What does the world cost? Oh well, then we'll just take a small coke.

Monday, March 03, 2008

Todd's Economics

Todd is studying for a big examination in his tough economics course. He doesn't particularly enjoy studying, but he still finds his book or notes open in the oddest of places. This morning, he takes Gregory Mankew's Macroeconomics with him to the bathroom as he puts in his contact lenses. With one eye focused on the Cobb-Douglas Production Function, he places a thin film of soft plastic over the other. The process is painful, awkward, dangerous and inconvenient, but it is efficient and brings more utiles (units of utility) than waiting to read the book until the vision of both eyes is corrected.

Todd begins his day with a number of basic assumptions. His zero assumption is that everything will be recounted in the present tense. This assumption is self contradictory, but Todd doesn't let that minor difficulty discourage his believing. Todd sometimes wonders why this fundamental presupposition isn't given the number 1, but he doesn't let this undirected curiosity distract him from his list of assumptions.

Assumption one is that darkness follows periods of light. While this has been observed, it cannot be proven predictively. Therefore, Todd assumes it.

Todd's third assumption, and one that always makes his father laugh, is that people are rational. Todd doesn't understand why this assumption is so funny.

Assumption four is that all assumptions are exogenous, meaning they don't make any sense.

Assumption five is that more assumptions can be made at any time, with little or no warning and that these assumptions can augment or weaken preexisting assumptions. That is, no assumption goes assumed.

At breakfast, Todd pulls out his notes from a lecture about population. The lecture focused on an English demographer (someone who studies demons), but Todd forget the name and thumbs through his notebook to refresh his memory. With his free hand, Todd shovels cereal into his Malthus.

Todd groans at the pun and then checks his watch. Language class is in forty-five minutes and Todd debates the marginal advantage of attendance. Todd has already skipped class twice this semester, a behavior that puts him squarely in the "poor student" bracket. Todd takes out a piece of paper and quickly graphs a model of the Marginal Product of Attendance (MPA). Todd enters arbitrary values for each of his graph's four inputs and looks at the result with a frown. Todd erases his inputs and enters new arbitrary values. With a satisfied grin, Todd leans back and finishes his cereal.

Todd puts a third tick mark on the blackboard above his fridge.

Todd goes alone (Solow) to his computer to check his email. A classmate sends him a competitive study challenge. Apparently studying alone brings all the dangers of monopoly: High prices, less output and, worst of all, incessant loneliness. Todd objects that the addition of a second student would actually be an oligopoly since perfect competition requires a large number of students.

A third classmate joins the discussion and a triangle is formed. The Harberger Triangle.

Todd groans again and navigates to the online study notes. Demand for the site exceeds the supply of bandwidth and the page takes a while to load. Todd guesses that too many students are trying to access the page because of the demand created by the examination but considers other options. Perhaps the site is undergoing renovations and no longer has the supply to handle the same number of accessing students. Or, alternatively, the university has imposed a quota on simultaneous website to reward those who don't wait for the last minute to study and thus kept the market from clearing. Or...

The doorbell rings, waking Todd from his causation reverie. It's Janet. She wants to go to the library to work on the exam. Todd doesn't like the library. The busyness creates a confusion that reduces his overall study output and his tastes and preferences are better satisfied by a quiet room, alone with his Macintosh.

The mental mention of busyness draws Todd's mind to the professor's lecture on business cycles and Todd absently shuts the door without an explanation for Janet. Even though no words are exchanged, Janet understands that Todd is in the valley of his cycle and does not take offense. She also knows Todd can be a very nice person at his peak. After all, Janet is an economics major.

Todd is beginning to feel dismal. All economies will end up stagnant according to David Ricardo and it won't matter anyway because we will all be dead in five generations (prediction made circa 1798).

With a sigh, Todd puts aside his study materials and grabs his coat. Language class is in ten minutes and he doesn't want to be late.


Anonymous said...

"...thou art beside thyself; much learning doth make thee mad."

Matthew said...

Posts like these are what makes FCN great.

Anonymous said...


Anonymous said...

(wow you sure can't please everyone)

So wait he went back on all his calculations in the end?