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BOOK REVIEW
Gillian Butler and Freda McManus (2006). Psychology: A Very Short Introduction
(Oxford: Oxford University Press), pp. 161.
What is psychology? Why does it matter increasingly to those in the world of
business, commerce, and industry?
Or, to put it more simply: Why am I reviewing this book on the eve of the meeting of
the U.S. Federal Reserve that will decide on whether the Federal Open Market
Committee will hold or raise key interest rates?
My main wager in reviewing a book like this is to point out that an interest in
psychology is not unrelated to what is happening in the world at large.
For far too long, areas like psychology, behavioural sciences, and psychoanalysis
were seen as theoretically important even though they were not considered relevant
to the rough-and-tumble of the world of business, economics, and politics.
Recent events like the financial crisis of 2008 have however sparked a new level of
interest in the behavioural sciences. That is because our attempts to fix the economy
and get it back into shape are dependent on our understanding of human nature.
The success of any policy initiative is based on whether or not it can find favour with
both stakeholders and members of the ‘broader economy.’
And, furthermore, as Ben Bernanke reminds us in his recent blog, only two percent
of monetary policy is related to the technical determination of interest rates. The
remaining ninety-eight percent is ‘psychology.’
What does psychology mean from the Fed’s point of view?
It basically means having a communications policy; managing stakeholders
effectively; and working out the ways-and-means through which the Fed can
‘stabilize’ the financial system as a prelude to intervening in the broader economy.
The term ‘stabilization’ can include not only stabilizing financial institutions and
countries, but also systemically important individuals.
How exactly will the monetary authorities stabilize these individuals?
The answer to this question will vary on a case-by-case basis since it will involve a
lot of testing and exams before the truth of any given situation can be ascertained.
That is why knowledge of areas like psychology, behavioural sciences, and
psychoanalysis will come in useful for the monetary authorities.

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This introductory book on psychology is a good way to get started in these areas.
Both the authors have been associated with research programs in the Department of
Psychiatry at the University of Oxford.
They bring to bear not only a sound research background but also work experience
that makes them uniquely qualified to introduce the reader to the world of
psychology.
The chapters in this book are organised as modules; they can be read separately or in
sequence.
This book does not presuppose any previous background in this area. It is organised
and written in a way that should be comprehensible to even a first-time reader of
psychology.
The book begins with a brief history of psychology starting with William James, the
Harvard psychologist, and brings the reader all the way down to the latest
developments in the area.
Each of the chapters focuses on an important topic like perception, learning,
memory, thinking, motivation, and emotion.
In addition to these topics, some of the chapters include a survey of an area in
psychology like developmental, abnormal, or social psychology.
Business school curricula focus mainly on organisational psychology, but how
employees behave is not reducible to what happens inside organisations.
It is equally important to situate organisational psychology within the area of
general psychology and the behavioural sciences as well.
Reading this book will make it possible for business school audiences to do precisely
that. So whether business school graduates become central bankers or retail bankers,
knowledge of human behaviour will always come in useful in the real world.
It will also be of interest to students of economics who wonder whether the basic
assumptions about human nature in economic models correspond to reality or not.
The rise of behavioural economics, for example, is proof that economists need to re-
think their false assumptions about human behaviour.
This book includes a number of tables that explain the different research methods in
use in both theoretical and applied forms of psychology.

