the big story today, on the ropes. good afternoon. i'm matt miller in today for dylan ratigan. we're wrapping up 2011 with a fragile economy and more trouble ahead in 2012. the latest signs, sears is closing more than 100 sears and kmart stores, putting thousands of jobs on the line. iran's latest threat to choke off oil shipments could drive up gas prices and take a bite out of the payroll tax relief washington has spent months fighting about. and that's before we even get to the fallout from the european debt crisis, china's bubble perhaps bursting, and other 2012 alarms. all part of a broader picture of continued tough times in america piling stress on the middle class. take a look at this. this chart might look like a bunch of spaghetti lines, but our friends over at calculated risk blog show how deep and long this employment slump is versus past downturns. others have been deep but short lived or shallow and long, but this is the first time in the

modern era job growth has been hit so hard for so long. that's a bad piece of spaghetti. we're not helplessç in the fac of this. things we can and must do to reverse the 2012 outlook. that's why dylan is heading out on a 30 million jobs tour next month. but to get us all clear and how to think about the stakes, we've got a man who spent much of his career advising presidents on just these questions, so think of this as your personal presidential briefing on the 2012 economy. princeton economics professor allen binder was a former vice chairman of the fed and an economic advise err during the clinton years. thanks very much for joining us. >> good to be with you. >> as we try and give people a sense of where things are, what should folks understand first about the near term outlook on the jobs situation? >> i think the first thing towns is we fell in a really, really deep hole and we're barely crawling out of it. i don't know which is worse. the hole was terrible. we should never have fallen into

such a big hole, but it -- it may prove to be worse in the end that we're crawling out so slowly. as your graphic showed, we've made progress but not very much progress on this jobs gap. >> and what's the reason for that? >> well, i think there are -- there's no short answer to that. one is the ruination of the financial system which has made borrowing and credit very difficult to do. one is the sheer depth. another is the running out -- i don't want to say running out but the using up of all the heavy artillery by the federal reserve and needing more. now they are down to light machine gunfire and, you know, they are headed for bebe guns. you know, they will do everything that they can, and finally, contrary to what a lot of people think, the relative timidity of fiscal stimulus relative to the problem. it was big in an absolute scale, but the problem was enormous. >> and something people neeo to understand because the republicans typically attack, you know, the socialist obama-like stimulus, but

mainstream economists really on both sides would say that the -- that the output gap, the hole we were in was much bigger than what the actual stimulus was. say a word about that. >> much bigger. the output gap got -- there's controversy in measuring it but think of a number like 8% gdp year after year until we get back, and now it may be 6 or something like that. we did one shot, 5% of gdp spread out over some years. the biggest hunk came in 2010, and i think that was around 2.6% of gdp in that one year, much less than all the other years. do the math. >> what does it mean what the jobless rate is going to be on the eve of the election? 8.6% today. what's your best guess when obama is asking people to pull the lever again? >> my best guess is 8.6% which is not a good thing for an incumbent to run on. >> do you think he can -- the

prospects of actual action out of washington seem kind of grim in the months ahead. do you have any hope that something can be done in the near term? what's your whole take on this payroll tax back and forth? >> not very much hope. first of all, i guess we should all thank heaven that we got the payroll tax continuation because otherwise that was going to be a heavy fiscal contraction. >> that's only two month, right? >> it's crazy. >> i'm assuming we'll get the other ten. that's a political assumption. >> right. >> you're quite right. >> if it's only two months, who cares. i'm assuming that it's going to be for the year so we'll not get that contraction. after all, it isç an election year and nobody really wants the -- >> that still means, even if it gets extended, unemployment is still going to be 8.6. it's not going to make much of a dent. >> you'll report extension is just preserving the status quo. the status quo recently has been positive but kind of meager growth, in the range of 2% or so. that's not enough to make a real dent on the employment problem.

