Hidden Order: The Economics of Everyday Life

354 Pages·1997·5.08 MB·English

by  David D. Friedman

HIDDEN ORDER
Previous Works by David Friedman
Price Theory
The Machinery of Freedom
The ECONOMICS of EVERYDAY LIFE
DAY I D FRIEDMAN
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HarperB usiness
A Division of HarperCollinsPublishers
A hardcover edition of this book was published in 1996 by HarperBusiness, a
division of HarperCollins Publishers.
HIDDEN ORDER. Copyright© 1996 by David Friedman. All rights reserved. Printed
in the United States of America. No part of this book may be used or reproduced
in any manner whatsoever without written permission except in the case of brief
quotations embodied in critical articles and reviews. For information address
HarperCollins Publishers, Inc., 10 East 53rd Street, New York, NY 10022.
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HarperCollins Publishers, Inc., 10 East 53rd Street, New York, NY 10022.
First paperback edition published 1997.
Designed by Nancy Singer
The Library of Congress has catalogued the hardcover edition as follows:
Friedman, David.
Hidden order: the economics of everyday life I by David Friedman.
p. em.
Includes index.
ISBN 0-88730-750-7
1. Economics. 2. Consumer behavior. I. Title.
HB171.F767 1996
330-dc20 96-11703
ISBN 0-88730-885-6 (pbk.)
98 99 00 01 •:• /RRD 10 9 8 7 6 5 4
This book is dedicated to:
My parents. for early lessons in rationality.
Julius Margolis and James Buchanan. for
getting me into this business.
and my co-conspirators living and dead.
the colleagues from whom I have learned:
Adam Smith
David Ricardo
Alfred Marshall
Harold Hotelling
George Stigler
Ronald Coase
Thomas Schelling
Gordon Tullock
Gary Becker
Robert Frank
John Von Neumann
Jack Hirschleifer
Earl Thompson
Howard Demsetz
Yew-Kwang Ng
Lawrence Iannaccone
Harold Margolis
Stephen Landsberg
Robin Hanson

CONTENTS
Foreword ix
Introduction xi
Section 1: Economics for Pleasure and Profit
Rush-Hour Blues and Rational Babies 3
2 Actions Speak Louder Than Words 14
Section II: Price=Value=Cost: Solving a Simple
Economy 23
3 Thinking on Paper: The Geometry of Choice 25
4 What Would You Give to Get Off a Desert Island? 41
5 Bricks Without Clay: Production in a One-Input World 54
6 Ptolemaic Trade Theory 65
7 Putting It Together: Price Theory in a Simple Economy 78
8 The Big Picture 100
Halftime: What We Have Done So Far 106
Section Ill: In Search of the Real World 109
9 Bosses. Workers, and Other Complications 111
10 Monopoly for Fun and Profit 130
11 Hard Problems: Game Theory, Strategic Behavior.
and Oligopoly 147
12 Time... 167
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viii CONTENTS
13 ... And Chance 180
14 Who Gets How Much Why? 195
Section IV: Standing in for Moral Philosophy:
The £conomist as Judge 215
15 Summing People Up 217
16 What Is Efficient? 227
17 How to Gum Up the Works 245
18 Why We Are Not AU Happy, Wealthy,
Wise. and Married 260
Section V: Applications: Conventional and Un 279
19 Law and Sausage: The Political Marketplace 281
20 Rational Criminals and Intentional Accidents 298
21 The Economics of Love and Marriage 317
Final Words 333
Index 335
FOREWORD
To know David Friedman is to fully grasp the meaning of "infectious
enthusiasm." There is no such thing as a casual encounter with this
man. Pass him on the street and he'll stop to explain what's wrong with
our tort system, or why farmers have more political clout than grocers,
or how to design a Doomsday Machine, or Friedman's Law for how to
find the men's room. Take him to lunch and you'lllearn why there are
so many religious broadcasters, the principles of medieval Icelandic
criminal justice, and how to keep your home safe from burglars.
Now, people who teem with ideas are a dime a dozen. Usually, we
call them crackpots. But disciplined thinkers who teem with ideas are
rare and precious. And a disciplined thinker who can express his ideas
with clarity and wit is a national treasure. Meet David Friedman.
The discipline at the core of David's thought is that of economic
theory. Everything he says is a rigorous application of the fundamen
tal principles of economics. Indeed, his thinking is so thoroughly
intertwined with economics that one book can serve simultaneously
as an introduction to mainstream economic theory and an introduc
tion to the extraordinary mind of David Friedman. This is that book.
And it's high time for it. My local chain bookstore carries over
two dozen popularizations of physics, but only one popularization of
economics. As it happens, that book is called The Armchair Economist,
and I wrote it. Writing that book taught me this: To make economics
both clear and entertaining, one ought to quote liberally from the
writings and conversations of David Friedman. David's name
appears in my book more than any other economist's.
Now readers have an opportunity to experience David Friedman
firsthand. Don't let me delay you any longer. Go for it. Prepare to be
exhilarated.
Steve Landsburg
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