The Economics of the Marvel Cinematic Universe

EconBuff Podcast #32 with Rex Pjesky

Dr. Rex Pjesky talks with me about the economics of the Marvel Cinematic Universe. Dr. Pjesky walks us through what happened with the “Snap” and “Blip” where half of all individuals in the universe are made to instantly disappear in the Avengers series of the Marvel Cinematic Universe. We discuss the implications of half the population of the world instantly disappearing and Dr. Pjesky explains how these implications relate to wages, prices, and interest rates. Dr. Pjesky argues that Thanos’s idea that the world would be better off with fewer people is misguided and goes against economic theory. Dr. Pjesky lays out the economic roots of Thanos’s argument, which go back to Thomas Malthus and Paul Ehrlich. Dr. Pjesky identifies three main errors in Thanos’s economics; misunderstanding what a natural resource is, not realizing there are increasing returns to market size, and not understanding how complicated economic relationships are. In explaining these Dr. Pjesky explains what economic growth is and what causes it. Finally, Dr. Pjesky address specialization and its causes, and we explore the economics of the “Blip” where half of the population comes back overnight.

Photograph: Marvel Entertainment

Transcript

Stitzel: Hello and welcome to the EconBuff Podcast. I'm your host, Lee Stitzel. With me today is Dr. Rex Pjesky. Rex is a professor of economics at West Texas A&M University. Rex, welcome.

Pjesky: It's good to be here.

Stitzel: So Rex, we got a fun topic today. We're going to explore the economics of some of what's happening in The Marvel Cinematic Universe --- specifically what are known as the snap and the blip. So, just for our listeners at home, will you, kind of, define those, and set that up contextually in what's happening in that (in those movies)?

Pjesky: Yeah. Obviously spoilers will abound. So, if you haven't seen these movies and don't want to know what happens, then don't listen further. Go watch them, then come back. But The Marvel Cinematic Universe (I guess is what it's called) is a series of movies that in the end focuses on the main villain collecting the power that he needs to whisk half of living organisms out of existence with a snap of his finger. So, that's why it's called in the movies the snap. So, at one point in the series of movies the villain wins --- supposedly snaps his fingers, and half of everybody at random disappears.

Stitzel: Including a bunch of the superheroes…

Pjesky: Including a bunch of the heroes. Yes.

Stitzel:…that we were following, but presumably a bunch of the bad guys as well. And it happens on all different planets. I guess we'll kind of be focused…

Pjesky: Yeah.

Stitzel:…on Earth as the movies were. So, I don't think…

Pjesky: Right.

Stitzel:…we're out of bounds.

Pjesky: It's universe-wide.

Stitzel: You said organisms. Was it just people? Or is it really like? Does it?

Pjesky: Well, I think. I mean, there was/there were some indications that it was everything.

Stitzel: O.K.

Pjesky: So, I guess all animals. But that the movie doesn't really get into that too much.

Stitzel: Well, predictably it's good storytelling.

Pjesky: Yeah.

Stitzel: Focus on what we find interesting, which is going to be, you know, probably the people and the pets. So...

Pjesky: Yeah.

Stitzel:…I don't know if any pets disappear in any of those sequences. But I don't remember any.

Pjesky: And then in the, you know, in the final movie five years transpires with half of the people gone. And then the heroes assemble as The Avengers do, of course, and they come back and they win the game. And they are, you know, they win the day. And they're able to bring everyone back after five years. So, in the movies this phenomenon is called the blip; because for those people that were gone for that five period time didn't, you know, they came back just exactly as they left. So, you know, if they were 20 years old when they ceased to exist, they were 20 years old when they came back. And everybody else had aged five years. And so, we have the snap where everybody just (where half the people) disappeared. And then we had the blip, where those people that disappeared were brought back into existence by the efforts of the heroes of the story.

Stitzel: So this a --- this is the central theme of the story, right? So, we're not tackling a topic that’s like: oh, here's a neat little thing that's in there, right? We've actually had some discussions with some colleagues in the past about things like Wakanda and a city that's cut off from the rest of the world in, kind of, a contained economy, right? We --- this would be an interesting topic too. And so, maybe I should have that colleague on in another episode and talk about closed versus open economies. But, like, this is the theme of the story, right? The motivation of Thanos (of the main antagonist here) is to get to this point where he thinks the world will be made better by completing his mission, by getting to the point where he can have the snap, right?

Pjesky: Yes.

Stitzel: And of course, [there are] lots of intricacies about how he goes about getting enough power; and the different interplay between the characters and different times that they try to stop him and save this environment or that. So, it's a very intricate story obviously, because I don't remember how many movies there are. But there's a quite a few.

Pjesky: 20 or so.

Stitzel: Yeah I was thinking it's quite a lot. So, I've managed to have seen them all. But, you know, when you have a series that's that long, [then] you're going to have some detail slip through the cracks I'm sure. So, what I want to talk about today though is, you know, evaluate Thanos', like, proposition, right? Like he has a thought process, and he says: listen, The Avengers are actually the bad guys for even trying to stop me. He says: oh yes, this is a terrible thing, but it'll make the world better, so I'm the good guy. And, you know, one of the themes of that character is having the will to do the hard thing that's going to make the world a better place. And then, you know, we could talk, and then get into where we, sort of, talk about some of these ideas. But I just want to start with, like, the most obvious thing. So, Thanos has this temporary win again. Spoiler alert. I'm glad you remembered to say spoiler alert, because I was thinking that movie's been so long ago that everybody would have seen it --- but never a good assumption. So, Thanos has a temporary win. He completes the snap. There's this five year period [where[ half of all people disappear. We have a lot of economic ideas at play. So, like, what's your first pass? Like, what's the first thing that an economist would be thinking about if this actually came to fruition?

Pjesky: Right. I think it's interesting to think about what Thanos’ motivation would be. And his idea is actually a pretty common one in social science. It's this really old idea in economics it started with Malthus. Thomas, is that his first name?

Stitzel: Yeah.

