Since my husband is a budding economist, I decided to branch out from my usual book preference and read this book. I actually think I might have "borrowed" this from my sister, who is also studying economics. I say "borrowed" because sometimes I look in my closet and at my bookshelf and realize that I had every intention of borrowing these items from my sister, but somehow they became mine. She is such a good soul for sharing, even if it is unknowingly. In most families it is the younger sister who borrows, but in ours it is the opposite. Summer always did have better fashion, music, and taste in books than I did.
I did start this book almost two years ago and I just could not finish it. As I started to read this book again, I realized something about the way that I read: I like to understand EVERYTHING that I read. If I don't, it is hard for me to get through it because I can get bogged down by grammar structures, semantics, vocabulary, syntax, etc. Hence, I did not finish it the first time I attempted. I also realized that I had not taken an economics course since I was in high school (I know, very ironic that I married someone that wants to be an economist yet I never took entry level economics in college, let alone advanced courses.) However, Travis and I do talk about economics--a lot, actually. I just like how Travis talks about it to me. Because I know him, I understand the concepts he talks about with me. He also doesn't address the high level math that is required to understand the nitty gritty (although, I do like math).
In this book, the format is pretty informal as well. However, I had a hard time understanding what I was reading. From marginal costs to cost-benefit analysis to the Indifference Principle, I was having a hard time grasping it all. I think I felt this way because the author seemed to be writing his opinion as if he was speaking for all economists. For me, it was sometimes hard to know what was opinion and what was applicable economic theory since I don't have the background. I think that if I had approached this book a little differently (not caring if I understood every single little thing he was saying), then I probably could have enjoyed it more instead of thinking I was reading a textbook.
Surprisingly, Steven Landsburg, an economist that from the sound of it in his writing is a macroeconomist, writes in an informal style that has more of an air of conversation than lecture. His grammar and syntax are informal, although he throws around some pretty hefty ideas like: Do government deficits matter? Which rich people should be taxed? Who should bear the cost of oil spills?, Why can unemployment be a good thing?, etc. He also tackles some more fun questions, such as: Why is popcorn so expensive at the movie theater? and Why are seat belts deadly?
As I kept reading, I realized that certain parts of economics really interest me, like when he was talking about funding resources in education. I have felt for awhile that funding in education is a sticky problem and I don't really know the solution. Most everyone would say that more money in schools is a good thing, but what I liked about this book is that it questioned this notion, asking, "Is it better to have more money in schools?" "Would that make it more efficient?" Steven Landsburg addresses the issue of illiteracy more so than education of the illiterate in his book, but I have always wondered why so much money in education is petitioned for the teachers to use in their classrooms and even when that money is received by teachers in the classrooms, do they spend it wisely? Do they even know what to spend it on to actually help with student success? Does buying more books actually help? Or maybe there is the possibility to consider that there are too many books and maybe the money is needed in another way to be more efficient? Since I do not have access to the randomized experiments that could give answers to these questions, I don't know the answers. Instead, teachers are given money and use it on whatever they think is best (and I am not undermining teachers' opinions, because I know their wisdom and experience is important), and somehow test scores still don't improve.
I also realized that there are parts of economics that really do NOT interest me: like taxes (boring...), politics, and price discrimination. For me, those parts were hard to get through. I knew this before I read this book, but it amazes me how much of our lives involves economics, sometimes without our knowledge.
Here is a brief summary of each chapter. Sometimes I have written only a sentence that is a principle of economics taught in that chapter. This might be the boring part for you, especially if you want to read the book, then skip to the end where you can see my short breakdown. If not, then keep reading:
PLOT SUMMARY (as much of a plot that there is in a nonfiction book :)
Chapter 1: People respond to incentives. Likewise, people that have cars with seat belts in them drive less carefully, thus nullifying the safety feature. There are just as many accidents with or without seat belts.
Chapter 2: Economics always assumes that human behavior is rational.
Chapter 3: Smoking may not be such a bad thing; it is probably keeping your insurance rates lower. The best way to choose a movie (or anything) between spouses is to express your preference in dollar terms. (Travis and I have done this frequently in our marriage and it seems to work for us).
Chapter 4: The Indifference Principle: Except when people have unusual tastes or unusual talents, all activities must be equally desirable.
Chapter 5: Apparently consumption and leisure instead of accumulation and hard work are what life is really all about.
Chapter 6: If you want to defend a policy, your task is not to demonstrate that it does some good, but that it does more good than harm. (Consequently, this is a problem I see with politics with many candidates stating only the benefits of their policies, but negating the fact that it should do more harm than good and proving it to the public! This is why I find politics so confusing...)
Chapter 7: Economic efficiency should be an important consideration in solving public policy issues.
(And by efficiency, he means doing an intense cost-benefit analysis).
Chapter 8: Adam Smith and "The Invisible Hand" concept that he is so famous for almost always gets construed as something other than what it actually is. In actuality, "The Invisible Hand" concept means that individual rationality, coupled with competition and prices, leads to efficient outcomes.
Chapter 9: When debating courtroom decisions, it is best to ask, "Which liability rule is least likely to interfere with individuals making negotiations between themselves?"
Chapter 10: Tax revenues are not a net benefit. A cost is a cost, no matter who bears it. Likewise, a good is a good, no matter who owns it. Voluntary consumption is a good thing.
Chapter 11: Governments don't just borrow money without reason; they borrow money to spend.
Chapter 12: Stocks need to appreciate faster to compensate for the fact that they don't provide any comparable stream of services. Thus, the balance of investing in stocks or real estate is about equal in terms of profit.
