An Economics Joke

Who doesn’t want more laughter in their lives?

So the joke goes:

Two economists are walking along and come across a pile of shit.

The first one says, “I’ll pay you $100 to eat that.”

The second one eats it and gets $100.

They keep walking and find another pile.

The second economist says, “I’ll pay you $100 to eat that.”

The first one eats it and gets the $100 back.

After a while the first one says, “We both just ate shit and we have the same amount of money we started with. That was pointless.”

The second one replies, “Not at all. We increased GDP by $200.”

I didn’t say it was a great joke.

The joke makes fun of the idea that any paid transaction counts as “economic activity” and how any increase in economic activity must be a good thing. Even if no one is actually better off.

Every time I hear someone equate the health of the economy and the amount of money spent, I think of this joke. It seems pretty obvious to me that money does not equal good in all cases. And therefore more money doesn’t always equal better.

At the same time when you buy something, a company often hires workers to provide the goods or services. And jobs do seem like generally good things.

Let’s explore some examples.

There are clearly cases where paying money for something is a sign of something good happening. Birthday cake sales are likely a sign of entirely good things. Someone is a year older. They have enough friends to have a cake rather than just a cupcake by themselves. The person who dreams of making cakes gets to have a career doing what they love.

There are also examples of where economic activity is not a good thing. The $250 billion dollars annually that fellow Americans spend on cigarettes, vape pens, sports gambling and legal weed is activity that we could ideally do without.

While we are pointing out less than ideal economic activity, I am not sure the social media industry has been particularly good for anyone, especially our youth. The $200 billion dollars that Meta makes from Facebook and Instagram seem like economic activity we can probably also do without.

Now those industries do provide jobs and jobs are important to people personally both financially so they can afford food and shelter and emotionally to feel safe. They are helpful to a democracy because it is easier to govern when everyone feels like they have a similar situation.

But there is little doubt the benefits of that economic activity are not obviously just good or bad. We want job opportunities for people but ideally not by selling goods to their customers that makes the customers worse off.

A different case is the GLP-1 drugs like Ozempic. It makes about $50 billion a year in US sales. The customers of those products report better quality of life. In addition to psychological benefits, customers can see a variety of other health as well as financial benefits. These all seem like good things!

However, America currently spends hundreds of billions of dollars on issues related to obesity. So the invention of Ozempic might actually produce negative hundreds of billions of economic activity by making many of these health and other costs unnecessary.

Is this still a good thing? Yes. But a hundred billion dollars pays for a lot of jobs. That’s not ideal but we can create other jobs that have more positive effects. In this case it seems like reducing obesity might mean less economic activity. Even though that would mean fewer jobs, that still feels like a win.

And so I’ll end this essay with one of my favorite adages: “Money isn’t everything.”

Side note: For the purpose of improving the readability of this essay I left out topics like why I grouped sports gambling with tobacco or included weed in that list. If you want to see that essay, comment on this post or send me a note.