Freakonomics Radio - 184. What Can Vampires Teach Us About Economics?

Episode Date: October 30, 2014

A lot! “The Economics of the Undead” is a book about dating strategy, job creation, and whether there should be a legal market for blood.

levitt you know i feel like i know you pretty well and yet there's one essential fact about you that i have no idea and i could guess and i'd be i'd have a 50 50 chance but i'm just gonna ask you edward if you ever touch her again, so will again. Don't do this. She's not sure what she wants. Don't do this. Let me give you a clue. Wait for her to say the words. Fine. And she will.

Jacob, just go, okay? Are you Team Edward or Team Jacob? Team Edward, for sure. Why? So it was a long time ago that I read Twilight, but I had a reaction to it that was different than any other person I've ever met, which is somehow Twilight had a very calming effect on me, almost like enlightenment.

Somehow when I read the book, it just allowed me to be at peace with the world. It was completely bizarre. It was very noticeable, though. And I think it related to Edward and the life of the vampires. So in the book, the vampires live forever, and they basically have nothing to do. And they also have decided to make choices about not following their deepest desires

of drinking human blood, but instead making do and being civilized and drinking only animal blood. And there was something about that whole portrayal of the vampires, which made me feel a kinship with them. It inspired you? It did. No, it made me very calm and kind towards people for about three months. And then, you know, things always fade after that. Would you like to be a vampire if you could? I think I would want to be a vampire. That wouldn't be so bad.

And would you rather be a vampire or a werewolf? I think I would want to be... Well, the werewolf... Yeah, I think I would want to be a Well, the werewolf... Yeah, I think I would want to be a vampire. I think that the vampires... I'm much more a vampire in spirit than a werewolf. From WNYC, this is Freakonomics Radio, the podcast that explores the hidden side of everything. Here's your host, Stephen Dubner.

Steve Levitt is my Freakonomics friend and co-author. He teaches economics at the University of Chicago. We were talking about the appeal of being a vampire. I like the idea of the timelessness of it. And one of the things that's happened to me and I think maybe happened to you as well, is that as I've gotten older, the amount of free time I have has shrunk to nothing. And I wish I had much more time to invest and to learn. And the vampires have nothing but time. They just sit around, you know, they don't sleep and they can get everywhere in a few seconds. And so they're very patient and well-learned. And I would like to have the constraint of time lifted, at least for a while.

But on the flip side, then you get stuck that if you get attached to things other than vampires, then you know that they're going to disappear very quickly. So you have to turn them into vampires. Now, considering that stories of the undead are fiction and supernatural fiction at that. What ideas or themes strike you as an economist as noteworthy? So to be honest, I've never thought for two seconds about the economics of the undead. But in general, it seems like the operative motivation in many of the fantasy and science fiction genre is the removal of the normal constraints. And so in Twilight, for instance, all sorts of constraints have been removed. So there's no need for sleep and there's

no need for money for the Cullens and they live forever. And they can get everywhere so quickly that you can then begin to fantasize about what you do when you have no constraints. Of course, you need conflict. So they have a bunch of other things to have to worry about, like other mean vampires and werewolves and stuff like that. But what I find interesting in fiction is when the author can create an alternative universe that has enough similarities in it that you kind of can get on board with it, and yet it allows you to get excited about things. And so Harry Potter would be the best example of that because that's a universe that's very parallel to ours. And yet somehow things are very different. And it's fun and playful to investigate that. So Steve Levitt, an economist, had never really thought about the economics of the undead. But, you know, he's hardly the only economist out there. Both Jim and I had an interest in zombies and vampires and other forms of the undead going back many, many years.

That's Glenn Whitman. He's an economist at California State University, Northridge. And I also have a second career as a TV writer. I wrote for the TV show Fringe for many years, and now I'm writing for the TV show Matador. The Jim he mentioned is Jim Dow, who teaches finance at Northridge. In fact, the two of us bonded over Buffy the Vampire Slayer when we discovered that we were both fans of it. And so, Glenn Whitman and Jim Dow decided to put together a book called Economics of the Undead, Zombies, Vampires, and the Dismal Science. It contains 23 essays by a variety of scholars with titles like Tragedy of the Blood Commons, the Case for Privatizing the Humans, and Investing Secrets of the Undead. I am not kidding. These are serious people taking on serious topics.

