PREFACE Common sense tells you that promiscuity spreads AIDS, population growth threatens prosperity, and misers make bad neighbors. I wrote this book to assault your common sense. My weapons are evidence and logic, especially the logic of economics. Logic is most enlightening -- and surely most fun -- when it challenges us to see the world in a whole new way. This book is about that kind of logic. Daughters cause divorce. A thirst for revenge is healthier than a thirst for gold. A ban on elephant hunting is bad news for elephants, and disaster assistance is bad news for the people who receive it. Malicious computer hackers should be executed. The most charitable people support the fewest charities. Writing books is socially irresponsible; elbowing your way to the front of the water-fountain line is not. The tall, the slim, and the beautiful earn higher wages -- but not for the reasons you think. Each of those statements is closer to the truth than you might imagine. If your common sense tells you otherwise, remember that common sense also tells you the earth is flat. What you're about to read is a celebration of all that is counter, original, spare, and strange. I mean every word seriously and every word in fun. These are carefully considered arguments about important issues. But they're also surprising arguments, and surprises are fun. This book will give you new insights about how the world works. Sometimes it might outrage you. I hope it also makes you smile. PART I: THE COMMUNAL STREAM Come out to my suburban neighborhood on any crisp October Saturday, and I will show you a minor tragedy: on every lawn a man with a leaf blower, blowing his leaves onto the next man's lawn. Eventually, they all go inside to recover from a hard and thoroughly unproductive morning's work. That's a bad way to spend a Saturday. If we all ditched our leaf blowers and stayed inside to watch football, we'd all be happier. Unfortunately, human beings are too rational for that. Blowing leaves always makes sense, whatever your neighbors do. If everyone else blows leaves, you'd better blow them also to avoid a double cover. Or, if everyone agrees not to blow leaves, your best strategy is to cheat and have the only clean lawn in the neighborhood. Economics is largely about the surprising and sometimes tragic consequences of rational behavior. When there's an exciting moment at the ballpark, everybody stands up trying to see better, and therefore nobody succeeds. At parties with a lot of simultaneous conversations, everyone speaks loudly to be heard over everyone else, and everyone goes home with a sore throat. Still, it's rational to stand at the ballpark, and to yell at the party. We stand and we yell for the same reason we blow leaves -- from exquisite (and entirely rational) concern for our own interests and none for the harm that spills over onto our neighbors. It's a general principle of economics that things tend to work out best when people have to live with the consequences of their own behavior, or, to put it another way, things tend to work out poorly when the consequences of our actions spill over onto other people. Simple and obvious as that general principle might sound, it has the power to undermine vast deposits of conventional wisdom. It suggests that the world has too few people, too few misers, and not enough casual sex, but just the right amounts of secondhand smoke and child labor. It implies that a thirst for gold is socially ruinous, but a taste for revenge can be a social godsend. It casts light on why the tall, the thin, and the beautiful earn higher wages. It suggests sweeping reforms of the legal system, the political system, the tax code, and the rule against jumping to the front of the water-fountain line. And it explains why automobile insurance in Philadelphia is so damn expensive. More mundanely, it tells us there's too much litter on the streets. That's less obvious than you might suppose. Sure, there's a lot of litter, but a lot isn't always the same as too much. After all, some litter ought to be there because the alternatives are worse. That half-eaten sandwich you just stepped on? Maybe someone dropped it to avoid being stung by a hornet. The newspaper wrapped around your ankles? Maybe the wind took it while someone chased down the tax returns that had just fallen out of his briefcase. And if you have a heart attack while you're walking down the street with a Popsicle, nobody thinks you should make a beeline for the nearest trash receptacle before collapsing to the ground. In principle, all the litter on all the sidewalks in all the cities of the world could be there for good reasons. But in fact, I'm sure there is too much litter on the streets, and here's how I know: the person who drops a banana peel and the person who slips on it are not usually the same person. That pretty much guarantees that people sometimes