Wednesday, August 20, 2008

** Logic of Life by Tim Harford

Many things we do might seem irrational, but when viewed from a wider perspective, actually reveal a rational and predictable basis. This book details how homosexual habits, racism, addiction, and many other 'irrational' behaviors are not really irrational after all. That doesn't mean that these are good or moral, but just that they are not irrational. Don't confuse one for the other. Good and bad are all relative as well.

Rampant oral sex in junior high; just another case of teens acting responsibly it seems...

Oral sex isn’t a symptom of more promiscuous teenagers. In fact, it’s a sign that teenagers are behaving more responsibly, in enthusiastically and rationally choosing an alternative to riskier sex – intercourse… Since abortion notification laws make it more difficult for teenagers – but not adults – to get an abortion, they should discourage risky intercourse among teenagers relative to adults. P5

Further, if oral sex is a substitute for regular sex, isn’t it at least possible that heterosexual sex is a substitute for homosexual sex? The rise of AIDS has made sex with men more risky than it used to be… Researchers discovered that both men and women with a relative who had AIDS were less likely to have sex with men, and less likely to say that they were attracted to men. P7

Feeling good about that raise? Well that should only last until lunch time

Researchers advertised and hired workers for simple jobs. ½ of the group was paid the advertised wage, the other ½ was paid an unexpectedly high wage. As predicted the grateful recipients of the higher wage worked extra hard. But in the real life setting, these warm, fuzzy feelings didn’t last very long; just 90 minutes for data entry workers. P17

Mathematical genius whores from Mexico

The risk that Mexican prostitutes take when they leave the condom in their purses seem to be strikingly well judge. The typical prostitute is acting as though she valued 1 year of extra healthy life at between $15,000 to $50,000 dollars – 5 years of income. (Prostitutes get paid 25% more to have sex w/o a condom.) In Mexico, only 1 in 800 carries HIV, and among prostitutes the rate is 1 in 300. The risk of catching HIV during unprotected sex is about 1 in 50 (2%) if either partner has some other STD, and less than 1% otherwise. The risk of catching HIV because of one instance of unprotected sex is small, while the pay is substantially higher. P27

Try this for your hometown

You have arranged to meet a friend in NYC tomorrow, but because of a breakdown in communications, neither of you knows where and when to meet. What do you? Students (who commuted by train) suggested meeting at noon under the clock in Grand Central. Tourists chose the top of the empire state building at noon. P50

Addiction is rational…

People who consume addictive products – cigarettes, alcohol, gambling – calculate that the pleasure of the habit will outweigh the pain… Each had made a rational decision to start knowing there was a chance they’d end up miserable and hooked, and now they were making a rational decision to continue rather than endure the greater misery of kicking the habit. P54

It can also be rational to get hooked in the first place. Imagine a young man who is thinking of trying a new drug. He knows that everyone who tries it loves it, at least at first. Some users find their lives degenerating into an increasingly desperate attempt to recapture that initial buzz, leading to the pain of cold turkey or eternal, unfulfilling addiction. Others seem able to enjoy the highs and remain quite content for the rest of their lives. He has no way of knowing which category he will fall. Is it rational for him to ingest the drug? If you say ‘No’, read the paragraph again but replace trying a new drug with getting married, and cold turkey with divorce. P54

Because addiction is self-reinforcing, with each fix creating greater desire for the next fix, cold turkey is a rational way to quit. The surprising implication is that addictive goods can be MORE sensitive to price changes than non-addictive goods, and addicts may pay more attention to price than light users do. Light users may cut back, but heavy users might prefer to stop entirely. It sounds ridiculous but turns out to be true: When a county raise liquor taxes, the local consumption of alcohol falls, but the local death rate of cirrhosis falls more sharply. In other words, when the price of booze increases, alcoholics are the ones who most cut down. P55

You marry yourself it turns out

Whom you marry does tend to depend on where you live, but also on how old you are, and what race you are. Most people marry the same race, similar age, and from same area. 96% of black women marry black men, and 96% of white women marry white men. P74
For every year a woman delays having her first child, her lifetime earnings rise by 10%. Of course someone who delays having children might earn more simply because her career is her priority, but you can get around that statistical minefield by looking at women who by miscarriages or accidental pregnancies, do not have children at the time they would have chosen. These random misfortunes all point in the same direction: A year’s delay adds about 1/10th to lifetime earnings. P78

Women really could be better at everything
There is no reason to believe that men were the breadwinners because they were any good at it. They might simply have been breadwinners because getting them to help around the house and with the kids would have been even worse… A small difference in relative expertise between men and women would be enough to cause a sharp division of labor across traditional sexual roles. P82

Why divorce is a good thing

Once divorce rates began to climb, it was no surprise that they increased dramatically… The more people divorced, the more divorcees – that is potential marriage partners – you could meet. That meant that it was easier to get divorced yourself and find a new partner. P83
No fault divorce laws had an unexpected but rational effect: by giving women an exit option, they gave men a stronger incentive to behave well inside a marriage. The result? Domestic violence fell by almost 1/3, and the number of women murdered by their partners fell by 10%. Female suicide also fell. P86

