All right. Hello, everyone and welcome to the 830 breakout session of the open simulator community conference 2013 As a reminder to our in-world and web audiences You can view the full conference schedule on our website at conference dot open simulator Dot org and you can post your questions in local chat on the uStream chat or tweet your comments using the hashtag oscc13 This hour we are happy to introduce Kay McLennan who will be presenting DIY build blueprints for creating engaging and effective virtual world learning simulations Kay McLennan is a professor of practice at Tulane University Kay started using virtual world simulations in her e-learning courses in 2008 and was a finalist in the federal virtual world challenge in 2012 for her prisoners dilemma game theory simulation and in 2013 for her data detectives game Kay's recent presentations on virtual world education simulations include interactive engagement and increasing learning outcomes in 3d virtual world educational simulations and activities and leveraging government and academic partnerships in Moses academic e-learning open simulator use case and Using 3d virtual world models and e economics instruction welcome Kay Good morning. Thank you Joe for the introduction It's a pleasure to attend this informative conference set in such a splendid virtual world venue Also, it's my pleasure to be able to share a bit about my use of the open sim platform in my e-teaching courses To start this presentation I want to provide some background on student preferences for simulation types and features Also, how to adapt virtual world builds to student preferences then elements in game theory elements in at my scenario game the data detectives game My DIY or do-it-yourself approach and then we'll have a long question-and-answer period But first I wanted to give a little bit of background on the open simulator advantage I moved to open simulator in 2012 and the first advantage I gleaned was a market increase in the voluntary participation rates of my students first When I was in second life my student voluntary participation rate was about 10% and it jumped Markedly to 33% with spikes to over 50% in the last three years And this is because I believe strongly in the open sim advantages including pre-created avatars and The avatars can have different permissions pre-stocked avatar inventories prepositioned avatars No need for x-rated warnings more space for more simulations and the ability to have or files and inventory files and also Last but not least lower costs So turning first to student preferences for virtual world learning simulations But interestingly in terms of engagement interactivity and e-learning increased e-learning outcomes My top pick was not my students top pick my students top pick was resource materials And in many cases the resource materials that I had initially put into the builds like vocabulary flashcards was just filler and I was I can tell you I was shocked to find out that Students ranked my filler much higher than the different games that I had developed thinking that they were the be all end all So let's start with a checklist for virtual world basics When it comes to building educational simulations My students require I teach online and sort of the gold standard for online is the ability to have asynchronous learning So asynchronous learning is the first thing that all of my students Declare it to be an important feature of virtual worlds however once a student is Has some experience with virtual worlds the next thing they say they're interested in is real-time sessions so It's kind of a schizophrenic outcome there Also the need for expansive builds and I've heard this over and over again throughout the last five years that virtual worlds have more affordances and Have to be more than what a student or a class can get from either a webinar a Skype call or Now there's Google Hangouts, so they have to be interactive students have to be able to have Learning outcomes that they can't receive for many of those other Platforms For novices believe that the virtual world learning activities should not be mandatory and non-nobvious Novices believe that they should be mandatory At next the slide that I've just put up is Quantifying the engagement factor. I asked students now a quick disclosure Obviously the students in my E-courses self-select themselves for e-learning and then within my online courses The students self-select themselves for the virtual world learning activities I run two parallel tracks where they can continue to discuss in our LMS our learning management system text based discussions or go into the virtual world But the interesting finding is that in terms of a Likert scale agreement with One being strongly disagree and five being strongly agree in terms of engagement classroom delivery ranked 3.5 e-course delivery or online courses 4.1 and then virtual world delivery 4.4 so almost a point higher when you compare face-to-face classroom delivery to virtual world delivery The next slide I put up a few quotes from students and I'm going to excerpts a few I love the idea of real-time discussions It makes the class more interesting the virtual world presentations were more interesting and caused me to want to read and learn I found myself wandering into other buildings not related to my class Keeping studies interesting is a factor that will lead to a higher success rate So students are sold In addition if we look at the correlation between interactivity engagement and increased learning if we look at Interactivity and engagement all all three are highly correlated that is classroom delivery E-course delivery and virtual world delivery, but when we look at engagement plus Increased learning classroom delivery is only moderately correlated E-course delivery is strongly correlated at 0.79 and virtual world delivery is even more strongly Correlated at 0.87 So students like virtual worlds virtual worlds are more engaging virtual worlds increased learning returning for a second to the actual types of simulations that students ranked the highest a resource center vocabulary flashcards again these were both fillers and they both got perfect scores The little horse that you see in the bottom is to signify that they're my dark horse Simulation types another highly rated type of simulation was meet the economists where students press buttons on Board with that take them to biographies of relevant economists and that ranked quite highly Gender dynamics in the workplace. This is another highly rated type of simulation Where students could relate to this simulation? Owing to what they've experienced in their own workplace and careers and work scenarios Turning next to the actual build and game features The first thing that I discovered when students got what they wanted which was expansive builds is That once they were in world even with note card descriptors and learning management system Descriptors of the available activities cafeteria style. I heard what do I do now? How do my I find my way around and of course as detailed in their findings Earlier, there's a need for resource materials. There's a need for asynchronous and real-time activities and a need for expansive builds The first build feature to respond to students interest in what to do now Was the addition of a student handbook? I went ahead and created a document that detailed everything that they might ever want to know about the build next What you see on the screen now the build feature is a museum inspired movement path. I'm going to take my cursor the entrance to the Build is here. There is a On-site orientation area that newbies can dash into there's icebreakers In this first hall, there's learning objectives Benchmarking and then turning the corner tutorial stations and Then entering the game Let me advance and as you can also see on the left side of this slide There's actual arrows in the floor. So there's no mistake about where they need to go here's a close-up of the integrated new user tutorial area again This is just off the waiting area where a whole class might assemble waiting for different avatars to RIS There are there's a video clip different slide shows Avatar accoutrements anything you might find in an orientation area or an island in a build the Learning objectives again and benchmarking is available and Of course with resource materials such a highly rated item in by students I took a lot of time putting together The different tutorial stations with definitions examples and rules that they can flip through slide shows to see and I Just received a notice that the slide resin is taking a little bit along So we'll all slow that down on the screen now is the Longshot of the scenario-based game and this was the key L Evolution from the desire for both asynchronous and real-time activities at the same time Rather than just limit the real-time activities to discussions The game I developed the game to be either asynchronous or To be played in pairs and groups There are four different clue stations So either four players or four teams can play at the same time This is an overview again. I'm going to it's a little bit of a different angle So let me see if I can use the cursor to go in here's the entrance way Here's the new user tutorials off to the left and then the movement through this first hallway is as somebody reads left to right a waiting area icebreaker area the learning objectives Benchmarking if desired The tutorial stations down one hall tutorial stations down a second hall and entrance into the game and after proceeding through the game exit into the wrap-up area with more land yapp and even a few souvenirs in building a game the key was the narrative and the Topic or issue that students have to solve that is should cloud buds this fictitious product to be introduced into this fictitious marketplace, which is a fictitious study called New London Each time Clues are found throughout the game board playing area There's little rizzards individual Rizzer buttons and if you look up to the top left and top right or top right You can see one of the four button Rizzards also in the top right hand corner of The sets that are surrounding the slideshow in this auditorium you'll see one sample clue analysis station and There are again, there are four Pinwheel fashion clue analysis centers and When a student or a team finds a clue If they're group one or student one player one They touch the button for that clue and it rizzes on the clue analysis board The other media on a prim features on in the clue analysis center include a calculator Which is used in calculating the rents for example There's also a stopwatch up stopwatch down if that's relevant to the game and play there's a whiteboard and also a clue analysis checkmark where students can keep track of How they evaluate the clues that they find whether they're pluses minuses or question marks On the screen now are four different scene examples in the top left-hand corner is the ministry of business registration and so the types of Clues that students fair it through include Ease of registering a business in this fictitious city and As you can see there are lots of other avatars NPCs waiting around and there's a long wait time As detailed take a ticket As well, there are different signs for Stereo austerity measures that have reduced this available staff But in in short the wait time is probably equivalent to the wait time to get your License renewed in the United States and so maybe some students might not think this is