Thursday, January 20, 2011

Interdependence Updated

I'm sure many of you are familiar with I, Pencil. You may even use it to demonstrate the gains from trade and increased standard of living or to demonstrate the value of interdependence. I have used it and continue to use in appropriate circumstances.

Here is a new twist from TED Talks (HT to Carpe Diem). You can call it I, Toaster - Attempted. It offers a new view on an old concept. 

Share your thoughts. Do you like one better than the other?  Why?

Monday, January 17, 2011

The Imaginot Line

Foreign Policy has a very engaging article on the recent financial crisis and central banking (HT Arts & Letters Daily). The article compares the faith in central banking prior to the crisis to the faith of the French nation in the Maginot line prior to World War II.

The article notes there are reasons to quibble over the comparison, but it is a good place to start when thinking about how we place our faith in institutions (rules and organizations) and that can impact our choices - for good or for ill. I recommend it.

Comparative Economics

In the next couple of weeks those of you teaching macro will begin examining national economies. Sometimes it is hard for students to understand how large the U.S. economy is compared to many other nations. Consequently, it can help for them to have a comparison.

Over the past few years, there have been numerous charts like this one from The Economist (HT to Carpe Diem). It compares the GDP of a number of countries around the world to the GDP of the 50 states. In each case it's a close match. But what makes this version different is that it then also allows you to compare the state population to the populations of various nations. It's very interesting.

Sunday, January 9, 2011

Money & Central Banks

I don't know how many of you generally listen to National Public Radio's This American Life.  I don't always catch it, but I usually enjoy it when I do.

This weekend they had a really interesting episode on What is Money? It does a good job explaining how money is just a tool and has value only to the extent that we believe in it. The episode began when a number of NPR reporters started to wonder about the money that was "lost" in the recent down market.  It meanders through how Brazil addressed its inflation problem in the 1990s by creating a virtual currency. And it winds up with a discussion on how the Federal Reserve usually creates money and what it did differently during this last crisis (think "lender of last resort").

It will take you an hour to listen to, but it will be worth your time even if you only get some great short anecdotes to use in your classroom.

Let me know what you think.

Wednesday, January 5, 2011

Tragedy of the Commons Meets Institutions

There are always lots of examples when discussing the tragedy of the commons. But today's edition of The Wall Street Journal has a new take on an old issue - fishing. The story (free content at this writing) is about fish migration in the Bosporus - that narrow stretch of water near Istanbul that connects the Black Sea to the Mediterranean.

It seems that the annual fish migration has drawn fishermen for centuries. But in recent years, the take has been diminished – a classic example of overuse of a common resource. But what makes this story a little bit different is the institutional twist. Turkey is seeking admittance to the EU. The EU may put restrictions on Turkish fishing as a condition of admittance. (Remember, rules set up the incentives that impact decision-making.) Turkey doesn't think limits are warranted. But there are ethnic issues involved, as well. (Cultural norms are part of the institutional matrix.)

The article also has a slide show and brief video to accompany it. I think you'll find it a worthwhile resource.