Now that I’ve finished my Spanish class, I’ve moved on to another class that crams as much political and economic theory as is physically possible into three weeks. (Really, how much can you learn in three weeks? A LOT, apparently–they’ve crammed an amazing amount of stuff into a short course.) In today’s economics segment, the presenter talked about the fact that economics, the dismal science, is fraught with statistics with built-in margins of error. Virtually every sacrosanct measure we trust to accurately measure an economy, from the average price of a gallon of gasoline to gross domestic product, is ultimately an estimate with a varying margin of error. As I heard this, I thought, but so much depends on these economic measures! Interest rates, Social Security expenditures, the Federal Budget, you name it–they all depend on the veracity of economic statistics that are merely estimates. So I got to thinking, how can one bridge the gap between economic assumption and reality?
Sometimes it takes humor to get the job done. The Stand-Up Economist, a jovial chap named Yorum Bauman, an economics professor at the University of Washington and part-time stand-up comedian. His YouTube presentation, "Mankiw’s Principles of Economics, Translated," is a classic. In it, Dr. Bauman boils the ten principles of economics into the following, easy to understand translations of generally accepted precepts:
- People face tradeoffs (choices are bad);
- The cost of something is what you give up to get it (choices are really bad);
- Rational people think at the margin (people are stupid);
- People respond to incentives (people aren’t that stupid);
- Trade can make everyone better off (trade can make everyone worse off);
- Markets are usually a good way to organize economic activity (governments are stupid);
- Governments can sometimes improve market outcomes (governments aren’t that stupid);
- A country’s standard of living depends on its ability to produce goods and services (blah blah blah);
- Prices rise when the government prints too much money (blah blah blah); and
- Society faces a short-run trade-off between inflation and unemployment (blah blah blah).
After watching The Stand-Up Economist, it all makes so much more sense to me!