Given the current climate, I feel a little behind when it comes to broader economic themes. Anyone have any recommendations for texts that can help non-economists grok the subject?
The "Free to Choose" television series is really great, second that. They're all on google video, search for the obvious keywords and "long" duration (20+ mins) to find them easily.
I especially liked the debate segment in each show, where Friedman argues his points with both supporters and detractors. It struck me while watching it, you really can't find stuff like this on TV anymore.
I'll second the Econtalk podcasts. Russ Roberts does a great job of looking into everyday phenomena with a guest and looking at how economics influences so much. Really a good listen.
My favorite book is "Economics in One Lesson". It's available free online and in print from major book sellers (see the top search results on the Google). This book does not represent mainstream economic thought, but that's a good thing given the track record of mainstream economists in the current crisis.
Another good, "popular" Austrian-school book is What Has Government Done to Our Money? by Murray Rothbard. The Theory of Money and Credit by Mises is on same subject but it's more comprehensive, the tone is more academic and is considerably harder. Both are available online.
Looked at that collection. I've read a lot of Austrian stuff and I'd say that Hayek's elaboration of the trade cycle and the dynamics of international currencies are the two greatest works of Austrian Economics. They are not the basics by any means though and are pretty tough going, as hard as reading books on compiler design.
Indeed, that's the single best book to start with. E.g. the very first chapter, the "One Lesson" (on the Broken window fallacy: http://en.wikipedia.org/wiki/Broken_window_fallacy) will right off explain to you why "Cash For Clunkers" was such a clunker.
(Ignoring the solid principle that accelerating future economic activity fails when the future inevitably arrives, something we're seeing right now in US residential real estate.)
A lot of people think that the Cash for Clunkers program was actually the single most effective element of the recent US stimulation bill. It really did contribute to a burst in actual buying of products, thus, economic activity. Whereas despite all the money made available to financial institutions there did not seem to be a follow-on rise in new or extended credit for businesses and individuals; if anything, it got worse afterward.
What is the argument for why the CfC program was bad or ineffective?
"It really did contribute to a burst in actual buying of products, thus, economic activity."
Which it took from future sales.
Whether it's better or worse than financial institution measures has nothing to do with whether it was good or bad. If they were both bad and it was less bad, it's still bad.
The argument that it was bad is ... the broken window fallacy. Perfectly fine working cars that could have been sold to people who can't afford new ones were destroyed (the engine oil replaced with a chemical solution that destroyed it after running for a short period of time).
Yea, it's a classic book in the same way Keynes' "General Theory" was, but I'm not sure I'd say that Austrian economics (such as Hazlett, Hayek, Mises, etc.) is a good way of understanding our modern system.
To get a good balance, I'd say to read something from Paul Krugman, Rob Reich, Greg Mankiw to understand left, center and rightist views on neo-Keynesian thought. For "Chicago School" / monetarist thought, Milton Friedman's "Capitalism & Freedom" is a good primer.
For a more scholarly view, "Money, Markets, and Sovereignty" is a great one for global-economic thought at the most macro level, and "Financial Innovation" (Molyneux) is awesome for showing where all of this came from - though only the first three chapters are accessible for someone who isn't comfortable with math.
Given that the neo-Keynesians are abjectly failing again (last time was the stagflation of the '70s) and that much of the world is now acknowledging this after trying 3 or so years of their snake oil remedies (e.g. note the recent G8/G20 fireworks, and it's been two decades for the Japanese), recommending that anyone read them as more than historical curiosities---important ones, I grant you---strikes me as fatuous.
(ADDED: OK, they're relevant today because they provide a convenient excuse for politicians to do something the latter love, to spend lots of money to get re-elected (see second paragraph of http://news.ycombinator.com/item?id=1465384 or any of the Great Depression histories that break out where the New Deal money was actually spent (three guesses)) ... but then again, does a beginner need to know anything more than that they offer an excuse for borrowing lots of money to then spend?
