What Would the World Look Like if Economists Were in Charge?

Podcast
Freakonomics Radio

Pretend for a moment that our highest elected officials, instead of acting like the lawyers that they are, were replaced by economists. You’ll hear from the economists Steve Levitt and Russ Roberts, former Estonian prime minister Mart Laar, and from a grandson of Milton Friedman about this supposedly rosy future.

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We’ve just released the third episode of our Freakonomics Radio podcast (here at iTunes; RSS feed here; or listen live via the box at right), and this one strikes close to the heart of many readers. It asks a simple speculative question: What would the world look like if economists were in charge?

You’ll hear a bit from Steve Levitt about the economist’s worldview in general, and how it differs from the politician’s. You’ll also hear from the very insightful Russ Roberts, a professor of economics at George Mason University who also blogs, has a podcast of his own, writes books, and produces rap videos. Here’s a cut of Roberts’s interview:

SJD: Okay, let’s play a fantasy game for a minute and pretend that you, Russ Roberts, a creative and very bright economist come to Washington and are put in charge of the whole country. And unlike every other economist that’s ever gone to high office, you don’t start acting like a politician. You really act like an economist from day one. So you get there, you’re behind the desk, you’ve got a pen and paper. What are some of the first things you do as soon as you arrive?

RR: I’m getting goose bumps, it’s so exciting. Well, what I would do? Let’s start with some obvious things. I would get rid of the Department of Commerce. The Department of Commerce doesn’t do anything except subsidize exports, which is just a way of saying it makes certain companies rich at the expense of the rest of us. So I don’t think the Department of Commerce does anything particularly useful, I would get rid of that. I’d get rid of the Department of Education. I don’t think that the Federal Government has any productive role to play in the school system. I’d get rid of all tariffs. I’d let people be free to buy whatever they wanted from all around the world. What else? I would get rid of the minimum wage law, which I think makes it hard for low-skilled people to find work; it makes them artificially expensive. I’d change the Federal Reserve. We spend a lot of time trying to find the right interest rate. That’s a fool’s game that has contributed to the current crisis. So I would change the Federal Reserve. I would certainly at a minimum require it to only care about price stability. Right now it cares about price stability, unemployment, the health of the stock market, Wall Street salaries, evidently. So I would get all of those things out. It’s going to be hard to do legislatively, so I would probably replace the the Fed with a Friedmanite fixed growth and money supply or just abolish it entirely and let private money emerge. I’m getting out of control here.

Kudos to former Estonian prime minister Mart Laar. Photo by Raigo Pajula/AFP/Getty Images)

The program also features an interview with Mart Laar, a two-term prime minister of Estonia who has been widely credited with turning a downtrodden former Soviet republic into a “Baltic Tiger.” How did this happen? As Laar tells it, he essentially channeled the spirit of Milton Friedman:

ML: First of all, when you grow up and develop under the Communists, then first of all you see what is not working, and that means that the Communism is not working and all those left-wing socialist ideas of state control and so on, they are just not working. They are against the human nature, and they will fail. Which means that when you read the Soviet newspapers about one man who is especially dangerous, especially crazy, and absolutely mad, and we should destroy all the human beings and the economies and so on, and this man was called Milton Friedman. And of course I became interested and when I first read Milton Friedman, it was my first book on economy that I ever have read. Then of course I was very interested because I think most of the ideas were simple but here they looked like work. And when I became the prime minister I decided, Why not.

You will hear an interesting story about Laar introducing the flat tax, a Friedman favorite, to Estonia, and about Laar’s meeting with Margaret Thatcher, whereupon he learned that the flat tax was not as commonly applied as he thought.

You’ll also hear from Friedman’s own grandson, Patri Friedman, whose personal belief is that the U.S. government is such a sclerotic oligarchy that the best solution is to start a new civilization in the ocean. That’s what led to his founding the Seasteading Institute. Here’s a look at a couple of possible seasteading options:

DESCRIPTIONPhoto: seastading.org Exterior of Clubstead, a 200-guest hotel/resort designed “to withstand the waves off the coast of California.”
DESCRIPTIONseastading.org Personality Winner of the Seastead Design Contest.

And finally, this being Freakonomics, you’ll also hear from Allie, the high-end call girl featured in SuperFreakonomics, talking about what her business would look like if the economists took over and legalized prostitution — along with drugs like marijuana and cocaine, and a market for human organs …

Hope you enjoy.

Audio Transcript

Stephen J. DUBNER: So if you would please just tell me your name and what you do.

John ZOGBY: John Zogby, pollster. I’m the Zogby poll.

DUBNER: So John, you know what Americans think about a lot of things. Now what do Americans think about politicians, the people running our country right now?

ZOGBY:  It’s pretty much at a low point. Right now members of congress get less than ten percent positive rating for performance and ethics. There have been times in the last year where’s it’s been up to like, 20 percent or so. But to give you an idea, when we’re talking single digit positive, I used to poll for another New York newspaper and back in 1995 OJ had a 16 percent approval rating.

DUBNER: Umm, so, worse than suspected murders?

ZOGBY: Uh, maybe a tie, but whatever it is, it’s not good.

DUBNER: Now, what about lawyers? How do Americans feel about lawyers these days?

ZOGBY: Also not well. Lawyers in fact, as of December specifically, 13 percent positive rating. That puts them four points ahead of stockbrokers and members of congress.

DUBNER: So tell me this, we don’t like politicians, we don’t like lawyers, so why do we elect so many lawyers to run the country? The president’s a lawyer, the vice president, the secretary of state, a whole lot of others; about 6 in 10 US senators are lawyers, why?

ZOGBY: I guess nobody who’s self respecting want to run for congress.

