Johnny Harris, one of YouTube’s most popular creators has recently started explaining macroeconomics because:
there’s so many topics here that are kind of gate kept by economists who like to make them really complicated. They are not that complicated. Like we can all understand what this stuff is.
and Johnny can explain it to all of us in simple terms because
I spent 4 years studying economics in university for this very moment, so let’s go>
So, Johnny Harris, with his degree in international relations and considerable experience in making popular explainer videos ranging from why McDonald’s ice cream machines are always broken to flat earth theory, is now telling us that he can explain macroeconomics better than economics professors.
Now, that is a bold claim.
But, actually, even though I am an ex-university lecturer in economics, I agree with Johnny that macroeconomics as a subject is too hard to get into mainly due to its heavy emphasis on mathematical modelling and statistics. So, I would actually love to see Johnny succeed and simplify these concepts to make them more accessible.
However, during my years of teaching economics, there has always been one thing that really pissed me off, and that was people ************oversimplifying economics. That is, people pretending that something is simple when it’s actually complicated. Giving you a solution, that is really easy to understand, but also horribly wrong.
And, in economics that is especially dangerous because misunderstanding concepts like inflation, recessions, and unemployment could lead to decisions that actually cause inflation, recessions, and higher unemployment, ruining the livelihoods of millions of people.
Therefore, I have started a special series on this channel that is dedicated to calling out big YouTube channels when they oversimplified economics. And now, after reviewing videos from giants like Economics Explained and Ray Dalio, it is Johnny’s turn.
Are his 4 videos about macroeconomic concepts such as, inflation, recessions, unemployment , and banking actually solid economics, explained in a more approachable way? Or is he spreading misinformation and oversimplifications packaged with flashy graphics, animations, and montages.
In other words, can you trust Johnny Harris, on economics?
To answer that question, I am going to be
1 Grading all the Johnny Harris economics videos
and, because I think Johnny’s goal of making macroeconomics more accessible is noble, I’ll then go over each video in some more detail with suggestions about how they can be fixed, if necessary.
Okay, to stay as objective as possible, I’ll do the grading in the same way as I did student essays back in my lecturing days, using a grading rubric. A grading rubric is basically a set of criteria, combined with a performance metric, that helps teachers to stay objective and helps students to better understand why they got a certain grade.
In this case, I have formulated 5 criteria.
Because Johnny claims to be explaining high-level economics in simple terms, my primary criterion is whether or not the main message of the video is roughly in line with economic science. And with that I mean how it compares to what you will find in an economic textbook or, possibly even the latest research. And, because there are quite a few of his viewers that compare his videos to university courses, or even some teachers that said they were going to use these videos in the classes they taught, I am going to give this criterion a heavy weight of 50%.
Second, because so many people care about economics to understand the world around them, Johnny often uses real life examples such as the SVB banking crisis, and Covid stimulus measures to make his lectures come to life. But, does he cover and apply economic theory to current events correctly? That is my second criterion, and given that it is probably why many of you watch these videos, I’ve given this criterion a pretty high weight of 20%, while I give the upcoming three other criteria a weight of 10% each.
The third criterion is whether or not Johnny’s story is consistent, both within the video and in relation to his other videos. So, for example, if Johnny is telling you in one video that the U.S. Federal reserve is an all-powerful puppet master, and in the next, that it basically cannot control the economy because it’s based on people’s feelings, then that would be inconsistent storytelling.
The fourth criterion is the use of credible sources. Now, I’m super happy that Johnny started including a list of sources under his videos after he got criticized by Jochem from the Present Past for not doing so. But, just listing sources isn’t good enough. To get a good score in this category, Johnny needs to back up his most important statements with trustworthy sources like economic textbooks or research. More importantly, he needs to correctly represent these sources.
Okay, finally, the fifth criterion will be easy for a YouTube legend like Johnny because that is engagement. And, given that the YouTube algorithm has spread these videos far and wide, people are raving about them in the comments, and that the like to dislike ratio on these videos is incredibly positive, I think I can safely award all videos on this criterion a 10/10 score.
So, even if Johnny would be spreading misinformation, at least people had a good time consuming it.
Anyway, with our criteria introduced, we can just get to answering the main question of this video right away. Can you trust Johnny Harris on economics?
Well…. it’s complicated. But, let me put it like this. The quality of research here isn’t exactly great.
His inflation video is the worst, scoring a 4.8 out of 10, mainly because what he teaches about inflation purely being a consequence of too much money is a big oversimplification compared to the various reasons that modern textbooks cover.
Similarly, his recessions video only score a 5.4 out of 10 because Johnny takes a big shortcut on the main message which is that recessions are caused by
loads and loads of people making a bunch of micro-decisions on whether or not to spend their money.
