Customer Reviews

The Logic of Life: The Rational Economics of an Irrational World

5 star:		(21)
4 star:		(9)
3 star:		(15)
2 star:		(6)
1 star:		(2)

 

 

A lively and thought-provoking follow-up to Harford's debut book The Undercover Economist, which used textbook economics to throw new light on everyday life. In this second book Harford moves well beyond the textbook to take us on a tour of some cutting edge research and thinking that's emerging from what he calls a "new breed of economists". Among them is Steve Levitt, whose Freakonomics popularized the notion that economists can have interesting things to say about areas you wouldn't normally expect them to be poking their noses into - but Levitt is only one of many academic researchers who are cheerfully roaming over other people's turf from their economics labs, so Harford's book serves as a timely overview of a newly sexy subject.

The result is a startlingly diverse collection of insights and anecdotes which are all held together by one central premise - that you can explain a lot about life by starting from the simple assumption that people are fundamentally rational. This is not an uncontroversial assertion - among the "new breed of economists" are those melding economics with psychology into a fledgeling discipline of behavioral economics, which focuses on our irrational quirks. Harford's view is not to dismiss these human foibles, but to argue persuasively that they shouldn't be overstated, and that in most important situations we behave rationally - that is, subconsciously evaluating costs and benefits and responding to incentives - to a remarkable extent.

Harford's writing is a joy to read, especially when he's impishly puncturing pomposity - my favorite is the "why your boss is overpaid" chapter, which discusses several theories that could rationally explain the obscenely high wages commanded by modern CEOs (hint: none of them are "because they're worth it"). One great lesson made clear by this book is that individually rational decisions can lead to socially horrible outcomes, a conclusion never clearer than in the discomfiting chapter on "rational racism". It's a valuable reminder that economics is a means not an end - rational choice theory doesn't dictate what society should be like, rather it teaches how we can harness rationality by changing incentives to shape the society we want.

Increasingly, economics is being used to explain the actions people take outside of their financial lives and then turned into books that are readable and, dare I say, interesting for lay people. Harford's latest work is the best of this crop that I've read so far.

What Harford does so well is pick interesting everyday topics, some big and some small, explain the rationale typically used to explain why things are the way they are, and then paint a new picture of what is driving peoples' actions. Harford explains why people will pay more to live in cities and why new tele-commuting technology will make cities more attractive, not less. He digs into the sadly explainable roots of racial discrimination in hiring and why some students are making the rational choice when they conciously decide not to study. The reasons may surprise you, but you will enjoy his explanations and frequently end up nodding in agreement or shaking your head in frustration with the inescapable but lousy conclusions.

The greatest thing about Harford's book is how clearly it demonstrates the value that economics can deliver. Done right, economics is a powerful tool for identifying the root causes of both good and bad trends. If a trend is good (Harford explains historic growth in wealth) you can learn how to promote it further. If a trend is bad (the decline of a city like New Orleans or Detroit) you can figure out how best to deal with it. Economics gives its users a tool for objective, clear thinking that is tough to come by.

Highly recommended for anyone who wants to develop their thought process. You'll come away a smarter voter, wiser consumer of news and thinking more clearly all-around.

This book works because it takes a simple concept,that rational choice underlies much of human behavior, and that many of our seemingly intractable problems have been produced by fairly mild and even rational individual decisions. I urge you to begin the book by reading the section on "rational racism," which I found in many ways the most compelling (and disturbing) part of the book. Harford actually begins the book with a discussion of apparently worrying teenage sexuality that turns out to be more encouraging than you might think possible. In doing so he reminds us that many of the things about which we worry,and about which commentators with big audiences shout shrilly, can be explained in a much clearer way by looking carefully at the rational decisions that produce them.

A great book and a fun read.

I think that I have read all of the recent "economics of everything" (Harford's phrase) books and this one is, in my view, the best. I also try to keep up with recent research in applied economics and found some gems in these pages that I had missed. The author alludes to about 200 papers and books from recent economics research and presents them in the most reader-friendly way, all in about 200 pages. I call that very efficient.

Harford's summary is also a useful antidote to all the "behavioral economics" that the popular press has picked up. The idea that some of us depart from rational choice on occasion is hardly news. The point of this book, that the rational choice model, has amazing power range is worth reiterating.

I liked Tim Hartford's earlier work - The Undercover Economist very much. I have taken a few graduate courses in Economics and loved the way the book refreshed and even gave new concepts to me. Thus, I picked up The Logic of Life with a lot of expectations. These expectations were badly dashed.

My big problem with this book is that Hartford lacks rigor. In a popular book I wouldn't expect the rigor of an academic article, but when an author draws conclusions that are wider ranging than warranted or if the author factually incorrect then I do have a problem. There are at least a couple of instances when Hartford does that. For me it taints the whole book - making me ask questions such as what if Hartford is factually incorrect in other places that I don't know about.

