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Landsburg, economics, and your life

On the money 

Landsburg, economics, and your life

Part two of a two-part series.

Some people live their lives according to religious principles. Steven Landsburg looks at life through the filter of economics. And if you read a selection of his books or magazine columns, you may be persuaded that economics play more of a role in your life than you realized.

A professor at the University of Rochester, Landsburg does research in the complicated field of quantum game theory. A leading author in the discipline, he's also written a top-selling Microeconomics textbook.

But Landsburg also has some pop-cultural cachet, thanks to his ability to apply economic theory to real-life situations. In addition to his monthly "Everyday Economics" column for the online magazine Slate, Landsburg has written regularly for Forbes and occasionally for The New York Times, the Washington Post, and the Wall Street Journal. His 1993 book, The Armchair Economist, continues to sell.

In his spare time, Landsburg creates cryptic crossword puzzles. He also cares enough about modern poetry to have posted his favorite poems on his website, www.landsburg.com/about2.html.

In part one of our interview, published last week, Landsburg talked about his views on fair trade, outsourcing, reparations for African-Americans, fair housing, and his notion that more sex would be safer for all of us.

In part two, Landsburg discusses the Supreme Court's recent ruling on eminent domain, racial profiling, steroid use in sports, Payola, Wegmans, and Scrooge.

City: What do you think of the recent Supreme Court decision saying privately owned land can be seized --- bought by force --- if a local government believes it would be better used by a business enterprise?

Landsburg: I was made very unhappy by it. I noticed on the web there is a group seeking to use eminent domain to seize Justice Souter's house and turn it into a hotel.

There were a lot of things in that decision that I found really appalling. They said the justification for doing this could be more tax revenue, as if tax revenue were some sort of social good. Anything the government gains from tax revenue is coming out of someone's pocket. There's no net gain there.

The question of how much tax revenue we want to raise to carry on legitimate government functions is quite independent from the question of where the shopping centers should be.

City: What do you think of the economics of random checks for terrorists at airports and now the New York City subway system?

Landsburg: I said in a Slate column that the solution is to profile like crazy but compensate people. When you search them, give them $10.

City: What's your take on the skewing of statistics and of the competitions themselves when athletes use steroids?

Landsburg: It's strictly a question of what the sports fans want to see. Do they enjoy the sport more if everybody is all tanked up on steroids and performing better or do they enjoy the sport more if they know that's not going on? Clearly it is to the advantage of the athletes as a group to enforce the contract that says none of us will do this. It is to the advantage perhaps of any individual athlete to violate that contract.

City: Do you have any thoughts on the latest Payola scandal?

Landsburg: I didn't follow it closely but I've never understood what the objection to Payola is. Certainly cereal companies pay Wegmans for shelf space all the time.

City: But not all of us think it's OK that Wegmans and other markets charge companies for shelf space. Wegmans doesn't have certain products that people want as a result of that policy. If you listen to some obscure but good music aren't you upset that big companies can pay radio, in effect, not to play music that other people would benefit from hearing and instead play crap they want to sell?

Landsburg: As a general rule I think these companies have all the right incentives to buy time for that music that they think people are going to like. It's a waste of money to buy time for music that people aren't going to like. Another point is nowadays it's easy to find any music that you like on the Internet. People aren't dependent on the radio anymore.

City: I want to look at your Slate columns. Two years ago you wrote a column suggesting punishing juries that get things wrong. As I read it, I thought you were not factoring in the strength of the lawyers in presenting the evidence. For instance, the conventional wisdom is that the jury that declared OJ Simpson not guilty got it wrong. But can the jurors really be blamed for the circus the judge allowed to go on?

Landsburg: No matter what activity you're engaged in, the rewards and punishments you get are partly tied to your performance and partly tied to things you have no control over and that are completely unfair. In every other area of life that I can think of, we have systems of rewards and punishment that are set up to give people an incentive to get things right.

People lose their jobs for reasons that are not their own fault; businesses go under for reasons that are not their fault; somebody decides they don't love you for reasons that are not your own fault. Nothing is fair, but we do try and set things up so people have incentives to get things right. I don't see why juries should be an exception to that. Right now they have no incentive to get things right.

City: How would you really know if they got it right or wrong?

Landsburg: Now and then you've got a case that doesn't go to trial because it's been settled; somebody confessed or somebody was completely exonerated. My idea was to go ahead and try those people anyway, but don't tell the jury what you're doing. Ignore the verdict, but reward or punish the jury appropriately if they get it wrong or right. Then every juror on every case will know that there is some possibility that this is one of these mock cases.

City: What's your take on the inevitable Social Security crisis we've been hearing about?