OK, yes, there's a bit more: the US Stimulus bill isn't even proper neo-Keynesian economics because of how slowly it's being spent and where much of the money is going; the multiplier is almost certainly negative. That does help in understanding how we got to today's situation. But I'm pretty sure if you read very much Austrian economics this will be covered.)
The Austrians are still making sense in our "modern" situation (is it really very much more modern than when they developed it in the last century???) and are still worth reading and even potentially adopting as the school you'll follow.
Studying the Chicago/monetarist school is important, although I would put them second after the Austrians.
If you're the kind of person who reads Diplomacy by Kissinger for an introduction to geopolitics or the Bible to understand christianity, then I'd highly recommend Human Action by Ludwig von Mises for a very strong understanding of economics. One of the best (and largest) books ever written on economics, you don't have to be of the Austrian school to get a lot out of it. It lays a strong logical and theoretical foundation and then considers issues in a very engaging and even entertaining manner for non-economists.
And it's available as a very high quality audiobook for free!
Yes, Human Action is big, thick and highly recommended. You can find one or more earlier and still quite useful print editions on the net (as I understand it, the subsequent edits weren't heavy).
Please beware that "economics" is a very dangerous subject in that the notions of "right" or "wrong" are very, very different from theoretical fields like mathematics, practical fields like engineering, or experimental fields like physics (yes, I'm aware this is perhaps overgeneralizing, but you get my point).
My practical advice to a beginner would be: Please disregard any theories in the beginning, by which I mean both rigorous microeconomic models and (especially) the narrative sort found in books for layreaders or newspapers.
Stick to data! Read a lot of data. And then some more. Also, instead of theories about the data generating processes, read their concrete definitions, what exactly do they measure (not just the general idea they're intended to capture but what exactly, like "192 vendors of banana in location X are self-reporting Y"), how are they collected, what market mechanisms exist (market microstructure), etc. Stick to the concrete and read data.
Only when you're ready to make a commitment, take a year or two off and dive into economic literature. Economics is a field where, if you don't know what's what, you will be "had" by the next plausible-sounding, impressive-looking idée du jour if you're not careful.
One has to know quite a bit to see the assumptions underlying the theories and how they influence its results, and I can tell you that the mainstream theory rests on very shaky theoretical foundations. The typical structure of economics literature is that this weak foundation is first brushed over in one sentence (usually starting with "we assume that..." and ending with "...to keep things simple/tractable/whatever"), then comes some big mathematical exercise, and then comes a very plausible-sounding discussion of the main idea that is constructed to either resonate or astonish you. there is also quite a bit of advocacy here, don't forget we're dealing with a real-world subject with somewhat fuzzy notions of "right" and "wrong", hence the incentive is there to fund/get funded for certain lines of research or results that support or refute political views.
Also, unlike in other fields, you will generally not find that the "best" economists naturally emerge in brand-name departments, like Harvard or MIT. It's very political. In my own opinion, the better thinkers are found on the fringes, perhaps with "official" specializations in physics or sociology or psychology and not officially branded "economists" at all!
So stick to data, you will know more than most branded economists and you can't go wrong, after all, the data is the data... ;)
I would actually not recommend econometrics as the OP seems to just start out in this area. My recommendation is: get to know the data, learn what is available, read the definitions/construction methods, plot it in so many ways, do simple statistical summaries, for subperiods, for the entire sample, nothing fancy. One caution though: Try to do so _before_ making up your mind as to what explains the world, and even more important, try to forget everything you've already been programmed to read into the data. It's like in some karate movie, you have to "empty your mind" and let the data come to you, and if you let it sink in, at some point, you will start to ask questions and seek your own answers. I think that's a better way than to be presented with one or two general frameworks and then force fed so many specific models and examples that invariably one ends up seeing the world and asking the same questions like "them".