Why your boss is overpaid
The salary of the VP acts not so much as motivation for the VP as it does as motivation for the assistant VPs. Economists don’t even pretend that your boss deserves the salary. P99
Experiments have proven that neighborhoods matter very much indeed for some facets of life, and not at all for others. The facts are these: Adults and children who moved to richer neighborhoods [from the poorest ones] were much happier and safer. Children were 4 times less likely to be seriously injured; behavior problems fell by 25% for girls and 40% for boys; severe asthma attacks fell by 2/3s. Children were 5 times less likely to be attacked, robbed or threatened. Adults were about 1/3 less likely to suffer from major depression, and their overall health improved… At the same time, the experiments showed that adults who moved to the new, low poverty neighborhood were no more likely to find a job. Children didn’t improve their test scores, and kids who moved were just as likely to get into trouble with the law after the move as beforehand. P129

Keep your new education/training a big secret
Would you tell an employer that your training to acquire the skills to switch industries? Your boss might accept your decision with a shrug, but he’s certainly not going to include you in his long term plans. When he has a promotion to hand out, you can bet you won’t be near the top of the list. Your option to escape means that you can’t be relied upon. P143

To a typical white student, studying hard does not offer an escape route from the society that surrounds him. His parents, extended family, peers are holding down the kind of jobs that come from an education. But as long as African Americans remain disadvantaged and clustered together in ghettos, a black student is acquiring the ability to escape from poverty, crime, and deprivation – and from those around him. People don’t like to see their friends developing escape plans; even the option to escape makes us nervous. P143

Do you attend the University of Life? I bet most of you do
Not only do cities allow people to learn from one another, but the people who have the most to gain from that process – people who depend on making connections – are the people most drawn in by the big cities. The idea of a successful city is a kind of University of Life, a place to learn from others. P154

Why do firms put up with paying such high salaries when they could move to small towns and hire workers more cheaply there? The only rational explanation is that workers in big cities are more productive in some way. There are 3 possible reasons why they might be. The first is that city folks are just smarter, but equally educated rural dwellers would eliminate this. The second is that workers happen to be lumped together within walking distance which saves on time and effort. But this is negligible savings, and can’t justify the wage differential. Here is what is really going on. Whenever workers are in big cities, their wage grows faster. Move to the country and even if you keep your wage, the rate of growth will slow. Move back to the city, and the pay raises start to mount again. The real wage premium is not paid to people who work in cities, but to people who did work in cities for long periods of time. P157-8

The more knowledge intensive an industry is, the more that industry is concentrated in a small area. Looking at the locations of over 4000 commercial innovations, economists have found that more than ½ came from just 3 areas: California, NY/NJ, Massachusetts. Almost ½ of all computer breakthroughs were developed in CA. Almost ½ of pharmaceutical innovations were created in NJ. P161

The industrial revolution was really just about cutting costs

The invention of producing cheap iron via coal (coke) did not spread to mainland Europe triggering an industrial revolution outside of England for the simple reason that Europe’s coal was too expensive, since most of it was shipped from Newcastle, England. Coke smelting in France or Germany was technologically possible but just not profitable for another 150 years. This turns out to be an unusually straightforward reason for the delay, and on closer inspection it turns out to be true for many of the Industrial Revolution’s technological advances… British workers at the time were the highest paid in the world. Thus any labor saving devices would pay big dividends. In Britain a spinning jenny (cotton gin) cost less than 5 mos salary, while in low wage France it cost more than 1 year’s wages. It was cheap French labor that accounted for the slow take up on continent not the supposed superior British scientific ingenuity or commercial acumen… All this shows that many of the important innovations of the Industrial Revolution were calculated and deliberate response to high British wages and cheap British coal. P198

Europe started to become decisively richer than China between 1500 and 1800, as opportunities to trade with the new world opened up. This wealth increase was confined to the nations engaged in the Atlantic trade: Spain, Portugal, France, Netherlands, England. Eastern European and Mediterranean countries missed out… The Atlantic trade dramatically strengthened the merchant class when it existed. Where it did not, the profits accrued to the monarch – to the eventual disadvantage of Spain and France, and the rises of the Dutch and English. P202

Why you're the master of your dog instead of the other way around

Division of labor may have meant one family trading with another or one community trading with another quite far away. Even 40,000 years ago, human settlements were using stone tools from other regions, wearing seashells far from the sea… Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog. In this respect, for all of their brainpower, Neanderthals appear to have been more like dogs than humans. There is no sign that they ever traded. That would have been a big disadvantage. Computer simulations show that the propensity to truck, barter, exchange could easily have allowed humans to wipe out Neanderthals in a few thousand years, even if the typical Neanderthals was stronger, faster, and smarter too. P208

The odds of you having 1 good idea in your lifetime are less than 1 in 10 million

Assuming 1 brilliant idea per 1 billion people per year, then the million strong Homo Erectus population of 300,000BC would have been coming up with 1 good idea every 1000 years. By 1800, with 1 billion people in the world, the rate would be 1 stunning idea annually. By 1930, it would be every 6 months. Today with over 6 Billion minds, it is every 2 months. This simple model (by Michael Kremer) fits the data perfectly. Kremer suggests simply taking population growth as a measure of technological progress. The faster the human population is able to grow, the more advanced the technology must have become. P211

1 comment:

Orkun said...

Thanks for the review. I have been wondering about this book.