Economics for Dummies
January 1 2002 by Joe Queenan
As always, the world held its breath to see who would be awarded the Nobel Prize for economics. The winners, George Akerlof, Michael Spence, and Joseph Stiglitz, were honored for their groundbreaking work in the field of markets with asymmetrical information.
According to the Royal Swedish Academy of Sciences, Akerlof had demonstrated how “a market where sellers have more information than buyers about product quality can contract into an adverse selection of low-quality products.” Spence had identified “an important form of adjustment by individual market participants, where the better-informed take costly actions in an attempt to improve on their market outcome by credibly transmitting information to the poorly informed.” Stiglitz showed how “poorly informed agents extract information from the better-informed.” With this kind of heavy artillery, it’s surprising these guys didn’t win long ago.
Because the Nobel Committee is notoriously tight-lipped, the general public never finds out who finished second in the voting. But CE has found the runners-up, and we offer some explanation for why they didn’t win.
Second Place. Dr. Tyler Mintz, a Seattle economist, was the first to pinpoint a correlation between the current slowdown in the software business and the proliferation of coffee bars. In his 1999 book Economic Consequences of the Latte, Mintz pointed out that as software designers reach age 30, they massively reduce their daily java intake. This is a result of gastrointestinal disorders induced by drinking 15 cups of espresso during critical debugging periods when they never get any sleep.
To wean themselves from espresso, programmers begin drinking cafÃ© lattes. But lattes are 90 percent milk and lack the jolt provided by unalloyed caffeine. This makes people who are already mellow even mellower and contributes to a decline in the quality of their work. Mintz believes that the only way the software industry can snap out of the doldrums is by firing everybody over the age of 30 or anyone who drinks tea, especially chai. Because of the civil liberties implications inherent in this thesis, the Nobel Committee has resisted honoring Mintz.
Third Place. Tank McGilley, an economist at the University of Texas-Corpus Christi, is renowned for his work in the field of sports economics. While researching his book Why the Yankees Always Win, McGilley found that baseball teams that spend huge amounts on players (the Yankees, Braves, Indians, Marlins, Diamondbacks, Mets) eventually win at least one pennant, unless they’re the Houston Astros. Since the Astros’ money is as good as anybody’s, and since the science of economics does not allow for such intangibles as “bad karma” or “choking,” McGilley concludes that their inability to win proves that markets are not logical and that economics makes no sense. McGilley recently abandoned the field to become a Web site designer. For obvious reasons, the Nobel Committee is unlikely to honor this fascinating maverick now or ever.
Fourth Place. Alfredo Gutteriez, an economist at the University of Vera Cruz, proved that Paraguay has no economy. Formerly a consultant with the International Monetary Fund, Gutteriez charges that the inflationary convulsions that are such a fixture of the Paraguayan economic landscape create an illusion of flux and disequilibrium suggesting an economy in disarray, when in fact no economic infrastructure of any sort exists. Because such a thesis is an affront to the proud people of Paraguay, and because two members of the Committee have condos in Asuncion, Gutteriez’s odds of winning the Nobel Prize are miniscule.
Fifth Place. Victor Schultz, a Chicago interest rates forecaster, has long been obsessed with the question of whether Milwaukee would ever have become famous were it not for its breweries. By utilizing retroactive regression analysis of the alcohol industry dating back to fifth century Burgundy, Schultz proved that by creating a huge blue-collar demographic, the rise of the beer industry prevented Milwaukee from attaining the status it should have achieved as an artists’ colony. All but one member of the Nobel Committee thinks this theory is stupid, and even he isn’t completely sure.
Joe Queenan is a regular columnist for CE. He makes no claims about the accuracy of this column, only its humor.