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Economics can help understand events in America and the world. Here’s where to find those answers.

16 February 2010

Summary:  Where to go to see how economics can explain what’s happening in the world?  There are no easy answers, but this post provides some tips and leads.  Updated September 2010.

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Many of today’s political and geopolitical crises have roots in economics.  In response it seems everybody has become a macroeconomist, whether or not they know anything of the subject.  So terms like Keynesian and Austrian get tossed about by people who obviously have no idea what they mean.  For example, Keynes did not advocate long-term government deficit spending — but rather a balanced budget over the full business cycle (i.e., counter-cyclical spending).  As a vital public service in these darkening days here are some recommendations where light can be found.

Contents

  1. The problem, finding light amidst the shadows
  2. Read the originals, the foundational books of economics
  3. Read some books
  4. Read websites run by economists
  5. Fun, informative, easy ways to learn about economics
  6. For more information from the FM site

(1)  The problem, finding light amidst the shadows

Current events have increased the already severe politicization of economics.  Both right and left deploy economists to win support for political policies by indoctrinating partisans in bastardized faux-economics.  Behind there are serious debates among different schools of economics, but the differences between what we know, suspect, and guess are lost in the fervor to gain support.

On one side are brilliant put politicized economists such as Brad Delong (Prof Economics Berkeley), who runs his website like a Maoist re-education camp (the better the dissent, the more quickly it disappears), and Paul Krugman — who writings seldom reveal to the layman whether he’s writing as a Nobel Laureate economist — or channeling Spiro Agnew (i.e., as a Democratic Party attack dog).  On the others are the equally brilliant freshwater economists, whose often appear willing to adopt any position — no matter how absurd — that benefits their rich paymasters.

Further confusing the subject, the descent of America into casino capitalism has created a plethora of financial websites, run by expert traders and economists — and wannabes and poseurs.  Many of these, in either group, know little about economics — but have awesome confidence about what they do not know.  For someone lacking a basic knowledge of economics, these websites’ mixture of information and misinformation will like confuse more then they enlighten.  Like Zero Hedge or Mish’s Global Economic Trend Analysis.

Worse, an earnest student can read a great deal about finance and economics and learn nothing.  Even from websites providing useful reporting, like Calculated Risk or its many lesser (and often highly ideological) brethren.  Two analogies might help explain why.

(a)  I know little about sports.  I could diligently read the sports page and learn about the teams and players, the disputes and rivalries.  I’d learn something, but mostly gain an illusion of knowledge.

(b)  Reports covering a beat pick up the basics about police, politics, war, science — but generally gain only a superficial level of understanding (some do become true experts, esp in fields where experience counts more than academic study — like politics).  Many websites provide both reporting and commentary (like newspapers), with their operators often unaware that great work doing the former does not necessarily equip one to do the latter.  To use C. S. Lewis crude but powerful analogy, no more than a hunting dog learns to use a gun.

What can an interested person do, requiring only modest amounts of time and effort?

(2)   Read the originals, the foundational books of economics

Adam Smith’s The Theory of Moral Sentiments and The Wealth of Nations.  Keynes’ General Theory of Employment, Interest and Money.  Friedrich von Hayek’s The Road to Serfdom (1944).  They’re not easy, and require much effort.  But they’ll richly reward you for the effort.

(3)  Read some books

This crisis has produce a surge of interest in economics. The free market has responded with many excellent and easy to understand books by experts.  Here are some recommendations.  All of these authors have been frequently cited on the FM website.

  • This Time Is Different: Eight Centuries of Financial Folly by Carmen M. Reinhart and Kenneth Rogoff (2009)
  • The Holy Grail of Macroeconomics: Lessons from Japans Great Recession by Richard C. Koo (2009; revised edition)
  • Crisis Economics: A Crash Course in the Future of Finance by Nouriel Roubini and Stephen Mihm (2010)

(4)   Read websites run by economists

There are now many websites that provide balanced and useful economic analysis of current events.  These lack the over-the-top confidence and boldness that people enjoy, people seeking to gain the illusion that the world is easily understandable by some fixed scheme.

(a)  My top recommendation is Econbrowser, sometimes a bit difficult for a layperson to follow but worth the effort.  It’s written by…

  • James D. Hamilton is Professor of Economics at the University of California, San Diego
  • Menzie Chinn is Professor of Public Affairs and Economics at the University of Wisconsin, Madison

(b)  Also valuable is the Becker-Posner Blog, by Gary Becker (Nobel Laureate) and Richard Posner (Judge and Sr. Lecturer, Law School, U Chicago).  This is a good complement to the more mainstream economics of Delong and Krugman.

