Economics of the Undead is featured this week on the Freakonomics Radio podcast.  You can hear me and two other contributors (Steve Horwitz and Enrique Guerra-Pujol) talking about whether a zombie invasion could be good for the economy, how legalizing blood sales could reduce vampire violence, and how economics can improve your vampire-human and human-human mating strategy.

For Freakonomics listeners arriving here, welcome!  In the right-hand column, you’ll find links to the table of contents, excerpts from the book, a course guide, and more.  (That “more” includes links to the book on the Amazon and Barnes & Noble websites… hint hint.)

Guest Post by Ilya Somin

My chapter in The Economics of the Undead focuses on the ways in which political ignorance undermines efforts to combat zombies and vampires. From Dracula to Buffy the Vampire Slayer to World War Z, a constant theme of books and movies about the undead is that  public ignorance and irrationality exacerbate the danger they pose to humans.

Typically, the story begins with a growing undead menace that the ignorant public is largely unaware of. As a result, government does little or nothing to address the problem. When the threat becomes so obvious that voters finally become aware of it, the reaction is an irrational panic that often leads to perverse policies that make the problem worse. In addition, the government and various interest groups often take advantage of the public’s ignorance and bias to use the crisis created by the undead for their own benefit. Nefarious government officials try to coopt the undead to advance their own agendas. Special interests exploit the situation by claiming that the best way to fight the undead is to give them more privileges or increased government funding.

The ignorance and irrationality highlighted in stories about the undead is an exaggerated version of the real-world problem of voter ignorance. Because the payoff to acquiring political knowledge is so low, voters are both rationally ignorant about politics, and do a poor job of evaluating the information they do know.

Public ignorance impacts real-world disasters just as much as  zombie uprisings. For example, ignorant voters reward governments far more for disaster relief spending than for disaster prevention, even though the latter is much more effective in saving lives.  Relief spending is far more visible to poorly informed voters than  prevention spending. After a disaster happens, the media constantly covers relief efforts. Voters watch because the coverage is dramatic and entertaining. By contrast, few voters keep track of disaster prevention spending, or even know about it. As a result, governments often fail to properly prepare for and mitigate disasters in advance, and then engage in wasteful but showy spending in the aftermath.

Political scientist Daniel Drezner, author of Theories of International Politics and Zombies, points out that the kind of public ignorance we find in zombie stories is now affecting efforts to deal with Ebola. As in the case of the undead, the response to Ebola was slow at first because most voters were ignorant of the very existence of the problem. When they finally found out about it, public reactions to Ebola were heavily influenced by ignorance and illogical thinking. Both right and left-wing activists and politicians took advantage of the situation to promote agendas with little or no real connection to the problem. The left is using Ebola to trumpet increased funding for government agencies like the CDC and the NIH, while the right uses it to justify restricting immigration and travel, even though neither approach is likely to do much to actually solve the problem.

Fortunately, at least for wealthy Western nations, the Ebola crisis is probably only a very minor danger. The average American is far more likely to die by drowning in their bathtub than by catching Ebola. If political ignorance undercuts effective responses to Ebola, the result won’t be anywhere near as bad as a zombie apocalypse.

Nonetheless, public ignorance could easily make Ebola policy more wasteful and inefficient than it needs to be, and might potentially result in at least a few avoidable deaths. And if Western governments react to ill-informed public anger by  banning travel to and from affected nations instead of  focusing on more effective and less draconian measures such as temporary quarantines, the result will be extensive needless suffering and a longterm exacerbation of disease risk. Too often, well-intentioned but ignorant humans are more deadly than even the most malevolent vampires and zombies.

Ilya Somin is a law professor at George Mason University School of Law, and author of Democracy and Political Ignorance: Why Smaller Government is Smarter (Stanford University Press, 2013). He is a regular contributor to the Volokh Conspiracy blog, affiliated with the Washington Post.

This blog post on ”finances of the undead” compares vampires with zombies to make a point about good personal financial habits. Obviously we approve of zombies, vampires and financial prudence.  Indeed, one of my chapters talks about what vampires can teach us about investing strategies. But in some ways I think the author is a little unfair to the zombies when she claims vampires as the better financial managers. After all, vampires start with several advantages including a functioning brain and the ability to speak. They’re also better looking, which economists have found to matter for income.

Of course, the undead differ on more than just their financial acumen. In chapter 10, Lorna Piatti-Farnell considers how vampires and zombies represent different aspects of consumerism, vampires as representatives of status-conscious behavior while zombies are more mindless consumers. They return to the mall in Dawn of the Dead because that’s what they know. But do we really want to consider this mindlessness? They know what they want, they try to get it and they don’t care what others think. If you leave aside eating people, there’s something likably simple about zombies.

In fact, zombies are now seen as being so reasonable that AT&T uses them to pitch their cable system. Maybe zombies are financially responsible after all.

