Sustainability

aje on December 7, 2023

Lecture handout: Sustainability

⭐ Required readings:

Here’s how to visit the grave of J.B. Say. Here is a photo from a book written by Richard Cantillon, published in 1755, which uses the word “entrepreneur”.

Here is a video on poverty being a lack of cash, not a character trait:

Here is the Bushradical video about building a log cabin in the woods:

Here is the Outdoor Boys video about building a snow shelter:

 

Here’s a nice visual showing different carbon pricing initiatives:

Here is more on the doughnut model:

Some spinning donuts (you see! it is meant to be measured after all!):

Here is a savage review:

  • Andrew Lilico: ‘Doughnut Economics’ by Kate Raworth, June 24th 2024 – including this zinger: “I can safely say I have never hated a book more than this one… It makes assertion after assertion about economics that is simply false, and even if the initial assertion were true, what is done with that assertion would still be wrong… We don’t need to reinvent economics. We just need to understand it properly and apply it correctly and with imagination. Unfortunately, reading this book will not help you to achieve any of that.”
Depopulation

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:

Lecture handout: Sustainability Survey
Degrowth

Recently there has been increased attention to the concept of “degrowth”. I think it’s important to recognise that we simply don’t have sufficient wealth for everyone to have a reasonable standard of living. Even if you somehow confiscated the 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 would lock 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 = $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).

In addition to this, growth is one of the biggest parts of the solution to our environmental problems. This is because:

  1. 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.
  2. The best way to fix our environmental problems is through technology, and as Hannah Ritchie has argued recent breakthroughs in the batteries required for electric vehicles, or low cost solar panels, are a result of economic growth (Ritchie 2024, p.35).

An academic article published in 2024 provides a comprehensive survey of 561 articles from the degrowth literature. It found that: “the large majority (almost 90%) of studies are opinions rather than analysis; few studies use… data… most studies offer ad hoc and subjective policy advice… various studies represent a “reverse causality” confusion, i.e. use the term degrowth not for a deliberate strategy but to denote economic decline (in GDP terms) resulting from exogenous factors or public policies; [and] few studies adopt a system-wide perspective – instead most focus on small, local cases without a clear implication for the economy as a whole.”

See: Ivan Savin, Jeroen van den Bergh, 2024, “Reviewing studies of degrowth: Are claims matched by data, methods and policy analysis?“, Ecological Economics, Volume 226

I also recommend the following:

Recommended books:

  • Ridley, M., 2011, The Rational Optimist, Fourth Estate
  • Munger, M., 2019, Is Capitalism sustainable?, American Institute for Economic Research
  • Rosling, H., 2018, Factfulness, Sceptre
  • Tupy, M.L., and Pooley, G.L., 2023, Superabundance, Cato Institute
  • Ritchie, H., 2024, Not the end of the world, Chatto & Windus

Recommended podcasts:

Learning Objectives: This session considers whether infinite growth is possible on a planet with finite natural resources.

Spotlight on sustainability: Doh!

Market applications

aje on December 2, 2022

Group activity:  Market Applications Assignment, December 2022 and complete this Market Applications Form
Instructor resource: Market Applications Solutions, December 2022

This topic is all about how market exchange generates prices, which can be used for information purposes. Here is a good quote explaining the marvel of the price mechanism:

“A spike in wages of carpenters, in a uniquely reliable way, tells consumers that the community needs them to be more economical in their use of carpentry services while also alerting potential suppliers to a rising need for carpenters. Falling prices, again in a uniquely reliable way, signal suppliers that a community already has all it needs. From such coordination, mediated by freely adjusting price signals, a nation’s wealth is made” (Schmidtz, 2023, p. 102)

 

In 2025 the city of New York introduced a congestion charge in the whole of lower Manhattan to try to reduce traffic.

As The Economist reports, early results revealed that rush hour journey times had been cut in half.

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.

Progress

aje on June 18, 2022

Lecture handout: Progress*

⭐ Required readings:

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.

Key organisations:

Key movements:

Recommended podcast:

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:

For more on Operation Warp Speed see ‘A Shot to Save the World‘. For a fascinating (but very long) account of Vaccinate CA see The Story of VaccinateCA.