the fear was it was going to get worse, that we'd have a fiscal contraction because of the expiry of the payroll tax. >> you're not a politician obviously. you advise politicians, but why in a situation lake this wouldn't obama have been putting out a much bigger plan to run on? if nothing is going to happen anyway, why not go for a real blow off the doors plan so, that you know, this is what i'm trying to do, not something that even, you know, even his stimulus, which was non-trivial, people said would add 1 million or 2 million jobs. there's 25 million people who need full-time work who can't kind it? >> i can't second guess the president or his political advisers, but i think they thought correctly by the way that even asking for the 500 billion or so, that whole jobs package with all its pieces, only one of which we've just been talking about, was way, way beyond what the congress would give. i think that was a correct judgment so the question is if you're only going to get 180 in the end, do you want to ask for 500, 1,000, 3,000?

you're only getting 180 in the end. >> i still wish he'd go big. look, that's their choice. talk about 2012 for a minute. i know you've been worried about europe. i think a lot of people don't understand, you know. they hear there are these scary problems going on in europe. can you help people understand the stakes and how it could affect the u.s.ç economy in th year ahead. >> i can try. two parts. one is simple. if europe has a recession, european countries are going to buy fewer american goods. that's a reduction in demand which is already weak in america. that's the simple-to-understand but much smaller part. the part that most us fear, if it happens, is if there's a serious set of financial eruptions in europe, our banking system broadly conceived is not going to be immune. just as theirs was not immune when the problem started here. it's an interconnected -- it sounds like a cliche, but it s in fact a globally connected financial sis them. >> and is that in part because our banks hold derivatives, all

these fancy instruments in which people are doing side bets on who is going to repay their stuff? >> there's all sorts of instruments and plain vanilla lending back and forth. our banks lend to their banks and their banks lend to our banks. our banks lend to european customers. european banks lend to american customers so even when you -- even if you don't leave the realm of plain vanilla simple banking, there are tremendous interactions. in addition to that, there are all these derivatives and a variety of other things. >> so do you think what europe did recently, the various moves they have taken where the central bank back door financing to the banks, maybe in the hopes of avoiding that banking crisis good enough buying time? what's your verdict? >> certainly buying time and knock on wood. this isn't wood, but i'll knock anyway. we don't know. >> the key thing that matters is the one that you mentioned. this policy of the european central bank to open the door, let's put it that way, to the book door financing of the sovereign debt.

don't want to buyç the soverei debt themselves. already landing titanic sums, and you know the governments of those countries will be leaning on the banks to buy the public debt. >> just a minute or so left. but the ideas of bankers behaving badly seems to be a theme true here and true in europe now because they run themselves on such a thinly capitalized basis that they are vulnerable. >> right. >> when events like this happen. what happened to any sense of stewardship? i mean, it's a huge theme of dylan and mine, that the idea -- if you -- the less capital you have running the bank, the bigger bonuses you can pay because you can do a higher return on equity and show that for your shareholders, what's the way out of this mess, if you're a benevolent dictator alan blinder? >> i agree, but remember that a lot of this was unforeseen and maybe unforeseeable. this is the worst financial rupture we've had since the 1930s. to your point you get a safer banking system if you require them to hold more capital. >> and they are still fighting

that? >> they are still fighting it, but they are losing. now, you could say well even 2%, even 9% capital isn't enough, but if you make it too high you start choking off lending so there is a delicate balance to be made. the bigger problem was that many of these capital requirements were honored in the breach, via derivatives, via off-balance sheet operations, complicated things that accountants and lawyers get paid, maybe some economists, too, to device. >> 15 seconds, last question. what's one source of hope for you in the next year? >> i think the source of hope is the economy is starting to show life. the consumer, unlike a lot of fears that were voiced, did not crawl into a hole and say that's it. i'm out of the çgame. the consumer is still in there spending, as the money comes in. the problem is the money is not coming in fast enough. >> alan blinder, thanks for taking the time for the personal presidential briefing for the folks at home, and happy holidays to you and your family. >> happy holidays to you, too, matt. coming up here on "the d.r.

