[Connel Fullenkamp] I'd like to introduce
to you the world's first-and-only stand-up
economist, Dr. Yoram Bauman!
Give it up!
[Yoram Bauman] Thank you!
Thank you very much.
It is a pleasure to be with all of you here
tonight.
Last night I was over at UNC.
What a bunch of sore losers.
My name is Yoram Bauman.
I do appear before you this evening, ladies
and gentlemen, as the world's first-and-only
stand-up economist.
Thank you.
It's a niche market.
I really have one thing going for me as a
stand-up economist, and that's low expectations.
I will tell you the first joke I ever told
on stage, which was when I told my father
I was going to be a stand-up economist, he
said, "Yoram, you can't be a stand-up economist.",
and I said, "Why not?", and he said "Because
there's no demand."
It gets better.
I said, "Don't worry, dad.
I'm a supply-side economist.
I just stand up and let the jokes trickle
down.
I believe in the Laffer curve."
It's just actually my joke so I can test how
much economics you all know.
And then I kind of arrange the rest of the
routine accordingly.
I'm giving you all about a six.
That's pretty good.
You know, people say that economics and stand-up
comedy don't have very much in common, but
I just want to emphasize that that is totally
not true.
In both cases, nobody likes to sit in the
front row.
So thank you for making me feel at home.
Many people are surprised that I make a living
doing stand-up comedy about economics.
In fact, the most common question that I get
is, "What do you really do for a living?"
I really do this for a living, and people
are sort of curious about what economics comedy
is all about, so I'll share a couple routines
with you.
I want to start with this one here, "When
Life Gives You Lemons."
You know, there's this phrase in English,
"when life gives you lemons, you should make
lemonade," make the best of a bad situation.
I spent the last 20 years living in Seattle,
and there's a Seattle band that's called Fly
Moon Royalty that has a song called "Lemonade,"
and some of the lyrics kind of put this nice
capitalist twist on this phrase "when life
gives you lemons."
So the lyrics are "when life gives you lemons,
you can go and build a lemonade stand, sell
it for $1.50, guaranteed to put a little cash
in hand."
And I thought this was kind of this nice capitalist
twist on the phrase "when life gives you lemons,"
so I started thinking about what other economic
ideas we could convey with variations on the
phrase, "when life gives you lemons."
So, for example, you can compare going to
get an MBA, a business degree, with going
to graduate school in economics.
So you when you've got a business degree when
life gives you lemons, you should go and corner
the market for lemons.
When you go to economics graduate school,
when life gives you lemons, you should go
and read the market for lemons: Nobel Prize-winning
paper by George Akerlof.
In microeconomics when life gives you lemons,
you should consider a world with only two
goods: lemons and everything else.
You know, show the budget constraints shifting
so that you can reach a higher indifference
curve.
Your extra credit assignment here is what
happens if lemons are a bad rather than a
good.
In macroeconomics when life gives you lemons,
you should show the impacts using an ISLM
model, and the extra credit assignment here
is to come up with clever terminology that
allows you to call it an "ISLemon model."
In development economics when life gives you
lemons you should find 50 similar villages
in Kenya, randomly divide them into two groups,
give lemons to one of the groups, and then
you wait six months and then you write a paper
for the JDE.
And finally, the European Central Bank version
is that when life gives you lemons, you should
ask the Germans what to do.
So that's an introduction to some economics
comedy.
Before I go any further I should show you
my t-shirt.
This is my "enjoy capitalism" t-shirt.
It's made in China.
If you look at the tag on the back it was
actually made out of 80% cotton and 20% irony.
Dry clean only.
I got started doing standup comedy about economics
partly because my academic career didn't go
quite as well as I had hoped, but also when
I was in graduate school I wrote a parody
of the 10 Principles of Economics in a popular
textbook, and it ended up on the internet
and here I am.
I'm going to share that routine with you,
if you've seen it then there's some new stuff
coming.
