 The Japanese don't really export natto, and it's probably a good thing. Best to keep it as a gross domestic product. Uh, $20. I wanted a peanut. $20 can buy many peanuts. Explain how. Money can be exchanged for goods and services. Woohoo! See, that's supposed to be funny because Homer's too dumb to understand how money works. But honestly, he has a right to be confused. Money is weird. It's a human abstraction of value. An arbitrary imaginary number that we assign to indicate how much we care about stuff. Economics is weird, too. It uses a ton of pure math, but it's actually a social science, and relatively fuzzy. Even people who've spent decades studying game theory and Laffer curves can't look at the stock market and tell you exactly what it's going to do at any given moment, or else they'd all be rich. Even what we do know about economics is hard to use predictively, especially when you're talking about the scale of national economies, which are insanely complicated systems with countless variables ranging from the weather to how much people trust each other. So money is weird and economics is hard to understand and use. Nonetheless, there are some people who are very loud and very insistent that they know exactly what's wrong with the economy and how to fix it. It frequently sounds a little bit like this. Well, of course, the economy is in the toilet. People are taking advantage of welfare. Social security is bankrupt. Immigrants are taking our jobs. The government isn't regulating enough. The government's regulating too much. Obamacare is socialist. That last one especially is pretty weird. One of the side effects of Cold War propaganda has been that many Americans are now absolutely convinced that any government involvement in business, whether it's regulation or heaven's forbid socialism, is actually un-American and against the founding principles of the United States. In actuality, there's nothing in the Constitution about economics besides government involvement in business, like the establishment of the Patent Office or the Commerce Clause. Is it fair my friend? You mean no? Now, free markets and capitalist principles do have an amazing track record and do do some incredible things. Competition means that prices tend to stay relatively low, product offerings tend to be diverse, and innovation is a relatively regular thing. But they're not good for everything. Adam Smith himself had several misgivings about the implications of free market capitalism and he invented the thing. There are some obstacles that we're facing right now that are actually exacerbated by capitalist principles and freer markets aren't going to fix them. First, if a large-scale problem doesn't have immediate negative consequences in a free market, it's always better to sort of whistle and look in the opposite direction until something really drastic happens. Take global climate change. If things get worse slow enough that it's not an immediate problem for anyone, the first choice of any company to maximize their quarterly profits is to play a game of chicken with their competitors and the world. Even though it would be better and cheaper for everybody if we dealt with it now, any company that caves and implements more environmentally friendly, less profitable policies is at a disadvantage to other companies that don't. You might think that consumers could just vote with their dollars to fix that, but it turns out that it's very cost-effective to just create a PR illusion of caring about the environment or customers or employees or human rights. And it actually works. Ford is still making cars after the pinto. Goldman Sachs list of controversies is longer than the rest of its Wikipedia page, but it's still doing fine. BP is still making oil rigs even after spilling millions of gallons of oil into the Gulf of Mexico. But hey, that was a long time ago, so water under the bridge, right? Deep water. Another problem that free markets tend to be bad for is income inequality. There's a growing gap between the ultra-wealthy and everyone else and that gap seems to increase with decreased taxation and regulation. There's actually an intuitive theoretical explanation for this. The greater your income, the greater your returns for risking the same percentage of that income. Economists don't agree on a lot, but many agree that the reason that social mobility is so abysmal in the United States compared to the rest of the industrialized world is because of our obsession with free markets as a solution to all of our problems. They just don't work for some things. It's pretty clear that there's no singular solution to economic problems, that different principles are needed for different situations at different times. So keeping an open mind is important, not just so that we don't make the problems that we have worse, but also because there are some problems on the horizon that even billion economists aren't really sure how we're going to deal with. Our current understanding of economics depends a great deal on laws of supply and demand, which have always worked great because we've always had a decent amount of both. But that might be about to change. On the demand side, if you haven't seen CGP Grey's video about the oncoming automation revolution, please go check it out. It's really worth watching. The short version is that no matter what your job is, robots are coming for it and they don't need coffee breaks or sleep. On the supply side, the things that you can do with increasingly cheap 3D printers are getting pretty incredible. We're still a long ways off from being able to print anything that we might possibly need, but what happens when anyone can just print whatever it is that they want for just the cost of materials? Also, if Oculus is to be believed, immersive virtual reality tech is just around the corner. What happens to the world economy when the only things that people really need anymore are an internet connection and nutrients? This sort of stuff is important. We're going to need to think really hard about what the future of money and commerce is going to look like and how to solve problems that are a bigger deal than high gas prices or Comcast growing us out of 40 bucks a month. We can't do that if we're just mindlessly repeating whatever economic principles aligned with our personal values and we certainly can't do it if we refuse to accept any variations in our current economic system because they're un-American. What is American is diversity and with the problems that we have to face in the near future, we're going to need some diversity in how we approach making and spending money if we want to keep any of it. Do you have any thoughts about what the future of money might look like? Please leave a comment below and let me know what you think. Thank you very much for watching. Don't forget to blah, blah, subscribe, blah, share and I'll see you next week.