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Freaky Economist: Cable Is Like Crack

Cable executives love to think of themselves as innovators, but are they on par with crack dealers? Pop economist Steven Levitt thinks so, and he means it as a compliment. Speaking to cable marketing executives at the annual CTAM convention in Boston, the author of best seller Freakonomics notes that force driving the cable industry isn't dissimilar from the development of crack cocaine in the early 1980s.

Cocaine used to only be "a rich man's drug," Levitt says, costing $100 or more a gram, snorted or occasionally smoked. Drug dealers hit on the idea of blending cocaine with a paste composed largely of  baking soda and breaking up into chunks sold for $5 that could be smoked, for an intense high.

"Just like crack cocaine is a much better delivery mechanism for delivering cocaine to the brain, you've got a better delivery mechanism" for video, telephone and Internet services, Levitt says.

Levitt devoted the rest of his time to a stump speech recounting many cases from his book, including the economics of crack dealers, prostitutes and employees at the IRS.