cartoon macro excerpt

8/11/2019 Cartoon Macro Excerpt

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The

cartoon introduction to economics

volume two: macroeconomics

By Grady Klein and Y oram Bauman , P h .D.

the Worlds first and only Stand-up Economist


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contents

Introduction, page 3

Trade and Technology, page 89

The Role of Government, page 73

Unemployment, page 17

The Classical View of Trade, page 99

Money, page 31

Complications, page 111

Gross Domestic Product (GDP), page 59

Foreign Currencies, page 139

Inflation, page 45

Foreign Aid, page 125

Chapter 1

Chapter 7

Chapter 3

Chapter 9

Chapter 2

Chapter 8

Chapter 4

Chapter 10

Chapter 5

Chapter 11

The End of the Business Cycle? page 153

The End of Poverty? page 167

The End of Youth? page 193

The End, page 207

page 219

The End of Planet Earth? page 179

Chapter 12

Chapter 13

Chapter 15

Chapter 14

Chapter 16

Glossary

Chapter 6

PART ONE:a single

macroeconomy

PART Three:global macroeconomics

PART TWO:international trade


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chapter 8 The classical view of trade

The economy is like

a well-oiled machine...

...and trade gives ita turbo boost!


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100

Trade is prettyawesome... ...Just like

technologicalprogress!

If a foreign country can supply uswith a commodity cheaper than we

ourselves can make it ...

The way that classical economists like Adam Smith look atinternational trade is simple and powerful ...

...and comes directly from the view that the macroeconomyis like a well-organized family .

Although trade creates losers as well as winners ,classical economists focus on the gains to society as a whole .

... better buy it [from] them with some part of the produce ofour own industry, employed in a

way in which we havesome advantage.

It is the maxim ofevery prudent master

of a family... ...never to attempt to

make at home what it willcost him more tomake than to buy .


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101

Congratulations,you win the

Nobel prize!

classical economists also emphasize that trade betweentwo countries can benefit both countries.

In 1817DAViD RiCARDOs theory of COMPARATIVE ADVANTAGE showed thatthese MUTUAL BENEFiTS are possible when countries are DiFFERENT ...

...but modern economists believe that MUTUAL BENEFITSare possible even when countries are SiMiLAR .

Paul Krugman won the 2008 Nobel Prize for his work in this area.

Just like tradebetween two

people...

...can benefitboth people!

PORTUGAL has agood climate forgrowing grapes.

swedes makevolvo s .

germans makebmw s .

we can bothgain from

trade!

england has agood climate for

growing wheat.

Lets trade bottles of wine for bags of flour!

And if we ever starttrading with other planets ,

I can explain that too!


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102

...but you can also easily see the benefits of trading with other countries ...

the benefits of trade are most obvious when you thinkabout families trading with OTHER FAMiLiES ...

Without you,mrs. taylor,my life would bethreadbare!

look, here comesMonsieur Chapeau!

Oh, bless your soul,Mr. Shoemaker.

without the french,I dont know howwed get AHEAD.


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103

...or evenwith aliens.

Take me to yourleading economist.


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104

im better off,and so is my new

friend zantrok! Zeekrox floudz,hoogha hoo

ghow zgr steve!

...then this alien encounter would be

pretty awesome for both sides .

...and if both sides engagepeacefully in free trade ...

If we encounter beings fromanother planet ...

You might not think that Adam Smith would have much to say about aliens ...

...but in fact classical economics teaches usan important lesson about interstellar trade:

life on otherplanets?

im still getting usedto the idea of life insouth america.

or if they encounter us!

... And NOBULLYiNG!

Want thiscandy bar? Then you have to

TRADE ME for it...


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105

We earthlings would benefit regardless of whetherthe aliens were LESS ADVANCED than us...

Plus there would be added benefits fromsharing new varieties of food and arts.

...OR MORE ADVANCED.

Cancer? Heck, wecured that eons ago.

need a hand with that?

can you believe thatthe price of admission is

just one avocado?

Whatsan avocado?

Life was much harderbefore we humans

discovered the planetGxhsnael!

Life was much harderbefore the Gxhsnaeliansdiscovered planet earth!


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106

of course, there would be a downside:interstellar trade would createLOSERS as well as WiNNERS.

but Classical economists respond toconcerns about OUTSOURCiNG ...

...by pointing out that FAMiLieS engage in OUTSOURCiNG too.

whether youre a family, a country, or a planet,outsourcing allows you to focus on what youre good at.

nothing ismade on planetEarth anymore.

its no wonderyou lost your job.

My jobgot outsourced

to Xanrak 7!

Thats why there areso many families named

Shoemaker and Taylorand baker ...

well, You dont bakeyour own BREAD,

do you?! ...and so fewfamilies namedEverything.

well makejetpacks...

...and well allgain from trade!

...well makepharmaceuticals...

We do?how?


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107

the idea that OUTSOURCiNG iS GOOD FOR SOCiETY

may seem shocking...

This also explains why classical economistsbelieve that the best thing about trade

isnt EXPORTiNG ......but IMPORTiNG.

As always, this classical view parallels the perspective ofa WELL-ORGANiZED FAMILY.

...but remember that classical economistsview the economy as a finely tuned

job-creating machine.How can it begood when i

lose my job? No big deal, theeconomy will create

a new job for you!

...but Whats reallygreat is all the COOLSTUFF we can BUY.

Everybody alwaystalks about how trade

CREATES JOBS ...

so The only reason toget a job working forSOMEBODY ELSE ...

Theres always workto do here at home .

...is to get moneyso you can BUY

STUFF!


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108

...like currency manipulation ...

The classical view of these activities is that youSHOULDNT WORRY ABOUT THEM.

...and dumping .

theyre exporting ray gunsto us at prices below their

cost of production.

...theyre trying tosteal the market!

Thats dumping , andthats not fair ...

Currencymanipulationand dumping are good for us.

Classical economists also take an unexpected positionon issues of unfair competition ...

Theyre keeping their

currency artificially cheapto promote their exports!

E x c h a n g e $ 1 f o r . . .

.6 6 .7 8

8 6 1 5 0

p o u n d s E u r o s Y e n

g l a k o n s


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109

And once again there is a parallel with families.

as with outsourcing, this classical view is driven bya confident attitude about job creation ...

...and by a focus on imports , not exports.

Currency manipulationand dumping mean thatwe pay less for the

stuff we want!

would you complain ifmr. shoemaker was

selling you boots at pricesthat were too low?

well, no.

duh.

then Dont worry,be happy!

We earthlings might have to stopmaking ray guns, but the economy

will create jobs elsewhere.

its creativedestruction!

o n s a l e ! 1 4 9 ,9 9 9 g l a k o n s

( o n l y $ 9 9 9 .9 9 !! )


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110

As well see in the next chapter, this classical perspectivecan be a little simplistic .

nonetheless, classical economics contributes valuable ideas todiscussions of free trade, whether its with a neighboring planet ...

...or with a neighboring household or country .

Why fight alienswhen we can trade

with them?

commerce...ought naturallyto be, among nations,

as among individuals...

On the one hand ,theres the classical

view of trade.On the other hand ,

there are somecomplications .

What aboutthe 3rd, 4th,

and 5th hands?

...a bond of union and friendship ...


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