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was our fault and we hope to launch a write-in campaign. >> i think he compared that to i think it was pearl harbor. i think it's more like lucille ball at the chocolate factory. >> all i would say, mitt, if you want to run a negative campaign and attack people at least be man enough to own it. >> of all of the candidate in the race, i have spent the last five years fighting socialism with everything that's within me. >> you're seeing a transformation, and -- and -- >> what is that transformation? >> the transformation is after watching the defend. >> makes you feel good about democracy. >> you heard 11th hour pleas to iowa voters with less than a week to go before the crucial caucus. the latest iowa numbers out just this hour show mitt romney holding at :kh, followed by ron paul. rick can strum surging into third, knocking newt gingrich down to fourth place with 14%. could it be all those negative ads? from rick perry's sudden shift to oppose all types of abortion,

to newt's call for mitt to man up and own his negativeity, everyone's pulling out all the stops in a last-ditch stab to win a race so chaotic it has me running out of mixed metaphors. time for our deep students of the democratic process, our wednesday mega panel, imogen, jonathan and rob. >> hi, matt. >> hey, jonathan. why don't i start with you. mitt romney, i thought his chocolate factory line, i love "i love lucy." i love the chocolate factory scene and it also kind of fit with the fathers knows best. mitt romney would cate a '50s sitcom. >> so "leave it to beaver." definitely appeals to people over the age of about 40, right, which is probably what they are looking for when they go into the caucuses, right? but this whole thing underlines to me, i don't know, the carnivalesque atmosphere to this. it's like -- to use another television analogy, it's like a

loony toons dog chase and santorum is out in front and there's ron paul. i don't -- they are all pandering to various little pieces that will get them a bit of the vote, whether it's the abortion issue that we just saw with that. i get to the point where it doesn't really matter who wins in iowa at this point. >> the beauty of live tv, i learned those poll results coming in on the screen. the fact that santorum has surged into third and mitt seems to be, you know in, there in first place kind ofç cleanly surprised me. what do you make of it? >> i can predict the winner of iowa. it's obama. i was in london, came back and reading "london times," owned by the same organization as fox news. i opened it up and there's a cartoon in there and obama getting a christmas present leaping for joy saying that's what it is and the present is romney, gingrich and perry, and quite frankly it's actually a gift to obama, and that's the thing about owe with a, and

there was a brilliant piece, 120,000 people, all very extraordinary. republicans lurching to the right to appeal to the iowa voters. that won't help them fundamentally with the electorate as a whole who are many moderate than many republicans and democrats would have us believe. >> jonathan, what do you make of the newt gingrich man up to mitt romney on negativity? taking the heat with the millions and millions of the super pac pro-romney money which from the cnn poll has torn newt down. >> right. >> is he going to coax him or bait him into any kind of different engagement? where do you see this heading? >> he won't coax romney into any kind of engagement but that's not his end game. when you have a candidate with no money going up against a candidate who has a lot of it and is spending it to hammer you in television ads, what you do, and especially if you have a reputation like newt gingrich as

being a rhetorical bomb thrower, you say everything and anything possible to get as much attention as possible so that you make the news, whether it's cable, national cable channels or if it's the local news in iowa in key markets,ç so you'r basically i think what newt gingrich is doing is employing a free media strategy. >> and he's always been great at that. been great at that since 1994. >> right. >> that was the key to his ascent. >> we're talking about him right now. >> exactly. >> we're pawns -- we're just players in newt gingrich -- >> everyone lakes a fight. everyone likes to see a showdown. >> this is true. i can't let that montage pass. the idea that michele bachmann can say i've been fighting socialism for five years when corporate profits are at record highs, the share of income that goes to capital opposed to labor is at an all-time divide and the whole 1% and 99%, the idea she can say that and not be shamed into silence is astonishing but from bad politicians i want us to move to bad bosses, rob.

