Tuesday, 6 July 2010

Khan Academy: Teaching falsehoods to 200 000 kids a month?

I read recently about the Khan Academy

This academy consist of a person recording hundreds of youtube videos teaching different subjects, going from mathematics, chemistry, biology, history, and economics.

The teachings are short, 10 minute videos, targeted at explaining to the student and dilettante many scientific subjects.

Allegedly, up to 200 000 students are visiting the site each month.

I didn’t watch the other themes, and I assume they are fine, but the ones about economics are terribly bad.

It is doubtful if Mr. Khan even had a micro-economics class (since you don’t hear him talk about supply and demand basics), but it seems typical of the learned intellectual who seem to think that because he knows some scientific subject, he can just “think” about economics in his head, without learning systematically about the subject, and whatever seem to be “common sense” to him must be true.

For instance, for Mr. Khan, what causes inflation is (typical scapegoats) businessmen raising their prices. Why do businessmen raise their prices, according to Mr. Khan?  Simply because they can, when there’s high utilization of the factors of productions (e.g, a factory producing at half capacity).

The fact that the US dollar lost 96% of its purchasing power over the last century is apparently simply due to greedy businessmen. 

Not surprisingly, Mr Khan has no notion of money supply (money is simply a “unit”). 

Mr. Khan analysis is one that statically look a a single company, or a set of a handful of companies, in a given year, and speculates (badly) on their hypothetical behavior without having any clue about what forces will lead to prices change in equilibrium.

Mr. Khan needs to read an introductory book (as this one, for example) about money, and learn that it is not businessmen that cause the general price level to rise, but the Federal Reserve that increase the money supply, year after year, and destroy the purchasing power of the monetary unit.

In fact, the truth is the opposite – businessmen, by their capital investment, cause an increase in productivity, which leads to higher production, and lower prices in general.

What does Mr. Khan shows as evidence of his theory?  The following graph:


(sorry for the bad resolution, taken from his video)

The “capacity utilization” (I’m not sure what metric he uses) is in orange, while the price index is in white;.

Mr Khan pretends that the former (the capacity utilization) is cause of the later (the price index).  So when one rises (capacity utilization), the other should raise as well (price index).

If there’s any example of confirmation bias, that is one.

At best, that graph shows that there’s no correlation between the two metrics (for some years, they raise in parallel, while other years, one raise while the other falls).

For the entire decade after 1990, prices fall while capacity utilization increases.

Worse, the graph fundamentally contradict Mr. Khan’s arguments, which is that “high capacity utilization” causes prices to rise, and low utilization causes prices to fall.  Indeed, his graph shows the CPI change rate, which is the rate at which prices increase, not the price level itself.

Basically, his graph shows that the price level increase year after year, no matter is the capacity utilization is high or low.  The price level never decrease for all the decades presented (the CPI change  rate never go below 0%).  So it doesn’t explain why prices increase at all, since they increase no matter what is the capacity utilization – and the rate doesn’t even correlate with the capacity utilization.

So in fact, this graph is the very refutation of his own argument.

Then, Mr. Khan even goes on to say that he was worried about hyperinflation because capacity utilization was getting too high at the end of last decade.

Why do Mr. Khan “common sense” fails?  Because he incorrectly extrapolate from his single analysis of an isolated business (which is far from accurate) to the general economy: the fallacy of composition.

Mr. Khan does not explain why would capacity utilization fluctuate at large in the economy, how it could become “uncontrollably high” as to generate hyperinflation, nor why isn’t high capacity utilization naturally counterbalanced by increase in investment, rising of the interest rate, and decrease in consumption. 

Nor, why would cycles of high and low “capacity utilization” would cause a sustained increase in prices?  Why wouldn’t the prices go high and low, and overall remain stable over time?

Why would not the general increase in productivity over the years, and general increase in production cause a general fall in prices instead (more supply –> lower prices)? 

Just basic econ 101 questions that Mr. Khan fails even to consider.

Maybe Mr. Khan should look at this graph instead, and he will maybe start to understand the main reason why prices increase, year after year:



Unfortunately, this is not all of Mr Khan’s pitfalls.

In Mr. Khan example, businessmen simply go purchasing luxury cars at the first sight of profit.  The only thing they control is the asking prices of their goods, and ask high as they can mange to get.  They are not investors, but behaves like spendthrift customers.

