When the economy tanked and Yale's endowment income took a hit, Yale University Provost and emotional intelligence theorist Peter Salovey, PhD, admits he became somewhat obsessed with reading financial history to better understand how the economic system failed. A spate of recent books, he says, offers plenty of psychological intrigue on what happens when emotions and money collide.
GradPSYCH asked Salovey to share his favorite reads from his psychologist-turned-economist phase:
"The Big Short," by Michael Lewis. "Of all the books written for the general public, this one provides the clearest explanation of the new-fangled financial products that bankrupted some of the largest and oldest financial and insurance firms in the world. Lewis's lively descriptions are quite entertaining."
"Too Big to Fail," by Andrew Ross Sorkin. "Once investment banks thought the government's view of them was that they were too big to fail, it created what the economists call a 'moral hazard.' Someone else was assuming the risks of their decisions. Sorkin's description of the weekend that Lehman Brothers failed is a page-turner."
"Conspiracy of Fools," by Kurt Eichewald. "Eichewald captures the lethal combination of human frailty, ineffective regulation and financial 'creativity' that led to the collapse of Enron. This is a company whose then-CEO was a really damaged character. You could really see how people who have no moral compass and a weak sense of themselves can, when put in a difficult situation, succumb to temptation."
"When Genius Failed," by Roger Lowenstein. "This is about the difficulty that even Nobel Prize-winning economists have in accurately modeling risk and how it led to the demise of the hedge fund known as Long-Term Capital Management. It demonstrates the difference between theory and practice."