From reader FC:
I love reading your work, and the articles you link, but I need more education as there’s lots I don’t understand. So I am doing some reading in undergraduate economics, and trying to get my head around introductory monetary policy theory. Is there any chance you have a few good texts you could recommend for the basics? There a lot of jargon for which I can’t really find decent explanations.
For financial economics, Benoit Mandelbrot’s The (Mis)Behavior of Markets is very good and written for laypeople, and has the added advantage of explaining what is wrong about conventional theories. But what about macro and (ugh) micro? The problem is a book like Steve Keen’s Debunking Economics assumes the reader already has the basic foundations.
What FC may need is more like a primer or series of primers rather than a textbook. Any suggestions very much appreciated.
Ha Joon Chang’s 23 Things They Don’t Tell You About Economics, and Economics: The User’s Guide are both excellent. Not to mention his book Bad Samaritans.
I enthusiastically agree about Ha Joon Chang! Very good.
I personally strongly prefer David Harvey’s (2009) The Enigma of Capital over Chang’s book. In it, Harvey gives a very good high-level/qualitative, narrative account of the economic history of the world since the Wars, thereby giving readers a. a sense of importance of all of the various pieces, and b. a good feel for how — and that — everything interacts. Once you’ve read it (and it’s a fairly quick read), I’d probably go for his companions. Next either Keen’s book, or some MMT text, such as Wray’s book?
In any case, I think being able to have a narrative/qualitative understanding of the processes and how they interrelate should always come first, and always trumps “rigor” (as understood by physics-enviers).
Chang has a more recent work that’s also excellent: Economics: The User’s Guide. This is simply a lovely, readable book, with the kinds of real world examples that really make the text come alive.
One caveat: Zero mention of Modern Money Theory (so far, I’m not completely done with the book)
The odd thing about Chang is that he’s (obviously) not a native speaker, but his writing is as good as Krugman’s. Now if we could only get him and Steve Keen together…;-)
Suggestion: skip economics and learn about the destruction of sustainable habitat for life on earth and the demise of industrial civilization, both of which are happening. End Game, by Derrick Jensen.
Reading: Capitalism Hits the Fan, also viewable in video via DVD (got mine through the library) but also probably available in the videos posted earliest on the website.
RDwolff.com lectures on capitalism from a Marxian perspective are excellent as are his monthly video updates (particularly Sept, Nov 2015 and Jan, Feb, March 2016 for context and history of current outcome as embedded in game)
There are also reading lists associated with many of the “online classes”.
Economics is a human construct like knitting circles are a human construct.
Henry Hazlitt’s Economics in One Lesson.
Try “Economix, How Our Economy Works (and doesn’t work) In Words And Pictures” by Michael Goodwin, illus. by Dan E. Burr. An excellent run thru economics starting back in the Distant Past to Today. A easy read, covers the major topics, good insight, and hits the major players, their contributions, and why it matters. And it made me laugh. Always good to have some humour here!
As for “Debunking Economics” by Steve Keen, I agree it is a higher level of entry so not for a casual read. Read it when you want to take on a mainstream economist. Keen shows how, using the various main stream economic schools of thought own words and logic, that mainstream economics is nonsense, in the sense it shows how and why people and economies ‘work’. I love the book and consider it a treasure but often I just wished Keen would say XYZ is phooey, the assumptions underlying it are just wrong, and therefore, let’s not talk about XYZ anymore. But mainstream economics will just not shut up and go away.
The first economics text anyone should read is Steve Keen’s Debunking Economics. That will serve to prevent a lot of confusion and demystify a lot of nonsense later on down the road in an economics education.
That said, Gaylord had the right of it; economics is a pretty worthless subject to waste time learning about and the opportunity cost of trying to understand it vs. something that is actually useful and meaningful should not be ignored. But I guess if you like knowing the various ways you’re getting screwed by the system (not that you’ll be able to much about that within the context of this system) it’s not bad.
Personally I think the whole elaborate economics edifice, including neoclassical economics and MMT, that our society is existentially premised on have a lot more in common with the Titanic than something you’d actually want to rely on to survive.