drop banana peels even when the cost (to passersby) exceeds the benefit (to the litterbug). Each time that happens, the world becomes a poorer place -- and that's what I mean when I say there's too much litter. "Too much," in other words, is no mere value judgment. It means precisely that in a world with less littering, we could all be happier -- just as we could all be happier in a world with fewer leaf blowers and a prohibition on standing at the ballpark. Whether you're blowing leaves or discarding litter, having children or having sex, saving or spending, smoking or drinking, setting fires or reporting them -- your actions have costs and benefits. As long as you feel all the costs and benefits, you'll tend to get the quantity right. You'll drop the right number of banana peels, or have the right number of children, or choose the right number of sex partners. But if you feel only the benefits while someone else feels the costs, you'll tend to overindulge. And conversely, if you feel only the costs while someone else feels the benefits, you'll underindulge. When you're splitting the dinner check, ordering dessert can be a lot like littering -- you get the benefits and the costs spill over onto your friends. If the $10 double chocolate mousse is worth only $4 to you, you really shouldn't order it -- and you won't, if you're paying your own way. But when you split the check ten ways, that mousse starts to look (to you) like a bargain. You place your order, the group pays $10 to buy you a $4 dessert, and the group (including you) is collectively $6 poorer. That's what I call a bad outcome. Spillovers cause bad outcomes. That much, I think, is clear, at least in theory. The art is in figuring out what counts as a spillover. Take, for example, the problem of secondhand smoke in restaurants. It's called secondhand smoke precisely because it spills over from one table to another (or from a table into the kitchen). But that doesn't make it a spillover in the relevant sense. It counts as a spillover only if the decision maker ignores it. In this case, there's no spillover because the restaurant owner -- the fellow who decides to allow smoking in the first place -- is unlikely to ignore something that offends his customers. Of course, he'll offend some customers no matter what he does. A permissive smoking policy offends nonsmoking customers and employees; a restrictive policy offends the smokers. But it's in the owner's financial interest to keep the offense to a minimum. He bans smoking if the benefits of the ban exceed its costs, and allows it otherwise -- for the simple reason that every cost and every benefit hits him directly in the pocketbook, via customers' willingness to spend money in his establishment. He's got all the right incentives so he makes all the right decisions. That's why most economists agree that second-guessing the owner -- say, by passing a law that overrides his choices -- is a bad idea. Call it, then, the communal-stream principle: Feel free to pollute your own swimming pool, but if your sludge spills over into the stream we all share, you should pay for the damage. Conversely, if you volunteer for cleanup duty, you should get a reward. Otherwise we end up with too much pollution and too few volunteers. A simple and obvious principle, no? But the consequences can be astonishing. CHAPTER ONE: MORE SEX IS SAFER SEX It's true: AIDS is nature's awful retribution for our tolerance of immoderate and socially irresponsible sexual behavior. The epidemic is the price of our permissive attitudes toward monogamy, chastity, and other forms of extreme sexual conservatism. You've read elsewhere about the sin of promiscuity. Let me tell you about the sin of self-restraint. Consider Martin, a charming and generally prudent young man with a limited sexual history, who has been gently flirting with his coworker Joan. As last week's office party approached, both Joan and Martin silently and separately entertained the prospect that they just might be going home together. Unfortunately, Fate, through its agents at the Centers for Disease Control, intervened. The morning of the party, Martin happened to notice one of those CDC-sponsored subway ads touting the virtues of abstinence. Chastened, he decided to stay home. In Martin's absence, Joan hooked up with the equally charming but considerably less prudent Maxwell -- and Joan got AIDS. When the cautious Martin withdraws from the mating game, he makes it easier for the reckless Maxwell to prey on the hapless Joan. If those subway ads are more effective against Martin than against Maxwell, they are a threat to Joan's safety. This is especially so when they displace Calvin Klein ads, which might have put Martin in a more socially beneficent mood. If the Martins of the world would loosen up a little, we could slow the spread of AIDS. Of course, we wouldn't want to push...