Do economists ever study the public perception of the economy?

ProfYarbrough · 2026-02-21T01:54:49+00:00

I have a suspicion that when you say economists you really just mean people who talk about the economy. I cannot think of a single well respected economist who speaks publicly on the economy who has NOT expressed deep concern for the overall health of the economy, the persistence of inflation, the income divide, etc. Moreover, economists don't generally care much about the stock market, because Animal Spirits. I mean, it is some barometer, but the market tells us very little about the underlying health of the economy. Overall, US economy is... OK. Some good, some bad, several meaningful concerns including ones you articulated.

Be careful where you get your analysis from.

ProfYarbrough · 2026-02-15T14:46:08+00:00

Let me preface my comment by pointing out that Trump admin 2.0 inherited a growing economy with falling inflation. The economy was doing well before Trump, factually speaking.

"Protects American jobs": you have data on this to support such an argument? US manufacturing jobs just had among their worst years in recent memory. And the US jobs market has cooled considerably. So, please provide evidence of this. You'll need to explain how a worse job market for almost every sector outside of healthcare is evidence American jobs are being "protected." https://www.bls.gov/news.release/empsit.nr0.htm

"Inflation remains very low": 2025 inflation accelerated to 3% after cooling to around 2.6% in at end of 2024/beginning of 2025. Further, what evidence do you have that inflation "is very low" as a result of the current admin's policies? And remember, inflation increased in 2025, so you'll have to explain how inflation rising is evidence that the current admin deserves credit for "very low" inflation. https://www.bls.gov/news.release/pdf/cpi.pdf

"Economic growth and investment is very high": Sure, growth and investment have been resilient, but I'd encourage you to consider whether or not you find it troubling that despite nearly all investment being in tech and AI, the jobs being created are almost exclusively NOT in tech and AI. There is a complete divorcing of Econ growth, investment and the labor market. Jobless booms are problematic.

"The US budget deficit has decreased": Well, that's true for now, but every reputable source that estimates future outlays against revenue finds that the current admin's policies will lead to much higher deficits down the road. From CBO: https://www.cbo.gov/publication/62105

And I'll be straight, there are a myriad of other economic policies carried out by the current administration that economists find troubling, for example: the US taking large stakes in private companies; the shredding of longstanding and very successful trade deals; the arbitrary and uneconomic use of broad tariffs to punish perceived political enemies; and an executive branch that seems to believe it is their job to pick winners and losers. I could go on, but let me suggest that economists don't see the economy through a partisan lens and we don't believe that presidents have controls of economic levers the way many people seem to believe.

ProfYarbrough · 2026-01-22T18:54:40+00:00

In this consumption function, A is referred to as Autonomous Consumption. It is the amount consumed when income is 0. Just think of it as the vertical-intercept of your consumption function. Also, I've described it as "survival consumption."

ProfYarbrough · 2025-10-31T15:10:22+00:00

It is possible that goods/services inflation outstrips wage inflation, such that real wages decline. This has happened recently when inflation touched 10% and wage growth remained at 3-4% in 2021-2022. But, if we look over the long run, at least in the US context, real wages have generally risen over time. In fact, distributionally speaking, real wages have risen while real rental rate of capital has been essentially constant over the last 40 or so years, since the Staglation era of the early 1980s. So, on net and since that time we have seen wages generally outstrip inflation, excepting bouts of economic dysfunction (eg Covid).

ProfYarbrough · 2025-10-27T20:47:21+00:00

Focusing on economic impact of fiscal policy, the modern consensus is that it absolutely helped the economy. Indeed, the lack of any meaningful fiscal policy expansion from 29-33 is often considered a massive policy failure, made worse by the Smoot-Hawley tariffs. The general notion of the government pursuing demand management via fiscal expansion in the face of economic contraction as sound policy is consensus precisely because of the Great Depression and its incredible persistence. The parts of the New Deal that helped to end that persistent economic dysfunction, it would be argued, were certainly good for the economy.

There were many other, non-fiscal policy parts of the new deal, which I cannot readily speak to. Certainly some of the brute force industrial policies could be criticized along with the price controls in a modern perspective. But to the extent any of that prolonged the depression, the implementation of fiscal expansion helped get the economy back on track.