This is Mankiw's Principles of Economics translated,
so for those of you who don't know, Greg Mankiw,
Harvard professor, wrote one of the best-selling
economics textbooks in the world, and it's
based on these 10 Principles of Economics.
Now I know there's a lot on the screen, but
I generally encourage folks not to even try
to read all of this.
Just take my word that you pretty much need
a Ph.D. in economics to understand these 10
principles.
Unfortunately I have a Ph.D. in economics,
so I've taken it upon myself to translate
these principles for the rest of humanity.
You're welcome.
We're going to begin by separating them into
the first seven principles, which are microeconomics,
and the last three, which are macroeconomics.
The difference, as PJ O'Rourke once said,
being that microeconomists are wrong about
little things, and macroeconomists are wrong
about things in general.
We are going to begin with the macro economics
principles eight, nine and 10.
Now believe it or not, these all have the
exact same translation, namely, blah, blah,
blah.
I can see some of you have studied macro economics.
As proof, I need only remind you that macro
economists have successfully predicted nine
out of the last five recessions.
As further proof, we can go up one font size.
Now let's go back to the micro principles.
Now the first one, people face trade offs.
This is really one of the most fundamental
ideas in economics.
The translation is very simple, right?
Choices are bad.
This is a simple syllogism.
Trade offs are bad.
Anytime you have choices you have trade offs,
therefore choices have to be bad.
If you don't understand that, take a look
at the second principle.
The cost of something is what you give up
to get it.
Translation, choices are really bad.
Now I have a little demonstration of this
fact to share with you.
Let's say that someone offers you a Snickers
bar, right, that you value at a dollar.
Alright, [inaudible 00:07:05] you can loosely
think of as your economic profit in this situation
is the dollar of the Snickers bar minus the
cost of what you give up to get it, which
is nothing, your economic profit is ... Don't
all answer at once.
A dollar.
Very good.
Now to begin to understand why choices are
bad, imagine that someone offers you a choice
between the Snickers bar that you value at
a dollar and some M&Ms that you value at $.70.
Now your economic profit is the dollar minus
the $.70, only $.30.
You begin to understand why choices are bad.
The worst possible situation, in fact, is
being offered a choice between a Snickers
bar and an identical Snickers bar, because
then your economic profit is zero.
Right, now people who are not trained in economics
might say that that's no different than just
being offered one Snickers bar, but that kind
of sloppy thinking will never get you a tenure-track
position.
I occasionally get emails from faculty members
and they're like, "I'm going to put that thing
with the Snickers bar on the final exam and
have the students explain what's wrong with
it."
Then they always email me back a week later
and say that they didn't do it because they
couldn't figure out the answer.
There is no good answer, people.
Choices are bad.
Choices are really bad.
I'm not going to beat around the bush with
you folks.
If you don't understand why choices are bad,
you're probably stupid.
Moving on, principle number three.
Rational people think at the margin.
Translation, people are stupid.
Now it is immediately obvious that people
do not think at the margin.
Nobody goes to the grocery store and says,
"I'm going to buy an orange.
I'm going to buy another orange.
I'm going to buy another orange."
That joke only makes sense to Econ majors.
People don't think like that.
But if people don't think at the margin, and
if as Professor Mankiw says, rational people
do think at the margin, we are led to a most
unhappy conclusion.
People are not rational.
People, in other words, are stupid.
Before you despair for humanity, take a look
at the next principle.
People respond to incentives.
Now the dictionary says that incentive is
a noun and it's a synonym for motive.
When Mankiw says that people respond to incentives,
what he's saying is that people are motivated
by motives.
You may think this is a bit like saying that
tautologies are tautological, right?
I mean, people would have to be pretty stupid
to be unmotivated by motives.
But remember principle three, right?
People are stupid, hence the need for principle
four to tell us that people aren't that stupid.
Alright, moving on to every economist's favorite
topic: free trade.
Principle five, trade can make everyone better
off.
Translation, trade can make everyone worse
off.
Henceforth known as the Trump translation.
Now you may wonder how it is possible that
the translation of principle five is the opposite
of the principle itself.
