Book Review

How lay people think and feel about the economy, and which economy-related expectations they hold is not only of scientific interest but also substantially influences economic results at the individual and systemic level. As empirical studies (e.g. Buch, 2018; Fornero and Lo Prete, 2017) show, the acceptability and effectiveness of economic policy measures and reforms also depend on how well citizens understand them. Especially in times of populist movements, highly emotionalised election campaigns (see e.g. experiences in connection with the Brexit Referendum) and 'alternative facts' or 'fake news', such an understanding is indispensable for the role of voters in order to be able to adequately assessing election programmes. Against the background of these considerations, the book written by David Leiser and Yhonatan Shemesh is timely and valuable for politicians, policy advisors, public relation experts, and particularly for economic educators in research and practice – the perspective that I will adopt in this review. Both authors are specialists in their respective fields. David Leiser is a renowned researcher in Economic Psychology with an emphasis on investigating how non-economists understand economic issues. He is past-president of the Economic Psychology division of the International Association of Applied Psychology (IAAP), a former president of the International Association for Research in Economic Psychology (IAREP), co-founder and deputy director of the Center for Research on Pension, Insurance and Financial Literacy at Ben Gurion University, Israel, where he is Full Professor of Social and Economic Psychology. Prof. Leiser holds a BSc in Mathematics from the Hebrew University in Jerusalem, a MSc in Adult Education from the University of Illinois at Urbana Champaign, and a PhD in Psychology from the University of Geneva, Switzerland, where he served as Research Assistant to Jean Piaget. He held visiting positions at the University of Chicago, MIT, Yale, Harvard, and Paris II (Panthéon Assas) and Paris V (René Descartes). Yhonatan Shemesh holds a BA and MA in cognitive science from Ben-Gurion University of the Negev. His research focuses on the ways the human evolutionary cognitive endowment affects how people think and act in the modern world. In their book, Leiser and Shemesh state that their aim is to “document lay beliefs about economics and try to expose their source” (p. 1), with an emphasis on macroeconomics. The ten chapters of the book can be grouped into three parts: The first three chapters (part one) are of introductory nature, whereas the chapters four to eight (part two) focus on specific aspects of how lay people (mis-) understand economic phenomena. In the final two chapters (part three), the authors explore some of the practical consequences that follow from their insights. In the first chapter, Leiser and Shemesh argue that laypersons typically have a poor understanding of economics, and – even worse – are unaware of their insufficiency in the majority of cases. This is not surprising per se, as such a phenomenon can also be observed in many other academic fields (e.g. Shtulman, 2017; Sloman and Fernbach, 2017). However, in the case of economics this is of particular concern because people’s economic beliefs do not only guide their behaviour but also affect public policy, especially in democratic regimes. The authors illustrate this problem with many real-life cases, for example from monetary, fiscal and social policy, and they hypothesise that these shortcomings are not caused by mere ignorance but are rooted in deeper and systematic biases of comprehension and comprehensibility of this specific domain. The following two chapters further explore this hypothesis. Chapter 2 explains why economics is so difficult to understand by outlining the types of reasoning that characterise this domain. Those characteristics include the focus on aggregate data, the inclusion of direct and indirect effects, and the consideration of equilibrium as an explanation. These features stand in sharp contrast to everyday thinking, which could be portrayed as individualistic, direct and static. In addition, laypeople judgements typically hinge on moral considerations, which professional economists (at least those trained in a positivist tradition) usually try to avoid. Alas, as the authors further explain in chapter 3, the type of reasoning common in economics does not come naturally with the human cognitive makeup, and has developed rather late, both phylogenetically and ontogenetically. Inconsistencies have to be expected due to limited knowledge, unavailability of many of the relevant economic concepts and restricted mental processing power. If not based on knowledge and cognizant reasoning, what then drives laypeople’s understanding of economic phenomena? This question lays at the heart of the chapters that form the second part of the book with a focus on different contents and sources of laypeople’s economic thinking. Chapter 4 is concerned about intuitive theories of unemployment and inflation, two macro-economic phenomena that lay people care about. In both cases, the available empirical evidence supports some of the claims from the previous chapters, confirming that