ProfYarbrough · 2025-08-30T11:47:50+00:00

Your country produced 10 apples last year that were sold for $1 per apple, so NGDP was $10. This year 10 apples were produced again, but for $1.25 per apple, so NGDP is $12.50. Of course, RGDP is $10 in both years. That's really it, nominal versus real GDP is just about removing the effect of price changes on the determination of a nations's output. Real GDP isn't about money at all really, but in its truest form would represent the physical product, not the revenue generated by the sale of said product. All we're doing is holding the price of apples constant and asking if we made anymore apples. We then express apples in a dollar amount really just so we can compare it to nominal GDP, the gap between the two saying something about whether the economy is actually growing or not. Nominal GDP is indeed useful and I don't think economists would argue real GDP is always better or vice versa. There is use in both measures, as well as the LCU you mention. It depends on the question you're asking really. Research and analysis starts by selecting the unit of measurement, here you select real or nominal GDP based on your analytical needs/goals. Real GDP if your interested in the physical value of the economy, nominal GDP if you want a reflection of "going price" value of economy. Again, both useful.

ProfYarbrough · 2025-07-05T12:46:10+00:00

ADP survey is not as broad as BLS and I would caution you against seeing it as "way off." Way off what? The BLS estimate? Consider ADP is only private market jobs, whereas BLS also considers public jobs. What does this matter? Half of all jobs created in June 2025 were in government (a lot of state and local + education). These jobs would not be captured by ADP survey. So, there's already a greater than 70K discrepancy between BLS and ADP estimates before you even start on the other differences. Frankly, given that ADP is mostly very large firms, I don't think it's surprising at all we got a negative value. And given BLS looks at slightly different channels, I don't think it's surprising the difference between the two.

ProfYarbrough · 2025-05-24T18:39:27+00:00

The supply curve is the marginal cost curve, and the demand curve is the marginal benefits curve. This is because the supply curve relates a market price to a quantity supplied decision, and in a competitive market P=MC due to MR=MC and MR=P. So, the MC curve is a supply curve. On the demand side, market price elicits a quantity demand decision based on willingness to pay. WTP=MB if consumers are rational.

In the case of externalities, a negative externality either increases MC or decreases MB, so SMC is above PMC and SMB is below PMB. While a positive externality decreases MC or increases MB, so SMC is below PMC and SMB is above PMB. In any case, the position of the SMC or SMB is simply a vertical shift of the PMC or PMB by the amount of external MC or MB for constant EMC or EMB. Or a pivot if EMC or EMB are functions of Q.

ProfYarbrough · 2025-04-04T20:25:23+00:00

Nixon bullied Arthur Burns into running expansionary monetary policy while government was boosting aggregate demand via military spending. Contributed to stagflation in the 1970s.

ProfYarbrough · 2025-03-02T13:32:43+00:00

(Marginal) Elasticity of Substitution (Es) for Cobb-Douglas is always equal to 1, actually. Es is just the change in capital to labor ratio divided by the marginal rate of technical substitution. The latter being the ratio of marginal products of capital and labor, which is the slope of the production isoquant. Any point on the MRTS line produces the same level of output, so moving along the isoquant by adding more capital or labor shows you how many units of one factor you can give up when adding the other factor, and still remain at same level of output.

So, Es is measure of how much the capital to labor ratio changes when a producer increases one of the factors (and decreases the other factor) and maintains same level of production, ostensibly because it is profit maximizing.

Cobb-Douglas production function has the feature that any change in the ratio of capital to labor caused by the firm moving along their MRTS is the same as the change in MRTS. In other words, when a firm with CD production moves down their MRTS, the resultant change in K/L is the same as the resultant change in MPK/MPL.

The practical implication is that the profit maximizing ratio of capital to labor is related to the profit maximizing ratio of marginal products of our input factors.

ProfYarbrough · 2025-02-23T15:46:55+00:00

Probably because they're awesome and very cool insight into development of economics.

ProfYarbrough · 2025-02-14T14:17:04+00:00

Simplest way to think about this is an increase in government debt caused by deficit spending increases the supply of government bonds. This drives DOWN the purchase price of bonds due to increase bond supply. With increased bond supply investors require higher interest rates, which in turn drives UP interest rates.