Hartford relies a lot on the experiments of John List to set up his premise - People are more rational in their day to day life than psychologists give them credit for. One set of List's experiments demonstrated that experienced pin and baseball card collectors are able to make rational decisions in situations where rookies often make irrational ones. Hartford then extends this logic to claim that as people are experienced in their day to day life - in activities such as work and shopping - they are unlikely to make the rookie irrational mistakes. To me this is a big stretch. I don't know anyone who thinks a day-to-day shopping decision through as much as an experienced collector would. A little effort from the author here in establishing his premise would have been really well served.

Hartford really lets go of rigor when criticizing the work of Jeffery Sachs. Coincidentally, I was reading "The End of Poverty: Economic Possibilities for Our Time" by Jeffery Sachs at the same time I was reading Logic of Life and I was shocked by Hartford's presentation of Sachs' theories and also his refutations. For example, Hartford says that malaria is unlikely to be a cause of under-development as it kills only young children and not adults. Sachs has argued in reasonable detail how malaria can cause poverty (absenteeism, delay of investment projects, undereducated children and parents making decisions of having more children). I for one cannot understand how one line stating malaria kills children and hence does not effect economy from Hartford is anything but a lazy piece of writing. Hartford' writing on the topic gets almost bizarre when he then states "In any case, these diseases can be fought by countries with the resources to do so." As this statement is apparently to refute the logic of Sachs, it is mind boggling as Sachs to my mind is also saying the same thing. The disease can be fought - however, the really poor countries do not have the resources to do so. At best statements like these are very poor editing of the book. The point here is not if Sachs is correct or not. The point is that if you are refuting the theory of a person, the least you should be doing is to state it correctly and in full.

For me, if I start doubting one part of the book I start thinking - this author is not very incorrect about a part I know about, so can I trust him on other parts where I don't know too much? This does sharply reduce the enjoyment of what is a very readable book.

Interesting only in bits, tenuously argued, outright outrageously silly in some places, and with a huge 'Freakonomics' hangover. Many situations and outcomes in life can be explained by applying a line of rational thinking, in the author's opinion, but there are weakly argued passages, slipshod overlooking of alternate explanations, overly narrow applicability of some situations, and places where the author blithely overlooks uncomfortable alternate justifications.

In comparison to Harford's first book, The Undercover Economist, this book places a weak second. In comparison to Freakonomics too this book is a disappointing tribute. Two stars for this book may appear harsh, and three stars would not be out of order, but the comparison is with the author's previous book, and this book falls far, far short.

For my money the only two good chapters in the book are "Is Divorce Underrated", which cogently uses the age old theory of supply and demand to argue how education, birth control, and a little bit of emancipation have helped reduce the gender gap; and "In the Neighborhood".
The other chapters that somewhat pass muster are "Why Your Boss is Overpaid" and "The Dangers of Rational Racism".
The outright stinkers have to be "A Million Years of Logic", which reads like a sloppy and hurriedly argued apologia for imperialism, and "Las Vegas", which fails miserably to explain the fascinating obsession with gambling that people have.

Take the example of the chapter, "In the Neighborhood - Economics of Not Being Stabbed In The Street". This is one of the better chapters, yet a constant stream of counter arguments spring to the mind when reading it.

A major underlying theory used in this chapter is one on models of racial segregation, developed by Thomas Schelling, winner of the 2005 Nobel Memorial Prize in Economics. Using a checkerboard and nickels and dimes (I think, or maybe pennies), Schelling showed that even a very small preference to have neighbors like themselves could lead very rapidly to a neighborhood that was almost completely segregated.

"
Even though each person makes rational choices, the result can be something that none of them wanted; you might say that rational behavior by individuals can produce irrational results for society. [page 110]
...
A very small preference not to have too many people unlike you in the neighborhood, or even merely a preference for some people like you in the neighborhood ... could lead to such very drastic equilibrium results that looked very much like extreme separation." In other words, mild causes could lead to extreme results. [page 114]
"

Good though this chapter is, a drawback is that the applicability of the arguments is often severely limited to only rich, developed countries. When you take the author's arguments and try and apply them to a developing country like India, they fall flat.

Consider this statement:

"... why one location is for millionaires only and another, perhaps very near, is dangerous, boring, and poor." [page 118]

In Mumbai (Bombay) million dollar homes (of the rich) in Cuffe Parade, Malabar Hill and elsewhere are almost next door to slums (of the poor). Ditto for places in Bangalore or Delhi and elsewhere. Lots of explanations for this state of affairs, but certainly locations here seem to be home to millionaires as well as the poor.

