Customer Reviews

Hidden Order: The Economics of Everyday Life

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1 star:		(7)

 

 

Economics for the laypersons has become the topic "du jour." This book written nearly a decade ago before economics became hot far surpasses its successors such as "Freakonomics." David Friedman does not dumb down economics like the others. Other reviewers who had at least a rudimentary interest in economics really enjoyed it. A few others who confused economics with their own political views predictably got frustrated with it. Economics is not always intuitive. As a result, several reviewers thought the author made mistakes regarding the graphs on page 29, or the example on housing on page 35. I reread these passages carefully. The author is accurate, it is just that these economics concepts are counter-intuitive. And, contrary to Steve Levitt in "Freakonomics" David Friedman did not shy away from tackling the inherent complexity in economics.

The book gives you a good foundation in both macro and microeconomics. Very early in the book he introduces and graphs demand and supply curves, marginal costs and revenue curves, utility functions. His coverage of international trade, taxation, subsidies, rent control is excellent. Along the way, you will also learn about investment theory and corporate finance. Friedman explains how the Efficient Market Hypothesis applies not only to stocks but freeway traffic and supermarket lines.

Friedman also gives full credit and fleshes out the ideas from the founders of modern economics, including Adam Smith, David Ricardo, and Alfred Marshall. This is unlike Steve Levitt in "Freakonomics" who truly believed he was the first economist to tackle every day issues forgetting that economics is the science of understanding everyday behavior to begin with.

For further reading, if you want to pursue an econ refresher I recommend an actual textbook: "Principles of Economics" by Gregory Mankiw. This is a textbook with a hip and humorous attitude. The Economist, the British magazine, raved about it when it came out. I also recommend Gary Becker's "The Economics of Life", and Steve Landsburg's "The Armchair Economist."

Like Steven Landsburg's "Armchair Economist," David Friedman's "Hidden Order" is an excellent primer in basic economics. Any book that helps bring real economics (as opposed to pseudo talk-show/pundit/political speech "economics") to an understandable level is good in my book, even if occasionally flawed.

"Armchair" did a good-to-excellent job of boiling down complex economic questions and answers. "Hidden Order" does so as well, but note that it's not for the light-hearted; plenty of graphs are available, and one not versed in Econ 101 may become temporarily lost. Thankfully, Friedman shores up his chapters by proving the theory with graphs, then stating "Here it is in English..." This allows readers who are not graphically inclined to skip over it without losing much understanding, while readers more interested in finding the proof behind the claim can peruse the mathematics at their leisure.

Still, it's not all perfect. There's some issues that he goes into great length, but others are touched on and left hanging. In part this is to reduce the down time for an already-sluggish topic, but the length for each issue varies quite a bit. And I have no idea why a parking meter is on the cover.

This book shaped my life since i picked it up in 1999 while browsing. I found it fascinating and adept - see the other reviews. I did an MBA, changed careers, worked in strategy consulting, and now have a VP-level job in a $6B enterprise. (Well, besides reading this book, the MBA helped...) This book is really eye-opening and you'll see the world around you differently, and how all kinds of people, organizations, and forces respond to incentives that can be subtle to figure out. For example, I'd known since junior high the Brits wore Red Coats in the Revolutionary War, and that made them easy to shoot at. It had never dawned on me, the British management felt the risk of Brit infantry fleeing AWOL was greater than the risk of the same, getting shot. They took the risk of getting shot, to avoid the risk of their troops fleeing (too obvious in bright red coats). Fascinating. Their are apparently some typos in the book which you can correct via the author's website, but I hadn't known that and was impressed by the book anyway, as is.

This book, written by the son of a legendary economist, is an attempt to explain, in reader-friendly fashion, some basic principles of macro- and microeconomics.

Well, there's something you should know up front: this book contains numerous unpleasant and confusing graphs and charts that the author uses in his explanations. There. I said it.

Because of this, you really have to ask if this book is the wisest purchase for your needs.

I'm one of those people who don't believe it is possible to teach economics meaningfully without resorting to unpleasant graphs and charts.

But if you agree with me, what would you be doing with this book? It's not more engagingly written than your average college textbook; its examples are quite standard; and, because it is a paperback, many critical ideas are missing.

If you're looking for a engaging and reader-friendly book that'll teach you about economics WITHOUT graphs and charts, well . . . I guess I would recommend either Buchholz's "From Here to Economy," or Wheelan's "Naked Economics," both well-known, helpful, and (as of this writing) reasonably current.

