Rap Video Update

I used this in Principles of Macro class on Friday. Immediately following this we watched "The Battle of Ideas" on Hayek and Keynes from the Commanding Heights series.

Hilarious. Reminds me of the dorm room debates from grad school--mixing a healthy dose of comedy into the weighty issues of the day. Provocative and witty.

For any future vids, I haven't seen anyone suggest yet that the creators do an "Alfred Hitchcock" and include themselves in a quick cameo appearance!

Dang it, I've been doing all of those things. I can't fricking read the news without saying, "it's stimulus season" and "the market coordinates time with interest".

Showed it to an MBA marketing class, with my opinion that this is the future of economic education for the masses. Of course, we first watched this: http://globaleconomicanalysis.blogspot.com/2009...

Have you considered entering this in The Sammies, a contest for free-market activism? There's a video category:

Video: Know how to edit video? Have the skills to go viral? An award for an exceptional online video that accessibly presents the ideals of liberty in relation to a contemporary issue: $3,000."

http://thesammies.com

Some fine moments that I don't think others have noted: the Bastiat reference to the broken window, "Say it loud, say it proud, we’re all Keynesians now," the "pols with machinations" line, "The market coordinates time with interest" is quite pithy.

Overall, the party/hangover metaphor worked quite well with the lyrics and the narrative, as well as fitting in with typical music video visuals.

The first time I watched it I exclaimed "Hey, that's Mike Munger!" (limo driver). A nice touch indeed. I've only read Mike's pieces on EconLib and heard him on EconTalk, so I guess I've seen his photo there. It was a "geek cameo" of sorts.

In a short op-ed in the Boulder Daily Camera I wrote:

To deliver the change he promised, the president should have showed Congress a rap video: "Fear the Boom and Bust" by EconStories.tv. With insight, wit, and rhyme, Friedrich Hayek explains how Keynesian fiscal policy fuels economic booms and busts. "It's legit, it's really good rapping," Ke$ha told NPR."

http://www.dailycamera.com/editorials/ci_14295796

Brilliant!

The video that appears at the top of the 'Related' Videos:

Miley Cyrus POLE DANCES at Teen Choice Awards . . .

I wonder how many more hits on their official web site? Do they count? I'm sure the grand total is far more than 500k...

i think the vid just great. great idea and great production, most importantly the rap is actually good

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” F A Hayek

But most of the economist did nothing to tell the financial regulators how little they really knew about risk when they designed capital requirements for banks based on favoring what is perceived by some human fallible credit rating agencies as Triple-A... which led the world directly over the badly awarded subprime mortgages cliff... a crazy bank regulatory paradigm that still is alive and kicking... and that most certainly must have poor Hayek screaming and rapping bloody murder in his grave out of sheer frustration with his disciples.

I did like the touches. The FED is the bar Ben Bernake and Tim Geitner were the Bar tenders giving stimulus shots. Keynes had stimulus shots but Hayek abstained. Keynes had a stimulus hangover with (inflation stagflation) but Hayek did not...

This is the best economics music video of all time...

It's probably the ONLY economics music video. .... unless you want to count some of Rush's songs, e.g. The Trees.

When I shared it with my friends one replied "wow your really embracing your inner nerdy white boy..."

I loved the video. You are correct - I can't get the tune out of my head. I've told at least 10 friends about it. And I want a coffee mug too!

A black and white filmed bluegrass ballad should be next.

No, no and no.

But I still think it is very cool.

Russ, I'm shocked at how good it came out. When you said you were doing it I didn't expect it to be this good. Every aspect is done extremely well. The rhymes, cinematography, the rap video cliches, the symbolism, the actors are great... bravo, sir... bravo...

The place you should study isn’t the bust
It’s the boom that should make you feel leery, that’s the thrust
Of my theory

great rhyme there

"Prepare to get schooled in my Austrian perspective!"

4-5 times a day, that runs through my head. Mighty fine...

I listen to it roughly three times a day. A great blend of beat, rhymes, and visuals make it intriguing.

Sadly, I'm not into rap.