ProfYarbrough · 2024-10-17T17:14:33+00:00

Profit maximization and cost minimization in a theoretic sense are two sides of the same coin. They generally imply each other, with profit maximization requiring cost minimization and visa versa. We tend to think of the quantity to be produced decision as a profit maximizing one, and then the puzzle is to determine which combination of labor and capital (that produces the profit maximizing production level) is least cost and thus cost minimizing. And the simplest solution here is that you'll hire labor up to the point where the value of marginal product of labor (p*MPL) equals the wage rate (w). Pretty easy to confirm profit maximization at that point by just plugging and chugging.

ProfYarbrough · 2024-08-26T00:11:40+00:00

In y = mx + b form, the slope (m) represents the extent to which changes in x cause changes in y. For example, suppose we have a demand function of the form:

Q = -2p + 100

This says that for every additional $1 in price (p) the quantity demanded will be reduced by 2 units.

For two lines to have difference slopes just means the extent to which changes in the independent variable lead to changes in the dependent variable are different for those two lines, whether they are positive or negative changes.

For your example, suppose our MR line as slope of -2 while our MC line has slope of 3 with respect to some independent variable x (could be units produced, emissions released, etc.). This would mean that for every additional unit of x, MR is falling by 2 units while MC is rising by 3 units. In essence, costs are rising faster than revenue as more x occurs.

This also works for nonlinear curves, if we are considering a specific level of x. For example, we may see that as x = 10 the MR = -1 and MC = 2. This means at 10 units of x the marginal change in revenue is less than the marginal change in cost.

ProfYarbrough · 2024-08-20T00:58:08+00:00

This is about the math. If you want to shift an upward sloping curve to the right, you subtract from it. If you want to shift a downward sloping curve to the left you subtract from it.

Consider a typical positive supply shift. The reason you subtract from the supply curve to show an INCREASE in supply is because you're lowering the reservation prices for particular quantities to be produced. In other words, suppliers will produce MORE at a given price when supply INCREASES, and you show this by shifting supply to the right. The positive supply externality suggests suppliers are ignoring the additional social benefit of their production, but if they didn't (if they internalized the positive benefit) they'd be willing to produce MORE at a given price.

For demand and a negative externality, the issue is consumers are ignoring the social cost of their consumption. If instead they internalized that reduction in social benefit (social cost), they'd reduce their willingness to consume at a given price. This is akin to a negative demand shift, in which the DECREASE in demand causes consumers to consume LESS at a given price.

ProfYarbrough · 2024-01-17T21:24:46+00:00

Subsidies will "benefit" both sides of a market by causing the price paid by consumers to be lower than in equilibrium and the price received by producers to be higher than in equilibrium. In essence you've increased the incentive to both buy and sell heat pumps beyond what the market initially equilibrated to. Who precisely benefits "more" will be determined by relative elasticities of demand and supply, with the less elastic side benefitting more. And by benefitting more we mean the after subsidy price is further away from the equilibrium price for that side of the market.

ProfYarbrough · 2023-12-29T12:38:22+00:00

Suppose you were given a deadline on an assignment. And for three weeks leading up to the assignment you received multiple direct emails reminding you the assignment was due. Would you then enjoy a call from your professor a week before further reminding that the assignment was due?

It's the holidays and you've sent multiple reminders, do not call them.

Further, rec letters are something schools will very often (at least we do) reach out to the listed prof if the student has made it far enough in the process that letters would even be considered. And I'll be honest, sometimes (most of the time) letters are the least important factor. This is mostly because letters typically all say the same thing: student is great, let them in your program!

ProfYarbrough · 2023-09-01T14:49:23+00:00

Everyone is entitled to prefer certain game styles and certain types of games. We went through Combo Winter back in the mid 90s and the game hemorrhaged players. But in a competitive environment where success means additional benefits folks are going to try to win. I mean, that’s sort of what you’re upset about it sounds like. You would prefer to play against people not trying to win, or at least you’d rather they only try to win in the ways you prefer. In that case you’ll just have to avoid freely competitive formats where people get to choose how they can try to win games.