Pjesky: Thomas Malthus. And, you know, Malthus' philosophy lives on today even with like Paul Ehrlich’s population bomb. And a lot of people who write today have this notion that living beings, you know, particularly human beings on Earth will somehow outpace the carrying capacity of Earth. And so, one of the things that Thanos says in the movie is that if life gets so abundant, [then] life will cease to exist, because there will not be enough natural resources to feed everyone. And eventually human beings standard of living will just collapse, and there will be massive starvation, famine, and death of many people (and maybe even the entire species) if this is allowed to continue. So, Thanos' motivation is the same thing that would have motivated something like something like Malthus. We have too many mouths to feed. And so, you know, a lot of people --- the movies don't really do a very good job of explaining all the reasons why that is wrong. So, mass murder is certainly wrong. And the movie does a great job of explaining that. But actually trying to debunk that as an idea is something that the movies do very little of -- a little bit, but very, very little.

Stitzel: I'd actually make the case that my impression watching the film is they’re playing to that a little bit --- of saying: well yeah, it's really bad, but maybe he has a point. And they're painting Thanos as a madman. I mean, that is the character. And so, but I think the madman is, like, these things need solutions. And he's just going to this way too draconian radical solution. And, you know, there are humanitarian ways that it could be done. So, I, kind of, thought that was one of the themes. But now you're saying there is a small way in which they did try to, kind of, counter argue. What is that way?

Pjesky: Well, I mean, there (we'll get to this) are maybe, you know, one, two, or three things that economics would say about Thanos' plan; [notwithstanding] that would illustrate it as, you know, not only evil (because he's committing mass murder), but it's also incredibly misguided and wrong. And to go down that path of thought, you really have to, you know, think hard about economics. And you really have to understand how the pattern of production and how human beings coordinate with one another works. You know, when you look at economics just as, sort of, a first pass at this problem, you know, [then] you come up with, you know, support that Thanos has a point right? So, if you were to use a, you know, what economists call a Real Business Cycle Theory --- and basically, probably, most variations of what we would call neoclassical economics, if you use those basic tools --- to analyze Thanos' proposition, [then] you come with some pretty easy answers. I think some pretty clear answers. If you take out half the population, [then] the supply of labor goes down, all right? That's going to push up wages and living standards of those who are who are left, right? If half the population goes down, or goes away, then your demand for capital is going to go way down as well. And so, that's going to push interest rates down. Investment is not going to happen, because investment isn't needed, right? Because, you know, before you had enough capital stock to support 7 billion people. And now you only need enough capital stock to support 3.5 billion people. So, you've got a tremendous surplus of capital all of a sudden overnight. So, interest rates are going to drop. No one's going to need to invest for a long time. You know, depreciation is a consideration. Because if one machine wears out, you just go to the next one, because there'll be another one laying around. So, when you when you take a simple first pass using basic economic tools at Thanos' problem, you pretty much conclude that he has a real point. And that for the people that are left, all right, this is going to be a tremendous boom to them materially, right, because you have fewer mouths to feed. The resources that are around, whether they're capital resources, or what economists call natural resources, all of a sudden those things are going to become abundant. Everybody's standard of living goes up. And, you know, humanity, sort of, avoids this cliff that Malthus, kind of, predicted; [thus the prediction becomes] where the population would reach a point where everything would just collapse all of a sudden. And that's what Thanos is trying to do. So, you know, again, if you take a simplistic economic view of what Thanos is trying to do, [then] you automatically see that he has a point. So, that's a really good starting point to think about this problem economically. But it's also really, really misleading at the same, you know, time. And the reason that it's misleading is that capital and labor are not homogeneous lumps, all right? Production is not based on countable units of labor and capital, but rather on the relationships among those who produce. So, all labor is not the same. All machines are not the same. So, if you just take out every other one, or if you take out half the labor at random (all right, as Thanos does), you don't end up in a spot where everything can go on exactly like it was only with half of the people. So, that's really, kind of, Thanos' error. And also this is, kind of, where, you know, step one in economics doesn't get you really where, you know, you need to be.

Stitzel: Yeah. There's several points there. One is: I'll insert a shameless plug here. Rex, you just mentioned Real Business Cycle. We have a recent episode on business cycles, so if you’re not familiar with Real Business Cycle, [then] see my interview with Bob Murphy. That was a great recap of that. And then you're hitting on two very important things, which I want to, kind of, expound on. One is --- I think there's an embedded notion of wealth is things. Wealth is physical capital stock. Wealth is actual resources. And that's a mistake. And that of course, I think, is fundamental to what Thanos is doing. And the second thing --- it was really struck when you said that wages would go up, and interest rates would go down. And I mean, that sounds like what people are striving for in the political sphere today. So, I mean, this is --- these set of errors couldn’t be more --- important to correct; which I find fascinating, because it's important, I think, sometimes to remember that, you know, we're in academic realms. We're teaching classes, and writing papers, and having conversations with other academics. And a lot of people may just, sort of, be tacitly taking their economics in from the media. And I don't mean the media as in the news cycle (although that is also a factor), but the art and culture that is around them. And I think there's a very natural --- we live in a resource-rich area. So, this is a wealthy area that ends up being a mistake. And then, I like the point that you made as well, which is if you take a first pass at economics, [then] you often get some tools that can (if you're not careful) be misapplied. I had the fortune of teaching principles of micro for the first time, in a long time again actually, all the way since I was in graduate school. I did it totally differently. I completely approached that class fundamentally differently than I had done it in the past. And it was for this explicit reason which is to talk about (you said) the relationships, right? This is actually a phrase that I picked up from you along the way, [and] is to call that coordination. And to talk about the way that you can see things that would otherwise be unseen using the tool of economics. So, if your brand of economics is, you know, wages up [and] interest rates down, [then] that’s good. Let's just stop the analysis there. I think you're missing what really makes economics powerful. That's part of what I’ve started this podcast to do, is to tag those exact kind of things and bring them to the forefront of the listener's mind. So, he said a couple of important things that I want to disentangle a little bit. Capital and labor are, you know, not just homogeneous lumps. That's really important, because I think those things underlie a lot of analysis that machines are machines and people are people. And those things turn out to not be very true. And maybe you get a little bit of lip service if somebody's talking about job retraining programs or something. But you won't hear that idea. You won't hear that idea very much. So, talk to us a little bit about that lump of labor fallacy and, you know, sort of, the analog for capital.