+1 A very good antidote for those who took Econ 101/102 in college and think they learned something.
I actually took the crap seriously in econ 101 and 102, enough so that earned above 100% in both courses at my university. I was enraged when I later discovered that it was ideological garbage masquerading as math and science. If I could impart one lesson to a novice economics student it’s this: you’d better be incredibly skeptical of anything anyone says or writes on the subject of economics, especially in classrooms. Economics textbooks in class rooms are known to be riddled with fallacious and misleading information for example. And if even the most basic textbooks in the subject are full of crap–well that’s just about all you need to know really.
I’m still seething that my university to spend money on what ended up being an ideological indoctrination seminar, and worse that I actually believed the crap in it for a while. That’s gd fraud, those scammers.
I wouldn’t go quite that far– there’s probably some validity to some bits of Econ 101. But a huge amount is political indoctrination. When I took my college class I was naively shocked at how they totally ignored power relations. I knew very little, but I knew something was wrong. The supply demand curve proof that minimum wages only increase unemployment seemed fishy to me. But this was long before Krueger- Card. Anyway, I was only a centrist Democrat at the time, very ignorant and not that much better now, but I felt like I was being conned.
And the worst of it is that our teacher was a political liberal, so with people on the left teaching what amounted to a religious creed of how market relations are about free choice and efficient use of resources, there was no room for the naive student to know how to push back.
Someone, maybe Joan Robinson, said the best reason to study Econ was for self defense. We live in a society where economics is like the ruling religion, an analogy I keep making because it’s true, and if you live in such a place you had better know the dogmas if only to know how to refute them or point out the weaknesses.
To be fair economics is not quite the dominant religious mythos prevalent in America. That honor belongs to Science and Progress, economics being only a minor free rider on those larger belief structures. The fact that so few Americans actually know what science is or how it works means that the crafty connivers in the economics biz were able to dress up their fraud with the trappings of science and math and thus snuck in under the radar into the psyches of the gullible and scientifically illiterate American public.
I respectfully disagree, at least somewhat. Science and Progress is not the dominant religious mythos in America, although it is likely number two. The dominant religious mythos is (tautologically, I know) Religion and Magic. Why are so many Americans gullible and scientifically illiterate? Because they are trained from an early ago to accept without question that certain fantastical or impossible events actually occurred. The Argument From Authority is ubiquitous, and is heavily dominant over Critical Thinking.
Of course, it’s not just the U.S. that is plagued by this. Beliefs in Religion and Magic are widespread throughout the world.
As they say, a goldfish can’t see the water it’s swimming in.
The belief in Science and Progress is so conpletely ingrained into the culture that it’s no longer even recognized as a belief structure but rather as “reality”. In contrast, at least religious nuts are still grounded enough to speak of their beliefs in terms of faith.
Here is the major point of difference between people who understand science and those who believe in Science: a good scientist understands that no idea can ever be proven, only disproven. That included our ideas about the future. The religious nut believes that the future is going to be brighter, shinier, and better because science and technology will make it so.
Dollars & Sense, the 41-year-old popular economics magazine (http://www.dollarsandsense.org) started publishing Gerald Friedman’s intro micro textbook, Microeconomics: Individual Choice in Community, a few years ago.
http://dollarsandsense.org/bookstore/infomicic.html . If that link doesn’t work, use the main bookstore link from the home page. (Friedman is the UMass-Amherst economist whose analysis of Sanders programs was criticized by mainstream economists like Krugman and defended on Naked Capitalism by James Galbraith and Friedman himself. Info on the kerfuffle here http://www.nakedcapitalism.com/2016/04/gerald-friedman-why-liberal-economists-dish-out-despair.html) It is highly accessible, like all D&S textbooks (most of which are anthologies of D&S articles), but is unusual among intro micro textbooks because it gives standard theory *and* criticizes it and provides alternative perspectives along the way. You can browse the D&S book catalog here: http://dollarsandsense.org/bookstore.html . The D&S macro and micro anthologies, Real World Macro and Real World Micro, have chapter introductions on key topics that would be of interest to a newbie who wants to learn the basics of standard econ but also wants to know what standard heterodox critiques are. They are, again, highly accessible, written for a general audience, and assigned in intro courses at colleges across the country. (Disclosure: I’m co-editor of the magazine and several of our books. We also publish Triple Crisis blog, which Naked Capitalism frequently reposts, so regular NC readers are familiar with our work.)