One concrete example is "aggregate demand". It's a concept presented in the most basic textbooks as a "fact" but it's really an artifact. Fischer Black claimed that the more he thought about it, the less he understood how one could distinguish between "aggregate supply" and "aggregate demand", yet economics is taught like that in every basic textbook I have seen so far. There are very few "facts" in finance and economics, so for the beginner, before consulting what others have thought, I would recommend first having an unadulterated look at the facts before reading explanations or stories.
One option is to browse some major university websites for commonly used textbooks and pick one that's appropriate for your level (in terms of math/econ background) and seems interesting. Some common choices are Krugman & Wells and books by Mankiw. Textbooks are drier than popular books, but they are clearer and more rigorous, and you have some assurance that any reputable one will attempt to present a balanced, mainstream view rather than pushing a personal agenda.
Another option that is a bit more expensive but may be a lot more enjoyable is getting some DVDs from the Teaching Company. They get what are usually very good lecturers to give their courses, and
seem to be the kinds of things you're looking for. I haven't watched these, but maybe worth a shot.
(Regarding some of the other suggestions: blogs are ok, but the more econ-heavy ones will assume some degree of familiarity with economic concepts, and will post on random topics in no particular order, so they don't really solve this problem. Non-mainstream books or famous monographs are also ok at some point, but as with all such things, it's generally best to at least understand the basic mainstream stuff first.)
To grok the subject, it will take a while.
Search for a good undergraduate economics course and follow that.
I second Hazlitt "Economics in One Lesson".
But if you truly want to understand this, you will need to start with one book and then note all the books and theories which come before, going back a long way 200 years or more. Read or read summaries of those as well.
In that way, you will get a firm foundation and understand how some "new" stuff is just old stuff with a new name.
Wealth of Nations is a great read, if only to appreciate how much of modern economics Adam Smith either foreshadowed or invented and how misrepresented his ideas typically are. There's a certain amount of slogging but it's well worth the time.
And yet his son has been considered one of the celebrities of the economic crisis for predicting it so well and profiting from it. The line between crank and brilliant is blurry.
Although his son predicted the crisis, he might not have profited from it. Part of his investment strategy was based on the assumption that the US economy would decouple from the rest of the world. As it happened, foreign investments were also hammered in the crisis.
Throughout history people have refused to submit to immoral government controls and have suffered the consequences. They are to be admired by people who aspire to be free.
The income tax is an assertion that government owns the work of its citizens and has a right to take as much of it as it wants. The majority of citizens accept this claim because they don't want to be fined, imprisoned, or otherwise mistreated.
Taxpayers are slaves on the government plantation, forced to work for the government. When a slave protests and is punished, he should not be called a crank by the other slaves.
Among the "services" that (American) government provides: Wars in Iraq and Afghanistan (countries that have not attacked us), military spending equal to what the rest of the world combined spends, social security and medicare (ponzi schemes in which workers today are forced to finance the retirement and healthcare of the elderly with no realistic expectation that their own retirement and healthcare will be similarly provided for), and of course law enforcement and prisons (a large part of which is devoted to punishing non-violent drug "crimes," i.e., people using illegal drugs themselves or suppling them to those who want to buy them).
Providing services does not justify the income tax, even if those services were useful or moral, which they are generally not (see above). The mafia and private slave owners also provide services (protection and employment) but this does not justify their robbery.
The sixteenth amendment to the American Constitution was only ratified in 1913. Somehow America survived until then without a general income tax.
Here's another vote for Basic Economics. It's a great (and fairly thorough) overview, written in a down-to-earth manner. Lots of real-life examples are used to explain basic economic principles, making this subject understandable and even enjoyable (for me, at least).
I've seen a few recommendations for that in this discussion. Never read any books by him, but in my experience reading newspapers over the years, reading oped articles by him, it seemed clear to me where his political affiliation lies, at least with respect to the main two US political parties. Did you see any of his political slant in this book? Or did he seem to stay neutral/impartial?
The "slant" in this book is that he is pro-free market and anti-central planning. He states that the free market is the most efficient way to allocate scarce resources. The book explains why this is so with many varied examples.
does he address Tragedy of the Commons? monopoly? uneven distribution of information and power? aristocracy (feudal or modern)? just curious, because those are also economic forces in the real world, but they tend to push back against the notion that a totally free unregulated market w/o govt intervention is best.
