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