I have a simple proof of this fact that will
blow your mind.
I want you to compare two statements.
One of them is, "Trade can make everyone better
off."
The other one is, "Trade will make everyone
better off."
Now if you had to pick one of those two statements
to put in your best-selling economics textbook,
it's no contest.
The second statement is clearly stronger,
but Professor Mankiw uses the first statement
instead.
If you think about why, there's only one possible
explanation.
The second statement has got to be wrong.
In other words, trade can make some people
worse off, and from there it's just a hop,
skip and a jump to trade can make everyone
worse off.
I figured some of you would have some questions
about this, so I added a footnote with some
details.
Eat your heart out.
Now that we cleared that up, I want you to
see the last two principles.
Markets are usually a good way to organize
economic activity.
Translation, governments are stupid.
Governments can sometimes improve market outcomes.
Translation, governments aren't that stupid.
Follow immediately from principle five and
its translation.
If trade can make everyone better off, what
do we need government for?
Just let people trade.
Governments are stupid, but if trade can make
everybody worse off, we better have a government
around to stop people from trading.
There are the 10 Principles of Economics translated
much better than what we started with, I hope
you'll agree, and part of what I want you
to notice here is how subtle economics is.
People are stupid, but they're not that stupid.
Governments are stupid, but they're not that
stupid.
The only thing that's not subtle in economics
is that choices are always really, really
bad.
I filmed a video of this a couple years ago,
put a video up on my website and on YouTube,
not thinking all that much of it.
I'm a little embarrassed to say that it has
now passed a million hits on YouTube, which
is a lot for economics jokes.
Not a lot for videos about puppies, but it's
a lot for economics jokes and many of those
hits are because the video was posted on Greg
Mankiw's blog.
It turns out that he's a fan of my parody.
Either that or else he comes from the school
of there's no such thing as bad publicity.
In fact, I got to perform in his class at
Harvard.
It was the last leg of my 2008 Supply Side
World Tour, which was mostly a trip to Israel
with my father, but as long as I was there
I did some comedy in Europe and then I stopped
off at Harvard on my way home.
Originally he wasn't going to tell his students
that I was coming.
He just said there was a surprise guest who
was coming to class, but then he had to tell
them that I was coming because some students
went to his office hours and said there was
a rumor going around the Harvard campus that
then Fed Chairman Ben Bernanke was coming
to class.
I'm going to be serious for a couple minutes,
then I will go back to telling you jokes.
I'm going to be serious for a couple minutes
because this example in this footnote is actually
a real example.
As economists, we spend a lot of time talking
about how trade can make lots of people, sometimes
everybody, better off, but it's actually possible
at lease in theory to have a situation where
trade makes everybody worse off, and since
this relates to the work that I do on climate
change and carbon taxes and stuff, I'm going
to talk you through that just for a minute
and then I will go back to telling you jokes.
I'm going to tell you a made-up story about
these three people.
We're just going to call them Orange, Pink
and Blue.
Orange, Pink and Blue live in a small town.
The small town has an air pollution problem,
so think Beijing, but with three people, because
models are simplifications of reality.
Each of these three people each have a garage
that's full of stuff that they don't use.
Now we're going to see some trades, so first
Orange is going to sell a lawn mower to Pink,
and the story I'm going to tell you is that
Orange is not using this lawn mower, she sells
it to Pink for $100 and Pink would be willing
to pay $200 for a lawn mower, so they each
get $100 in net benefits.
Orange from selling this lawn mower for $100
that she's not using, Pink only has to pay
$100 for a lawn mower that she values at $200.
The trouble is that when Pink starts using
this lawn mower which Orange wasn't using,
creates a little bit of air pollution around
the town.
Maybe you can monetize the health impacts,
asthma, missed days of work and school, stuff
like that.
Maybe you could monetize those health impacts
at $80 per person.
Not just for Orange and Pink, but also for
Blue, so the impact on Blue is what economists
call a ... An externality, a negative externality,
because Blue is external to the trade between
Orange and Pink, but note that Orange and
Pink each get $20 in net benefits from that
trade.