"It is yet another example of a positive externality: When I go to the park, I not only make it more interesting for other people, I also make it feel safer. That may attract more of them and they will make me feel safer. Empty streets are dull and feel dangerous, so they stay empty. Bustling streets are interesting and safe. Is it any wonder that they are bustling?" [page 120]

Yes, an empty street or park is certainly not a safe place to spend any amount of time if you can avoid it. But here also your mind goes to a relatively new global phenomenon: terrorism and riots. These typically happen in or around the busiest of streets. Mumbai 26/11, or 9/11, or the London attacks of July 2005. And so on. The terrorists did not strike in a deserted part of town. They chose the busiest parts of town. The poshest parts of town. The most parts that "felt" safe to people.

The third example is when the author talk of how high rise buildings make the streets less safe.

"
There was more than aesthetics at play when a high-rise was built. These tall apartment buildings tended to lift eyes away from street-level and make the streets more dangerous [page 120]
...
They (Glaeser and Sacerdote) discovered that residents of big apartment blocks were more likely to be victims of crime and were more likely to fear becoming victims. And it wasn't because: large blocks are often for public housing: The size: of the building itself was the problem. [page 121]
... Each additional floor in your building increases your risk of being robbed in the street or having your car stolen by two and a half percentage points-if your building has twelve stories rather than two, your chance of being mugged rises by a quarter. [page 121]
"

If you talk of western countries, this argument could very well hold true. But, move to a developing country and the argument becomes a lot more tenuous.

Countries like India and China do not have the luxury nor can afford to be as environmentally callous as to have independent houses for everyone. Apartments, high-rises are the answer. Yet high rise apartments in countries like India often offer a greater degree of security and lower crime than independent houses.
A major reason is that apartments have a lot more eyes focused on its ingress and egress points. A gate manned by a security watchman or two acts as a further barrier for the would-be criminal. Nothing of the sort for most independent houses.

Same is the case with almost every other chapter.

Tim Harford's latest is very readable, a worthy progeny of the line that includes "The Tipping Point", "Blink" and of course, Freakanomics.

The book, written in a pleasant, chatty manner, very much like the FT column is based on a very simple premise: that human beings respond to incenitives. He then discusses instances where humans appear to deviate from that basic principle; a bit of probing and analysis invariably shows that the original conclusion was far too simplistic, and that humans, whether its prostitutes having unprotected sex, or humans living in cities that are far too expensive for the wage premuim there (NYC, anyone?) are still responding to clear incentives, just as Smith would have predicted.

Highly recommended for entertainment; those looking for indepth economic analysis would be better advised to go elsewhere.

This book so badly wants to be Freakonomics or a Blink-type book, but it doesn't come close. Some of the data presented are indeed interesting. Unfortunately Harford almost always provides an overly simplistic analysis of the data. He usually makes broad sweeping generalizations and makes sure they are consistent with his thesis that people are actually rational. There is actually an interesting book to be written on the presented topics, but Harford's premise that everyone is now saying people are irrational is a strawman argument. "Are people rational or irrational?" is a false dichotomy that ignores significant differences across contexts and across individuals. Doing justice to the issues addressed in the book would involve much more complex thinking involving multiple disciplines. For example, some of the new brain imaging research indicates that for some people some types of decisions (e.g., moral) seem to involve emotional processes first followed by higher-order rational processes kicking in to rationalize the emotional decision already made. What types of decisions are most likely to follow such a pattern? Why are some people much more prone to such a pattern? Such questions considering types of decisions, environmental contexts and individual differences are well beyond what Harford presents here. It's a shame.

This is a cracking fun read for anyone who wants a new angle on familiar problems. It's stimulating and challenging but Harford carries off this trip with a reassuringly everyday style. Very easy to pick up, very readable and ideal for a busy person - you can pick up again after a real-life interruption thanks to Harford's clear but very humorous way of explaining things. A wide range of people would enjoy this. Perfect present material!

I agree with everything Gertrude Whitman said, but I won't be able to say it as well as her. If you've read anything at all about behavioral economics before, there is nothing for you in this book. I bought it because it was on The Economist's list of best books and I often like their recommendations, but I was quite disappointed. Flipping through it, I found myself saying over and over "Heard that before ... read that on a blog months and months ago... Don't see why that's supposed to be illogical in the first place."

You read this book and you just cannot shake the impression that Mr. Harford's publisher really had to squeeze the 272 pages out of him. Its full of casual, page-consuming asides about where he's sitting when he's writing the book and how lucky we are to be reading it. It should have been published as an article in Wired or something, but even then it might not have enough original content.

It certainly has its merits. Its breezy and covers a variety of interesting topics, but this book would never have been published without the success of Freakonomics or Mr. Harford's first book. Three of the four economists quoted praising the book on the back cover are featured in chapters that describe their work in glowing terms. I don't mean to question their credibility, but its a little fishy that the publishers couldn't find anyone who didn't stand to gain from the book's success.

The paperback could make a pleasant, quick read, but do not buy the hardcover and do not expect anything truly novel.