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Milton Friedman, Milton Keynes, Milton Schuman and Maynard Keynes

May 21, 2017 Leave a comment

Below is a very funny clip from Yes Minister where Humphery is advising Sir Desmond about the possibilities of making the Minister make the decision that they want him to make. However the start has Sir Desmond getting a little confused with his economists and giving his reason for buying the Financial Times.

Categories: Eco Comedy

Brexit and ‘Yes Minister’?

May 2, 2017 Leave a comment

In light of what has been happening in Europe recently here is a very amusing clip from the BBC series “Yes Minister” in which Sir Humphrey and Jim Hacker discuss Brussels and the notion of the UK trying to pretend that they are European. Also discusses why other European nations joined the common market in the first place.

RIP John Clarke

April 11, 2017 Leave a comment

Sad news yesterday of the passing of John Clarke. As well as his Fred Dagg character he was part of  ‘Clarke and Dawe’ which aired on ABC Australia in which prominent figures speak about matters of public importance. Below is the time they look into what Quantitative Easing actually is. Very amusing and his sense of humour will be missed.

Consumption Function cake

March 23, 2017 Leave a comment

Many thanks to A2 student Lara Hodgson for this superb cake that the class enjoyed this morning. Remember that the standard Keynesian consumption function is written as follows:

C = a + c (Yd) – where:

  •   C = total consumer spending
  •    a = is autonomous spending
  •    c (Yd) = the propensity to spend out of disposable income

Autonomous spending (a) is consumption which does not depend on the level of income. For example people can fund some of their spending by using their savings or by borrowing money from banks and other lenders. A change in autonomous spending would in fact cause a shift in the consumption function leading to a change in consumer demand at all levels of income. The key to understanding how a rise in disposable income affects household spending is to understand the concept of the marginal propensity to consume (mpc). The marginal propensity to consume is the change in consumer spending arising from a change in disposable income. The higher the mpc the steeper the gradient of the consumption function line. As you can imagine the consumption of cake was fairly rapid.

Consumption cake.jpeg

Categories: Eco Comedy, Macro Tags: , ,

Irish Economist Jokes for St Patrick’s Day

March 17, 2017 Leave a comment

Being St Patrick’s Day I thought it appropriate to look at some humour.

“Why was the Irish economist afraid of swimming? He was conscious of the liquidity trap.”

“How do you confuse an Irishman when trying to maximise his utility when purchasing two products? Put two shovels against the wall and tell him to take his pick.”

“What do you call it when an Irish economist has an idea? Moral Hazard”

“An Irishman said he saw a ghost. The Irish economist said it was just the invisible hand.”

“What’s the difference between Iceland’s economy and Ireland’s? One letter and six months”

“We all know what pareto optimal allocation means… What about Irish optimal allocation — when all persons are equally well off, and one person really gets it bad, worse off, while all the rest are much better off…”

“An Irish economist walks into a pizzeria to order a pizza. When the pizza is done, he goes up to the counter get it. There a clerk asks him: “Should I cut it into six pieces or eight pieces?” The Irish economist replies: “I’m feeling rather hungry right now. You’d better cut it into eight pieces.” (see the “Father Ted” version above)

“Why would Father Jack not make a good economist? There would always be massive inflation as his only policy would be to increase liquidity.”

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Cash is a rational birthday present but inappropriate

February 23, 2017 Leave a comment

Here is a clip from Seinfeld that I use when teaching Behavioural Economics. It seems rational that Jerry gives Elaine $182 for her birthday but it really is inappropriate. Cash replaces social norms by market norms and ruins the feelings usually evoked by a typical non-cash birthday gift. The deadweight loss of giving is the loss of efficiency that occurs when the value of the gift to the recipient is less than the cost of the gift to the giver. In this case, economists argue that cash would be a more efficient gift.

Economic terms useful for policy

February 6, 2017 Leave a comment

eco-termsHT to Kanchan Bandyopadhyay for this piece from Bloomberg by Noah Smith entitled ‘5 Economics Terms We All Should Use’

He suggests that rather than the usual economic terms that are banded about like recession, downturn, boom, unprecedented trade deficit etc, there are other words that are far more useful especially when you think about policy. He suggests the following:

Endogeneity
Something is endogenous when you don’t know whether it’s a cause or an effect (or both).  For example, in the simple supply and demand model, suppose that there is a change in consumer tastes or preferences (an exogenous change). This leads to endogenous changes in demand and thus the equilibrium price and quantity.

Marginal versus average
Economists like to say “on the margin.” This refers to small changes instead of big overall effects. Another example is the importance of effort versus natural talent. Natural talent might matter a lot on average, but a little more effort could go a long way.

Present value and discounting
Present value means trying to figure out how much some long-term thing is worth today. Discounting means you have to decide how much less you value things that come far in the future.

Conditional versus unconditional
One common example of this is life expectancy. People like to point out that life expectancy in the Middle Ages was only about 35. But that includes lots of infant mortality. If you lived in the Middle Ages and you made it to adulthood, you would probably live well past 35. While conditional life expectancy has increased since then, it hasn’t gone up by nearly as much as the unconditional version — reductions in infant mortality have been the biggest difference.

Aggregate
Economists say that something that works individually doesn’t work in aggregate. Another good example is debt. Individually, borrowing and spending money reduces your wealth. But in aggregate, debt doesn’t reduce the value of the whole world’s wealth, since one person’s debt is another person’s asset.

I do like his comment at the end of the article:

So there are five econ terms I think should enter our everyday vocabulary. As long as this doesn’t happen endogenously, the marginal increase in the aggregate present discounted value of our public discourse would have a high conditional probability of being positive!

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