Pjesky: Yeah. I mean, you know, in economics we, you know, have this idea that, you know, economies grow based on labor, capital, technology, and natural resources. So, if you look in, you know, like chapter two or three of a principles textbook, we'll talk about these factors. And it's a common theme throughout any economics class on macro growth, and several other, you know, topics that economists, you know, study and economists think about. But this misunderstanding of the nature of these factors in production is, sort of, Thanos' first prime error. So, he misunderstands particularly what natural resource is. He misunderstands. He would misunderstand what labor is. He misunderstands what capital is. And he probably misunderstands what technology is as well. So, you know, in economics we find that these factors in production come together as inputs, and out pops outputs. So, they go through some technical process, and we combine people's labor, natural resources, [and] machines. You know, we combine those using some kind of technology. We reform those into something that is more valuable than the pieces. So, that's, sort of, you know, heart and soul of what economists start thinking about when they think about growth. But it's --- all of this is not anywhere near nuanced enough to understand exactly how human beings have managed increasing standards of living over the past, you know, two [to] three hundred (maybe several hundred), you know, years. So, the truth of the matter is --- is there there's no such thing as a natural resource. There's no such thing as capital. There's no such thing as labor. It's really even no such thing as technology. These don't exist in and of themselves. They're not, you know, (to use a wonky word) they're not exogenous, all right? They're not given to us so labor in and of itself means nothing. So, if I spend my day digging holes and filling them up, [then] I have accomplished nothing. I have labored greatly, you know. There’s not much harder than digging a hole. I’ve labored greatly. But I have accomplished nothing for anyone except exercise for myself. But I haven’t accomplished anything that would increase the material standard of living of society. The same thing is true with capital. Machines in and of themselves are not inherently valuable. Natural resources --- the same. You know, in some instances depending on the context, a river is a powerful tool to produce things. You can use it for irrigation. You can use it for power. In other contexts, a river is a nuisance that has to be crossed or avoided. It's a dangerous thing. Oil is the same way. You know, a thousand years ago oil would have been considered sludge. It would have been waste. It would have been pollution. It would have been something that wasn't worth anything. It had a negative value.

Stitzel: And by the way, if we just, like, found that in our backyard it would still be that.

Pjesky: It would still be that.

Stitzel: That's a very, very complex process. That's to take that and put it through the refining process. That's just an enormously complex process. So, it's still that way. It's still that way.

Pjesky: No, no. It's still --- it's exactly right. It's exactly right. So, what makes these things valuable is human ingenuity that puts these things together. So, it's not labor that makes things valuable. It's labor with a purpose. It's labor that's coordinated with other human beings. It's labor that's coordinated with technology, with so-called natural resources, with capital that can actually rearrange things in such a way that results in a product, or good, or a service, or whatever you want to call it that's valuable to human beings. So, oil is sludge. But through an incredibly complicated process as you indicate, if oil is turned into gasoline, [then] well that's just a really, really amazing product. If oil is turned into plastic, [then] again complicated process. Amazing product. Amazing uses. If the power of the river is harnessed to provide some, sort of, mechanical energy for a production process, or if the water is diverted in a very specific way to irrigate crops, then you’ve got something, all right? But you can't just say: oh wow, the world is filled with these natural resources that exist out there. And the only thing that we have to do is go toil to pick them up and our standard of living will increase. That's just not the case. For thousands of years, human beings existed without any real measurable increases in standard of living. It wasn't until we figured out, or learned, or discovered, or even stumbled upon --- depending on what your view of history would be, it wasn't until we found out --- to have a high level of coordination with each other in such a way that would turn these things into production processes and into products that really improved our lives (and really changed our lives) that we saw the modern world with all of its comforts, and delights, and entertainments, and everything else, sort of, you know, sort of, take shape.

Stitzel: So, let's take this idea and then, kind of, get into the snap and what Thanos has done, right? So, he wins. He snaps. Half the people disappear and he takes off. And we're left with the ruin of Earth, right? And half the people are gone. And as you indicate --- presuming that I think there's kind of a general way in which people would grasp: oh the economy is probably in ruins, and things are really bad. And many very valuable and important things that were, sort of, not focused on and you know people losing people that they care about, that's like you said --- Marvel did a good job being, like, mass murder that's really wrong, no matter the motivation. But let's explore that a little bit. To say, I was very interested. We still see. As I was watching --- there's a documentary, absolutely fantastic called Formula One Drive to Survive. And it's on Netflix. My son's big into racing. I'm not a big fan. But this documentary is great. Can't stop watching it. But I got to the episode where they were about to race, and they go through the shutdown from Covid, and then, you know, the sequence of them, kind of, like, restarting everything. But it's really striking, right? It's these fabulously wealthy people, and the very important guys managing these firms (these individual racing teams). And they walk into these grandiose buildings that are empty, right? I mean they've got race cars from however far back this company's been, right? Every year's model is laid out in this nice showroom, and just unbelievable buildings. There's no staff, you know. It's, like, maybe one person with these people. And the guy has his iPhone with his airpod in his ear talking to people. And he's turning on his computer, and he's zooming. And I went: wait a minute, here's all this disruption in the economy; and yet, these guys are turning on the lights in an otherwise empty building. These guys are firing up laptops, and connecting to Wi-Fi, and connecting to radio towers; [whereas] much of what they needed to do their job went on, and they didn't think about it for one second. And if Thanos comes through and snaps and goes, [then] I think a lot of those systems go down. So, talk to us a little bit about, kind of, the way that this random selection, and the breaking of this different coordination problem might happen. And maybe even compare and contrast to what we saw a little bit last year.

Pjesky: Yeah. The --- I mean, this brings, I think, us to what I thought Thanos' second primary error was in his plan. He didn't understand that more people means more specialization is possible. So, we don't realize that the things that we take for granted are supported by the efforts of literally countless people. And all of that depends on individuals sorting into jobs that contribute to the overall production process. That has to happen, you know, sort of, you know, organically. Or it has to happen as an emergent property. So, those, you know, those supply lines (whatever you want to call them), the pattern of production (to use an economics term), [or] the structure of capital…

Stitzel: Yeah.

