Brian Goegan Presents

Macroeconomic

Principles

Welcome!

A Tale of Two Questions

A Prologue for Macroeconomics

Guess the Country

See if you can guess what country I am describing below:

Average income is about $5,000 per year.
Life expectancy is around 54 years.
About 55% of homes have indoor plumbing.
Only about 60% of children are enrolled in school.

What do you think? Take a guess.

Reveal the Answer

Surprise, surprise! Its a trick question!

The answer is the United States of America in 1915!

Economic growth has lifted millions of ordinary Americans out of poverty. But it wasn't always this way.

Why are we so rich?

For almost all human history, the typical person lived on about $3 per day in consumption, give or take a dollar or two. That is in today’s dollars. That's living in the present day United States and your $3 per day is all you have for food, clothing, shelter, and everything else. Of course, we hear about the kings and aristocrats and the other select few who lived at a higher standard, but these were few and far between. Much more common were the typical farmers, and laborers, and slaves who spent most of their lives producing and consuming just enough to keep on living.

This chart shows the average annual income per person worldwide from 10,000 B.C. to 2020 A.D.

Then, in the late 18th century, that started to change. First in Britain and the Netherlands, and then all over Europe and in the colonies descended from them. For the first time in human history, the typical person was lifted out of poverty. And it wasn’t like the world had been without progress before. History is littered with flashes of genius, innovation, and invention, but those small flames of economic growth were always snuffed out by an increasing population. So why, then, when it happened around 200 or so years ago, did the fire stay lit? And why Britain? Why not France, or China, or Ancient Rome? And why has it still not spread everywhere?

Most people haven't even thought about this before. We tend to think that humans just made a little progress with each generation and eventually we got to where we are now. But the truth is that we are living in the blip of time just after an economic explosion unlike anything in history. And we best figure it out why it happened unless we want to see the flame snuffed out again!

Why does it keep going wrong?

As the late poet Notorious B.I.G. said, “It's like the more money we come across, the more problems we see.” Throughout history the wealthy have seen their fortunes grow in a flash only to disappear just as quickly in financial calamities. But innovation has made us all rich, and now we are all subjected to the ups and downs of the market.

The business cycle, as we call it, is the unsteadiness of our economic growth. Fits of exuberant growth are followed by devastating downturns, which fling people by the millions back into poverty. Sometimes the downturns are small, and sometimes they are large. But after the 19th century saw dozens of these horrible swings, the policy-makers of the 20th century started to try and solve the problem. Have they? Certainly, the 21st century has already seen some wild swings, from the financial crisis of 2008 and the "Great Recession" to the sharp movements during Covid-19 Pandemic. The question remains: Is there something we can do to stop these downturns from happening, or recover from them sooner?

This course sets out to answer two questions:

Why are we so rich?

Why does it keep going wrong?

Here is the honest answer...

We don't know. Unlike the Standard Model of Particle Physics or Climate Change, there is no grand consensus, though we do have some leading candidates. In the chapters that follow, you will explore those theories and the evidence in their favor as well as the evidence still left unexplained.

Why?

You are probably taking this course because someone is requiring it of you. So, what is the value? What will you gain from taking this course? Frankly, I don't think this course contains material essential to your life. You don't need to know any of this to be more productive in any job (other than mine) or in life. Personally though, as a person who is just interested in the world, I think this course absolutely *rules*! It was one of my favorites in college. But that isn't a good enough reason to make you take it. So... why?

Chesterton's Fence

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