ANNOUNCER: This is Freakonomics Radio, a new podcast about the hidden side of ... everything.  In this episode, Henry the sixth, a politician himself, said it best: The first thing we do, let's kill all the lawyers. And then: what if -- wait for it -- what if economists got to run the world?  We'll hear from a high-end call girl; an Estonian who ran his country according to the gospel of Milton Friedman; and a guy who wants to start building new nations in the middle of the ocean. Here's your host, Stephen Dubner.

DUBNER: Steve Levitt is my co-author on "Freakonomics" and "Super Freakonomics."  He’s an economist.

Steven D. LEVITT: Well, mostly economists just sit around in their offices, and they complain to other economists about the fact that no one listens to them, and if only we got to run the world, it would be such a better place.

DUBNER: So the typical economists differs from the typical politician let’s say, how?

LEVITT: Well economists don’t really care what other people think about them.  I think that might be the first and the biggest thing.  Politicians have to say and do things that they think other people will like, whereas economists don’t have enough social skills usually to actually realize that the things that they say and do offend others.  I cannot remember going to a party with my wife where after we left she didn’t chide me for having insulted or berated or challenged someone in a way that was completely and utterly beyond the social norm.  And I had no idea! Every single time, we don’t go to that many parties, but every single time we go I’m amazed that she tells me at this party, just like the last one, I did something wrong.

DUBNER: Economists are by nature candid.  Maybe too candid. That's because they base their arguments on what the data have to say -- rather than how politics or morality might dictate. A solution that might strike an economist as perfectly rational might strike the rest of us as deeply repugnant. They have a lot of ideas to improve the world -- but they're mostly ignored. So today, we have a modest proposal.  For the next 20 minutes or so, let's put away the politicians -- and let's put the economists in charge.  We're going to start with the very strange case of Estonia.

Mart LAAR: My name is Mart Laar. I have been twice Prime Minister of Estonia, and I'm not an economist.

DUBNER: Starting in 1992, Mart Laar helped change Estonia from a downtrodden former Soviet satellite to what some people called a Baltic Tiger.  And while it's true that Laar is not himself an economist, he did his job by channeling one of the most renowned economists in history.

LAAR: When you grow up in the Soviet society under the communists you heard about the one man who is especially dangerous, especially crazy, and absolutely mad, and which would destroy all the human beings and the economies and so on, and this man was called Milton Friedman.

DUBNER: Milton Friedman, the University of Chicago economist, the 20th century's most passionate advocate of free markets.

LAAR: When I first read Milton Friedman, Free to Choose, and to be real it was my first book on economy what I ever have read. Then of course, I was very influenced because I think most of the ideas were simple, they were clear and they looked to work. And when I became the prime minister then I decided, why not? As I was not so much informed what has happened in the world so I was sure that most of the countries in the world have instituted from long time ago the Milton Friedman ideas, and then I decided just to follow them.

DUBNER: So you read Free to Choose by Milton Friedman –

LAAR: Yep

DUBNER: And you thought well this stuff sounds great and it sounds very logical, there probably wouldn't be a book like this if he hadn’t gotten to do all these things so since they did them in the US, I should do them in Estonia, right? That's the idea?

LARR: Yes, more or less, yes.

DUBNER: And at what point did you find out that much of what Milton Friedman advocated he never actually got to do, like a flat tax in the US?

LAAR: I got it quite quickly actually. The flat tax I got on my first meeting with Margaret Thatcher, who I admired very much and who was a great admirer of Milton Friedman. I met her first when I had been prime minister I think for some months and so on, and when I told her what I am planning to do, she looked at me with these big eyes and said “you are one brave young man.” And then a little bit introduced me on the realities of the Western world on which I was not very well informed. But I didn’t stop.

DUBNER: Laar treated Friedmans’s book as his Bible as he started governing Estonia. HE abolished tariffs, to encourage international trade. He privatized 90 percent of the economy. He particularly liked the idea of a flat tax. One tax rate for everyone, nice and simple. And promptly instituted it.

LAAR: Within my first meeting when I proposed to introduce the flat tax in Estonia they looked on me as I am a little bit crazy. And asked “do you know something on the economy” and I answer “economically, no not so much.” But I think this is a great idea because it looks to work. And I didn’t know then that I would be the first one to see this, but I introduced it. I was 32, I was young and crazy, so I didn’t know what is possible and what's not, so I did impossible things.

DUBNER: Mart Laar's reforms were generally considered a success. And you know what -- there are a lot of countries, more than 30, where the highest elected official has an economics background. But let's come back across the Atlantic, to Washington, and let's dream a little.  Here, economists don't get to be president. It's true that Gerald Ford, Ronald Reagan, and the first George Bush were economics majors in college, but they all quickly moved on to something else. What if we took a real-life, practicing economist, full of good ideas, and gave him the keys to the Oval Office?

Russ ROBERTS: I’m getting goose bumps it’s so exciting.

DUBNER: This is Russ Roberts.  He's a professor of economics at George Mason University.

ROBERTS : I’d get rid of the department of education. I don’t think that the Federal Government has any productive role to play in the school system. I’d get rid of all tariffs. I’d let people be free to buy whatever they wanted from all around the world. Uh, what else? I would get rid of the minimum wage law, which I think makes it hard for low skilled people to find work; it makes them artificially expensive.

DUBNER: Wow, cutting the Department of Education?  Abolishing minimum wage?  Now you start to get the idea of why economists are so popular at parties.

ROBERTS: I’d legalize all drugs. Besides -- cocaine and marijuana, which I confess to never have tried. I'm 55 years old. I'm the only 55 -year-old --

DUBNER: You still have time Russ, you still have time.