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Clarity about these methods will be useful not only for psychologists, but also for
business academics.
That is because the papers that they read on different aspects of management theory
and practice presuppose that the reader can independently evaluate the validity of a
host of research findings.
In a knowledge-based society, professionals can keep up-to-date only if they are able
to read, assimilate, and internalize the latest research on an on-going basis.
That necessarily means that they must evaluate the scope of these research findings
within the context of research methods; they must not take these research findings
out of context.
That is as true for psychology as the technical areas of the management curriculum.
This user-friendly approach to thematic areas, subjects, topics, and methods in
psychology will make that possible for a serious reader of this book.
The basic impression that each of these chapters leaves the reader with is that there
is a difference between folk psychology (i.e. what we know intuitively), and what we
know from the scientific study of psychology.
The difference between these approaches will come in useful in any serious attempt
at problem-solving in organisations.
The organisation of the book into different branches will also make it possible to
situate the areas or subjects within which the reader can attempt to answer a
question in psychology.
The importance of this form of differentiation relates to the fact that readers usually
conflate the differences between different branches of psychology.
So, for instance, the concerns of cognitive psychology will be quite different from
abnormal, social, or developmental psychology.
Though there are different ways of doing psychology, the authors have taken a
pragmatic orientation; they want to make this book ‘useful’ to as many types of
readers as possible.
The orientation that I am invoking in this review is that of those who teach or study
in business schools.
An area that might be of particular interest in this book is motivation theory because
that is the topic which is of the most practical relevance in everyday life or in
organisations.

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The authors try to subsume the usual models given in organisational psychology,
but emphasize the fact that the answers that we will ultimately accept to questions
about who-does-what-and-why in organisations depends on theoretical orientations
that remain implicit in our approach.
By listing and explaining these different theories and the models that they invoke,
the authors make it possible for the reader to situate what his habitual patterns of
behaviour and thought really mean.
This approach works not only for motivation but also for theories of achievement,
communication, and learning.
The authors also explain the different types of tests that have been developed by
psychologists.
They however do that in the context of psychometric instruments and explore
whether these instruments are reliable and valid; and, if so, the experimental
contexts that determine them to be so.
This is particularly the case with intelligence tests.
The basic assumption in meritocracies is that it is possible to measure human
intelligence with a high level of accuracy. But is that a valid assumption?
How do racial, cultural, sexual, and gender differences affect what we mean by
intelligence? Is it possible to measure intelligence in a way that will do justice to the
mediatory function of these variables? If so, how?
The answers to these questions will teach us a great deal about how we should
deploy and manage human resources (and talent) as potential sources of competitive
advantage in firms.
Another topic that interested me in this book is the theory of personality types. Does
the traditional distinction between introversion and extroversion have implications
for identifying the degree of neuroticism in employees?
What does personality theory have to teach us about stability? What are the psycho-
social determinants for stable behaviour in employees? Are there any correlations
available between specific determinants like levels of ‘cortical arousal’ in brain
science and the observed levels of stability?
While these questions have always been studied by psychologists, the possible
answers to these questions have taken on a new importance because of the interest
demonstrated by the monetary authorities in these questions.

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It would not be a stretch to say that the recent revival of psychology (in the context
of financial stability) is related to the interest exhibited by central bankers like Ben
Bernanke of the U.S. Fed and Mark Carney of the Bank of England.
Will the next generation of central bankers have even more powerful models of psychology to
work with?
I think they will.
But it is hard to say what the intellectual sources of such models will be. Will they
come from psychology, behavioural sciences, brain sciences, or psychoanalysis?
The importance of such questions cannot be underestimated. They have both
theoretical importance and practical value.
That is because psychological testing has become a way of life not only in
organisations, but in the world at large.
Being able to participate in these psychological tests from the locus of the examiner
or examinee without experiencing bouts of unconscious resentment has become an
important pre-requisite for success in many areas of life.
That is why it is incorrect to think of psychology as only a theoretical or a feminine
discourse with no implications for the world of action.
The insights that the authors share with us on the differences between
developmental behaviour and abnormal behaviour are crucial for not only
psychologists who teach and research in these areas but also because they serve as
tools of employee appraisal.
Given the subjective nature of these psychological phenomena, however, it is not
possible to deploy psychology with anything less than a sophisticated
understanding of methodology.
My praise for this book and the authors should not be construed as implying that
this book is both necessary and sufficient to become a psychologist-at-large.
That is the most commonly made mistake amongst beginners who do not estimate
the amount of reading that is required before using psychology as a problem-solving
tool and for being able to take corrective action when required.
This book, and books like this, then, can serve as a point of entry into the discourse
of psychology and the behavioural sciences for those who are interested in the
insights that they can make available.
SHIVA KUMAR SRINIVASAN