Here is the Netflix trailer for the Three Body Problem:

Activity: Transformative Breakthrough Worksheet

For a survey of potential breakthrough technologies see:

  • Weinersmith, K., and Weiner, Z., 2017, Soonish, Penguin

Or this Wikipedia article:

Or this collaborative slide deck:

In September 2019 Eli Dourado provided a detailed and illuminating look at the sectors most likely to contribute to higher future economic growth, with specific examples of technological possibilities.

In December 2020 Tyler Cowen provided a list of new technologies that may mark the end of the great stagnation. He included:

In February 2022 MIT Technology Review listed their 10 biggest technology breakthroughs in 2022. They are:

  1. Moving away from passwords
  2. Coronavirus variant tracking
  3. A long-lasting grid battery
  4. Artificial intelligence for protein folding
  5. GlaxoSmithKline’s malaria vaccine
  6. Proof of stake
  7. COVID-19 antiviral pills
  8. Practical fusion reactors
  9. Synthetic data for training AI
  10. The world’s largest carbon removal factory in Iceland

In February 2023 Alex Armlovich listed the following:

  • We cured AIDS (but nobody noticed)
  • We cured Hepatitis C
  • First mRNA vaccines
  • First personalized genomic cancer treatments
  • First CRISPR-based cures on the market now
  • Ozempic

Here is an explanation of nuclear fusion:

Here is a podcast with Eli Dourado:

My favourite “no brainer” growth drivers includes:

I suspect that future growth requires a cultural shift toward the principle of progress, and this involves a shift to longer term thinking. This post by Max Roser nicely presents the importance of “Longtermism”.

Here is a powerful and fascinating account of why advances in artificial wombs are so important, and I encourage all students to read it and reflect carefully on whether we should:

  • Alter the 14 day rule on keeping embryos in labs.
  • Invest more in Femtech.

Here is a video showing how the pill accelerated female participation in the workforce:

And, if you are blessed with children, don’t beat yourself up about having to breastfeed. The evidence in favour is fairly weak:

For more on Permissionless Innovation:

A good, uplifting account of how creativity can result from not asking permission:

Here is a short quiz activity on the difference between the Precautionary principle and Permissionless innovation.

Here is a video on the importance of ideas:

And don’t forget that cComfort is the enemy of progress” (P.T. Barnum)

 

Learning Objectives: Link technological innovation to growth theory and a broader reflection on the importance of the humanities

Cutting edge theory: A survey of potentially transformative breakthrough technologies.

Focus on diversity: Virginia Postrel’s book, The Future and it’s Enemies, encapsulates the distinctions made at the end of the lecture. 

Central banks and digital transformation

aje on March 25, 2022

Lecture handout: Central banking and digital transformation*

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:

The evolution of money

Key readings:
Recommended podcasts:
Current policy relevance:

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)
  • The Fed should allow fintech companies to have master/settlement accounts (which the Bank of England did in 2018)
  • For more see: Selgin, G., “A ‘narrow’ path to efficient digital currency”, Cato Briefing Paper No. 134, February 9th 2022
Other country case studies

Here’s a website that keeps track of interest in CBDCs around the world:

https://cbdctracker.org/

Here is a good article summarising various CBDC experiments:

Learning Objectives: Provide an assessment of central bank responsibilities in the digital currency landscape. 

Cutting edge theory: Assessing current policy relevance of central bank activities.

The evolution of money

aje on October 23, 2021

Lecture handout: The evolution of money*

Textbook Reading: Chapter 7 (Section 7.3; pp. 216-225)

“I’m very interested to watch the crypto community relearn centuries of monetary economics” John Cochrane (Conversations with Tyler, March 10th 2021)

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

To learn most about the gold content of smartphones see here and here. For a video showing the extraction fo gold from iphones see here.

Interactive practice

Here I am at a museum:

Extra activity: The Bank of England Museum

Fun fact

Apparently the first person to mention Bitcoin in a congressional hearing was Larry White, in 2011!