ROBERTS: I know a couple, a few friends of mine who claim to be in the same virgin space. I say that only because people assume that if you’re in favor of legalized drugs it’s so you can get high all the time. I want a world where you’re free to get high and you’re free not to get high. I don’t want my kids to take drugs. I don’t want to take drugs of those kind, but I think that should my choice and not the government. By making cocaine and marijuana legal we’d free up millions of dollars currently wasted on trying to keep it out of peoples’ hands, which doesn’t work. It’s a totally ineffective law. And we’d go back to a law where we would say it’s legal but it’s not a good idea. It’s like TV. TV is legal, you can watch it all you want. But it’s still not a good idea to watch too much. It’s up to us as adults to try to figure out about TV, and candy bars, and marijuana, and scotch, how much of that we’re going to use, and how much a responsible person is going to consume. For some folks it’s zero, for others it’s way too much. That should be their choice.

DUBNER: What would you do about prostitution?

ROBERTS: Should be legal. I’ve never gone to a prostitute either. I guess this is confession time. But it should be legal because I think activities between consenting adults are nobody’s business but their own.

DUBNER: Alright, so that's the theory. Why don't we ask a real prostitute?

ALLIE : My name is Allie and I worked as an escort for about 8 years in the United States, and I guess what people would classify as a high-end escort, charging between 300 to around 600 dollars an hour.

DUBNER You’ve since retired, correct?

ALLIE: I have.  I have retired and went back to school.

DUBNER: Ok, and what are you studying?

ALLIE: Economics.

DUBNER: You were what just about anybody in the world would think of a really successful business person. You set up this business – now it happens to be an illicit business – but you set up this business and ran it well and ran it efficiently, and made a lot of money, right?

ALLIE: Yeah, I did. I mean, looking back, I didn’t know all the terms, I kind of learned by doing. But I had huge profit margins, yeah.

DUBNER: In the entire time you were working as a high end call girl - 8 years worth, were you ever arrested?

ALLIE: No

DUBNER: Did you ever come close to being arrested?

ALLIE: Not that I know of.

DUBNER: If there’s one thing that people think  is true about prostitution, especially at the high end, but it’s not, what would it be?

ALLIE: I would say that the guys are paying for crazy sex acts.  I think you hear this all the time, if he’s paying 1,000 dollars an hour no telling what he’s doing to that poor girl, right? I found that the more that the clients pay, generally, the less sex that’s happening.  They’re paying for companionship, and just company, and to be able to relax and be themselves.  And sex.

DUBNER: The premise of this episode is what the world would like if economists were in charge, ok? And most economists as you probably know, would argue that prostitution should be legalized, there are a whole lot of reasons why that is so. Now what if it were made legal? How would that change your business if you were still working as a prostitute?

ALLIE: I think obviously it would make probably make the prices go down a little bit.  Although, people talk about maybe more girls would enter into the market.  I think maybe a few would be.  The thing is that generally the barriers to entry for women to get into the business are more values and the way that they’re seen in society.  I think more than -- I mean obviously more than their costs, because it’s a relatively inexpensive business to get into.

DUBNER: So that's what might happen to prostitution if an economist like Russ Roberts were in charge. There'd probably be more Allies, but they'd make a bit less money -- and they'd pay taxes. People with moral objections wouldn't patronize her business.  The market would decide.  A nation run by economists would be a nation where the government wasn't making as many moral judgments -- which, interestingly, might mean the end of "values" voters. I wonder ... is there anything else Roberts might want to take care of while he's still in office?

ROBERTS: I’d change the Federal Reserve.  We spend a lot of time trying to find the right interest rate.  That’s a fool’s game that has contributed to the current crisis.  So I would change the Federal Reserve.  I would certainly at a minimum require it to only care about price stability.  Right now it cares about price stability, unemployment, the health of the stock market, Wall Street salaries, evidently.  So I would get all of those things out.  It’s going to be hard to do legislatively, so I would probably replace the Fed with a Friedmanite fixed growth in money supply or just abolish it entirely and let private money emerge.

DUBNER: Ah, it all comes back to Milton Friedman. He died just a few years ago, at the age of 94. Most people don't know it, but we're living a lot of his ideas today. You know how your paycheck has taxes automatically withheld? That was a Friedman argument. Our 100% volunteer army? A Friedman idea. School vouchers? Friedman. The reboot of Estonia happened only because Mart Laar believed in Milton Friedman's ideas. But when you look at Washington today -- holy cow, politics has become so broken that Friedman's own grandson -- all he wants to do is go out to sea.

Patri FRIEDMAN: I’m Patri Friedman and I founded the Seasteading Institute, a nonprofit which researches how we can let people build new societies on the ocean.

DUBNER: Ok, now your father David is an economist, and two of your grandparents, Rose and Milton were economists, and some people consider Milton Friedman to be one of the most influential economists who ever lived. So, what would you think of a world where instead of politicians running things, the economists were in charge?

PATRI: That’s kind of the world that I’m trying to create with seasteading. The way I see it is, the way to get economists to be in charge of government is to put businessmen in charge of government. That is, if we make government more of a market commodity with different citizens, different businesses, looking at different countries and picking the ones that really fit their values and work efficiently, that the businesses that operate these countries will naturally hire economists to tell them what is the best way to run a country and they’ll run experiments.

DUBNER: What do you, Patri, what do you dislike so much about government, particularly the US government, that you are willing to go and invent floating cities on the ocean?

PATRI: Well I’m one of those crazy libertarians, so I dislike most of the laws of the US government, but one of the things that I love most about seasteading is that it will work even if I’m wrong about what will make a good society. I mean, while I’m out there starting my crazy libertarian society, hopefully lots of other people will be trying other very different types of societies and if my crazy libertarian world turns out to be a bit too crazy and not a good place to live I can go switch and live somewhere else.

