lucas2 - What Economists Do - Robert E. Lucas, Jr.WHAT...

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Sheet1 Page 1 What Economists Do - Robert E. Lucas, Jr.WHAT ECONOMISTS DO Robert E. Lucas, Jr. 12/09/88 Economists have an image of practicality and worldliness not shared by physicists and poets. Some economists have earned this image. Others--myself will take this as a confession or a boast, but we are basically story-tellers, creators of make-believe economic systems. Rather than try to explain what this story-telling activity is about and why I think it is a useful--even an essential--activity, I thought I would just tell you a story and let you make of it what you like. My story has a point: I want to understand the connection between changes in the money supply and economic depressions. One way to demonstrate that I understand this connection--I think the only really convincing way--would be for me to engineer a depression in the United States by manipuiating the U.S. but a real virtue of the democratic system is that we do not look kindly on people who want to use our lives as a laboratory. So I will try to make my depression somewhere else. The location I have in mind is an old-fashioned amusement park--roller coasters, fun house, hot dogs, the works. I am thinking of Kennywood Park in Pittsburgh, where I lived when my children were at the optimal age as amusement park companions - a beautiful, turn-of-the-century place on a bluff overlooking the Monongahela River. If you have not seen this particular park, substitute one with which you are familiar, as I want you to try to visualize how the experiment I am going to describe would actually work in practice. Kennywood Park is a useful location for my purposes because it is an entirely independent monetary system. One cannot spend U.S. dollars inside the park. At the gate, visitors use U.S. dollars to purchase tickets and than enter the park and spend the tickets. Rides inside are priced at so many tickets per ride. Ride operators collect these tickets, and at the end of each day they are cashed in for dollars, like chips in a casino. For obvious reasons, business in park fluctuates: Sundays are big days, July 4 is even bigger. On most concessions--I imagine each ride in the park to be independently operated--there is soma flexibility: an extra person can be called in to help take tickets or to speed people getting on and off the ride, on short-notice if the day is unexpectedly big or with advanced notice if it
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This homework help was uploaded on 04/06/2008 for the course ECON 154 taught by Professor Bjoernbruegemann during the Spring '07 term at Yale.

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lucas2 - What Economists Do - Robert E. Lucas, Jr.WHAT...

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