Sep

28

L of LThe basic premise of The Logic of Life by Tim Harford is that people are rational, that they act to get more of things when they are cheap, less when they are expensive, that they take account of the future outcomes of their decisions, subject to constaints of wealth and health, and that they respond to incentives. But sometimes their rationality is constrained by the psychological biases that Kahneman and Tversky write about. It's a follower in this regard of Freakonomics by Leavitt and Dubner, and Discovering Your Inner Economist by Tyler Cowen.

Unlike these latter two books where the authors' analytical insights and original research lurk behind every page, Harford's book is a compilation of startling finding by others, interviews with the authors, and anecdotes about his own predilections and biases. Those predilections are the kind that make one more and more reluctant to know him as the book progresses. At the supermarket you find him scoffing at the potato chips and junk food that the typical patron buys, at another page deploring the spread of kebab shops in his neighborhood, at another regretting that his colleagues at the World Bank or the residents of Rock Island or Detroit are not as vibrant as he would like.

In short this is another one of those books, where the author dislikes the common things and common people that he is writing about, and stands above them in cynical obloquy. Worse yet, Harford allows these biases to permeate his analysis of the findings of the studies he provides and fails to report their limitations and alternate explanations.

The book opens with the usual appeal to sex and readership with the report that teenagers are engaging much more in the upper varieties of sex than the lower. The reason is the increased cost of the latter. No times series are given to support this change in activity and no alternate explanations are given. An incredibly shallow discussion of mice choice is given in this chapter to show that mice as well as men respond to incentives. The experiment he reports supposedly shows that mice respond to lower prices and higher income by buying more of an inferior good when their income changes (a Giffen good) without any consideration of alternate explanations such as the changing tastes or health or senses of the mice. The second chapter is about Chris Ferguson's success in Las Vegas, and has nothing to do with the economics or game theory he's writing about.

The third chapter talks about the work of Becker on the incidence of divorce as a function of the division of labor and the alternatives available to women, and the increased cost to a woman of bearing a child versus men. He lightens the subject with some anecdotes about speed dating where women choose only 10% of the potentials and men choose 20%. The fourth chapter is a completely speculative account of the reasons that CEOs get more money than their underlings which he believes is due to the demonstration effect they have in creating incentives for others.

The fifth chapter is an application of the selfish gene to why cities are more popular than rural areas and why women prefer cities because they can find more wealthy family providers. No alternate explanations for the differential desire of the sexes to live in cities or the changing options that the internet now provides is given. The sixth chapter is the typical agrarian reformer's discussion of racism in hiring, this time based on resumes sent to employers by a brilliant Harvard economist that shows that when the name seems like the employee comes from a poor area, he is less likely to be called back. No consideration is given to the rationality of the employer in making such a decisions or the latent factors that show that socioeconomic class and performance, or intelligence and performance, are related. The rest of the book is about the increased spikiness of the world, the importance of property rights as an incentive to work hard, and an analysis of 1000 years of world history applying his  selective findings from the previous chapters.

This last chapter is particularly weak because the author stubbornly refuses to set forth the prime movers of the economy from  history — that businesses respond to profits, that individuals have many substitutes for their desires, that innovation comes from the opportunity for profits, that keeping the fruits of one's efforts inspires one to greater efforts, that markets are essential to provide the signals that allow the orderly distribution of goods, and that the rule of law and strong property rights create the backdrop necessary for improvements in material well being.

One can speculate that the reasons that these principles are ignored throughout the book is that they are antagonistic to the sense of life of Harford. And since this book is about the everyday activities of people and animals in improving themselves, this bias of Harford's makes the Logic of Life very illogical and incomplete.


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2 Comments so far

  1. Steve Leslie on September 29, 2009 8:39 am

    I often wonder who actually buys these kind of books. I am sure it is a small minority. On the other hand, I am sure McKenzie Phillips's book and new revelations on her alleged s-xual liasons will sell plenty. This may be a good indicator of the type of world we live in. If one were to study the human I would think a good place to start is at a WalMart superstore. Variables would include the time of day that one would visit such store. Sadly one would find a very representative collection of Americana.

  2. michael webster on October 14, 2009 11:40 pm

    I agree with most of your review, as I found the book disappointing -except for some survey work reinforcing some of Becker’s ideas.

    However, you and I are in the minority.

    The book was reviewed over a 1.5 years ago at marginal revolution, and attracted a number of high quality comments.

    http://www.marginalrevolution.com/marginalrevolution/2008/01/logic-of-life-.html

    But, I am still with you - just a bit of disappointment. Not up to his earlier book, which I liked a great deal.

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