They may not know about Blue, they may not
care about Blue, so that trade could still
make sense to them.
Now I'll tell you a very similar story about
Pink, who's going to sell a motorcycle to
Blue.
They each get $100 in value from that trade.
Pink's not using this motorcycle, she sells
it for $100.
Blue is willing to pay $200, she only has
to pay $100, so she gets $100 in net benefits,
but when Blue starts using that motorcycle,
air pollution gets a little worse.
Maybe an additional $80 in healthcare costs
for everybody, and now you just complete the
circle.
Blue is going to sell a chainsaw to Orange,
don't ask why.
They each get $100 in benefits.
Air pollution gets worse, another $80 in healthcare
costs for everybody.
Now if you just add up any one of these columns,
you see that after all three of those trades
together, everybody ends up at -$40.
I do all sorts of college shows.
I get all sorts of answers to that question,
like "Zero," or "-$100."
Math is hard.
-$40.
This is the Tragedy of the Commons, the Prisoner's
Dilemma if you're familiar with those ideas.
Right?
The economics here is that each person's trades
are individually rational.
If you ask any of these people if they want
to take back any of the trades that they made,
they'll say no because each trade they make
leaves them $20 better off.
But altogether, the trades end up hurting
everybody.
If you want to belabor the point and make
a connection to climate change, you could.
I don't know, like label the people.
This is in very broad strokes what economists
are concerned about when it comes to climate
change.
Everything you need to know about climate
change in just a couple of slides, and then
I will go back to telling you jokes.
We have this fact that carbon concentrations
in the atmosphere are going up, primarily
due to human activity, burning fossil fuels
and deforestation.
Then we have this theory that says that if
carbon concentrations go up, then global temperatures
are going to go up.
This theory actually pre-dates Al Gore.
They laughed at that joke more in Texas.
It goes all the way back to this fellow, Arrhenius,
who was a chemist in Sweden and in 1896 he
made the first estimate of how much global
temperatures would increase if we doubled
CO2 in the atmosphere, which we're on track
to do kind of the middle of this century.
His estimate from 1896, about five degrees
Celsius, nine degrees Fahrenheit, is actually
still pretty close to the range that climate
scientists talk about today.
The big difference between where he was then
and where we are now is that he thought that
climate change was going to be awesome, because
he lived in Sweden at a time when the economy
was dominated by agriculture.
These days we tend to be a little more worried
about rising sea levels, ocean acidification,
extreme weather events.
In any case, we have been running this experiment
on planet Earth for the last 150 years or
so, and here are the results of the experiment.
The blue dots are measures of global average
temperatures for individual years.
The red bars are 10-year averages from the
1880s up to the 1970s, and then there's the
1980s, the 1990s, the 2000s, the first part
of this decade.
Temperatures I would argue are going up pretty
much in line with the projections of climate
science.
Now if you happen to not believe that humans
are partly responsible for increasing global
temperatures, I will try to find common ground
with you anyway.
The common ground comes from the way that
economists think about pollution problems,
which is that the way to get less pollution
is to make polluting expensive because when
you make polluting expensive, you get market
forces working to promote conservation, innovation,
development of new technologies, all the things
that I at least as an economist love about
capitalism.
What I work on when I do series economics
work is using the tools of economics and the
power of capitalism to protect the environment.
A couple of policy tools to talk about, like
a carbon tax or an auction cap and trade system,
but the point of those policy tools is to
drive up the price of fossil fuels.
Now this is generally the part in my talks
where people stop laughing, because it's hard
to convince people that we should be paying
more for gasoline and electricity and things
like this, but there is a side benefit to
these policies, other than the main benefit
of potentially saving the world.
The side benefit is that if you do these policies
right, you generate a pile of revenue.
The idea that I work on and talk to folks
about is that we could be using most or all
of that revenue to reduce or eliminate existing
taxes.
It's called environmental tax reform or tax
shifting or revenue-neutral tax swaps.
