An independent agency, the Federal Reserve oversees monetary policy. Through its basic tools that recently have expanded considerably, it expands and contracts the supply of money and credit in the U.S. economy.
An Economic Question: You might enjoy visiting this Fed website to determine your own monetary response to different economic scenarios.
Some serious reading that relates to this economic humor might include Paul Krugman’s excellent NY Times Magazinearticle about saltwater and freshwater economists. As the cartoon says, “Um…It didn’t work…again…But the theory is still sound.”
And, for more background about the housing crisis, here, through their purchase of “toxie,” NPR’s Planet Money reporters tell the whole story.
An Economic Question: How would you interpret “the first economist” cartoon?
In 1810, Nicholas Appert, a cook and bottler, inserted some food in a Champagne bottle, sealed it, and placed it in boiling water. Described by James Burke in Circles: Fifty Roundtrips Through History, Technology, Science, Culture, a French newspaper said that this new way to preserve food “brought spring and summer to winter.” (p. 40) It also brought Appert a prize of 12,000 francs from the “Society to Encourage French Inventors” (an approximate translation).
But that was only the beginning. From champagne bottles, the tin can was only an idea away. Developed in Great Britain by a gentleman who obtained Appert’s patent, the tin can enabled a British ship captain, looking for the Northwest Passage in 1818, to carry a supply of carrots and peas, gravy and roast veal.
Fast forward to 2011. You will enjoy looking at a more recent innovation, a “robot” that dispenses ketchup (aka the Heinz Automato).
The Economic Lesson
In an Econtalkinterview, George Mason University’s Robin Hanson explains that our interpretation of the impact of technology on economic growth depends on the time frame. Viewed in smaller increments, like the past century, we see relatively consistent growth rates of maybe 4%. However, when we step back and look at the past 10,000 years, then growth patterns look quite different. Instead of a consistent march forward, we see growth spurts. For example, the onset of farming represented a growth spurt as did the Industrial Revolution.
Hanson believes that as each new spurt fueled future growth, the standard of living improved much faster than previously. Consequently, a current spurt could have an immediate impact. His name for the growth spurt phenomenon is technological singularity.