Saturday, July 23, 2011

Economics with a Beat

If you've been following even a little bit of the fight going on in Washington over the debt ceiling (and who hasn't), you might be having a hard time understanding what is so hard (and who doesn't). Yes, there is bloat and waste in a thousand places in the government which could be trimmed. But also, yes, there are loopholes and inequities in the tax code which could be closed to raise additional revenue. Common sense says that grownups would look at the situation, understand the need for action and the necessity for compromise, and meet somewhere in the middle. But this is Washington: common sense doesn't necessarily prevail.

The key to understanding why the two sides can't seem to come together lies in their underlying philosophies: it's less about the actual numbers, more about the approach. A front page story in The New York Times called it "A War Over Government." White House correspondent Jackie Calmes wrote, "President Obama wants deficit reduction, including tax increase for wealthier Americans and corporations. Congressional Republicans... want a vastly smaller government constrained by lower taxes. The two are not the same thing."

So what exactly is the theoretical base that drives each side? Well, if you didn't sleep through Econ 101 (and I hate to say it again, but who didn't) you would have focused on two of the key theorists of the modern era. That would be John Maynard Keynes, a British economist who advocated for central control of economies through the use of fiscal and monetary policy, and his counter, Fredrick Hayek, an Austrian economist who was a proponent of free markets.

Of course, those are simplified summaries. To understand it, you need to dive into the details, dealing with phrases like "aggregate demand" and "price stickiness"(Keynes) or "inflationary credit expansion" and "catallaxy"(Hayek). Tough sledding for most. And even if you did manage to keep your eyes open through class lo those many years ago, it was, well, lo those many years ago. I can't remember where I put my keys, let alone economic theory touched upon briefly when I was twenty.

That's why I'm thankful for John Papola and Russell Roberts. Papola is an award winning producer/director in broadcast entertainment and marketing, while Roberts is a professor of economics at George Mason University. Seeking to learn and understand more about the economy, Papola stumbled upon Roberts, his blog "Cafe Hayek" and his podcast "EconTalk." Papola approached Roberts about collaborating on a video that would explain economics in an entertaining way. And that led to in 2010 to "Fear the Boom and Bust," and in April of this year "Fight of the Century."

Styled as rap battles between the Keynes and Hayek, the lyrics tackle the underlying theories of the two. In "Fear the Boom and Bust" Keynes kicks it off: "BOOM/1929 the big crash/We didn't bounce back—economy's in the trash/Persistent unemployment, the result of sticky wages/Waiting for recovery? Seriously? That's outrageous!" Hayek responds: "Whether it's the late twenties or two thousand and five/Booming bad investments, seems like they'd thrive/You must save to invest, don't use the printing press/Or a bust will surely follow, an economy depressed." Together, they sum it up: "We've been goin' back n forth for a century/ [Keynes] I want to steer markets/ [Hayek] I want them set free/There's a boom and bust cycle and good reason to fear it/[Hayek] Blame low interest rates./[Keynes] No it's the animal spirits."

In "Fight of the Century" the two are called to testify to Congress. The ranking member of the panel raps to them, "Which way should we choose?/more bottom up or more top down/the fight continues/Keynes and Hayek's second round." They continue to throw down, with Keynes rapping, "We could have done better, had we only spent more/Too bad that only happens when there's a World War/You can carp all you want about stats and regression/Do you deny World War II cut short the Depression?" Hayek's answer: "Wow. One data point and you're jumping for joy/the last time I checked, wars only destroy/There was no multiplier, consumption just shrank/As we used scarce resources for every new tank." The gallery nods and bobs to the beat, including a Ben Bernake look-alike in the front row, who turns out to be Papola's father.

Former New York Governor Mario Cuomo famously said that you campaign in poetry but govern in prose. I don't think I ever heard him say you create monetary policy in committee, but rap it in hearing room. But perhaps he should have. Papola and Roberts have done what very few can do: make economics entertaining and understandable. Now, if they could only come up with a similar effort to help me understand synchronized swimming, I'll be all set.


Marc Wollin of Bedford thinks he took Econ 101, but then again, maybe not. His column appears regularly in The Record-Review, the Scarsdale Inquirer and online at

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