It’s Wonderful

Where does bread come from?

Illustration: Little Fluffy Clouds: Source: Wonderfulloaf

Russ Roberts had done it again. He’s the economics professor who produced a couple of hip-hop videos a few years ago that explained macroeconomics via a rap-battle between two early 20th-century economists: Friedrich Hayek and John Maynard Keynes. So far, the YouTube videos have been downloaded almost 10 million times.

He’s currently a research fellow at Stanford University. But that doesn’t mean he’s given up teaching. He just came out with a delightful lesson on how economic structures and institutions emerge: “It’s a Wonderful Loaf.” The lesson comes in the form of a poem – like his rap battles – that’s animated and set to music. In his poem, Roberts ponders the question of how a simple staple like bread can be so universally available – in all its myriad forms – without a Bread Czar or universal planner making universally binding decisions.

The answer is emergence – the same phenomenon that allows fish to swim in schools or birds to flock or grains of sand to form ripples and beaches. Simple rules, when followed by a large number of smaller things, create a larger system that couldn’t be predicted. Who knew that hydrogen bonds in water would freeze into the crystalline lattice that would emerge as a snowflake?

Source: TED

Roberts explains that the same self-organizing principle allows economic systems to come together. In the case of bread, farmers and millers and truckers and bakers all organize themselves into a smoothly functioning system, with no one giving them orders or directives. Yes, we need roads and laws and a sound currency to transact – infrastructure – but generally, if a Bread Czar were running things, there would be shortfalls and surpluses. Roberts explanation is a pleasure to read, watch, and listen to. I can’t get his music out of my head!

Economics has been called “the dismal science” because it deals with scarcity and allocation and hard choices. But if educators as talented as Russ Roberts keep at their craft, it could easily be re-named, “the delightful discipline.”

Douglas R. Tengdin, CFA

By |2017-07-17T12:21:19-04:00May 5th, 2017|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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