An excellent point

A physicist, a chemist and an economist are stranded on an island, with nothing to eat. A can of soup washes ashore. The physicist says, “Lets smash the can open with a rock.” The chemist says, “Let’s build a fire and heat the can first.” The economist says, “Lets assume that we have a can-opener…”

The punchline suggests that instead of solving problems, economists just assume them away. But the real work of economics actually comes after the initial assumption. A real economist goes “..then if we had a can opener, we would be set. So let’s go make a can opener.” The joke misrepresents the work of economists by focusing on “opening a can” — a task that has neither ambiguity nor great subtlety. On these issues, of course the hard sciences will be superior. But what if we asked a different question such as “how should we reduce carbon dioxide emissions”? In this case, there is no clear answer. But the economist would go “let’s assume there were a price to carbon. Then the first welfare theorem means there’s no inefficiency. So let’s go price carbon!”

10 thoughts on “An excellent point”

  1. God help ’em on the island if there’s more than one economist. Better to go with the rock than starve to death listening to the argument.

  2. “how should we reduce carbon dioxide emissions”

    Not a good example because the first question is “should we reduce C02 emissions”

    First the case for reduction having net beneficial effects has to be considered (it barely has been. CO2 rise significantly improves crop growth and we humans generally prefer warm to cold) then whether there are easier/cheaper ways of getting the same effect (stratospheric sulphur is orders of magnitude cheaper). Then, if the answers were other then they are you would start looking into cost/benefits of method (in which case a nuclear powered world would be the answer).

  3. A good economist on the other hand would know that you can’t “price carbon” other than as a good for sale in a free trade.

  4. The task isn’t opening the can. The task is getting edible food.

    The mis-identification of the task in the analogy is bad as the mis-identification of the task in the real example (as per Neil’s comment.)

    I would expect that the core task is “for a given definition of ‘benefit’ and a given population, what should we do to maximise net benefit for that population?”

    And, I suspect, that for any complex situation the answer approximates to “let them get on with it themselves” or, in other words, “nothing!”

  5. If they’ve only got one can of soup between three people on a barren island, they’re fucked anyway. Hopefully they’d stop fiddling with the can and look to construct some sort of fishing apparatus.

  6. “A real economist goes “..then if we had a can opener, we would be set. So let’s go make a can opener.” ”

    Despite the physicist already having suggested a means to open the can.

    I don’t think the joke goes where the author thinks it does, otherwise what the economist said is largely redundant. The economist is thinking of future problems by assuming the current ones are solved. Opening and heating have been taken care of. What comes next: Is it worth eating? An old tin could be corroded or long out of date and lead to poisoning. Something in it might cause one or more of them to have a fatal allergic reaction. Check the tin first and if it looks okay only then spend time and energy getting into it.

    With the carbon dioxide analogy the economist assumes the physicist has shown the consequences of rising CO2 emissions and the engineer has shown how to reduce them. The economist can then show whether it is worth doing.

  7. How would the can wash ashore unless there was some air in it?

    Economists might be useful as food tasters, but in this case I think you might find yourself with rather fewer economists in the medium term.

  8. “Back in the 1920’s, it was thought that monetary policy should ease during the boom and tighten during the bust. This was called the Real Bills Doctrine, and ended up amplifying the business cycle.”

    From the linked blog, this is one of the most asinine things I’ve ever read. Never have I seen the phrase “Real Bills Doctrine” misused so egregiously. The linked blog that he cites for support is even worse. I’ll defer to someone else.

  9. The physicist and the chemist should use the rock to bash in the head of the economist, who they then eat. The soup can be used for a starter, if they can ever get the tin open.

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