Chapter 13: Economy-wide unemployment can be a sign that times are getting worse or a sign that times are getting better. I never would have considered this, but I am glad I read this because now I understand unemployment better and how statistics don't always mean what we think they do.
Chapter 14: How do we measure the benefits of literacy, how do we measure the costs of providing it, and how do we determine whether we currently have too much or too little? I really liked this chapter because it opened my eyes even more on the resource breakdown of education and considering the possibility that there might be too much literacy already (gasp! I know, my teacher heart was opposed to this idea at first, but when speaking strictly of allocating resources, we must try to accept all of the possibilities).
Chapter 15: Enhanced competition, enforceable contracts, appropriate incentives, attention to consistency, and market forces generally serve us well.
Chapter 16: The purpose of expensive popcorn in movie theaters is to extract different sums from different customers. Popcorn lovers pay more for their additional pleasure and since there are enough people willing to pay the high price for the additional pleasure, the high prices continue to exist.
On the flip side, the ticket prices are a little lower to draw the popcorn crowd in, but high enough to the non-popcorn crowd to draw them in as well.
Chapter 17: Theory suggests that when an enforcement mechanism is available, any group of competitors will attempt to collude.
Chapter 18: Sellers know more about their merchandise than buyers do and can acquire reputations for honesty by always revealing information about their product. But, does honesty pay?
Chapter 19: You really can estimate how interest rates are likely to respond to a bumper crop or natural disaster, however that knowledge alone will not make you rich.
Chapter 20: In the stock market, prices are not random. Price changes are random, so the best possible predictor of tomorrow's price is today's.
Chapter 21: There are two technologies for making cars in America: one is to manufacture them and the other is to grow them. And thus, international trade is born.
Chapter 10: Tax revenues are not a net benefit. A cost is a cost, no matter who bears it. Likewise, a good is a good, no matter who owns it. Voluntary consumption is a good thing.
Chapter 11: Governments don't just borrow money without reason; they borrow money to spend.
Chapter 12: Stocks need to appreciate faster to compensate for the fact that they don't provide any comparable stream of services. Thus, the balance of investing in stocks or real estate is about equal in terms of profit.
Chapter 13: Economy-wide unemployment can be a sign that times are getting worse or a sign that times are getting better. I never would have considered this, but I am glad I read this because now I understand unemployment better and how statistics don't always mean what we think they do.
Chapter 14: How do we measure the benefits of literacy, how do we measure the costs of providing it, and how do we determine whether we currently have too much or too little? I really liked this chapter because it opened my eyes even more on the resource breakdown of education and considering the possibility that there might be too much literacy already (gasp! I know, my teacher heart was opposed to this idea at first, but when speaking strictly of allocating resources, we must try to accept all of the possibilities).
Chapter 15: Enhanced competition, enforceable contracts, appropriate incentives, attention to consistency, and market forces generally serve us well.
Chapter 16: The purpose of expensive popcorn in movie theaters is to extract different sums from different customers. Popcorn lovers pay more for their additional pleasure and since there are enough people willing to pay the high price for the additional pleasure, the high prices continue to exist.
On the flip side, the ticket prices are a little lower to draw the popcorn crowd in, but high enough to the non-popcorn crowd to draw them in as well.
Chapter 17: Theory suggests that when an enforcement mechanism is available, any group of competitors will attempt to collude.
Chapter 18: Sellers know more about their merchandise than buyers do and can acquire reputations for honesty by always revealing information about their product. But, does honesty pay?
Chapter 19: You really can estimate how interest rates are likely to respond to a bumper crop or natural disaster, however that knowledge alone will not make you rich.
Chapter 20: In the stock market, prices are not random. Price changes are random, so the best possible predictor of tomorrow's price is today's.
Chapter 21: There are two technologies for making cars in America: one is to manufacture them and the other is to grow them. And thus, international trade is born.
Chapter 22: Beware of great thinkers who advertise their conclusions without revealing their assumption.
Chapter 23: When making a model to analyze data, it is important to consider hidden variables that would make the data look different if the rules change.
Chapter 24: Environmentalism targets childhood specifically. (The author is highly opposed to environmentalism, i.e. recycling, conserving resources, etc. He does not like the fact that it is taught in primary grades, and therefore, he has a very snarky ending).
In short, here is the breakdown of The Armchair Economist:
Genre: Nonfiction
Number of pages: 231
Reading endurance: I would say medium-high endurance required. It depends on what kind of reader you are. I am the type of reader that likes to understand everything I read, so it was harder for me to get through.
Good Moral: Somewhat. Some of the "morals" of economics don't really jive with my personal morals, but nonetheless it is interesting to learn more.
Favorite Quote: "When Peter chooses to work 80 hours a week and get rich while Paul chooses to work 3 hours a week and get comfortable in other ways, who is to say which choice is the wiser? I can find nothing in economics, morality, or for that matter my personal instincts that says we should approve more of one than of the other. Unemployment, or a low level of employment, can be a voluntary choice and a good one." (pg. 130)
This quote totally reminds me of my husband, Travis, who has told me on multiple occasions when he was getting his undergrad that his economics professors would not care if he went to class or not, believing that each student optimizes his time according to what he thinks is best and therefore trusting each individual to do so. I was an education major and all of my professors put a BIG emphasis on class attendance because school is life when you are in education. I just thought this quote was funny because you can see maybe the beginnings of the differences Travis and I have and I am happy to be able to understand him a little bit better.
Recommend? Yes. I would recommend this if you want to branch out and read some nonfiction that you normally wouldn't and if you have any interest in economics.
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