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Watch the following short clip from the movie "The Hudsucker Proxy" on YouTube.

Create a discussion thread which answers the following questions: How does this movie clip apply to what you have read in Chapter 3? Why does the price of the hula hoop fall at first? How would you describe that in economic terms using the model of supply and demand? Why does it later rise? How would you describe that in economic terms again? What does this tell you about the free market? Can you think of another product whose price has changed as the hula hoops did in the movie, for the same type of reason?

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Darryn D'Souza
Darryn D'SouzaLv10
28 Sep 2019

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Related questions

What do you believe is the ultimate impact of technology on job creation? Should there be curbs to the pace of modernization?

(Answer in a paragraph(around 200 words))

What Econ 101 Can Teach Us About Artificial Intelligence

Here's why advancing technology often leads to more jobs for humans, not fewer

A Tesla Model X 75D semi-autonomous electric vehicle is parked at the Governor's Mansion in Olympia, Wash., this year. Goldman Sachs predicts that 25 years from now, driver employment will be growing by 300,000 less per year because of autonomous vehicles.

By Greg Ip

Aug 9, 2017

The first chart you draw in Economics 101 is the downward-sloping demand curve. It shows that when the price of something drops, people consume more of it.

This elementary rule of economics is remarkably helpful in discussing the effects of technological change. As I wrote last week, when technology makes something cheaper, we consume more of it, often by finding new uses. This lesson repeats through history: When coal-fueled steam power became more efficient in the 1800s, demand for steam power and coal spread. When automated teller machines made it cheaper to operate bank branches in the 1980s, banks opened more branches.

My column cites spreadsheet programs like Lotus 1-2-3, whose arrival in the early 1980s made repetitive recalculation vastly simpler and faster. This reduced demand for bookkeepers but created more demand for people who could run numbers in new and interesting ways, such as accountants and management consultants.

In a recent article for the Harvard Business Review, Ajay Agrawal, Joshua Gans and Avi Goldfarb, economists at the University of Toronto who study artificial intelligence, say that in the 1990s, economists didn’t buy into the hype that the internet and the World Wide Web would upend everything:

“It wasn’t that we didn’t recognize that something changed. It was that we recognized that the old economics lens remained useful for looking at the changes taking place. The economics of the ‘New Economy’ could be described at a high level: Digital technology would cause a reduction in the cost of search and communication. This would lead to more search, more communication, and more activities that go together with search and communication. That’s essentially what happened.”

They apply that lesson to artificial intelligence and more specifically to machine learning, the use of powerful algorithms to make predictions from patterns in large quantities of data. Machine learning, they say, means many problems will be reframed as prediction problems. Autonomous driving no longer involves programming the car to respond in a certain way to a variety of controlled scenarios, but instead, to watch what humans actually do and then respond the same way.

How does this affect jobs? The authors says it depends on whether the technology competes with or complements what you do. Spreadsheets competed with what bookkeepers do (record keeping and calculation) and thus made them less valuable, but complemented what accountants and consultants do (analysis), and made them more valuable.

Mssrs. Agrawal, Gans and Goldfarb say that AI reduces the value of those who predict things for a living, such as whether a mark on an X-ray is a tumor, but it raises the value of those who use predictions to make judgments:

“When prediction is cheap, diagnosis will be more frequent and convenient, and thus we’ll detect many more early-stage, treatable conditions. This will mean more decisions will be made about

medical treatment, which means greater demand for the application of ethics, and for emotional support, which are provided by humans.”

So AI will create winners and losers within and among industries and occupations. But what will the net effect be? More jobs or less, and for whom? This isn’t knowable, but history suggests that while a specific occupation or industry may suffer losses, the aggregate effects will be positive. The growth in accounting and analytical jobs since the early 1980s is much larger than the loss of bookkeeping jobs.

Nor did all those bookkeepers necessarily lose jobs; many probably became accountants or analysts. As Mr. Gans told me, bookkeepers may have been best placed to exploit the capabilities of spreadsheets: “If you were doing calculations all day as a bookkeeper, chances are you thought a bit about why you are doing that. When you got a spreadsheet, rather than doing one calculation per day you could do 10 to 50, so you had a better sense of what the [calculations] might say.”

Some readers said AI is a much bigger threat than spreadsheets because it has so many more potential applications—and they displace uniquely human abilities. I agree with the first part, less so with the second. I suspect workers in previous eras, whether they drove a horse and plow, handled a stock trade or connected a phone call, thought there was something about their job that a machine could never replace.

Will the disruptions this time around be greater? Maybe, but not necessarily. Goldman Sachs predicts that 25 years from now, driver employment will be growing by 300,000 less per year because of autonomous vehicles. That’s 25,000 jobs per month to make up, compared with the 5,000 per month that the decline in bookkeeping since 1985 represents. But it’s hardly insurmountable in a labor market where five million jobs are created and destroyed each month.

Others said I was ignoring the potential for rogue algorithms and robots to turn on us or strip us of our freedom.

The experts, of which I am not one, tell me AI is nowhere near that capability. (Before the robots can kill us they must first stop killing themselves.) And don’t assume spreadsheets have been all benign. Excel may not have slain anyone Terminator-style, but it did help wound J.P. Morgan through its role in the “London Whale” trading disaster.

Which brings me to the final point. We should not confuse what technology enables us to do with how much better off it makes us. Spreadsheets enabled analysts to construct much more intricate forecasts of stock prices and the economy, but didn’t make those forecasts any more accurate. AI may enable companies to better manage the risks of their products and actions, but those products and actions may not be more profitable. Many a CEO has wondered whether the money they spend on spreadsheet-wielding consultants yields any real value. Some day they may wonder the same thing about their AI-wielding consultants.

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