For instance, whether a zombie apocalypse could actually be good for the economy. Right? That's worth thinking about, isn't it? After all, we spend a lot of time thinking about the economic impact of war and natural disasters. We saw, for example, in New Orleans after Hurricane Katrina and parts of the Northeast after Sandy, that unemployment rates dropped when labor is being devoted to cleaning up a mess. That's Steve Horwitz, Charles A. Dana Professor of Economics and Department Chair at St. Lawrence University in Canton, New York. The chapter that Horwitz wrote, along with Sarah Squire,

is called Eating Brains and Breaking Windows. This refers to a famous 19th century story called The Parable of the Broken Window by the French economist Frédéric Bastiat. It was part of an essay called That Which is Seen and That Which is Not Seen. But it's not just a parable about a broken window. To economists, it's known as the broken window fallacy. In the original essay, Bastiat imagines, you know, we have a small, quiet village, and a young hoodlum throws a brick through the window of a house, right, shattering the window. And, of course, the owner of the house that had the broken window is unhappy about it.

And the people gather around and they cluck their tongues about how terrible this is, and, you know, kids today and all that. And then finally someone says, well, this is actually good, because it's going to be generating business for the glazier, the window maker. And that's income for the glazier, and the glazier will have, you know, maybe a hundred dollars that he can spend on maybe a new pair of shoes and the shoemaker will have some money. This line of thinking leads people to say, well, maybe it's not such a terrible thing after all that the young hoodlum has broken this window. And so that's an argument

for why you might think that a disaster could actually be good for the economy. But remember, it's the broken window fallacy. The fallacy, of course, is that you cannot look just at what is seen. You also have to see what is not seen. In other words, the business activity that would have happened if it hadn't been for that disaster.

If the homeowner doesn't have the window broken, the homeowner's got $100 to spend on something else and has a functioning window. You can see where the economists are going with this theory as it relates to the undead. How does it work for the zombie apocalypse? Well, it's absolutely the case that if there were an invasion of zombies, there would be a great deal of economic activity generated. Sure, people might rush to fill up their gas tanks and buy a lot of groceries, probably stock up on supplies like axes to crush the zombies' brains.

You know, all the preparations that it would take to prepare for that apocalypse. We'd have to have cleanup of the bodies and the property destruction and so forth. All those expenditures, while sure, they create jobs and they create economic activity, they don't really create wealth. If we hadn't had to spend all of those things fighting off zombies, we would have been able to spend all of those resources doing other things to make our lives better. Food, clothing, shelter, flat screen TVs, whatever it might be, right? And so on that level, it's in a sense a wash. Plus, of course, there's the fact that we have all of the death and destruction wreaked by the zombies.

All those exchanges from buying shotguns at Walmart to cleaning up the bodies to rebuilding houses afterwards are all about either maintaining or getting us back to where we were before. What we want, what economic progress means, is people trading and exchanging in ways that continually get them new and better things that they desire more. And so we're actually worse off for the zombie apocalypse, which is, of course, what common sense should tell us. But sometimes people will find a way to talk themselves into some pretty unusual propositions when it comes to economics. Coming up on Freakonomics Radio, let's say you love vampires, but you don't love the violence that comes from vampires attacking humans for our blood. Might there be a solution? If vampires had the choice to buy blood, they would probably do so.

And if you're a vampire-loving economist hoping to meet a vampire-loving mate, where's that supposed to happen? In the nerdiest of possible ways, I met her at Comic-Con. One more thing. If you enjoy the biting commentary offered by Freakonomics Radio, why don't you subscribe? It's free and easy at iTunes and with other podcast apps. From WNYC, this is Freakonomics Radio. Here's your host, Stephen Dubner. Hello, Professor Garapujol?

Yes. Hey, it's Stephen Dubner. How are you? Oh, hi, Stephen. Very well, thank you. Enrique Garapujol is a professor of law at the University of Central Florida. His chapter in Economics of the Undead is called Buy or Bite. As a legal scholar and as a professor of law, let me just ask you this. What's the problem with vampires and how would you propose to fix it? Well, when we look at vampires, what I call the vampire world, I would put my thumb on the main problem, violence.