And this is, if you think about it, both really vague and actually dangerous. After all, this gives the false impression that recessions are caused by people getting randomly scared, and that you can’t really do much about it, which is not at all what you would learn in an economics class.
Then, luckily it gets quite a bit better with the unemployment video scoring a 7.2. While this video is not perfect, it does represent Johnny’s promise for this series: solid economics but told in Johnny Harris’s amazing storytelling style.
Finally, the banking video, while it annoyed me personally, because it used an outdated banking theory that I debunked here on YouTube, and dips its toes into conspiracy theories by saying that
your bank account is kind off a lie
, using the rubric meant that I still ended up giving this video a 6.5 out of 10. The reason was that despite many mistakes, the main message that this system is fragile and yet essential for the modern economy is actually pretty much in line with what you would read in a textbook.
So, yeah, here they are on screen, these are all the grades for Johnny’s videos. As you can see, they leave much to be desired.
So, does that mean that after watching these videos, you got the wrong idea about inflation, recessions, unemployment, and banks? Well, yes, to certain extend you did. But, no worries, next up, I’ll go into exactly where these videos deviate from economic science, so that you can get the right take-away after all.
2 Inflation Video
gets it so wrong and how it can be improved.
This video scores just 4.8 out of 10 as a consequence of a 4/10 score for the main message of the video, which is very much an oversimplification of what you would hear in an economics class.
You see, while Johnny starts with the very old-school definition of inflation that
inflation is when there is more money in economy than stuff to spend it on
or in more words,
When there’s extra money floating around and people want to spend it faster than businesses can make stuff, then all of the businesses in all of the industries raise their prices and that is inflation.
However, economic textbooks as well as basically all economists use the modern, simpler definition which states that inflation is
A sustained increase in the general price level, often measured by an index of consumer prices
then, when talking about what causes prices to go up, Johnny argues that there could be more money floating around because either the government stimulates the economy or the Federal reserve lowers interest rates to increase bank lending.
Now, both of these are legitimate potential causes of inflation, and maybe even the only two a really old-school economist like Milton Friedman would tell you about So, Johnny isn’t completely wrong. He is just not telling you the whole story.
You see, research has since shown us that the link between money floating around and inflation doesn’t hold up so well historically. And therefore, many other explanations for inflation have been researched by economists.
And that’s why the CORE-UK textbook that I used for this video, lists at least five causes for inflation. Sure, an increase by general prices can be caused by excessive demand, created by stimulus. But, it can also be caused by big supply disruptions such as the ones we saw during covid. A third explanation could be big changes in the power of firms versus their employees. Fourthly, as Britain has seen after Brexit, a big drop in the exchange rate can also cause inflation as it makes import more expensive. And finally, many economists argue that inflation can even become endemic in a society thanks to self-fulfilling expectations, in which the pure expectation that prices will go up by a certain percentage each year can actually motivate firms to raise prices by that amount at the start of the year.
Next, Johnny talks about who controls inflation. And here, he sets the Federal reserve up as some kind of puppet master which is totally in control of inflation, as it can raise and lower interest rates to manipulate our spending. However, then later he seems unsure whether the Federal reserve can get inflation under control when he says about the current inflation that we’ll need to
See if they can steer the ship back on course. And let’s hope it works.
and then he even seems to say that in Venezuela, which had to deal with extremely high inflation,
Johnny: the fed the puppet master couldn’t figure out how to get it back in control.
and that seems really strange. After all, since he just told us inflation is pretty simple and that all the Fed would have to do is raise interest rates, the implication is that the Venezuelans are kind off stupid. And, this is precisely why I’m pretty hard on Johnny for telling these oversimplifications. Because if you oversimplify, you cannot hope to understand what is shaping these crisis and therefore you can not hope to do anything about them.
So, If we follow the textbook economics story, we will also find that the Federal reserve tries to influence inflation by raising and lowering interest rates. However, given that we know that inflation can also be caused by stuff that is not under the control of the Fed, it becomes clear that the Fed is far from a puppet master. And, then when we read research about how in Venezuela, corruption devastated its industrial sector, while the government kept spending money to buy votes, it becomes clear that the central bank there couldn’t easily fix its extreme inflation problem on its own.
And besides being more accurate, this would make Johnny’s inflation story much more consistent, since multiple inflation causes means the Fed is no puppet master and therefore that indeed we’ll need to
See if they can steer the ship back on course. And let’s hope it works.
Yes, let’s hope so, and that they don’t cause a recession, which brings us to Johnny’s
3 Recession video
in which he correctly explains that recessions are basically when the GDP line goes down, rather than up, and that they are often caused by big events outside of our immediate control such as wars, or interest rate hikes.