>> you chose me for some reason. >> you look like a bad boss. i'm sure you're a good boss but there's a new study out from baylor university, people get tenure for this stuff, found that stress in a mean boss doesn't just affect you in the workplace but can filter into a worker's personal life and some of the bad questions asked is how often does your supervisor tell you your thoughts or feelings are stupid, put you down in doubront of others and tell you you're incompetent, express anger at you when he or she is really mad for a different reason this. kind of workplace bull eg, have some statistics to show on the screen is widespread. what do you make of this? >> i've worked in newsrooms all my life and at a hedge fund before that. i've never seen any tension. never seen any bullying. i've never seen -- i worked -- dylan and i used to work together at a company called bloomberg lp where some of this stuff might have happened. >> oh, i worked there too, rob. >> like a okbloomberg mafia. >> but, you know, it depends -- you get paid for some of this

stuff. there is an element. i'm not condoning it in any way, but would i imagine if you're in a hedge fund and you're on the trading floor at an investment bank and you get yelled at and people are screaming and there's high tension and all sorts of stuff going on, they are probably rewarded for dealing with that. >> rob, that is the stupidest remark i've ever heard. i'm sorry, it bleeds even into cable hosting. there's kind of a dim mick. >> that was really mean. >> the survey is stating the obvious. however, there's tough times out there at the moment. you read today that sears are laying off -- stopping 100 stores. at the same time gap are closing a fifth of their stores in america over the next two years. it's tough to be a boss and tough to be an employee at the moment. very interesting is america is the only western democracy without anti-bullying employment laws. >> why do we need -- we need anti-bullying laws? >> everywhere else in the world, europe, britain, we've got them as well, so here is the only place that doesn't seem to be

necessary but you do love a lawsuit. >> jonathan, in the same abusive spirit, do you want to give us one of your underwhelming pseudoinsights? >> oh, my god. i almost said something that would have gotten me banned from the network for a very long time. >> sorry, just in the spirit of the survey. >> just going to ignore you. look, it's not surprising that if you work in an environment where people are tearing you down day after day, of course, it's going to translate into really bad behavior at home and your loved ones and children and relatives and whomever else you come intoç contact with will fl the brunt of it, but, you know, i get abused every day via e-mail by people i don't even know. >> that is true. >> when you're in the writing business you get this all the time and people feel free to kind of wail at you in ways they never would do in person. i have to say, jonathan, i always think the dog gets the brunt of it. i've been guilty sometimes with our dog, if i've had a bad day,

end up being kind of cruel, mean to your dog in ways i actually apologized for. >> matt, what are you admitting here? >> i'm not saying dog abuse. >> but i've been mean to my dog. >> there's a chicken and egg thing here. it may be that people are abused at home or they find themselves, you know, belittled or beaten down by their loved ones, their children and then they come to the office and they find that they are bringing it that way rather than the other way around. >> i'm not buying that. >> i think several people can probably get tenure looking into that. that's a dynamic that's not been looked into. >> there you go. >> the panel is going to statement thank you for those insights and abuse. straight ahead, from north korea to iran, syria to china, what global hot zones pose the biggest risk in 2012? our specialist with the answer right after this. [ male announcer ] cranberry juice? wake up!

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quite a spectacle in north korea today as the country bid a final, tearful and theatrical and not so spontaneous farewell to kim jong-il. son kim jong-un walked with his hand on the hearse and notably at his side for all of it, two men thought to be running the show behind the scenes, jong-un's uncle. more on the hot spots the u.s. needs to watch in the coming year, ian bremer, the president of the you're asiaç group and author of several best selling books on global affairs. >> glad to be here for a change. >> let's start with north korea. that's really concerned me. the whole transition. you lack at all this stuff closely. they have nuclear weapons. there hasn't been a transition like this in a long time.

what's your sense? how should folks at home think about what the risks are for the u.s. and the global community at this time? >> well, the risks are significant because this young guy, 28-year-old fellow with his finger on the button, kim jong-un, has only been grouped to become the leader of this most totalitarian state in the world for about a year and a half. no way he can actually run this country. if it's going to work it's going to work because those around him that have shepherded him through are happy to use him as a symbolic figure. we won't know for a while, but it's an incredibly unstable thing. you know what they say about companies that are owned by families? they say the first generation builds it, the second holds on to it and the third destroys it. that has to be your concern with kim jong-un and in a part of world where economic growth is so critical for the united states and for the world's economies, this is one of the biggest risks for 2012.