Mr Khan also shows the typically intellectual anti-business mentality, where in his example, for a company to be successful, they must deceive customers (by putting nicotine in their cupcakes) and gouge them arbitrarily (“increase prices when utilization is high”).

The problem is that, like most intellectuals, Mr. Khan would be a terrible businessman, who would go quickly out of business against better competitor if he was to behave as he portraits businessmen to behave in his examples.

Businessmen are not moron who can only tinker with prices (those who are are not in business for long) to maximize their profit rate.  What they want is maximize their profit, no matter what is the rate they will have (better to have 10% on 2 millions $ than 50% on 50k $), and by forecasting their customers and competitors behaviors, they invest, expand, change, innovate accordingly.

In conclusion, that Mr. Khan is economically illiterate is not a problem, but that he remains in this state of ignorance and go teach students about his ideas is a danger to the progress of knowledge and the general welfare of society.


  1. No matter what you say, what Mr. Khan has created has helped countless people and will continue to, which is probably more than what you will ever accomplish. If you want to criticize him like this, email him and point it out to him in a polite way so that he can at least consider your idea. And finally, your English is very bad. You use all these big words and try to explain things that sound complicated, but your sentences are wrong grammatically and even spelling wise. So if you don't take care of that, doesn't matter what you try to say, you are making yourself look like you are trying to look smart but you are not.

    1. I completely agree. To the person who wrote this article, you should probably learn to speak English and respect a guy who is possibly revolutionizing education in America. Furthermore, why don't you go watch some of the other 3,000+ informative videos of his and realize that he can teach people.

    2. Both of these replies were written by Sal Khan ;)

  2. Hello, thank you for your reply.

    First, you may have guessed than English is not my first language, hence the disclaimer in the "About me" section, so you may excuse my "very bad" English.

    Then, that Mr Khan contributions help children, I'm disputing this claim in regards to the economics lessons he is giving - one is not helping others by teaching falsehoods.

    Regarding the other topics he is teaching, I don't know about them, and I haven't commented on them either.

    Anyhow, I note that you didn't dispute any of my claims regarding Mr Khan teaching falsehoods, but rather focus on criticizing me ("English is very bad", "look smart but you are not"), so I'll consider my claims unchallenged.

  3. Oh, regarding sending him an email, I though of doing this, but since I could not find any 'contact' information anywhere on his web page, I took the time to write this blog instead.

  4. It took me about 1 minute to find contact info for Khan academy. It is on the Khan academy about us page and it is sal@khanacademy.org. Your explanation about inflation, while obviously true, is an oversimplification. If wages increased at the same rate as inflation due to monetary expansion inflation would be cancelled out. On a relative basis not raising wages is the same as raising prices.
    It can also be argued that another cause long term inflation, besides monetary expansion, is interest rates because if a business because if a business borrows $100 and has to repay $110 without the extra $10 directly contributing to productivity they have to raise their prices to recoup the $10 interest. Paradoxically raising interest rates can increase the demand for money with the result being money is worth more (deflation). Raising interest rates creates short term deflation as demand for money increases (deposits) and supply generally goes down (loans). Over the long term though high interest rates will eventually contribute to inflation as production decreases due to less capital being available or due to companies incorporating the cost of non-productive interest rates into their prices. You are obviously right about monetary expansion causing inflation but to think that is the only cause of inflation, while completely ignoring the relationship of wages to prices, is an oversimplification.

  5. Thank you for your comment.

    Regarding your point: "If wages increased at the same rate as inflation due to monetary expansion inflation would be cancelled out. On a relative basis not raising wages is the same as raising prices."

    When economists talk about inflation, they always refer to nominal changes in the general price level, never about real price increase (which would then taking wage increase into account).

    Needless to say, wage increase typically have a tendency to tail behind consumer goods price increases.

    My claim, and it is shared by many others (see Milton Freidman 'Inflation is always and everywhere a monetary phenomenon'), is that ultimate cause of inflation - nominal price increase - is the increase in the quantity of money.

    Regarding your other point, "another cause long term inflation [...] is interest rates": No, your reasoning is fallacious.

