Some economists contend that humans do not have the cognitive stability for rational decision making. They argue that we are too preoccupied with our intuitions and gut instincts. Consequently, human nature is primarily irrational. How could our actions possibly be explained as rational? Smoking cigarettes kills, but people continue buying pack after pack. AIDS is a leading cause of premature death, yet people still have unprotected sex. Your boss gets to cash in a corpulent paycheck every week while you work ten times harder and receive pocket change in return. New York City life is remarkably expensive, yet it is home to many of the most successful people in America.
All this seems utterly and undeniably irrational on the surface, but according to Tim Harford, there lies rationality underneath the surface. In The Logic of Life, Harford stresses the notion that people generally make rational choices by weighing the costs and benefits of any decision before proceeding.
He analyzes the economics of peculiar topics like sex, love, poker, crime, racism, and office politics. Embedded in all these scenarios is one predominant premise: rational people respond to incentives.
Teenagers are hardly ever described as rational, especially concerning decisions about sex. However, Harford begs to differ. For instance, research indicates that oral sex among teenagers has been drastically increasing for the past decade. After all, sex is expensive, and teenagers can't afford the hefty price tag. Oral sex is the only other substitute available on the market. In this particular situation, cost is not a monetary expense. The exorbitant costs of sexual intercourse include sexually transmitted diseases, like AIDS, and pregnancy. Thus, the reduced relative cost of oral sex, leads to an increase in demand. Harford supports this rationality of teens by analyzing the cost, benefits, and consequences of oral and...