>> is it a risk that unravels in chaotic fashion or does it unraffle and we have unification and we have, you know, chrysanthemums flying through the streets and everyone is happy and japan is excited? how do we gauge it? >> you're talking about 2012, the risk is that the transition doesn't work and the place starts to fall apart. that could eithurç mean implosin which means massive refugees, mostly into south korea and not into china, that would have major negative impact in the short term on one of the most dynamic economies in asia. or it means more provocations as they try to hold the country together ineffectually. we saw in the run-up to that transition in the last year that there were artillery attacks against the south korean island, they sank a ship. we also saw before kim jong-il died, there were an unusual number of car accidents with senior officials getting killed. you know, there aren't that many cars in pyongyang that.

sort of thing, it's not a traffic accident. i mean, the fact is that there's -- there are purges that are occurring and i'm sure they are occurring right now and we're in the aware of them. 2012 is actually a dangerous time to see if you can have a smooth transition. >> before i get imogen in, what's the white house, hillary clinton, what are -- what's our side doing behind the scenes to try and manage this kind of scary, potentially scary moment? >> what they are not doing. they are not working closely with the chinese. obama and hillary clinton have both made very successful trips throughout asia over the last month with american allies bucking them up and offering them strategic support while the chinese were on the back foot. the united states and china, the two countries that have been most engaged in the six-party talks over the past years, to try to ensure a level of stability, don't have trust militarily whatsoever on this issue. the u.s. is doing the best it can to reassure japan and reassure south korea and show

the united states is there, but their intelligence isn't that good on the ground and frankly,ç china's isn't much better. >> imogen? >> i'm your newest biggest fan. you wrote this brilliant piece on how it's too soon to write america off just yet and i was wondering if you could expand on that for everybody who didn't see the piece this morning. >> very kind of you to say. >> isn't that the kind of question you like to get asked. >> i do, i wasn't expecting that from across the pond but i appreciate it. >> you're looking great, too, by the way. >> feeling casual. you got me working in new orleans, that's bad enough. look, i think the point is that everyone out there, it's very fashionable to be declinist when you look at the united states right now, but actually if you think about the size of the american economy, if you compare it to other countries out there, if you're making a decision in 2012, you don't get to invest in america today or america ten years ago. if you did, you might make a different decision. there is no such portfolio out there. you get to invest in the u.s.,

or you get to invest in europe, in japan, or china. gold, which isn't a country. the united states is actually on much stronger footing in terms of hard power. where the united states has been knocked down in the last ten years is in terms of support for its values, whether we talk about the 2000 elections or whether we talk about worldcom and earn ron and lehman brothers and aig, talk about guantanamo bay. those i think are the issues that the united states is having problems with, and those are the places where the united states really needs to find its mojo in the 2012 presidential elections. unfortunately, my view, neither the republicans or democrats are getting the totality of that picture. >> jonathan has got a question. >> yes, ian, lovelyç glasses. >> thanks. >> continuing on imogen's compliment. >> i'll be on set next time. >> we spent a lot of time talking about north korea and that being a hot zone, but is there a country that's also a

hot zone that the overall american public isn't aware of but should be aware of and should be concerned about? >> well, i think that the big places that are on -- on our radar right now have to be north korea. we're not paying as much attention to north korea as we should and iran, and those are countries that not only have the capacity to provoke, but they also have the capacity to imploerksd and because of iran being such an important energy player, both in terms of production but also in terms of transit and north korea, because of the importance of the economy around, it those are the two that you have to pay the most attention to. there are lots of questions, no question, in the middle east that are problematic, especially with the u.s. now leaving iraq. i think the dangers of sectarian conflict, taking what's been one of the most exciting investment stories in the middle east, iraq, and making it potentially much more divisive internally, that's the one that we're probably going to spend a lot more time paying attention to in

