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Steven Landsburg applies economic theory to your entire life

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Steven Landsburg applies economic theory to your entire life

Part one of a two-part series.

Think of life as a series of equations. Everything you do is a trade-off. Every decision has a plus or minus attached.

You've never considered economics a part of your life? Steven Landsburg wants to change that. In popular books and newspaper and magazine columns, Landsburg vividly illustrates the impact of his field on everyday life.

When Landsburg discusses economics, he sounds more like a philosopher or psychologist. And you'll come away convinced that economics underlie everything from food to sex.

Landsburg, a professor at the University of Rochester, is a prolific author whose 1993 book, The Armchair Economist, continues to sell 500 copies a month. Microeconomics, a textbook he wrote 15 years ago, remains among the most popular texts in the field. "Everyday Economics," the column he's been writing for the last decade for the online magazine Slate, continues to draw hundreds, even thousands of responses per column from readers.

His Slate column had an unlikely beginning. Landsburg sent a manuscript of The Armchair Economist to one of his favorite writers, well-known pundit and former CNN Crossfire host Michael Kinsley, asking him for a blurb.

"I got back a disdainful letter saying he'd read the manuscript and it illustrated everything he thought was wrong with economists and the way economists think. And he certainly would not write a blurb," Landsburg says. "Seven years later, out of the blue, I got a call from Kinsley and he said, 'I'm starting a magazine and ever since you sent me that manuscript, I've had a note on my desk saying I'd have to find an occasion to get you to write for me.'" (To find a backlog of Landsburg's Slate columns, type his name into the search box at slate.com.)

While Slate readers tend to be polite in their responses, a recent appearance on Fox News with John Gibson drew frightening, racist e-mail.

It began when, in a Forbes column, Landsburg argued that protectionism is ugly in many of the same ways that racism is ugly because "it involves saying that we care less about some people, in one case because they are a different race and in the other case because they're in a different country. And we should care more about unemployment in America than elsewhere."

Gibson never got past berating him.

"I didn't go into this believing that protectionists were racist, but the email I got after this was so rabidly racist and so frightening."

A Libertarian who tends to vote Republican, Landsburg throws out ideas guaranteed to delight and enrage people of every political stripe. Conservatives might love his position on minimum wage (abolish it!), but they may need extra heart medication when digesting his explanation of why the less promiscuous among us should be out having more sex.

However controversial his opinions, Landsburg has style. He moves effortlessly through complicated economic issues by tying them to real-life situations. The fanciful Gil Hibben knives displayed in his Brighton home were purchased on eBay; his strategy for winning eBay auctions was the subject of a Slate column. Other columns (and his books) are sprinkled with references to Wegmans, Tops, and Barnes & Noble. And his book Fair Play was structured around economic ideas he learned bringing up his daughter.

Landsburg's stature as a popular economist is so strong that he was selected to review Freakonomics in the Wall Street Journal. His rave may have helped it rise to the top of best-seller lists. (He observed immediate results by watching it climb in Amazon standings after his review was published.)

In a recent interview, edited for publication, we asked Landsburg to discuss his views on outsourcing, slavery reparations, fair housing, and whether having more sex would be safer for all of us.

City: Your books and columns make it clear that you are an advocate of free trade, so I assume you were enthusiastic about CAFTA (The Central American Free Trade Agreement). Is it wrong-headed to care about American jobs going south of the border?

Landsburg: I think it's wrong-headed for many different reasons independent of each other. Even if all you care about is Americans it's wrong because Americans benefit and so do foreigners. Everyone benefits.

I don't think there are any losers from free trade. I defy anyone to point to the person who would be better off if he never traded with anyone and had to make all his own clothes, grow all his own food. We all benefit from trade.

I don't see any reason why I should care more about total strangers in Detroit than total strangers in Costa Rica. That seems fundamentally ugly and I'm appalled that there are so many people who think that.

City: Do you feel the same way about high-tech jobs going to India and eventually China?

Landsburg: On all the grounds I just spoke about. It is definitely better for Americans to buy high-tech services cheap than it is for them to buy them expensively. Finding someone to outsource stuff to is just like finding a new technology.

If you can find some guy in China who will analyze your X-rays for 25 percent off the American radiologist's rate it's just like finding a new technology that does radiology cheaper.

Finding new technologies is the source of our prosperity, and trade is just another technology. A partner who will trade for cars is just as good as having a machine where you put wheat into one side and cars come out the other.

City: In "Fair Play" you say compensating American workers for jobs lost to free trade is like compensating slave owners for freed slaves. What's your logic?

Landsburg: Americans who benefit from trade restrictions are profiting by restricting the freedom of their fellow citizens to buy goods from whomever they want to buy them from. Restricting my freedom to buy goods from China is analogous in some ways to enslaving me. It's not slavery, but it takes away some of my freedom and someone else profits from it.

City: Later in the same book you come out pretty clearly against reparations for African Americans. You say most of the people who would be paying the price are not related to people who benefited from slavery. But what about institutions that everyone benefits from that were built with proceeds from slave labor? At Brown University, for instance, some buildings were built with slave labor.

Landsburg: I am not philosophically opposed to the idea of reparations. I think it's difficult after any length of time to identify who the current winners and losers are and it's very difficult to make those reparations in a way that makes sense.