such a you know long wait after all In a clock-wide fashion number two is the rents. That's an important feature Since this is new London and I created the game while the London Olympics were underway I ended up with a castle crown castle and Some clues related to the royals Influence on culture and the community Again, this is just a close-up of the clue Rizor buttons and Where are the little blocks Riz and each time and each time a button is pressed a no-card is given Also, if the no-cards are lost in an inventory The players or students can touch any of the boxes that raise upon their little clue analysis center to get a duplicate notecard There's a long shot of Clue analysis center and again, it's up in the far right corner of the set that's surrounding the slides After the game is played The wrap-up can occur As a real-time discussion with different team boards set up or if the game is being played asynchronously students are going to need to Provide their instructor with some kind of feedback on what their analysis is also in the lower right-hand corner of the 3d set surrounding the stage is a rubric that Provides guidance on grading the evaluations that students come up with and you know feedback to them as well And of course, there's also a post game assessment possible One of the features of this game which may end up being a little bit of overkill But it was fun to build it was a dual instructor control center in a hot-air balloon above the game every White board it has a duplicate address and You know little screen up in the instructor control center and it was fairly easy to do the same with the all of the different clue analysis Boards the blocks as they raise down on in the student level They also raise simultaneously in the instructor level and the reason for this is if there's a large group playing the instructor or the TA monitoring play Can speed up or equalize play as needed and of course provide assistance and send out note cards Turning next to my favorite the di Y approach or do-it-yourself approach The reason why I ended up on this Is Using this approach to all of my 3d builds is that I fear nothing would have gotten done working with an emerging technology Had I not done otherwise If the getting the islands funded first in second life and now a grid funded in open simulator It takes all the energy I've got and getting additional resources at my institution for Interns and assistance and other help is just beyond You know what is possible with an emerging technology? But I'm very happy that I've gotten funding for the islands again Students respond very favorably to what they've experienced so far So looking next at at a dy do-it-yourself approach. There's four Aspects to it one is the platform itself self-hosting or hosted I'm not going to discuss this much because I use a hosting solution myself Hypergrid business and the second is a state region or grid management tools The third is the actual creation of the physical space and then last is the creation of the build and learning materials When it comes to region or grid management, there's really no I've just sort of assembled Kind of a hodgepodge here of Different items. There's no you know Nothing better than actually just experimenting with the region tab and the land tab in your region to figure out all The different settings and what they all mean Also, there are resources that were first Targeted towards second life scripting your world the official guide to second life creating your world all excellent resources That I purchased and one of the things that it wasn't my original thought Somebody suggested that you can get copies of these different Resources on half.com or used to books for even just a couple of dollars apiece. So that's another place to start There's the fleet world wiki There's also a very good resource the open sim school quick start guide I put the link in the note card that you can take a copy of Moving on to the physical space Boy, there are so many resources now open sim creations for or files terrain files Texture files Is one Linda Kelly or files for just an assortment of really great Starting content that you can modify and change as well. I'm a fan of the open Vee builds I have a Website link in the note card and I always like to give a shout out to clever zebra Back in gosh 2008 was when the clever zebra just first gave their freebies away in SL And that was sort of the light bulb above my avatars head that I could do this myself When they gave out their freebies In the note card, I've also provided links to some of my favorite OS grid shopping spots Right Plaza Mal D. Violent where I got some great castles and tutor buildings and the Venus Emporium on steam And also some places that I can't get to anymore. I don't know whether they're offline or what The deal is with that In terms of my wrap-up all I can say is two enthusiastic thumbs up for open sim If we look at the open sim advantages Repeating what I had said earlier the ability to pre-create avatars with different permissions for hyper grid jumping and just about anything else is Decided advantage the ability to pre-stock avatar inventories with no cars and other educational materials like for example when I'm playing the Free trade game to give them the widget components Pre-positioning avatars right in front of where they need to be. I don't have to include any x-rated warnings There's much lower costs. I've got more space and the ability to make and use Or files and inventory files is invaluable Looking at the student advantages, of course, there's increased learning outcomes increase engagement Experience with a platform that may benefit students in their future work efforts, and that's something that I've just come to realize Is important to students and not only that This is almost a funny revelation recently students started Telling me that they took my particular finance course or economics course in lieu of another Section precisely because of the virtual world component and I have to say at first, you know and and to To this day that kind of disturbs me because you know I spend so much time building and creating all these virtual worlds and managing the grid all by myself And and you know that was okay when it was just my choice But now all of a sudden there's this thinking feeling that students are depending on it Sort of changed the equation slightly, but I'm hoping to get over that That you know the fact or get over the thought that I have to keep doing it In terms of the instructor benefits There's it's kind of a land-yap thing or something extra for my students now not that I Did this to set out to pander to my students But it doesn't hurt that you know I get lots of accolades in my student evaluation of teaching about the virtual world component I feel it's just increased my creativity a hundredfold and As I've ended up making more and more of my own virtual world sets I've ended up making more and more of my own teaching ancillary material and I find I'm less reliant on expensive textbook solutions and really hope to you know move my teaching materials and textbooks away from expensive Textbook solutions into more open source and my own materials and then finally the do-it-yourself advantages And they're connected to the instructor advantages there's kind of a case for the need for basic knowledge of virtual world platforms as Essential to the creation of effective learning simulations in this platform and of course DIY is best suited to the platform Because open sim allows instant changes So when you're using a platform that allows instant changes the instructor needs to know how to make those changes And of course it sped up my development I wouldn't have been able to have gotten this far this fast if I was relying on Extra funding for assistance and other workers, so all right That's completes my formal presentation now We can get back to questions and if I've missed any questions Since we came back from When the stream was lost the recording stream, please do type them again in the chat I think we've got ten minutes here for Discussion and chat any comments to any sharing similarities We've got several of our presenters that are going to follow my talk sitting in the audience Rachel and Rami's and Probably more as well any comments and questions George adds once I had an interesting discussion with a cyber psychologist. Yes, there is such an occupation We were wondering if the people who spend a lot of time in virtual worlds need less dreaming in real life Gosh, I don't know the answer to that. Does anybody in the audience have the answer to that? Ellie asks what would you recommend for those of us teeter on the edge of starting up in OS? I'm wondering how hard it is to manage your own grid and what are the best options. Ah, that's an excellent question my Response is that a hosted solution may be one way for you to easily get up and running and open sim and Ellie adds Answers George questions. I find building augments my dreaming exponentially I'm gonna come back to George's question. I just know when I first started working in virtual worlds with the ability Yes, I've been asked to repeat George's question George asks once I had an interesting discussion with a Hyperpsychologist and yes, there is such an occupation we were wondering if the people who spend a lot of time in virtual worlds need less dreaming time in real life and Ellie answers George at George. I find building augments my dreaming exponentially And Steven and the second question asked Ellie was asking what is recommended for those of the audience that may be teetering on the edge of starting up in open sim and Steven is responding to Ellie to find support groups including hosting solutions and the g-plus communities that's an excellent tip and Another tip, there's the different listservs that I Steven just jotted my memory the OS Open sim educators list form the open sim users list form the users List is Primarily for technical issues. I subscribe to both but and there's a One there's a different format the sled listserv You find people Gosh repeating when they respond, you know E repeating 15 messages and They'll shout you down in some of these new open sim listservs You have to just copy over the one sentence or two at the top of your reply that you're responding to and then as Put your answer underneath it Okay Rachel asks or comments. What are the essential components of the DIY team? Well, the essential my DIY team is me me and me I am the scriptor builder grid manager content designer all wrapped up in one Yes The only difference I is that I'm not the platform Hoster I that's where for the moment. That's where I draw the line here And I'm sure we're going to hear from Rachel She's probably the chief cook and bottle washer, too George is responding back to Ellie. I use divas universal campus distribution fairly easy to set up This is what we use for virtual cow tech students find it easy to use and manage this is the breakout zone that we're in now is a Modification of part of the universal campus and this is back at you George The universal campus is a mega region build it when you bring it into your grid it goes over for sims and I had the devil of the time I was experimenting with it one day and I put it in at the edge of My and I thought I had only gotten one of the islands But I put in all four islands and they poured over my grid and there was no way to remove them Because every time I tried to remove one of the prims it would grow back again So finally