Dollars & Sense is great. Highly recommended.
If you’re interested in MMT, in June ‘Macroeconomics in the 21st Century: A Modern Monetary Theory Text’ by Mitchell and Wray will be published. Their ‘Modern Monetary Theory and Practice – an Introductory Text’ was published last month.
Keen has made some lectures and a blog available at: http://www.debunkingeconomics.com
Editorial comment on economics: “. . . obstinate ignorance is usually a manifestation of underlying political motives.” Kalecki in Political Aspects of Full Employment
Karl Marx, Capital Vol. 1 and the Communist Manifesto
This is real economic theory, in comparative perspective.
Agreed. David Harvey’s course lectures are a super helpful companion.
Oh right! Just a light intro?
Check out the series “Money and Banking” at New Economic Perspectives website. It’s not book-length and may be too jargon-y, but it appears thorough and broken into digestible posts.
Bill Mitchell, Randy Wray, and Martin Watts have a new book: Modern Monetary Theory and Practice: an Introductory Text, published last month. There is also a Kindle edition now.
Viewing economics as a social science, I think it’s useful to get an understanding of the questions economics are trying to answer.
For this I think anything by Naomi Klein or Michael Hudson is very good. I think Shock Doctrine and This Changes Everything (an emphasis on climate change) would be great primers.
I would also highly recommend a subscription to Jacobin. They have been publishing a number of very insightful articles.
ECONned and Michael Lewis are the starting points. They are easy to read and go directly to the reason so many of the suggestions contain words like ‘debunking’ or rebuttal.’ The business of Wall Street is insider information. Economics theory is all too often armchair philosophy which ignores the practical facts.
“What is easy, is easy to know; what is simple, is easy to follow. He who is easy to know attains fealty. He who is easy to follow attains works.” “What is easy is readily understood, and from this comes its power of suggestion.” [I-Ching]
Physics is simple but difficult. It is not easy to know, but if you follow the steps, the experience of the work brings clarity. There are great works which have endured for more than a century but which are hard to read. Adam Smith and Marx are great reading for going to sleep. Keynes counts too.
Hazlitt, ‘Economics in One Lesson‘ is easy to know, which has made it hugely popular from 1946 until today. But that ease ignores the flawed assumptions underneath, which make it a political and moral statement tied to the conditions of the time, which were regulated after the Depression. ‘A Random Walk Down Wall Street’ was easy, and at least acknowledged the lack of knowledge in general, but ignored the insider knowledge in particular.
The reader query noted undergrad econ. Back when I was etc, that was split into Macro (unemployment and inflation) and Micro (supply and demand, leading to economies of scale and ‘marginal’). Both have an implicit bias. Macro’s is in the fuzzy definition of money. Micro is immediately practical, but leads to decreasing overhead and thus opposes taxes.
Howard Odum’s work is the best I’ve seen on grounding economics in the world. He does the work of framing the concentration of wealth into the cities. But he runs into that wall of practical application about money, that its distribution is controlled socially, by information which only has value when it is monopolized. Econ theories supported support the dominant paradigm, and are political. NC has shocked me by revealing how much of the field is based on bags of nothing. With some exceptions, it is philosophy, not science.
Economics is not a well-formed category. The eco- of economics and ecology comes from Oeconomicus, a practical manual. It’s worth a look, to see those matters which concerned the ancient Greeks that are still of concern to us.
John Maynard Keynes by Hyman Minsky
The new Lombard street – Perry Mehrling
Economics for Pleasure, by G.L.S. Shackle
Cambridge University Press, second edition 1968
I recall learning from and provoked a fair bit from, “Between Capitalism and Socialism”, by Robert Heilbroner. Timely.