Pjesky:…I think would be a would be a good term for economic students toto latch on. You know, that's not exogenous either, O.K.? That is created based on the ultimate desires of what consumers want. It is dependent on what is technically possible. And it's dependent probably, most importantly. And the factor in this that's probably most ignored [is] it's determined by the extent of specialization in the marketplace. So, if you take half the people out (and it's a random half), [then] even if it weren't a random process, it wouldn't be the case where well you've got half the people. So, you have half the doctors. And you have half the car people making cars. And you have half the people making iPads. And you have, you know, half the people working at Zoom and everything else. So, you know, again, as a naive first pass at this you think: well, you know, if we have half the people, and half of the productive capacity, well then everything just goes on as normal. There wouldn't be any disruption. But that's absolutely not true. If you have half the people, [then] two, you know, two things are gonna, you know, are gonna happen. This, sort of, spills into Thanos' third primary error. So we'll circle back to that I’m sure. But with the division of labor, you have people being able to use their labor, use the capital that exists, use the natural resources, and use technology for human betterment in in ways that they couldn't if there were fewer of us. So, you know, imagine that if you took like, you know, a thousand of the smartest, you know, hardest working, you know, (whatever metric you want to use) [and] you took a thousand exceptional human beings, and you took them somewhere, and you isolated them. And you didn't give them, you know, anything. They had to start from start from scratch. Do you think that they would be able to come up with a COVID vaccine? Do you think that they would be able to come up with iPhones? Do you think that they would be able to come up with automobiles and air conditioning? I don't think that they'd be able to come up with any one of these things. But, and I'm absolutely certain that they wouldn't be able to come up with all of them. And the reason that they can't is not obviously because they're not smart enough. Because in the thought of experiment, they’re the exceptional human beings. They can't exploit the division of labor like a large group of people can. So, if we're really going to have benefit of everyone's labor; if we're really going to use machines to the fullest extent that machines can be used; if we're really going to use what could be called natural resources to the fullest extent that natural resources can be used, and technology is as well; [then] if we're going to use all those things for human betterment, the more people the better, O.K.? The more people the better, because the/that division of labor can really, really deepen. And people can specialize and do narrower and narrower jobs. And as people do narrower and narrower jobs, things that were not economically viable before suddenly become economically viable. The Covid vaccine is a good example. I mean, it's something almost right out of science fiction itself. It was developed so quickly and is distributed so quickly because the benefit of that is spread out over basically everybody in, you know, everybody on Earth. If we were trying to find a vaccine for a disease that was just affecting, you know a few thousand people or something like that, [then] well economically that suddenly becomes a much harder problem. So, you know, as the number of workers goes up and as the number of consumers goes up as well, [then] the division of labor can deepen. And we can come up with all of these relationships among us that enable us to produce products for human, you know, betterment.

Stitzel: So, one of the things you mentioned for example is Thanos snaps and half the doctors go away probabilistically. And everybody thinks: well sure, but half the population went away as well. Except you're ignoring the fact that there are doctors that specialize in very rare diseases that can do that for a population that they currently face; [whereas] that couldn't be a viable occupation if half the doctors and half the population is gone. So, it's exactly analogous to your take a thousand people and put them on a desert island thought experiment; because now those doctors are dealing with the set of people. There's fewer of them. They can divide up the different things that we would like doctors to focus on. And I think if you take half the doctors out of the world, I mean we might lose things that we don't even really think of as specializations anymore [such as] ear, nose, and throat doctors, or gastroenterologists, or something like this. Those might those might not even exist in a world with half the people and half the doctors. And it's --- I think it's astounding, because I think people would grasp the idea that there are some, like, critical knowledge and procedures that might have been lost because you had experts in them that happen to be the one. But it's much, much broader than that. It's to say even if I were the world's foremost expert in a particular disease, and I don't go out of existence with the snap, [then] I still am not going to be able to practice in that way anymore.

Pjesky: Yeah. I mean, thinking about specialization medicine is a really good thought experiment to, sort of, explore this notion; because right now we have doctors that are extremely specialized. So, you know, you might see a neurologist for one problem, and another neurologist might not be able to help you very much because he or she specializes in a different problem. So, you might have epilepsy but the doctor in your area might specialize in migraines or something like that. And then if that was the case, then, you know, would you need to find another specialist. But you think about how wonderful that is for people that have very, very particular conditions that they need medical care for. They will be able to find a specialist that spends all of his or her time thinking about just that one particular disease. And if you cut away half of the people --- this is your point, [that] if you cut away half the people --- then those specialists, if they remain narrowly focused, will not be able to stay busy enough. And so, they won't be economically viable, all right? They won't be economically viable anymore, and they'll have to become more generalized. So, another thing to think about along those lines, sort of, you know, brings us to Thanos' third primary error, you know, third rooted error is that, you know, Thanos didn't realize how our standard of living is supported by economic relationships that are extremely, extremely complex. You know, just the first pass using, you know, medicine as an example, you know, we have relationships with our doctors. And at every single area of our economic life we have relationships with certain producers. So, you know, I have a relationship with a grocery store. I have a relationship with a gas station. And the pattern of my life and the pattern of the availability of those goods and services have come to match for me. And so, I go buy groceries at this one place. I get my gas at another place and so forth. So, it's really, really naive to think that if half of us were whisked away randomly --- and there would still be as many gas stations per person, [and] there would still be as many doctors per person etc., it's really, really naive to think --- that there wouldn't be major disruption in all of those relationships, right? Because my grocery store would change a lot. My gas station would change. My doctor would change, assuming that he or she was still in existence of course. And all of these relationships would change. And then you multiply that. You know, you think about what a hassle that would be to an individual just trying to get gas and groceries. And then you multiply that to companies that are trying to piece together supply chains; [inasmuch think] of a thousand different firms [trying] to build something complicated like a car, or build something complicated like an iPad, or get complicated things like gasoline, [or] any kind of electricity generation. The products that we use are all even the simple ones like t-shirts. All the products that we use are based on extremely complicated productive process, extremely complicated structures of capital and labor, and how they fit together. So, if you take out half of those relationships (even if it is half of everything), the math/the arithmetic that seems so clear is all of a sudden not clear at best. And at worst it's completely irrelevant. One of my favorite scenes End Game, which is the fourth and last Avengers movie, is when Ant-man is walking back to his house. And as he's walking back to his house he's in despair emotionally, of course, because he doesn't know if his family is [and] he didn't have any idea what’s happened. But as he's walking ---- this is a really short scene, and this might be one of the few times that Marvel tries to illustrate to people what the economic devastation of the snap would be as opposed to just the emotional devastation which would be huge as well, but --- his neighborhood is incomplete disarray. There are abandoned cars. All the houses are dilapidated. The trash hasn't been taken out. And this is, you know, in a 5 to 10 or 15 second scene. This would be exactly what the entire economy would look like. Everything would be in complete shambles, because overnight all of these relationships that our entire modern world are based on would be would be, you know, snapped out of existence.