Have you considered, say, the Levitt/Lott controversy as folk ballad?

How about a version with subtitles? (Sorry, posted this on the other comment thread also)

Let me recommend getting this on iTunes.

How? I'm up 4 it.

356k hits? Tammy Wynette has 2m hits.

http://www.youtube.com/watch?v=DwBirf4BWew

;-)

Give 'em 4 years and Russ & Co. will have a record cut too.

I want more. More economists, more fresh beats. When can we get it?

Needs more cowbell.

Also, I would have rhymed "macro" with "whacko" rather than "off track" (at 1;22).

Just trying to keep it real.

It's in my five star iPod playlist.

It was "Off track.... yo": the "yo" contributed by the back-up rapper track. :)

I watched it until you had them claim that Keynes thought that savings was a bad thing.

You know that is not true and I challenge you to show where Keynes ever siad it.

You are entitled to your opinion and your analysis, but not your own facts.

You expect to much from an economics rap. I would like to see most people achieve the same level of accuracy, listenability, & credibility as Russ has.


And its not as if Russ does not to cater to higher levels. So
if you want a detailed discussion the paradox of thrift hop over to Econtalk podcasts, and listen to the one with Farazzi.

That's a little harsh. He's referring to it in the context of the paradox of thrift, which Keynes did in fact popularize.

http://en.wikipedia.org/wiki/Paradox_of_thrift

They clearly took poetic license in certain parts of the song and simplified things, but I challenge you to popularize macroeconomics and do it better than Russ and John did.

It's poetic license, but the context was extremely unclear. You cannot come out of this video with a fair understanding of Keynes, I don't think. In that sense I agree with sfe.

If you go into this video with a fair understanding of Keynes, I think you can genuinely appreciate the video, appreciate the poetic license, and recognize it's created by a Hayek fan.

But it's not a good educational tool insofar as people are not going to get a good view of Keynes if they didn't already know about him. If people who have no knowledge of Keynes watch this there is absolutely no doubt they will come out of it with a completely distorted sense of what he thought.

I'm all for popularizing economics.

But I'm more for intellectual honesty.

I've seen this claim about Keynes made by several libertarians recently
and it is just plain dishonest. At best it just shows that they do not really know what they are talking about.

I just completely fail to understand why so many libertarians think they have to lie to support their political philosophy. If I had to do that I would seriously reconsider my beliefs. It is why I have generally quit reading Cafe Hayek.

Moreover it is obvious that you do not understand the paradox of thrift.
The paradox of thrift as advanced by Keynes is that under certain conditions everyone trying to increase their savings leads to a smaller supply of savings. The paradox of thrift says that smaller savings is a bad thing. Just the opposite of what you are seem to think or understand.

Paradox of thrift ... "everyone trying increase their savings" ... EVERYONE ... please ... this is Hayek's point that aggregate reasoning is just plain wrong. Their is no intellectual dishonesty in the claim, just Keynesian refusal to let go of aggregate level reasoning.

Fine, you want to believe that 2 + 2 = 5,

that is your right.

Meanwhile, the rest of the world will go with 2 + 2 = 4.

Just do not be surprised when no one takes you seriously.

You take interpretive rap lyrics out of context, interpret them, and then sling accusations of intellectual dishonesty when the message you infer does not literally appear in Keynes' work. You lose.

Yes, I know,do not confuse you with the facts.

Thanks to a popular online encyclopedia...

For although the amount of his own saving is unlikely to have any significant influence on his own income, the reactions of the amount of his consumption on the incomes of others makes it impossible for all individuals simultaneously to save any given sums. Every such attempt to save more by reducing consumption will so affect incomes that the attempt necessarily defeats itself. It is, of course, just as impossible for the community as a whole to save less than the amount of current investment, since the attempt to do so will necessarily raise incomes to a level at which the sums which individuals choose to save add up to a figure exactly equal to the amount of investment.
—John Maynard Keynes, The General Theory of Employment, Interest and Money, Chapter 7, p. 84

That is exactly what I said the paradox of thrift was.