Debt: The First 5,000 Years, by David Graeber
Melville House Publishing, 2011
Excellent, but hardly undergraduate.
Actually, I think Graeber’s book is highly effective at debunking the “barter” theory of money within the first few chapters without getting too technical. Highly recommend because before one dives into technical economics, one should understand what money IS.
Highly recommend (and need to reread it myself).
Agreed – I use the first couple of chapters of Graeber in the Money and Banking class I teach.
Though it is a lot of personal narrative, I would also recommend Bill Black, “The Best Way to Rob a Bank is to Own One.”
Mandelbrot’s book is quite good and I’d highly recommend that one too. Maybe not exactly what FC is looking for and not written by an economist (which might be a plus!), but I enjoyed David Graeber’s ‘Debt: the First 5000 Years’ which also debunks a lot of the conventional theories.
I haven’t read Bill Greider’s ‘Secrets of the Temple’ regarding the Fed but it’s been on my list for a while and I’m guessing it gets at monetary policy. Can anyone else recommend this one? I’ve always liked Greider’s work but not sure how up to date this one is having been written in the ’80s.
I just finished Galbraith’s ‘The End of Normal’ yesterday which was quite good and gets at a lot of the problems with current monetary policy. It’s maybe more jargon-y than the others I mentioned but not textbook level jargon so not too hard to digest. Plus he’s pretty funny for an economist.
“Secrets of the Temple’ recommended, though possibly outdated, since the rules have changed.
“Secrets of the Temple” is a good intro to monetary policy, though it was written pre-QE.
Greider’s book was one of the first I read in trying to understand what the Fed does. I generally like Greider’s writing, but this book was not that helpful. It had a very narrow in focus in time – and the basic workings of the Fed were not well explained. It’s more of a history of the period.
“Macroeconomics Principles and Policy” (Canadian edition), by Baumol, Blinder, Lavoie and Seccareccia. Chapters 12 and 13, written by Lavoie and Seccareccia, provide a superb description of how the banking system, the central bank and (endogenous) money creation work in the real world.
Also, all of Scott Fullwiler’s articles available on the New Economic Perspectives website.
On Coursera, the “Economics of Money and Banking” two-part course by Perry Mehrling.
And on edx, the IMF’s course on “Macroeconomic accounts and analysis” – very strong on the accounting framework for GDP, the balance of payments, the government budget and the financial sector (central bank and commercial banks). One can just scrap the few sections that still mention the (nonexistent) money multiplier and concentrate on the core part that goes much deeper on the accounting topics (in a very clear and rigorous presentation style) than any available international or macro economics textbook.
“The Rise of Mr Ponzi”
The full book ;
Can anyone recommend any podcasts? I’ve turned into a big podcast fan.
They’re not exactly podcasts, and you’re likely to be already familiar with them, but I’ve found Steve Keene’s youtube videos, at his ProfSteveKeen youtube collection, extremely informative. You can browse his offerings until you find something appropriate to your level. Unlike some podcasts, they can’t be run profitably in the background while you’re doing some trivial task. I find I have to pay close attention, and occasionally have to replay portions that go by too quickly. Also, a basic acquaintance with differential equations is helpful to understand his simulation software “Minsky” that he sometimes uses for debunking of the equilibrium concept. So his offerings do require some commitment, but offer substantial rewards.
Le Show – He’s had some great interviews lately, including Andrew Bacevich, James Galbraith and (not least) Yves.
War Nerd Radio – With Gary Brecher and Mark Ames
Hardcore History – Dan Carlin’s highly entertaining presentation of historical events
Common Sense – Dan Carlin’s slightly less polished political show
Seven Deadly Innocent Frauds of Economic Policy by Warren Mosler
PDF available on-line. Economics you don’t need a degree to understand. Turns conventional economics on its head.
