This week Ron and Ed are thrilled to have had Professor Steven E. Landsburg, professor of Economics at the University of Rochester, where students recently elected him Professor of the Year. He is the author of The Armchair Economist, Fair Play, More Sex is Safer Sex, The Big Questions, two textbooks in economics, a forthcoming textbook on general relativity and cosmology, and over 30 journal articles in mathematics, economics and philosophy. His current research is in the area of quantum game theory. He writes the monthly “Everyday Economics” column in Slate magazine, and has written regularly for Forbes and occasionally for the New York Times, the Wall Street Journal and the Washington Post. He appeared as a commentator on the PBS/Turner Broadcasting series “Damn Right”, and has made over 200 appearances on radio and television broadcasts over the past few years.

Segment One

Ed and the Professor discuss quantum game theory. Well, Professor Landsburg talks about it, Ed is still confused.

Quickly, they move on to Presidential politics wherein the following blog posts from Landsburg's blog, The Big Questions, get elaborated upon:

Ed then asks what advice the Professor would give the next future President.

Segment Two

The Armchair Economist: Economics and Everyday Life

$10.77

By Steven E. Landsburg

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Inscribed on Karl Marx’s Tomb: "The philosophers have only interpreted the world in various ways. The point is to change it." In The Armchair Economist, Steven Landsburg writes, "The economist’s greatest passion is not to change the world but to understand it."

Ron asks why economists have not given up the assumption of rationality?

Also, in The Armchair Economist, Landsburg writes, "Most of economics can be summarized in four words: People respond to incentives. The rest is commentary."

Does behavioral economics shed light on the, perhaps, one-half of human behavior that is “irrational”?

The last chapter in The Armchair Economist is titled, “Why I’m not an environmentalist: the science of economics versus the religion of ecology.”

You write about being lectured to by 4 and 5 year-olds about safe energy sources, mass transportation, and recycling (you also mention attempting to throw away your recycling bin), so why aren’t you an environmentalist?

Landsburg’s Rules of cost-benefit analysis:

Only individuals matter, and
All individuals matter equally

Are you optimistic about mankind’s ability to adapt to any climate change?

Segment Three

Ed asks about income inequality based on a speech the Professor gave three years ago in Dallas at an event for the National Center for Policy Analysis. There was no wealth inequality in the 16th century because everyone was starving and "it all sucked."

Since 1965, the average American has gained 6.5 hours of leisure per week, and low-income people have gained 14 hours per week, leading Landsburg to ask, “Why do we tax an hour of work but not an hour of leisure?” Should we “redistribute” leisure?

Healthcare today is a better bargain than it was in 1965. Ignoring AIDS, the quality of healthcare in America in 1975 was the same as what were seeing in the poorest parts of the third-world today. That’s how much better it has gotten in America, and the third world, in the last 40 years.

Segment Four

Fair Play

By Steven Landsburg

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In Fair Play Landsburg writes, "There’s nothing less interesting than a fact unilluminated by a theory. Theories make knowledge possible."

Ron asks what is the premise in your book, More Sex Is Safer Sex? For the record, Ed had to put his mic on mute because he was laughing uncontrollably.

Is the death penalty a deterrent? My economics professor at San Francisco State made us read Isaac Ehrlich’s research, which shows that for every execution somewhere between 8 and 24 murders are deterred? (And professor Ehrlich is opposed to the death penalty on moral and religious grounds).

Landsburg does write that there is a difference between the enactment and the enforcement of the death penalty. Could we run an experiment where if you commit murder on Monday, Wednesday and Friday, you get life in prison with no parole, but if you commit murder on Tuesday, Thursday, or the weekend, you get the death penalty, and see if changes behavior?

An FDA commissioner can make two types of errors: Type I error: approve a harmful drug that kills people, thereby losing his job; or a Type II error: don’t approve a drug that could save many lives, but the dead patients won’t ever know. To reduce the likelihood of a Type II error, you suggest paying the FDA commissioner in pharmaceutical stocks for every drug he approves. Would this work?

Thank you Professor Landsburg for appearing on The Soul of Enterprise. It was an honor to speak with you.