(c)  To understand the nature of the current crisis — and possible public policy responses — see the publications of the Levy Institute of Bard College, the major center of study about the theories of Hyman Minsky.

(d)  For a broad view of current economic thought and its policy implications, see the Econmonitor at Roubini’s website (you’ll see hundreds of posts from the FM website in its archives).

(e)  The FM website has many posts explaining basic economics; see the links at the end of this post.

(5)  Fun, informative, easy ways to learn about economics

First, read  the “Introducing” series of books by Icon Books.  Graphic textbooks, 150 – 200 pages, 8×5 paperbacks.  Their quality ranges from good to excellent.  They have two about economics, providing a sound introduction to the subject.

  • Introducing Capitalism: A Graphic Guide
  • Introducing Keynes: A Graphic Guide

Second, read Wikipedia, whose pages on the sciences are among their best.  While not totally reliable, they are a fine place to start.  And the links, to other Wikipedia pages and outside sources, allow exploration according to the reader’s interests.  Start with…

(6)  For more information from the FM site

Reference pages about other topics appear on the right side menu bar, including About the FM website page.  To see all posts about our new wars:

Posts on the FM site about economics — theory and practice:

  1. The greatness of John Maynard Keynes, our only guide in this crisis, 4 December 2008
  2. About the state of economic science, and advice from a famous economist, 8 December 2008
  3. “A depression is for capitalism like a good, cold douche.”, 17 December 2008
  4. Words of wisdom about the global recession, from the greatest economist of our era, 29 December 2008
  5. A very important article by an expert, discussing the necessary next step to solve the financial crisis, 17 February 2009
  6. Economic theory as a guiding light for government action in this crisis, 10 March 2009
  7. A look at Faux Economics, increasingly popular but bizarrely wrong, 15 June 2010
  8. Keynes comments on our new-found love of austerity, 21 June 2010
  9. Why have mainstream economists lost the argument about the need for more economic stimulus?, 27 June 2010

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5 Comments leave one →
  1. everson permalink
    16 February 2010 9:40 pm

    Great post FM. As a lay person who has gone down the path of self learning on economics I would like to add a few more sources that are of great use to me:
    * Steve Keen (Post Keynesian). He has a very interesting model that incorporates issues of debt and was one of the few to see all this coming.
    * Bill Mitchell (Modern Monetary Theorist)

    Some may find MMT to be controversial, but it appears to best describe the inner workings of our modern monetary systems of all the various schools of economics (mainstream or otherwise). Professor Mitchell is a prolific and accessible writer. Look for his Debriefing 101 series of posts on common, current issues.

    Richard Koo of Nomura in Japan is one of the most knowledgeable economists on our current plight. His book “The Holy Grail of Economics” is very accessible. I have found it to be the single best book on the current crisis that I have read.

    As FM says read the originals. It has been shocking to me to read Smith and Keynes and to see how both are ‘spun’ to serve the needs of the various chattering classes.

    Like

  2. tfitz permalink
    16 February 2010 10:28 pm

    Though it can be complex, Naked Capitalism is where I go to learn about ecnomics and ‘what is going on’
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    FM reply: It certainly provides coverage of “what is going on.” With a tight ideological spin. Yves Smith writes clearly and fluently. But I’d classify this as a political site, like those on the right, as such likely to mislead those reading it without a firm background in economics. This is typical for websites run by people with financial industry experience, not an academic economics background.

    Like

  3. atheist permalink
    18 February 2010 1:34 pm

    Thanks for the links. I’ll at least try to get through the Iconbooks version of Keynes.

    Like

  4. Mark Thoma gives a brief guide to the different schools of economics permalink
    13 September 2011 1:23 am

    A brief guide to the different schools of economics, and the questions each best answers: “New Old Keynesians?“, Mark Thoma (Prof Economics, U OR – Eugene), 12 September 2011

    Like

  5. Richard Nelson permalink
    13 February 2012 4:13 am

    Excellent survey, well written and thorough. You have provided a road map to me to strengthen and broaden my knowledge of economics. Now that I am retired I can spend the time doing the research. Thanks again.

    Like

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