It's just, you know, when it comes down to it, you know, you see a lot of gory stuff going on in the vampire world. But here's what it comes to it. As a legal scholar, right, I'm not just here to describe a problem. On a normative perspective, I'd like to solve it. And I think I have solutions right there under our nose. It's let vampires buy blood. And so I wrote a piece where I talk about this possibility and explain how markets work, why black markets tend to be violent, not just in the vampire world, but generally, and describe, hey, why it makes sense for vampires to want to buy blood and why some of us, probably not all of us, why it would make sense for us to sell blood. Okay. I'd like to read to you a portion of the introduction to your piece. You write that most

members of the vampire race resort to coercion, compulsion, and confiscation to get what they want the most, blood. But why, you write, why are vampires such parasitic predators? Maybe we are asking the wrong question. Maybe we should be asking, why don't vampires offer to buy our blood instead of taking it by force? So, do you have an answer to that question? Why don't they, in the literature, offer to buy blood? Two words, legal failure. Economists often talk about market failures when certain voluntary transactions impose costs on others or on society. Here, I'm talking about legal failure. And what I mean by that is when the law, for a wide variety of

reasons, prevents transactions from taking place in the first place, prevents market transactions. And what it really comes down to is this intuition that, you know, if vampires had the choice to buy blood, they would probably do so. You think so, really? You don't think that that goes against the nature of vampires? Isn't what makes vampires fun or attractive if one is attracted to them. The fact that they go and take via the neck the living hot blood as opposed to walk into, you know, the equivalent of a California pot dispensary and buy a little packet or a tablet or a capsule. That wouldn't be any fun, would it? Yeah, I am certain that some vampires do obtain a thrill, right? A rush of sucking people's blood by force. But what I'm getting at is that not necessarily all vampires,

in fact, sort of a subtext of my piece is that vampires may not necessarily be all evil or all bad. So you're saying that vampires are essentially driven to violence by the lack of a legal market in blood. Exactly right. Exactly right. So his solution is an obvious one, a legal market for blood so that vampires don't have to attack us. When you take blood by force, you run the risk of retaliation. And so what I describe is that a lot of vampires might say, well, wait a minute,

you know, taking blood is not necessarily free, right? I'm generating a risk of retaliation by vampire slayers. And so maybe if I have the choice of buying blood, I might just prefer the peace of mind, right? So the same reason why somebody buys pot down the dispensary as opposed to, you know, in some shady dark alley. That's a great point. As Milton Friedman might have said if he were in on this conversation, there ain't no such thing as a free blood suck. Let me ask you for a moment to describe the legal status of blood sale or purchase in the U.S. and elsewhere? Just to put it simply and lay it out there, really blood transactions are under what I call

the shadow of the World Health Organization. The World Health Organization, though it's merely a private organization, does actively encourage all nation states to prohibit the sale of blood. And some countries, for example, our friends in the United Kingdom have acted on that prohibition. It's unlawful to sell blood. In the United States, though, it's a little trickier. We have something from 1984, the National Transplant Organ Act, which prohibits the sale of human organs, human tissues, but does not address the question of blood or ova, sperm, those type of genetic material. And so, in the United States, technically, right, you own your own blood, and you could say there's no express prohibition against the sale of blood. But at the same time, you have sort of this dark looming shadow where other types of genetic material and human organs, the sale of which are prevented.

And so it's just – and this is what I address in the paper. One category of legal failure is simply uncertainty, right? Not saying one way or the other which sales are allowed and which are not. And when there's a legal uncertainty, how do people tend to behave? I realize it's too broad of a question because people behave in a lot of different ways, but what sort of incentives or disincentives or tendencies toward antisocial behavior are created by legal uncertainties? Two points. Number one, if there's a demand for a given good or service, the demand doesn't just go away just because the law is unclear or just because the law in fact prohibits a certain transaction.

And of course a case in point would be drug transactions or prostitution or what have you. So demand is there. In the vampire world, of course, the demand is all the more compelling because the need for blood is a part of the vampire physiology. But here's what else happens. Not only does demand not go away, lawbreakers will crowd out law abiders. And what do I mean by that? I mean that a lot of persons will say, well, you know what? Law's unclear. I'm not going to sell my blood. I'm not going to buy blood. It's not clear. What if the deal goes wrong? What if I'm not given the type of blood that I was promised? I can't really sue in the

courts to enforce this type of agreement. If I do, the outcome is uncertain. And so what ends up happening is people who are willing to take this type of risk, lawbreakers, generally speaking, will come in and fill this demand. And when you have lawbreakers filling in the demand, that's sort of another source of violence, right? And so that's why I think it's important that the law get it right. And if we want to address violence, consider legalizing this type of market. All right. I love your idea. I love the idea that the violence of vampires is created by a legal failure by which there's no blood for them to purchase or barter for whatever. But I hate to rain on this awesome parade of yours, but wouldn't fixing the problem as you propose also destroy the literature itself? Isn't the whole beauty of vampire literature the illegal and dangerous and violent procurement of said blood? And are you willing to live, Professor Garapujol, with being the person responsible for killing off the vampire genre?

