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You're not as stupid as you look
on 4 February 2008
Just finished "The Logic of Life", the second book by Tim Harford of "Undercover Economist" fame, and recommend it to anyone with an interest in economics and/or how the world works.
The book's essential premise is that you're not as stupid as you look: or, to put it another way, that human behaviour is the product of rational choices, however seemingly irrational, destructive or absurd the outcomes of those choices may be. The book then ranges across subjects as diverse as the causes of the industrial revolution, institutional racism and teen America's fondness for oral sex to prove the case. (Incidentally I tip my hat the poor sap who, one assumes, wagered that Tim couldn't work the phrase "teenage fellatrices" into the first few pages of a book of popular economics - and lost.)
"The Logic of Life" uses the tools (and research) available to the professional economist to make clear a number of seemingly-intractable puzzles: why in a seemingly democratic political system governments consistently favour small interest groups with huge subsidies (it's not worth the trouble for the voters to co-ordinate themselves to save a couple of cents each in taxes, but it's well worth the trouble of agribusiness to coordinate itself to demand millions of dollars in subsidies); whether colonial rule benefited the colonised territories (yes, when it left them with the institutions that are necessary to create wealth already in place); and whether it's a good idea for people who dine regularly together to take it in turns to pick up the bill (contrary to Tim's previous advice in his "Dear Economist" column for the FT, almost certainly - no one diner cares enough about a bill split ten ways to watch out for the restaurant ripping the party off, but if you take it in turns to pick up the tab the guy whose turn it is to pay will put a quick stop to unordered bottles of wine arriving at the table).
Probably my favourite part of the book, however, is the summary of William Nordhaus's work on measuring how improvements in technology from one period to another translate into economic gains. Nordhaus considered, and attempted to measure, the labour required to light a room of a house, using for the purpose first a pile of wood he had chopped, carried and ignited himself; then a Roman oil lamp; and finally a modern lightbulb. He concluded, perhaps not surprisingly, that the Roman oil lamp was not only easier and cheaper to light but produced a sensationally better quality of light, and that of course the modern lightbulb offered the same benefits over the Roman oil lamp again. Over to Tim:
"Nordhaus's experiments suggested that as far as light was concerned, economic growth has been underestimated not by a factor of two or three but ten thousand times over. A modern lightbulb, illuminating a room from 6pm until midnight every night for a year, produces the same amount of light as thirty-four thousand candles from the early nineteenth century. In the early nineteenth century, earning the money to buy thirty-four thousand candles would have taken an average worker all year. When I remind myself to turn off unnecessary lights, I am saving light that would have taken my grandfather's grandfather all his working hours to provide. For me, the saving is too small to notice."
Confirmation, if any more were remotely needed, that this is the best time in the history of the world to be alive. To - quite deliberately - mangle the words of that fool Cecil Rhodes, always remember that you are living in the C21st and have therefore come first in the lottery of life.
"The Logic of Life" is not only an excellent summary of the current state of the art in behavioural economic research and a treasure-trove of fascinating factoids, but a warm and engaging book, a rational man's attempt to share with the reader his obvious love of the world and its rational foundations. Perhaps the truth won't make you free, but understanding how the world works through the lens of "The Logic of Life" will make you appreciate it a whole lot more.