I just realized(from online classes) that,colleges who we pay a lot of money , has worse quality than khan academy, who does it for free even 8 years ego.

Khansian Economics!

I'm gonna go ahead and call that last bit of the video "Khan-sian" economics.

Excellent video. I have a weaker grasp on economics than I'd like to admit. I've been doing some self-teaching, and your videos have been an excellent way to bolster that. Thank you for putting this out there!!

Person C: I think the economy is gonna crash! Person C: **crashes the economy** Person C: *surprised pikachu face*

I am in college and your your videos have always been very helpful I owe u a lot

How the hell does sal know EVERYTHING? How does he know science and commerce and history?

I want to thank you so so so much! You’ve really helped me during all of this COVID-19 mambo jumbo, and I learned about 6 weeks worth of lectures in just a few of your videos, I will honestly keep coming back because I have learned so much in depth about Econ. Thank you!!!!

I really believe Sal is one of those guys with 0 haters. How could someone not love him and his work?

Indeed, it's worth reading the whole quote, from chapter 3 of his "Tract on Monetary Reform" (1923) Ch. 3: "The long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is past the ocean is flat again."

"When people have bad dreams, the stock market crashes." Salman Khan

Dude your videos awesome. I first started watching your videos on algebra when I first started attending community college. Now that I am finally in a state university I still watch your videos from time to time just to get my bearings. Thanks Khan, YOU MY MOY BLUE!!!

I'm glad there's at least one video on KZfaq giving it a fair explanation.

You helped me understand about half of our inflation problems with 10 seconds of video

My economics class sucks. Thanks for this great lesson 👍

Why don't I seem to have the capability to understand economics?

Thanks, this helped me to understand this subject better than the last hour of studying I've done.

The Keynesian model here is generally based on a stimulated economy (of the short run) and when dealing with fiscal policy of government, is built on monetizing debt. So when you have the Keynesian model, it's based on a system of monetized debt through a government that tries pushing up the pendulum. The thing is, pushing the pendulum will result in a back swing.

The great blindspot in the analysis of market economies by Keynes is the central importance of land markets and the fact that the supply of land is inelastic. In the real world, the price mechanism does not clear the market for land. Quite naturally, owners of land will withhold land from use or sale in anticipation of ever-rising land prices. The only way to remove the potential for owners to profit from hoarding land or "investing" in land for purely speculative gain is to impose an annual tax on land equal to its potential rental value. Only then would land markets respond as does labor and capital goods.

Thank you Keynes for creating at least 90% of America's economic problems

I will never be able to stress enough how well made I think this video was

I'm in 9th grade and I don't understand the charts but I get what you're saying about how Keynes thinks we need to stimulate demand as well.

Super Video ! Like from Ukraine !!

Do Austrian Economics next!!

Great video, clear and concise. thank you very much.

I admire all your videos and the valuable content it gives. I have been learning a lot through them, great work.

you have no idea how much you have helped me. Thanks Salman!

Classical: long run, all water will reach its natural level Keynes: but short term there are waves! Short term thinking in both life and economics is dangerous and counterproductive

I always pronounced it key knee zian, so I was a little off haha

A very concise explanation. Thanks for doing it man . Came with different conclusions than you but i guess thats whats its all about! Thanks for putting it out

Awesome Awesome explanation of Keynesian economics - I tried to read the General Theories, but all the equations confused the hell out of me. Thank you!

I was struggling with the subject, since the book is difficult to understand. Luckily this video seems understandable.

I love how this video purports to demonstrate that there are no absolutes, but we should believe one side or the other once in a while...

A great supplementary watch for my students.

Yeah we all have exam tomorrow! All the best guys

Yes, the Keynesian aggregate supply curve tends to verticality as the actual output approaches the potential. So, it is a realistic model.

Sir Please try to put Urdu subtitle also because my english is not good to understand your lecture... Big request 👍👍❤❤❤

Keynesian? More like "Khan made a great video again!" 👍

This was a very informative and understandable video, thank you!