2012. >> talk a little bit, ian, about iran, the lead story in the "new york times" about their saber rattling, cutting off the straits and limiting oil shipments. a big chunk of the world's oil comes out there. how seriously should we take that as a threat? you're used to reading these kind of tea leaves. what does it mean? >> well, they do roughly once a year, they threaten to shut down. some senior official in iran threatens to shut down the straits of hormuz and oil prices goç up and predictably back do again but this is coming from the top, top leadership in iran and what it shows is the sanctions coming down the pike in iran are starting to bite and energy sanctions, oil sanctions from europe are actually a possibility now and there's a reason for that. three countries in europe that get oil directly from iraq. one is spain, now has a new conservative government more opposed to iran. a second is greece, now has a new technocratic government,more opposed to iran and a third sitly, now with a new technocratic government, now

opposed to iran so in the last three months, three european countries have had elections or have changed their leadership, and all of them, the critical ones for iran to get support aren't anymore. the iranians are concerned and her trying to say, look, don't push us too hard because here's what they do. if they cut oil off in the straits of hormuz it's economic suicide for these folks but nonetheless, the sanctions are starting to bite, and from an american perspective, certainly an american perspective that's very concerned about the prospects of milt strikes from israel, that's good news with regard to this conflict. >> ian bremer, the most fantastic year-end whirlwind tour. a lot of serious stuff to watch out for. be safe in nrls and we'll talk to you in the new year. thanks as always to our mega panel with my apologies for getting into the abusive spirit in the earlier segment, jonathan, imogen and rob, happy holidays to you guys.

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to dive bomb from the sky. well, it turns out it was bad sushi, sort of. scientists now believe the birds were poiseoned by the sea life the birds were eating. researchers discovered toxin-making algae present in nearly 80% of the plankton that local squid and anchovies ate that summer, so follow me here. they ate the plankton, birds ate them and went mad because of a brain-damaging acid and famous director made movie about crazy birds, got it? if scientists can explain why the birds attacked, maybe they can get to work on another movie animal history, how a family of great white sharks can terrorize the same family over the span of four movies. i understand the original "jaw" but how did the shark know that the family went to bahamas in "jaws, the revenge." some mysteries may flummox even our best minds. next up, how about this as an

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>> economic interactions between the u.s. and china are a little bit like two teenagers having their first sexual experience or something. it's supposed to benefit both parties. >> and the joke's just keep coming from our next guest. he calls himself the world's first and only stand-up economist, and he just wrapped up a comedy tour through china where in many cases the joke was

on them. early in the show we talked about serious economic issues for 2012. now here with a seriously fun i take on what's to come, phd, day job an environmental economist at the university of washington. he's the coauthor of "the cartoon introduction to economics, volume two, macro economics." welcome. >> thank you very much. >> well, what's that t-shirt you're wearing? it looks like the coca-cola logo with capitalism written on it. is that -- that's the message you brought to china in. >> this t-shirt was actually made in china, out of cotton and irony. >> very good. tell us more about your -- your tour in china. were you doing english language audiences? were you doing to chinese audiences, and were they sharing in the laughs? >> i was -- i did some performances for english language audiences, but a lot of

folks in china speak english well enough to appreciate some jokes, and i was working on climate change economics actually so i had a serious side and a funny bit as well. >> how did you get into this as well? what led you to become the world's first stand-up economist? >> it was -- i was in graduate i wrote a pair difficult an economics textbook and one thing led to another, and i kind of got bitten by the bug of stand-up comedy and started to go down to open mike nights and it turned out people wanted economics jokes so that's what my little niche is. >> i remember, i saw in looking over some of your stuff which is fabulous you have one joke about the difference between micro economists and macro economists. tell folks about that. >> microeconomists are wrong about specific thing and macro economists are wrong about things in general. >> i love that. >> and is there other stuff from your china material that folks ought to be aware of because it help shed light on the actual