Small is Beautiful – Schumacher
Paradigms in Progress – Henderson
Debt, the First 5000 years – Graeber
Secrets of the Temple – Greider
One World, Ready or Not – Greider
A Free Nation Deep in Debt – MacDonald
Super Imperialism – Hudson
Anything/Everything by Michael Hudson, Bill Black
America: Who Really Pays the Taxes – Barlett & Steele
The Baroque Cycle – Stephenson (historical fiction, yet learned)
Has anyone read John Kay’s new book? On finance?
As someone who isn’t jargon- or theory savvy, I’ve found him to be a remarkably humane instructor. I know Obliquity is well regarded around these parts…
Further more and follow Bill Mitchell at http://bilbo.economicoutlook.net/blog/
And go to http://neweconomicperspectives.org
For blogs and books.
Bill Mitchell is a must: great archives of past topics, some very simple, some sleep inducing such as the ones on Australia’s labor market though real world data on labor as it fits with MMT(Modern Monetary Theory.)
Growing prosperity, The battle for growth with equity by Barry Bluestone and Bennett Harrison. Heibroner endorsed it as important as Keynes’ General Theory.
Simple, elegant and powerful.
I was extremely fortunate to attend the Harvard Trade Union Program in 2011 and Barry Bluestone was one of the presenters that really grabbed me.
Please consider this important work of simple, but not simplistic economic theory.
“Modern Monetary Theory and Practice: An Introductory Text” by Bill Mitchell and L. Randall Wray. Just out and available on Amazon in a Kindle edition for 25 bucks or so.
1) Debt: the first 5000 years is available on audible.com, narrated by a good reader. The re-frame of this book is so disorienting and wonderful I found hearing it AND reading it both helped me get my head around it better. Fundamental narratives in the Enlightenment fairy tale called Economics are laid bare. No doubt a graphic novel/visual on-line treatment would be the next step to cutting down the debt slavery military industrial money tree.
2) Rx get the pre-division of economics from politics, well the separation of overwrought math models obscuring contrary feedback and context set in the real (non-elite reality), get Introduction to Political Economy, by Charles Sackrey, Geoffrey Schneider, and Janet Knoedler. Was published by Economic Affairs Bureau, inc. which publishes a bi-monthly magazine, Dollars and Sense.
3) Request: all in-jargon acronyms in NK (aka Naked Capitalism) be spelled out and collected into an always available file, and
4) I wish the technical terms were hyperlinked to that wonderful alternative economics dictionary, perhaps with a special color identifier different than article links.
5) I wish NK could also include a section for all the classical economic myth assumption busting happening in cognitive neurosciences, behavioral economics, anthropology, System Dynamics, see Stella, (which supports assumption transparent testable sub-unit modeling that captures both finite material mechanics and non-finite psycho-sociological “intangibles” and can extend beyond limited data-set history), etc., which reinforces and extends the larger context given in book #2 above.
A person can gain some valuable insights from Ecological Economics: Principles and Applications, by Herman Daly and Joshua Farley. This is in it’s second edition, and like many textbooks, is too expense. You might be able to find a copy of the first edition at a used book dealer. I own a copy of the first edition.
Doug Henwood’s Wall Street How it Works and for Whom
I would recommend J D Alt’s Millennials’ Money, which is an update of his Diagrams and Dollars. It can be looked at as an MMT primer with lots of diagrams. This book can be found on Amazon.
For those with more ambition, I would recommend Mitchell, Wray, and Watts, Modern Monetary Theory. It is the first version of their MMT textbook, an advanced edition of which is scheduled to come out this summer. Unfortunately, the first version of the textbook has no index. This might put some readers off. It is published by Amazon.
I have just noticed that Ed Seedhouse has recommended Mitchell’s textbook. Sorry to have replicated your recommendation, Ed, without mentioning you. I must have missed your contribution.
Would it be possible to put ‘Primers’ and/or ‘Literature’ under the Topics heading where a collection of primers, literature, references, etc. is maintained and kept up to date? Or would this be too time consuming?
It seems to me that there is a real need for this, because people have more and more questions on what is going on economically/financially and start looking for answers themselves.
