Some spinning donuts (you see! it is meant to be measured after all):
Yes! At last… Watch national Doughnuts changing over time. Published today: 150 countries, 1992-2015. Eye-opening & powerful work by @AndrewLFanning & coauthors. Check out the website – an incredible teaching resource… https://t.co/8D59jZ9TMppic.twitter.com/PwMYZwHc3g
Paul Erlich’s ‘The Population Bomb’ warned that we would be unable to feed a growing global population and that the solution was to reduce birthrates. He said “we can no longer afford merely to treat the symptoms of the cancer of population growth; the cancer itself must be cut out”. Suggested methods included adding sterlients to the food supply (see Ritchie 2024, p.155). That didn’t happen, but fears about overpopulation were so influential it led to the sterilisation of 8 million Indian men. And yet as of January 2023 Paul Erlich is still receiving media coverage when warning about unsustainable growth. Note:
As the lecture argues, we are more than capable of providing good living standards for the population. And if you are worried about an exponential population growth then don’t be. Population growth has fallen from over 2% in the 1960s to 0.8% by 2022. We have now passed “peak child”, with the highest number of children peaking in 2017. The global population is expected to stabilise at 11bn. It turns out that when you are successful at reducing poverty people tend to have fewer children. We have sufficient natural resources as well as the socio-economic system necessary to support a thriving global population. Like John Lennon, we do not need to be concerned about over population:
Recently there has been increased attention to the concept of “degrowth”. We simply don’t have sufficient wealth for everyone to have a reasonable standard of living. Even if you somehow confiscated entire global GDP and shared it equally everyone would only get $15 per day. (84 trillion between 8 billion people is $10,695 which is $30 per day. This is a reasonable income for many parts of the world, but very much locks us in to present consumption power. Would you have wanted your parents to have made a similar trade back in 1985, which would be $12 trillion between 5 billion is $2,400, i.e. less than $7 per day? I’ve used income, rather than wealth, because the data is better. These figures should also be adjusted for purchasing power, but it’s only meant as a back of the envelope exercise).
Growth is one of the biggest parts of the solution to our environmental problems because:
We have successfully decoupled a lot of the negative impact of growth. Therefore there’s no fixed trade off between material betterment and environmental protection.
The best way to fix our environmental problems is through technology, and as Hannah Ritchie argies (2024, p.35) recent breakthroughs in the batteries required for electric vehicles, or low cost solar panels, are a result of economic growth.
Instructor resource: Market Applications Solutions, December 2022
This topic is all about how market exchange generates prices, which can be used for information purposes. My favourite examples of using price data to tell a story are the two charts below:
Recommended listening:
Special Episode 12: Jen Dirmeyer – What Do Markets Do For Us? The Curious Task, July 27th 2022 – Jen Dirmeyer talks about the marvel of market order, with a particular focus on the incredible coordination that takes place to deliver consumer goods in contemporary society. She points out that supply curves reflect the best alternative use of resources and demand curves reflect the best alternative way of satisfying consumer needs, and in doing so rest on the same underlying logic. Also, I really liked Jen’s emphasis on an important downside of the reliance on market exchange – people with higher incomes, or higher budgets, are at a significant advantage over those less fortunate. This is indeed a social problem but the choice between economic systems is a choice between one that emphasises economic power versys one that emphasises political power. And the former may well be more egalitarian overall. Because economic wealth creation is positive sum, and therefore one person’s advantage need not come at the expense of another’s.
“Ep. 39: Mike Munger — Is Price Gouging Wrong?”, The Curious Task, April 29th 2020 – Mike Munger is an excellent communicator of economic ideas and I highly recommend listening to this entire interview. But what I particularly liked were the following points:
Markets are systems for coordinating diverse plans and preferences
Markets provide a decentralised response that is locally tailored
Any agreement on price requires a disagreement about value
Prices provide a signal about how much other people value something, and you don’t even need to know who those people are. You only need to know the price.
Prices are information that come from everywhere: we don’t know the source and we don’t know what it contains.
Markets are a decentralised mechanism for communicating how much other people value something.
