The Logic of Life

I finally got around to finishing another book.  It's only taken 6 weeks or so.  This last book written by Tim Harford comes from the pop-economics genre that's rising in popularity.  This genre tries to apply economic theory to other areas of life to explain why certain things happen.  In a lot of ways, it's the economics of human psychology.  This is a follow-up to Harford's previous book The Undercover Economist.  The major premise of The Logic of Life centers on the belief that people are rational.  Harford defines people who are rational as those who respond to incentives, whatever the incentive may be.

To start, Harford is a very good writer.  The topics that he covers could easily put the reader to sleep, but Harford has a writing style that keeps the subject matter interesting and meaningful.  He's obviously passionate about economics, but he is able to combine is passion with economic knowledge and the ability to communicate.

The book looks at similar kinds of things as Freakonomics, by Steven Levitt.  The highlight of the book was the chapter on marriage.  He shows how marriage has changed based on economic theory.  He even makes a case for divorce.  He doesn't necessarily advocate divorce, rather he shows how women have become empowered by work and education, and easier divorce.  This has resulted in making divorce less treacherous for women now than in the past.  Harford believes this has ultimately led to declines in domestic violence, as the woman has an out from a marriage.  Specific situations may vary, but the trend appears to exist.

Another interesting chapter is about rational racism.  This isn't where people consciously hate blacks, but where companies tend to overlook resumes of people with African-American sounding names.  This is caused by a few factors.  First, the hight number of resumes that many companies get, makes it difficult to do deep read of each resume.  Because, experience tends to show that folks with the African-American names tend to not have the required skills, generally due to lack of education, the recruiters know that a resume with a given name likely won't work.  One reason that it continues, is that it works.  It's not that it's a good thing, but companies can afford to discriminate because it doesn't affect they're competitiveness, where blatant racism (hating blacks) would.  The rational racism still allows them to get the right mix of minds.

Support for this comes from a computer simulation where students were assigned colors (green or purple) to be employees with other students as 'employers'.  The employees were to get jobs and the employers were to hire them.  Employers were to select students based on a cyber-die that were rolled for a 'test score'.  The employees had the option to get an education before each test.  Getting an education weighted the die so they had a higher probability for a hight score.  Employers were penalized for selecting employees who did not get an education.  In the end, the one color became discriminated against, because the employers learned, that color had a lower tendency to get the education.  Those employees in turned became less likely to get the education, because they knew they were being discriminated against because of their color.  It became a cycle, that at first was merely random.

Overall this is a good book.  It's one that I'll likely pick up again to reread and gain more insight.  I definitely think that better understanding economics in general, is a good idea.