My reading in economics, which includes some of the books mentioned here and which has taken place over the past twelve years or so, has been very frustrating. We say that we have a “system” of economics, but we don’t discuss it as such. My working life, I retired in 1995, was spent designing systems for large enterprises, most of which engaged in economic activity that had a direct impact on the daily lives of Americans. Without exception, each of these enterprises specified goals that they wanted their systems to serve, and they specified concrete ways to measure the effectiveness of their systems in meeting those goals. It all made sense to me. But there are no goals for our system of economics. Yet every day I read about ways in which the economic aspirations of various groups are not achieved, due to the way in which our economic system operates.
My initial response to this serious defect in the way we think and talk about economics, was to assume that my ignorance about economics was to blame. So I have read and read and read, searching for a book that describes our system of economics as a man-made system that can be modified to solve our economic problems. But I can find no such book. It seems to me that books on our system of economics assume that it is not a man-made system, but rather it is a natural system like the weather and we humans must learn to cope with its natural functions.
But this natural system model is just crazy to me. So, I would love to hear about a book that treats economics as a man-made system with man-made goals and with ways to achieve those goals. I am weary of hearing people argue over economic theories and accomplish nothing.
Blogs of very different viewpoints do a wonderful job of identifying problems, and this one is among the very best, but nobody offers a comprehensive plan for solving our economic problems. This may be a new phenomenon for America–in the past we have always managed to try something new in an effort to make things better, but nowadays the debates we have seem to be a form of recreation, not a process leading to worthwhile change.
Add to this dangerous deficiency the fact that our national and state governments are failures, and yet, they are man-made systems which we can modify to solve our problems. They are not natural systems, they are corrupt man-made systems that can destroy our civilization, and we do nothing. We foolishly believe that we can change our system by working within the system–this is demonstrably insane.
We can never solve our economic or political problems by working within our current economic and political systems. These systems need to be replaced, we know all of the evil effects of our current systems, now is the time to design new ones and implement them.
Oh, I’ll recommend two of my absolute favorites, because I think that both fit what you are asking for:
The Gardens of Democracy: Eric Liu and Nick Hanauer
You may also enjoy one of Hanauer’s TED Talks, trying to wake up his fellow plutocrats to the fact that killing their Golden Goose via inequality is complete stupidity, to say nothing of dangerous:
And sit back and enjoy yourself with The Origin of Wealth, in which economics is shown to be an all too human endeavor. As an added bonus, this book traces how the fluid dynamics of the 1800s led to appalling ‘mechanistic’ economic ideas:
‘The Gardens of Democracy’ was apparently inspired by ‘The Origin of Wealth’. They both draw deeply on systems thinking.
Best of luck!
Jerry. it is essential to distinguish between microeconomics, which is the economics of the individual, household, and firm, and macroeconomics, which is the economics of the nation state. If we don’t do this, confusion reigns. Neoclassical economics assumes that these two disparate disciplines can be easily reconciled. To try to do so is to fall foul of the fallacy of composition, the idea that what is applicable to the individual is applicable to the group.
They must be treated quite separately. And the mathematics that neoclassicals use has no application to the level of the nation state at the present state of development of the field. Keynes used simple algebra and quite elementary Calculus. Pigou, a non-Keynesian until about 1950, used quite sophisticated Calculus to no real effect. Many of the processes these equations describe either don’t exist or not in the form the equation requires.
I like the Origin of Wealth. A good book. Also, the plutocrat recommendation is a good one. It has always puzzled me that the rich should act in such a way that was, in the long term at least, so contrary to their own interests. In sacrificing the 90%, they sacrifice themselves.The film Forbidden Planet has a theory that explains this, that the Krell succumbed to the uncontrolled, though not necessarily uncontrollable, monsters of their own Ids, which destroyed them all. They failed to understand that they were themselves the source of their own destruction. Some of the rich obviously understand this. but will this be enough?
