-Good evening, Mr. Bowie!
Listen, we’re already in a lot of trouble with the EPA
and if you stick around, we’re gonna have to
fill out a bunch of interdimensional commerce forms.
So, if you could relocate to New Jersey or maybe Canada,
you’d really be doing us a solid.
-That ought to do it, thanks very much, Ray!
-Are you a God?
-Half on my mother’s side but we are not very religious about it.
We really only go once or twice a year on high holidays.
-Then… die!
[music playing]
-Hello, I’m Andrew Heaton and you’re watching EconPop -
the show that sifts through the haystack of popular culture
to find the needle of economics within. And then stabs you with it.
Ghosts! They’re terrible.
They come into our houses at night, drink all of my roommate’s beer,
leave dirty plates in the sink,
and then forget to put the toilet seat down.
Ghosts are responsible for nearly all of the things,
which irritate my roommate,
who unfairly blames these clearly paranormal shenanigans on me.
But it’s ghosts. So, who am I gonna call?
[music playing]
That’s right - my friend Jim!
Jim never hassles me about leaving dishes in the sink.
Also, he likes Ghostbusters, which is one of my favorite films.
A 1980s classic which explores
ectoplasm, Sumerian Gods, entrepreneurship
and the pitfalls of overzealous government regulators.
Entrepreneurship is about alertness to opportunity,
taking risks, finding innovative solutions to problems,
and hopefully making a profit at the end of it all.
At the beginning of the film,
our heroes are uniquely aware of the problem of ghosts.
But they’re not doing much about it
because they’re in comfortable, cushy academic jobs.
-Personally I liked the University.
They gave us money and facilities -
we didn’t have to produce anything.
You’ve never been out of college.
You don’t know what it’s like out there.
I’ve worked in the private sector. They expect results.
-Once they’re forcibly jettisoned into the private sector,
they decide to take a risk and start their own company.
Taking risks is a crucial aspect of entrepreneurship.
Most startup companies fail.
For example, my idea for a one-time-use,
disposable ladder company failed horribly.
Seriously - a lot of people died.
To start a business at all is a risk
because in most instances you have to leave
what is normal and comfortable
for something that will probably fail.
It’s also a big financial risk.
Dan Aykroyd’s character, Ray, mortgages his house
in order to get a loan to start the Ghostbusters.
If the business had failed,
he would have gone bankrupt and lost everything.
-You are never gonna regret this, Ray!
-My parents left me that house. I was born there.
-You’re not gonna lose the house.
Everybody has 3 mortgages nowadays.
-None of the guys were guaranteed income on day one,
as opposed to taking jobs as employees in established firms.
But, great risks can lead to great rewards.
If the business succeeded, they would get to keep the profits.
The Ghostbusters are also innovators.
Ray and Egon invent devices to trap ghosts.
Bill Murray desperately wants to sleep with Sigourney Weaver,
and works diligently and creatively towards that end.
Somehow, an entirely new industry, ghostbusting, is born.
And it works! They make money. And lots of it!
Their first ghostbusting job at the hotel illustrates
an important and often confused aspect of the market economy.
It doesn’t reward people for the amount of effort they put in,
but in the value they create for others.
-$5,000? I had no idea it’d be so much. I won’t pay it.
-Well, that’s alright. We can just put it right back in there, can’t we?
-Well, we certainly can, Dr. Venkman.
-No, no, no. Alright! Anything!
-Economists call this “subjective value.”
It’s the reason shiny diamonds cost more than bread and water.
Unfortunately for the ghostbusters,
their biggest obstacle wasn’t getting enough customers
to become a viable enterprise. It was the EPA.
And, to a lesser extent, an interdimensional Sumerian God.
You might think that, all in all, a malicious super powerful entity
bent on destroying the world is worse,
but you should also keep in mind that the ghostbusters
actually managed to defeat Gozer,
whereas they only stalled Walter Peck.
He’s probably drawing a pension right now.
-I want to know more about what you do here.
Frankly, there’ve been a lot of wild stories in the media
and we want to assess any possible environmental impact
from your operation.
-Walter Peck is the avatar of snarky bureaucrats,
the obsequious EPA official we’d all love to smack.
His employer, the Environmental Protection Agency,
was formed in 1970 by beloved U.S. President
Richard Nixon’s executive decree, to counter pollution.
What economists call “negative externalities.”
Negative externalities are when some activity you’re doing
imposes costs onto unrelated third parties.
Let’s say that the proton packs used to capture ghosts,
produces smog. That’s a negative externality.
Resolving negative externalities is about tradeoffs.
Sometimes people talk about pollution
like we can either have it, or not. And that’s true.
We could ban all pollution if we banned all cars,
tractors that harvest our food,
and power plants that make our electricity.
I’m disinclined to do so.
So, unless we want to bring back the Middle Ages,
where we grow our own zucchini,
use carrier pigeons to literally deliver tweets,
and generally die around 35, there’s going to be some smoke.
We have to decide: how do we best deal with these tradeoffs.
One problem with the EPA is that it changes the equation
from economic tradeoffs to criminals vs. non-criminals.
Peck doesn’t simply threaten to tax the ghostbusters
for their emissions, he threatens to throw them in jail.
-Excuse me, this is private property.
-Shut this off. Shut these all off.
-I’m warning you. Turning off these machines
would be extremely hazardous.
-I’ll tell you what’s hazardous. You are facing federal prosecution
for at least a half a dozen environmental violations.
Now, either you shut off these beams or we shut them off for you!
-Further, EPA regulations tend to deal with
public health via micromanagement.
It’s one thing for the government to say
factories can only produce so many pollutants in the air or river.
It’s another thing to tell them exactly how
they must go about achieving this.
By creating complicated rules and regulations
as to how businesses must operate,
how often they must clean particular components,
what sorts of machines they can use, which solvents, etc.,
we run the risk of stifling businesses from coming up with their own,
possibly better, solutions,
to meet the quality of public health we want to achieve.
For example, in 1975 the EPA mandated
platinum-based catalytic converters for all cars
to ensure that they met certain emission guidelines.
American car manufacturers favored this approach
because they’d already put a ton of money
into developing these catalytic converters themselves.
Japanese car manufacturers had gone a different route,
using alternate, more affordable technology.
Their cars were already clean enough to meet EPA emission guidelines,
but they were forced to adopt catalytic converters anyway,
raising prices for American car buyers, reducing competition
and, ironically, wasting precious resources at the same time.
In the film, the EPA shuts down the Ghostbusters and by doing so,
releases a wave of ghoulish specters across the city.
That’s what economists call “unintended consequences.”
In the end, everyone wants
both a cleaner environment and innovation.
The question is, in a world where everything has a cost,
how do we best achieve both?
As for me, next time my apartment is swarmed by poltergeists,
who am I gonna call? Not the EPA. The Ghostbusters.
Or, more accurately, Dan Aykroyd. He’s really into that stuff.
[music playing]