That is a great question. But here's the deal, right? Just like we have legal markets in, you know, selling and buying cars, right? There's still car theft, right? There's always going to be people who, for whatever reasons, right? And that's a whole other literature, may want to still steal cars. So I still think, I still think I may kill off some small part of the literature. But I still think, you know, there will be cunning and thrill-seeking vampires who will want to live outside the law. And so there should still be hope for aspiring writers and whatnot. Earlier, you will remember, we spoke with one of the book's editors. My name is Glenn Whitman, and I'm an economist and also a TV writer.

Whitman wrote two chapters about romantic relationships between human girls and vampire boys. I've always been fascinated by applying economics to understand relationships, specifically speaking as a guy who is now married. But I had a long period of singlehood and it took me a while. I spent a while out there on the market. I wonder if you could share with us anything that you've learned, whether as an economist or just a plain old human being, from studying vampires, something that's changed the way you live your life or think about anything. It's going to make me seem like one of those people who never changes and never learns a lesson. But the perspective that I brought specifically to the chapters about vampire human dating

were really the lessons that I had already applied. They were already the way that I thought about human-human relationships. And now that's something that changed. It was as a result of thinking in those terms, thinking about search matching theory when I first learned about it sometime in the late 90s when I was in graduate school. And that had an effect on me at that time. It made me realize the degree to which the idea of the one, the single person that you are destined by the universe to end up with, is kind of a silly concept. So instead, it's a much more reasonable way to think about it to say, look, even if the kind of person I could be with is only one in a

million, that's still a huge number of people in a world of billions of people, right? And so that means what there really is, is a set, not the one, but the set. And what you're hoping to do is to land somebody who is in that set. And so that made me think in terms of my dating strategy, how I would meet people in terms of trying to maximize the number of people that I could meet or at least find out about enough to know whether they could conceivably be in the set. So doing that, you know, decreases the cost of actually finding somebody. Now, talking about it this way makes it sound like I was sitting around with pencil and

paper and a spreadsheet. Yes, it does. Yes, it does. And that's not accurate. That's not accurate at all. What my dating life actually looked like when I had one was much like other people's. It involved a lot of going out to bars and meeting people. It really was just a mindset. And how did you meet your wife, ultimately? In the nerdiest of possible ways, I met her at Comic-Con.

We've got to stop now. It doesn't get any better than that. Sorry. Go ahead. Yeah. The wrath of Khan party. We bonded talking over Buffy and Angel. Oh, man, that is a beautiful story. What is her name?

Brynn. Brynn, you're a lucky lady. And Glenn, I'm sure you're a lucky guy, too. Extremely. Thank you so much for talking today. It was a blast. Absolutely. Hey, podcast listeners, on the next Freakonomics Radio, given the fever for corporate mergers and acquisitions, we were wondering, maybe the U.S. should merge with Mexico?

Jim Cramer likes the idea. Look, that IPO, I want everyone in and I'm willing to pay 20 percent above the price talk because I think people are short selling Mexico because they think it is just a place where you just have lawlessness. They've not been to Mexico. They don't realize the immediate premium this deal is going to go to. But Sente Fox, former president of Mexico, he isn't so sure. I see that close to impossible. It's not the wish either of the United States and its wonderful people, nor is the desire of Mexicans in our great culture.

We try to persuade him anyway. And we ask former White House chief economist Austin Goolsbee what he thinks the idea You'd have all the people in Mexico going Wait a minute, why do I have to listen to these Bozos in the Senate anyway? Is that really better than what we had? Goolsbee's got a point But what if the benefits

Outweigh the costs? Welcome to a Mexico That's next time on Freakonomics Radio. Staff includes David Herman, Greg Rozalski, Greta Cohn, Caroline English, Susie Lechtenberg, and Chris Bannon, with help from Joel Werner. If you want more Freakonomics Radio, you can subscribe to our podcast on iTunes or go to Freakonomics.com, where you'll find lots of radio, a blog, the books, and more. Bye.