DUBNER: If economists were in charge just list for me some of the big changes that would happen right off the bat?

PATRI: If economists took over I think we would see a lot of deregulation.  I think we would see the government doing a lot less.  I think we would see federalism.  I think that school would be run by vouchers.  And then the economists would be quickly out of power as the teachers unions marched on Washington in their millions and seized the economists and through them out of high story windows.

DUBNER: The defenestration of economists in Washington.

DUBNER: Economists think they have a lot of answers -- and they probably do. But in a culture like ours, a lot of those ideas would be grossly unpopular. We seem to be stuck with a super-partisan government with no real competition. Milton Friedman's own grandson thinks Washington is such a sclerotic oligarchy that he wants to leave civilization behind, starting over in the ocean. Of course, we could send all the politicians out to sea instead, but that's another podcast for another day.

In the meantime, maybe we should put a little more faith in economists?

Or ... maybe not. Steve Levitt told me a story once, about the economist's favorite tool: the power of incentives. He and his wife were trying to potty-train one of their kids, Amanda.

LEVITT : She had been potty trained, and then had completely lost the interest in it, and my wife had done everything that the experts told her to do, and nothing had worked—gone on for six months. So I said to my wife “Look, I’m an economist. Everything’s about incentives. I understand how to incentivize people, let me take control. I got down on Amanda’s level, maybe three years old, and said “Amanda, every time you go pee pee in the potty I’m going to give you M&Ms.” OK? Because M&Ms were the thing she cared about most. And she said “really?” I said “yeah.” She said “well I’ll go right now!” I said “OK,” and she went right into the bathroom, and goes potty, I give her the M&Ms, and I turn to my wife and I say “just let the expert handle the problem.” You know, it worked great for about two days. Every time Amanda had to go to the bathroom she would announce it publicly, she’d go in there, we’d give her the M&Ms,  couldn’t have been better. Then on about the third or fourth day she said, I have to go the bathroom. I went in there with her, and she tinkled out two or three drops. And I thought, ok she didn’t have to go that badly. I gave her the M&Ms. Not more than two or three minutes passed and she sad, I’ve got to go to the bathroom. She went in there she tinkled out a few more drops, I gave her the M&Ms. And it turned out that she was just going to do that to infinity. My three-year-old daughter had figured out such bladder control within three days that she now was able to go on demand. And she had figured out how to game a system that a world-leading economist had come up with. It’s really a cautionary tale to economists – when you come up with incentive schemes that even your three year old daughter can undo in a few days? What does that mean when you come up with an incentive scheme the whole world – you know, two, three hundred million people are out there strategizing against it, trying to beat you? You know you’re going to get beaten.

[CREDITS]

Leave A Comment

Comments are moderated and generally will be posted if they are on-topic and not abusive.

 

COMMENTS: 57


  1. Dan says:

    Sounds like you guys went off the deep end. (I’ve always had my suspicions…) I guess its not an economist’s job to distinguish “efficient and inefficient” from “good and bad”

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  2. Mario Bros. says:

    Enjoyed the podcast as always. Just wish you asked more than just Friedmanites. I would like to know how Keynesian and behavioral economists would run the world also.

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  3. Michael K says:

    Don’t let the fact that Russ Roberts blogs, and has a podcast skew your perception of him. He’s a brilliant guy and the podcasts on EconTalk are consistently excellent.

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  4. Ken says:

    @Dan

    Who determines what is “good and bad”

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  5. Will says:

    Not all or even most economist are Friedmanites…Can we have a range of economists not just Chicago school.

    The most interesting parts of economics I find are about market failures.

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  6. Bryan says:

    I have a big problem. I love Freakanomics podcasts, but so far there have been released and there have only a few and most are short. Please consider your iTunes fans and give us timely (weekly?) podcasts to listen to that are at least 20 minutes. Otherwise you are wasting our time and killing our anticipation to enjoy more of an econmics point of view.

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  7. Dan says:

    @Ken…good and bad are not scientifically ascertainable therefore they do not exist. QED

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  8. PaulD says:

    Russ Roberts: “I don’t think that the Federal Government has any productive role to play in the school system. ”

    Of course, it does: it can implement a nationwide voucher system so that parents can choose how to educate their own children no matter where they live (without paying for said education twice).

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  9. DT says:

    This podcast was a bit unsatisfying. Not because of the quality, but the fact I think could be extended into about 50 episodes. One thing I did learn, if economists ran the country, they would pause every 7 minutes for a commercial plug like the podcast.

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  10. nate says:

    Your book contains lots of facts and we all love it to bits, but interviewing an economist who advocates privatizing education, and calling this efficient and rational, only proves that economists are human, and will happily ignore facts and do completely insane things based on a personality cult that they joined in their youth.

    Like science and medicine, economics requires rules, editors to follow them, and some kind of public accountability, or it becomes an echo chamber.

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  11. Brad Warbiany says:

    “Enjoyed the podcast as always. Just wish you asked more than just Friedmanites. I would like to know how Keynesian and behavioral economists would run the world also.”

    They already are. Ain’t it grand?

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  12. Michael R. Keller says:

    The notion of building a libertarian, Ayn Randian society on the ocean was the driving plot point of the hugely popular video game, Bioshock.

    In the game, the end result of having a taken-to-the-extreme libertarian society was . . . not pleasant.

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  13. Grant says:

    With all due respect to economists (I have a bachelors and my wife has a bachelors and masters in economics)… Would things be better? I think the only people who agree less than politicians are economists. You know: put 10 economists in a room and you’ll have 10 different opinions. Talk about not getting anything done…

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    • lf lewis says:

      I could care less about economists. I think anthropologists should run the world. Economists are only interested in one thing and that is enhancing capital. There is a lot more to the world than GDP. Being an educated person with a job, a clean efficient home, a good environment, happy family and real health care is far more important. As an anthropologist I know I could do better than an economist. And I was required to take economic anthro for my major. Please make ME president.

