Intro to Economics Recommended Reading

*The following is the list I am giving my Principles class.  I tried to focus on blogs and books that are 1)primarily about economics 2)understandable by someone with no econ background and 3) not deadly boring.   I look forward to comments and suggestions*

Principles of Macro Recommended Reading

Daily News:

Financial Times

New York Times

Wall Street Journal

Weekly:

The Economist Magazine: Analysis of world economic and political news

Audio:

Econtalk: A weekly podcast featuring interviews with interesting and often well-known people on economics-related subjects.  The archives go back to 2006 and most are not “dated”.

The Economist: some material from the magazine can be found in podcast form for free on iTunes.

Planet Money: National Public Radio’s tri-weekly podcast, easy to understand

Blogs:

Becker-Posner Blog: Nobel prize-winner Gary Becker and father of Law and Economics Richard Posner debate an issue once a week.

Freakonomics: The authors of the book Freakonomics do more non-traditional applications of economics

Free Exchange: The economics blog of the Economist magazine, with clear analysis and daily links to the best economics writing

Marginal Revolution: In my opinion the best economics blog.  Updated daily, sometimes technical but usually accessible.

Overcoming Bias: A unique outlook based on economics, signaling and status.  Focus on prediction markets and the far future.

Paul Krugman:  The most active econ-Nobel-prize blogger.  Very good when he isn’t being a partisan, and not to be dismissed lightly even when he is.

Extra Credit:  Read one of the following books.  Come to office hours prepared to discuss the book for at least 10 minutes.  What parts were most interesting?  What did our class help you understand about the book, or what did the book help you understand about our class?  What did you disagree with or have questions about in the book?

If our discussion convinces me that you have read and thought about the book, you will get up to 5 points added to your final course grade.

Books:

Capitalism and Freedom, Milton Friedman: The great economist puts forward a lot of ideas about how to improve public policy.  All the ideas were new and radical when the book was written in 1962; today a few have been implemented and seem normal, while others may still surprise most readers.

Freakonomics, Levitt and Dubner: Applies economic methods to non-economics subjects in interesting ways.  This book is a good introduction to the power of econometrics / statistics.

Superfreakonomics, Levitt and Dubner: More application of economic ways of thinking to interesting non-economic subjects.

The World is Flat, Thomas Friedman: A readable introduction to a “globalizing” economy.  Many interesting stories.

The Worldly Philosophers, Robert Heilbronner: A book about the lives and ideas of some of the best and most interesting economists.

The Return of History

These days economists do lots of abstract math but know little about history.  This wasn’t always the case; until the Depression, the history-heavy and math-light Institutionalists were the dominant school.  But as the Depression dragged on and the Institutionalists had no major new ideas to fix it, Keynes and the modelers took over both policy and economics.

Mathematical modeling has continued to be the dominant tool of economics until this day.  But with the not entirely satisfactory response of mathematical economics to the financial crisis and recession, it seems that people are once again turning to history.  I get the sense that Reinhart and Rogoff’s This Time Is Different: Eight Centuries of Financial Folly has been the book economists most took to heart in this crisis.

I am certain that at the margin economists do too much math and too little history.  I hope to do my own small part to address this misallocation, and I am glad to see that Reinhart and Rogoff have made such a big move with such success.

Paul Krugman Syllogism Fail

Just as I was wondering whether Paul Krugman’s blog was too political and partisan to recommend to students as a way to learn economics, he treats us with this.

Bad regulations show we should rely more on regulation, and corrupt politicians mean that politicians should have more power.  Plus, the failure of a non-libertarian system shows how libertarianism can’t work.  Brilliant, one Nobel is not enough for this man!

Better Living Through Economics

That is the title of a new book edited by John Siegfried which tells the story of 12 ways in which economists have changed policy and made the world a better place.

I had hoped that it would be accessible to a popular audience so that principles students and others could get an idea of some of the good things economists do.  But most of the chapters involve a lot of techincal jargon and many have math as well.  However, it will be good for economists and advanced economics students to get a sense of what economics can accomplish.  Perhaps more people will be inspired to work on applied policy instead of arid theory.

The most surprising chapter in the book was the one on the draft and the all-volunteer-force.  It turns out that economists were central in both persuading congress to end the draft and in the design of the AVF.

I think the best stories are the ones in which new markets are created.  There it is easiest to see both how big the change was and how involved economists were.  Thanks to the work of economists in doing research and changing policy, we now have auction markets in sulphur dioxide permits and wireless spectrum, and matching markets for school admission, kidney donation, and medical fellowships.  I hope that the future holds much of this “economics as engineering” rather than as a science, social science, or especially as applied math.  In the book’s “overview”, Charles Plott makes the claim that the FCC auction (which economists pushed for and designed) yielded benefits “that far exceed all research funding for economics summed over all of history”.

Sustainability and the Death Tax

The “death tax” or estate tax is being debated in the U.S. Congress.  Most popular discussion revolves around how “fair” it is.  In typical economist fashion, I will ignore this question to talk about its efficiency and distortion.

The government has to raise money somehow.  The ideal taxes either distort the economy in a good way (Pigovian taxes) or distort it as little as possible (lump-sum tax, height tax).  Most actual taxes distort the economy in a bad way.  Payroll and income taxes discourage work, sales taxes discourage consumption, capital gains taxes discourage investment.  So what about the estate tax?

The estate tax gives a minor reason not to earn income, and a major reason to consume rather than save.  Like direct taxes on saving and investment, the estate tax encourages people to expend resources in the present rather than saving them for the future.  Lowering these taxes would lower the discount rate.

It is odd that I have never heard (non-economist) environmentalists who claim to value “sustainability” advocating lowering any of these taxes.  It is one sure way to make many people value the future more relative to the present.  Perhaps the fact that it would largely help rich people is so repugnant that it should be avoided even if it benefits the environment and the future.

One thing I think everyone can agree on, though, is that this is one tax that should change little from year to year- lest it distort the economy in a murderous way.