the solution I had was to upload a blank or file and it erased it So what I would really like is the universal campus broken up into four individual or files just a wish list there But the universal campus items are beautiful Just like the swag items that came with this conference I thought we we got some great items there Ramesh asks how much of the physics in SL. Do you miss an open sim? I missed the car physics until I realized that I found open-source script recipe for wearable cars in my prisoner's dilemma Simulation one of the learning activities is a chicken game where The students have to face off with the cars You know something quite dangerous in real life, but not dangerous and an open in a virtual world simulation And I had a devil of a time I was trying to get the car script to run and it would only run on the X on the XY axis from You know Y to X it was on the X axis from east to west that was what it was But it's still it didn't even work right, but all of this is going to change very soon when the bullet Physics engine which I get the senses even better than what is in second life now is going to be deployed Let me see what else I'm missing here you Paul Comments you mentioned that sharing content and or and Inventory files is an advantage of open sim. Is it possible to share? Is it not possible to share content already created and available in the second-life marketplace? You can only export from second life what you create Are both the creator and the owner of? so the And actually as a rule of thumb, that's exactly What you need to be doing in open sim unless you've got explicit? Permissions to do so in open sim, but a second life It's really hard to get content out if you know if you even if you purchase it you can't get the content out George comments just find some students who are good with computers and games and they're good with this I I agree Steven washes mist of Rachel's dishes and keeps up the kitchen. All right, let me get down to here Blank wars are essential. Yes, I've learned that Any final questions or comments this has been a great audience I've enjoyed hearing your comments and questions and we can always go back to Ellie Does anybody have any advice more advice for Ellie thinking of I assume perhaps leaving it a second life and coming into open sim It wait to you it. I am excited for you Ellie to be coming into open sim The hosting service that I have has a web page interface and so you can just upload an or file download and war file And it's so fun I you'll spend an entire day going through all of the Linda Linda Kelly files And just a basic setup in open sim is for islands. So think about that You're gonna have four islands to play with and you won't know what to put up and pretty soon It will go to eight and probably 12 so well. Thank you all for your attention and If there's any other comments We've got two minutes Ellie comments seems to me that those of us who know our way around SL are hesitant to lose all that expertise It's been great for confidence building. I I agree. I Second life got a lot of things right and I enjoyed Let's see. I was there for two years and you know, I still have avatars my main avatar and my inventories I a lot of things that I purchased in there that I can't take out and there's you know, some events I Duck in to see so it was a great way to start I agree and the one thing about the DIY approach is that the one the individuals I observed I don't know whether I this is this is an unscientific Observation, but it seemed like the ones that had the least money and had to do more themselves in second life Were the ones best suited for leaving early and going into open sim But open sim is very stable and robust now. So enjoy Steven has just asked a question. What degree programs are students in typically all school of continuing studies, right? Most of the of all the students in my courses are school of continuing studies courses but I do have some Day school students at Tulane or other students in Newcombe Tulane in my courses. There's a bit of a Cross-pollinization where our students can take day school classes and vice versa and we've just started Allowing Newcombe Tulane students to Major in several of our school of continuing studies programs. I teach business studies courses and the three main courses I teach are economics finance and ethics and Those are the three courses that I've built Individual simulations for I have individual buildings set up with different simulations related to the middle part of the material in the course and the it's cafeteria style and That's how I started and now the data detective school is an example of me moving into more of an immersive game Environment and what I'm trying to do is in the future compare students views of cafeteria style versus the game style. I Think we're still holding for the recording to come back on any other questions. Did that answer your questions, Steven? Oh And they are undergraduate. Yes, it's all undergraduate courses Rachel asks a question. Do you think the increase in the number of students that volunteer would have happened anyway? No, I I thought again the feedback I got from my students When they were in second life was that it was really hard to get from the orientation Island to Figure out what to do to get to our Individual islands within second life now. I offer up six different starting looks three male and three female starting looks and Pre-create their avatars Pre-position their avatars to be right in front of where they need to be and That made it's a huge difference in the participation rate and Considering okay, Rachel expands on her question considering the timeline 2010 versus 2013 well, that's a good question. I Don't see myself going back into second life Because I'm used rather than having just one or two islands. I I'm now used to having nine islands and Also, I can it's completely private, but I could have them hyper grid jump to the OS grid the platform is As stable the VVox voice The only last piece in the puzzle is For our new bullet engine and that's headed Ellie asks if my slides are on slide share and They're not Right now But I do have one version of them at this link. I've just put into the chat plus link to the website and Also, if you haven't already there is a note card I haven't gotten to the point where I'm describing the DIY my DIY approach we're waiting for the recording stream to come back but I've just been told one more try and we'll be coming back. Let me see if I've missed any questions here Rachel, are you in a second-life teaching? I just I Guess I'm I'd be curious for some Somebody who has a more up-to-date comparison of teaching in second life versus open sim Everything works for me in open sim and I have to say that wasn't the case when I was in second life Rachel does have builds both in SL and open sim and is your experience different do you find students Find it ease as easy to be in second life as an OS and Ellie's in second life as well and Rachel states that she agrees that OS builds can be much more expansive and at a much less cost and And Steven adds Rachel is dual SL and open sim right now She will talk later at 1230 in this zone good. We'll all be here For Rachel's talk Thank you all. I'm gonna close out here and Please email me if you have any more questions or ping me during the rest of the conference All right, that's very good. Thank you Kay for terrific presentation as a reminder to our audience You can see what's coming up on the conference schedule at conference dot open simulator dot org In this room next session will be virtual exercise design in the mercy virtual learning environments Recent emerging approaches with Ramesh Rahul Thank you again first speaker and I will be back shortly with the next session. Thank you


Okay, it looks like about 10-15, so I'm going to go on the basis of start my lecture and they will come, we'll see, okay? I want to start by saying that I have a lot of good things to say about Milton Friedman, okay? But not today. And the reason is we're dealing with money and macro and not with microeconomics and market theory generally. But I will say this much, I mean if you look at Friedman on issues like rent control or issues like minimum wage, issues like international trade and so on, he's an inspiration. And he's a good debater and kudos to Friedman on all those things. The only thing I can't forgive him about, you might know that Friedman was spearheaded. He spearheaded the move to end the military draft and he succeeded. And what I can't forgive him for is he didn't do it quite quick enough to save me. I spent four years in the military, okay? Now, today is Hayek and Friedman head-to-head, but as you'll see pretty quickly, Keynes is right in the middle of it. He's right in the middle of everything and so can't keep him out here. But in bringing in Keynes, we'll get a better idea about Friedman and his differences with Hayek. Here we go. Start with the level of aggregation, which is something I deal with very quickly on a summary basis. But it's something I want to draw your attention to early on in this lecture. And I start with an overstatement.  Your aggregation scheme is your theory. When you pick up a macro textbook, it's almost like some throat clearing remarks about, okay, look, we've got income, we've got consumption, we've got investment, we've got government spending. So now we're ready to go. Let's get some theory working here for us, okay? And yet what you want to realize is that by specifying that as your aggregation scheme, those are the four aggregates you're going to pay attention to, that means that you've already decided that there's nothing going on within any one of those aggregates that have any claim on our attention. And of course there's that investment aggregate sitting there that will be graft against this, that and the other thing, but never explored in its interior, okay? And of course the Austrians were saying, no, no, you've got to look at the structure of capital, the structure of investments, all right? So it's a good place to start. Now I'm going to look at the three of them, Keynes, Friedman, and Hayek. I think we can do it fairly quickly. They're rising at a high level of aggregation. Keynes believed that market economies performed perversely. I had that written before as Keynes argued. He didn't really argue, he just believed it. They behaved perversely, especially the market mechanisms that bring saving and investment in line with one another. Seeing unemployment and resource idleness as the norm, that's because he was looking at the wind during the 30s, the Great Depression was on. Keynes called for counter-cyclical fiscal and monetary policies and ultimately for a socialization of investment. That's in quotes, that socialization of investments. That's in his swan song chapter 24 of the general theory. His fiscal and monetary policies were aimed at just propping up capitalism long enough to usher in some more reasonable form of economics, namely socialism. That's Keynes' high level of aggregation. But if we look at Friedman, he's got a higher level of aggregation. Friedman, his monetarism was based on a still higher level of aggregation. The equation of exchange, MV equal PQ. More about that later, how many of y'all already know what MV equal PQ mean? Quite a few will get to it that don't. Q is total output, everything. That's consumption and investment. In other words, his level of aggregation doesn't even allow a distinction between consumption and