So, then, why am I again scoring the main message of this video with a meagre 4 out of 10?
Well, that is because after a good introduction, the main message of the video starts to deviate in a big way from what you would learn in an economics textbook.
You see, to explain why a big outside event causes a recession, Johnny highlights a vicious cycle in which people are worried by the news which leads to less spending, less production, and that leads to people losing their jobs, which again makes people more worried.
and so, Johnny’s take-away is that
for a million tiny little reasons, things like policy and just general feelings and a bunch of people’s guts this line will go down.
The problem, however, is that is completely different from what I read in the textbook which tells us that actually regular people tend not to cut back their spending so much in response to big events like a war or something like that because they tend to have some savings for a rainy day.
The textbook then backs this theory up with these graphs that show us that while consumer spending is typically more stable than GDP, investment spending by business is far more unstable. And, so the textbook argues that it is actually investors that are prone to over-optimism, for example about new technologies, which can lead to overinvestment, in which firms all invest at the same time. It also states that investors can get caught up in irrational manias, in which they believe asset prices can only go up. To make matters worse, economists who have looked at hundreds of years of crises data have shown that if such investment booms are fueled by debt, they are especially likely to lead to crises.
And, so, the textbook also presents us with a vicious cycle. But, it looks quite different than the one Johnny showed us, showing
reduced expectations for future demand, will prompt firms to cut back investment spending, which reduces hiring, which means people spend less, which makes business even more pessimistic about the future.
So, it’s not just people randomly freaking out because of scary news stories. If that was true, we’d have been in a recession permanently over the last decades.
<9/11 clip (growth 1%), Iraq invasion (+2.8%), London Bombings (+3.5%), Syria civil war (+1.5%), Crimea invasion (+2.3%)>
But, okay, a vicious cycle amplifies economic downturns, that basic message is the same. However, Johnny then tells us that
by looking at this line what we can is that a recession is natural and normal is a part of our modern economic system. It will likely come and then go. People will lose jobs. Businesses will close. And at some point for a million tiny little reasons, things like policy and just general feelings and a bunch of people’s guts. This graph will stop going down and it will start going up again.
and that, I think, is a really dangerous oversimplification, because, while the line might have always gone back up for the United States, there are plenty of countries which never recovered from a big recession, or countries whose economies grew significantly slower after one, leading to sky high unemployment and human suffering.
And so, to make the video more in line with textbooks, Johnny could, after defining GDP and discussing external shocks, highlight the role of volatile investments and then talk about how damaging recessions are and what we can do to potentially prevent them or make them hurt less.
Luckily, Johnny’s third video, about
3 Unemployment
is a lot better, and I have therefore graded it with a 7.2 out of 10 score.
Similar to the recessions video, Johnny’s off to a great start as he starts by simplifying the textbook definitions of unemployment and the economy. In fact, this is the first time Johnny lists a textbook as a source, as he turns the following definition from a textbook written by famous economics professor David Colander
the study of how human beings coordinate their wants and desires, given the decision-making mechanisms, social customs, and political realities of the society’,
into economics being the study of
a set of rules. Relationships and patterns that help huge groups of people that don’t know each other somehow peacefully coordinate with one another
So, that is great! This is what I expected from these videos. And it gets even better when Johnny then, like the textbook, explains how the market for bread works using supply and demand and how the labour market is similar, yet different because
humans aren’t baguettes when humans are an unused resource. In an economy that means suffering and misery and anxiety and worry.
and yeah, I think that is a really important point to make, given that economists sometimes have a tendency to focus too much on the numbers, and not on the suffering that they represent.
Next, Johnny explains that unemployment is a market failure, and that it can be split up into two types of unemployment, what he calls natural unemployment, that is always there, and what he calls cyclical unemployment, which is caused by recessions.
And, sure, a textbook explanation of unemployment goes deeper. But, for these videos, I don’t think anyone expects a perfect explanation, as long as the main message is roughly in line with economic science, and for this video, that is largely the case.
The only reason that the main message doesn’t score higher is that at the end Johnny says that natural unemployment is inevitable part of rich capitalist economies when he says:
So don’t think about it too much. It’s a sort of Faustian bargain that we’ve made and for most of us it’s worth it. Incredible opportunity for prosperity in exchange for surrendering some control of our situation.
and that is an oversimplification. Yes, capitalist economies like the USA and Japan have had fairly manageable natural unemployment rates. But, by saying hey that’s capitalism, don’t think about it too much, you are I think doing a real disservice to people in capitalist economies with sky high natural unemployment rates like South Arica and Spain, especially since
humans aren’t baguettes when humans are an unused resource. In an economy that means suffering and misery and anxiety and worry.
