Videos

The Numbers Game

Episode 1: How’s The Middle Class Doing?

Episode 2: The Paradox of Household Income

Episode 3: Do the Rich Get All the Gains?

Episode 4: Let’s Party Like It’s 1973!

It’s a Wonderful Loaf

Much of our daily life is the result of plans we make, followed by actions we take. If I want clean dishes, I have to intend to do them and then actually execute that plan using soap, water, and a sponge, or a dishwasher. The same is true of raking the leaves in autumn or shoveling snow in the winter. Or taking a trip to see a friend. Or changing careers. To make these things happen, we have to take charge. If we just sit back and wait for the dishes to climb into the dishwasher, we will wait for a very long time.

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Some things in our lives happen on their own without any person’s plan or action. No one has to lean into the curve to keep the earth on its orbit around the sun. I don’t have to remember to breathe when I wake. I don’t have to plan on sweating while I exercise. These things happen naturally without any intention. They are part of our natural world and we take them for granted.

But there is another category in our lives—things that are caused by humans but that aren’t the results of anyone’s intention or plan. The price of housing is higher in Washington, DC than in Wheeling, West Virginia. No one decrees that difference. But if you move from Wheeling to Washington you will find your rent is higher as if it were a law. Wearing shorts and a t-shirt to a funeral is a bad idea even on a hot summer day but who wrote the memo that makes that clear? On weekdays in major cities, people slow down at rush hour though every driver would prefer a different pace. These outcomes emerge from the individual actions of our fellow human beings but no one is in charge to steer them.

A pattern that emerges without coordination is called an emergent order. These bottom-up patterns often look as if they are designed or intended, but they are not.

The variety and availability of bread at decent prices in cities around the world is an example of emergent order. The variety and availability and the pattern of prices emerges from the interactions of the enormous number of people who want to eat bread or bake it, along with the multitude of people who use flour for some other purpose or who are allergic to gluten, or who want trucks to deliver pizza rather than bread and so on. Somehow, the actions of all these people fit together even though no one actor in this economic drama is in control. Day after day, the drama unfolds without a director or a script.

Emergent order doesn’t mean there is anarchy. The government’s legal system and public infrastructure underpin the process that allows the interactions between buyers and sellers to create the order that feeds the citizens of a great city. But there is no bread czar. No minister of flour. No wizard of wheat. Yet, somehow, my desire for rye doesn’t stop you from getting whole wheat. Your desire for whole wheat doesn’t make life hard for the pizza lover. And there is beer made from the same grain to go with the pizza if you want it. The harmony of our daily lives happens without anyone being in control of the overall outcomes.

It would be something of a miracle if such a bottom-up system, undesigned and unplanned by any human hand to achieve the ends it actually achieves, could do anything nearly as well as a system designed from the top down to achieve the same results. Yet something crazier is the case—the bottom-up system often outperforms the top-down system. Of course this isn’t a general rule—there are many results where a top-down approach is necessary to achieve a desired outcome. Think of national defense or pollution control for example. But that uncoordinated specialization and cooperation can emerge to satisfy the hunger of millions without centralized control has been a source of wonder going back to at least Adam Smith and his contemporaries.

The economist’s short-hand phrase for this phenomenon of bread being plentiful throughout a populous city is “the market for bread,” represented by a supply and demand diagram. While this representation is inevitably a crude simplification, it can help us understand the ways in which the price and quantity of bread respond to changes in the desires of buyers and the constraints facing sellers. Supply and demand can also help us understand the effects of various government policies—price controls, taxes, subsidies. This blackboard approach to emergent order has the great attractiveness of simplicity. There is much to learn from it. But it fails to capture the full richness of the process.

“It’s a Wonderful Loaf” is my attempt to capture some of what is magical about bread and other examples of emergent order. Here are some additional resources for those who would like to go deeper into the idea of emergent order and its application to economics. Many of these resources are embedded in this annotated text of the poem. Enjoy.

Fear the Boom and Bust

The 1st Keynes vs. Hayek Rap Battle

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Video Details

In Fear the Boom and Bust, John Maynard Keynes and F. A. Hayek, at the insistence of Lord Keynes, go out for a night on the town and sing about why there’s a “boom and bust” cycle in modern economies and good reason to fear it.

Fight of the Century

The 2nd Keynes vs. Hayek Rap Battle

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Video Details

This was my second rap video with John Papola. In this one we wanted to talk about how Keynes and Hayek might have felt about the Great Recession’s aftermath and the question of what government should and should not do to help recovery. Along the way they both speculate about government’s interaction with the financial sector leading up to the crisis. Was it too much coddling or too little regulation? Underlying it all is what we think of as the central question of policymaking–should we rely on order that emerges from the bottom up or that is imposed from the top down.

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