investment, although he would admit that investment tends to be a little more erratic than consumption. So it puts in eclipse the issues of the allocation of resources between current consumption and investment for the future. And certainly puts into eclipse any kind of ongoings within the investment sector. But seeing no problems with him emerging from the market itself. In other words, he's a market guy. He thinks Adam Smith's invisible hand works quite well. Thank you very much. So Friedman focused on the relationship between government-controlled money supply, that's the M up there, and overall price level, that's the P. So his whole focus was simply on that relationship between the money supply and the price level. Now here's Hayek. Capital-based macro is distinguished by its propitious disaggregations. Look that up in Webster if you don't know what. It just means well-chosen, okay? Which brings into view both the problem of intertemporal resource allocation and the potential for a market solution. Hayek showed that a coordination of saving and investment decisions could be achieved by market-governed movements in the interest rate. He also recognized that this aspect of the market economy is especially vulnerable to the manipulation of interest rates by the central bank. Boy, that's, I mean, he's set the stage now on how to go about analyzing this. You can't handle that with monetarism. You can't handle that with Keynesianism because of your level of aggregation. So again, how methods shape substance. And I'll look at methods, and once again I'm going to start with Keynes, and you'll see why quickly enough. This is from a 1988 book by Alan Melcher, who himself is a monetarist. And look what he says, and think about this. Keynes was a type of theorist who developed his theory after he had developed a sense of relative magnitudes and of the size and frequency of changes in these magnitudes. He looked at what was moving around. Well, income's moving around. Consumption's moving around. Investment really moving around. It's flopping around, okay? I want to consider those. He concentrated on those magnitudes that changed most, assuming that the others remain fixed for the relevant periods. And when I look at things that don't flop around, Keynesian theory is essentially a theory of things that flop around a lot, okay? And I depicted this as what I call a variation sieve, sort of a metaphorical variation sieve. In other words, collect all of the data that you have on all of the magnitudes that you can think of, and then find whatever the sigma is, what's the extent of variation of those, and then you pour them through this sieve and all the things that don't seem to vary much, they fall through the sieve. The things that vary a lot stay in the sieve.  Now, you want to think about that. Is that a good strategy for setting out your macroeconomics? All right. That's Keynes. Well, you couldn't expect much more from Keynes. But look what Friedman says. He says, I believe that Keynesian theory is the right kind of theory in its simplicity, its concentration on a few key variables. What does key mean? Flopping around. Key magnitudes and potential fruitfulness. My potential fruitfulness means you can use your econometric skills to analyze these things. Because any of you have taken any econometrics or statistics or whatever, you know that if you have an independent variable that doesn't change, there's no sense in putting it in. It's not going to explain any of the dependent variable. How could it? It doesn't change. It changes just a little bit. It's still going to be swamped by things that change a lot. Okay? So here they're using their econometric techniques as a criteria for trying to figure out what's actually relevant to do. The implication here is that big effects have big causes. See, ultimately you want to find the cause of this, the cause of that, and so on, but they seem to think that there's a relationship between the size of the effect and the size of the cause. In fact, more than that, Friedman is on record in an IEA pamphlet a number of years ago where he says that we're able to assume, we have a right to assume that big causes come from big effects. That sort of boilerplate to the whole enterprise. Well, of course, that's not true. Now, some big causes have big effects. Some big effects have big causes. Mount Vesuvius and Pompeii come to mind. Big cause, big effect. Okay? But a careless smoker starting a forest fire. Little cause, big effect. Okay? And according to the Austrians, what seems to be a mild change in the interest rate can have a cumulative effect that eventually makes a boom unsustainable. So that's part of the methodology of both Keynes and Friedman about big causes and big effects. Elsewhere, Friedman has actually said, this is a quote from a New York Times article, about 68 I think it was, we're all Keynesians now. This is Friedman. We're all Keynesians now. Now he was misinterpreted. He didn't mean to say that we're all in favor of active fiscal policy, discretionary, monetary policy, policies about budget deficits and so on. We're not trying to manipulate those things. We're not all trying to manipulate those things. How are we all Keynesians now? Well, he clarified it in a later piece. He says, no, no, no. What I meant was we all used the Keynesian language and apparatus and we could include aggregation scheme. Okay? Except actually Friedman has won up on Keynes by having a higher level of aggregation. That's what he meant. Well, okay, fine, he meant that. But if he meant that, then he really shouldn't have said all unless he was just forgetting about the Austrians because they don't do that. All right? That's the distinction. They have a much more disaggregated system. Yeah, Time Magazine 1968. There you go. Now, look at what Hayek says. He's not saying big cause, big effect.  Okay? Anybody can pick that up. It takes some skill to look for other things. The role of the economist Hayek points out this is in pure theory of capital is precisely to identify the features of the market process that are apt to be hidden from the untrained eye. In other words, the untrained eye, even the eye of the entrepreneur, is not likely to monitor fairly mild changes in the interest rate that nonetheless have cumulative effects and eventually over a period of time, the length of the boom that it's generating will reveal its unsustainability and cause a collapse. Exactly what he had in mind. For Hayek, then, the cause and effect relationship between central bank policy during the boom and the subsequent economic downturn have a first-order claim on our attention. Let's figure out why this growing economy all of a sudden went bust. Was it growing too fast? If so, why? Was there something wrong with interest rates? If so, what was the policy that gave rise to that? He's looking at the boom. His whole theory focuses on the boom to figure out why a bust turns out in some circumstances to be inevitable. So it has a first-order claim on our attention despite the more salient movements in macro-magnitudes that characterize the post-crisis spiraling of economy and the deep depression. So you see this subtle thing. You actually don't see it. You have to tease it out of the history of the 1920s. You understand that there was something funny going on with interest rates during the 1920s, more so near the end of the 1920s in the middle, but you sort of tease that out of your historical understanding and you know and you find out why that then gives you a downturn. Now, it's only after the downturn starts that Friedman gets interested because it's only after the downturn starts that you see this flopping around. You see this huge drop in investment expenditure, a huge drop in consumption, a huge drop in income. And the Friedmanites will say, oh, that's what we've got to focus on are we have to make our theory out of these huge drops and see how they correlate and so on and never mind what happened before. Friedman regard the 1920s as the heyday of the Federal Reserve and see anything wrong going on there. Okay. This is something Hayek said during his Nobel lecture. There may well exist better scientific evidence that has empirically demonstrated regularities among magnitudes that flop around a lot. For a false theory which will be accepted because it is more scientific than for a valid theory which is rejected because there's no significant quantity of evidence for it. That last part of the sentence may be an overstatement. I mean there is historical evidence that makes us think that the interest rates are too low during the 30s or during the 20s. Now, I've already suggested, but I'll do this in a more deliberate way, about the difference in focus. Keynes attributed the downturn to psychological factors. So when he talks about the downturn, he's not really talking about economics, he's talking about psychology, he's talking about animal spirits. So that's what he's looking at to justify, to realize, okay, that's why we had a downturn. I suggest that a more typical and often predominant explanation of the crisis is a sudden collapse in the marginal efficiency of capital. The EMEC here is just entrepreneurial expectations of the profitability of continuing to invest. They get cold feet, okay? They lose the fire in the belly, lose their will, and it's contagious. They all pull back and the economy goes south. So that's his idea is why we got the boom in it in the bust going on. Keynes' main focus is on the dynamics of the subsequent downward spiral and on policies aimed at reversing the spiral's direction. So he's looking at the window in 1930s and he sees the economy spiral downward. And he's trying to think up policies and make them spiral back upwards, okay? Independent of just why they started the spiral, but if you really want to know why they started the spiral, psychology, animal spirits, and so on, okay? That's Keynes. Friedman, he's just dismissive about the issue. And I've learned I've picked these expressions out of the literature of monetarism. Dismissive about the whole issue of the cause of the initial downturn, referring to it as, and this is only a partial list, ordinary run-of-the-mill routine garden variety of recession. What does that mean? I mean, shouldn't the economists be able to explain the economics of a recession? Why is there a recession? No, that's just an ordinary garden variety run-of-the-mill recession. That's not what we're interested in. Of course, we're not interested in it because we don't have the data. We don't have a set of data that will allow us to investigate this econometrically, empirically. And so instead, we look at the post-recession dive into deep depression. And he makes that distinction. There's the recession, and then there's the spiraling into deep depression. And it's the spiraling into deep depression that he wants to analyze. So he's really pretty consistent with Keynes here, except he doesn't mention animal spirits. So his focus is on the policy blunders that occurred on the heels of the downturn and on the correlation between the decrease in the money supply and the decrease in GDP. That's the cue, output. Real output is GDP, real GDP. That's the cue when in V will be Q. Now, there are lots of other things going on too that cause the spiraling, but this was a biggie, the contraction of the money supply. And this is not exactly a paraphrase, but it's in the spirit and in the tone that Milton Friedman uses, especially in lecturing, the correlation between movements in the money supply and movements in the total output leaves no doubt about the central issue. In other words, those things go down together. And I've heard one commentator say that Friedman speaks in a tone as if he's talking to a group of students that were made to stay in after class because of not getting things straight. So that's the tone that he uses. Hayek's focus is on policy-affected aspects of the boom and their implications for the boom's unsustainability. Well, our sustainability here doesn't have any. Post-bus reallocation of labor and capital takes time, y'all, but the particular dimensions of it, such as the Great Depression and its length and depth, are to be explained largely in terms of the policy perversities that hamper the recovery. In other words, yeah, yeah, Hayek knows the Depression was deep and it was bad, but it was bad because of all the policies of Hoover and Roosevelt, policies of crop destruction to try to get the prices of the crop up.  