The problem is scarcity. And the only options are price rationing or non-price rationing.
Price gouging
When economists defend the market response of higher prices during natural disasters (i.e. price gouging), we are not defending all types of price gouging. Consider the following:
Price hikes – if someone raises the price of a good or a service after having made an agreement, this is fraudulent and clearly wrong.
Licenses or patents – if a company receives monopoly protection for a specific product, and then raises the price, this is a reflection of artificial scarcity and not real resource scarcity. One form of this is cronyism, which is where companies are able to charge prices that exceed costs due to their political connections. This type of price gouging is because of artificial restrictions created by government interventions, and should be solved by creating a competitive market.
A market response due to increased scarcity – this is what economists defend!
For more on price gouging, see this video by Mike Munger:
Watch the full movie The Greatest Showman (2017), Michael Gracey
Human civilisation faces many threats. Some of them (e.g. climate change, AI and nuclear war) have the potential to destroy us and our planet. Other types of risk are less existential but still highly damaging, such as pandemics. Covid revealed lots of vulnerabilities in our capacity to manage problems, and one temptation is to fix specific points of failure. This might improve our resilience for future pandemics, but who is to say whether that is the threat that we face? As Mark Pennington has said, “If there is reason to doubt the efficacy of centralised governance in strategic risk planning then the most effective and multipurpose ‘insurance policy’ that might account for the broadest range of future risks may be to sustain robust levels of economic growth. The resources generated by such growth may provide resilience against risks from multiple directions.” In other words, the best insurance policy against unknown threats is greater wealth.
Here is a good Economist article surveying “the new tech worldview” exhibited by the likes of Peter Thiel and Patrick Collison.
Ep. 76: Steve Horwitz — What Drives Progress?, The Curious Task, Jan 13th 2021 – this interview touches on several themes from my teaching, including rising living standards, permissionless innovation, and the great stagnation. I also find it poignant to listen to – I knew Steve personally and he passed away just 6 months after this recording.
Here is Tyler Cowen talking about Stubborn Attachments:
Here is Aubrey De Grey claiming that the first person to live to the age of 1,000 has already been born:
We are seeing unprecedented innovation in payment technologies, with disruptive firms encroaching on activities that many think should be left to central banks. But why not think creatively about the opportunities and threats from decentralised money? What is the proper role of a monetary authority in a system that is fit for the twenty first century? This lecture equips students with the skills to take a radical look at contemporary issues that relate crypto currencies and central bank activities.
Prerequisite: I assume that you have some familiarity with basic concepts from money and banking, and know about and understand Blockchain and Bitcoin. If you don’t, see here:
In response to the 2022 Fed paper, George Selgin wrote a briefing paper that advocated expanding the set of providers that the Fed deals with, to obtain the competition and innovation that comes from the private sector without the Fed having to issue their own digital currencies. Stablecoin issuers do not require the same regulatory oversight as traditional banks, by providing access to the Fed’s system they simply need to ensure that they fully back their coins with central bank reserves (and possibly short term Treasury certificates). This would require:
Bank licenses should be available to non-traditional banks (i.e. institutions that don’t do all of the activities typically associated with a bank, such as maturity transformation)
Can someone really understand crypto currencies and the future of digital money without having a solid grasp of why money even exists? This topic is a great example of why historic knowledge and theoretical clarity are crucial when involved in fast changing industries – it provides a benchmark to verify the bold claims made by industry practitioners. The purpose of this lecture is to gain a deep understanding of what money is and how it has evolved.
Background readings:
Menger, C., 1892, “On the Origins of Money” Economic Journal, 2:239-55
Radford, R.A., 1945, “The Economic Organization of a P.O.W. Camp”, Economica, 12(48):189-201
Steve Hanke runs the Troubled Currencies project which gathers black market data to construct up to date estimates of high inflation environments. You can see more here.