Landsburg: The crisis is not in the system, it's in the economics. It's in the fact that there are going to be a lot more old people in 20 years and they're not going to want to work but they're going to want to keep eating.

That sets up a political conflict where they want young people to give them more and young people want to give them less. That seems to be almost more of a political issue that's going to play out however it does as a result of the political power old people have and the political power young people have. I don't think there's much we can do now to affect the way it's going to play out.

City: I want to talk about some of your more contrarian ideas. Last Christmas you wrote a column in praise of Ebenezer Scrooge.

Landsburg: There's a tradition in the Wall Street Journal and other places of praising Scrooge for his greed. This had nothing to do with greed, this was about miserliness, which is a different thing altogether.

Scrooge's miserliness meant he consumed less, which meant there was more for other people to eat. It's a reason to be glad when our neighbors consume less. It also feeds into the issue of why a consumption tax is a good thing.

Scrooge accumulates more and more wealth. It doesn't hurt anybody. He's holding a bunch of gold and nobody wants that gold for anything anyhow. It's not something you need; it's not something you can build a house out of. As soon as he starts exchanging gold for food, then other people start going hungry.

City: You are against bi-partisanship.

Landsburg: Bi-partisanship seems to me to be a form of collusion, and economists know all sorts of reasons why collusion is a bad thing. We want the parties competing with each other.

One problem with political parties is they can become corrupt. They can pass legislation that essentially channels wealth to themselves. Part of the reason we have competition is that when one party gets greedy, the other party can point that out and promise to be less greedy. When they're talking to each-other they can conspire to both be greedy and share the wealth.

City: You were also upset when your daughter's pre-school teacher was indoctrinating her with environmentalism.

Landsburg: There are a lot of environmental issues that are absolutely important and raise serious issues, but a lot of the environmentalism that my daughter was taught in school was not thoughtful environmentalism.

It was a blind view that completely ignored that fact that our environment consists not just of trees and plants and animals, it also consists of the cars we drive and the air conditioning in our houses. There are difficult trade-offs and we need to think about them.

City: Are you opposed to the idea of a minimum wage?

Landsburg: I think it's a terrible policy. For one thing the idea is to help poor people, but it doesn't help poor people. It helps a certain, very specific group of poor people. If you want to help poor people, I don't understand why you're not giving money to poor people. The burden is inappropriately spread out. In terms of what you'd want to accomplish, the earned income tax credit does a much better job than the minimum wage.

City: So if people ended up working for $2 an hour, that would be OK with you.

Landsburg: Sure.

City: In a recent column, titled "Feed the Worms Who Write Worms to the Worms," you suggest the death penalty for computer virus writers. You do some calculations that estimate the benefit of executing a murderer to be, at the high end, $100 million, while the benefit of executing virus writers would be higher.

Landsburg: The purpose of that column was to illustrate and to argue that we should decide these kinds of issues on a cost-benefit basis and to make a real argument for why it would be a good thing. In order to illustrate, I pulled some numbers out of the air. I pulled a number off the web of $50 billion worth of damage from these guys. I have no idea if that number's right or not. But I wanted to illustrate a way of thinking.

City: In a column that I'm sure drew a large response you suggested thinking of Terri Schiavo as a toaster on the basis that her husband wanted to discard her and her parents, in effect, wanted to retrieve her.

Landsburg: I'm wrestling with stuff I've been wrestling with all my life: When we make policies, whose preferences should count? The standard answer is that all preferences matter and that all preferences should go into the decision, and that's why we like markets because markets respond to everybody's preferences.

On the other hand, it seems intuitively clear to me that there are some preferences we just don't want to cater to, such as a preference for censoring what people read. It seems to me that even if you get enormous pleasure out of censoring what I read, I don't think people should care about that and I don't think that should be given any weight in making policy.

In the Schiavo case, it seemed to me that [her husband] essentially wanting to discard her body was of a piece with people wanting to censor what other people read. It was not doing him any good and it was stopping other people from doing what they wanted to do.

How sure am I that I'm right about that? Not very, because I have no coherent theory about what preferences should count and what preferences shouldn't count. My gut feeling was that the preference to discard something that someone else wants to use is a preference we should ignore.

City: In "The Armchair Economist" and in much of the rest of your writing there's this idea that if only economic logic was used in more situations, the world would benefit greatly.

Landsburg: Human beings are bundles of irrational impulses, there's no doubt about that. I tend to think we have a better chance of understanding the part of people's behavior that is rational than the part of behavior that's irrational, so it's productive to concentrate on that. Economic logic helps us understand the world, and I think that understanding is a good thing.

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