Question

Module 1 Discussion

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Economist Steven Landsburg argues that if one believes in the death penalty for murderers because of its deterrent effect, using cost/benefit analysis we should execute computer hackers - the creators of worms and viruses - because the deterrent effect in cost saving would be greater than the deterrent effect in saving lives. Estimates are that each execution deters eight murders, which, if one valued each life at about $7 million, saves about $56 million; he estimates that executing hackers would save more than that per execution, and thus would be the economic thing to do.

1. Do you agree or disagree with Landsburg's argument? Why?
2. Can you extend cost/benefit analysis to other areas?

Answer 1

Solution:

I am agreed with the fact that to execute a hacker that save more than that per execution as the cost of an execution results in benefits of $7 million for muderer where as for hacker is $7 million for 8 person that is $56 milion hence the cost of execution is same where as the benefit is more in case of exectution of hacker.

Here cost saving or benefit derived one as the same thing.

Another example:

Like: there are two projects which cost $12000 and $8000 respectively where as the revenue earned from the both are $20000 and $15000, so we can compare the cost benefit of both project by their ratios as Project A and Project B

i.e. 20000/12000 : 8000/15000 that gives the ratio as 1.66: 0.53 Hence Project A is better than Project B.