Original subtitles

60 second adventures in economics number one the invisible hand an economy is a 60 ضركة سةركيَشي لة زانستي ئابووريدا يةكةم ئابووري و دةستي شاراوة بريتية

tricky thing to control and governments are always trying to figure out how to لة شتيَكي ئالَؤز بؤ كؤنترِؤلَكردن و حكومةتةكان هةردةم هةولَي ئةوة دةدةن كة لةوة بطةن كة do it back in 1776 economist Adam Smith shocked everyone by saying that what ضؤن ئةنجامي بدةن. لة سالَي 1776 ئابووريناس ئادةم سميس سةري هةموواني سورِماند بةوةي كة طوتي government should actually do is just leave people alone to buy and sell ثيَويستة حكومةت بةتةواوي ئةوة بكات كة واز لة خةلَك بهيَنيَت بةوةي بة ئازادي freely among themselves لةنيَوان خؤيان هةلَسن بة كرِين و فرؤشتن. he suggested that if they just leave self-interested traders to compete with ثيَشنياري ئةوةي كرد كة ئةطةر خةلَكي بةسوودي كةسي خؤيان هةلَسن بة ئالَوطؤرِ بؤ كيَبرِكيَ كردن one another لةطةلَ يةكتر markets are guided positive outcomes as if by an invisible hand if someone بازارِةكان بةشيَوةيةكي دةرئةنجامي ئةريَني ئاراستةدةكريَن كة ئةويش لةرِيَطةي دةستي شاراوة. ئةطةر charges less than you customers will buy from them instead you have to lower the كةسانيَك لة تؤ داواي نرخي كةمتر بكات ئةوا كرِيارةكان لة ئةواني تر دةكرِن لةجياتي تؤ ئةوةش بؤ نرخي price or offer something better نزمتر يا شتيكي باشتري ثيَشنياركراو دةطةرِيَتةوة. whenever enough people demand something they would be supplied by the market

like spoiled children

only in this case everyone's happy later free marketeers like Austrian economist

Friedrich Hayek argued that this hands-off approach actually works better

than any kind of central plan

but the problem is economies can take a long time to reach their equilibrium and

may even stall along the way and in the meantime people can get a little

frustrated

which is why governments usually end up taking things into their own more

visible hands instead

number two the paradox of thrift

much like a child getting his pocket money one of the biggest economic

questions is still whether it's better to save or spend free marketeers like

Hayek and Milton Friedman say that even in difficult times

it's best to be thrifty and saved banks then channel the savings into investment

in new plant skills and techniques that let us produce more and even if this new

technology destroys jobs wages will drop and businesses hire more people

so unemployment falls again simple at least in the long run but then a live

fast die young kind of chap called john maynard keynes cheerfully pointed out

that in the long run we're all dead

so to avoid the misery of unemployment the government should instead spend

money to create jobs

whereas if the government tighten its belt when people and businesses are

doing the same

les is spent so unemployment gets even worse that is the paradox of thrift

so instead they should spend now and tax later when everyone's happy to pay

though making people happy to pay tax for something even cannes didn't solve

number three the Phillips curve bill phillips was a crocodile hunter and

economist from New Zealand who spotted that when employment levels are high

wages rise faster

people have more money to spend so prices go up and so does inflation and

likewise when unemployment is high the lack of money to spend

means that inflation goes down this became known as the Phillips curve

government even set policy by the curve tolerating the inflation when they spend

extra money creating jobs but they forgot that the workers could also see

the effects of the curve

so when unemployment went down they expected inflation and demanded higher

wages courting unemployment to go back up while inflation remained high which

is what happened in the nineteen seventies when both inflation and

unemployment rose

then in the nineties unemployment dropped while inflation state low which

all rather took the bend out of Philips his curve but at least part of Philips

his troublesome trade-off lives on when faster growth and full employment return

you can bet inflation will be along to spoil the party

number for the principle of comparative advantage

whether you think economies work best if they're left alone or the government's

need to do something to get them working

the one thing that can't be controlled is the rest of the world fear of foreign

competition once led countries to try and produce everything they needed and

impose heavy taxes to keep out foreign goods

however economist David Ricardo showed that international trade could actually

make everyone better off bringing in one of the first great economic models

he pointed out that even if a country can produce pretty much everything in

the lowest possible cost with logic on mystical an absolute advantage

it's still better to focus on the product that can make most efficiently

that sacrifice the least amount of other good and let the rest of the world do

the same by specializing they can then export these surfaces to each other and

both end up better off

this is the principle of comparative advantage and it has persuaded many

countries to sign up to free trade agreement but unfortunately it can take

a long time for countries to trade their way to prosperity and because it's now

much easier to move to where the money is

it's increasingly not any goods across borders but people which is somewhat

uprooted Ricardo's theory

number five the impossible Trinity most countries trade with on another which is

usually pretty good for all involved but it does mean it's a bit harder for each

to keep control of its own finances

there are three things that governments are particularly keen on

they like to keep the exchange rates table so that import and export prices

don't suddenly jump around

they also like to control interest rates so they can keep morrow is happy without

upsetting savers and they like to let money flow in and out of their country

without causing too much disruption but there's a problem when you try to do all

of these at once

say for example the eurozone tries to lower its interest rate and reduce

unemployment money flows out to earn higher interest rates elsewhere exchange

rates drop which causes inflation

so the euro interest rate is forced back up again you can either fix your

exchange rate and let money flows freely across national borders but have no

control of your interest rates or control your interest in exchange rates

but then you can't stop the capital flowing in and out but like an

overzealous triathlete

you can't do all three at once

number six rational choice theory of all the things to factor in when running an

economy of the most troublesome these people now by and large humans are

irrational lot when the price of something rises people supply more of it

and buy less of it if they expect inflation to go up

people usually ask for higher wages they might not get them and if they can see

interest or exchange rates falling in one country people with lots of money

there will try to move it out faster than you can say double dip and

governments often decide their economic policies

assuming such irrational actions which would be great if it weren't for the

fact that those pesky humans don't always do what's best for them

sometimes they mistakenly think they know all the facts or maybe the facts

are just too complicated and sometimes people just decide to follow the crowd

relying on others to know what they're doing

when too many cheap mortgages were being sold in 2007 a lot of people didn't know

what was going on and a lot of others just follow the crowd

some lenders may have rationally believe that when the crunch came the scale of

the problem would force governments to rescue them which was true for the

bank's if not for all their customers