Thursday, July 10, 2008

On The Logic of Life (A review)

Ever since Stevens, Levitt and Dubner broke into the scene with their enormously popular Freakonomics, there has been a multitude of popular economics books. Books that uses the tools of economics -- the study of incentives, laws of supply and demand, trade-offs -- and apply them to everyday life. The result is often a fun, counterintuitive explanation of how the world works. Dubner and Levitt's most memorable contribution being attributing the decreasing crime rates in the U.S. to legalizing abortion.

Tim Harford wrote the first of these pop. econ. books -- the undercover economist. A popular book among economics students, perhaps not so much outside the discipline. With his latest work, The Logic of Life : the rational economics of an irrational world, Harford takes on the mainstream.

If you are interested in finding out why your boss is overpaid, why racism is still persistent or why teenage girls are increasingly giving blow jobs to their boyfriends, this book is for you.

Fundamental to Harford's book, is rational choice theory. His argument is not so much that “people are always and everywhere rational”. He admits they aren't. His contention is that people are "rational nearly enough and often enough" to make rational choice, a useful framework to understand the world. "Earth isn't a perfect sphere", writes Harford, "But it's nearly a sphere, and for many purposes the simplification that the Earth is a spherical will do nicely."

If you are thinking Harford imagines human beings as absolutely rational beings, along the lines of the infamous "homo economious" or the "economic man" capable of sophisticated reasoning, you are wrong. Harford is deeply aware that human beings are motivated by all kinds of human emotions. He writes, "These motivations are not financial, and not always selfish -- but our responses to them are national. As any teenager will remind you, no less planning, calculating, strategizing goes on about maters of heart than about the matters of the wallet."

Harford surveys the the work of number of economists, experiments involving human beings to lab rats, and data involving house prices to blow-job rates to answer the most interesting of questions. Why do more women live in the cities? why do racial minorities self-segregate? Why do voters choose bad politicians? and why do more and more teenage girls go down on their boyfriends? To all of this, there is a rational answer.

Ask that last question from any Sri Lankan TV-intellectual and they would give the standard western-culture-destroying-our-culture explanation. Social scientists might similarly offer more sophisticated versions of the same story. Ask an economist (or at least Tim Harford) and the explanation is simple. The American "blow job epidemic", according to Harford, is a rational response to changing incentives. When costs or benefits of something change, people change their behavior. Thanks to sex education, many teenagers (at least in the U.S.) know that regular sex has real risks -- they are much more aware of not just about the risk of pregnancy, but the risks associated with sexually transmitted diseases which comes with penetrative sex. Comparatively, oral sex has less risks or as Harford puts it, "The costs of oral sex are, quite simply, lower than the costs of regular sex". Teenage girls weigh these costs and benefits -- not always consciously -- before going down on their boyfriends. The result is while the rate of penetrative sex among teenagers in the U.S. is going down, the popularity of oral sex is on the rise.

The Logic of Life, is full of this type of fun and provoking ways of explaining things based on hard data. You might think that much of the stories in the book doesn't apply to places like Sri Lanka. Certainly, some of it doesn't, but a lot of it, (especially the chapter about "rational racism" and politics) does. Harford's logic of life is smart, well-written and a joy to read. I you liked Freakonomics, you'll love this one. Even if you didn't, you'll still like it.

For more (admittedly better) reviews, visit the Book's website. Harford, like many economists of this genre maintains an engaging blog, which I read often. Unfortunately, I haven't seen the book in Sri Lanka as yet. You can order it from amazon. For some excerpts from the chapter about love and marriage, see this slate article.


Anonymous said...

Man I wish my students wrote papers like this, instead of filling them with equations!, I could learn some English! Are you really a hobbyist econ student?

Deane said...

yup :)