Yoram Bauman, the Stand-Up Economist, strikes again…this time it was at the annual meeting of the American Economic Association, held in Chicago back in January. I thought this bit was brilliant (in case you’re curious, the chick in the front row with the ponytail is me trying to get the live stream of the session to work properly), and I’m very glad that Yoram decided to put it online.
I am obviously a big fan of economic comedy (who isn’t, really?), but I do recognize that it has a pretty significant downside in that the audience for it is pretty limited, whereas the potential audience for Dane Cook and fart jokes really knows no bounds. This bit in particular requires a decent amount of background knowledge in order to get the jokes, so I’ve taken the liberty of providing some links and commentary below the video as proof that education can be found in the most unlikely of places. (It’s actually quite impressive that this bit can generate a pretty good overview of what economics is all about.)
0:47 – Microeconomics vs. Macroeconomics: Yep, that sounds about right, especially given the perceived performance of macroeconomics during the financial crisis and such. (See here for a refresher, though I think it really should be titled “How Did Macroeconomists Get It So Wrong,” since microeconomists are generally the people who think macroeconomics is bunk. )
1:10 – Classical macro: “Perhaps the central idea behind it is on the ability of the market to be self-correcting as well as being the most superior institution in allocating resources.” In other words, shit such as price and wage stickiness or other market imperfections doesn’t happen.
1:15 – Keynesian macro: In this school of thought, animal spirits “is the term John Maynard Keynes used in his 1936 book The General Theory of Employment, Interest and Money to describe emotions which influence human behavior and can be measured in terms of consumer confidence.”
1:20 – Neo-Keynesian macro: “In particular, New Keynesians assume that there is Imperfect competition in price and wage setting to help explain why prices and wages can become “sticky”, which means they do not adjust instantaneously to changes in economic conditions.”
1:25 – Neoclassical Synthesis: The Neoclassical Synthesis is an attempt to reconcile the ideas of Keynes and neoclassical economists, and, technically, what Yoram is referring to here is referred to as the New Neoclassical Synthesis, which posits that wages and prices are sticky in the short run but such market imperfections don’t affect the long run levels of output and unemployment.
1:34 – Econometrics: Lagged food consumption is just food consumption one period earlier, which is clearly correlated with, well, shit in the current period. Therefore, it has potential to be a valid instrumental variable.
1:52 – Environmental Economics: Environmental economists look at a lot of externalities, or market side effects, and one principle of economics is that taxing markets where negative externalities are present actually raises the level of well-being for society. (I suppose it’s not hard to make the argument that shit produces negative externalities.)
1:55 – Supply-side economics: “Supply-side economics is a school of macroeconomic thought that argues that economic growth can be most effectively created by lowering barriers for people to produce (supply) goods and services, such as lowering income tax and capital gains tax rates, and by allowing greater flexibility by reducing regulation.” (Note: There are a lot of critics of supply-side economics within academia.)
2:00 – Behavioral Economics: I think “this shit is irrational” pretty much sums it up.
2:04 – Austrian School: If you listen to Ron Paul enough, this statement should sound familiar. More specifically, “In contrast to most mainstream theories on business cycles, Austrians focus on the credit cycle as the primary cause of most business cycles.”
2:20 – Pareto Improvement: A Pareto improvement is a change that makes some people better off without making anyone else worse off.
2:36 – Martin Weitzman: “In 2005, Weitzman was arrested on misdemeanor charges based on a local farmer’s allegation that Weitzman had stolen several truckloads of manure. Weitzman claimed that he had received permission, but he agreed to pay the farmer $600 in order to have the charges dismissed.” It’s like the jokes write themselves sometimes.
2:54 – Robert Lucas: Lucas is well-known for his work on the implications of rational expectations. The theory of rational expectations essentially states that people are not systematically wrong in their expectations regarding the future.
2:58 – Reinhart and Rogoff: “Throughout history, rich and poor countries alike have been lending, borrowing, crashing–and recovering–their way through an extraordinary range of financial crises. Each time, the experts have chimed, “this time is different”–claiming that the old rules of valuation no longer apply and that the new situation bears little similarity to past disasters. With this breakthrough study, leading economists Carmen Reinhart and Kenneth Rogoff definitively prove them wrong. Covering sixty-six countries across five continents, This Time Is Different presents a comprehensive look at the varieties of financial crises, and guides us through eight astonishing centuries of government defaults, banking panics, and inflationary spikes–from medieval currency debasements to today’s subprime catastrophe.”
3:15 – Paul Krugman: A reasonable inference, since I suppose you don’t title your blog “The Conscious of a Liberal” unless you think that shit happens because of the Republicans.