It's one of many models of the economy. The detractors of Keynesian economics are fewer than the proponents, but the detractors tend to be more passionate. There are also a great deal of people who bash "Keynesianism" while endorsing Keynesian ideas, so they pretty much don't know what they're talking about (today's GOP). The end result is that, on the internet at least, you'll get a lot of detractors - many will be Ron Paul fans. In university economics depts, you'll have plenty of supporters.

Fantastic video, well explained, please keep up the amazing work

wow something that looked so complicated was made extremely easy to understand through watching this video thank you

ReALLY USEFUL AND EASY TO UNDERSTAND, THANK U!

A few others things to think about... 1.) Where does the Government get the money from to "invest"? (it either has to print it or take it from the economy)... Government has nothing that it first doesn't take) 2.) How does it know which companies, industries, etc are the best to invest in? 3.) Could the idea that the Government will "bail out" or interfere cause a moral hazard? 4.) Does Government policy (economic, monetary, etc) cause the bust that requires a boom?

The Keynesian concept of consumption function states that there is a common tendency for people to spend more on consumption when income increases, but not to the same extent as the rise in income because a part of the income is also saved.

There is no "sometimes" about the free market finding the best equilibrium. There's only a timeframe and most of the time people are too impatient (want instant gratification) to let it run its course in the best fashion possible and end up picking the scab prolonging how long it takes to heal! The problem with increasing aggregate demand especially through government spending of any kind is that you aren't going to get the proper productivity out of it you're going to boost productivity in areas of the economy that are inefficient or less useful that if you let the market determine which industries/products are in demand!

Loved this video, learned a lot, subbing khan, thanks for the help

you should do austrian economics

I don't believe I understood in college the reasons WHY the LRAS curve in vertical, so I just figured that I'd have to merely accept that this model is correct, though seemingly preposterous. Aggregate quantity is always the same no matter what the price of the total?

After watching about 50 of your videos, I thoroughly believe you could beat watson on Jeopardy! Great videos :)

"In the long run we're all dead." And so is our nation.

Keynes said "In the long run, we are all dead" somewhat tongue in cheek. He wasn't being pessimistic. He was shining a light on what he thought was an over-emphasis of the idea that the economy would fix itself and stabilize in the long run. So his point was that yes, things would EVENTUALLY get better, but in the meantime there'd be enormous unnecessary suffering.

thank you, you're the best

It’s hard to get the government to stop spending, unless it’s social spending, aka the exact sort of spending described in the analogy. What we can’t get them to stop is military, surveillance, or foreign influence spending.

keynes is laughing, "they actually buy into this"

Keynesian Economics. A short-run solution that has been breaking windows for the last 70+ years.

Best concise video on this topic

@youngthinker1 - No, I wasn't trolling. Just attempting to cast doubt on principle of total "laissez faire" in economics by a parallel application to another sphere of human well-being. I am glad that we choose to use government to control spread of bodily diseases. It would be nice if we could control spread of economic ills. That's a big "IF", because applied economics are thrown off course by human emotional reactions and by unforeseeable circumstances like war and natual disasters.

There is a fundamental flaw in the explanation of business cycles put forward by Keynes. He accepted the neo-classical discard of the classical treatment of nature (i.e., land) as a distinct factor of production. The apparent reason is that Keynes could not think of land beyond the treatment provided by Ricardo relating to agricultural land. Locations in cities are valued by the square foot, not by the acre where land is more distant to centers of population. Moreover, he failed to see that a high annual tax imposed on the rent of land would provide important incentives for owners of land to bring the land held to its highest, best use or sell to someone who would. Raising revenue from the taxation of land rent would have an important stabilizing impact on the production of goods and services. Taxes on wages, capital goods and commerce have the opposite effect; they impose significant deadweight losses on economic output.

Sal please explain why the independent variable (price level, P) is depicted on the y axis, whereas the dependent variable (GDP) is depicted on the x axis. Thanks.

