me, however, that the organization of this book is missing exactly what the book purports to deliver: strategic thinking. ... Read more

Book Description

In this volume Dr. Chiang introduces readers to the most important methods of dynamic optimization used in economics. The classical calculus of variations, optimal control theory, and dynamic programming in its discrete form are explained in the usual Chiang fashion--with patience and thoroughness. The economic examples, selected from both classical and recent literature, serve not only to illustrate applications of the mathematical methods, but also to provide a useful glimpse of the development of thinking in several areas of economics. Outstanding features include: (1) written with clarity and a comparable level of expository patience; (2) reinforces discussions of mathematical techniques with numerical illustrations, economic examples, and exercise problems; (3) presents a simple problem with a well- known solution in several different alternative formulations in the numerical illustrations; and (4) explains economic models in a step-by-step manner (from the initial construction through the intricacies of mathematical analysis to its final solution). ... Read more

Reviews (6)

Learn the stuff before writing a textbook
This book may be great for students. I has many good examples, is well written and generally looks good. HOWEVER, for anyone who actually knows optimal control theory it is clear that the book has several flaws. The worst example is the section on transversality conditions in infinite horizon problems. Chiang simply has no idea what he is talking about.

Better than any of the courses I had attented.
The book of professor Chiang is not simply a good introductory text to dynamic optimization in the continuous-time form, but also provides a tight explanation of the related original economic models. It is better than any of the courses most people had attented before. I wish a similar book will appear soon, developing dynamic optimization tools, and especially optimal control in the discret-time form.

Elements of Dynamic Optimization
Very few people have the quality of expressing ideas and concepts with such clarity and simplicity as Professor Chinag has done. If you are new to dynamic optimization, particularly calculus and variation and optimal control theory you had better start with this treatise.

Chiang does it again.
No one in the field of mathematical economics has half of Chiang's skill for explaining difficult subjects in a complete, understandable manner. If this is your textbook, consider yourself fortunate. If it isn't, buy it anyways. You'll definitely come out ahead.

Excellent introduction
An excellent introduction to the subject, just as Richard Feynman lecturing Physics, extremely readable! ... Read more