I’ve recently learned of two different products aimed at customers expecting a zombie invasion.  First, there’s the $113K Zombie Fortification Cabin from Tiger Log Cabins:

The ZFC-1 is a log cabin kit designed with the walking dead in mind. The structure consists of three connected buildings. It comes stocked with reinforced slit windows, walls and doors; a barbed-wire surround; an escape hatch on top; and a living room with Xbox, TV and sound system. It comes with an arsenal storage unit to secure your anti-zombie weaponry. There’s also a toilet system, garage, kitchen area with microwave and an upper deck with a full view all around so you can keep an eye out for the oncoming horde. A garden section means you won’t have to take over an abandoned prison to start a small produce farm.

Second, there’s Zombie Juice, a tonic designed to prevent you from turning into a zombie after exposure:

When I set about creating my Zombie Juice, I was going for an end result that was good for the whole body. A tonic. Something that would boost the immune system, strengthen the organs, regulate digestion, cleanse toxins, and provide lots of vitamins and minerals to the body. I wanted it to have all the ‘anti’ properties… antibiotic, antibacterial, anti-fungal, antiviral, anti-radiation, antioxidant, anti-inflammatory… I wanted it to be strong enough to knock out any stray bit of illness or disease that might find its way into our system, but gentle enough to be able to take daily to prevent any illness or disease from finding its way into our system in the first place.

What do these products have in common?  Both make claims about efficacy that cannot be tested until it’s too late to ask for a refund.  Interestingly, the log cabin company does offer a 10-year anti-zombie guarantee (“Please note — we require medical evidence of the presence of a real zombie should you wish to claim under the 10 year anti zombie guarantee.”)  But how could this guarantee ever be enforced?  Zombie Juice offers no similar guarantee – in fact, the recipe is simply offered for free online – but if there were such a guarantee, it would be similarly pointless.

Unenforceable contracts arise in Economics of the Undead in Eleanor Brown and Robert Prag’s chapter on “Zombification Insurance.”  Zombification insurance claims can only be expected to pay out during contained zombie outbreaks, inasmuch as a full-blown apocalypse makes payouts both unlikely and superfluous.  As Brown and Prag put it, “None of those people running screaming through the streets in World War Z are looking for their claims adjusters. … In a full-blown zombie apocalypse, then, anybody who wants to run screaming through the streets in search of her claims adjuster should be heading for the courthouse where the insurers are filing their bankruptcy papers.”

Unenforceable contracts are bad for a couple of reasons.  The obvious reason is that they allow firms to make promises they never intend to keep and offer products they never intend to work.  The cabin may be shoddily constructed; the anti-zombie tonic may be ineffective; the zombie insurance company might have no intention of paying out any claims.  Some people may be suckered into buying these low-quality or fraudulent products.

The other problem with unenforceable contracts is less obvious but just as bad:  they may deter the creation of products and services that do work.  Let’s say there’s a company with an anti-zombie product that is genuinely effective, but it costs more to make than the bogus kind.  They’d like to send a message to potential buyers that their stuff really works, and one way to do so is to offer a guarantee:  “I’ll compensate you if my product fails.”  This offer is cheap for the makers of the genuine article (because they don’t expect to pay out) but expensive for the snake-oil salesmen (because they will have to pay out).  Or at least, that would be true if the guarantee were enforceable.  Without enforceability, however, both producers can make the same guarantee with little fear of consequences.  As a result, consumers cannot distinguish between the effective and ineffective products.  And then the producer of the costly-but-effective product will get priced out of the market.

As Brown and Prag observe, matters change substantially if zombie outbreaks are expected to be sporadic and contained.  In that context, contractual guarantees can be enforced — and even if they can’t, reputational effects (think Yelp) can induce better behavior on the part of producers.  Perhaps the creators of the ZFC-1 cabin are assuming such a contained-outbreak world.  It’s the end of the world that encourages end-game behaviors.

In the first two chapters of Economics of the Undead, “Human Girls and Vampire Boys, Parts 1 and 2,” I emphasize the long-term problems that may arise in relationships with a mortality mismatch.  As I note in the concluding paragraph of Part 2:

Simply put, the mortal-immortal pairing is not a sustainable relationship model. Without conversion, every such pairing is doomed by the eventuality of death. And besides, if a vampire loves his human partner enough to stay with her to the bitter end, why not give her the gift of immortality instead? A human girl might rationally wonder why her lover would refuse her that precious gift. As human-vampire relationships become increasingly common, we should not be surprised to see “turning ceremonies” emerge as the ultimate signal of undying commitment.

But… what happens next?  Do vampire-vampire relationships raise issues distinct from human-human relationships?  In two-vampire marriages, the phrase “Til Death Do Us Part” isn’t quite the exit clause that it is in a two-human pairing.  But in other respects, long-term vampire-vampire matches may not differ that much from human-human ones — as this excellent video suggests (sorry, WordPress doesn’t support embedding for MSN Video):

Weird Things All Vampire Couples Do

U by Kotex is using bloodsuckers to advertise bloodsuckers.  The feminine product line is financing Carmilla, described as a “quirky Canadian vampire web series” based on the classic novella by Joseph Sheridan Le Fanu.  Here is episode one:

An introductory video for the web series helpfully informs us that vampires have periods.  Indeed, the immortal Carmilla says she’s had over 4000 of them; I guess menopause is not a thing for the undead.  Given the intense brand loyalty associated with feminine hygiene products (“women rarely change brands after their 20s,” says one article), their suppliers would be wise to target the vampire demographic.  Also, given how much blood is involved in a vampire’s daily existence, I have to think even male vampires might find other uses for these highly absorbent products.

