Part II begins the analysis of market effects on human development, with only incidental references to our other desideratum, happiness. As mentioned, I have isolated three facets of development: cognitive complexity, a sense of personal control over the features of one's life, and self-esteem. Part II focuses on the first of these, cognitive complexity. It contributes to the overall themes of this book by illuminating both thinking and emotion in the market experience. The devotion of six chapters to this subject is justified by both the prominence of misleading concepts of rationality and the paucity of ideas of emotion in economic analyses. I seek to correct these deficiencies by substituting concepts of cognitive complexity and cognitive functioning for rationality and by showing the ways emotion and cognition interact in the analysis of transactions. Two chapters are devoted to the role of money in market behavior because of the centrality of money in market analyses and in economic behavior.

Before entering upon the analysis of actual thinking processes in the market, Chapter 3 explores the relation of the market to two kinds of idealized modes of cognition, rationality and cognitive complexity. We will discover that rationality, as it is usually employed in market analysis, is misleading even as an ideal, and damaging to analyst and “practionaer” alike when it is used descriptively as a way of understanding behavior. This chapter, then, is devoted more to what economists have said than to the way the market actually works. In Chapter 4 I turn to market functioning, introducing research reports to show how emotions influence cognition and vice versa.