Planet Money Live: Two Truths and a Lie

Planet Money

NPR

Business, News

4.6 • 29.8K Ratings

🗓️ 28 June 2023

⏱️ 24 minutes

🔗️ Recording | iTunes | RSS

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Summary

The shocks of the pandemic economy gave us a bunch of enormous natural experiments, which helped to prove or disprove conventional economic thinking.

Take, for example, the bullwhip effect, the idea that the further away from the customer you are in the supply chain, the more volatile your orders are likely to be. This theory played out at an enormous scale, in the pandemic. Consumers and companies overreacted to the risk of shortages by ordering more products and hoarding them, causing massive shifts in the supply chain – just like the theory says.

And the pandemic gave us a lot of natural experiments like this. So, on this special live edition of Planet Money, we looked for other big economic lessons from the past three years, and we took this information and turned it into... a gameshow! It's Two Truths and a Lie: Econ Edition. We get into questions about the workforce and labor market during the pandemic, and how it affected how economists view the world.

This episode was hosted by Mary Childs. It was produced by Dave Blanchard, and edited by Jess Jiang. It was engineered by Josh Newell with help from Robert Rodriguez. Original music by Jesse Perlstein.

Help support Planet Money and get bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney.

Transcript

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0:00.0	This is Planet Money from NPR.
0:06.6	So often in economics, we get these theories that sound really good.
0:12.0	They sound like they could be true, but there's no way to test them in the real world.
0:17.8	So people run around believing these theories and repeating these theories that are completely
0:22.6	mushy and untestable forever.
0:26.1	Like there's this idea taught in business schools called the Bolwip Effect.
0:30.7	The idea that the further away from the customer you are in the supply chain, the more volatile
0:35.2	your orders are likely to be.
0:37.2	So like with the whip, the part that's close to your hand goes up and down a little bit,
0:42.0	but the farthest part goes up and down a lot.
0:45.8	And this interesting sounding thing was suddenly everywhere in the pandemic.
0:50.6	If you recall, there were a bunch of shortages and consumers, companies, everyone reacted
0:55.4	by ordering more of the thing, ordering it earlier and hoarding it.
1:00.4	And because all the different companies in the supply chain don't communicate very well
1:04.6	or coordinate their needs, they tend to overreact.
1:08.8	They freak out about running out of stock and they overorder, or they freak out about
1:13.7	having excess inventory and they slash orders.
1:16.8	So if some customers suddenly decide that they need an extra pack of toilet paper this
1:21.4	week, that might mean the factory at the far end of the chain ends up with the
1:25.4	hundred more orders one week and then no orders the next.
1:29.9	And to see a perfectly manifested Bolwip Effect at this enormous scale, it was kind of
1:37.1	weirdly beautiful.
	...

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