“Pierpaolo Barbieri on Latin American FinTech“, Conversations with Tyler, May 19th 2021 – in particular this shows the importance of knowing financial and economic history for tech founders
“Brian Armstrong”, Conversations with Tyler, February 2021 – a great overview of how the CEO of Coinbase sees the crypto industry
Hashpower – Part 1, Investors Field Guide – a fantastic early introduction to blockchain technology and potential of crypto assets
Money and the rule of law – in conversation with Daniel Smith, Center for the Study of Governance and Markets, King’s College, November 3rd 2021 – an interview about Smith’s co-authored book where he provides a critique of central bank performance
Recommended video:
Here is a standard historical overview of money:
This is a great lecture video, by the late Steve Horwitz, summarising Carl Menger’s work on the origins of money:
If you are totally new to concepts like blockchain, bitcoin and NFTs and want a thorough account of the history and development, in a well produced an informative documentary that takes a highly skeptical and cynical approach, I recommend this:
For a more positive view of NFTs, an identification of the context in which they’ve emerged (post global financial crisis and great stagnation), and subjectivist approach to value, see this Twitter thread.
A good article debunking a lot of Web3 hyperbole is here:
Did SBF’s utilitarian philosophy contribute to his willingness to cross ethical boundaries? (His objective was to make as much “risk neutral” money as possible)
If his intention was to contribute to the norms of capitalism, would he have behaved differently?
Learning Objectives: Understand the origins of money and how this can be used to understand the role of central banks in a fiat money system, as well as to navigate the crypto landscape.
Cutting edge theory: Making assessments of digital and crypto currencies.
Watch the full movie Parasite (2019), Bong Joon Ho
Many consider inequality to be a key social problem, and yet economics is all about delving beyond intuitions. Do we have good data on what has happened to inequality over time? What type of inequality matters? Is there an important trade-off to consider when confronting inequality? The answers to these questions may be controversial, but they are relevant and important.
Here is a thread containing 10 books about inequality:
10 Great books on Economic Inequality 1) Inequality – Tony Atkinson Absolutely THE book on inequality and what can be done about it. Atkinson was a giant in the profession and this book reflects this, the length-insights ratio of this book is amazing. pic.twitter.com/Vf0W21VurM
loads of the objections people have to inequality, if there is any truth to them, are probably actually objections to perceptions of inequality, which may be more driven by media coverage than reality. If that’s true, then trying to reduce inequality in fact is a waste of time — you should try to get the media to talk about it less instead
My view of the inequality debate is informed by “Fast” Eddie Felson, from ‘The Hustler’,
Vincent Geloso has challenged some of the work done by Gabriel Zucman. You can read more here:
Thread: Let us be clear — the work of Gabriel Zucman should be taken with a major/huge grain of salt. Largely because he and his colleagues have been sloppy as hell. I will not mince words here and list the litany of sloppiness #econtwitterhttps://t.co/4icOSMcZc7
On initial inspection this graph looks highly dubious:
The selection of countries is suspicious (why exclude countries that have more income inequality than the US, and why include Finland but not Singapore?)
The “Index of health and social problems” looks arbitrary and prone to manipulation
However I’ve not been able to find the actual source yet. I assume it comes from ‘The Spirit Level‘, which I believe has been quite firmly debunked.
Oxfam are also renowned for using dodgy statistics. For example:
Aside: Sometimes I’m asked what I really think about inequality. Really? That the there is no ethical basis for being concerned about inequality per se. In fact, the best argument to take it seriously is because low educated and xenophobic natives, who have hit the jackpot in where to be born, hold civilised (i.e. cosmopolitan) society to ransom by threatening extremism of various sorts and civil disorder unless their concerns are met. Ideally, we prevent all that from happening by ensuring nominal income stability and productivity growth. But there’s no moral basis for “equalising” arbitrary distributions. Our moral concerns should be focused on eradicating poverty and destitution; and ensuring a competitive market economy that rewards wealth creation and limits rent seeking. If forcing Charles Koch to emigrate improves your metrics of success, then I demur.