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  14. Lori says:

    @ Michael-
    I’m pretty sure Bioshock went badly because people got addicted to chemicals from a sea slug that let them create ADAM that warped people’s brains. I suppose you could attribute the mass spread of ADAM to the lack of rules surrounding commerce, but economic analysis, particularly new institutional economics shows that you don’t need a strong DoC to regulate people’s behaviors in small settings. I wouldn’t try to use a Bioshock argument as a reason to not have a libertarian society, the same way I wouldn’t use a 1984 argument to justify total anarchy. I have an econ major (admittedly with a Randian bent) and have played Bioshock- not the best analogy.

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  15. Weirror says:

    I thought he would abolish the Presidency. You economists (sorry, you rightly term economists as the Freakonomists) have no memory at all: examine the cause of the recent meltdown and look at the markets who are manipulated by the “rougue bankers” and “powerful financial interests.

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  16. Ed says:

    Makes no diff…. an economist is in charge of Canada… and he ain’t done squat… all the things Canada is being praised about were done by the previous government…. which was run by a lawyer!

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  17. johnleemk says:

    Will:

    One issue with that is although market failures are *interesting*, it is their relative uncommonness which makes them interesting. Markets obviously fail all the time — but they only fail critically in a handful of cases. In the vast majority of cases, it’s unimaginable to not have a market. Nobody could imagine buying their food or clothes from one central provider. Most of the things people have are obtained from relatively well-functioning markets.

    It’s common belief that markets don’t work perfectly. What’s less commonly understood is that despite this, they often work well enough. Since in most of the cases studied by economists, markets are working, obviously cases of market non-failure are going to be more prevalent than cases of market failure.

    Grant:

    That’s a common misconception. Economists are pretty unanimous on issues like rent control, for example. The consensus among healthcare economists is for a healthcare system which doesn’t exist in most developed countries (one with government intervention, but a different kind than the one typically envisioned).

    Disagreements are interesting because they can get very public and brutal (academia being what it is), but no media outlet is ever going to carry the boring story, “AEA members agree: tariffs are generally bad.”

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  18. John says:

    Reminds me of the joke that ends: “First, assume we have a can opener.”

    Like children in a sandbox building impossible skyscrapers in their mind, these little fantasies of being king show a healthy imagination. Nothing wrong with that. But they also direct our gaze to the vast, black, silent, void between the world we stand on and the world in the economists mind.

    Can we also have some centaurs in our world, please, oh king?

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  19. John says:

    Or, how about this thought experiment: Three economists are in charge . . .

    It could only end in tragic violence.

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  20. DanB says:

    So, why not actually put Roberts in charge?

    Here’s the plan: he founds a city, Robertsville, on an out-of-the-way plot of land that no one is using. In Robertsville, there is no democracy and thus no politics. All decisions normally made by the mayor, city council, board of education, chief of police, and so on are made by Roberts and his deputies.

    Now, you might think this is a recipe for small-scale despotism. But first of all its not like Roberts can countermand state or federal law: he only has the powers normally invested in local officials (zoning, property taxes, etc). And more importantly, if you don’t like the way things are going, you can always leave! So Roberts will have a huge incentive to keep the citizens happy. And in return, of course, he’ll get a big paycheck.

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  21. Eric says:

    Well, the sex and drugs part was fun, but unfortunately Milton Friedman was all wrong, as it turns out. Well managed economies that tax heavily and have strong social programs do better than any of the others, empirically: http://www.npr.org/blogs/money/2010/01/podcast_the_awesomest_economy.html

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  22. Ravi DVR says:

    The seasteading institute appears to be much like a game that has cropped up in recent culture.

    It’s called “bioshock”.

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  23. Ian Kemmish says:

    “If”??? I thought they already did….

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  24. Michael R. Keller says:

    @Lori

    I wasn’t actually trying to prove anything. I was just mentioning it as a point of interest. But, since you want to argue about it . . .

    The point in Bioshock was that a purely libertarian society *allowed* people to do things that we would find reprehensible. It was survival of the economic fittest taken to the extreme, where people were encouraged to maximize their personal outcome at the expense of everyone else.

    Yes, in small groups, humans (usually) don’t need laws to regulate behavior. However, we don’t live in small groups. And a successful small libertarian society in the middle of the ocean would eventually grow too large (through either immigration or native births) to keep that state permanently.

    A belief that separating oneself from existing society and creating a utopia is possible dooms you to failure, whether that utopia is libertarian “everyone for themselves” or communistic “each according to his needs” one.

    Unfortunately, too many economists believe that one of these two is possible. However, people are not perfectly rational beings capable of self-regulation at all times, nor are they perfectly moldable beings willing to be dictated to at every turn.

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  25. Kevin says:

    Think of an election like a market (where the voter/consumer is free to choose from the product/candidate offerings). In America, the market has developed in a way that includes two major competitors (Democratic Party and the Republican Party).

    If our current government is the result of a free market, why would we expect things to turn out differently if we made an island nation in the middle of the ocean? Wouldn’t the Friedman school of thought say that if things aren’t run well, the electorate would simply “vote the scoundrels out”?

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  26. J.P. Steele says:

    Lenin once referred to ultra-leftism as an “infantile disorder”…..and what she we call your sandbox?

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  27. wesley.tate says:

    @Mr. Keller -
    Your thoughtful understanding and theoretical applications of both cartoon communism and libertarianism is a tour de force. The true utopia, as all Americans innately agree, may only be manifested by uniting 3.79M square miles of land mass under 200 years of political machination.