relationships between our country and the trajectories between the communist state-run/capitalism and america's? >> yeah. i mean, china is a very interesting place. sort of nominally communist, but there's a porsche dealership right near mao zedong's mausoleum and the woman at the porsche dealership said capitalism and communism, that both of them are good and everybody in china knows that china owes $1 trillion in u.s. treasury debt, but they don't necessarily know what it means so i had one fellow who told me america was a loan shark, and i explained that america is not a loan shark. america is like a borrowing walrus, just like floating in a sea of our own treasury debt and he said don't talk to us about the treasury debt. here in china we're pissed off that you sold us those treasury bond. we're interesting because here in america we're pissed off that you bought them. >> i was just over thereç myse. not a stand-up economist, but

there's one communism and capitalism joke that i know that used to be told about the old russia. you know, what's the difference between communism and capitalism? in communism man -- in capitalism man exploits man and in communism it's the other way around. i -- i always appreciated that. tell us. i was looking at your late book, an you've got some interesting stuff about nobel prizes and the fact that they zigzag in the way the swedish nobel committee ends up rewarding what seems like diametrically opposed views of the economy. tell folks about that. >> i don't know if i would say they are diametrically opposed but certainly folks who don't necessarily agree with each other. maybe in part because what they won the nobel prize for is not necessarily connected, you know, to what they are talking about on cable tv. paul krugman won for his work on international trade, not for his ranting in the "new york times," and the same thing is rue for next on the right side of the political spectrum who think that -- think the stimulus is no good but they won the nobel

prize for, you know, for relatively esoteric they'ry in terms of rational expectations or other things that are difficult to -- to put into day-to-day terms. >> now, what's your -- you've got a serious side to you obviously because you are a bona fide phd, card carrying economist. i know you've got concerns about the way economics is actually taught and the things that economic students take away from the classroom, whether they are econ majors or non-majors trying to get exposures. what do you think is wrong with the way we're teaching the subject these days? >> a lot of economics is the invisible hand and the idea that individual self-interest canç promote the common good and that's not the whole story and if students only take out that component of it then maybe they will be less inclined to contribute to things as we think of public goods or contribute to the common good, and that was actually the subject of a payne paper that i -- an academic paper i worked a within my colleague alana rose where we

looked at student contributions to a group that promoted students causes, and we found that students who took economics classes were more likely to free ride in that situation than students who hadn't taken economics classes. >> and so in terms of the future of how this stuff gets taught -- do your students think you're hysterical? are you a riot in the classroom? >> i do my best, but i'm funny for an hour but not funny for a semester. >> look, an hour, a little comic relief in economics is probably better than a lot of folks can hope for. you know, one beef that i've always had with the economics profession, and i was an undergrad major, you know, 100 years ago so dangerous enough to know a little economics, but the idea is economics is a science is something that many economists that i respect talk about, when they talk about the profession. my view is always that there's so much that fits more in the way it used to be called political economy because you just can't think about economics as a hard science in the same

way. where are you on that? >> you sound like my father. i -- i mean, there's -- there's truth on both sides. there's certainly mod that's we can create where we say, look, here's a rational actor trying to maximize profit or whatever, and then we can see how they work in the model, but then the difficult challenges whenç youo out into the real world and see how people actually behafrks people are driven by a lot more than what we can put into our models so that's where the art of it comes in. i think that both of those perspectives have value. it's just a matter of how do you remember connect them up with each other. >> and yet one of the things that shocked me coming out of the financial crisis and the whole huge, you know, epic downturn that the country has been through is that the profession of economics hasn't been more chastened because you didn't hear anyone, and i'm not singling you out obviously because it's not your main area that -- that you write and research on, but no one was talking about inadequate bank capital a couple years ago. no one was talking about the