For more on the links between free banking academics and the early history of crypto see:

The Starbucks hustle:

Starbucks isn’t a bank, but here’s a good Twitter thread on their fintech capabilities:

For more see JP King’s post, “Starbucks, monetary superpower“. And here’s my short video on The Starbucks Hustle:

Starbucks is a truly fascinating company, and I highly recommend this interview with Howard Shultz:

  • Starbucks (with Howard Shultz), Acquired, Season 14, Episode 5 – learn the origin story (it preceded Peet’s Coffee and properly introduced Americans to arabic beans, was born in Milan as much as Seattle, and some notable CSR activities. My concerns about the Starbucks app seem to be shared by Shultz).
El Salvador

For a good overview of El Salvador’s experiment see:

Stablecoins

In May 2022 the stablecoin TerraUSD broke its peg to the dollar. A very good explanation of what happened, and why, is by Josh Hendrickson: When a Dollar Isn’t a Dollar. And so is this thread:

https://twitter.com/knifefight/status/1525146449914105856

Troubled currencies
  • 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.
Recommended readings:
Further readings
  • Piecing it together, The Economist, March 11th 2023 – a fascinating theory that the adoption of the silver coin contributed to democracy
Recommended audio:
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:

Some argue that Bitcoin’s main value is as a focal point for crypto more broadly. In this sense it is like Kerrygold butter. See:

  • Bailey, Andrew M. and Warmke, C., “Bitcoin is King”, Chapter 10 [PDF here]
Further activity

In September 2022 Sequoia Capital published a gushing profile of FTX founder Sam Bankman-Fried. In November they went bankrupt, and Sequoia removed the article. However, you can download a PDF version here.

Points to consider:

  1. 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)
  2. 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.

Inequality

aje on November 26, 2020

Activity: Thinking about wealth
Lecture handout: Inequality*

⭐ Required readings:

Watch: $456,000 Squid Game in Real Life

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:

Imagine trying to answer the following question:

A study by Gimpelson and Treisman (“Misperceiving inequality“, NBER Working Paper 21174) found that:

  • In 29 of the 40 countries a majority of respondents who ventured a guess guessed wrong.
  • In 29 countries, the leading choice attracted fewer than 50 percent of those who guessed.
  • In almost three quarters of countries, most respondents who thought they could identify the general pattern of inequality got it wrong.

As Sam Bowman has argued,

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:

and here:

I’ve often seen students link to this graph:

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:

Here is an article from Marginal Revolution providing context and assessment of the tribunal that found Next had broken the Equality Act of 2010

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.

For more on Mr Beast see this twitter thread and this interview with Joe Rogan:

Or this one with Lex Fridman:

The lecture tried to show the link between economic growth and rising living standards for the general public.

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.

Similarly, see this quote:

A key point from the lecture is that when assessing inequality it is important to look at consumption (or living standards) as well as income and wealth. In this post Scott Sumner makes the case for why the only sensible way to look at inequality is through consumption.

Wealth tax

In January 2022 a group of high net worth individuals signed a petition to campaign for a wealth tax. Here is an overview and discussion of a wealth tax:

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 a KPMG report on how Switzerland treats Cryptocurrencies as part of its wealth tax.

Here is the reason I’m concerned about the link between inequality as a public policy issue and central bank digital transformation:

Ultimately, I think a wealth tax is:

  • Good for: a symbolic gesture that we want an economic system that prevents billionaires.
  • Bad for: generating an appropriate amount of tax revenue within a liberal democracy.
Universal basic income

A universal basic income is a policy programme that provides all citizens with a specified amount of money irrespective of need. This Vox article provides a good summary of different examples of how they work in practice. In 2023 the UK trialled a scheme paying £1,600 per month.

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:

  Recommended audio:
  • “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:

  • The Dark Knight Rises (2012) – the good guy is a billionaire, the police are heroes, and Bane occupies Wall st… I’m not sure the Batman is a positive depiction of wealth, but it’s certainly a very rare example of a movie that is more right wing than left wing.

  • 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!)

  • Saltburn (2023) – this film is a challenging watch but very good (the line “she’d do anything for attention” is perhaps one of the funniest I’ve ever heard). If you’ve read Engleby then I think you lose a large part of its power and originality, and if you understand the Solow growth model you may be confused by the ending. In terms of its implication for inequality, you do sympathise with the rich, and it sort of parallels Parasite’s warning about trust and naivety. But Oliver isn’t poor (despite his bad accent, Prescott is fine!), and the Catton’s aren’t portrayed as having earned their wealth. They are not horrible people but we do laugh at their buffoonery and aren’t asked to respect them. Felix isn’t atrocious but he’s manipulative. Like Parasite, it shows the rich as victims of those less fortunate, and unlike Chloe we’re not supposed to cheer them on. But it doesn’t portray wealthy people in a positive light.

