The Logic of Life

The Logic of Life The Rational Economics of an Irrational World

Tim Harford Published by Random House

ISBN: 1400066425

Tim Harford is an optimistic economist. Rather than becoming stuck in the daily torrent of noise and news from the global financial markets, trying to making sense of this small move in Chinese interest rates or that short-lived fluctuation in a Ukrainian bond yield, Tim has the confidence and the chutpaz to cast his net far wider to unearth much of the hidden wiring of our everyday lives, and in doing so he brings microeconomics alive at nearly every turn. He draws on a tremendously wide range of quirky and often ground-breaking research from a new breed of economists whose laboratory style experiments are providing us with intriguing insights into hugely important economic, social and political controversies.

Tim’s optimism seems to stem from a robust belief that, when it works, economics can simplify the world and provide lasting insights to intractable problems. Such an approach requires taking risks, it needs people to challenge the conventional wisdom and think counter-intuitively.

The heart of the book is a mazy journey through any number of intriguing aspects of ‘rational choice theory’. This is not usually a subject that can be described as fun especially when it smothered from head to toe in complex mathematics. Mercifully ‘The Logic of Life’ is completely free of equations and calculus; instead we can relax into some intelligent, lucid and confident economics from a natural communicator. On several occasions I have enjoyed watching Tim show his passion for the subject to groups of eager students and hard-bitten economics teachers. And in The Logic of Life, there is a real sense that economics has something pertinent to say on issues of deep public concern.

Tim takes us on a journey from the television studios of the Oprah Winfrey show where teenage sex lives are top of the agenda to a shopping mall in Chicago where he commits a rational crime with a septuagenarian Nobel-Prize winner. We touch base with the street prostitutes of Mexico, the gambling palaces and poker dens of Las Vegas, pricey restaurants in London, the African savannah, a double-glazing business in Ohio, the locale surrounding the World Bank in Washington, playgrounds in Hackney Downs and classroom experiments in Virginia that can transform a group of law abiding students into racists within twenty minutes. It is all exhilarating stuff.

From a teaching perspective, one of the book’s major strengths is in clarifying some of the core ideas from a clutch of important contemporary economists. The likes of Gary Becker, Thomas Schelling, Ed Glaeser, Roland Fryer, William Nordhaus all figure prominently together with well known figures such as Adam Smith, Thomas Malthus, Alfred Marshall and John Von Neumann, the founding father of game theory. Inevitably having used such a broad canvas, some chapters are more convincing than others; I wasn’t comfortable with some of the ‘rational’ explanations for the explosive growth in the pay and earnings of CEOs, whose rewards, to this author, border on the obscene.

My favourite sections were ‘In the Neighbourhood’ which gave me a brilliantly clear understanding of Schelling’s model of the emergence of racially segregated communities built around mild preferences about where to live. And chapter seven, ‘The World is Spiky’ is tremendous on the drivers behind the dramatic economic success of some cities set against self-reinforcing decline of others. The economic geography of cities now gives due weight to the importance of increasing returns to scale and the positive externalities that can flow from cities rich in diversity and hot-spots of creative activity. Having recently watched ‘When the Levies Broke’ the brilliant Spike Lee documentary, Tim’s writing in chapter 7 brings home with real clarity the scale of the government failure that lay behind the tragedy in New Orleans in 2005 and the bodged recovery programme ever since.

The Logic of Life persuades me that people’s behaviour is often much more rational than is immediately apparent but that rational choices can have very undesirable social consequences. Tim’s book is ideally suited to sixth form economists who want to experience much of the fascination and relevance of microeconomics enjoy the sense of fun which permeates Tim’s writing. This is a great page-turner that will cement Tim’s well-earned reputation for bringing economics alive to a much wider audience around the world. I can now justify my addiction to his writing as a perfectly rational act!

The Logic of Life is available through all good bookstores and an audio-version is also for sale.