The Logic of Life: The Rational Economics of an Irrational World by Tim Harford
My rating: 4 of 5 stars
I like this kind of book. It provides much to think about, and much of it is interesting. One thing that is a problem with any kind of modeling though, is that you have to draw borders around whatever you’re talking about. You have to decide at what point you’ll stop looking. Any easy example: Harford claims that the industrial revolution was, in a sense, started by James II’s greed. In a way, yes, you can draw that line. But you could also claim it was the greed of the rich merchant parlimentary class. Or it was the greed of William of Orange. See, it’s all rational.
But what’s rational depends on maximizing utility, and while money is the only objective way to measure that, you ultimately have to translate everything into money in order to weigh it. How much is love worth? Well, given a context, (all other things being equal), and given a large enough group you can measure it how much people value it, in terms of dollars and cents. So in an abstract, non-applied economic theory what we are really looking at is how much people value their values, whatever those values happen to be.
But going back to the first paragraph, you can always draw a line in narrative between events and claim causal connections. I suppose I could talk more about William of Orange’s upbringing perhaps, or James II’s upbringing, or the conditions for merchants to get wealthy enough for governments to borrow from them. In a way, you can make life rational if you narrow the constituent claims enough for only certain relationships to be highlighted. Drawing straight lines, as it were, in a narrative (all events chained through time are basically narratives) so in that sense, you might want to consider some of this with a grain of salt. Or you can suspend some disbelief and be blown away by these studies.
I rather found his research and his terse concise writing to make a pretty entertaining read. We do believe things happen for a reason because we clear the board of much of the possible nonsense (that NYC has many single women because most of those women have a certain undesirable haircolor, or that the % of people with a Brooklyn accent tend to be single) and in that way, leave only a few recognizeable pieces. From there, we see things happening, and so we believe that if things change there has to be a material change in their condition for things to change, otherwise things would stay the same.
The same here, is the thought that you wouldn’t have any narration at all. But of course we have events, having events happen is a matter of what happens! So you have to pose a question, but pose it in a way that is answerable with the pieces on the board.
But that’s systems thinking, and that’s what science does. We notice a pattern and apply a pattern and if it fits we think we have understanding. We can’t deal with the complete chaotic reality, so we have to narrow it down. In the process of narrowing it down we have to end up with pieces, so we already dropped quite a few of the data bits out. (Can we measure how much neighbors trust each other in terms of race? Can we do so with house values? Maybe, or maybe not.)
In a way this book is really about how our modeling as humans (how we evaluate the world) seems to make sense to us, but proves to be inadequate to the task (see purple workers) because we have incomplete information. So economics in this way is about how our modeling as humans is inadequate because we have incomplete information as individuals…but then economics itself is nothing but modeling under a specific constraint. Now doubt some of what he says seems to really apply, such as bosses or group bills at the dinner table, but maybe that’s because this kind of thing is what economics was designed to do, and that’s how people make decisions when there are clear markers — because they model them in terms of money (we all know how much a dollar is worth to us). But applying it to things outside of money? Is chopping wood during pre-historic times worth a dollar amount? I have no idea if what he says is correct or not. Most likely, it’s somewhat or mostly correct, but then again, I, like everyone else, have incomplete information. No one has the total picture… probably because that picture is impossible to have.
