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.
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.
- The problem, finding light amidst the shadows
- Read the originals, the foundational books of economics
- Read some books
- Read websites run by economists
- Fun, informative, easy ways to learn about economics
- 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 – whose 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, who 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 likely 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 produced 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 Japan’s 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 Econmonitors 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…
- key people, such as Adam Smith, Keynes, or Hayek,
- the schools of economics, such as Keynesian or Austrian,
- the big debates, such as that between Saltwater and Freshwater economics.
(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:
- about the Financial crisis – what’s happening? how will this end? – esp section 8, about solutions
- about the End of the post-WWII geopolitical regime
Posts on the FM site about economics — theory and practice:
- The greatness of John Maynard Keynes, our only guide in this crisis, 4 December 2008
- About the state of economic science, and advice from a famous economist, 8 December 2008
- “A depression is for capitalism like a good, cold douche.”, 17 December 2008
- Words of wisdom about the global recession, from the greatest economist of our era, 29 December 2008
- A very important article by an expert, discussing the necessary next step to solve the financial crisis, 17 February 2009
- Economic theory as a guiding light for government action in this crisis, 10 March 2009
- A look at Faux Economics, increasingly popular but bizarrely wrong, 15 June 2010
- Keynes comments on our new-found love of austerity, 21 June 2010
- Why have mainstream economists lost the arguement about the need for more economic stimulus?, 27 June 2010
Originally published at Fabius Maximus and reproduced here with the author’s permission.