systemic risk built up through all the derivatives and connections. shouldn't economics sort of have its head between its tails and what's the agenda for renewal, besides your own comedy? >> wow, you know, i think there were probably some folks who were talking about that and they were just drowned out in sort of the -- in the general brouhaha of the moment, so -- and in terms of moving forward, one of the most interesting things that i see, and like you said this is in the my particular focus area in economics -- >> i'm asking you to stand in for the soul-searching we need from the economics profession. >> i'm a comedian, not a magician, but i -- i think the interesting thing that i see is just that it's not at all clear to me that the events of the last couple of years have really changed minds in the economics world. it just seems like the economics world may be like the political world is just becoming more polarized. >> and why is that? just about -- we're nearing the end of our time, but does that

mean that economistsç of all people you would think would be sort of the rational man model would be new evidence emerges, maybe the way we thought about this was wrong and even alan greenspan said i thought self-of banks would make sure they took greater care in their risk management. does that mean the behavior in economists of not waking up to predict this crisis disproves the rational man theory at heart of economics? ten seconds? >> you've done it. now you're going to win the nobel prize. >> well, the book is fantastic. i really enjoy looking through this. >> thank you. >> this is "the cartoon introduction to economics," the macro economics version. thanks for taking the time today for sharing your wit and your insights. >> my pleasure. >> coming on "hardball," what's got newt so testy? maybe it's those new poll numbers? chris matthews with all the politics of the day, but first our "daily rant." ari melber's idea for a

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now here's ari melber with a rant on how congress just can't get its homework done on time. ari? >> thanks, matt. everyone knows congress has managed to do one good thing before the holiday break. after a last-minute standoff the republican house passed part of president obama's payroll tax

holiday. that's the measure that fattens paychecks for about 160 million americans and acts as a stimulus for domestic spending. so we're all good, right? wrong. this is a good policy,ç but th congress gave it a very bad time line. the agreement only covers two months, and then congress will literally do this all over again. they will have the same legislative fight, the same political debates and while president obama will probably win again, this is just no way to manage the economy. whether you're making a fiscal plan or a family budget, no one starts every eight weeks starting over. it's not limited to recession policy either. remember all this recurring drama about government shutdowns? well, that happens because congress sin capable of agreeing to its most important domestic obligation under the constitution, setting an annual budget. instead, the congress has been setting temporary mini budgets for a few months at a time. you watch the news so you may know these are called continuing resolutions. that's government speak for homework extensions. take a look at this.

here's a chart i made based on data from the library of congress. as can you see, congress used these temporary bills more and more frequently and especially during periods of divided government, but when you get up to five or six of these a year the annual budgets already shrunk down to basically a bunch of two-month stop gap measures that. provides needless uncertainty for american government and all the businesses in this country. it provides endless sequels to the government shutdown drama which i think annoys just about everyone who doesn't work in the media. it seriously complicates our accounting. congress never even enacted an actual budget for the iraq war. instead it shrouded the ongoing costs in the temporary continuing resolutions, and it warps the entire legislative process because today every miniature standoff is treated as a potential shutdown event, and when congress has not completed this year's budget it's hard to turn to anyç other priorities which is another excuse for inaction. in the end though, this is not a complicated problem. we don't need a blue ribbon commission or a bunch of new ideas here. the solution is for congress to

fulfill its constitutional obligations on time, and that only demands discipline or some sense of shame. i'm not holding my breath. matt? >> ari, it's hard to argue with that. you know, i look at this and i think people around the world look at the way we're governing ourselves on the two-month fiascos, the way we have debt ceiling standoffs that look like there's always some kind of pseudocrisis, and yet my fear is this election won't settle anything and we're set up for what could be four more years of this because we're still going to be in divided government. how do you see that? >> i agree. i think bad habits are hard to break, but what usually happens you is get worse. like if you're on a diet and you start snacking and snack more and more, i think this congress has gotten used to these continuing resolutions as the default normal way to fund the government, and it doesn't work. people can see it doesn't work. >> and i think we're going have -- in we do end up with obama re-elected, republican congress, the idea that we're going to see what could be a series of, you know, everyone is