Explain SMBC — the wiki for Saturday Morning Breakfast Cereal

2013-09-19

2013-09-19 View on smbc-comics.com → 1 revision
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2013-09-19
Votey panel for 2013-09-19
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Explanation

This comic presents a chart titled "Know Your Branches of Economics" with two axes. The vertical axis (in red) measures "how well theory describes scenarios it considers," ranging from "describes well" at the top to "describes terribly" at the bottom. The horizontal axis (in blue) measures "how likely those scenarios are to occur in reality," ranging from "will never happen" on the left to "happens constantly" on the right.

Two data points are plotted: Microeconomics appears in the upper-left quadrant, meaning it describes its scenarios very well, but those idealized scenarios (perfect competition, rational actors, complete information) rarely occur in reality. Macroeconomics appears in the lower-right area, meaning the scenarios it considers (recessions, inflation, trade dynamics) happen constantly in the real world, but macroeconomic theory describes them terribly -- economists notoriously struggle to predict or explain macroeconomic phenomena accurately.

The joke is a pointed critique of economics as a discipline: the branch that works well theoretically deals with situations that almost never arise in practice, while the branch dealing with everyday real-world phenomena is notoriously bad at actually explaining or predicting them. The votey panel reads "Shame on the three of you who enjoyed this joke," playfully acknowledging that this is an extremely nerdy joke that only a small number of people who understand both micro and macroeconomics would appreciate.

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