Sunday, May 1, 2011

Does everything really happen for a reason? Is there some logic to life, something lurking behind our decisions that we remain blissfully unaware of? According to several economists, yes. I understand that economists are generally the last people one would go to for answers about human behavior, but really, that's what economics is, or at least a large part of it. Who cares about GDP or interest rates or invisible hands or utilitarianinsm unless it can give us some kind of insight into the choices people may make, and the reasons behind these choices.

Okay, it's that time of the month again. No, not that time, it's book review time. I know, this is the first one, but I read a lot. Why not try to impress people with the vast scope of my well-readedness. No, that's not a word. I just made it up. But I bet you wouldn't know that if I didn't tell you.

I just read "The Logic of Life" by Tim Harford. Excellent book, even if the author is British. It talks about rational choice theory, which is a very interesting concept. Basically, the theory holds that people's decisions, regardless of how haphazard or asinine they appear to be, are made by engaging in a process of cost/benefit analysis, a determination of risk vs. reward that is computed many times, in infinitely small increments of time.

The example used by the author is catching a baseball. No one knows the physics or the mathematical computations required by a person holding a glove to determine where the ball will go and where the glove should be in order to have the ball hit it. Many stupid people have, nonetheless mastered this activity. Even more difficult are the calculations required to hit a baseball as it's coming at you at over 90 miles an hour, but some can do it with ease. No one is accusing Manny Ramirez of being a mensa candidate, but he was one of the best hitters that ever lived.

The author takes us through several studies and experiments done by economists attempting to tease out differences in the way people behave when faced with similar options and how they behave in the same situations when faced with different consequences. One of the studies included a look at teen pregnancy and the changing morals of teenagers with respect to sex. It seems that the evidence shows that, in states where parental consent is required for an abortion, teenage pregnancy is reduced significantly. If one of the costs of having sex is having to tell your parents that you are pregnant, it apparently tips the scales in the other direction. There is also evidence that, during the height of the aids scare, people in general were less likely to have sex with men. This includes men as well as women. Apparently being gay is not a lifestyle choice, unless of course, that choice may lead to a long, painful, and drawn-out death.

Harford also makes a distinction between regular racism and so-called rational racism. The regular kind is genuinely abhorrent, while the rational kind, while equally abhorrent, is actually backed up by studies. It seems that it is in an employer's economic interest to discriminate on the basis of race in some cases. This, of course leads the people being discriminated against to give up trying to improve, leading to the discriminatory practice becoming more prevalent and, sadly, more rational. Sort of a self-fulfilling prophecy.

The Logic of Life is an interesting read, made so by the author's style and rather dry sense of humor. There is a great deal of information and opinion. There are also studies and experiments that back up the author's assertions. All in all, it is a thought provoking journey through the human decision-making process. It was well worth the 5 dollars I spent on it, and I recomend it to anyone that is interested in why we do the things we do.

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