Greatest theory in economics proven or disproven?

Last week I was outside my office and I saw a $5 bill on the ground. Famously, economists say you never see a $5 bill on the ground because someone would pick it up. But instead of picking it up, I stood around watching to see if anyone else would.

A bunch of people walked by not noticing it. Then one guy saw it, saw me, and asked if it was mine. I said no it wasn’t, I was just curious what would happen. He laughed and made a joke about economists.

Then a second guy came by, picked it up, and said I’d dropped five dollars. I said no, actually it was there before me. He looked around, noticed a homeless guy across the street, said “I think he needs it more than me,” walked over and gave it to him.

That is Matt Yglesias.

Ezra Klein says this disproves the hypothesis. I draw the opposite conclusion.

Helps to remember that, in the original joke, the bill is on the ground. The economist simply refuses to believe it is there.

3 thoughts on “Greatest theory in economics proven or disproven?

  1. I thought the point of the joke is that Friedman was kind of blinkered. And FSM knows, the current crisis has proven that to be utterly true.

  2. Nothing makes me happier than coming across Flying Spaghetti Monster references where least expected…

  3. The result of your eperiment is interesting; it shows that our economic assumptions are sometimes false. But I want to ask with regard to the street in which you looked to the people wheather the people were too rich so that the transactions costs were too high.