What Would the World Look Like if Economists Were in Charge? (Ep. 3)

Listen now:

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; listen to the transcript; 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:


Photo: seastading.org Exterior of Clubstead, a 200-guest hotel/resort designed “to withstand the waves off the coast of California.”


seastading.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.


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"

Mario Bros.

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.

Michael K

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.



Who determines what is "good and bad"


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.


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.


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


You could post a link to the file, which is here:

iTunes is awful.


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).


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.


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.

Brad Warbiany

"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?

Michael R. Keller

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.


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...


@ 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.


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.


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!



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.


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."



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?


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

It could only end in tragic violence.