Regardless, I'll definitely check it out. Looking at the 1st few pages on Amazon and he seems to have good writing skills. Do not like the Hoover Institution connection though.
For an overview of mainstream modern econ, if you read nothing else, read Naked Economics by Charles Wheelan. For a good introduction to the major economic schools of thought check out Economics as Religion by Robert Nelson (he has written a new one on the same subject that I haven't yet read). To get into behavioral economics, I'd recommend Predictably Irrational by Dan Ariely and The Winner's Curse by Richard Thaler.
Tread carefully, there is a lot of polemic posing as economics on bookstore shelves.
Everybody is suggesting some Austrian Economics books.
I don't think it's a good idea to start with something which is not mainstream in the academic world.
I've read something about austrian economic, and it sounded good to me, but I know it's so easy to foolish a layman in any field with almost anything.
If most academics today at top univesities and most nobel prize are not followers of the austrian school there may be good reasons.
Better to start with the current state of the art and then read about less popular schools.
Popular in academia doesn't mean right, and at least one Austrian (Hayek) won the Nobel Memorial Prize in Economics; note that it's not a real Nobel and the committee's notorious practice of giving the award to so many people with radically and incompatibly different theories shows it's poor guidance about the truth (see http://en.wikipedia.org/wiki/Nobel_Memorial_Prize_in_Economi... for a start).
The Austrians deserve respect if for no other reason being one of the "last men standing". The stagflation of the '70s should have put a stake in the heart of the neo-Keynesians, but the lure of "borrow, spend (and then get reelected)" is obviously too strong for most politicians (Keynes' advice that you pay back the borrowing in good items was at best naive, although upon rare occasion it has been followed).
Paying much attention to the officially popular in academia after watching the last 3 years of failure of their nostrums (and two decades in Japan) just doesn't strike me as a good use of the time of a beginner. Better to study a school like the Austrians that hasn't been falsified by the real world multiple times.
Yes, it's quite ironic. I'm not saying Austrian Economics is wrong, I don't know enough to make such a claim.
I'm just saying that for a complete beginner it's better to start with what is believed to be correct by most professionals in the field.
Then of course it's great to study Austrian Economics.
I think that starting with the general consensus among professionals is the way to go in any subject.
I know economics is heavily politcs influenced and politics can trump over truth, but still...
To think different first you have to know mainstream and if you see something wrong in it you can criticize.
University Economics by Armen Alchian is quite a good introductory textbook to the basics of mainstream economics. It has a strong emphasis on understanding economic concepts intuitively which I like.
If you're looking for a more mathematical introduction, McAfee's open source book is a pretty good introduction to microeconomics and is available for free at http://www.introecon.com/
Thanks for the recommendations, everyone. I don't have a math-heavy background, so Econ has always seemed formidable and daunting to study. I'm sensitive to the political agendas of name-brand economists and theories and just never really knew where to begin.
One text that hasn't come up here, but has in my offline discussions, is Foundations Of Economics: A Beginner's Companion by Yanis Varoufakis. Any opinions on that?
Economics is a bit like theology. You read it to get exposed to the ideas, learn about other people's beliefs, and be amazed by the beautifully argued but experimentally unsupported theories. I liked Eric Beinhocker, Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics.
http://economistsview.typepad.com/ has more centrist/liberal views on a variety of economic issues and has a good set of links to daily economic-related blog posts from various points of view.
The above blogs have enough links to other blogs to get you started, and they will give you different points of view on current topics.
If you are concerned about learning about how we got into all this mess and have 10 minutes to spare - this would be a great primer http://www.crisisofcredit.com/
Along with the excellent recommendations here, I would add "The Worldly Philosophers" by Heilbroner (http://www.amazon.com/Worldly-Philosophers-Lives-Economic-Th...) for a slightly different angle. It covers a wide range of famous economists and describes the high points of their theories along with some biographical detail, in a very engaging style. It's the economics version of "Men Of Mathematics", which is also a fascinating book.