However, if you need to learn some economics and have (quite sensibly) resigned yourself to the inevitability of charts and graphs, I would just go ahead with a solid freshman textbook: Slavin's "Economics" (8th Ed.) could not be more student-friendly, while Mankiw's highly-regarded "Principles of Macroeconomics" (3rd Ed.) is less so but superlative in every way.

As it is, since Friedman's little book is not noticeably cleverer, better-written, or more innovative than other books of its kind, the only advantage it seems to offer is its convenient paperback size, which makes it more conducive for reading in the tub.

David Friedman's gift is making some of the more complicated concepts of economics simple. In _Hidden Order_, he does this with his trademark wit and ingenuity. The most esoteric yet essential aspects of modern economic thought - marginal utility, indifference curves, opportunity costs, Nash equilibria, rent-seeking, etc - all come to life in this modest paperback.

Unfortunately, it is Friedman's penchant for simple explanations that leads to some of his odder conclusions (for instance, check out his explanation on why movie theatres charge so much for popcorn). This is a nagging trend in "Chicago school" economics: reasoning outwards from a textbook principle in order to rationalize the evidence, rather than collecting evidence and reasoning backwards.

Even with that aside, Friedman's _Hidden Order_ is an introductory primer of rare quality.

PRO:
+ Clear, concise, and clever.
+ Graphs and charts to illustrate the trickier points.
+ Bibliography at the end of each chapter. Further reading for a more detailed look into each topic.
+ Assumes almost no knowledge of economics; starts from the beginning (the motivation for action) and continues from there.

CON:
+ Friedman's odder theories about behavior may strike the reader as "quaint."
+ Tends to give examples rather than definitions. For instance, he never comes out and says, "Rent-seeking is any kind of behavior X ...", but he gives very thorough examples of what rent-seeking is.

David Friedman has done remarkable job in writing an intellectually challenging yet very readable and enjoyable exposee of modern economics.

What sets his book apart from the rest is the use of realistic examples and not the usual textbook apples-to-oranges consumer preferences. Friedman discusses e.g. why is popcorn expensive in movie theaters, is it worth driving to a neighboring town for a bargain sale, who benefits from export duties on japanese cars and economic consequences of divorce.

All of this is rigorous but without mathematics. All of this sounds convincing: rationality assumption of consumers (or economic agents in general) is shown to produce miracles in economics. David Friedman, son of Nobel laureate economist Milton Friedman, takes his axiomatic economics sometimes too far: for example, he believes, like his father, that destabilizing speculation does not exist. Reading Kindleberger's Manias, Panics and Crashes will cure anybody of this folly.

Friedmans text is lucid, the reading experience is exhilarating. If there had been economics books like in my youth, I would have become an economist (and not a physisct like David Friedman !)

Despite what I am about to say about the downsides of Friedman's approach, this is a book well worth reading. It's just a bit too sure that it has revealed all we need to know about motivations behind behaviors. On that point, I'm unconvinced. More on that in a moment.

As noted by most reviewers, he does a credible job in the first part of the book explaining the basics of economics. The graphs are a bit difficult if it is the reader's first exposure to economics, but I found his verbal explanations to be clear and compelling.

He then goes on to apply this knowledge to a panoply of real world situations. His discussions on taxation, pollution, and product liability are quite thought provoking. If the reader isn't rethinking some cherished beliefs by this point, then he is either is already a U of C economics diehard or didn't pay enough attention. Capital stuff!

I wish he had left out the very last section of the book. There he applies the same rationalistic approach to behaviors such as gift giving or punishing drug users. He fails to satisfy in both cases.

He's largely puzzled why people choose to give gifts to people they like rather than money. He offers 'paternalism' as a possible explanation, but since paternalism's rewards seemingly can't be measured in terms of value, he gives up the topic, moves on, and leaves the reader hanging. Well developed theories of the basis of social power from psychology offer more well developed and satisfying explanations of gift giving and are also borne out in well run experiments.

Similarly, it would seem that his beliefs applied to the question of drugs would make legalization the most rationale path. Surprisingly, he only wants to discuss the punishment alternatives for hard drug usage because he assumes that all hard drug users steal to support their habits. This then enables him to analyze the cost to society which then enables him to examine a range of punishment alternatives. That's fine as far as it goes, but it begs the discussion for the vast majority of illegal drug users who stick to so-called soft drugs. It also leaves unspoken whether all illegal drugs ought to be legal for people wealthy enough not have to steal to support their illegal purchases.

