Two economists (one a Chicago School devotee of Uncle Miltie and one
A Rational Expectationist) were walking down the road and came across
a pile of shit. The Chicago School devotee of Miltie offered the
Rational Expectationist $20,000 to eat the shit. After a quick
optimization calculation, the Rational Expectationist ate it. Later,
down the road they came across another pile of excrement and the
Rational Expectationist in turn offered the Friedmanite $20,000 to
eat it and after a quick optimization calculation he ate it.
As they were walking down the road the rational expectationist
said to the Friedmanite: "You know, we just screwed up; we are
actually worse off because we each have $20,000 with no net change
from our original cash position plus we have both eaten shit. The
Friedmanite looked mockingly at the Rational Expectationist and said:
"it is obvious that you never studied economics at a school of the
stature of Chicago. You have completely ignored the fact that we have
just generated $40,000 worth of trade."
Jim Craven
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