The Armchair Economist: Economics & Everyday Life

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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. If you find it hard to believe that people drive less carefully when their cars are safer, consider the proposition that people drive more carefully when their cars are more dangerous. This is, of course, just another way of saying the same thing, but somehow people find it easier to believe. If the seat belts were removed from your car, wouldn't you be more cautious in driving? Carrying this observation to the extreme, Armen Alchian of the University of California at Los Angeles has suggested a way to bring about a major reduction in the accident rate: Require every car to have a spear mounted on the steering wheel, pointing directly at the driver's heart. Alchian confidently predicts that we would see a lot less tailgating. People respond to incentives" sounds innocuous enough, and almost everyone will admit its validity as a general principle. What distinguishes the economist is his insistence on taking the principle seriously at all times. A psychologist and Nobel Prize winner summarizes and synthesizes the recent decades of research on intuition and systematic thinking.

PDF / EPUB File Name: The_Armchair_Economist__revised_and_update_-_Steven_E_Landsburg.pdf, The_Armchair_Economist__revised_and_update_-_Steven_E_Landsburg.epub Peltzman's observations reveal that driving behavior is remarkably sensitive to changes in the driver's environment. This affords an opportunity for some drivers to influence the behavior of others. Those ubiquitous Baby on Board signs provide an example. The signs are intended to signal other drivers that they should use extraordinary care. I know drivers who find these signs insulting because of the implication that they do not already drive as carefully as possible. Economists will be quite unsympathetic to this feeling, because they know that nobody ever drives as carefully as possible (do you have new brakes installed before each trip to the grocery store?) and because they know that most drivers' watchfulness does vary markedly with their surroundings. Virtually all drivers would be quite unhappy to injure the occupants of another car; many drivers would be especially unhappy if that other car contained a baby. That group will choose to drive more carefully when alerted to a baby's presence and will be glad to have that presence called to theft attention.

At the library

In 1817, David Ricardo—the first economist to think with the precision, though not the language, of pure mathematics—laid the foundation for all future thought about international trade. In the intervening 150 years his theory has been much elaborated but its foundations remain as firmly established as anything in economics. Chevalier, Judith A., and Anil K. Kashyap. “Best Prices: Price Discrimination and Consumer Substitution.” American Economic Journal: Economic Policy, vol. 11, no. 1, 2019, pp. 126-159.

I don't always agree with him in my heart, BUT my brain has a hard time arguing the ideas he puts forward. I'm not trying to convince anyone of anything. Read the book and then think about what is in it. Put some of the techniques he teaches into looking at the problems we see in today's economy. The Indifference Principle-->"Unless you are unusual in some or the other way, nothing can make you happier than the next best alternative" Lets unravel this. If there are 2 options in the world to choose from, for instance, whether to go to a fair or to go to a park then the only way you will feel special about your choice of going to either of the places depends of the fact that it has to be relatively unique. This means that suppose you choose to go to the fair, then going there holds that special value to because not everyone else chose that option. Isn't this equivalent to enslaving our satisfaction at the hand of others? 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. The extensively revised and updated edition of Steven Landsburg’s hugely popular book, The Armchair Economist—“a delightful compendium of quotidian examples illustrating important economic and financial theories” ( The Journal of Finance). 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.)There are two technologies for producing automobiles in America. One is to manufacture them in Detroit, and the other is to grow them in Iowa. Everybody knows about the first technology; let me tell you about the second. First you plant seeds, which are the raw material from which automobiles are constructed. You wait a few months until wheat appears. Then you harvest the wheat, load it onto ships, and sail the ships eastward into the Pacific Ocean. After a few months, the ships reappear with Toyotas on them. P.S. Since I joined GoodReads, I’ve tried to make a habit of reviewing everything I’ve read more or less right after I finished it, if only as a reminder to myself of what it was and what I thought of it. For the most part, it’s proven to be a pretty good discipline, and I’ve enjoyed it, and in the process, encountered some fascinating fellow readers in the world, so bonus points there, and now just you shut up about the narcissism of it all, if you please. Most of economics can be summarized in four words: "People respond to incentives." The rest is commentary.