Essay On Everyday Economics/The Arm Chair Economist

Economic theories are as wide as an economists’ vision to think. In the Steven

Landsburg book The Armchair Economist вЂ" Economics and Everyday Life, Landsburg

takes many of these economic theories and relates them to everyday type

scenarios and makes them understandable to a beginning economist. He breaks his

book into six sections each relating to different types of economics, from

personal to national theories.

Landsburg talks about the power of incentives in his first chapter. What he is

referring to is how incentives drive peoples decisions to do things in life. He

makes an analogy that Seatbelts kill. This statement refers to the added

protection one gets from wearing a seatbelt, which will entice someone to take

greater risks while driving a vehicle. We as consumers are bombarded with

incentives everyday in the market place. Incentives, come in all forms, sale

prices, free-bees, coupons. Incentives are designed to make you do something

NOW instead of putting it of until later. Incentives are not always a good

thing, such as in today’s housing market. Homebuyers were offered sub-prime and

zero percent interest rates to purchase homes. This allow buyers to buy a bit

more home than maybe they were qualified to get. Buyers made these decisions at

the time because they looked safe, but in the long run many of these buyers have

had to give up these homes due to bank foreclosure.

Landsburg also talks about maximizing our efficiencies. He relates this theory

into an idea of why Rolling Stones concerts always sell out. Is it because they

play good music? Maybe. Most likely it is because its tickets are priced

right. Pricing tickets is a theory of Supply and Demand. The demand curve

suggests that as prices go down the demand for that product will go up. So if

the concert promoters’ price their tickets too high chances are they may not

sell out and also limit the number of consumers who are capable of purchasing

these tickets. Pricing a ticket correctly can also lead to sales of more

tickets and additional products. With buying a ticket at a reduced price leaves

the fan with more money (consumer surplus) to purchase more items, possibly

cd’s, shirts, posters etc.

Although taxes are a necessity in American society Landsburg discusses how they

are bad in relation to the economy. He explains how “Deadweight loss” is costly

to both the consumer and the seller. These taxes tend to take money out of the

economy and make it less efficient. There are a number of different ways to

look at deadweight loss. Everyday we as consumers have to deal with this

Deadweight loss. When we go to buy gasoline (which by the way is ridiculously

priced right now) there are many taxes that have been imposed on each gallon.

These taxes restrict us consumers from taking that money and spending it on

something else that we would much rather have or need. Another way the economy

experiences this deadweight loss is in the mere fact that consumers may not

purchase and item due to the overall cost with the tax. A consumer may be

willing to pay 5.00 for a burger but with the tax it takes the total cost to

6.00. The consumer does not buy. This in turn takes that money out of the

economy for the moment. For this reason economist call taxes inefficient.

Landsburg talks about the differences in Smiths view and Darwin’s view. They

have no correlation on economics. Darwin’s view is basically survival of the

fittest, while Smiths view says that if we all work efficiently we will create

an efficient complete economy. Let me try to put this into something that I

truly enjoy in life. Baseball. In the last few years the biggest story to come

out of baseball, is the use of performance enhancing drugs, HGH and steroids.

In the book Landsburg give a few examples of birds, students, and cows and says

they all cheat to be number one. Well some baseball players decided they wanted

to cheat also. Allegedly. For example Allegedly Barry Bonds took steroids.

Why? He wanted to be the best, healthiest athlete and prolong his career. He

did and became holder of one of the most hallowed records in all of sports.

Number one in career home runs. Roger Clemens again allegedly used

performance-enhancing drugs to prolong his career and to make him stronger and

healthier. What did this get Roger 7 Cy Young awards and a Face