The Armchair Economist: Economics & Everyday Life

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PDF / EPUB File Name: The_Armchair_Economist_-_Steven_E_Landsburg.pdf, The_Armchair_Economist_-_Steven_E_Landsburg.epub There is evidence that people respond significantly to incentives even in situations where we do not usually imagine their behavior to be rational. Apparently psychologists have discovered by experiment that when you hand a person an unexpectedly hot cup of coffee, he typically drops the cup if he perceives it to be inexpensive but manages to hang on if he believes the cup is valuable. Air bags cause accidents, because well-protected drivers take more risks. This well-documented truth comes as a surprise to most people, but not to economists, who have learned to take seriously the proposition that people respond to incentives. Lccn 2011051923 Ocr ABBYY FineReader 11.0 (Extended OCR) Ocr_converted abbyy-to-hocr 1.1.20 Ocr_module_version 0.0.16 Old_pallet IA17340 Openlibrary_edition He helped me learn some economic theory, especially in the second half of the book, but he has also planted some dubious arguments and social theories. When it comes to the discussion of societal problems, he presents economical solutions as "common sense" but denies the reader any counter-arguments or reasons as to why they have not been implemented.

Occasionally people are tempted to respond that nothing -- or at least none of the things I've listed -- is worth any risk of death. Economists find this objection particularly frustrating, because neither those who raise it nor anybody else actually believes it. All people risk death every day for relatively trivial rewards. Driving to the drugstore to buy a newspaper involves a clear risk that could be avoided by staying home, but people still drive to drugstores. We need not ask whether small pleasures are worth any risk; the answer is obviously yes. The right question is how much risk those small pleasures are worth. It is perfectly rational to say, "I am willing to search for a cassette while driving if it leads to a one-in-a-million chance of death, but not if it leads to a one-in-a-thousand chance of death." That is why more people search for cassettes at 25 miles per hour than at 70. Witty economists are about as easy to find as anorexic mezzo-sopranos, natty mujahedeen, and cheerful Philadelphians. But Steven E. Landsburg...is one economist who fits the bill. In a wide-ranging, easily digested, unbelievably contrarian survey of everything from why popcorn at movie houses costs so much to why recycling may actually reduce the number of trees on the planet, the University of Rochester professor valiantly turns the discussion of vexing economic questions into an activity that ordinary people might enjoy.

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International trade is nothing but a form of technology. The fact that there is a place called Japan, with people and factories, is quite irrelevant to Americans’ well-being. To analyze trade policies, we might as well assume that Japan is a giant machine with mysterious inner workings that convert wheat into cars. Any policy designed to favor the first American technology over the second is a policy designed to favor American auto producers in Detroit over American auto producers in Iowa. A tax or a ban on “imported” automobiles is a tax or a ban on Iowa-grown automobiles. If you protect Detroit carmakers from competition, then you must damage Iowa farmers, because Iowa farmers are the competition. Leeson, Peter T. “Logic Is a Harsh Mistress: Welfare Economics for Economists.” Journal of Institutional Economics, 2019, pp. 1-6. Revised edition on sale May 1. In this revised and updated edition of Steven Landsburg’s hugely popular book, he applies economic theory to today’s most pressing concerns, answering a diverse range of daring questions, such as: Why are seat belts deadly? Why do celebrity endorsements sell products? Why are failed executives paid so much? Who should bear the cost of oil spills? Do government deficits matter? How is workplace safety bad for workers? What’s wrong with the local foods movement? Which rich people can’t be taxed? Why is rising unemployment sometimes good? Why do women pay more at the dry cleaner? Why is life full of disappointments? Whether these are nagging questions you’ve always had, or ones you never even thought to ask, this new edition of The Armchair Economist turns the eternal ideas of economic theory into concrete answers that you can use to navigate the challenges of contemporary life. Armchair Economist: Economics and Everyday Life by Steven E. Landsburg – eBook Details

I wish I could say that this was a clever fiction I devised to make a point and a joke, but I’m nowhere near that clever.) After this slight digression into the challenges of empirical research, let me return to my main topic: the power of incentives. It is the economist's second nature to account for that power. Will the invention of a better birth control technique reduce the number of unwanted pregnancies? Not necessarily -- the invention reduces the "price" of sexual intercourse (unwanted pregnancies being a component of that price) and thereby induces people to engage in more of it. The percentage of sexual encounters that lead to pregnancy goes down, the number of sexual encounters goes up, and the number of unwanted pregnancies can go either down or up. Will energy-efficient cars reduce our consumption of gasoline? Not necessarily -- an energy-efficient car reduces the price of driving, and people will choose to drive more. Low-tar cigarettes could lead to a higher incidence of lung cancer. Low-calorie synthetic fats could increase the average weight of Americans. Let me mention a third response as well. Ehrlich did not just make up the number 8; he arrived at it through a sophisticated analysis of data. Skepticism is fine, but it is incumbent on the serious skeptic to examine the research with an open mind and to pinpoint what step in the reasoning, if any, he finds suspicious.) Now this is critical because this explains the real monetary value of walking along the beach. Non-economists might gag that this activity has a value, but it does. I could have done anything with my time, like work, but I chose to spend it in this particular manner, and that is worth something. So if enjoying nature means something, there could theoretically be a dollar value attached. In fact, there often is. My friend Judy owns a fat pad in Marin county (which she got for a song from a person shortly thereafter indited for international drug smuggling...but that story is for another time :-) Anyway, you would be hard pressed to find someone who loves nature more...for walking in it...swimming in it...and merely knowing it exists. But it does have a value. I don't know the number, but I would imagine that if a suitably ludicrous offer was made for 40 acres in Marin, that love of nature could be quantified. This insight, the fact that value must be attached, as hard as it may be, to non nuts-and-bolts numbers is true....and valuable...and then completely ignored as evident by the aforementioned millionaires example. This means that raw accident statistics cannot reveal how drivers respond to Baby on Board signs. The problem is to find a clever statistical technique to make all the necessary corrections. I do not propose to solve that problem here, but I offer it as an example of a typical difficulty that arises in empirical economic research. Many research projects in economics revolve around creative solutions to just such difficulties.Finally, the topic of monopoly is brought up several times in the book. Interestingly, Landsburg links the idea of price discrimination to monopolistic competition, arguing that the business needs some power to establish varying prices. In this case, such authority decreases the risk of competitors appealing to the highest paying clients by offering a lower price cap (Crapis et al, p. 3589). In the same chapter, Landsburg questions the statement that movie theaters have a monopoly over popcorn, arguing that this belief fails to consider the diversity of customers and their preferences. This question is left unanswered, but economic theory poses that high prices are justifiable due to customer demand.