Stitzel: I like what you said they're commenting about the compounding nature of this. So, if you're not careful and you think about this very, very shallowly --- you say: well sure, it would be a hassle, and my grocery store might go out of business; but there's another grocery store in town, [and] I’ll just go over to that one. --- But that is a trivial thought process, because you're saying (just assuming that would be in business) every virtually [and] every complex production system would grind to a complete halt. I mean, it would just stop. So, you're talking about a situation where you begin to compound. And the relationships that you're talking about --- they actually come back to an idea that I've had you on the podcast about before. And this idea of what it is that transaction costs and how you solve those problems is an important feature, maybe the important feature of an economy. Triangulation, trust, and transfer --- all of those things are broken. So, when I say this relationship is broken --- it's not something, like, cutesy feel good, like, I wave hi to my grocery store. It's --- I rely on there being food that I need when I need it there. I rely on that bottled water that I buy to be clean and safe. I rely on things that I might otherwise die if I didn’t have on being there. And I have no idea. I don’t even know the cashier's name. I don't know the manager’s name. I don't know the owner's name of where I get my groceries [at the] store. I don't know any of those people. So, I think it's worth --- I like that you brought out the compounding idea. And I think it's important to reiterate that relationship. That idea that you're talking about is extremely powerful, right? It isn't a trivial idea that's like it's a relationship that I have [where] I can just as well form a new one. But it's also that all of their relationships are shattered. And when we go back, now you have to triangulate again. Now I have to find where is it that I'm going to reliably get water and food and products that I need --- just day-to-day products that I need for my wife and kids. Where am I going to do that? That's extremely hard. How am I going to trust the person that's doing that? I mean, like you said --- if you're living in a dilapidated, you know, bordering on post-apocalyptic world, [then] I might be just as worried about you shooting me as, you know, trading me a clean bottle of water. Let alone we could probably do the rest of the episode on the idea of, you know, trust in the economy and that being predicated on so much. Like, what would I even trade you? Like, we might drop into a barter economy overnight. It's very curious. And we probably ---I'd have to go back and watch the show again. Am I going to see a sequence where somebody pays for something with a credit card? Because that's definitely not happening anymore. I'm not going to pick up my phone. It's not going to work, right? I'm not going to go to the gas station, and when that pumps out of gas. Or maybe it doesn't even have electricity to pump the gas, right? Begin to think about the number of these and then those are just the ones we see as consumers. Now imagine (you did a good job mentioning this) the production [and] the supply lines that are shattered as well [were] companies that go out of business. We're, kind of, seeing some of that even in recent times --- last year with the toilet paper shortages, and lumber has been a really weird product over the past year. I won't comment too much on that because I’m not particularly knowledgeable. We're seeing gasoline happening, right? Like these supply lines can be a little bit sensitive to relatively small changes; [whereas] none of which are even approaching the magnitude of what we're potentially talking about [since] half the people in the world disappeared overnight.

Pjesky: Yeah, I mean, nothing that's happened has ever approached that. But it's actually a lot worse than you think. So, when, you know, everything that you just said is exactly right. The devastation would be caused by the loss of triangulation [and] the loss of trust. All of that would be would be gone essentially over overnight. And the rules that we’re accustomed to playing by in the economy would change. But as those things reform --- so as people develop new relationships, as new structures of capital (to use the economics textbook term again), sort of, form (which it would) --- the world's not going to be the same as it was. It's going to be a lot different. So, the first few minutes we talked about the prediction that wages (the real wages) would go up. I think that is absolutely false, because --- that in that model is the assumption (to get really wonky) --- in that model is the assumption of constant returns to scale. You don't have that. They have increasing returns to scale to market size. So, even within that really formalized model, you don't necessarily have wages going up. You have to assume something to get that to give [you]/to get that result. But, you know, just the practical sense you know the world is going to be different; because, you know, as an example, think about everybody who's skilled at making cars. You cut the population in half, [then] those people are not going to have jobs making cars anymore, because there's going to be plenty of cars just sitting around.

Stitzel: Yeah.

Pjesky: So, it'll be a long time before somebody really needs a new car in that world. So, if, you know, people who fix cars --- if your car breaks down, [then] what are you going to do? Well, you're just going to go get another one, right? You're just gonna go get another one. So, housing would be the same, right? So, you know, we have a housing stock that's suitable for seven billion people in the world, [and] half those people are gone all of a sudden, [then] you've got a surplus in housing. So, the wages of people who build housing people in residential construction --- those wages are definitely not going up. So, those individuals are retraining. They're going to find something. And this would happen, all right? They're going to find something else to do; but what their wages are going to be in the end is probably on average going to be something less than they were before. And their standard of living is probably going to be in many ways less than what it was before, because they're not going to have this specialization that existed before. So, everybody's going to have to be more generalist.