    Businesses do not "have to" raise their prices to pay back their loans. They "hope to" be able to pay their loans with their sales receipts - otherwise, they lose money, and eventually go out of business. This process do not cause a general change in the price level.

    The whole point that is missed by Mr Khan is basic price theory: the market clearing process.

    Businessmen do not ultimately control the price of the goods they sell - the consumers determine by their decisions to buy or not to buy, which goods, and at what price, how the produced inventories will be cleared, and at what price.

    To resume, using supply and demand terminology, the general supply of goods and the general supply of money determine, along with the general demand for goods and general demand for money the general price level.

  6. Also, the interest rate has no direct effect on the general price level, since it only changes the relative structure of prices, depending on how remote are capital goods in time from the consumer good their produce.

    I.e. some prices will go up, others will go down.

    That being said, the manipulation of the interest rate by increasing the money supply by the central bank will affect the general price level, which is a whole different story.

    The main limitation with your example is that you take isolated examples without considering the effect on the rest of the economy.

    In your example: One businessman decides to raise his prices above the market clearing price -> part (or all) of his inventory goes unsold -> he then limits his purchase of factors of production (why order as much inventory since his can't sell his current one?) which causes a fall in the price of those factors of productions, and a fall in the cost of other goods (then the price, through competition) depending on those factors.

    It it important to analyse all the effects of a change in the economy, and not only the partial ones, to be able to understand economics.

    I highly recommend the following book to get acquainted with economic reasoning:


    Quoting: "To see the problem as a whole, and not in fragments: that is the goal of economic science"

    1. Well, I think I have to agree with you. Similarly to you, I haven't watched any of his videos except his mathematics videos. If I had half a mind to say anything (which I obviousy do) I'd say that there are gaps and even misunderstandings in his videos. Don't get me wrong, he is very, very intellegant, but I have trouble understanding some concepts and it is really starting to wear me thin, especially with how the excercise system works. I'm just glad to hear it isn't just me.

  7. You are right and the same time so is Khanacademy. And that is why economics is mostly opinion, its a bunch of theories that are proven as much as they are disproved. Sort of like politics.

  8. I understand why a portion of the public share your opinion.

    The truth is that economics is a very politicised discipline, where a lot of people with a political agenda will believe in a theory because it fits their own wishes of how things should be.

    But, this is not unique to economics.

    In evolutionary biology, for instance, you have different groups arguing over the validity of one theory, and creationists also claim that biologists' beliefs are just as much religious and theirs.

    But the fact that a field of knowledge is controversial does not mean that economics can't be a science where it can say something insightful and truthful about the regularity of phenomena in human society.

    Only by studying economics yourself you will be able to understand on which side of the fence the bias stands, and figure out the propaganda from the truth, along with the scope and limits of economics science.

    In resume: You are mistaken in believing that economics science does not exist.

    Study it for yourself, and you will understand better.

  9. Well you do realize he has an MBA from Harvard, Masters in electrical Engineer and computer science from MIT. Which leads to his general view about economics.

    The problem is anyone who studies a real science and then starts studying economics realizes that economics is not a science. It's like setting an equation to human choice. You can not do it(maybe one day we can). Economics tends to remove the human element from all its equations, which is why its both right and wrong. People sometimes go against what the economic rules say is suppose to happen.

    What I am talking about.
    1. You say that prices go up because the devaluing of dollar. You are completely right!
    2. He is saying prices go up cause someone up top wants to make more for greed or whatever. He is completely right!


    You are both right! When you believe that just one side is right you are selling something. You are selling libertarianism. He is selling education :D

    My fancy quote:
    In politics or economics if you decided that your side is correct you are selling something.


  10. The fact that he has studied natural sciences plays against him in giving him the false assurance of being able to come up with 'common sense' conclusions about economics without having systematically studied the field.

    Regarding your comment of "economics is not a science", again, it depends what you are studying. Economics is not a natural science, obviously, but a social science. The methods of the natural sciences (reproducible experiments) is not suitable for the study of economics.

    Regarding your comment about explaining the general increase in prices, you are wrong in believing that someone "up top" increasing "his greed" can cause any increase of the price level.

    Actually, if wealthy people increase their demand for money ("become more greedy"), this will have as effect a reduction of the price level, not an increase: a higher demand for a good increase its price -> higher demand for money increases its purchasing power, hence reduces overall prices.