There was a progressive tax rate that oscillated between 70%-90% on the ultra wealthy, and around 20%-30% on the Middle Class. The beauty was since the government had a steady stream of income, it was able to use those funds to invest in infrastructural projects, GSE's like Fannie and Freddie(which because of those two institutions mortgages were lent at a sustainable rate instead of the 2000's with the ARM and Sub-Prime loans), NASA, Social Security, Medicare/Medicaid, Food Stamps, etc.

Oil is by no means scarce, and the problem is that it IS being controlled, instead of being drilled as fast as possible by every mom & pop who can invest in an oil well. There is no capacitor (I think you mean battery) that can store 1/3 of a day's electricity, especially when night is when most electricity gets used. Batteries also take resources to produce and would have to be continuously replaced from use.

Excellent teaching skills

um... no. Capacitors store voltage; inductors store current. Batteries supply a constant power source within a circuit. Capacitors build up a charge and discharge all at once.

The only people who ask for raises when things are not being sold or there is not demand are Union workers. They must all subscribe to the Keynesian thought of economics.

Taught me more than the text

Moving the AD to the right (i.e. inflating) only changes the scale of the model. It does nothing to change the reality. It will, however, create false signals on a more micro level, causing more chaos within the system when individuals slowly discover that their medium of exchange is worth less. This is why the depression of 1920 was over in about a year, while the one beginning in 1929 did not fully recover until after WW2.

I have been watching your videos for a while now, and I only yesterday saw your TED Talk. Keep up the great work!! :D

This explanation of the "General Theory..." is an example of using a set of facts, which although individually are with a few exceptions accurate, totally distorts the actual meaning of Keynes analysis of the economy. Classical economic analysis assumes that the economy will operate at full capacity, and can not explain the phenomena of involuntary unemployment. The General Theory explains that it occurs as a function of aggregate savings and investment.

Awesome 👍

I really need to start at a more basic level.

great video make more of these

Both or neither. It depends on what ASSUMPTIONS you make about individuals and how they make decisions. That is why there is a debate about Smith's view, Keynes' view and supply side view and which is better.

Those wind and solar farms need huge amounts of space. That means clear cutting mountainsides or digging up deserts before you can install anything. Again, if it were so effecient and easy to produce, someone would have already be using it. The sun also sets and the wind stops-- problem there. The land mass of New Mexico, by the way, is no small area. The millions who live there would have to be forced out by the gov't or by BigEvil, Inc. I'm not really comfortable with either.

Could you make a video for the Austrian School of economic thought as well?

In New Orleans, areas where Habitat for Humanity and other charities have rebuilt are better than before. Places where people have relied on the government to rebuild are STILL waiting for approval and/or funding. People trying to rebuild themselves have been denied permits by their own city planners. CIty "recovery" projects still look like disaster areas 7 years later. I have little doubt as to which method the people of New Orleans whould rather have.

Thanks

We also certainly can't create legal entities to represent our community, where ownership of property is tied to shares in the legal entity. Such that a community can in a literal sense "own" land, water bodies, resources, etc. Then through the use of contractual agreements form the basis through which the ToCs can be solved. We do not punish polluters by forcing them to bear the full economic consequences of their actions, through class action. Industrial polluters are largely protected.

May 2020 and now the Keynesian economic seems more real

Keynesian works well in America because of its big domestic market.

I FINALLY understand what that Ron Paul guy has been talking about! lol

this 12 minute video > 4 hours of lectures.

