The Logic Of Life: The Rational Economics of an
Irrational World.
By Tim Harford
(Random House, 272 pages, $25)
“Most of economics can be summarized in four words: ‘People respond
to incentives.’ The rest is commentary.”
That is the first line from Steven Landsburg’s seminal
pop-economics book The Armchair Economist. Published in
1993, Landsburg’s book paved the way for mainstream economics
crossovers such as Freakonomics, The Economics of
Life, Hidden Order, and Discover Your Inner
Economist. But perhaps none remains as true to Landsburg’s
dictum as Tim Harford’s latest effort, The Logic of
Life.
In the follow-up to his 2005 The Undercover Economist,
Harford employs unwavering faith in man’s ability to rationally
respond to incentives to investigate the phenomena that shape the
everyday world. The reader can barely keep up as he connects
divorce rates with the Pill, casts Chris “Jesus” Ferguson as the
heir to John von Neumann, and recommends playing the lottery as an
alternative to voting — all in the name of rational choice
Unlike Chicago economist Steven Levitt in Freakonomics,
Harford, a journalist for the Financial Times who writes
the popular “Dear Economist” advice column, doesn’t present his own
findings. Instead, he repackages studies by academics in a form
that even the most casual reader could follow and appreciate.
The number of studies he employs makes for a lightening-fast
pace, which keeps the The Logic of Life approachable and
captivating. Harford plays to his writerly strengths by ending the
book with a victory lap one-chapter history of mankind predicated
on man’s response to incentives.
PRESENTING THE MOST counterintuitive findings in lighthearted
fashion is a sure formula for pleasing the audience. But it gives
rise to a problem academic journal editors encounter often enough:
studies with more outlandish claims are more likely to have
shortcomings in logic or methodology overlooked.
In some cases, Harford makes small leaps of faith that
strengthen his point but fall short of the precise standards of
economics. For instance, in his chapter on the ways in which
individual choices shape cities, Harford references the empirical
work of Edward Glaeser and Bruce Sacerdote in confirming urbanist
Jane Jacobs’ claim that taller buildings increase crime.
Jacobs’s intuition is of the kind that Harford loves: a
head-slapper. Upon hearing it, the reader wonders how they failed
to think of something so obvious. However, it’s not as easy to
prove as Harford thinks.
Claiming that Glaeser and Sacerdote find that taller buildings
cause increased crime is a step further than they themselves were
willing to take in their paper “The Social Consequences of Housing.” The study
is a cross-section controlling for observed characteristics of
neighborhoods, and so although the authors can isolate the
correlation between the heights of buildings and the level of crime
in neighborhoods, it seems like a stretch to confirm the enticing
but unlikely claim that taller buildings cause an increase in
crime.
Harford not only makes that leap of logic but he also uses it in
a passage incorporating anecdotes about two women attacked in
different neighborhoods as well as race statistics about the UK —
a synthesis which seems to run roughshod over the assumptions
underlying Glaeser and Sacerdote’s paper.
IN ANOTHER EXAMPLE of his rush to shoehorn empirical findings into
fun facts, Harford makes a mistake the borders on the costly
blunder Steven Levitt and Stephen Dubner made in
Freakonomics’ most famous passage.
Soon after publishing his now-famous study arguing that the
legalization of abortion led to lowered crime in the 1990s, Levitt
recommended that abortions were beneficial. A wave of
counter-studies ensued, along with outrage from many pro-life
advocates. In the final printing, Levitt omitted many of those
normative claims, and further studies have proved that Levitt’s
data was fatally flawed.
And now, in the chapter entitled “Is Divorce Underrated,”
Harford argues that, from an economic perspective, there is a
socially optimal level of divorce, and that it would signal some
women’s disutility if the divorce rate fell.
One study he uses to support this claim is based on a
speed-dating experiment run by Michele Belot and Marco Francesconi.
The two economists find that the quantity of numbers exchanged
during a speed-dating event doesn’t depend on the quality of the
participants.
Thus people aren’t in fact holding out for their “one true love”
— despite what they might say. Harford uses this finding as part
of his argument in favor of divorce: if people don’t have one and
only one significant other, they shouldn’t be bound to their
spouses permanently.
Belot and Francesconi’s study, however, is limited in its
conclusions because of the weakness of using data from a dating
service for which the participants to register and pay a fee.
Aren’t the people most likely to go speed-dating also the most
likely to have lower ideals of love?
No Romeos or Juliets are likely to register for something as
shallow as a speed date.
THESE ARE MERELY two examples of slight misinterpretations in a
book crammed full of intricate studies, yet it is not nitpicking to
mention them. They encapsulate the weaknesses that characterize
pop-economic books in general and The Logic of Life in
particular.
Ignoring details undermines econometrics’ predictive power and
reduces its conclusions to mere opinions. Harford wants to portray
economics as a brutally rational and value-free way of thought, but
he thwarts himself by including examples that incorporate faulty
assumptions.
Taking a page out of his book, though, I could explain Harford’s
oversight using rational choice theory: It makes sense for Harford
to sacrifice some precision to maintain the breezy attitude with
which he sheds light on racism, the allure of cities, etc. His
aloofness while giving immediately obvious explanations for
phenomena once thought of as life’s mysteries leaves the reader
feeling smart enough to solve all the world’s problems using the
economist’s tools.
Harford states his aim in the introduction: “…it is a world in
which people can generally be expected to make rational decisions,
and where those rational decisions suggest some astonishing
explanations for many of life’s mysteries. It is this world that I
would like to show to you.” He accomplishes this goal handily. The
reader comes away impressed with the brute power of choice.
But in economics, for every good the costs must be considered
along with the benefits. I would suggest that Harford consider the
costs of drawing too many questionable conclusions from tentative
research — for how it will affect those who can’t tell the
difference.