Stitzel: There'll be some very weird ways in which it might literally be the case that a handful of the very, very durable things (houses and cars), you know, the average way in which you had wealth might go up dramatically. But everything else, and especially anything that's not durable, right, [such as] electricity, water, [and] gasoline --- those are very critical, and they're going to be in big, big, big trouble. You know, but I somehow sit here and think [about] somebody who doesn't have the appreciation for emergent order that that we would. So, somebody who thinks: well, we can design a system from a top-down, kind of way. So, you can say: well, let's just take all the people out of the poor countries that survived. And let's just put them on all the suburban houses in the nice cities. So, Prescott, Arizona will still have a bunch of people in it. And they're just --- there just won't be anybody in rural India. And we'll just --- we'll just shake all these things up. And now everybody will have nice houses and nice cars. And we'll just get back to doing that, which of course as you're saying, the specialization that got us to that point won't be there anymore. That won't be a sustainable lifestyle. Of course, what there are many other critiques there that would be very obvious to point out. You can't undo people's culture, and ties to their place, and their society like that, and just transport them. But I guarantee that's what people would say we should try, you know. And so, comment a little bit because I kind of want to get to the blip maybe. But…

Pjesky: Right.

Stitzel:…comment a little bit about somebody who would respond to you by saying: well, we don't have specialization; but we have this huge capital stock of, presumably, things that people liked just fine before the snap happened. And we'll just move everybody into The United States. And we'll have, you know, we'll just have three billion people in the materially rich places in the world, and in the in the ideological West. And we'll just evacuate the ideological East, which has many, like, political and philosophical problems. But let's set those aside for a moment.

Pjesky: Well, I mean, something like that might happen where, you know, depending on what society's legal government policy type response was, [then] there might be mass migrations. You know, there are forces that, sort of, make people want to lump together in cities (and big cities) now; and those forces might still be in play after the snap, and that might happen again. So, people that were left, they might flock together; and we might end up with a world that looked somewhat like it was before. But, you know, to think about everybody just, sort of, coalescing where the capital is, let me give you something to think about that’s, sort of, tangent to that. Before, someone would conclude: well, we've got all this capital, and capital represents wealth. And so everybody's just going to be wealthy. So, you know, think about houses. And, you know, houses represent wealth for a lot of people. You know, as a rhetorical question: if you're a middle class person in The United States, what would the value be of having a second house? Which theoretically, you could have, if half the people were gone; then there'd be, instead of one house for everybody, there'd be two houses for, you know, everybody. What would the value of that be? Well, the value of that second house for somebody that's middle class in The United States would be the ability to either sell that house or rent it out. But if you've got half the population, and that's why you have a second house, [then] that source of wealth isn't there anymore. You can't sell it to anybody, because who wants a house you can't rent it out to anybody, because who wants a house? So, just to say everybody would be rich because we have all this excess, all these excess cars, all these excess houses, [and] all this excess capital stock, you know, [then] you could even say the same thing about people's bank accounts, right? You know, people that disappeared --- they've got all this money in the bank that could just be given to somebody else, right? And just, like, wow. You'd think: wow, everybody would be rich, because everybody's bank on average (everybody's bank balance) would double overnight. But what are you going to buy? And so, it's impossible to underestimate how devastating half the population being gone would be. It would not --- Thanos is completely evil, obviously. And he's completely wrong. It would not bring a golden age to society for half of the people to disappear. We would not all suddenly become twice as well off, ignoring the emotional, right? Ignoring the emotional, we would not be materially twice, you know --- our material statute would not double overnight. Our material statute would go down. We would all be worse off than we were before, because we would lose all the benefits that we have from a specialization. We would lose all the benefits that we have from these complicated relationships, that support our modern life. So, you know, that's, sort of, what happens when half the people go away? Another thing that The Marvel Universe deals with is what happens when they come back? Because in the final movie they bring everybody back. So, after five years everybody just appears again out of nowhere, you know, apparently doing whatever it is that they were doing, you know, five years ago. And the movies don't explore that very much. But, you know, sort of, what I think prompted us to talk about this was the latest series from Marvel is The Falcon and The Winter Soldier. And The Falcon and The Winter Soldier, sort of, centers on this problem of what exactly happens when all these people come back. Much of what we've talked about that's devastating when everybody disappears is also going to be problematic when everybody comes back. So, you know, now you have this flood of people coming in. Their skills might, you know, it's very difficult to say how much society would reorganize itself in just five years; but a lot of people's skills are going to be mismatched. There's a lot of practical problems that would have to be thought about, that would have to be dealt with. You know, what happens if somebody else has moved into your house, you know? For, you know, for instance it's all, sort of, complicated --- just almost, sort of, you know, trivial details about people's lives that would have to be worked out in some way. But the bigger question is the reverse one that we've been talking about for the last, you know, half hour, 45 minutes or so. What happens to integrate all of those people back in? And, you know, The Falcon and The Winter Soldier --- and I don't think this gives away too much of the story because that is recent and people may…

Stitzel: Spoiler alert is important.

Pjesky:…(spoiler alert is important) but, you know, this isn't anything that is a major point of action in the story. It's that it's there. It has to do with the plot. But you know I don't think that we're giving anything away if we talk about this a little bit. But in that five years between when everybody disappeared and everybody came back, you know, according to The Falcon and Winter Soldier, there was a lot of movement among people like you like you mentioned before. So, you know, countries became --- and again, the show doesn't spend very much time talking about this, because why it’s war. It's boring, right? So, you know, they'd lose viewers if they started expounding on economics for 50 minutes.

Stitzel: Not me. I’m watching it.

Pjesky: Well, yeah.

Stitzel: I guess I'm watching it anyways.

Pjesky: We're fun. We're fun people. So, we like economics.

Stitzel: [Laughs]

Pjesky: But you know it's the world became more open to trade. The world became more open to migration. So, you know, what you mentioned about, you know, people not having to worry about national borders when they move from one place to another, there's some evidence of that in the Marvel Universe that this actually happened in between the snap, and, sort of, the blip (or during the blip). But then when everybody came back, the show, kind of, talks about how things didn't continue to go that way. So, governments around the well-formed, you know, (what I think the show called) repatriation councils…

Stitzel: Hmm mmm.

Pjesky:…I think of what is it? The global repatriation…

Stitzel: Yeah. Yeah. Yeah.