This is also something that Dracula noticed when he encountered a “normal” modern house:
I’ve been a nobleman for 400 years. I’ve lived in castles and palaces among the richest people of any age. Never….never! Have I stood in greater luxury than surrounds me now. This is a chamber of marvels. There isn’t a king, or queen or emperor that I have ever known or eaten who would step into this room and ever agree to leave it again. I knew the future would bring wonders. I did not know it would make them ordinary.
Here is a debrief about the wealth tax quiz. Recently, Norway increased their wealth tax to 1.1%. According to a report in The Guardian, “More than 30 Norwegian billionaires and multimillionaires left Norway in 2022… This was more than the total number of super-rich people who left the country during the previous 13 years, it added. Even more super-rich individuals are expected to leave this year because of the increase in wealth tax in November, costing the government tens of millions in lost tax receipts… Many have moved to Switzerland, where taxes are much lower”
Here is the reason I’m concerned about the link between inequality as a public policy issue and central bank digital transformation:
We realize it’s difficult to pay your wealth tax when much of your wealth is in the form of illiquid assets. As a result, we’ve deducted the amount from your CBDC balance, which is now negative and subject to the central bank’s borrowing rate.
I largely share Martin Wolf’s (2023, p. 283) criticisms of a universal basic income (UBI) in that by being so intentionally ill targeted it creates too much of a waste of limited public funding – “A UBI at a high enough level to render targeted assistance to those who are vulnerable, needy, and deserving would be unaffordable, while a UBI that is affordable would benefit many people who do not need the money and fail to benefit important services and people who need more than they have now.” I prefer a moderate income tax with generous allowances and incentive compatible welfare payments.
We can think of the state as an “insurer of last resort”, with its access to taxation permitting favourable terms for mitigating risk (p. 274). By being able to compel people it also avoids the “adverse selection” problem that befells individuals in particular need. This helps to explain the main economic justification for a well functioning welfare state (p. 276):
Incomplete private insurance
Incomplete capital markets
Note though that improving the market in those two areas would reduce the need for widespread social protection.
Luxury
I was very disappointed when Rimowa were sold to LVMH and switched from being a high quality travel company to part of a luxury brand. As Michael Story said,
As per Mary Douglas I view high status consumption goods as part of our need to separate ourselves from others, and signal which groups we belong to. I don’t play those games (at least not on those margina) and think it’s a bit of a waste of resources to do so. But I respect people who admire beauty, design, and the pursuit of aesthetics. Live and let live, I say. But tax the hell out of them…
Labour markets
In terms of workplace diversity and employment discrimination, one of the most famous academic economists is Roland Fryer.
Recommended audio:
“Roland Fryer on Race, Diversity, and Affirmative Action” EconTalk, September 4th 2023 – Fryer explains how the study of discrimination can be approached in three main ways: preference based (e.g. Gary Becker); information based (e.g. Kenneth Arrow); and structural (i.e. sociologists). He summarises his career, talks fondly about the influence of his grandmother, and the importance of combining intuitive wisdom with rigorous data analysis. His main point is that wage discrepancies are not necessarily discrimination, and companies often lack the curiosity or capability to use the data at their disposal to really understand the problems they face. This helps to explain why the benefit of diversity training is zero, and the impact of mandatory diversity training is possible negative.
Slavery
For an overview of the debate surrounding the role of slavery in the rise of the West see:
“Claudia Goldin on Inequality“, Conversations with Tyler, Oct 6th 2021 – this conversation focuses on gender inequality and the labour market in particular, and although some of the discussion is aimed at graduate students they pose some excellent questions to reflect on.
“Thomas Piketty on the politics of equality“, Conversations with Tyler, April 20th 2022 – Tyler challenges Piketty on some of the political economy arguments relating to progressivism and does a good job putting Piketty’s work into a history of economic thought perspective.
Ep. 28: Vincent Geloso — Should We Care About Inequality?, The Curious Mind, February 12th 2020 – Vincent talks about which types of inequality are most important to reduce and discusses some of the academic literature that has contributed to our understanding of the issue. His main claim is the need to build a dashboard and avoid overly simplistic explanations or solutions.
