Russ Roberts

February 2015

A Monthly Archive (10 entries)

Steil Follow-up

EconTalk Extra
by Russ Roberts

I want to thank everyone who responded to the Benn Steil continuing education post. Most of the responses were related to the question about war's impact on GDP and why I thought war was bad for the economy even though it boosts GDP.

Listener/reader David Hurwitz did a nice job on these topics. He wrote:

Wartime spending meant less of everything consumers would want like cars, refrigerators, more housing square feet per person, etc. Thus in a real sense, the economy is worse off in terms of both production goods that exist in the world, and net global economic capability as a consequence of the destruction. Production to replace the destruction of war only means time is wasted to get back to where one was before. Those that died or were physically or spiritually maimed don't show up in such calculations.

Such thinking means for one thing that poor thinkers would see the horrible effects of war as a solution to some future mess that leaders brought on the world.

People are not better off when their GDP is higher if a large enough part of the rise is the cost of weapons that were not deemed necessary or desirable before the war.

He then added:

Seeing something as having good attributes that don't exist creates false signals which leads to pressure in the direction of achieving that erroneously identified good.

Exactly. When we talk about benefits of war, we encourage war. Sometimes war is necessary. But there's no reason to think that it has a silver lining of creating economic prosperity.

I encourage everyone to go back and listen to this EconTalk episode with Robert Higgs and to read his work on the true state of the economy during WWII. And watch the Keynes-Hayek rap Fight of the Century for another treatment of these issues.


Last year's most popular guest, Duke University's Mike Munger, was back on EconTalk this week, discussing the process of choosing in groups.

Their conversation ranged from Odysseus to the Lewis and Clark expedition, and more. Now it's your turn...Choose one of the questions below and submit your reply via email to by midnight on Monday. Some of the responses will again be highlighted in our follow-up.

Thanks for helping us continue the conversation.

Choosing in Groups.jpg


Your Favorite Episodes of 2014

EconTalk Extra
by Russ Roberts

I want to thank everyone who completed the survey--almost 1200 people responded from over 60 countries. Here are the top ten episodes of 2014 as voted by you. Every episode got at least 3% of the vote. The top episode got 25%. I especially want to thank you for your comments. Your interest in EconTalk and your appreciation for our efforts is deeply satisfying to me. I hope 2015 can be even better as we try to add ways for you to deepen your learning if that interests you.

1. Michael Munger on the Sharing Economy
2. Marc Andreessen on Venture Capital and the Digital Future
3. Bryan Caplan on College, Signaling and Human Capital
4. Russ Roberts and Mike Munger on How Adam Smith Can Change Your Life
5. Sam Altman on Start-ups, Venture Capital, and the Y Combinator
6. Nina Munk on Poverty, Development, and the Idealist
7. D. G. Myers on Cancer, Dying, and Living
8. Daron Acemoglu on Inequality, Institutions, and Piketty
9. William Easterly on the Tyranny of Experts
10. Jonathan Haidt on the Righteous Mind
10. Thomas Piketty on Inequality and Capital in the 21st Century

CATEGORIES: Extras , Favorites

Podcast episode Michael Munger on Choosing in Groups

EconTalk Episode with Mike Munger
Hosted by Russ Roberts

Michael Munger of Duke University talks with EconTalk host Russ Roberts about his latest book (co-authored with Kevin Munger), Choosing in Groups. Munger lays out the challenges of group decision-making and the challenges of agreeing on constitutions or voting rules for group decision-making. The conversation highlights some of the challenges of majority rule and uses the Lewis and Clark expedition as an example.

Size:34.5 MB
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The Council on Foreign Relation's Benn Steill was Russ Roberts's guest this week on EconTalk, where the conversation ranged from Soviet spies to anti-Semitism and imperialism to international power grabs galore.

Now we'd like to hear from you, and take this week's conversation a bit deeper. Choose one of the prompts below and submit your reply (250 words or less, please) via email to by midnight on Monday.

And again, special congratulations to listeners Rick and Warren, whose responses Roberts used in his follow-up to last week's episode with Daniel Sumner.

Battle of Bretton Woods.jpg


CATEGORIES: Books , Extras , History

Sumner Follow-up

EconTalk Extra
by Russ Roberts

The Continuing Education entry for last week's episode with Dan Sumner asked the following two questions for you to respond to:

1. Mancur Olsen and Gary Becker argue that small groups have greater political power than larger ones, which seems counter-intuitive, as they would muster less influence (fewer votes and less money). Explain why it would be the case that their political influence would increase. Roberts notes that over recent decades, the agriculture industry has become increasingly concentrated into smaller number but larger firms. To what extent has this borne out Olsen and Becker? What does this suggest about the political power of agriculture going forward?

