Book Review: Hidden Order

Hidden Order: The Economics of Everyday Life by David Friedman

Hidden Order is my favorite popular economics introduction, because, rather than being a sequence of interesting stories making a point, it has the logic and structure of a textbook: starting from simple beginnings, Friedman hones in on certain insights, and then gradually adds complexity to explain more and more.

This is not surprising, since before this book (published in 1997), Friedman had written an intermediate macroeconomics textbook called Price Theory (first edition in 1986, second edition in 1990). The chapter titles and subjects are almost word-for-word identical. The difference is a loss of mathematical detail and rigor and end-of-chapter problems; perfectly fair for a pop intro.

After an introductory Part I that introduces economics as it’s actually thought of by economists (as opposed to a naive laymen view that it’s all about money and the stock market, the far more fun stuff is things like the economics of war and the economics of driving), Part II logically constructs modern price theory in a very clean and ideal world. Part III adds a number of real-world complications, like the existence of firms (as opposed to single-person production), strategic behavior, and the uncertainties of time and chance. Part IV is subtitled “The Economist as Judge” and deals with efficiency, at least as economists define it. This is the section dealing with rent-seeking, public goods, and externalities. One simplification in this section that I wish he had done without was the assumption of constant utility of dollars (one dollar being worth the same to a rich man as a poor man) versus something more realistic like utility as a logarithmic function of dollars. The final Part V deals with some particular applications: the economics of crime, public choice theory, and the economics of dating and marriage.

In my experience (having convinced several people to read it), Hidden Order might need to be read “in waves”, as many paragraphs are dripping in insight and the reader might move too quickly and not be building on a solid foundation. Typically when revisiting a chapter the point sticks better having seen a bit where he’s heading. It’s definitely worth the effort though.

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