They try to get the price of pigs up. That doesn't give you a recovery. Hoover imposed a tariff, a smooth, holy tariff. That doesn't help. Roosevelt had price fixing. Office of Price Administration, that crop prices up kept prices from adjusting to the fallen money supply, okay? Make work projects on and on and on, cartelizing industry, so they could behave collectively as a big monopoly. All of these things took their toll in the Great Depression. Hayek knew that, okay? But it wasn't part of his business cycle theory, because his business cycle theory was aimed at showing why there was a downturn in the first place, why the growth during the 20s wasn't healthy growth. It was unsustainable growth, all right? Many of people have rejected the Austrian theory on the grounds that the misallocation of capital, well, okay, maybe there was some misallocation of capital, but it just wasn't enough to explain how that depression was so deep and why it was so long. Well, no, it doesn't explain that one, intended to explain that, nobody ever thought it would explain that, okay? But people like Gottfried Hobbler made that argument, Lionel Robbins and so on, both of whom at one time were sort of tuned in to the Austrian theory of the business cycle. Query here, I don't know why it's in orange, we put queries in orange. Can we justifiably say the bigger the boom, the bigger the bust? And you do read that, it's in Rothbard, it's in other places, but if you read Rothbard carefully, when he explains why that is true, the bigger the boom, the bigger the bust, he's talking about a bust to reallocate the misallocation that went on during the boom, okay? He talked about the necessary reallocation, meaning made necessary by the money caused misallocation during the boom, that's what he means when he says the bigger the bust, the more you misallocate, the longer it's going to take to reallocate. Yeah, he didn't mean that somehow the boom in the 20s was so big that it took all of 10 years to fix and a recession that involved 20-odd percent unemployment. He didn't mean that, okay, because those were caused by all that other nonsense going on during the 30s. Okay, so for Friedman, the full analysis of a business cycle consists almost wholly of an empirical accounting of the depression's depth and length, especially the depth in terms of the collapse in the money supply. For Hayek, Austrian theory is fundamentally a theory of the unsustainable boom and the subsequent reallocations of misallocated resources, accounting for the actual depth and length of the depression that ensues, requires an economic and historical account of each particular episode, all right?  Case of the cabbage-eating Mississippi monster. I will say. Suppose that in late October of 1929, a thousand-pound monster descended on Mississippi soil, okay? You spent the next three and a half years eating all the cabbages and quite a few rabbits between Tupelo and Pascagoula. By early March of 1933, the monster weighed 4,000 pounds, 30 to 1,000, okay? Two investigators are sent to Mississippi to get a handle on the situation. One's from Vienna and one is from Chicago.  I haven't looked into it. So the B&E's investigator asked, where in the world did this hideous thing come from? This is from Vienna. They proceed with the investigation. It turns out on further investigation that the monster was an unattended consequence of some ill-conceived government-sponsored bionics project, okay? Well, but then, case closed, you know, we figured it out. Now, here's the Chicago economist. The Chicagoan shows up, shows the Austrian aside, you know, this is part of the temperament, too. Not necessarily a freedman, but of other monsters. Never mind how the thing got here, the real question is, how did it grow from 1,000 pounds to 4,000 pounds? How did an ordinary run-of-the-mill garden-variety monster quadruple in weight in 40 months, okay? Chicago's answer, of course, is it was all those cabbages. They couldn't get good data on the rabbits. You see that problem, too. What can you do? Correlation between cabbage consumption and weight gain at the Mississippi Monitor leaves no doubt about the central issue. That would be the monitors, okay? Query. Do we suspect that the data availability is what led the Chicagoan to his conclusion and that the lack of hard data pertaining to the monster's origin caused him to be dismissive of questions about where the thing came from, okay? So these and other related suspicions are what underlie the message in Hayek's Nobel address, the pretense of knowledge. That's the title of his Nobel address. I don't think he mentioned Mississippi monsters, buddy. He might as well, and he should have, okay? Okay, now let's look at freedman's monetarism and you're still here. You're not going to see a lot of graphical analysis like I did with the Austrians or like you could do for the Keynesians because the monitors pretty much hang their hat on that one relationship. There was a point, 1970, where freedmen set out to exposit monetarist ideas in terms of the Keynesian framework. And it wasn't just the Keynesian cross that was a step above that, called ISLM analysis, where you take into account interest rates and other things. And he laid it out in two successive articles. I think there are two parts of one article over a couple of journal issues. And so he's showing how you could use the Keynesian apparatus to show what the monitor's conclusions are. That was in 1970. In 1999, though, in the New York Times article, he identified that exercise and his involvement in it, and he was the author, as the worst mistake he'd ever made to try to explain monetarism in terms of Keynesian analytical apparatus. It just didn't work. It just didn't fly. The worst mistake he ever made. But telling me he didn't have any apparatus of his own beyond that, you know, that's all he did have, so it makes you wonder. With a nearly constant velocity of money, velocity of money is just the rate at which you spend the money that exists. M is the money supply. It's all the money in the economy. And that would be cash, and it would be some total of checking account deposits. That would be the smallest magnitude that you might want to work with. And each of those dollars gets spent more than once during a year. I buy something from you, and you buy something from somebody else. So you have to multiply M times V to get the total spending, total buying. How much do people buy? Well, here's the money supply they've got, and here's how many times on average each dollar is spent, so M times V is the amount of buying, the amount of spending. If you look at the other side, P times Q, what does that remind you of? That's the price of something times how much of it you bought. It's capitalized, so it's total Q, all the junk in the economy you could buy, times capital P, which is the average price level of consumer price index, for instance. So you multiply P times Q, and that shows you how much somebody's sold. The people are selling the Q and they're getting a price B for it, so that's how much they sold. So in the final analysis, Mv equal PQ really just says selling equal buying. Well, all right. It does. So it's total logical, and Friedman understands that perfectly, but if you dress it up a little bit, you can milk some ideas out of it. So it goes like this. Let's have output growing slowly. So the price level moves with the money supply. So there's that bar over velocity that means it's not changing. That was then when he was writing this stuff. Now velocity is all over the map. Okay, that's no longer a stable magnitude, but when he was doing his monetarism, it was. Pretty stable. Had a slight change to it. So there's the growth. Yeah, it's positive, but not much. Now, suppose the money supply is a pretty big money supply. Well, look at the equations. Something's got to be happened to P to make those two magnitudes equal because buying is still equal selling. So what happens, of course, is P rises not quite as much as M, but almost and not quite simply because Q rose 2. You had some real growth going on. All right. So he milks that out of it. And then an important part that he milks out of it is the direction of causation. Although it's not a rigorous demonstration, but it's plausible. And it goes from M to P. In other words, it's because the central bank increased the money supply that prices rose. It's not that prices rose so much that the Fed decided, boy, better increase the money supply so people can pay those high prices. Logically, you could think it could be that, but it's not. You had the monetary expansion. Why would they do that? It turns out because they depress interest rates and goose up the economy when they do that. But that's not part of this theory. Now, the next part is critical to my lecture here. I'm watching the clock because I don't want to leave out anything. And that is there's a long lag with a lag of 18 to 30 months. 