Recommended film:
You can see the trailer to Parasite here:
I also recommend the 2021 BBC series Chloe. As this Guardian review demonstrates, when it says “I hope she gets away with everything”, some viewers can actively root for despicable behaviour if it’s presented as a commentary on inequality.
During the class I say that it is inconceivable to have an American movie that portrays wealthy people in a positive light. Potential counter examples include:
One Day (2023) – Dexter is obnoxious and his wealth and priviledge is not portrayed in a positive light, but we certainly sympathise with him and, as this Guardian review points out, his “wide-boy charisma and frightful yet endlessly forgivable privilege are perfectly pitched; I forgive him a thousand times. His poshness is neither glossed over nor glamorised; it is simply integral.”. Dexter’s dad is a good man, who we sympathise with, and we don’t hold his wealth against him. That’s something, I guess. (Note this isn’t American, or a movie, but I’m open to anything!)
Finally, if you like the plot device from Parasite, with people appearing from underground captivity, confronting a confusing situation as a result of odd costumes, leading to violence and mayhem… then I recommend Emir Kusturica’s Underground (1995):
Learning Objectives: Survey the latest empirical work on inequality and relate this to wider social issues.
Are we running out of ideas? Freakonomics, November 2017 – the key points are to consider whether productivity is happening but isn’t being captured by GDP due to spillovers
According to Max Grossman, as of 2021 half of all scientific papers that had even been published had come in the last 12 years, and yet much less than half of scientific progress had happened in that same period.
Here’s a great image showing a long-term timeline of technology (but notice the gap between smartphones and Now):
Here is a video showing the opening of the Empire State Building:
And don’t forget just how amazing it was when people saw the iPhone for the first time:
https://www.youtube.com/watch?v=9hUIxyE2Ns8
Isn’t it weird how you used to be able to easily tell when a TV series was set from the fashion? And yet long running recent shows are much harder to date. For example,
Consider the following:
I was saddened to learn recently that same amount of time had passed between the first human airplane flight and the first human spaceflight as between the first spaceflight and 2018 (see here).
Here is a good defense of the importance of aviation:
“It has offered people the opportunity to migrate from one country to another It lets them return home to visit their families. It has provided jobs. Driven innovations in new technologies. It has made our societies more diverse and multicultural and has allowed us to experience the beauty of other countries. these are experience I want everyone in the world to have access to” (Ritchie, 2024, p.99)
The lecture provided some pessimistic views on transformative breakthroughs. But every now and then I notice the power of steady, incremental progress. For example:
Textbook Reading: Chapter 1 (Section 1.2, pp. 16-29)
The purpose of this session is to realise that value comes from satisfying people’s needs, and that this leads to a broad and insightful realisation that:
Competition is when anyone else tries to satisfy the same customer needs that you do.
Innovation is trying to find better ways to satisfy your customers needs.
Entrepreneurship is successful when you understand your customers needs better than they do.
For a great article showing the combination of Ikea, DIY, and female social media influencers, see “Sisters are doing it for themselves“, The Economist, December 23rd 2023
Steve Job’s famous advice was to not listen to your customers. This is in contrast to Tyler Cowen’s “law of interesting content” – which is that interviewers should have the conversation that they want, not what they think their listeners want.
I think it is incorrect to say that the reason diamonds are more valuable than water is because they are scarcer. This would be using the term “scarcity” to refer to a relative amount of present consumption, but that is obtuse. We normally use scarcity as a collective assessment of the availability of a good. In other words, there is no such thing as personal scarcity.
Learning Objectives: Link a thorough concept of value with implications for competition and innovation. Derive demand curves.
Cutting edge theory: Jobs to be done
Focus on diversity: Economists typically take preferences as given, but we can provide a theory of demand reflecting “the individual’s commitment to an intelligible universe” (p.52), where goods are considered to be a visible reflection of culture. Mary Douglas (1921-2007) was one of the world’s most admired social anthropologists, and her 1979 book, ‘The World of Goods’, provided a rich and compelling illumination of consumption patterns.
The training scene from Rocky IV demonstrates the difference between the USSR (technologically sophisticated but lacking in heart) and the US (backward but free).