Witty economists are about as easy to find as anorexic mezzo-sopranos, natty mujahedeen, and cheerful Philadelphians. But Steven E. Landsburg is one. The Armchair Economist by Steven E. Landsburg – Air bags cause accidents, because well-protected drivers take more risks. This well-documented truth comes. In The Armchair Economist, Steven E. Landsburg shows how economic thinking illuminates the entire range of human behavior. But instead of focusing on the.

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What I enjoyed landsburv about this book was that the examples were so clear that I felt like I actually understood atmchair of the basic principles of economy – and some of the things Mr. An economics professor’s sometimes charming, sometimes glib, always counterintuitive guide to evaluating the small anomalies of daily life in a free-market society. In a series of interchangeable Account Options Sign in. This widely documented fact comes as a surprise to most people, but not to economists, who have learned, perhaps better than most, to take seriously the proposition that people respond to incentives in complicated ways.

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Economics and Everyday Life. Seat belts cause accidents because well-protected drivers take more risks. Landsburg shows how economic thinking illuminates the entire range of human behavior. But instead of focusing on the workings of financial markets, international trade, and other topics distant landsbrg the experience of most readers, Landsburg mines the details of daily life to reveal what the laws of economics tell us about ourselves.

As Landsburg shows, some behavior that strikes most people as utterly unremarkable is quite extraordinary when seen through economists’ eyes. Why, for example, does popcorn cost so much at the movie theater? The “obvious” answer is that the theater owner has a monopoly. But if that were the whole story then he would charge a monopoly price for use oandsburg the restrooms as well. When a sudden frost destroys much of the Florida orange crop and prices skyrocket, journalists often point to “obvious” evidence of monopoly power.

Economists see just the opposite: If growers had monopoly power, they wouldn’t have to wait for a frost to raise prices. Why do restaurants earn higher profits on liquor landsvurg on food?

Why are some goods sold at auction and others at pre-announced prices? Why don’t concert promoters qrmchair ticket prices even when they sell out months in advance?

Why do box seats at the ballpark sell out before bleachers do? Why do corporations confer huge pensions on failed executives? Landsburg wields the tools of the economist’s tradeto solve these puzzles, often reaching conclusions that are at odds with our intuition.

After revealing economic principles in readily apparent phenomena of everyday life, Landsburg applies these same principles to newspaper and media accounts of public issues. Selected pages Title Page. Contents or Choose a Movie. How Economists Go Wrong. Other editions – View all The Armchair Economist: Landsburg Limited preview – The Armchair Economist revised and updated May Economics and Everyday Life Steven E.

Landsburg Snippet view – What distinguishes the economist is his insistence on taking the principle seriously at all times. I remember the late s and waiting half an hour to buy a tank of gasoline at a federally controlled price. Virtually all economists agreed that if the price were allowed to rise freely, people would buy less gasoline. Many noneconomists believed otherwise.

The economists were fight: When price controls were lifted, the lines disappeared. The economist”s faith in the power of incentives serves him well, and he trusts it as a guide in unfamiliar territory.


InRalph Nader published Unsafe at Any Speed, a book calling attention to various design elements that made cars more dangerous than necessary. The federal government soon responded with a wide range of automobile safety legislation, mandating the use xrmchair seat belts, padded dashboards, collapsible steering columns, dual braking systems, and penetration-resistant windshields. Even before the regulations went into effect, any economist could have predicted one of their consequences: The number of auto accidents increased.

The reason is that the threat of being killed in an accident is a powerful incentive to drive carefully. Ecnoomist a driver with a seat belt and a padded dashboard armcuair less of a threat. Because people respond to incentives, drivers are less careful. The result is more accidents. The principle I am applying is precisely the same one that predicted the disappearance of gasoline lines.

Armchair Economist: Economics & Everyday Life

When the price of gasoline is low, people choose to buy more gasoline. When the price of accidents e.

You might object that accidents, unlike gasoline, are not in any sense a “good” that people would ever choose to purchase. But speed and recklessness are goods in the sense that people seem to want them.

The Armchair Economist

Choosing to drive faster or more recklessly is tantamount to choosing more accidents, at least in a probabilistic sense. An interesting question remains. How big is the effect in question? How many additional accidents were caused by the safety regulations of the s? Here is a striking way to frame the question: The regulations tend to reduce the number of driver deaths by making it easier to survive an accident. At the same time, the regulations tend to increase the number of driver deaths by encouraging reckless behavior Which effect is the greater?

Is the net effect of the regulations to decrease or to increase the number of driver deaths? This question cannot be answered by pure logic. One must look at actual numbers. In the middle s, Sam Peltzman of the University of Chicago did just that. He found that the two effects were of approximately equal size and therefore cancelled each other out. There were more accidents and fewer driver deaths per accident, but the total number of driver deaths remained essentially unchanged.

An interesting side effect appears to have been an increase in the number of pedestrian deaths; pedestrians, after all, gain no benefit from padded dashboards. I have discovered that when I tell noneconomists about Peltzman”s results, they find it almost impossible to believe that people would drive less carefully simply because their cars are safer Economists, who have learned to respect the principle that people respond to incentives, do not have this problem.

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. It is in no sense foolhardy to take more risks when you have a padded dashboard. Driving recklessly has its costs, but it has its benefits too. You get where you are going faster, and you can often have a lot more fun along the way. It can mean passing in dangerous situations, but it can also mean letting your mind wander, or temporarily diverting your attention from the road to look for a tape cassette.

Any of these activities might make your trip more pleasant, and any of them might be well worth a slight increase in accident risk. Occasionally people are tempted to respond that nothing — or at least none of the things I”ve listed — is worth any risk of death. Economists find this objection particularly frustrating, because neither those who raise it nor anybody else actually believes it.

All people risk death every day for relatively trivial rewards. Driving to the drugstore to buy a newspaper involves a clear risk that could be avoided by staying home, but people still drive to drugstores. We need not ask whether small pleasures are worth any risk; the answer is obviously yes. The right question is how much risk those small pleasures are worth.

It is perfectly rational to say, “I am willing to search for a cassette while driving if it leads to a one-in-a-million chance of death, but not if it leads to a one-in-a-thousand chance of death. 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, economit they know that nobody ever drives as carefully as possible do you have new brakes installed before each trip to the grocery store? 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. This, incidentally, suggests an interesting research project.

Armchair Economist: Economics & Everyday Life by Steven E. Landsburg

Economics suggests that many drivers are more cautious in the presence of a Baby on Board sign. The project is to find out how much more cautious by observing accident rates for cars with and without the signs. Unfortunately, accident rates can be misleading for at least three reasons. First, those parents who post signs are probably unusually cautious; they have fewer accidents just because they themselves are exceptionally careful drivers, independently of how their sign affects others.

Second and introducing a bias in the opposite directionthose parents who post signs know that the sign elicits caution from others, and they can therefore afford to be less vigilant themselves.