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Busting Popular Economic Myths

Summary:
In my latest column for AIER, I celebrate the fact that sound economics works like acid to dissolve popular myths.  A slice: To think like a good economist is not only to be forever skeptical of popular explanations of economic phenomena, it is also to be fearless at examining reality in ways that often strike non-economists as bizarre. My favorite example of a seemingly bizarre but enormously revealing take on reality is my late colleague Gordon Tullock’s observation that if Congress really wants to reduce highway traffic fatalities to near zero, all it need do is to mandate that the steering column of each automobile be fitted with a sharp steel dagger pointed directly at the driver’s heart. Sheer brilliance. Upon hearing Gordon’s suggestion, the typical person immediately asks

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In my latest column for AIER, I celebrate the fact that sound economics works like acid to dissolve popular myths.  A slice:

To think like a good economist is not only to be forever skeptical of popular explanations of economic phenomena, it is also to be fearless at examining reality in ways that often strike non-economists as bizarre.

My favorite example of a seemingly bizarre but enormously revealing take on reality is my late colleague Gordon Tullock’s observation that if Congress really wants to reduce highway traffic fatalities to near zero, all it need do is to mandate that the steering column of each automobile be fitted with a sharp steel dagger pointed directly at the driver’s heart.

Sheer brilliance. Upon hearing Gordon’s suggestion, the typical person immediately asks incredulously, “What?”— a reaction that seconds later turns into the realization that Gordon is indisputably correct. No degree in economics is needed to understand how people would respond to this incentive.

Once someone understands Gordon’s insight, that person can easily be shown its true, practical importance, which is this: reality is more complex than it initially appears. If, for example, government mandates that automobiles be made safer to drive, then people are likely to drive less carefully. The decline in highway fatalities will thus be disappointingly small.

On its own, Gordon’s insight isn’t sufficient to show that government-mandated safety improvements are unjustified. But it is sufficient to warn us to avoid basing policy recommendations on our first impressions. Relentlessly issuing this warning, as simple and obvious as it sounds, is the single most important service economists can render to the public.

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Don Boudreaux
He is a professor of economics at George Mason University in Fairfax, Virginia. Previously, he was president of the Foundation for Economic Education.

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