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.

Cutting edge theory: Assessment of a wealth tax

Focus on diversity: Thomas Sowell has written extensively on topics such as race and inequality. In this interview he discusses the myths of economic inequality.

Stagnation

aje on November 26, 2020

Activity: Transformative Innovations
Lecture handout: Stagnation*

⭐ Required readings:

Watch “Steve Jobs – iPhone Introduction in 2007” (the first 17 minutes is sufficient)

Recommended audio:

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:

 

For more on whether Jeanne Calment really was the oldest person ever, see Wikipedia. Saul Newman is a demographer who has found that the places that have lots of people living over the age of 100 tend to be riddled by clerical errors and pension fraud – he won an Ig Nobel in 2024. This chart shows that once birth certificates became widely adopted far fewer people claimed to be very old.

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)

Here’s a photo of Lady Priscilla Norman on her electric scooter, taken in 1917!

And here is the Studebaker electric car from around 1905:

To some extent this lecture is about trying to work out what happened in the early 1970s. This website poses the same question:

Some interesting (and possibly related) facts about this period:

And here are some iconic photos from 1974.

Perhaps, in future, people will look back on 2007 and say “what happened??”

The lecture provided some pessimistic views on transformative breakthroughs. But every now and then I notice the power of steady, incremental progress. For example:

Noah Smith has a nice Twitter thread on progress since 1970.

This website: My Ordinary Life: Improvements since the 1990s 

And here’s a great video showing the progress made in car passenger safety:

If you found the point about complacency convincing, see

Finally, a lot of the themes from this session was covered in a quarterly report that I wrote for Kaleidic Economics over 10 years ago!

Learning Objectives: Understand the scholarly literature on the secular stagnation thesis

Value creation

aje on October 16, 2020

Lecture handout: Value creation*

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 more information about David Reynold’s model of the Brent Bravo oil rig, see here and here. In 2013 Barry King tried to beat Reynold’s record by constructing a model of Salisbury Cathedral (which is a popular tourist destination for KGB agents). You can read more here. Since 2012 Steve Waller has spent around 12 hours a day to create a scale model of the St Hilda district in Middlesbrough. We may respect these creations, but unless we have a need that they satisfy, that doesn’t make them valuable.

Here’s a list of items that have caused controversy over their value:

  • The ‘I am rich’ app (link)
  • Among Us shaped chicken nugget sold for almost $100,000 (link)
  • A banana duct taped to a wall fetched $5.2m (link)
Activity: Here is a worksheet on understanding value. Here is a short quiz on understanding value. Here is an application to Food and Beverage management.

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.

For an overview of the water-diamond paradox:

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. 

Spotlight on sustainability: Plastic packaging

Wiggle Room

aje on February 24, 2020

Group activity: The Balkan Wiggle-Room Index, October 2020

Here is a nice dashboard of different positions:

Learning Objectives: Generate a scorecard assessment of different countries macroeconomic position.

Cutting edge theory: Establish current indicators for an under studied location.

Transition economics

aje on February 24, 2020

Learning Objectives: Understand the socialist calculation debate. Consider the empirical record of different transition economies.
Lecture handout: Transition Calculation*

The training scene from Rocky IV demonstrates the difference between the USSR (technologically sophisticated but lacking in heart) and the US (backward but free).

https://youtu.be/1oDTNEEu3Rw

  • Audio: Planet Money, “Peanuts and Cracker Jack”
    • What are the main factors that determine the earnings of a vendor?
    • Why is it better to have the vendors decide on who does what, rather than senior management?
    • How much entrepreneurial profit comes from working harder than others?

One of my favourite ruminations on the differences in economic systems.

  • Further reading: “Havana or Prague” in Hitchens, Christopher, (2010) Hitch-22: A Memoir, New York: Twelve
Lecture handout: Transition Shock*

There’s a big difference between queuing for basic necessities, and queuing in excitement about the first McDonalds in Moscow:

These resources form part of my Managerial Economics course map. You can watch the full YouTube playlist here. This page ties into Chapter 12 of ‘Economics: A Complete Guide for Business‘.