Pjesky:…council. And they were basically in charge of trying to put everything either back the way it was, or trying to (from the top down try to) make sure everything became better. So, they completely ignored the idea of emergent order. They completely ignored the idea of, sort of, human interactions and coordination happening in an organic way; [whereas] that would, you know, (through trial and error and such), sort of, recreate the world that would naturally be after something like this happened. They tried to force everything. So, and again --- not a spoiler alert I don't think --- but that's what creates a lot of the tension in that show, you know, The Falcon and The Winter Soldier. So, you know, whether it's the snap, or whether it's the blip, how quickly and how well humanity recovers from these things is going to be determined by how we how we respond to it. And, you know some people would be, you know, wow we need to let (for lack of a better word), we need to let nature take its course. And we need to let the new economy, and the new society, and the new culture, sort of emerge out of the natural interactions of individuals. And other people are going to say: well no, this is an opportunity for us to create a society that we've designed. And, you know, again, that's really, really interesting for an economist to watch (or somebody that's interested in economics to watch); because, you know, this has been a debate in economics for over 100 years now about how best to organize society. There has to be some coordination among individuals for us to have the standard of living that we have. Anybody that's self-sufficient is going to be poor. You know, self-sufficiency is the definition of poverty. if you have to do everything yourself, [then] you are absolutely going to be poor. So, in order to be rich, you have to find a way to coordinate your activities with other people. So, it's been a debate in economics and in larger social sciences for, you know, 100 years at least; and probably even more than that as to how best to organize society. What decisions do we leave to individuals to make? What relationships do we let evolve naturally through interactions of individuals? And what do we try to dictate through some, you know, centralized more political process? And so, that theme is in Marvel quite a bit. And that theme is in The Falcon and The Winter Soldier a lot. It's background --- it's not what's discussed a lot, but for someone who's looking at it, they will see those themes there, and it --- plays out really, really interesting in a really, really complicated way.

Stitzel: I thought [or] what I found most interesting about The Falcon and The Winter Soldier is the central issue in that is probably property rights. And what happens to somebody who goes and comes back? Like, it's a legal issue that nobody can have the answer to. Like, I don't have the answer to it, but I'm sure even good lawyers don't have an answer to that. And then, of course, this gives rise to all the things that you're talking about, which I thought were absolutely fantastic. And the show does do a good job capturing that these top-down systems, that are supposed to organize, [that] they are political systems. They're fundamentally political systems --- which means the political system will be picking the winners and the losers. So, what you called nature and emergent order [is that] one of the things that (my bias, but I'm in good company) you would want those systems to be made (and the society and economy to be ordered through) [is from] the free choices of individuals making the best for themselves, you know, conditional (on a set of) rules that honor people's individual rights, right? So, not roving gangs of warlords, right, but otherwise free to choose how you would go about your business. And I was very curious. One thing that show failed at, obviously which we knew they would, is in this case you see the world going on exactly as it was going on before, right (the cars, and the big fancy buildings, and the computers), and everything is just apparently plug and play for the world. And, you know, maybe they did capture one thing fairly well is --- that the poorer places of the world seem to be hit a little bit harder. I'm not sure how true that would or wouldn't be. I'd have to think about that some, but it is a good thing to remember that your complex systems would be hurt; but the poorer places in the world they also rely on coordination, and hopefully their path out of some of that poverty would be through the type of coordination that we're talking about. So, we're coming up on an hour now. I want to do a couple of things really quickly. One is --- we've mentioned several times, sort of, what Thanos' three primary errors are. I want you to encapsulate those for us really tightly, so that people can, kind of, put those in their back pocket. I think we've moved nicely through them. But it's good to put a stake in the ground, and then maybe talk about the, like, historical; because we talked a little bit about Malthus, and, like, what the outcomes would be. And maybe bring some of those ideas back around to what we see today.

Pjesky: Sure.

Stitzel: So, start with our synthesis.

Pjesky: Well, I think, you know, Thanos made three prime errors. First, he misunderstands what a natural resource is. So, you know, a natural resource isn't worth anything. It doesn't have any value at all, unless it is made valuable by human ingenuity. And more people means more ingenuity. The second thing that he got wrong is that he didn't realize that there are increasing returns to market size. So, again, more people means more specialization, [and that] means that everyone's efforts [and] everyone's contribution is going to get greater as there are more people to serve, and as there are more people to interact with. Finally, he doesn't understand how complicated economic relationships are. So, when you just whisk half the people out of existence, [then] all of the structure of production [and] the structure of capital is going to just absolutely collapse over overnight. And so, it's going to be absolutely devastating. So, you know, to use a phrase that Thanos used several times --- people are a lot more, so if I'm gonna collapse those three errors into one --- people are a lot more than just mouths to feed. So, you know, a human being is a mouth to feed. But a human being also has the capacity to --- because of the increasing returns to scale, to market size, and market specialization, an additional human has the capacity to ---- contribute more (than he or she eats) to the system (for lack of, you know, for lack of a better word).

Stitzel: This is Alex Tabarrok’s idea of whether you view people as brains versus…

Pjesky: Yes.

Stitzel:…mouths, right?

Pjesky: Yeah.

Stitzel: Yeah. So, that's --- it's a really important idea. And I think that’s one of the, like --- that’s one of the things that really changed a lot of the way that I viewed things, is that explains a lot of how people view the world. So.

Pjesky: Yeah. Well, I mean the --- yeah, I mean, Thanos was a mouth guy.

Stitzel: Yeah.

Pjesky: So, and, you know, I hope The Avengers were brain people, right, that they recognized that they needed to bring everybody back; not just because people miss their loved ones, but because, you know, every person that they brought back was an additional brain. So, you know, the history of Thanos' plan is really, really complicated, and it's very, very long as well. It goes back to Malthus 300 years?

Stitzel: Yeah. I forget the timeline. Yeah.

Pjesky: And probably even further. Probably even further, you know, further than that. And his ideas, sort of, resound in today. And the main reason why I think that Malthus is wrong is that we see the prices of what we would consider (and I'm doing air quotes “what we would consider”) to be natural resources as falling. And we see the value of the human contribution to productive processes going up over time. I can give you two anecdotes that sort of support that. The first is a famous bet between Julian Simon and Paul Ehrlich, where in 1980 they made a bet. And Simon --- Ehrlich was the population bomb guy, and Simon --- said: you pick some commodities, and you pick them, and my bet will be that the price of those commodities in 10 years will be less than there are now; [accordingly], which would give support to the idea that the population bomb concept was wrong, that we weren't running out of stuff. Because [when] we run out of stuff, [then] prices go up. And it turns out that it wasn't even close. Simon won the bet. The price of copper, and or whatever else was in the mix --- they all they all went down.

