Economics with a side of friesYou know how I am about food, so it's no surprise that I like analogies about food. In How Did Economists Get It So Wrong? by Paul Krugman (NYTimes.com), there is a great parable that uses an analogy about ketchup. Admittedly, ketchup isn't central to the point of the example, but I like it anyway.
Finance economists rarely asked the seemingly obvious (though not easily answered) question of whether asset prices made sense given real-world fundamentals like earnings. Instead, they asked only whether asset prices made sense given other asset prices. Larry Summers, now the top economic adviser in the Obama administration, once mocked finance professors with a parable about “ketchup economists” who “have shown that two-quart bottles of ketchup invariably sell for exactly twice as much as one-quart bottles of ketchup,” and conclude from this that the ketchup market is perfectly efficient.The article is good overall beyond the reference to tomato sauces: it's a discussion of two major rival economic theories, one of which insists that the market always balances itself out (which, under current circumstances, involves some wild rationalizations for our current lousy situation), and another that says that the market sometimes needs help.
It's amusing to read about economists who think that unemployment is 100% voluntary, and was even during the Great Depression, until you realize that some people listen to their advice.
posted by Arlene (Beth)10:00 PM
Thursday, July 12, 2007
It must be summer: the tomatoes are FABULOUS. At my favorite co-op grocery store, there were no fewer than SIX varieties of heirloom tomatoes on display. Green striped, red ruffled, yellow round, yellow ruffled with red stripes, red, and red-green (which sort of look black from a distance, but up close you can see that they really are a deep red and green combined).
Oh oh oh oh oh.
Dinner tonight: locally made onion and red chard ravioli topped with a fresh sauce of minced garlic sauteed in extra virgin olive oil with shredded fresh basil leaves, added to diced yellow heirloom tomatoes (round, lemon-colored) and heated gently, so the tomatoes just release their juices.
posted by Arlene (Beth)10:44 PM