So, to make this video safe for class, I’d recommend a teacher ends the video with a remark that while the reason for big differences in natural unemployment between capitalist economies are complex, and so that this could be a potentially interesting research subject for the students.
And yeah, that is only a minor adjustment. Sadly, bigger adjustments will be needed for Johnny’s final video which is about:
4 Why banks fail
and weirdly enough, while I really disliked this video at first, when I used my grading rubric to review it, it didn’t do so poorly, scoring a 6.5 out of 10.
So, then, why did I really dislike this video when I first saw it? Well, to start, because, when explaining what banks do Johnny throws in this strange statement that
your bank account is kind off a lie
because…
We think of a bank is like a place where we take our money and store it like we give our money to the bank people and they go put it in the giant vault and it is safe until we need it.
But, apparently to Johnny’s surprise, banks don’t do that, instead they
can go out and invest with and make money on using my money, they can go invest it. This often means giving out loans to people and collecting interest.
But, even if that is surprising to some, I think it is important to emphasize that banks themselves don’t lie about this on their websites. I mean even the dictionary definition of banking literally includes that
In its role as a financial intermediary, a bank accepts deposits and makes loans.
Even worse, in his first video Johnny told us that central banks are not like
a normal bank that stores your money and then lends it out.
and a little bit further in his own video Johnny says that banks
actually give me a little bit of that interest that they’ve made to say like, Hey, thanks for letting me use your $9,000.
So, Johnny being surprised that banks are not vaults is not just strange, it’s inconsistent within this video and in relation to his previous videos.
It’s also quite different from the textbooks that Johnny himself uses as sources which are quite clear about the business model of banks: they issue deposits and extend loans. And, they make money because the interest rate on loans is higher than those on deposits.
So perhaps, Johnny wasn’t actually surprised by the fact that banks lend out money. But, more that they can create money in the progress?
To explain how banks can create money, Johnny uses Money Multiplier Theory from an old textbook. However, and this is the second reason why this video annoyed me at first, this money multiplier theory has already been debunked by central banks like the Bank of England, Deutsche Bundesbank and Federal Reserve years ago and also … my first ever video on YouTube is called How Commercial Banks Really Create Money.
But, yeah, this is precisely why I used a grading rubric. It acts as a reminder to teachers not to let bruised egos impact the grading. After all, even though this theory has been debunked, it’s hard to blame Johnny too much, since he did actually get it from a somewhat recent textbook.
That being said, most modern textbooks these days, as well as the videos on my channel explain private bank money creation using simple balance sheets.
However, importantly, for the main message, the textbook and Johnny end up with the same conclusions. That is, if everyone wants to withdraw their deposits at the same time, a bank has a big problem. And because banks create money that is the lifeblood of the economy, governments then often come in to save them. However, as Johnny puts it:
But in the long run, it could just mean banks will feel emboldened to continue with bigger and bigger bets, knowing that the government will bail them out, knowing that there’s not real consequences, knowing that they’ll get their bonuses.
And that is the same conclusion as many economists reach when they warn for this effect, which they call moral hazard.
And with that, I think we can wrap up this video on a positive note. Despite Johnny starting with some outdated theories, the second part of the video once again delivers on Johnny’s noble intention: to simplify economic theory.
That being said, my
Conclusion
is sadly that I don’t think Johnny’s videos have lived up to his promise of simplifying economics because they too often oversimplify economics. This isn’t such a big problem for his unemployment and banking videos. But, making inflation seem more simple than it really is, is potentially dangerous. Similarly, making recessions out to be something that is just caused by feelings and that the line will always go back up purely based on the American experience, is a very dangerous oversimplification because it potentially stops people from studying tragic case studies like that of Greece.
But hey, here’s the good news, when reviewing these videos, I did really see a lot of potential and I want to encourage Johnny to keep making them, given that he uses a more recent textbook and avoids further oversimplifications. What’s more, not being able to explain the biggest questions in macroeconomics, doesn’t mean that Johnny’s simpler, general interest videos are bad. You see, while I was quite critical of these 4 videos, I really didn’t see any evidence that Johnny was purposefully trying to fool anyone. It just seems like he bit off a bit more than he could chew here.
Although, this is pure speculation on my part, because while I did reach out for comment to Johnny’s team well before publishing this video, I didn’t receive a response. Hopefully, he will still do so in the comments of this video.
But, yeah, what do you think, have I been unfair to Johnny? Or have I been to generous? Let me know in the comments, and if you think peer-reviews like this are essential for the YouTube educational ecosystem, consider supporting my channel on Patreon or by becoming a member.