The idea being that if we had higher taxes
on things we want less of, like carbon emissions,
then we could afford to have lower taxes on
things we want more of, like jobs and income
and savings and investment.
It's an idea that has support from across
the political spectrum, even from folks like
George Will, conservative columnist for the
Washington Post.
He came to one of my classes a couple years
ago.
He doesn't, or at least at the time, didn't
believe that humans were partly responsible
for increasing global temperatures, but I
asked him if he would support replacing part
of the payroll tax, part of the employment
tax in this country with a carbon tax, and
he said that he was all for it because he
hates the payroll tax.
At the time unemployment was 8%, like I hate
the payroll tax and Al Gore hates the payroll
tax.
Al Gore says we should tax what we burn and
not what we earn.
I asked George Will what he thought about
the fact that he and Al Gore agreed on this
particular issue, and George Will said, well
he said, "An idea should not be held responsible
for the people who believe in it."
In any case, there's actually a place that's
actually done this.
The best climate policy in the world as far
as I'm concerned is in the Canadian province
of British Columbia, where they had a right
of center government that said, "Look, we
want to reduce carbon emissions but we don't
want to grow government," so they balanced
this carbon tax with reductions in other taxes.
Brian Murray here on campus is one of the
experts on this, the effects of this policy.
I was the founder and co-chair of the first-ever
carbon tax ballot measure in the United States.
It was the Initiative 732 Campaign in Washington
state.
If you want to go in-depth into the campaign,
then get into your time machine and go back
about six hours and come to the seminar that
I gave today at 10:30.
Or you might be able to find it or something
similar to it online.
But our policy was pretty similar.
It was a carbon tax, we cut the state sales
tax.
This was a pretty good policy, but it didn't
pass.
We ended up with 41% of the vote, which was
not bad for a first try.
We got some support from both the right and
the left, but we lost a lot of voters on the
right, perhaps more surprisingly to this audience,
we lost a lot of endorsements on the left
also.
The CR Club came out against our policy, Washington
Environmental Council, Governor Jay Inslee,
the state Democratic party, they all wanted
a revenue positive carbon tax, which led the
Washington Post to write one of my favorite
editorials of all time, "The Left's Opposition
to a Carbon Tax Shows There's Something Deeply
Wrong with the Left."
One could respond to this in all sorts of
ways.
I responded to this by leaving Seattle and
moving to Utah and registering as a Republican.
Thank you.
I just figured I'd had enough dealing with
left wing crazies who were opposed to climate
action, so I decided I wanted to deal with
right wing crazies who were opposed to climate
action.
Now I will go back to telling you jokes, ladies
and gentlemen, so thank you for putting up
with that.
The last couple years have been good years
for economics comedy.
Thank you.
I got to be on the PBS News Hour, for example.
Now I don't know how much you all know about
the world of standup comedy, but let me just
tell you this.
In the world of standup comedy, ladies and
gentlemen, it does not get any bigger than
the PBS News Hour.
I have been getting phone calls nonstop on
my rotary dial telephone.
It was actually pretty amazing.
They interviewed three economists on this
show.
They interviewed Robert Shiller, who won the
Nobel prize.
They interviewed Joseph Stiglitz, who won
the Nobel prize, and they interviewed me.
I felt like kind of a self-aware version of
Sarah Palin.
What did they ask?
My moment of TV fame on the PBS News Hour,
they asked if I had ever bombed on stage.
Alright, now a couple things about this.
First of all, I am not afraid of failure.
I'm an economist.
Secondly, I'm a professional comedian, so
if a joke doesn't work you just sort of keep
throwing stuff out there until you find something
that sticks.
Just basically the same thing that the Fed
and the Treasury did for the last seven or
eight years.
Finally, I had to admit on the PBS News Hour
that I had bombed on stage.
The worst show I ever did was in October of
2008.
Remember what was happening to the world economy
and the stock market in October of 2008?
It looked like we were going back into the
Great Depression, right?
October of 2008 I did a show in Colorado Springs
for a group of bankers.