30 months, two and a half years. So in other words, increase the money supply prices go up. It takes two and a half years for it to go up. This is in the literature of monetarism as a long and variable lag. I mean, 18 to 30 is a pretty wide range there. In my time and money, I referred to that aspect, that lag, as the soft underbelly of monetarism. They haven't really accounted for the length of that lag. And in one of Friedman's last writings on last books, on monetary theories called Monetary Mischief, I think it came out in 93 or something like that, Monetary Mischief, he recognized this as the major unsettled issue of monetarism. It's a major unsettled issue of why in the world it would take that many months for prices eventually to adjust to the money supply. Well, we'll milk that a little bit later and show how that works. What Friedman did milk out of this and kudos to Friedman for this, inflation is always and everywhere a monetary phenomenon. Let's go back to that. That was in a 1968 book called Dollars and Deficits or Deficit in Dollars. Much to me in the other way, Dollars and Deficits. That's probably the most quoted thing out of Friedman. Well, good. We ought to get that message across. And so Friedman's monetary rule is he thinks the money supply should be increased at a slow and steady rate to achieve long-run price-level constancy. In other words, here, if you've got that little bit of growth, okay, we'll just get that little bit of money. And he doesn't mean even match it on a year-to-year basis, because you don't know how much the economy is going to grow this year. But look at it on the long term. If the long-term rate of growth is 2% or 4% or whatever it is, well, increase your money supply year in, year out at 2% to 4%, and that probably won't disturb the economy. You'll have constant prices, nearly so, and sustainable growth. But he's in trouble here in two ways. One, having price-level constancy isn't actually argued for as the proper goal. In fact, the Austrians would say that you really want increases in productivity to lead to reductions in prices. That gains from productivity can be enjoyed by customers, by consumers, in terms of getting things for a lower price. So the Austrians would dispute the price-level constancy as the goal, and even Friedman himself in his later writings realized that there's something wrong with his monetary rule because it clashed with his general idea that bureaucrats don't do what's good for the economy, they do what's good for themselves. So the Federal Reserve Bank doesn't have the incentive to implement that rule. They have other incentives to pump up the economy, to finance projects by the government and so on. So anyhow, you get a constant price-level with that deal. But what happens within the Q aggregate? Now we're going to go Austrian on him. What happens within the Q aggregate as a result of monetary injection? Well, I can do this very quickly because you've seen it before. There's a supply and demand for loanable funds, and even if you want to increase the money supply by just 4% or something like that per year, that money is still going out through credit markets. I mean, the central bank lends money into existence. They add to the supply of savings money that was created for the purpose of keeping the price level constant that doesn't involve any saving at all. And so you get that shift to the right of the money of the savings. So Friedman, though, declares in the 1920s that the golden years of the Federal Reserve ignores interest rates during the 20s because they didn't change much. And I add that is they fell through the Keynesian Sib. They were sort of out of play before you even got started. Friedman, by the way, has sent me on one occasion a chart of movements in the interest rate during the 20s just to demonstrate that they didn't change very much. He sticks to his guns on that. And the Austrians, Hayek particularly, would say, but what if they should have changed but weren't allowed to? And it turns out this is the paradigm case. This is what typically happens in business cycles in the Great Depression, in the dot-com boom and bust. And it goes like this. During the 20s, breakthroughs in technology increased the demand for loanable funds and put upward pressure on interest rates. This was what Mises called the entrepreneurial component of the interest rates. In other words, there's new technology, we can implement it and make a profit. So we need to borrow more money. And more people are trying to borrow money to implement the technology and that was driving interest rates up. Or that would drive interest rates up if the Fed didn't step in and hold them down. All right? So what happens here? The Federal Reserve guided by the real bills doctrine. I won't go into that. But essentially if it says that the interest rate goes up, put it back down. We don't need that. Put it back down. Still miss something here. Okay, so seeing no change in interest rates when they should have risen because of technological advances, Hayek was able to identify some critical forces hidden from the untrained eye. That's what Hayek was talking about when he says that's what you have to look for. There's the query. Which of Freedmen's, which view Freedmen's or Hayek's is more firmly anchored in the empirical historical circumstances of the 20s? I think the Austrians are better anchored. Okay, so does Keynes recognize the significance of the loanable funds market in the context of business cycles? No, we've seen already he threw that whole diagram out. No, he denies that saving depends on interest rate and he all but denies that investment depends on the interest rate. So he jettisons the loanable funds market theory. For him, saving is dependent only on income investment and investment expenditures that are based predominantly on psychological considerations. So here's Freedmen. Does Freedmen recognize the significance? And the answer is no, he assumes this market is working well and so ignores it in dealing with the key issues of the relationships between the money supply and the price level. For him, the focus is on total output Q, which includes output of consumption goods and investment goods. So up there at the top, saving equals minus 8 plus 1 minus 3 times y. You don't see any interest rate there. And i equals i sub 0. I know some of you don't like math, but I need to explain that question. If you put a sub 0 by a term like that, it means don't ask me anything else about that term. It just tis what it is and we don't know about it. Okay, we can get rid of them. Now with Freedmen, he's got mv equal pq. Now, he wouldn't throw away that diagram, but he doesn't have any use for it because if you think about it, Q, that's total output, and so that relationship is something that goes on within that Q. And he's not analyzing what's within that Q. So he doesn't use a loanable funds market. There it goes, okay? It's gone. You don't need it. Freedmen's view of monetary contraction, it's the same as expansion except we're going the other way. Sharp monetary contraction puts downward pressure on p and q. If p is sticky downwards, he didn't generally think they were sticky downwards, but certainly during the Great Depression, they didn't fall, didn't fall very much, didn't fall very fast, but precisely because of New Deal policies and Hoover policies to prop them up. So it's really dangerous to have a money supply collapse and have the government cropping up prices. Evidence shows that between October of 29 and March of 33 decreased in was the essential primary dominant cause of the decrease in Q. So if p is either sticky as Keynes believed or wasn't allowed to fall much as Hoover and Roosevelt ensured, then a decrease in m is going to give you a big decrease in Q, okay? That's the cave into depression. The correlation between movements in the money supply and movements in total output leaves no doubt as to the central issue. Again, that's Keynes' focus. Here's a critical comparison, and I want to go through this pretty quickly but I think you can see. I'm going to compare the dot-com boom and bias, that's the 90s, and I say cushioned by an underlying real growth. I mean, the dot-com revolution, boy, talk about an increase in technology that could be exploited for the good of lots of people. There it was, okay? No question about it. There was something good going on, all right? The other one is the housing boom and bust. And I don't say cushioned by, I say compounded by, mortgage-market distortions. Now, the distortions were good for a few people that were able to buy a house and hold on to it and not get caught underwater later. But by and large overall, it was a disaster from the beginning. So that aspect of the boom that was driven in large part by mortgage-market distortions, holding interest rates down by eliminating the risk, not really eliminating it, but far beginning off through Fannie Mae and Freddie Mac and everybody wants to buy the derivative securities. And the homeowner then doesn't have the risk that otherwise would have been there. And look at the two cases. In the case of dot-com, you start out with an increase in the demand for loans because people want to take advantage of the new technology in the dot-com industry. So that puts upward pressure on interest rates. Well, fine. Let the market adjust. We have a new equilibrium rate. We've got more savings and those savings can be used to bring into fruition the new technology, the dot-com. But the Federal Reserve wouldn't have it that way. The Federal Reserve wanted to drive that interest rate back down. And they did. So in other words, they increase the supply of money, they don't really increase savings, they just add to it some increment of money. And it causes the supply to shift rightward and puts the interest rate back down. But now look what's happening. Now savings is back where it was before. But investment reflects the money provided by the Fed. So you've got investment exceeding saving. And you've got an overinvestment, you've got malinvestment because interest rates are lower than they should be. So you really do have to tease that out of the history because you don't see the interest rate rising. You see it not rising when technological developments suggest that they should. Now look at the big contrast with the boom and bust in the housing episode. That didn't start by new technology. That started with a distortion of the housing market. And that is, we have increased supply of credit that put downward pressure on interest rates. Now you have all these subsidies to housing. And when you do that, that gives you low interest rates. But guess what? If it had stopped there, then that would have meant that funds that generally were available to manufacturers are going the other direction because you're getting more secure loans since the government is picking up the risks. So to keep that from happening, they increased the money supply still more. Like that. And now all of a sudden, you've really got the interest rates in the basement. That's why you saw interest rates so low around 2004 and 2005. And of course, lower still now. And so if you look at this, so you have a double shift in the supply of loanable funds compounded both the downward pressure on interest rates and the excessive borrowing. The artificial boom rode piggyback on the distortion of mortgage markets. So that didn't leave you a cushion to fall back on because you've got monetary distortions added to regulatory distortions. So when that sucker comes undone, the economy really is going to be in bad shape as it is, as it was. In fact, there's a little chart that shows you that period back there where the interest rates were too low for too long, although of course not nearly as low as they are these days. Okay, I'm going to have time for this in just a few minutes. Friedman's plucking model. This is an Austro-monitorist story here because about the time that the review of Austrian economics was coming into existence, Walter Block had a particular strategy to get articles from well-known economists and he would challenge them to write negatively about the Austrian theory. And he challenged Friedman. He said, would you write an article explaining just what it is you think is wrong about the Austrian theory? And Friedman wrote back and wrote back his right. We didn't do email in those days, but he wrote back and he says, well, I've already done that and I don't want to do it again. So Block had to ask him very apologetically, I'm sorry I missed it, where did you do it? So what he cited was an interim report of progress on a project he was doing for the National Bureau of Economic Research published in 1964. It's actually in Friedman's book, Quantity Theory of Money and Other Essays. That's what it was, but then he said, but I actually didn't mention the Austrians, but I thought you people wouldn't know who you are, you know. So it was left at that. Well, of course, Walter got that literature in Reddit and it was something called a plucking model. He called it then at the time. And here's the way it goes. Friedman says, if you look at what's going on during