Book Review: The Armchair Economist: Economics And Everyday Experience by Steven Landsburg
This short and eloquent book does a mostly excellent job of explaining to non-economists how economic reasoning works in a wide variety of mostly non-financial areas. But it’s frustrating how he can get so much right but still demonstrate many annoying oversimplifications that economists’ biases make them prone to.
For example, on page 145 he claims that a trash collection company could cheaply prohibit Styrofoam peanuts in the trash by checking everyone’s trash once a year and fining violators $100,000. But anyone who thinks about the economics of such fines will be able to imagine massive costs from people disputing who is responsible for peanuts in the trash. Maybe there are cultures in which such fines would ensure negligible violations, but there are probably as many cultures in which disputes over people putting peanuts in someone else’s trash cans would produce more waste than the peanuts do.
His suggestion of applying antitrust laws to politicians is almost right, but ignores the public choice problems of ensuring that laws marketed as antitrust laws do anything to prevent monopoly. The details of antitrust laws are complex and boring enough that few people other than special interests pay attention to them, so special interests are able to twist the details to turn the laws into forces that protect monopolies.
On page 183 he says “Flood the economy with money and the nominal interest rate goes up in lockstep with inflation”. Given a sufficiently long-term perspective, this is an arguably decent approximation. But he’s disputing the common sense of a typical reporter who is more interested in a short-term perspective under which those changes clearly do not happen in lockstep (on page 216 he provides hints at a theory of why there’s a delayed reaction).
He makes some good points about the similarities between environmentalism and religion, but it seems these points blind him to non-religious motives behind environmentalism. He says on page 227 about relocating polluting industries: “To most economists, this is a self-evident opportunity to make not just Americans but everybody better off.” Maybe if he included a payoff to the U.S. workers whose jobs went overseas, this conclusion would be plausible. But it’s hard enough to figure out how such a payoff should be determined that I suspect he simply ignored that problem.