I'm sorry if you can not understand good writing.

"the reactions of the amount of his consumption on the incomes of others makes it impossible for all individuals simultaneously to save any given sums. Every such attempt to save more by reducing consumption will so affect incomes that the attempt necessarily defeats itself."

I can't possibly see any interpretation of that other than the way it was interpreted in the video. Maybe you have some sort of special insight on Keynes that just about every Keynesian economist Samuelson to Krugman missed, if so, congratulations.

This is Keynes explaining an economic theory.

It is not Keynes saying that savings is bad which is what the video says
and a new meme that has been taken up recently by libertarians.

If I say that gravity has the same impact on a pound of feathers as on a pound of lead I am not making any statement about what I think is the right way for gravity to act. If Keynes develops a theory that explains why the economy in the early 1930s was not acting the way classical economic theory says it should be working he is doing just what any scientists does, observing reality and developing explanations.

In no way is Keynes Paradox of thrift an expression of what he favors and in no way does it support the statment that Keynes thinks savings is a bad thing.

Remember, you are defending a PhD economists telling an audience that more than likely has never read Keynes and has never been exposed to his theory something that he knows is not true.
He is deliberately misleading the audience and producing a highly biases, misleading and intelligently dishonest production.

I"m sure your mother would be so proud of you adhering to the good communist strategy that the ends justify the means.

Where does the rap claim "that Keynes thinks saving is a bad thing"?

When he says "savings is destruction/that's the paradox of thrift". That's not the paradox of thrift. It could be accepted as a heavy artistically licensed version of the paradox of thrift, but the point is if someone comes into the rap not knowing what the real paradox of thrift is, they're going to be mislead by that line.

This is where it would be good to have Professor Roberts explain his intent.

My initial though is that when there is a downturn, this means that the widespread urge to reduce consumption is destructive of economic growth because business is dependent upon sustained consumption.

It does need to be explained better.

Keynes is almost incomprehensible to me here, but Hayek seems to exaggerate the significance of conventional "savings" and the relationship between the interest rate and demands for deferred consumption or expectations of future consumption. Saving may equal investment in some strict, technical sense, but monetary authorities (creditors) can entitle investment exceeding the total of differences between current individual income and expenditures. They do it by predicting increases in productivity.

Current "saving", in the conventional sense of individual income less individual expenditure, is not equal to investment. Investment is credit extended with an expectation of future production. If every individual spends every dime of his own income as soon as he receives, this credit could and presumably would still exist, because creditors can still "create money" denominating the value of future production exceeding production, and this monetary expansion requires no inflation fundamentally. The expansion doesn't require a central banking system. It can and does occur in decentralized monetary systems as well, as under a gold standard.

The video emphasizes the most important distinction between Hayek and Keynes, Keynes' privileged role for state spending in economic recovery, particularly state spending financed by borrowing from conventional "savings". This state spending is not necessary for economic recovery at all and seems more likely to impede recovery. Recovery requires expansive credit, but extending this credit to central authorities, with corresponding protection for creditors, is incredible folly.

Seems to me that paradox of thrift means that if everyone increases their savings during a downturn, there will be a reduction in demand for credit (because they reduce consumption).

A reduction in demand, sans intervention, should mean deflation, which would mean that people could increase savings AND maintain consumption. The goods with the least demand would drop in price the most. On the other hand (OTH), people do not stop eating, etc.

The theories extant at the time of the great depression led to massive destruction of value and obstruction of value creation.

I think Keynesians understand a command economy, but do not quite comprehend the NATURAL functioning of the market, hence their tendency to undervalue the significance of the bubble before the bust.

Keynes statement above does seem rather incomprehensible, as if he knows what he means but doesn't know how to say it.

Seems to me that paradox of thrift means that if everyone increases their savings during a downturn, there will be a reduction in demand for credit.

Real saving is the other side of the credit coin. A saver is a creditor. If everyone demands less credit, how are the savers extending more credit?

Credit is not simply, or primarily, about consuming now and paying later. Credit can finance future production, to create a future income stream, not to finance current consumption.