I learned a heck of a lot from reading John Kenneth Galbraith's books. In particular, The Affluent Society,
The New Industrial State, and Money: Whence it Came, Where it Went
Heh, I was about to say that Slashdot already does something like this, but I am pretty sure they aren't covering cases 6 and 7. Cosmic rays and keyboard cats...now there's a startup problem I can sink my teeth into. Thanks. :)
"Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics" is really great Hacker News-ish book about economics. It's the only non-technical book that gets into agent-based computational economics. There's some unfortunate business strategy waffle in the middle but otherwise it's fantastic.
Whoa what with the hacker love for Austrian economics?
It like everyone take after Eric S. Raymond, the hacker who extends Austrian(Hayekian to be more exact) economics to the field of software development in his The Cathedral and the Bazaar.
Economics is so fantastically politicized---in a more honest age, it was called political economy---you'd have to apply your maximum filters for Wikipedia to be of any use. Probably not the best choice for a beginner.
I think it is because unlike with the real/natural sciences, in Economics it's very easy and common to commit fallacies like cherry picking and making deductions based on incomplete information or emotion-based assumptions. Folks that grew up with a silver spoon in their mouth (relatively speaking) are more likely to be anti-government/pro-market, and folks who want to make a living by running a business tend to not like taxes and not like external regulation of their activities, even when their activities would cause harm or impose external costs on their fellow citizens (pollution, etc.).
Actually I'd argue that Wikipedia may be a more neutral resource than many books because with books there can at times be only 1 person who blesses it with authority whereas most economics articles are vetted by the community and endlessly critiqued and debated over by editors, with both Pro and Con factions wrestling over the fairness and objectivity of each sentence. A book can often just be an attack piece or propaganda tool.
The problem is that Wikipedia articles will have "random" biases and omissions. When you read a book by one author it's at least likely to be consistent in its bias.
E.g. the latest example I've found of this, which I grant you is relatively obscure compared to more prominent and no doubt well fought over articles, is the one on the Washington Public Power Supply System (WPPSS), which had one of the largest Chapter 9 bankruptcies in history: http://en.wikipedia.org/wiki/Washington_Public_Power_Supply_...
All that financial history has been airbrushed out; unless you notice the categories at the bottom, check out the Further reading or the right External Link or sample the article's history you'd have no idea about what was a rather major bit of economic history, rated as one of the three both large and notable Chapter 9 bankruptcies: http://en.wikipedia.org/wiki/Chapter_9,_Title_11,_United_Sta...
It's a "classic", at one time the classic, but I don't have much respect for an author who's glowing portrayals of the wonders of the Soviet economy were over the years quietly modified and then dropped as the truth became too well known to be ignored.
Agreed on both your points. (His college textbook is probably the thickest in my economics collection.) I lost a lot of respect for him over the Soviet era. It undermines his credibility on many other issues. Economics is already a soft science (compared to physics, etc.) so having trust in the authority of it's pole bearers is pretty critical.
Exhibit number N on why the neo-Keynesians don't get much respect today (well, not counting those they empower).
And it was worse than I'd remembered when I composed the above; as Wikipedia says, "In Samuelson's 1973 edition of his famous textbook, he laid forth the prediction that the Soviet Union would catch up to the United States in per capita income by 1990, and almost certainly would by 2015 because of its superior economic system. Subsequent editions of his textbook would later push the date of his prediction back farther until the Soviet Union ultimately collapsed."
Basic Economics by Thomas Sowell
Applied Economics by Thomas Sowell
Free to Choose by Milton Friedman (video series, too)
Use of Knowledge in Society by Hayek (short, non-technical paper which is full of brilliant insights): http://www.econlib.org/library/Essays/hykKnw1.html
Not a book, but the Econtalk podcast is fantastic: http://www.econtalk.org/