    The truth is actually the opposite of what you believe.

    Note that the full demonstration of this fact takes more than a paragraph in a comment reply. One has to study economics systematically, which is my point.

    Mr Khan is not selling education, he is simply stating patent falsehoods, because, due to his normal education in natural science, he is overconfident in his ability to understand a science he never studied.

  11. I am significantly more concerned about falsehoods being taught in history classes and uninspiring teachers than I am concerned about the problems you describe (even if they are indeed errors).

    Whether or not you are right isn't the real issues. The question is whether your points are even relevant. It's like arguing over statistical significance when the difference being discussed is so small as to be practically irrelevant.

    If this material were serving to educate economists, then that would be a problem. I certainly hope it isn't.

    The math material is top-notch by the way.

  12. My points are relevant as far as Mr Khan Economics lessons are relevant.

    They repeat a common fallacy held by the ignorant masses that inflation is caused by businessman's greed, and attempt to make up a theoretical explanation for it.

  13. You made the comment that a business will lower the price if they want to make money. This is only true in some markets(not many), and in all markets this is only true in the short term. They might make a large profit initially but in the end their sales will grow stagnant.

    In the long term business make the most economic profit by having someone purchase their product above its "real" cost. They do this by advertisements, celebrity endorsements or they do try to actual make the product better than the competition(or tell you it is). A businesses goal is to have you believe that their product is worth a higher cost. All the top companies do this. It's not greed, it's business. Unless you think greed is making profit then there is no hope.

    Of course prices are going up because businesses want to make more money. How can you even try to argue otherwise? Yes there are other aspects that are causing the prices to go up but in the end it is about businesses making money. You use the word greed to make it sound negative, but this is what companies do.

    **Opinions past this point**
    The public mostly believes prices are going up because of the government. Prices will go up because we expect them to go up so businesses will use it as an "excuse" to raise them. If we in return said No we will not buy your product at that price then it would eventually go back down, but because we expect it to go up so we will buy it and say its all governments fault. This is exactly what is happening with gas prices. I will admit this last bit is my opinion.

    But lowering prices to increase profit only works in the short term.


  14. "Of course prices are going up because businesses want to make more money. How can you even try to argue otherwise? Yes there are other aspects that are causing the prices to go up but in the end it is about businesses making money. You use the word greed to make it sound negative, but this is what companies do."

    Sorry, you are completely wrong. Businesses do not ultimately control the prices at which their product sell. This is why some companies have a profit, while others have losses, and ultimately go bankrupt.

    Computer manufacturers would have loved to see computer prices increase, or even remain stable, but they steadily decreased in price year over year over the last 30 years, along with increasing in quality.

    This is the effect of competition and investment in research and development.

    "The public mostly believes prices are going up because of the government"

    On the contrary, the public believe, as you do, that prices are going up because compannies want to make a profit (or are 'greedy', depending on whether they approve of such action).

    While the fact is the opposite: prices are generally going up because government central banks (all over the world) are increasing the quantity of money, year after year.

    Only very innovative industries (such as the computer industry, where there is the least regulation, and government control, incidentally) manage to increase production faster than the government run the printing press, so to effectively have lower nominal prices.

    For example, the first Apple Macintosh was selling for $2,495 in 1984, equivalent to more than $5,366 adjusted for inflation today, for a computer that is vastly inferior to a typical iPod in terms of computing power.

    Companies don't lower prices with the intention to increase their profit, they lower their prices because they have no choice if they want to remain competitive and keep their customers. Lowering their prices generally reduces their profits, in the long *and* short term.

  15. "Sorry, you are completely wrong. Businesses do not ultimately control the prices at which their product sell. This is why some companies have a profit, while others have losses, and ultimately go bankrupt."

    They do not control them in the sense they can raise them arbitrarily. As I said previously, the way a businesses raises their prices is by taking advantage of economic situations or by advertisements.

    *An example of how a business can raise their price*
    By hiring a celebrity to endorse their product, they are able to sell their product at a higher price because people believe their product is now better. It's amazing how well this works. It also prevents people from competing with them which again is another way they can control prices by making it so expensive and sometimes impossible to compete with them.