Suppose I can take a lucrative job in the city, many miles from my home, only if I buy a car, and I can afford the car only if I take the job. I can't pay cash for the car, but I can obtain credit. This credit does not simply finance my consumption. It finances my production. I'm actually richer after the borrowing, because my purchase of the car is not consumption. It is investment.

Suppose I already have the car and the job in the city. I decide that I want a boat. The boat is purely recreational. It doesn't increase my productivity or contribute to my income stream in any way. Maybe it even makes me less productive, since it distracts me from more productive employment, but I want it anyway. I can't pay cash for it, but I can obtain credit. This credit simply finances my consumption. It leverages my current income without contributing to it, so insofar as my boat depreciates as I pull it off the lot, I'm poorer, in strictly financial terms, after the borrowing. I'm presumably happy to exchange financial wealth for the boating pleasure, so I'm not poorer in more general terms, but I am poorer in financial terms. That's essentially what "consumption" means.

A reduction in demand, sans intervention, should means deflation, which would mean that people could increase savings AND maintain consumption.

Inflation is a general fall in prices, the price of what I sell as well as the price of what I buy. If prices generally fall, then the price of my labor falls. If the price of my labor falls, my income falls. If my income falls, I can't necessarily maintain my consumption, while saving, even if other prices also fall.

The goods with the least demand would drop in price the most. On the other hand (OTH), people do not stop eating, etc.

People do stop eating, but when people stop eating, all bets are off. If the value of my labor falls below my own subsistence, resources titled your "property" are fair game. When I'm starving, I couldn't care less how you label things. In this environment, the most valuable commodity is a gun, and titles change less predictably.

The theories extant at the time of the great depression led to massive destruction of value and obstruction of value creation.

"Obstruction of value creation" is a nice phrase.

Keynes statement above does seem rather incomprehensible, as if he knows what he means but doesn't know how to say it.

He seems to make a zero-sum assumption, by assuming that "total savings", or the total of differences between individual income and expenditure, must equal total investment. That's just not true. I can invest without any monetary income at all, as when I buy the car by borrowing promissory notes from a gold banker before starting my job in the city.

My credit doesn't really come from the banker's gold. The banker may issue notes far exceeding a volume of gold in his bank vault, as long as my purchase of the car really does add value to my labor without the car, because the notes denominate the value of synergy between my labor and the car, not the value of gold in the banker's vault.

The banker's notes aren't necessary at all for that matter. The seller of the car could extend me credit directly, simply allowing me to take possession of the car and pay him in installments later. In this scenario, the seller essentially creates the money himself and lends it me so I can then use it to purchase the care from him.

In principle, I could even build the car myself before taking the job. In this scenario, I extend myself credit, to purchase my own labor from myself, until the car is completed.

I know you get that already, but it's worth repeating.

Inflation is a general fall in prices

I expect you meant "DEflation".

Errr ... yeah. Thanks for catching that.

Yes, thanks for expanding.

I've been trying to figure out what Keynesians don't get, why they are so dismissive of the Austrian explanation of what I think should be called the Monetary Cycle theory rather than the business cycle theory.

DK dismisses the Austrian theory with a straw man by suggesting that the ABCT claims that monetary expansion is the ONLY cause of economic downturns.

How is it that Keynesian theory can so occupy the mind as to cause its holder to gloss over the obvious and ignore the fundamentals?

Is it merely because they are so strongly invested in directed order that they don't wish to see the alternate view?

Do I dismiss it that way? I've always said I'm fine with ABCT, I just don't think it encompasses all the sources of downturns. Specifically, it obviously doesn't speak to downturns caused by demand shocks or inflexible interest rates. I don't ever remember "dismissing" ABCT, just not being unduly impressed by it.

Well, it does get squeezed to the point where the reply button disappears.

Naturally, there are various schools that are contrarian, but I don't endorse contrarianism for its own sake, but when needed to oppose infringement on human freedom, hence I much prefer libertarianism to Marxism. Contrarianism is not a purpose and I do not propose it as such. Perhaps I rely too much on context.