Yeah, they were not happy campers.
Now I'm not allowed to tell you which bank
it was because I signed a non-disclosure agreement,
but let me just say that if you wanted to
figure out which bank it was, it wouldn't
be, well, so far to go.
Such a smart crowd.
It actually wasn't Wells Fargo.
That's okay.
Anyway, comedy is kind of a violent business.
Right?
Like if you're doing well, then they say that
you're killing.
If you're doing badly, then they say that
you're bombing.
I totally bombed that show, and I did so poorly
I actually spent a fair amount of time afterwards
sort of soul-searching, like trying to figure
out where had I lost the connection with this
audience of bankers in Colorado Springs in
October of 2008?
I finally realized that I lost them on my
opening line, and my opening line was, "Hey,
how's it going?"
Apparently it wasn't going very well.
I have since then, by the way, done a number
of other shows for banks and financial institutions
and they have gone much better, especially
because I have learned an important lesson.
I have learned to get paid in advance, because
you never know if the bank is going to be
there for you tomorrow.
The material that I've done is part of what
I like to think of as a renaissance in economics
humor.
The idea of a renaissance in economics humor
probably coming as a surprise to those of
you who know that renaissance means rebirth,
and had no idea that there was ever a first
birth of economics humor, but in fact there
was.
It was in the '70s and the early '80s.
It included papers like Paul Krugman's Theory
of Interstellar Trade.
This is a great paper.
You can find it on my website, StandupEconomist.com
or elsewhere.
Krugman of course, trade theorist, won the
Nobel prize for his work on trade theory.
He's also a big science fiction fan, so the
basic premise of this paper is assume you
have trade between solar systems, right, interstellar
trade.
Then presumably you have space ships that
are traveling close to the speed of light,
so you no longer have time simultaneity because
of Einstein and special relativity and all
that stuff.
The question he looks at in this paper is
which clock should you use to calculate interest
rates?
The clocks on the planet or the clocks on
the spaceship?
If you're into geeky stuff like that, whatever
you think about his politics, he's a great
writer.
Another paper from this time period is this
one, Life Among the Econ, by Axel Leijonhufvud.
I'll tell you about some more modern papers
in the world of economics humor.
Japan's Phillips Curve Looks Like Japan.
If you need a refresher on the Phillips Curve
idea, this was an idea that came out kind
of in the '50s and the '60s.
It said there was a trade off between inflation
and unemployment.
You could have high inflation, low unemployment,
or the opposite, but the idea was you were
always somewhere along that Phillips Curve
line.
Then in the '70s we had stagflation that combined
high inflation, high unemployment ... Rational
expectations adjusted, short run Phillips
Curves, stuff like that.
Anyway, this paper was written by a Canadian.
It is almost certainly the funniest thing
ever published in the Journal of Money, Credit
and Banking.
There's a link on the author's website to
the paper, and the link on his website says
that the title of this paper is also the abstract,
and frankly most of the text.
Which is something we should be aiming for
in all academic papers, I think.
The rest of the paper is taken up by this
graph here.
Just to explain what's going on, on the X-axis
we have the unemployment rate in Japan between
1980 and 2005.
On the Y-axis is the inflation rate.
Now for ease of viewing, the author's going
to rotate this around the Y-axis, and then
there's a map of Japan.
Extremely impressive research.
Great job market paper.
Another piece of economics humor I should
mention is this paper.
This is actually a real economics paper.
It's called, Can Financial Innovation Help
to Explain the Reduced Volatility of Economic
Activity?
A paper that was published in 2006, shortly
before financial innovation led to the greatest
increase in the volatility of economic activity
since the Great Depression.
You may think this bodes ill for the research
that was done by these scholars, but in fact
it's okay, I have tracked down the abstract
of this paper and here's the abstract of this
paper.
No.
No.
I can't.
You all have been awesome.
Thank you so much for coming out tonight.
Thanks to the economics department and everybody
else who's sponsoring this event.
Have a great night, everybody.