    Yes they can't just flip a switch and people buy things at higher prices. They have to be a lot more cunning. And this is why some businesses fail and some succeed because the people in charge have better ideas on how to push the market to where they want.

    So regardless of how they go about doing it, any successful business will increase their prices, but that have to have a plan of attack to pull it off. The market can be pushed, it is not beyond control. Many successful business models have proven this.

    I also disagree with the statement that the general public blame business for our economic peril. It depends on where you live. I live in the south part of america which tends to have more of a libertarian or Republican view. Here people blame the government for everything.

    I know enough about economics to know that we are arguing theories not facts. There are waring theories in the economic field that disagree with this free market attitude that you have. I put libertarianism on the same level as communism. Beautiful ideas that fail when you add the human element.


    Also the computer market is a unique market, because it was and still sort of is a new market, competition is very high. But the computer market has changed. The more successful companies are no longer cutting prices they are finding more "sneaky" ways to keep their prices stable or increase them. Apple has increased their entry level mac mini with the new edition as showing this idea in action. I doubt you will ever see massive decrease in price of apple computers again. Well maybe when steve jobs dies(which I hope he doesn't cause that's just mean to talk about)

  16. Advertisement is fundamentally no different from any other production process.

    Your argument boils down to "by adding services to a product, we can increase its price".

    You are basically saying "Car companies can increase the price of their car by adding a gold plated engine". Well, not necessarily.

    Advertisement has a cost, and there's no guarantee whatsoever that the price paid by customers will cover the advertising cost. In other words, there's no guarantee of profit by using more advertisement. It may or not work, it could very well generate less revenue and cause losses.

    Any competitor can use advertisement too, and there isn't a lack of celebrity to endorse products.

    Point: There's no fundamental reason why advertisement would increase profit more than any other production process.

    Advertisement is a stereotypical scapegoat from socialists such as John Kenneth Galbraith, who see it as mind control tool to brainwash the gullible public.

    If this was true, company would simple use it to condition the public into buying their product, and never experience a loss.

    Fact is, it is possible for anyone to avoid advertisement if they want to. For instance, I do not own a television, so I never see TV ads, but most people don't mind watching advertisement in exchange of having the program they watch subsidised by advertisement companies.

    I encourage you to learn more about economics, and you will realize that many beliefs the public hold as truth as in fact simply myths.

    Regarding your comment that "there are waring theories in the economic field that disagree with this free market attitude that you have":

    That's true, you will always find people that disagree with whatever theory exist.

    For instance, you can find people that dispute the theory of evolution.

    This doesn't mean the theory is false, though.

    Some groups can a powerful interest into disputing a theory's conclusion, whether it may be caused by personal bias, or on religious or national grounds.

    In economics, many people have a religious like belief in a given vision of the world, and rejects theories not because they can demonstrate that they are false, but simply because the theories conclusion clashes with their vision of the world - who is to blame for the world's problems, what is to be done, who are the heroes, who are the villains, etc...

    1. Once you said "socialists" and "mind control" it became clear that this whole blog is about political mudslinging which you're trying to hide behind a smokescreen of economics.

      Anything you say now has become questionable due to your need to tear down any political views that are now your own.

      If you cannot work with others that do not hold the same views as you to build something better, then it doesn't matter how many times you say something. You're still being a naysayer who doesn't want to help anyone improve their lives.

  17. "It is doubtful if Mr. Khan even had a micro-economics class"

    Khan managed a hedge fund before he focused on Khan Academy full time.

  18. A small correction, he wasn't a hedge fund manager, he was a analyst.

    Anyhow, the common man often confuses economics and finance, and believes that because one work in either field, it gives him knowledge of the other.

    This belief is thankfully incorrect. Many successful businessmen held widely diverging opinion about economic science, but were nonetheless able to succeed in their respective fields.

    One can be an expert in finance, or a speculator, but still know little in economics, and vice versa.

  19. I found this blog post in an attempt to find ANY negative critiques of Khan on the internet. I think he's a great guy but to suggest his "academy" could ever do anything but supplement actual education is specious nonsense. People just seem to fall all over themselves in droves complementing the man, but the fact is: A) his videos are twice as long as they need to be because he spends so much time dickering around with his drawing software, and B) almost always a gloss. I used them to help me with a distance calculus class and he rarely went over anything but the easiest kinds of problems. I just watched his video on the nephron (I'm studying for the MCAT) and I essentially just wasted 20 minutes of valuable studying time waiting for him to say anything that wasn't very basic on the subject.