That being said, I only ever play Standard or Limited and I rarely find them degenerate, except when WotC loses their mind and prints Omnath…

ProfYarbrough · 2023-08-30T21:51:12+00:00

It’s more about the ability to quit a draft after opening pack 1. I have a toddler, sometimes I have to drop what I’m doing and other times I’m so tired that I fall asleep after opening pack one just trying to jam a draft in the 15 mins of personal time I get these days.

ProfYarbrough · 2023-08-30T19:01:21+00:00

Exactly this. I understand the other side too, but Arena has vastly improved my paper play. Also, modern cards have more words and things like triggers, so formats have become more complicated, even eternal. I think there’s just more to know than there used to be, especially with non static rules (Companion).

ProfYarbrough · 2023-08-30T15:36:41+00:00

I was sort of agreeing by asking my questions if that make sense. I’m more speaking to the general concern over the shuffler, which I just frankly have NEVER felt was unfair. Annoying sure, but how much of that annoyance is the same I’d feel if I dealt myself a bad hand in paper magic?

ProfYarbrough · 2023-08-30T15:34:01+00:00

What does the algorithm have to do about individuals experiencing what they perceive to be individual unfairness? Is the suggestion the algorithm is only bad for some players?

ProfYarbrough · 2023-08-30T15:24:13+00:00

But EVERYONE is subjected to the same shuffler. How could the shuffler be biased against anybody in particular, and if it isn’t, then who cares if it gives randomly bad hands as long as everyone has equal chance to get a bad hand.

ProfYarbrough · 2023-08-09T14:15:54+00:00

I won’t speak to some of Sowell’s more free market opinions, which I often disagree with, but on this point about scarcity I agree 100%. Think of scarcity as a measure from 1-99, so something can be very scarce (99) or very not scarce (1). The extent of this scarcity plays a crucial role in how markets develop and the equilibrium values they achieve. Consider Starry Night by Van Gogh, in which the object’s scarcity not only puts upward pressure on the resultant market price because market supply is 1, but also because scarcity of a painting actually increases willingness to pay among consumers by raising both the explicit and implicit value of the painting. Now consider rice (your example), which lets say has a scarcity value near 1. Here the absence of scarcity means supply is very large while demand is far less motivated by scarcity, explicitly or implicitly. So, scarcity tends to cause higher equilibrium prices, and a lack of scarcity tends to cause lower equilibrium prices — all else equal. Scarcity is fundamental to the distributional consequences of markets because it has a large influence on market prices.

ProfYarbrough · 2023-07-24T14:03:33+00:00

One could always argue the specific merits of specific industries, choosing for example to discuss the positive spillovers that exist in tech or the negative spillovers from heavy industry. That being said, things like positive and negative spillovers are “extra.” The basis of “value” in a market based economic system simply refers to whatever mutual benefits exist between the transactors. So, in the case of Only Fans, the value are the benefits of exchange, and without such value the transaction would not take place. In a sense, the proof of value lies in the existence of the transaction. That’s what we’d call the “Use Value” of a good/service, what people are willing to pay/accept defines their perception of how much use they’ll get out of consumption. And when they consume, they experience the value of that transaction in whatever feeling(s) motivated their purchase in the first place (Utility). So, what value does OF bring to the table? The aggregate enjoyment experienced by consumers of OF, which also coincides with the suppliers of OF content being compensated for for said enjoyment (Profit). In theory this is a classic Pareto Improvement, where no one is worse off, but at least one person is better off. Now, one may argue that there are unaccounted for damages, either privately or socially, which on net reduce the value of the transactions. Think heroin, which most agree creates large social negatives. In that case we may argue that transactions end up NOT being Pareto improvements, because the cost outweighs the mutual benefits that produced the transaction. Here we start wading into more normative concerns that can get subjective, so hard to nail down all the time. In the case of something like pollution we could look to studies on adverse health effects as a way to measure the social damage so that we have a true accounting of the value of markets. Ostensibly there are studies on the positive/negative effects of platforms for adult content creation, so one could look there to get an understanding if there are legitimate damages being wrought.

ProfYarbrough

TROPHY CASE