In this episode, Glen Whitman discusses Economics of the Undead: Vampires, Zombies, and the Dismal Science, a book he co-edited with James Dow. Glen is an economics professor at California State University and, unlike most academic economists, he moonlights as a TV writer. He first wrote for the TV show Fringe and now writes for the soccer spy drama, Matador.
The book’s website provides the following description:
“Whether preparing us for economic recovery after the zombie apocalypse, analyzing vampire investment strategies, or illuminating the market forces that affect vampire-human romances, Economics of the Undead: Zombies, Vampires, and the Dismal Science gives both seasoned economists and layman readers something to sink their teeth into.
Undead creatures have terrified villagers and popular audiences for centuries, but when analyzed closely, their behaviors and stories—however farfetched—mirror our own in surprising ways. The essays collected in this book are as humorous as they are thoughtful, as culturally relevant as they are economically sound, and provide an accessible link between a popular culture phenomenon and the key concepts necessary to building one’s understanding of economic systems large and small. It is the first book to combine economics with our society’s fascination with the undead, and is an invaluable resource for those looking to learn economic fundamentals in a fun and innovative way.”
In this episode, Nathan Smith discusses the economics and history of migration and migration restrictions. Nathan is an Assistant Professor of Business Administration: Finance and Economics at Fresno Pacific University and regular blogger at Open Borders: The Case.
We start the episode by discussing the economic impacts of Nathan’s own migration to Fresno. Students gain, as he adds to the supply of economics professors, other economists might lose from his competition in labour markets, people looking for parking near the University might lose, as he slightly reduces the supply of available parking spaces, and property owners gain from his demand for housing. In general, anyone Nathan transacts with gains from the transaction, while those who he competes with may suffer some slight loss.
The big slogan among open borders advocates is that a significant reduction in migration restrictions could “double world GDP.” Nathan’s own most recent estimates show about a 91% increase world GDP, mainly because people would move from places where they can earn very little (e.g. places with dysfunctional institutions) to places where they can earn quite a bit more (e.g. places with well-functioning institutions, complementary factors of production, highly developed networks of specialization and exchange, etc.). There are complementarities between human capital and unskilled labour. For instance, great managers are more productive when there are many workers to manage, and the workers are more productive where there are great managers. Continue reading Migration and Open Borders with Nathan Smith→
The minimum wage is a contentious issue among economists, and yet it enjoys near-universal support among the public. In my view, public views of the minimum wage are simply the result of a lack of careful thought by most people. Daniel Kahneman’s theory that people, when faced with a difficult question, substitute a simpler question that they can easily answer, applies particularly well in this case. People answer the question of whether they would like people to earn more when the real question is whether government should mandate higher wages (I first heard this argument from Bryan Caplan on EconLog).
A purely empirical argument for or against the minimum wage is methodologically wrong-headed because empirics do not speak for themselves. Sound theory must be the economist’s first tool in understanding the effect of a policy such as the minimum wage.
Before we can understand something like the minimum wage, we must understand the role of prices in allocating factors of production to their various uses. The price of a factor signals to entrepreneurs that that factor is scarce, that it is needed elsewhere in the economy, and that the entrepreneur who can reduce his usage of relatively more scarce factors in favour of relatively less scarce ones can earn profits, while entrepreneurs who fail to do so earn losses. I give the example of a sandwich shop during an oil boom; the high price of labour caused by the oil boom leads the sandwich shop to substitute away from labour in various ways. Continue reading Price Theory and the Minimum Wage→
In this episode, Diana Thomas discusses the relationship between the Virginia School of Political Economy and the Austrian School of Economics. Diana is an Associate Professor of Economics at the Heider College of Business at Creighton University.
The Virginia School is a branch of public choice, the application of the tools and techniques of economics to the study of political actors. The Virginia School’s founders, James Buchanan and Gordon Tullock, were the first to systematically apply a rational choice framework to the study of politics in The Calculus of Consent.
Two assumptions commonly made by neoclassical economists are the “benevolence assumption” and the “omniscience assumption.” The benevolence assumption is implicit in normative analysis of what governments “ought” to do, as this assumes that political actors are motivated to maximize the common good rather than pursuing their self-interest. This assumption is challenged by public choice economists. The omniscience assumption is at play in economic models that depict the economy as being in equilibrium, whereby nobody is misinformed of or surprised by economic reality. This assumption is challenged by Austrian economists. Continue reading Virginia Political Economy and Entrepreneurship with Diana Thomas→
A key difference between Austrian economics and the neoclassical-mathematical economics developed in the mid-twentieth century by Paul Samuelson and others is the assumption by the latter that people are essentially omniscient. What neoclassical economists call “rationality” effectively means omniscience. When the agents in neoclassical models face any uncertainty, the uncertainty is always fully understood in advance; for instance, a stock’s value tomorrow might be drawn from a normal distribution with a known mean and variance. Without the assumption of omniscience, the Austrian school faces the important question of how people can make economic decisions in a complex, uncertain world.
Ludwig von Mises’ answer (see his 1920 essay, Economic Calculation in the Socialist Commonwealth) was that capitalist entrepreneurs calculate in monetary terms. That is, they use the prices of the immediate past as their starting data, and attempt to direct factors of production in such a way as to maximize the spread between costs and revenues. If their predictions of price changes are good, they earn profits. If their predictions are bad, they earn losses. Thus, their direction of scarce resources is subject to immediate and consequential feedback allowing a selective process for only the best entrepreneurial forecasting methods. Without monetary exchange and prices, the problem of directing factors of production to their highest uses becomes intractable.
An interesting thing about Mises’ calculation argument is that it does not only relate to socialism, but to free, capitalist societies also. Mises states that, “Economic goods only have part in this system [of monetary calculation] in proportion to the extent to which they may be exchanged for money.” Thus, when a good cannot be exchanged for money, for any reason, it is subject to a Misesian calculation problem. Continue reading Economic Calculation and Education→
In this episode, Ash Navabi discusses whether the Austrian School of Economics is a cult and the value of mathematics in economic theory. Ash is an economics student at Ryerson University.
Ash wrote an article responding to recent criticisms of the Austrian school by Keynesian bloggers Noah Smith and Paul Krugman. Krugman approvingly referenced Smith’s attacks on the “hermetic system that is Austrians.” Just a week later he made the following telling comment about the economics mainstream:
“And modern academic economics is very much an interlocking set of old-boy networks; to some extent this has become even more true since the decline of the journals, with most discourse taking place via working papers long before formal publication. I used to refer to the international trade circuit as the floating crap game — the same 30 or 40 people meeting in conferences all over the world, reading and citing each others’ work; it’s the same in each sub-field. And to some extent it’s inevitable: there’s so much stuff out there, and you have to filter somehow, so you mainly read stuff by people you know and people they tell you are worth reading.”
In this episode, James Caton discusses the classical and inter-war gold standards. James is an economics PhD student at George Mason University.
Gold has many qualities that make it an ideal money: It is valuable, scarce, divisible, and easy to transport. It is also easy to verify the value of a given amount of gold: The Old Testament references weights and scales being used to measure gold. Ancient people could verify the purity of the gold by observing its water displacement.