I prefer the Austrian school because it is explicitly contrarian TO political construction of social and economic evolution.

Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed.

ABCT is not intended to encompass all sources of downturns, the intent of ABCT was to explain downturns that were described merely as a mysterious "business cycle". Up to the development of ABCT, apparently no one ever thought to examine the role of central banking and monetary policy in these downturns.

Fans of "planning" seem to believe that downturns can be "planned out" of the economy. Mises proposed, essentially, that the planning itself had a role. Little wonder that fans of "planning" go to lengths to dismiss ABCT, for their attachment to hierarchical planning endures regardless of their perpetual failure to produce intended results, particularly smooth economic functioning.

OK - well it strikes me as an incomplete analysis of business cycles too. That doesn't mean I've ever thought or suggested it was a bad analysis (at least I don't think I've suggested that).

Do you really think they were the first to examine that? That conclusion goes back at least as far as Sismondi (an important inspiration for Keynes), if not further. It's hardly Austrian in origin, although they do share that. You also see central bankers themselves expressing these concerns (for example, Benjamin Strong). Strong's concern about the role of banking and credit in business cycles doesn't pre-date Mises's work - but it was soon enough after Mises's work (and Mises was unknown enough in the Anglo-American world at the time), that I think it's probably safe to say that Strong came to those conclusions independent of the Austrians.

I can't personally speak for fans of planning, but your characterization of them strikes me as a caricature. I haven't heard anyone suggest that downturns can be "planned out" of the economy. I have heard people suggest (and I concur) that we can ameliorate and reduce the incidence of downturns. That seems like a very different claim, though.

I can only give my impression, as there are, of course, a wide variety of beliefs to be found even in homogeneous groups.

Fans of central planning often suggest the reason we haven't reached a directed nirvana is because of those who resist direction, that if we had the "Right" people in power, then the evil obstructionists would be swept aside and there would be free, quality, and abundant health care, etc., for all.

Of course, such beliefs tend to be fairly vague and ill thought out, but the reason many favor central planning is that they do not desire to take responsibility for their lot in life.

Others just think they are smart enough to decide who's smart enough to make and implement a well though out plan.

Anyhow, while there may have been concern about central banking and banking monopolies, including Jefferson, it seems to me that Mises, informed by earlier thinkers, fleshed out the so-called business cycle into a thorough explanation of boom-bust cycles induced by excessive monetary/credit expansion.

It is not an explanation of the meaning of life. It merely provides a strong critique of monetary policy liberated from competition. As such, it is highly favored by those who also critique strong political authority, just as Keynesianism is favored by those who benefit from the credit monopoly.

It was a long time before I understood what people meant by "credit monopoly".


There is a polarization inherent between those in power and those who want to be in power, but there is also a polarization between those who are either in , or desire to be in power, and those who do not wish to be subject to those who desire to wield power over others.

It has often been the experience of libertarians to be subjected to offense by both left and right, and most often by characterizing libertarians as being of the left or right. This has shifted somewhat in more recent years to the general perception of libertarians as being more of the right.

Hmm... perhaps. It just seems to me that you have a lot of options - such as Sismondi a century before the Austrians - that offers a similar credit expansion explanation of business cycles, but also offers a much richer collection of additional explanations. I'm currently reading through Reinhart and Rogoff's new book right now, and you get the same thing - a very clear recognition of the role of credit and banking in business cycles, but they don't hang everything on that. It seems to me that understanding of credit can be found lots of places - it's not anti-Keynesian certainly - so I'm less inclined to get too excited about a theory that focuses so exclusively on it. I just prefer a richer explanation, but as I've said - that's not to say I don't acknowledge the value of ABCT. It's just always struck me as (1.) unoriginal to begin with, and (2.) very resistent to change in the face of new evidence (unlike Keynesianism, for example, which has gone through a lot of changes over the decades). I suppose that may be due to the epistemology of the Austrian school, which makes it inherently resistent to change and adjustment.