a business cycle, let's start with a country that's growing steadily. He called it an incline plane. I don't know why he used this terminology. Take an incline plane that represents growth and then realize the actual path of the economy is not quite so smooth. But the reason it's not quite so smooth is it dips down occasionally at different extents and different places. And so what you get is something like this. And he labeled these or described these as bust and boom. Although in my rendition, I suggest that what he's calling a boom is actually a recovery. But he called it bust and boom. And so you could think there was maybe something in the early 20s and then a big thing, a great depression, and then a later depression, maybe dot com. That's the way it is. He says those silly Austrians, they're always talking about boom bust cycles as if the bust depends on the strength of the previous boom. He says it's not that way at all. Let's look at the data. We bow before the data. That's the standard monitor's refrain. We bow before the data. And what we see is we don't have boom bust sequences. We have bust boom sequences. Bust boom, bust boom, bust boom. And yeah, sure enough, the boom is just about the same as the previous bust. So it's not that the Austrians are just wrong. They're really kind of cute, but I'm not sure he said cute. But they're just not talking about, they're not explaining anything that needs to be explained because of this bust boom cycle. Well, it turns out just shortly after that there was a birthday party for Friedman. And he was asked to do a paper. Well, he hadn't worked on monetary theory for years. So what he did was write about the plucking model and got his lead article in Economic Inquiry. Well, that was great for me because it came out in 93 and so now it's legitimate target for criticism. So I wrote a comment on his plucking model from an Austrian perspective and submitted it. It initially got rejected, but rejected on the basis that Friedman shouldn't have written that article that he wrote and so we do want to waste more paper with a comment on the article. Eventually the editor overruled and published the paper in Economic Inquiry. So I have a plucking model and of course what I show there is that his boom is really a recovery, one, and two, the actual boom is something that's already hidden in his incline plane because it's at the high level of aggregation. It's C plus I. And so that gets hidden away in the incline plane. Okay, what have we got? Oh, there's Friedman. Now, I want to get through this too. We'll make it Friedman and Knight versus Hayek and Minger because I want to link this to my first chat. How many saw my first article on capital theory? A lot of you see it anyhow. Why was Milton Friedman so unreceptive to the Austrians' capital theory? And my first answer is because of his attitude towards prices and production, I was at a conference in San Francisco, I think it was in 1986, and during a break there was a three-way discussion between me and Leland Yeager and Milton Friedman. Friedman, for some reason or other, was talking about how hard to read Dennis Robertson is. You can't read his book very easily at all. It's really turgid, you know. I don't know why he was talking about that, but he was. And then, all of a sudden, he interrupted himself and he turns to me and pointed at me. And when Friedman points at you, you kind of pay attention. He pointed at me. He says, I'll tell you another book that's impossible to read. He said, Prices and Production. He said, I challenge you to read that book and tell me what's in it. Well, right there, you know, he's not exactly warming up to the theory. So what does he do instead? Here we're going with this lag again. What goes on in the short run? It's night and clerk, all right? Now, let's read through this. We've got time. He starts his story when the Fed has already increased the money supply and it's in the hands of the public. Now, something funny went on in that process, but that's where he starts. So he says, holders of cash will bid up the price of assets. If the extra demand is initially directed at particular class of assets, say government securities or commercial paper or the like, the result will be to pull the prices of such assets out of line with other assets and thus widen the area which the extra cash spills. The increased demand will spread sooner or later affecting equities, houses, durable producer goods, durable consumer goods, and so on, though not necessarily in that order. These effects can be described as operating on interest rates. He puts it in quotes. If a more cosmopolitan, I put, i.e. Austrian, interpretation of interest rates is adopted, then the usual one of them refers to a small range of marketable securities. Now, here's the killer. See, there's the Knight-Clark model. And even to help you read this, so you can read it without your head swimming, I put sources in orange and services in green. Now, see if you can follow this. He said, the key feature of this process, he's thinking he's got a hardwired Frank Knight-Clark in his mind, and he didn't know what Hayek wrote. The key feature of this process in which interest rates are low is that it tends to raise the price of sources, orange, of both producer and consumer services, green relative to the price of the services themselves, it therefore encourages the production of such sources and, at the same time, the direct acquisition of the services rather than the sources. But these reactions in their turn tend to raise the price of services relative to the price of sources, that is to undo the initial effect of the interest rate. Well, if you just convert the Knightian stuff to Hayek stuff, you get a much different story, don't you? You don't get this service and sources stuff. But then he goes on. The final result may be a rise in expenditures all the way around, and that's P going up without any change in the interest rate at all. I mean, the whole boom by cycle is finished. Now, at that point, interest rates and asset prices may simply be a conduct through which the effect of monetary policy change is transmitted to expenditures without being altered at all. How can it be altered? All it's doing is juggling sources and services. What about the actual hardware in the economy? Nothing about that. And I think when he does try to account for the lag, here's what he says. It may be that monetary expansion induces someone within two or three months to contemplate building a factory within four or five to draw plans within six or seven to get construction started. The actual construction may take another six months, and much of the effect on the income stream may come still later. Insofar as initial goods used in construction are withdrawn from inventories and only subsequently lead to increased expenditures by suppliers. So here, that's the Austrian theory. That's the Austrian theory. In other words, get rid of sources and services and put in full-bodied capital structure. And his 18 months is simply this period where the economy is overheating and you've got misallocation of resources, and then the rest of it is the Keynesian spiral. So that's what it amounts to. I've got to show you this. Forgive me. The story here is when I was in Menlo Park, that was a short walk to the Stanford library. Friedman was at the Hoover Institute, and I had heard that he drove a Cadillac and he had NV Equal PQ as his license plate. So I went over there with the camera several different days, sometimes not even finding a Cadillac, let alone the license plate. But I went over there one day and I found two or three Cadillacs, two or three. And I found one, this one, that I took a picture of. However, this one didn't have the NV Equal PQ, but at the time I was discouraged I wasn't going to come back, I was getting ready to leave. So I just took the picture and I thought, well, Photoshop will do the rest. So I put it on here. And then, not too much later, on the blog of Mankiw, he said, this was back in 06, he asked about, does anybody know what my license plate was? Well, it turns out EC-10. Is that what he teaches, I guess? I don't think I would advertise that, but that's what he did. And so, here was the discussion. It's kind of small, I'll read it. You know, I hate to spoil things, but I must say I think Milton Friedman has a better plate. And he quotes this, years ago trying to find Friedman's apartment in San Francisco, I knew I was on the right location when I spotted a car that said NV Equal PT. T was Fisher, Irving Fisher, T for Transaction, NV Equal PT. Friedman didn't use T because he couldn't get data for it. It was like the rabbits. So he used Q. And he represented it as Y. In other words, Y is what you earn to buy Q, so okay, we could use Y. And then the next quote, it says, Friedman's plate is NV Equal PQ. Not NV Equal PT. There's a link. Can we get on the internet here? Yeah. Well, there's France. It's the French side. And if you go down there in the French side and see, can anybody read French? It's too small. La Voix Tour of Automobiles. Okay, you click that. They cribbed my picture off of my website. But Friedman does have a name. Went the wrong way. No, I don't need to get back out of there. Anonymous writes, that's pretty ridiculous. And the next one writes, I love economists. And Friedman does have the license plate. But it's NV Equal PY. Look at his crappy equal sign. It looks like it's electrical tape. Okay, thank you very much.


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Car sharing services have become increasingly popular in recent years, with many companies offering electric vehicles as part of their fleets. These vehicles are often touted as environmentally friendly, but they may not be as clean as advertised. In fact, the production of energy to power electric vehicles can result in significant amounts of carbon dioxide emissions. Researchers have attempted to quantify these emissions, but the data is limited. This study analyzed the actual levels of CO2 emitted from both electric and gasoline-powered vehicles used in car sharing fleets. The results showed that electric vehicles were much more efficient than gasoline-powered ones, resulting in up to 65% fewer emissions per trip. Additionally, the driving style of the driver plays a major role in determining how much CO2 is released. Operators should ensure that their drivers are aware of the importance of driving efficiently and safely, especially in cold weather conditions. This article was authored by Andrei Kubic, Katarzyna Turin, Piotr Falega, and others.


One time a year we'll come down. This is the second year that we've done it. Through this time that way everybody gets a round through to see, you know, how things don't affect everything. Catastrophic happens. So we don't have a jet that we can bag lift or crane lift there.  You have to lift every three years and then we brought some of the younger guys down to get started and get a little bit of experience on it. So it's basically giving us that experience of crane lifting, bag lifting. If an aircraft goes off the runway, if an aircraft goes down, we're able to go in, if we can get a crane in, lift it up, throw it on a flatbed. If a gear collapse is on the runway, we know what to do with the bags, getting the aircraft up and the gear back safe. So the training, I mean, isn't too difficult. The biggest deal is whenever you do have a downed aircraft, figuring out how to get it out of wherever it's either stuck in or went down at.