Stitzel: I forgot the title of Julian Simon's book, but he's kind of the forerunner of guys like Steven Pinker and Matt Ridley. And they give him a lot of credit. So, I wish I could plug the book there. I'll put…

Pjesky: Put in a link. Yeah.

Stitzel: I'll try to put that link. I'll put a link somewhere. So, tell us the other thing.

Pjesky: The other one is --- and I don't know if this is true or not, but it's an anecdote that I had someone that I read somewhere --- about a soldier in World War II that had a fiancé. So, he went off to war and he was going to come back after the war. And he was going to get married. And he was a paratrooper. So, that meant that he para-trooped into Italy or wherever people were paratrooping in World War II. And he spent the entire war with his parachute on him. So, he just didn't get rid of it. He carried the parachute with him through all of this fighting --the weight of it or whatever --- so it's somewhat burdensome. And the reason that he did that is because he thought the parachute would make a great fabric for his fiancée’s wedding dress. Now that's really remarkable to me, because back then it must have been finding someone to make a wedding dress was easy, but finding the material was difficult. Now, if you've had to have clothes tailored or anything like that, now it's the opposite with almost anything. It's almost impossible for you to find someone to make the dress, but the material would be plentiful and cheap for you to find. So, you know, no one today would carry around silk fabric because it would make a good material for a dress, and you'll increase the chance of getting killed, because carrying a little bit extra weight. No one would risk that now, because, you know, you can buy the fabric for a suit or a dress for, you know, a few bucks. But it would be incredibly expensive to find someone to create and to alter such a garment. So, that's an anecdote that if to the extent it's true --- it is, you know, maybe not the story, but the concept is true --- where, you know, the value of human labor has gone way up. And, you know, if people were abundant, you wouldn't see that, right? If people were abundant you wouldn't see that. We have, you know, we have apparatuses here that are holding our microphones, that are very heavy and extremely expensive, right? If we actually had the problem of having too many people, [then] we'd have, you know, student workers, or graduate students, or something like that they would be holding our microphones instead of these complicated tripods that are holding our microphones. But it would be unheard of to have people in here doing that kind of work, because people are/they're scarce.

Stitzel: Yeah.

Pjesky: Right? They're not abundant. We don't have overpopulation. There's no evidence for that other than people's platitudes. So, you know, people are brains. They're not, you know, they’re not just simply mouths to feed. They are, but they're much more than that. They’re much more than that. Every individual is unique and contributes much more than they take away, you know, certainly, you know, certainly on average. And it's one of the reasons why I like economics, because it's a really human field of study; because we can sit here and talk about how valuable human beings are for an hour. Whereas some other fields might have difficult time doing that, right? Because we can, you know, mathematically and philosophically and contextually explain to people the benefits of people's brains (in people's existence) more than just what they consume.

Stitzel: Well, and I think it's a pretty common error where you see people say something about a particular resource is really common, right, whether that's oil or lumber. Or, you know, they talk about this idea that, you know, this country or that country is in trouble because of where the state of the natural resources there. But, I mean, there's actually a lot of work in the development literature and economics about what’s even called the resource curse, right? Because it might actually be a bad thing. And I think one of the lessons that you touched on along the way --- there is this idea about wealth and what is wealth. And I think it comes down to seeing people as brains. That’s a another good way to, kind of, frame this whole problem; because the tailoring example struck me, you know, [and] because I've actually had that experience tailoring in particular. But also, I like to wear cowboy boots as a good Texan would; but I got to get the heel caps replaced on my cowboy boots, and cobblers are hard to find.

Pjesky: And expensive.

Stitzel: Yes. And the one that I was --- yes, and the one that I was --- that I had a relationship with (to use your framework from earlier) has gone out of business. So, now I got a pair of boots that need to be repaired, and I don't know where to take them. So, I’m gonna be looking to form a new relationship there. And if Thanos were to snap his fingers, and half the people went away, there’s probably a lot of industries that are (like you're saying) looking for people that there's scarcity there that wouldn't survive. They just couldn't survive. Even if all the other things that we've said on this podcast weren’t true, it still wouldn't matter. I think there's just an element of human ingenuity, and the power of what it is that people can do. People are the scarce resource.

Pjesky: Yes.

Stitzel: I think that's --- that really is a good point. That is the limitation to the economy now. The other thing that I throw in there, because I’m a big fan of this work that Andrew McAfee is doing on dematerialization. And, you know, so that he's saying: look we’re --- he's got a figure that it doesn’t even sound right it says --- the world is returning a land mass the size of the state of Washington to nature every year, because we don’t need it for using those resources. Which I guess maybe my impression of the land mass of the world is too small, but that just that doesn't seem right to me. That doesn't even seem possible. But I’ve double checked that a couple of times. But in general, we are making more things with fewer physical atoms. Like literally the --- I don't say biomass, but the --- physical mass of the things that we’re producing is going down, while the number, and quality presumably of things that we're producing is rising. Comments on that?

Pjesky: Oh yeah. I mean, it’s obvious where, you know, new person in the world eats one potato, but because that person is in the world they/we produce two more.

Stitzel: I see a lot of the work of Malthus or maybe Thanos in the world today. So, I’m hoping that some headway will be made in seeing people for being brains and not seeing for being mouths. I think a lot of policy discussions around the world ---is even in the developed world, maybe more likely [and] more frequently in the developed world --- could benefit from that kind of mindset; rather than saying we need to promise jobs or promise college education more, right? And I think that's coming from a mindset of saying: well, how are we gonna feed all these people? My guest today has been Rex Pjesky. Rex, thanks for joining us on the EconBuff.

Pjesky: Thank you very much.

Stitzel: Thank you for listening to this episode of the EconBuff. You can find all previous episodes on YouTube at EconBuff podcast. You can check out our website at www.econbuffpodcast.wixsite.com You can contact us at econbuffpodcast@yahoo.com.