Whiteboard Macroeconomics

There’s nothing that economists love more than a good blackboard (or in modern times, a whiteboard) to work out some basic models of how we think the world works. Supply and demand rules in microeconomics, but macroeconomics has a few good blackboard models too.

So I was excited to see when a member of Congress was using a whiteboard to work through some basic economic logic, as Rep. Katie Porter did in this video she tweeted using the textbook macroeconomics aggregate demand and aggregate supply model:

However, while I haven’t taught macroeconomics in about a decade, it seems there are a few flaws in her analysis. Flaws enough that this probably wouldn’t get a passing grade on an oral exam. I could detail them myself, but… I will leave this to the readers as an exercise! For fun, even if you don’t think this is the best model in the world, just assume it’s a good model. What did Rep. Porter miss? Leave a comment.

One thought on “Whiteboard Macroeconomics

  1. Lee April 6, 2023 / 4:50 pm

    As a non-economist, here are a couple of my observations.

    First, it’s interesting to hear someone advocate for higher taxes on the basis that higher taxes will reduce AD. Isn’t that generally thought to be a bad thing?

    Second, the main point of her argument seems to be that taxing the wealthy and redistributing the money will both reduce AD and increase the purchasing power of the beneficiaries of the redistribution. But even if higher taxes do result in the ultra wealthy reducing their demand for certain goods or services, I would think they would reduce their demand for luxury items, not the types of goods that the majority of the general public would typically consume. Wouldn’t it be likely that the prices for many goods might increase if the increased purchasing power of the program’s beneficiaries results in higher demand for those items?

    Liked by 1 person

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