Economists often use Gross Domestic Product as the measure of the size of an economy as well as to measure economic health, growth, etc. While useful in general, it's not always a perfect measure of economic well being, and this comic helps to explain why.

Does the situation in the cartoon actually count in GDP? At the very least, it's a helpful thought exercise to test your understanding.

A few weeks ago, I had the pleasure of attending the humor session at the annual meeting of the American Economic Association in San Diego. Yoram Bauman, aka The Stand-Up Economist, did a pretty good bit on "Hyperinflation in Hell" that was both entertaining and a decent lesson on money supply and the cultural importance of Joss paper.

A video of his talk is now online, and you can see it here.

The Efficient Markets Hypothesis is a well-known concept in finance that suggests that it's difficult (if not impossible) to "beat the market" when it comes to investing:

Proposed by the University of Chicago's Eugene Fama in the 1960's, the general concept of the efficient markets hypothesis is that financial markets are "informationally efficient"- in other words, that asset prices in financial markets reflect all relevant information about an asset. One implication of this hypothesis is that, since there is no persistent mispricing of assets, it is virtually impossible to consistently predict asset prices in order to "beat the market"- i.e. generate returns that are higher than the overall market on average without incurring more risk than the market.

Overall, academic research is somewhat divided on whether the efficient markets hypothesis holds in all cases, but economists generally agree that, at the very least, the direction of stock price movements is difficult to predict in the short run. Therefore, it probably doesn't surprise them to learn that a group of finance professionals was outperformed in a stock-picking contest by a cat named Orlando.

Nobel-Prize-winning economist James Buchanan passed away a couple of days ago at the age of 93. (Not to be confused with 15th president of the United States James Buchanan, for whom an obituary would be long overdue.) Buchanan's work was focused on public choice, and Dylan Matthews at the Washington Post described Buchanan as "the man who got economists to care about politics." (A pretty apt description, in my opinion, though my views on caring about politics are still a little hazy.)

To learn more about what Buchanan was all about, his Nobel Prize lecture is probably a good place to start.