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The Logic of Life
The Rational Economics of an Irrational World
Tim Harford
read on June 1, 2010

Despite the title, I expected this to be a typical behavioral econ book about all the different ways that people are silly and irrational. I've read plenty of books like that before, and don't really tire of them. I was ready for more examples of framing biases, endowment effects, etc. The premise of this book is actually the opposite. Essentially, Harford argues that in almost all cases (at least, in cases where people are performing familiar tasks - that is, not wacky one off lab experiments) people are strictly rational. The book makes a great case. It is very approachable. It reads like a Malcolm Gladwell book but you can tell it's written by an actual economist. It's much more rigorous than Gladwell.

Anyway, the main concept that I think is worth preserving here is that Harford argues how very, very small preferences- or very small imbalances in initial endowments- can have devastating social consequences at scale. He spends a lot of time describing what he calls "rational racism"- where it actually makes sense rationally for a business owner to not hire minorities, on account that he expects them to be less educated. Disturbingly, it is then rational for minorities not to invest in education, on account that they aren't going to get hired anyway. Make no mistake, Harford finds racism deplorable, but if we can ever get rid of it, he argues that we need to understand that what is causing it isn't just ignorance and hate, but rather very rational people making logical choices.

Author Bio:

Tim is an economist, journalist and broadcaster. He is author of “Messy” and the million-selling “The Undercover Economist”, a senior columnist at the Financial Times, and the presenter of Radio 4’s “More or Less” and the iTunes-topping series “Fifty Things That Made the Modern Economy”. Tim has spoken at TED, PopTech and the Sydney Opera House. He is a visiting fellow of Nuffield College, Oxford and an honorary fellow of the Royal Statistical Society. Tim was Economics Commentator of the Year 2014, winner of the Royal Statistical Society journalistic excellence award 2015, won the Society of Business Economists writing prize 2014-15, and the Bastiat Prize for economic journalism in 2006 and 2016.