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  28. M.B. says:

    I love most of those Ideas. Most are consistent with mainstream conservative views, although some ideas are a too little Libererian for my tastes. A nice contrast to when you get accademic economists espouse views about redistribution of wealth and free homes for the “homeless” and free icecream for the icecreamless. Ok I made up that last point but you get the point.

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  29. Michael R. Keller says:

    @wesley.tate

    If only economists could stop believing that people are cartoon characters with easily definable reactions, they’d see we already found our “utopia”.

    The left and right of America harbor such vitriol that sometimes it is difficult to notice that our pendulum swings have gotten shallower.

    200 years ago we fought over whether non-whites were actual human beings. 100 years ago we fought over whether a woman was equal to a man.

    Today we’re fighting over . . . insurance. That’s right: insurance. Sure seems like we’ve found a pretty stable center to me.

    Even though the hatred of the left and right for each other is as hot as it ever was, at least the stakes have gotten pretty low in the grand scheme of things. It’s as close to utopia as 300+ million people are ever going to get.

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  30. Don Merrill says:

    Hmmm …autonomy, self, independence, freedom … all subjective based on how it affects somebody else. Even if I had a cabin in the woods far away and not bothering anybody, I can depend on most of you traisping out to my land just so you can know why I want to be away from you. These concepts; financial, political, religious, economic … in the end, they’re all based on whether you’re the “in” group or the “out” group – their lauded effectiveness or efficiency is irrelevant. Humanity follows the “function follows form” model and that’s why, in the end, we manage to make most things monsterous, including tenents of the social sciences.

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  31. Dr J says:

    From Wikipedia:
    “The mission of the department is to “promote job creation and improved living standards for all Americans by creating an infrastructure that promotes economic growth, technological competitiveness, and sustainable development.” Among its tasks are gathering economic and demographic data for business and government decision-making, issuing patents and trademarks, and helping to set industrial standards.”
    Sounds like it does a bit more than “subsidize exports” – patents? demographic data? Industrial standards? The man is an idiot.

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  32. BEN says:

    I simply wanted to echo a point already mentioned in the comments: please give a broader point of view! As a former student of economics I am offended to have only libertarian, Boothe school folks representing what “economists” think… that said, I realize it’s early going with podcast and I hope you keep it up.

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  33. Sarah says:

    Your podcasts are fantastic–please keep them coming! I really enjoyed this one, especially the way it was broken down into segments. Thanks for a really superb effort…again!

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  34. SR says:

    Agree with those calling for non-libertarians. That’s really a pretty small minority of the Economist profession. Thank goodness that Russ Roberts doesn’t get to make these decisions in practice.

    Yes, economists generally agree on tariff removal, that’s fine. But its a pretty small school that argues we’d seriously be better off without monetary policy.

    How might a moderate Liberal economist policy prescription look?

    1. Get rid of farm subsidies and corporate welfare.
    2. Slowly increase social security retirement age requirements to acount for longer working life and longer life expectancy and keep the public safety net solvent.
    3. Place a price on negative externalities, like a carbon tax or cap and trade system. Use ensuing price signals to encourage denser habitation patterns. Use revenue to reduce other taxes.
    4. Do what every other rich country does for education; have schools in poor areas get *more* government money rather than *less* government money (which is what happens when you fund them through LOCAL property taxes).
    5. Adopt a single player public health system, like every other rich country, and take advantage of the lower administrative cost burden.
    6. Reinstate inheritance taxes on truly huge estates. Do families really need to pass on more than $10 million tax free?
    7. Try to decrease outrageous executive compensation by giving shareholders more direct power over compensation packages.
    8. Change power utility regulation to encourage energy efficiency investments and demand side management.
    9. Adopt an addition treatment-based approach (rather than a punitive approach) for drug user offenders. Cheaper, more effective.
    10. Rationalize defense spending; reduce boondoggle projects for favored congressional districts, and recognize that soft power can be cheaper than hard power. Beef up State Department development assistance (hire development experts, not diplomats).

    How’s that for a start?

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  35. Ryan says:

    This Chicago School economic philosophy–complete deregulation and privatization–has brought suffering to countries around the globe, from Chile to Mexico to Iraq. Look no further than Naomi Klein’s excellent book Shock Doctrine for a through exposé of its devastating consequences. The true dangerous utopianism is not social democracy but rather this radical Friedman economic school which argues, without any empirical proof, that the free market will solve all our problems.

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  36. deibs says:

    I guess both kinds of economists have been included: the intellectual heirs of Milton Friedman and the actual genetic heirs of Milton Friedman.

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  37. Loren says:

    I’d like to subscribe to this podcast but I don’t use Itunes. I use zeipod and have no intention of changing. How can I add this podcast into an alternative player.

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  38. Peter says:

    The whole premise of this blog entry, “What would the World Look Like if Economists were in charge?” does great harm to the legitimacy of economics as a field of objective scientific inquiry, and gives ammunition that to those who claim it’s simply a political discipline used to promote libertarian ideology. Economists, like everyone else, have a variety of political beliefs and even disagree on the proper role of government regulation. To insinuate that all follow lockstep with the neo-liberal utopians at the University of Chicago makes it hard to harder to argue that “acting like an economist” is any different from “acting like a politician.”

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  39. ro says:

    What about the fact that many times, rational decisions at an individual scale appear to be irrational decisions on a grand scale, and various positive feedback loops that continue to haunt our financial systems?

    The department of commerce also has a role in seeing where our growth is and keeping good statistical records of our country.

    Additionally, we don’t live in a unipolar world and there are other countries that might threaten our economic growth, by artificially keeping its currency undervalued stability, (cough china cough).