thank you sal for making khan academy

The problem people are taught about supply and demand is in 2D space.....but it's a 3D and sometimes a 4D construction. As supply increases, price falls, but as demand increases, price rise....so you have 2 axis of supply and demand, with a third axis of price. However, there is also the account of the vector of future position based on velocity of the production.....meaning, every point in the grid points to another position in the grid to determine the flow of the price over time. For example, if the demand for televisions are 100, and you supply is 90, then you have effectively reduced the future demand down to 10 because you've provided the supply....then you add in the delta of replacements, population growth and other factors to build that back up. The goal of a company is not to match supply and demand, but to maximize the return profit of the cyclical velocity in the fourth dimension.....otherwise, you go bankrupt like Blockbuster (supply with zero demand). As for the consumer, they will have demands for various things at various levels regardless....and they may come as patterns (ice cream has higher demand in summer, for example), but ultimately you use that to determine the velocity vectors. Pricing itself isn't an exact value, as each market has different values to determine, it's more of a multiplication factor against the national mode of purchasability. GDP doesn't come into play until AFTER the production has been consumed....which means it isn't even a qualifier for the graph to determine anything. GDP is just a measure of the nation to meet demand, that's all. As for the depression about people "not wanting to work, but demand was high and prices couldn't rise"....this was because the national mode was reduced, and multiplying a high number against a low number still results in a low. For example, let's say that a normal factory supplying 100 cans against a market demanding 100 cans cyclically, the mode of the nation is at $10, and the multiplying factor at that level is 0.1.....so the can's price is $1. Now imagine the factory no longer able to supply cans, and hungry people's demand now goes to 200, the multiplying factor skyrockets to 5, so you would think that the price of the can is $50....but no.....the national mode, because people were out of work and had no money, was at $0.10.....which put the price at $0.50 for the can. The mode of the economy was extremely low during the depression, which made prices fall even though they were in high demand, because people still couldn't afford it (because having $10 in disposable funds easily buys 10 cans at $1 each.....but having only $0.10 can't even buy you 1 can at $0.50).

Gunna try a masters in economics, hope Khan academy has some math videos to help with my rust calc :(

No in a "free market" "public water" would either be privately owned according to first appropriation, aka the people who used the resource first, ie local fishermen, the people living in the surrounding area, etc or by a legal entity representing the people in the surrounding area. Enviromental damage to that resource can then be treated through tort and property law. Air pollution can be similarly treated, with polluters being forced to bear the economic costs through class action suits.

HAS EVERYONE FORGOTTEN ABOUT THE ROARING 20'S??????Every time I listen to someone talk about the great depression, they somehow forget to mention the easy money policies leading to that event. It would be like mentioning our current great recession without mentioning the obscene home prices and roaring 2000's. The real problem here is the FED having control of our money. At will they can expand or contract AD, leaving the government and people to fend for themselves.

What is keynes view on govt investment in education... it should produce more supply because more people can provide more goods and services on the supply side; but it also should produce more demand as more people should have more income to spend on the demand side

Very helpful. Thanks

@youngthinker1 Good points. The Fed also kept interest rates artificially low for several years. This encouraged more borrowing.

The problem with keynesian is... its VERY SHORT TERM, meaning that it could work as a spark but to continue doing it causes C, B, and D to go out of business while the Government pays A for all of its output. "There is nothing more permanent than a Temporary Government Spending Program"

for the last diagram you drew, the y-axis is actually Price LEVEL, you will get points off for this on the IB Exam

Khan should do Austrian Economics!

@baydood510 Austria is a great nation! So many scientists, thinkers, philosophers, musicians in that tiny country, great respect!!

If by corporations rigging prices, you mean: "voluntary cartelization intiated by competitors", thats already disincentivized. You're also overlooking hundreds of years of top down involuntary cartelization by the government. You can talk about the threatening possibility of Mc Ds colluding with BK all you want. he face of laws and regulations that marginalise small vendors (particularly mobile ones), artificial economies of scale, and monopoly protections such as proximity restrictions.

Good video. Thank you.

There is enough oil to last for a minimum of 400 years at current growth projections. Again, you can thank the gov't-sanctioned cartells of BP and OPEC for helping to regulate their competition out of the market. Batteries gat better all the time, but are not good enough (and/or cheap enough) to justify their use. Again if it were currently profitable, someone would be doing it. Space stations use such batteies, yes-- on public money, at prices no individual would pay.

@kubaniski It goes back further. Check out what Carter did then see what happen in 1996 with a certain government organization that controls bad loads, Franky Mae and it sister organization. When the government forced businesses to make bad loads (they passed a law that would hit companies with large penalities), and the government financed the loans with tax payer money, that created the bubble. It took 20 some odd years, but it burst.

what about the critique of a downward sloping AD curve not being very realistic?

Now do a video on the Austrian critique of classical and Keynesian aggregate analysis.