“The Armchair Economist: Economics and Everyday Life” is an interesting 1993 book by University of Rochester Economist Steven Lansburg. The book pairs well with “Freakonomics.” This book excels with several counterintuitive examples that relate to things we see every day. In this way, this book makes complex economic concepts easily grasped.
The author can best be described as witty, and this is a wonderful book that should be read. The very first example is of how seat belts in cars kill. The rationale is that the extra security provided by these devices encourages drivers to drive quickly and recklessly. Have you ever thought about this topic this way?
“The Armchair Economist: Economics & Everyday Life” Book Review
The best way to understand the 1993 book, “The Armchair Economist: Economics & Everyday Life,” is through some examples of the arguments. This will give the reader a feel for the book.
Why are taxes bad? This is a primary argument in “The Armchair Economist: Economics & Everyday Life.” First, taxes are bad because they are no fun to pay, but, more importantly, they can be avoided. They are a deadweight social loss. They are inefficient because the author argues that taxes on capital, often cited by many as a way to resolve inequality, are in fact a form of double taxation. ‘Double taxation’ targets wealth that has already been taxed as earnings. This is most evident on estate earnings.
However, prices are good. This is called ‘Price Theory.’ It is a complicated economic concept that is made simple in presentation in “The Armchair Economist: Economics & Everyday Life.” Landsburg says, chanelling Adam Smith, that each person actiting in their own intest sets the price of a good. A significant part of the chapter elucidates that natural selection in biology is inefficient. He looks at the tail length of tropical birds to make the point that the market does not set physical characteristics in nature.
A third example in “The Armchair Economist: Economics & Everyday Life” is random walks and stock prices, a primer for investors. Landsburg says, that most economists believe that most of the time that stocks follow a random walk. That is, they behave like the chance involved in the roulette wheel, which Landsburg uses to illustrate the concept. There is a lot of that in the book.
He says that the common advice of financial advisors to dollar-cost average is bad for random walks. Because of this concept, other common stock market aphorisms do not make sense. Landsburg targets ‘Profit Taking’ when stock prices fall and the ‘Abreast of the Market’ column, read by many in the “Wall Street Journal.”
Why You Should Read This Book
You should read this book because it makes complex economic concepts understandable. Sitting through a college economics class can be boring, but this book is not. Read “The Armchair Economist: Economics and Everyday Life’ because it is entertaining and wonderfully written. You may just learn about complex economic concepts along the way. Every time a complex economic topic is mentioned, there is an interesting everyday argument presented. It is like the author is explaining these concepts to his grandmother.
Final Analysis: The Science of Economics and The Religion of Ecology
The book ends with a chapter on this topic. Landsburg writes, “Economics is the Science of Competing Preferences. Environmentalism goes beyond science when it elevates matters of preference to matters of morality. Should we pave the wilderness to make parking more convenient? What is entertaining is that Landsburg begins this chapter with stories of his daughter winning pageants at age 2 and 4. Whether parking lots should be created in the wilderness, he says, becomes a political decision. Politics can be defined as the authoritative allocation of scarce resources.
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