The city of Clarendon Hills, Illinois, has begun issuing zombie hunting permits.  A permit system is typically used to limit the amount of something.  Which raises an intriguing question:  why does Clarendon Hills want to reduce the amount of zombie hunting?  Apparently, there must be too few zombies!

This is not as absurd as it sounds.  As Michael O’Hara argues in Chapter 16 of Economics of the Undead, “Zombies as an Invasive Species,” one potential solution to a zombie infestation is to encourage people to hunt zombies for sport.  Initially, while the zombies are numerous and out of control, you wouldn’t want to limit this activity.  But if zombie hunting became popular enough, then the zombies could be hunted into extinction — which would mean the death of a popular and enjoyable pastime.  To prevent the overhunting of the zombie population, you would need to establish private zombie-hunting preserves (as O’Hara suggests) or government-issued zombie-hunting licenses (as in Clarendon Hills).

Another possibility is that the Clarendon Hills government may have determined that zombie-hunting produces positive externalities (benefits to people besides the hunters), but also negative externalities (costs to people besides the hunters) — possibly in the form of accidental killings of uninfected people.  If the bad externalities exceed the good ones, then you might want to place limits on zombie-hunting.  But this seems unlikely in the face of a serious invasion.

In any case, this is a good time to quote one of my favorite lines from Economics of the Undead.  O’Hara says in the conclusion to his chapter, “Of course, once we accept the idea that zombies can be an economically valuable species, we cannot avoid the question of whether certain members of society might be more valuable as zombies than as living humans.”

The Toast brings us its latest pop-culture parody:  Ayn Rand’s Buffy the Vampire Slayer.  Here’s a key passage:

GILES: In every generation there is a Slayer. She is the Chosen One. She alone will stand against the forces of darkness –

BUFFY: What does it pay?

GILES: What do you mean?

BUFFY: I’m being expected to risk my personal health and well-being on behalf of those too weak to fend for themselves, yes?

GILES: I wouldn’t put it exactly like that.

BUFFY: Surely this kind of specialized labor merits compensation, if my skills are so highly valued on the free market.

GILES: Well, we can’t really offer the Slayer money, if that’s what you mean.

BUFFY: Then I will find someone who can, and work only for the highest bidder.

Okay, Buffy doesn’t exactly sound heroic here… but she’s got a point!  After all, we don’t expect policemen and soldiers to work without pay.  Sure, most firefighters are still volunteers, but the number is declining, and even the volunteers are often given some form of compensation such as health insurance, workers’ comp, stipends, and per-call or per-shift fees.

When you think about it, it’s pretty strange to expect an important, even vital, service to be performed out of pure altruism.  As Adam Smith observed, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.”  That is how we induce people to work in almost all professions.  Why should vampire slayers be any different?

If you’re a devoted Buffy fan, you know the lack of compensation eventually becomes a real problem.  After Buffy’s mother dies and Buffy becomes the sole provider for both herself and her sister Dawn, her financial situation becomes dire.  In “Flooded,” Anya (a near-anagram for Ayn) suggests that Buffy should start charging for slaying vampires:  “I mean, you’re providing a valuable service to the whole community. I say cash in!” Dawn objects, “You can’t charge innocent people for saving their lives.”  Dawn is clearly wrong, of course; see above re: soldiers and cops.  Eventually, Buffy ends up working at the Doublemeat Palace — time that would surely have been better spent defending humanity from creatures of the night.

Arguably, vampire-slaying is a public good – that is, a service that you cannot exclude non-payers from benefitting from.*  Every time Buffy slays a vampire, she saves any number of anonymous future victims, none of whom can be identified and made to pay.  Economists will often argue that government should fund public goods because they’re difficult for the private sector to provide.  Even Ayn Rand would have agreed to that; she supported government services to protect individual rights of person and property, and surely protection from vampire attacks would qualify.

However, in the world of Buffy the Vampire Slayer — and arguably the real world as well — the government is not exactly a reliable ally.  (See Ilya Somin’s chapter in Economics of the Undead for more about why governments fail to anticipate the undead threat.)  So perhaps it would be better for some private organization — the seemingly well-funded Watchers’ Council being the obvious choice — to pay slayers for their services.

But regardless of whether you think the public or private sector should fund vampire slayage, it still makes sense to compensate the brave people who are on the front line and taking the biggest risks on behalf of everyone else.**

* True public goods have a second condition, non-rivalry in consumption, which I’m ignoring because it’s not especially relevant here.

** By the way, if you’ve seen any of the sex scenes between Buffy and Spike in Season 6, then you already know what Ayn Rand’s Buffy the Vampire Slayer would look like.