City: You also discuss the "symmetry principle," saying landlords ought to be able to discriminate against blacks or gays because blacks and gays can discriminate against landlords. There may be some logic to this, but shouldn't the different weights of positions of power be part of the equation?

Landsburg: I'm not sure it's so clear that you should expect those power differences. I've been a landlord and a tenant, and I didn't feel particularly more powerful in one situation than the other. In the one case I'm relying on a person to let me live in a building that he owns, in the other I'm relying on a person to pay me rent.

City: But surely there are differences. What if a black couple wants to live in a neighborhood with an excellent school district, but the landlords there are making a choice not to let them?

Landsburg: Obviously this is horribly ugly behavior, but it seems to me that if freedom means anything it means protecting the rights of people who we find appalling.

City: You go pretty far in your embrace of this logic, concluding that Affirmative Action is unfair to bigots. But what about the historical record in terms of discrimination and disadvantage? In some cases you seem to regard the world as if it was constructed yesterday.

Landsburg: If you compensate people for slavery, you want to put the burden of that as much as possible on people who have benefited from slavery. People who have benefited from being bigots or refusing to rent to blacks are not the same people who benefited from slavery.

When you enslave somebody you've done a real wrong; when you refuse to rent to somebody you're doing something ugly, but you never owed them an apartment in the first place.

City: But if there weren't laws against this kind of discrimination do you think minority groups would have made the progress they have over the last several decades?

Landsburg: I hate to say this, but I expect they wouldn't have and that's a sad thing. When I look at the civil rights laws of the 1960s I think that they're very hard to justify morally and very hard to justify constitutionally. I also think they did a hell of a lot of good and I'm conflicted about that.

City: So you're saying it was an unnatural thing that we did in making these laws, but, then again, wasn't it an unnatural thing we did in bringing people over from Africa to work as slaves?

Landsburg: It was an unnatural thing that somebody did.

City: OK, my family came over from Russia around 1900, but what about the argument that we have all benefited in some measure from that labor?

Landsburg: I say this at the risk of being misinterpreted, but I suspect that the main beneficiaries of American Slavery have been American Blacks, the descendents of slaves who are living in the United States now instead of living in Africa. If you want to go back and sort out who the winners and losers are from slavery... If you were a black in Africa in 1810 and you knew what slavery was going to be like, but you also knew what it was going to mean for your descendents, I'm not sure what you would have chosen.

City: What about the millions lost on the Middle Passage?

Landsburg: Of course you want to count that too. Those people are the ones you'd really want to compensate, but they're gone. How are you going to do it?

City: The title of a column --- and your next book --- is "More Sex is Safer Sex." Many people would find that counter intuitive.

Landsburg: People who are very conservative sexually and have a very small number of partners do the rest of us a big favor by joining the partner pool because they are relatively safe.

You don't want them ramping it up too much because then they'll become exactly like the promiscuous people and just as dangerous. If you could get a few more of them into the partner pool you could slow down the spread of AIDS and people would be having more sex. And voluntary sex is presumably a good thing.

City: I'm sure this was controversial. Do you think it's because you divorced sex from morality and simply looked at it as a reality?

Landsburg: A little bit of that, but most of the mail I got was from people who disputed the logic of it and that mail was fun because you got into some very intelligent discussions. There was some discussion of the morality, but it seems to me people like to have sex, so more sex would be a good thing.

City: You've written that "no one should be asked to pay for someone else's health care." Economist Robert Frank says that it would be cheaper to pay for the health care of the uninsured because we pay even more for it when people resort to visiting emergency rooms for non-emergency care.

Landsburg: I just got an email from an emergency room doctor at Columbia University Hospital. An ambulance ride costs between $200 and $600. He says he sees between 20 and 40 patients a day who have feigned an injury to get an ambulance ride to someplace near the hospital. That's an incredible waste of resources.

Obviously there are gigantic problems in the way we allocate health care resources and to try to fix one part of it without fixing other parts surely would make things worse. I was making a broad philosophical statement there and wasn't trying to design a whole health care system.

City: A couple of times in the book you bring up the idea of $7 gallon bottles of water as an example of market forces. A few years ago I believe it was the Coca-Cola company that came up with the idea of a beverage machine that would raise the price according to how hot it was...

Landsburg: Yeah, what a great idea that was and what a shame it failed. I think they marketed it wrong. Instead of saying we're going to charge you more when it's hot they should have said we're going to give you a discount when it's cold.

City: But were they going to give you a discount when it's cold or were they going to charge the normal price?

Landsburg: I don't know what "the normal price" means because that's always changing too.

City: I knew you'd like this idea, but everybody else in the world hated it. It was viewed as a public relations disaster.

Landsburg: What you needed to sell it to people was: It's not just a matter of paying more when it's hot. It's a matter of having a better chance of finding a Coke in a machine when it's hot. So often you go to a Coke machine on a really hot day and it's empty, and that will happen less.

This is the solution to the problem of people who only want Cokes a little buying them anyway because they don't cost that much. On a hot day some people want the Coke more than others and this solves that allocation problem. But people look at it and all they think about is the idea that Coke's going to make more money. Maybe better economics education would solve that problem.

Next week: Landsburg gets into eminent domain, racial profiling, steroids, Payola, Wegmans, OJ, and Scrooge.

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