    Khan videos are nice introductions to subjects, and his pleasant demeanor is comforting when you're struggling with a particular topic. But if you really want to learn something, turn off your computer and open your text book.

  20. Marek, agreed with your higher level criticism - I also find the quality in KA videos lacking.

  21. This article is great because it helps demystify and dismantle the Khan Koolaid that everybody seems to be drinking.

    Very few people know anything about education, and don't take responsibility for the extreme danger posed to a child's future if they get POOR education.

    The success of Khan Academy is nothing new, it's pure instant gratification, American-style. "Hey, our kids just have to watch these videos and then they'll be smart! And we don't have to do anything!" Right...

    Videos teaching subjects were available online well before the Khan Academy. It's nothing new. In the end all you get is Khan's annoying nasally voice, as if HE specifically is THE best person to be teaching these subjects. Then you get these horrible bright scribbles contrasting painfully against a dismal black background with some low-res pictures thrown on to the screen.

    At best what you get is a refresher for something you already knew. But to learn something totally from scratch, these videos are ineffective. Again, it's teaching the old-fashioned way: Just SIT there while I, the TEACHER, lecture at you. No interactivity. No adaptability to the unique mind of the student. Nothing.

    And that's apart from the factual errors this article points out.

    Khan Academy is free. Which is all it has going for it. So if you want to go waste your time and not pay any money to do so: ConAcademy.org

    Excuse me. K-H-A-N.

  22. I think it's more of an oversimplification than bias.

    Yes, inflation is caused when businessmen raise nominal prices. Inflation is an increase in the cost of living.

    Now whether the businessmen raise prices out of their own choice or in response to the value of the dollar is another thing he fails to explain, but it's more just skipping over things than teaching falsehoods.

    He never actually says the word "greed" and he was a hedge fund analyst himself before he started doing this. And yes, that doesn't necessarily make him an expert on economics, but one would expect him to at least know basic microeconomics.

    I think you're just being a bit oversensitive here.

  23. I would really appreciate some Austrian/free-market economics lessons in the economics section . I understand that he goes through several schoolbooks, study them and then teach them, but he might have missed HUMAN ACTION by Ludvig von Mises... But then again, Khan is not helping people who seek knowledge in general , but those who are going through an established program

  24. Our school is having students sign up for the Khan Academy. Recently, as a Parent, I received an email that there was "a bunch of new content". I reviewed a bit of that content and found it to be typical liberal non sense. I then locked my daughter out of the website. I intend to speak to the Principal of the school about having this website removed from the curriculum.

  25. This blog post is nicely written. Khan Academy is surely overrated - it earned great publicity because of backing by Bill Gates, but that does not imply his content is top-class. I have been learning economics for some time. From the perspective of Economics, inflation is caused by an increase in money supply; I have never come across an economics textbook that lists greedy businessmen as a cause. He may make a claim that greed leads to inflation, but that should not be placed in the "Economics" category and instead should be labeled as his personal opinion (or rants) which is not backed by mainstream economic theories. I have watched his series on the financial crisis, which is just largely his personal opinion.
    I have created an account in Khan Academy a year ago to learn calculus. The videos lack depth compared to other math videos on YouTube I am watching, say MIT open course ware or patrickjmt (I am self-studying so I have no access to lectures at school). I would also like to add that a lot of features (say earning energy points and badges) in Khan Academy are just gimmicks that are created using the large amounts of donations and do not really help learning.
    To sum up,it is true that Sal has taught many students, but one should note that
    1) Sal's math videos are too easy
    2) His videos may contain some hidden agenda (say greedy businessmen lead to inflation)
    3) He gave up his job as a hedge fund analyst to create free-of-charge videos, but he actually receives a lot of money from Bill Gates and workers in the Academy are generously rewarded financially (just look at their careers page)
    4) Khan Academy is overrated

  26. His voice is grating though.

  27. Seems like Khan should make it clear he is reinventing the subject rather than teaching any well-established version.