In the first episode of Econception, we look at one of the top issues facing the US economy today: the national debt. It’s big, yes, but why is that a problem? I explain the reason why, with help from a 1989 paper by economist Herbert Stein. Stein is famous for Stein’s law: If something cannot go on forever, it will stop. The debt cannot increase forever, so we don’t have to worry about it doing that. The real problem with the debt, as Stein explained, is that it represents a misallocation of resources in the economy. Politicians allocated $6 trillion of the $27 trillion national income last year in the federal budget. Did they do it wisely? Did they consider the effects that allocation would have on private investment? The $2 trillion deficit last year and the even larger forecasted deficits to come demonstrate that the basic questions of government budgeting are not being answered or even attempted in any serious way by the only people with the power to make better decisions.

Then we’ll take a look at a few issues in the news. Are two-thirds of Americans really living “paycheck to paycheck”? Maybe, but that term doesn’t mean a whole lot and doesn’t necessarily signal distress. A look at data on median income, median wealth, and the median amount of money people have in checking accounts provides a much clearer, and less scary, picture. And what about the proposed merger between JetBlue and Spirit Airlines that the Department of Justice argued should be scrapped? Bigger companies aren’t necessarily worse for consumers, and the combined airlines could present a potent challenger to the four largest airlines currently operating most of the domestic market.

Listen to the episode to hear more about those topics, and to learn about one of my favorite economics papers at the end. Remember the economy is complicated and nobody has all the answers, but markets work. Subscribe and share on your favorite podcast service.