You are making my point. You are asking me to accept the idea that there are two different, irreconcilable systems of economics: micro and macro.You are asking me to accept these two systems as if they are two natural systems that can only be described by mathematics, and, by extension, we must accept them as laws of the universe and search for ways to use them to our advantage or at least keep them from destroying us.
But there is no proof of such a framework. No matter what name you give them, no matter what mathematical processes you assign to them they are nothing more than creations of human beings, and as such they can be modified or replaced whenever and however we choose.
This means that all of the books mentioned in this thread are nothing more than works of fiction.
My life has been spent in the real world developing real systems to solve real problems, and I am happy to report that such things are possible, even in the field of economics.
Apparently, I am seeking a book that has not yet been written.
The barbarians believe their tribal customs are laws of nature.
They are mostly wrong, but man-made systems must obey the laws of physics. And even physics has two different, irreconcilable theories.
In economics we need to understand which parts are man-made and mutable, and which are naturally constrained by the ‘laws of economics’ if any. And we need to figure out how both parts work as the designers didn’t leave us the manual.
Macroeconomics, the argument goes, cannot be explained in terms of microeconomics in the same way that weather cannot be explained in terms of the properties of water molecules. There are emergent properties, the whole is greater than the sum of the parts, complexity, etc.
Such things are well understood in physics and biology. Not so much in economics yet. Steve Keen is in the vanguard here. If you have any familiarity with System Dynamics you will appreciate his work.
Man-made systems do not have to obey the laws of physics. If physics governed economics then we would not have saltwater and freshwater varieties.
Laws of physics cannot be changed by humans, but man-made systems can be changed. Economics is a man-made system that works badly if it works at all. We can change it or replace it as we please. The attempts by economists to cloak their ignorance in the clothing of mathematics would be truly embarrassing to any rational human.
In 1949 Albert Einstein was thinking about the field of economics and whether it could be useful in designing a future society that was an improvement on the one then in place. He was considering economics from the scientific point of view. He wrote this:
More recently, we hear from Max Tegmark, a Danish physicist who made a stab at choosing a career when he graduated from high school. He wrote:
Tegmark decided to become a physicist and is author or coauthor of more than two hundred technical papers, twelve of which have been cited more than five hundred times. He holds a Ph.D. from the University of California, Berkeley, and is a physics professor at MIT. I applaud Tegmark’s wish to make “our planet a better place,” and I agree with his description of economics as being “a form of intellectual prostitution.” I wish I had thought of it.
Einstein: economics is not useful
Tegmark: economics is a form of intellectual prostitution
There is nothing more to say.
Well, I think they might well be laws of nature, inasmuch as they emerge from our own genetic code, and group dynamics, prey-predator dynamic etc.
Yes, we have man-made/ created various systems that embody these principles, but deviations from the underlying dynamics will not be long lived.
There it is again, talking about “underlying dynamics” as if they are natural constants.
Ha Joon Chang (mentioned by the first commenters) also has a number of excellent interviews on the internet. His comparative approach of various schools of thinking in economics is a helpful approach–he suggests that some ways of thinking make lots of sense and are helpful in certain contexts, but nonsense if applied to other contexts.
If you want to go outside the box into new ways of thinking and acting, whether at the micro or macro level, look into David E. Martin‘s about Integral Accounting. There’s not yet a book about this–though his blog indicates one is in progress–but even the introductory videos may help soften the conventional ways we’ve been taught to think. He says he’s planning to hold meetings over the next year with those with a genuine desire to learn about fundamental new approaches and apply them–if anyone’s interested I suggest they contact him personally.
The best book about economics I’ve found to date is Frederick Soddy’s Wealth, Virtual Wealth and Debt, 2nd edition (WVWD). It begins with the observation that “…a logical definition of wealth is absolutely needed for the basis of economics if it is to be a science.” Soddy limited his discussion to the general ingredients of types of wealth that sustain human life, not the wealth to be found in, for example, a van Gogh painting or a Beethoven symphony.