There's a whole range of widespread human behaviors which cannot be explained satisfactorily by this type of analysis. Using hard drugs, participating in extremely dangerous sports, and masochism come to mind.

So the 'uber-explanation' of all human behaviors in the last section of the book takes away substantively from the rest of the book. Since this train of thought in the first 80% of the book has lept from economics to the theory of law over the last 25 years via scholars such as Posner and Coase, it now influences much public policy discussion and judicial thinking today. For that reason alone, this book is worth reading. This is not 'just about economics' just as it is not 'all you need to know about what motivates human behavior'.

Not everyone has heard of David Friedman, son of the Milton Friedman, but he's a professor of economics and has written several books. I had a different book on my list to read first, The Machinery of Freedom, but I came across this title and it looked interesting enough, so I picked it up and I'm glad I did.

Friedman tries to bring economics, the study of the allocation of scarcity, into everyday life situations, job hunting, wife hunting and why kids behave as well as discussing how economic policies on a larger scale (government edict) effect everyday life, purchasing power, costs, production, etc.

His effort is a mixed of insights and confusion, and he notes near the beginning of the book that if a reader understands all the concepts, even upon a second read, that person might as well be teaching the stuff. I have to agree I was lost in much of the explanations and didn't completely understand a good portion of the logic and how it all worked, however, I did grasp a basic understanding of the overall concepts and even in areas that I couldn't explain myself, I have a better picture of how it all works.

One of the reasons this book, and others like it, are important reads is simply because economic policy decisions by our elected leaders make such a long range impact upon our normal lives, it's not that any one voter has much of an effect upon an election, and Friedman goes into depth explaining why most people don't really spend much time or effort to learn about issues or politician's that they are casting votes for, if everyone's basic understanding level was increased, it might have a positive impact upon our lives. Perhaps. Perhaps not.

One of the interesting things about how politics work, from an economic viewpoint, is explained by Friedman. He shows how a major bill, whether trade tariff, tax or what not, is huge to a small group, but small to a huge group. Think of it like this; if a bill will cost every American a few dollars in increased costs, but delivers a benefit to a small group in the millions of dollars, who will spend the time and money to see to it that the bill passes? Obviously the small group can focus time and money, it's worth it to them, the large group however, not only is harder to coordinate (assuming someone even tries), it's not necessarily in someone's interest to spend time and money to save a few dollars, so because the cost is spread out, it's harder to coordinate a concentrated effort to stop such a bill.

Think of the implications of the economics in the explanation there, a thousand bills passed in congress, each costing you only a few dollars each, cost you thousands a year, yet each one by itself is only a negative of a few bucks, so how much time is it worth it to you to defeat that particular bill? However each of these thousand special interests has millions to gain, so to them, spending thousands and thousands has a positive expectation.

The other areas that I found very interesting in this book were the discussions of criminal law and the economics faced by the accused, how the D.A.'s allocate resources (plea agreements), the prisoner's dilemma and other such interesting ways to look at normal everyday problems of society through the lens of economics. There is a little bit of discussion of the drug trade and other libertarian ideas, but mostly the book concentrates on explaining the economics of policy's and laws and of course, supply, demand, monopoly's and the like without much pontificating on Friedman's part about what choices are better or worse for society.

There is a discussion of trade and tariffs, how wheat can be turned into cars and how lot's of stuff you hear on the news is uttered by people that have no idea what they are talking about, and often make pronouncements that are the polar opposite of reality.

In conclusion, I'd highly recommend this work to anyone even slightly interested in how economics works, and also how they may have been fooled into thinking certain things about laws, trade, benefits, anti-trust, supply and demand and such that are simply wrong and misleading. It may change how you vote, it will certainly challenge the way you view the current political world.

Highly recommended.

It's an excellent book. Although I enjoyed reading Freakonomics, "Hidden Order" is a much deeper and broader book in terms of issues discussed.
What I really like about it that in additional of covering existing issues, it helps to learn how to approach new problems.

The sad thing is although the book was written in 1996, we(and politicians, and TV/Radio talk heads) are still using the same uninformed reasoning during the discussions.

It would be great if the book became a required reading in the high schools and colleges.

After getting it from a library, I bought it for my friends.

David Friedman is a wonderful writer. His "Law's Order" fascinated me and helped draw me into the field of economics, in which I have since earned an MA. I picked up Hidden Order when I was in graduate school, and it served as a nice refresher for basic and intermediate economics. He presents material in an intuitive way, far different from most academics. I served as a TA for an intermediate microeconomics class, and whole-heartedly recommended this book to all my students who were having any difficulty making sense of the material.