I'll venture further to suggest that the ABCT is not the central thesis of the Austrian school of economics, but rather is the central critique the Austrian school makes of credit monopoly.

TO my thinking, the Austrian school is school is about the natural functioning of the market and the role of entrepreneurial activity in economic growth. As such, it is an observational school with only one prescription: let it be.

As I have said, Keynesian fits well with "managed" economies such as we have in the U.S.

I suspect the big thing about the Austrian school is opposition to central management of economies, in that sense, it doesn't change, just as the Keynesian school is unchanged about the appropriateness of political intervention in the economy.

Perhaps Keynesian thought has had to evolve because previous applications haven't borne the desired fruit.

The Austrian school hasn't had to suffer such feedback as yet because there's been no real free market model implemented to show its flaws. Yeah, I know there's been a lot of talk from time to time about "free markets" in America, and even the implementation of libertarian policies (!?) at the highest levels, but no, there's been no free market.

From the earliest days of the republic, there has been some form of political intervention to prevent a free market, yet THAT is what the Austrian school champions.

I'm talking about flaws in the Austrian understanding of the operation of the economy, not about flaws in Austrian prescriptions for the economy. If that's what you're talking about, we've no more had "Keynesian" policy than we have had "Austrian" policy.

I'd like these flaws elucidated.

Any prescriptions that are implemented should be thought of as "political" prescriptions with any adjective used is merely for purposes of misdirection or cover.

So what is the Keynesian critique of political direction of the economy?

RE: "So what is the Keynesian critique of political direction of the economy?"

Keynes pointed out two problems quite explicitly in the General Theory: first, it would be contrary to human freedom, and second it would inefficient (p. 380). I'm not aware of any Keynesians that would disagree with him on these two points - are you?

That's the part that politicians would ignore.

That's why I prefer the Austrian school; the much larger emphasis on human freedom. It is a contrarian school in this world and the world need more contrarian sentiment, I think.

:) Marxism is contrarian, but I don't think that's a sufficient reason to buy into it. Hell - until recently Keynesianism was contrarian too.

Now what we got here is a failure to communicate.

No, seriously, that's what the problem is. People use words differently. They mean different things in different contexts.

You're clearly right, sfe, that Keynes was not opposed to "savings," but it would be equally accurate to say that Keynes was opposed to the act of saving in certain circumstances. Take off that last little qualifier ... or put it in a context:

Savings is destruction, that’s the paradox of thrift

... and he was "opposed to the act of saving."

How does one get past these difficulties? Intellectual curiosity and discussion. The video can't be everything to everyone. It can't lay out economic theory in precise, rigorous detail.

I recommend you take the video for what it is, and you provide your input in a constructive and precise way.

After all, your claim that "[Russ and John] had them claim that Keynes thought that savings was a bad thing" is just as misleading as you allege the video to be.

I'm new here; found this site because of the video. I've watched it twice. I think my favorite lyric is Hayek's, "I want them set free!" Good stuff!

"...have you memorized the words yet? Watched it more than ten times?..."


While I understand Russ's enthusiasm about the video (it is indeed a great one), he must be confusing his audience with the drones watching MSM.

Or people who enjoy karaoke...


......not that I am one of those people or anything!

Hadn't visited the Cafe in a few months with other things keeping me busy, but the video is a GREAT re-introduction to a great site. I've already posted it on my Facebook page and shared it on some of the local forum sites I frequent as well. Might have to e-mail it to some of my econ professors as well!

Oh, and I have almost watched it 10 times already. And it's stuck in my head -- bouncing around when I walk singing the chorus under my breath as I move about the house today!

Russ, when is the EconStories online store coming? I want me a coffee mug with that Hayek quote on it.

I find myself chuckling at random moments, especially about some of the clever small jokes in the video. For example, "The General Theory" in place of the Gideon bible, and Hayek's introduction to the hotel receptionist: "F.A. Hayek.... with an 'H.'"

+1! That was clever. Roberts's book, The Invisible Heart has many such clever and witty moments so it surprises me none that the video would have joke in it as well.

I agree, the bible bit was golden.

It's been in my head all week.