Wednesday, May 30, 2012

The Ceteris Paribus Fairy

The ceteris paribus fairy explained


This is how I think about the concept of ceteris paribus in economic thought.  It’s a nice way to make things work out swimmingly, but reality often paints a different picture.  Fairies are a convenient mascot for something like this.


This is the Ceteris Paribus fairy.  His name is Latin for "all other things held constant."


Sometimes the Latin translation varies depending on the source, but the meaning is the same.


How to pronounce "Ceteris Paribus"


The first econ professor I ever had referred to ceteris paribus as “KET-err-iss”, and I can’t seem to quit pronouncing it like that, even though it’s not the correct Latin pronunciation.


Ceteris Paribus Fairy's power: keeping all other things constant!

 It’s not bippity boppity boo or anything that amazing, but still.


Ceteris paribus fairy is not the same as the tooth fairy, but oh well.


Ceteris Paribus Fairy doesn’t care about sexiness.  Might he need a shave and a gym membership?  Perhaps.  But who are we to judge?


No matter what the situation, he holds all other variables constant.
Again, he’s not turning teeth into money or anything that amazing.  
But it’s still an important power to wield, at least in economics.


Hootie is a good dog when he goes on walks, ceteris paribus.

Really, he is.


Hootie is a good dog, as long as everything else is kept constant.


Without the magical presence of the Ceteris Paribus Fairy, Hootie is not a good dog when he goes on walks.  
In fact, most of the time, he is a complete spaz on walks.  


Hootie being a spaz on his walk


That's because without the Ceteris Paribus Fairy around to hold all other variables constant, Hootie (the well-meaning dog that he is) is easily distracted.  And my chances of being dragged along as he chases a squirrel up a tree are increased.  By a lot.  



In essence, the Ceteris Paribus Fairy allows us to make predictions with confidence about Hootie’s behavior during a walk, regardless of the environment or circumstances. 


"What gives?" you might say.  Why even bother with the Ceteris Paribus Fairy when he never seems to be around in real life?  


Well, the answer is because he's an essential part of basic economic theory.  And if you, a hapless student of economics, refuse to believe in the existence of the Ceteris Paribus Fairy, you'll doubtlessly end up thinking too much about what else could happen in the situation at hand.  It's a flaw most smart, logically-thinking people fall into.  On economics exams, it often results in wrong answers and bad exam grades.  


So go ahead.  Take advantage of the Ceteris Paribus Fairy.  In fact, he wants you to.  Really.  And your grades might just thank you for it.  








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2 comments:

  1. Quick note on pronunciation: Both pronunciations are correct. "Ket-" is classical latin. "Set-" is church latin in a part of the world influenced by germanic/slavic languages. "Chet" is church latin in an a part of the world heavily influenced by Italian.

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  2. ecclestical latin (church): tshe
    many other languages like german: tse
    real reconstructed classical latin: ke...
    your K-ayterees Pahreeboos is correct :D

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