- Hardcover: 272 pages
- Publisher: Random House; 1 edition (January 15, 2008)
- Language: English
- ISBN-10: 1400066425
- ISBN-13: 978-1400066421
- Product Dimensions: 6.4 x 1 x 9.5 inches
- Shipping Weight: 1.1 pounds (View shipping rates and policies)
- Average Customer Review: 64 customer reviews
- Amazon Best Sellers Rank: #429,805 in Books (See Top 100 in Books)
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The Logic of Life: The Rational Economics of an Irrational World 1st Edition
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A Message to Amazon Readers from Author Tim HarfordGive yourself a pat on the back. You're not as stupid as everyone says you are, and now there's a book that proves it. When I first conceived of The Logic of Life, my aim was to show that a world full of smart people--people like you, that is--doesnt necessarily look logical on the surface. We eat too much and worry about being fat; drink too much and cringe when we remember; spend too much at Christmas and worry about the bills in New Year. And thats just the small stuff: what about crime, racial segregation, divorce, big-money politics? And yet underneath it all there is a hidden logic. It isnt always pretty, but its there if you know how to see it. That is what The Logic of Life is all about. But when I'd finished the first draft, my editor told me that he didn't think that people were as logical as I'd said. He wanted me to prove my point. At first, I thought it was my editor thinks people are illogical because he works in the publishing business. Of course life looks illogical if you do that. (In fact, life looks crazy in most offices: see "Why Your Boss is Overpaid," chapter four.) But then I realised he was right. I'd left the most important step out. So I went back and made sure that I laid out all the amazing evidence. I looked at single women hitting the dating scene in American cities; I looked at juvenile delinquents across the US; I looked at Mexican prostitutes; I looked at traders at a convention in Disney World; I looked at professional poker players in Las Vegas and professional soccer players in Europe. I looked at violent spouses, alcoholics, and school bullies. In every case I discovered a story of hidden incentives and unexpected logic. And through the process of writing--and living--the book, I discovered that this crazy world of ours makes more sense than you might think.
From Publishers Weekly
Financial Times and Slate.com columnist Harford (The Undercover Economist) provides an entertaining and provocative look at the logic behind the seemingly irrational. Arguing that rational behavior is more widespread than most people expect, Harford uses economic principles to draw forth the rational elements of gambling, the teenage oral sex craze, crime and other supposedly illogical behaviors to illustrate his larger point. Utilizing John von Neumann and Thomas Schelling's conceptions of game theory, Harford applies their approach to a multitude of arenas, including marriage, the workplace and racism. Contrarily, he also shows that individual rational behavior doesn't always lead to socially desired outcomes. Harford concludes with how to apply this thinking on an even bigger scale, showing how rational behavior shapes cities, politics and the entire history of human civilization. Well-written with highly engaging stories and examples, this book will be of great interest to Freakonomics and Blink fans as well as anyone interested in the psychology of human behavior. (Feb.)
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This is an interesting enough discussion of everyday human action reflecting rational economic calculation--however counterintuitive it seems at first blush. From my armchair this looks like part of a trend of economics grounded who-woulda-thunk-it books cashing in on *Freakonomics*, although the specific examples (see below) are usually thought provoking. Definitely written for the self-styled "advanced layman", as I flatter myself as being, so it worked for me, generally.
Brief Content Summary:
Teens engaging in oral sex, third world prostitutes not using condoms, companies promoting crooks and boneheads to multimillion dollar executive positions, poker playing game theorists, are all acting, in a sense, rationally. There is an economic logic for divorce when women have better opportunities outside dysfunctional marriages; despite our romantic ideals, we are economic thinkers when mating.
More disturbing is that segregated housing and even racially influenced employment decisions have an economic logic "rational racism": Research shows that "black looking" names are a detriment in employment applications, all other things being equal. Other research shows that, in a reinforcing cycle, minorities learn they are more likely to be rejected, see no point in excelling, which in turn reinforces the half-truth that is the basis for rejection. (I found that part so compelling and interesting I'm assigning it in my race and crime class.)
Voters are rationally ignorant because their vote counts functionally for nothing, as are the victims of special interest lobbies like the subsidized sugar industry. Revolutions against corrupt and oppressive states are rare and hard to initiate because most individuals rationally and avoid direct conflict with the state.
It ends with a somewhat clumsy apologetic for defense of property rights and an optimistic appraisal of the human prospect that can occur when (I guess this is the point), we let people act in their own interests. People innovate and create wealth. If this addendum had its own "logic of life" I missed it, to be sure.
It's funny that I write this now that Chris Ferguson, the mathematics-game-theorist whiz kid who rocked the house in Vegas using game theory principles, is among those now being indicted by the state department for a multi-million dollar Ponzi scheme from his gambling website. No doubt Harford would have a "rational actor" explanation. Maybe sometimes people just do stupid stuff because they have a warped *perceived* reality.
The book reads very quickly and the various studies and papers are presented in an easily digestible format. Worthwhile reading for anyone with a passing interest in economics. Serious readers should go for the articles in the bibliography instead.
To make his points and share his economic wisdom, Harford introduces the reader to numerous prominent economists, and other spicy characters, through the recount of actual, real-life scenarios. His assertions sound believable, and are backed up with an abundance of information.
Harford begins with a detailed, inspired analysis of why teenagers have backed off on having actual intercourse, in favor of engaging in oral sex. He explains the rationale (based on cost/benefit analysis) used by sexually active teens to determine that oral sex is less risky than intercourse. This lively topic launches the book into an novel discussion of an abundance of topics, including: tradeoffs, incentives, rational and irrational decision-making, opportunity costs, supply and demand, profit and loss, division of labor, economies of scale, comparative advantage, positive and negative externalities, and spillovers.
From the first chapter to the last, Harford grabbed my imagination with expressive stories, which colorfully illustrated economic principles. Harford's main point, as I understand it, is that rational and irrational decision-making is based on incentives, pure and simple.
For example, he recounted an experiment with rats, where the rats were conditioned, through exposure to a succession of changing states of supply and demand opportunities, to make choices about the amount of root beer or tonic water they chose to get by pulling a lever on a device, which dispensed the liquids.
Harford also offered an overview of the simplicities and complexities of Game Theory, auctions, and betting, to give evidence to his assertion that people are compelled to evaluate opportunity costs, trade-offs, and benefits, consciously or subconsciously, when making decisions.
A concept he has developed, which he refers to as the "Marriage Supermarket", is particularly fascinating. The challenges inherent in attracting a partner, making a long-term commitment, and parenting, was rendered crystal clear through Harford's marketplace analogy. I found Harford's discussion of marriage and divorce highly entertaining and enlightening.
In Harford's discussion of addictions, he mentioned that apparent cures for addictions actually reinforce addictive habits, because the cure is available. I think his assertion is true, and that it also applies to other risks people take knowing there are "cures" available. Abortion, divorce, credit, and loans aren't typically thought of as "cures", but these things most certainly are used as rationales for taking risks.
Harford offers sharp insights on the logic behind splitting the check at a restaurant, the pitfalls of taxation, special interest groups, CEOs, and shareholder relations. His discussion of why city life is more dangerous due to tall buildings and the shortage of "eyes on the street", was especially thought provoking.
This book has fueled my ever-growing passion for the ideas and principles associated with economics. The study of economics is becoming an "art" to me, a potent medicine laced with graphs and curves, a powerful tool on the alchemical pathway to equilibrium.