    And what about regulating our banking system? And making sure we don’t have a second great depression?

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  40. Kwaku says:

    Not all economists think alike, certainly not all economists have this Alice-in-wonderland view of the world where every economic actor is rational – interview other smart and creative economists such as Krugman, Stiglitz etc about what they’d do if they were in charge and let see how fundamentally different their approach to governance would be.

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  41. Hanrod says:

    The serious and important question by the poster above, and the silly pat answer by another poster regarding the definition of “bad” and “good”, grasp at an essential factor; i.e. what is it all for?

    An economist is assumed to be a logician and an expert at determining what “works”; but there are first and always the questions “for whom”, and “for what” any system should be made to work. The latter question is particularly sound.

    All too often these economic discussions take place without first answering these questions, THEN establishing some “mission” statement with goals and measurable objectives directly addressing the answers.

    I suspect that the reason that this is not often done, is that for a scientific, “value-free” economist to define for whom the “work” is to be done, will usually consign the many to oblivion while the fewer are benefited, without even addressing the “for what” question..

    This may be seen as simple conformance to inescapable “natural law”, well known but seldom presented by economists; and it is probably the reason that economics is called “the dismal science”.

    We can reasonably assume that the “Friedman / Chicago School” economists and their philosophy are a direct result of eons of fruitless attempts to determine what is “fair”, thereby causing them to throw up their hands and leave everything to the, Darwinian, “market”. Are we our “brother’s keeper”?

    Of course, this is professionally incompetent, and a philosophical “cop out”; and, as to economic and political systems Alexander Pope said it best, some 200 years ago: “For forms of government let fools contest / What e’er is best administered is best.”

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  42. Ian says:

    What would Milton Friedman do? Well you’ve answered THAT, and you’ve already heard that a lot of us would like to hear some different perspectives. I’m saying it again.

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  43. Joshua Northey says:

    I enjoyed your books and the podcasts so far. You point out an interesting nugget here and there.

    Not exactly sure what this particular podcast was trying to say? Economists are all libertarians? Maybe ones trapped in the late 1800s Monarchist Austria like the followers of Friedman/Hayek/von Mises are?

    The rest of us have realized that Government intervention in the economy is no longer the main distortion of markets to be fixated on. yes it is important and needs to watched out for. Yes we could make huge improvements (you could probably safely scrap 90% of the department of agriculture’s budget).

    Instead the biggest opportunity for increasing well-being is figuring out how to handle collective action problems, the irrationality of people, the wildly imperfect nature of many assumptions that markets require to work. People will absolutely act on the right incentives if the information and choices are available, they are typically are not.

    The governments role in the economy should be to allow us to use the power of markets by stepping in and papering over and bridging those gaps where they break down. Healthcare for example, where people often cannot shop around or wait and look for another provider, or choose between $4000 worth of care for your broken arm, and the $500 xray and setting by a nurse they really need.

    I would like to see more talk about the problems the inherent nature of cable companies infrastructure outlays create monopolys, and how best to work around that problem. And what is the right way to handle the cartel/professionalization of many professions? Should doctors be the ones to determine the supply of doctors?

    There are all sorts of interesting real world problems to solve instead of fantasies about worlds with perfectly rational actors.

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  44. Mirza Zia says:

    There was a recent article in a Malaysian newspaper on corruption.

    http://thestar.com.my/news/story.asp?file=%2F2010%2F3%2F20%2Fnation%2F20100320134645&sec=nation

    Their explanation on motivation of corruption is a little hard to buy. As per the 2009 Transparency Index, countries with low corruption are also countries whos populations enjoy high salaries. Seeing it that way certainly ignores other factors like work culture, strictness of anti corruption law, etc. But completely ruling out low incomes as a factor is kinda dumb. Their methods to reduce corruption though are pretty obvious and make good sense. Increase the cost of corrupt behaviour by enforcing strict penalites to reduce bribe taking. Which is well and fine. But more often than not its organization which is tasked to enforce anti corruption laws that proves itself corrupt.

    So three things.
    1. What do you make of the report?
    2. Whats your take on the best way to reduce corrupt practices? In other words what works better financial dis incentives like hefty fines or social dis incentives like public humiliation?
    3. Finally if in the future I wish to share articles with you do i just post it on some random post of yours or is there already a way but I havn’t figured it out yet?

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  45. alananitanana says:

    a new floating community in the middle of the ocean… so many wrong things with it, environmentally and culturally… politicians “worry too much about what people think and economists don’t,” well, good thing politicians can be held accountable. On the other hand, the free market is rarely held accountable. removing moral guidelines to maximize profits, is why economists are not ruling the world. …and so what happened to the country that instituted flat tax? was that a cliffhanger, a narrative strategy, or the outcome so clearly not positive that we are not told if mr. freedman’s idea actually worked. why is this podcast so short? maybe it reflects the short-term solutions, fast-passed, lightness, no real explanation of the real complexities of the world that consumerism evokes… uhhhohhh, careful freakonomics, by your own standards you’ve failed; i’m the costumer and I’m not satisfied ;)

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  46. Michael Cohen says:

    I’ll add my voice to the chorus: Not all economists are libertarians. Not all economists believe that Milton Freedman knew what he was talking about. Not all economists think that tarrifs are bad. Not all economists believe that the minimum wage is bad. A little balance here would be nice, because this episode sure made a casual listener think that all economists are nutso libertarians. Another episode like this and I’ll just stop listening.

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  47. Brendon David says:

    Loved this episode. Politicians have been screwing up our country for too many generations now. Thanks for publishing.