2. How do crop insurance programs differ from direct payment subsidies, according to Sumner? How do the effects (intended and unintended) of each type of program compare? What was Greg Page's case for his support of the switch in the 2014 farm bill from the latter to the former. What do you think Sumner would say in response to Page about which is preferable?

Everyone chose the first question--why are small interest groups relatively powerful. You'd think they'd be irrelevant. They have fewer votes to offer and potentially less money.

Rick Groves got off on the right track when he noted:

Invariably, the interests of larger groups are more complex, nuanced, and diffuse. Small groups can sustain a clear, consistent set of requests that can be addressed directly and engaged with more reliably.
A listener named Warren got to the heart of the matter by pointing out that political lobbying has a collective-action problem--it's tempting to let another peanut farmer do the lobbying and work because you might get the benefits, anyway. Smaller groups find it easier to overcome this problem, as Warren argues:
The smaller the collective action group, the more likely that the group will be able to overcome the collective action problem. (1) Because in a smaller group it is easier to monitor as to whether or not people are able to be free-riders and to then introduce some kind of mechanism to encourage them to join the collective enterprise. And (2) smaller groups will find it easier to organize politically. The farming lobby, being very small in proportion to the public as a whole, are much easier to organize politically than the whole public. Therefore, the farming lobby is able to impose negative externalities on the general population at large. We have a government failure generated by structural incentives within the political process.
The only thing missing here is the relevant jargon, which is "transaction costs." Smaller groups have lower transaction costs and while they may have fewer resources than larger groups, their incentives to employ those resources politically and their ability to encourage the employment of those resources politically are larger than for small groups. To take a simple example, crop insurance of $20 billion per year costs the average American about $60. That amount is so small that most Americans are unaware of it. And if you are aware of it, how much time are you willing to spend to stop that from happening? Not so much. It's just not worth it. But if you are a farmer who gets tens of thousands of dollars from the program, you will be very interested in the program, eager to help politicians who implement the program, and eager to coordinate with your fellow farmers to make it happen. From the New Republic summary of the most recent farm bill:
Referring to beneficiaries as "farmers" underplays how giant agribusinesses really benefit from subsidized crop insurance. There have traditionally been no limits to premium support, meaning the richest businesses reap the most benefits. A provision from Sen. Tom Coburn to reduce payouts for farmers with over $750,000 in income was stripped from the final bill, despite passing the Senate twice. The Environmental Working Group, a critic of crop insurance, estimates that 10,000 policyholders receive over $100,000 a year in subsidies annually, with some receiving over $1 million, while the bottom 80 percent of farmers, the mom-and-pop operations, collect only $5,000 annually. These are educated guesses, because under current law, the names of individual businesses receiving support are kept secret, a provision maintained in the new farm bill. The House version included a measure that would disclose which members of Congress receive subsidies, but that was dropped.

So congrats to Rick Groves and to Warren for doing an excellent job.

Podcast episode Benn Steil on the Battle of Bretton Woods

EconTalk Episode with Benn Steil
Hosted by Russ Roberts

Benn Steil of the Council on Foreign Relations and author of The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order talks with EconTalk host Russ Roberts about Bretton Woods, the conference that resulted in the IMF, the World Bank, and the post-war international monetary system. Topics discussed include America and Britain's conflicting interests during and after World War II, the relative instability of the post-war system, and the personalities and egos of the individuals at Bretton Woods, including John Maynard Keynes and Harry Dexter White.

Size:29.9 MB
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This week, Roberts spoke with agriculture & resource economist Daniel Sumner on the history, winners, and losers of U.S. agricultural subsidies from the New Deal to today. Now we'd like to go deeper and see what you took from this week's conversation.

Choose one of the questions below and submit your response (250 words or less, please) via email to by midnight on Sunday, February 15. Put "Sumner Extra" in the subject line. We'll post some of your responses at EconTalk so we can continue the conversation.



Podcast episode Daniel Sumner on the Political Economy of Agriculture

EconTalk Episode with Daniel Sumner
Hosted by Russ Roberts

Daniel Sumner of the University of California talks with EconTalk host Russ Roberts about agricultural subsidies in the United States, the winners and losers from those subsidies, and how the structure of subsidies has changed from the New Deal to the present. Sumner also explains how American policies have affected foreign farmers.

Size:31.7 MB
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Podcast episode Luigi Zingales on the Costs and Benefits of the Financial Sector

EconTalk Episode with Luigi Zingales
Hosted by Russ Roberts

Luigi Zingales of the University of Chicago talks with EconTalk host Russ Roberts on whether the financial sector is good for society and about the gap between how banks and bankers are perceived by the public vs. finance professors. Zingales discusses the costs and benefits of financial innovation, compares the finance sector to the health sector, and suggests how business education should talk about finance to create better behavior.

Size:28.3 MB
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