Armchair Economist by Steven E. Landsburg

By Steven E. Landsburg

Seat belts reason injuries simply because well-protected drivers take extra hazards. This generally documented truth comes as a shock to most folks, yet to not economists, who've realized, maybe larger than such a lot, to take heavily the proposition that individuals reply to incentives in complex methods. within the Armchair Economist, Steven E. Landsburg exhibits how monetary pondering illuminates the full variety of human habit. yet rather than targeting the workings of economic markets, foreign exchange, and different themes far away from the adventure of so much readers, Landsburg mines the main points of way of life to bare what the legislation of economics let us know approximately ourselves. As Landsburg indicates, a few habit that moves most folk as totally unremarkable is sort of remarkable whilst visible via economists' eyes. Why, for instance, does popcorn price loads on the movie show? The "obvious" resolution is that the theater proprietor has a monopoly. but when that have been the full tale then he might cost a monopoly fee to be used of the restrooms in addition. whilst a surprising frost destroys a lot of the Florida orange crop and costs skyrocket, reporters usually aspect to "obvious" proof of monopoly strength. Economists see simply the other: If growers had monopoly strength, they wouldn't need to look forward to a frost to elevate costs. Why do eating places earn better gains on liquor than on foodstuff? Why are a few items bought at public sale and others at pre-announced costs? Why don't live performance promoters bring up price tag costs even if they promote out months upfront? Why do field seats on the ballpark promote out prior to bleachers do? Why do agencies confer large pensions on failed executives? Landsburg wields the instruments of the economist's tradeto clear up those puzzles, frequently attaining conclusions which are at odds with our instinct. After revealing fiscal ideas in conveniently obvious phenomena of daily life, Landsburg applies those related rules to newspaper and media debts of public concerns. Contesting the wid

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Your prediction is wrong, so your theory is wrong also. Here is a another difficulty, less obvious but also harder to dismiss: The buy-your-job program gets the incentives just right for workers but gets them exactly wrong for stockholders. Once the workers have bought their jobs, stockholders root for financial disaster. Every dollar of earnings generates $500,000 in wage obligations. If the company earns nothing, no wages need be paid. Insofar as stockholders can influence corporate decision making, the consequences of this incentive structure are plainly disastrous.

Observations of actual behavior can even help us guess what we would agree to. We know that when people can insure at fair odds against catastrophic diseases, they typically do so. It is reasonable to infer that if we could insure against being born untalented or handicapped or otherwise unlucky, we would do that as well. Behind the veil, such insurance would be available: we could all agree that those born smart and healthy would share their incomes with the rest. Because we all would want to sign such a contract behind the veil, Rawlsians argue that it should be enforced in real life.

On a recent Saturday, Homer Simpson suggested that the aquarium would be a welcome change from the family's usual weekend picnic. His son Bart, however, was quick to remind Homer that a visit to the aquarium meant a long and unpleasant wait to get in. After some negotiation, the family agreed to drive by the aquarium and see how long the line was. If the waiting time to get in was fewer than 45 minutes, they would stay at the aquarium; if it was more than 45 minutes, they would go on to the park.

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