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  48. William says:

    This is silly. This version of economics is based on the premise that all people act rationally and are omniscient, which is obviously not the case. If you abolished the minimum wage, employers would simply browbeat uneducated workers into accepting disadvantageous terms. A free market only works when both parties can walk away. Wal-mart can just hire someone else, but the worker needs the job badly. Get rid of all tariffs and subsides? Yes, some should go, but all? Have a nice day when there’s a war or international dispute and we have no industrial or agricultural base. Regarding various welfare programs, intervention in unemployment, etc., even if you look at things from a amoral perspective, a certain amount of this sort of thing is necessary to buy social peace. A true free market would result in an oppressed underclass that would toss him out of the Oval Office in rapid order. Or, if w hypothesize a dictatorship, there would be a revolution in slightly less short order. The chaos of every bank issuing currency would just be lovely. AIG dollars, anybody? And I’m just getting started. Economists really need to get that the world is messy, not an ideal equation.

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  49. David says:

    I was so disappointed when this podcast started off with mis-attribution of the worst high-school-dropout-uses-google kind:
    “…Henry VI, a politician himself said it best: ‘the first thing we do, let’s kill all the lawyers.’”
    I am not a lawyer, nor do I believe (as most lawyers do) that the line was part of the planning for a revolution – the implication being that without lawyers the law would fall and revolution would be easier.
    Still, Henry VI did not say this. The fictionalised Shakespearean character of Henry VI also does not say this. A minor criminal character named “Dick” says this in a play that is named for Henry VI.
    We don’t say, “as Nixon said, ‘this coffee’s colder than witch’s tit!’” if Oliver Stone put those words in a cop’s mouth in his movie “Nixon.”
    Embarrassing.

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  50. bedmondson says:

    I loved the books and feel that Feakonomics has given me the opportunity to look at the world in a different way but…. this podcast was absurd and has firmly set Dubner and Levitt as partisan hacks.

    The laymen listening to this podcast would come away from it believing that there is no disagreement among economists. I am sure Stephen is aware of the numerous notable economists around the world that would have a major problem with the assertion that all economists would run the country according to the Chicago school’s ideas.

    Also, either Levitt is bald face lying or his wife has zero common sense when it comes to raising children. Would you really have us believe that in SIX MONTHS of potty training, Levitt’s wife did not think to offer an award for going in the potty? not only that, but once the reward was offered, she immediately went? Anyone that has been involved in potty training a kid should find this story suspect. Now why would it be important to Levitt to make up such a trivial story such as this? To try and use a simple story to prove to the listeners that everybody operates off of incentives, when in reality this is not always the case.

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  51. Nate says:

    This fell short. I was looking for somebody to make the case to me about the Friedman stuff, and what did we get?

    -Estonia – guy there tried flat tax. What was the result? What were the numbers and to what degree were they attributable to the flat tax or the other Friedmanite policies? I guess that doesn’t matter.

    -Asked two economists, one Friedmanite, one Friedman’s GRANDson what they’d do, and *surprise* they’d both deregulate everything and get rid of the department of Ed, the Fed, etc. Looking for an in depth dissertation of how those policies have worked in real life (say, in Chile)? Look elsewhere.

    -Maybe there are limits to economists ability to help: Steve Levitt’s daughter gamed the M&M incentive. Steve calls himself “one of the world’s leading economists”.

    Good God, we’re not even to the point of debating the merits of what basically amounts to a Friedmanite advocacy piece, because the case was never made.

    This podcast was revelatory, but not for the reasons intended.

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  52. try the real world says:

    “I don’t think that the Federal Government has any productive role to play in the school system.” Full stop on my reading. Has this gentleman not traveled to, say, Peru, which doesn’t have federally mandated free public education? 6-year-olds come and shine your shoes. Nice country you’d have us turn into, Mr. Roberts, because you’re mad at your parents about something and transfer that feeling to the federal government.

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  53. Scott Bailey says:

    I hate to be that guy but here goes: Henry VI did not say “First thing we do, let’s kill all the lawyers.” I mean, maybe he did, he might have said a lot of things, but there is no record of King Hank 6 ever saying that particular phrase. However, in Shakespeare’s play HENRY VI, Part 2, a moronic character named Dick the Butcher says it to his his equally imbecilic friend Jack Cade, who is under the delusion that he will soon become the King of England. (They also come up with ideas such as having claret wine run down the “pissing conduit” and killing people who know what nouns and verbs are.)

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  54. Jim Davies says:

    This comes off as one-sided, as many have already commented. The only non-economist you spoke with was majoring in economics. No opinions of sociologists? Political scientists? Law professors? Cultural geographers? And as others have pointed out, you don’t even address the range of views *within economics.*

    It’s not surprising that your conclusion is that the world would be great if economists ran it, if the only people you’re asking are economists.

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  55. Jeroen says:

    Hi Stephen,

    I just only subscribed to your podcasts and have listened to the first 6 of them in the last day.
    Each one is really good in it’s own way.
    This one, What Would the World Look Like if Economists Were in Charge?, triggered a memorie of a show that a Dutch historian called Maarten van Rossum did last year.
    He has studied the Dutch Golden Age, the 16th and 17th century, when Holland was the wealthiest nation in the world.
    In his opinion, this succes was due mainly because Holland was run at that time by merchants and not by kings or religious leaders.
    Also Holland became a magnet for the great thinkers of that time because Holland was the only nation in the world where there was true freedom of religion. Amsterdam was the only city in the world in the 16th century where jews could become citizen of the city.
    This religious freedom was mainly a practical thing, the merchants didn’t want religion to stand in the way of a good business opportunity.

    So I guess you can answer your question of What Would the World Look Like if Economists Were in Charge? by saying, look at Holland in the 16th and 17th century.

    Thanks for all your great work, I will continue to listen and read it with interest!

    Jeroen

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