Steven Pinker is a prolific writer on many topics, and his latest book focuses on the issue of common knowledge, When Everyone Knows That Everyone Knows... Common Knowledge and the Mysteries of Money, Power, and Everyday Life, an essential issue in information economics and game theory. Common knowledge is the shared state of understanding associated with a fact that is known by everyone, and it is assumed that everyone knows that everyone knows. This back-and-forth about what everyone knows can go on forever. It is the foundation of non-cooperative games with full information and of group decision-making.
There can be unwritten or accepted knowledge that is common, often associated with conventional thinking or wisdom, yet, as in the story of the boy who says the emperor has no clothes, there can be a radical change in thinking when common knowledge is challenged by the truth. Assumptions about what people know and what they think others know can affect price expectations in markets and influence bubbles and their bursting. Coordination of behavior is affected by what is assumed to be common knowledge.
There are great stories and jokes associated with common knowledge that make this a fun book to read. Still, I would have preferred Pinker to focus on specific use cases to help clarify the key problems of how knowledge and expectations are coordinated in markets.
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