What does Chinese and Mexican cuisine have in common? It seems like actually a lot more than you think. So in this video, we're gonna be doing a deep dive into talking about what the cuisine share and possibly what the cultures share as well. Yeah, we're gonna be reviewing this viral article by food writer Clara Wang right now. Andrew, real quick, let's get into some photos just to show people this connection is real. First off, Andrew, taquitos, floutas and egg rolls, right, seems pretty obvious. Boom. Okay, here we have tamales and zongzi, or, you know, lomai guys, basically sticky rice wrapped up. Empanadas and certain Northeastern-style fried jiaozi. Ooh, here we got minuto and then you have the Cantonese tripe dish. David, what is it called? Aotai yi. And we've got Mexican fried fish and we've actually got a more Southeast Asian dish, but you know, some of the more like minority groups in Southern China also eat this as well. Andrew, I've got mong, ginger chicken, as well as Mexican shredded chicken, boiled chicken here. Here we have flour tortillas that look exactly like the peaking duck pancakes, the chun bings, or the bings, sorry, from peaking duck and they look, they're almost made exactly the same too. I would say tacos and some peaking duck wraps, obviously depending on how you make it. Peaking duck wraps, obviously going with, you know, small taquitos as well. Like you said, tatue bing and fajitas. Almost we're getting into like Tex-Mex. Oh, those look really similar, bro. Chicharones and shioyuk, the Cantonese roast pork. Ah! A rune bing from Taiwan and then a open-faced burrito. Obviously I'm not saying burritos are fully authentic, they're more Tex-Mex. But man, Andrew, Chinese yotiao and Spanish churros, which obviously are really popular in Mexico as well. Let's get down to the peppers, David. Last but not least, these little crispy peppers that we get at Los Tacos number one that I love to eat, they really, really look like the Chinese peppers that come with a lot of Chinese dishes, like Sichuan dishes. Oh my goodness, make sure you like, subscribe, turn on your notifications guys. Andrew, in the article, so you guys don't have to read it, but we'll link it below. She brings up the linkage between ancient civilizations, population density, diverse climates with a lot of different ingredients, outside influences that came in over the years, necessity to tenderize and flavor undesirable pieces of meat, whether that was oxtail, offals, and a focus on family and food gatherings. Ooh. I can see all those points valid, Andrew. But here's a few other ones that she didn't mention in the article, Andrew. There's a lot of Cooley and migrant labor, both domestically in those regions, but also internationally. So you're saying a lot of blue collar workers that have left their homeland to work in other places, that's common amongst Chinese and Mexican. And Chinese actually have a gigantic migrant worker seen internally within the country as well. And, David, here's another thing. Climate-wise, a lot of Mexico and a lot of Southern China, including some Southeast Asia, is actually sharing the same latitude. Yeah, so usually places with the same latitude globally have similar climates and that can grow even similar crops, right? They both share the Pacific Ocean that could have, I mean, technically a whale could swim from one end to the other, right? They both have rural agricultural farming cultures as many ancient places were, whether we're talking about the Olmecs, the Mayans, Inkins or something like that, ancient China. I would say that, I guess, and this is more anecdotally on the people side, like when I meet a lot of Mexican people or people from Mexico, I do feel like that maybe their demeanor, you could say is similar to Chinese people, especially the ones from Oaxaca or Puebla, the very humble, hard-working. You're saying more indigenous native. Yeah, they're very humble, hard-working and quiet. They don't actually talk that much. I mean, if I just said that, you might think I'm describing some Asian people. Yeah, cilantro, peppers, pickled things, sauces, some sort of balance between fats versus acids, sweet versus heat, although, to be fair, those balances are often quite different. That creates the different flavor profiles despite looking similar. So yeah, I thought it was really interesting because prior to reading this article, Andrew, I did not, I had thought about it, but I didn't know that there were so many internet threads and articles comparing Chinese and Mexican cuisine. Oh, dude, there's actually a lot. I didn't know that people were asking this question for years.  Chinese food and Mexican food. Now, are those the most authentic representations of those, even though you're right, in America, the number one and number two ethnic foods are Chinese and Mexican. Obviously, Mexican above Chinese. Yeah, and people might be referring more to Tex-Mex like a Taco Bell or something like that, and they might be referring to Panda Express, but regardless, those are forms of Mexican and Chinese food. Yo, I also looked it up. The average GDP per capita in China and Mexico is kind of similar. Interesting. David, there's even some comments that people left that were so deep cut. They didn't say, oh, it's not just food, guys. It's also the appreciation of jade, jade jewelry. And here's two pictures of Chinese jade and Mexican jade. Obviously, this is more coming from like the Mayan, Incan days when they were like, Andrew, back to Quetzalcoatl. Whoa, yeah, I know. Like Quetzalcoatl is kind of like a dinosaur dragon character. And then obviously, like Chinese love dragons. I think the Chinese dragon, you can say, is a little bit different, but of course, there's always that too. Yeah, so I mean, let's get into the comments section, Andrew. Somebody said the tolerance and appreciation of animal body parts that are considered weird to some people is both there and it exists in a lot of folk cooking. However, a lot of folk cooking from other cultures has been worked out of the culture. Like let's say, for example, Western European people had fennel and they had offals at one point. They no longer really use those ingredients very often. Right. And here's another comment that said, hey, there's also a striking similarity between Mexican and Indian cuisine. And then they went on to list all the things that are similar. So it's kind of like what we're doing with Chinese food. So I guess like, I think there is an argument that it's not like, this is not. Yeah, yeah, yeah. I think the comparisons between Chinese and Mexican food are not exclusively to China. Because you could do the same thing with Korea because a lot of, for example, Bedia or like, you know, like a Yuk Daejang or something like that with the red soup might even look more visually similar. But like just that general region. Yeah, I think initially I always looked at the Korean food that we ate in America, very similar to Mexican food, because especially if you go to Korean barbecue, there's a lot of pickled stuff, veggies and grilled meats.  Right, right, right. So I, but I think that it is kind of interesting to see the similarities between Mexican and Chinese cuisine also anecdotally, because like, Mexican and Chinese people work in the same kitchens oftentimes. Right, I was reading that there's a, almost like a genealogical justification for this because Mexico keeps a lot of its indigenous roots before Spanish colonization or European colonization more so than other South American countries. Like each South American country has a different distribution of how much they work the indigenous culture into their modern day culture. And Mexico is at a pretty high rate. Right, I would say with Peru as well. You're right, I would say from the food that I've had, maybe like Argentina doesn't play up the indigenous roots as much in their popular food culture. So the food in Argentina is almost gonna bear more similarities to something in Europe, whereas food in Mexico, especially depending on the province or the state that you're in could remind you a lot more of Asian food. Yeah, I guess so, so far everybody, leave a comment down below if you really see the similarities. Also, what do you think are the similarities between the Mexican and Chinese people? I think like it's hard to say, because China's so big. I would say that it's definitely like parts of China, especially maybe certain more of the drier lands or like inland, right? Inland, central China, those foods definitely taste more Mexican because they share cumin spices, like cumin beef from the Xi'an region and stuff like that. Which actually was influenced by the Silk Road, which came to the Middle East, from the Middle East, right, Persia, Iran, right? And I heard that Mexican food low-key actually has a lot of influence from Lebanon and the Middle East as well, due to immigration from a few hundred years ago. Yeah, so I mean, I guess that could be definitely a linkage that I guess kind of ties the two together. But obviously like, I mean, and we always like indigenous North Americans, there is some linkage to Asia from like tens of thousands of years ago. Right, across the Bering Strait, right? Right, but as far as like food culture, I don't know if they, I don't know if they brought the peaking duck. You know what always stuck out to me though is I remember we knew some people that were pretty much full Oaxacan in LA, Andrew. And I used to ask him, I was like, yo man, is your guys' earwax dry or wet? And he was like, I don't know man, I think mine's just dry. Oh, that's a shared thing. So here's a quote from Clara Wang that I thought was interesting. Here's a few quotes. She says, you know, they both had to handle the nutritional demands of dense populations on a bigger scale than the scattered cities in Western Europe that have, and they had much longer to figure out what is most delicious. Cooking techniques like braising, stewing, broiling and steaming, as well as the use of complex spices and marinades were developed to transform tougher cuts of meat and awful into mouthwatering, manoodle flavorful braised pig trotters and tender oxtail stew. Yeah, I think they always had gigantic like physical labor populations and you need to feed those people, but oftentimes they don't get the best cuts of meat, but then you need to spice those cuts of meat to make them edible. But over time, what people don't want becomes the wanted. Dude, I guess that definitely I would say a lot of Mexican food also to me visually crosses over with a lot of Southeast Asian food because it's a little bit more tropical too. I think if you look at a lot of foods, not completely across latitudes, there is similarity. This guy runs a half Taiwanese, half Mexican restaurant in LA. He said, when you look at Chinese restaurants, Mexican restaurants all day, they're just stewing, cooking down, braising, making soups. Like in Biria, stewing the meat down, having a taco, but also serving the soup. My mom makes soup for dinner every night so we can have a soup, but we can also eat the chicken that we made the soup with. Says Sao, who considers a fond tuan like a rice burrito. Yeah, I almost think, David, does this kind of reconfirm the video that we did a while ago about how Asian and Latino couples are increasing in California? And Latino, a lot of Asian men and Asian women are marrying Latino men and women now. And it's almost like we always kind of joked about how cultures were similar. And I don't think they're exactly similar obviously, but of course there's a lot of like crossover. Yeah, well, I know that 23 and me for a while, I think they recently separated it out. They just put any sort of indigenous North American, like Native American First Nations Indian blood in with Asian. Like they just categorize that as Mongoloid. Anyway, I think that my main takeaway is that I think a lot of the seven most ancient cultures in the world are gonna have some similarity. Mesopotamia, which is Iran area, and Indus Valley, which is India, ancient Egypt, China, Mayan, and a little bit less ancient, but more recently, but still ancient Greek and Roman. But yeah, for sure, Mayan, Chinese, Egyptian, Indus Valley, and Mesopotamia, I think anything that's been around for that long is gonna have similarity in my opinion. Yeah, that's true. Yeah, it's cool to see pictures side by side. Let me know what you guys think the similarities are, or other Asian dishes that you see parallels with with Mexican cuisine or other South American dishes. It's a fun exercise, right, it's cool. I wanna get some tacos now. We got to. I'm going to get some tacos. All right, everybody, please hit that like button. Leave a comment down below if you learned something from this video. Thank you so much for watching, and until next time, we're the hot pot boys, or should I say the, I don't know how to say pot, fuego pot, I messed up. Fuego pot boys, until next time, we out, peace.