I’ve had the opportunity to read an advance copy of The Logic of Life by economist and journalist Tim Harford, aka The Undercover Economist. Harford is no dry ‘dismal scientist‘. His earlier book was an international success, explaining the micro-economics of coffee, the cost of pollution and the dynamics of auctions. Highly informative and educational, it was an entertaining read, and a hard act to follow. Can he repeat his success with this new book?

Harford draws on academic research from around the world to explain why so much of what makes up modern (and ancient) society is based on rational behaviour. It’s no dull read, as he repeats his ability to both educate and entertain. I should warn you, however, that he begins by exploring the rise of oral sex among teenagers, and that’s just for starters. Idealogues of gender, morality or class may find some of Harford’s subjects and arguments hard to take, rational though they may be to those of more classic liberal persuasion. The Logic of Life is full of rich pickings for an idea-magpie like me - too many to list here, but including why cities exist, and why your boss is paid more (it’s to encourage you!)

One example I’ve already used to show off at the lunch table was how prejudices can arise. A simple laboratory experiment divides the participants into ‘employers’ and ‘workers’, and the workers into ‘Greens’ and ‘Purples’. Workers can opt to spend ‘money’ on ‘education’, which will improve their ‘test results’ (determined by dice throw with weighted odds favouring the educated). Employers only know the person’s test results and colour code (which has no significance). Employers are rewarded when they hire someone who has been educated, and penalised when they hire someone who has not.

By statistical fluke, slightly more Greens gambled on education in the first round. Employers picked this up through the test results, and started to see Green as a positive indicator, albeit slight, The workers also started to notice this: Purples started to not invest in education, while Greens tended to invest. Through 20 repetitions, what had been a slight statistical fluke turned into a self-perpetuating prejudice that affected the behaviours of nearly all participants. By the end, Purples were uneducated and had no faith in education, and employers were rationally shunning them. Powerful stuff.

I’d recommend The Logic of Life to anyone, including business people, with an interest in why things are the way they are. However, the people who absolutely should read this book are our elected representatives and the policy analysts who serve them.

As well as being an entertaining and informative author, Tim Harford is an award-winning speaker, he writes a regular column for the Financial Times FT magazine, he presented the BBC TV series Trust Me, I’m an Economist, and he now presents the BBC radio series More or Less. He won the 2006 Bastiat Prize for economic journalism and he also writes an entertaining blog. Tim Harford is on an international speaking tour and will be in Wellington in late February.