You most definitely do not need a degree in economics to follow him – but his style of prose IS difficult to follow. Before turning to economics and specifically money, Soddy was a chemist. He won the Nobel Prize for chemistry in 1923 for his work with radioactive isotopes. Nor do you need a degree in chemistry to grasp his ideas – only the most basic grasp of the last 300 years of human history. For example Soddy listed “Discovery, Natural Energy and Diligence (as)— the Three Ingredients of Wealth”. Soddy, Frederick M.A., F.R.S.. (WVWD) (Kindle Location 1276). Distributed Proofreaders Canada. (Kindle Location 1276). Distributed Proofreaders Canada.
“Discovery” refers to advances in human knowledge, in particular the kind that allows us to understand and manipulate the physical world for the benefit of our species. ‘energy from inanimate sources’ rather than “Natural Energy” would perhaps have been a better description of the type of energy to which he was referring. The third ingredient “Diligence” may have become obsolete, at least in the sense in which Soddy intended it, i.e. machine tending. (Another form of diligence – paying attention to what is happening to the world around us – is obviously more urgent than ever.)
That “Natural Energy” is an important ingredient of wealth should come as no surprise to anyone familiar with the oil wars of the last century and this one. “Discovery”, without the means to make practical use of it, is obviously not of much value. That’s where money, AKA capital, comes in. That money is, according to Soddy, in essence debt, a claim on society’s real wealth, the kind of wealth required to implement new ‘discoveries’. I haven’t read Mandelbrot’s The (Mis)Behavior of Markets yet. But if he doesn’t list the failure of those markets to be structured along sustainable lines suggested by the laws of science that really govern the world then IMHO opinion he is missing something important.
I have read – or at least started – Steve Keen’s Debunking Economics (DE). Keen’s grasp of advanced mathematics allows him to penetrate what Soddy’s peer – a living (REAL) economist Michael Hudson – calls “junk mathematics” based “junk economics”. (I would recommend everything by Hudson I’ve read!) The problem I had with DE is the same one I have when Yves or Lambert introduce an article here is ‘junk’ or ‘garbage’. It just takes too much intellectual energy to follow convoluted bullshit so I skip to the comments or skip the article entirely.
Any such list would be incomplete without the indispensable “Small Is Beautiful – Economics As If People Mattered” by E. F. Schumacher.
I found this book all too conventional and threw it across the room after a few pages. Veblen, Keynes, Marx, Uno attacked the foundations of economic orthodoxy. Schumacher accepts them without really considering alternatives.
How about first taking a journey to learn what money is and isn’t? Jerry Martien’s “Shell Game” makes short work, in a very readable manner, of how human scaled ideals of the gift, reciprocity and attendant accounting became contorted to financialization of property, hence…economics.
If your interest is in learning to comprehend the lingo used to discuss basic issues of monetary policy, you might consider giving Philip Coggan’s “Paper Promises” a read.
The theme of this book Is: “economic history has been a war between creditors and debtors, with the nature of money as the battleground.”
The plan of the book, as set down at the end of the introduction, is first to examine the nature and origins, and evolution of money; then how states rose and fell along with their money;next, how currencies became tools of economic policy;all leading finally to an examination of the modern debt crisis in the context of history, arguing that the current position is unsustainable.
Just be aware that it is a work of journalism and not intended for university study.
I love reading and understanding Michael D. Yates’ books. For someone new his dissections of Marx are unbeatable. He makes it all personal and yet correct at the same time. Naming the System can be obtained cheaply through Thriftbooks. I love his rant against neoclassic economics in it, among other things.
I just so happened to write a review of his NEW book for Amazon which came out yesterday, an effort which was to “catch” precisely the reader who hasn’t really done any econ reading before to actually READ The Great Inequality. That book is applicable to individuals readers or someone running an up to date economics seminar, as he truly explains Piketty’s work in a very clear way, for instance. But the best bit is his Dickensonian attention to detail as to what capitalism steals. A new reader will welcome this personalization making important points. Foreward by Henry Giroux.
HIS recommendation is that people read Paul Sweezy’s The Theory of Capital Development.
There is also Heilbroner’s The Worldly Philosophers, a classic many of us cut our teeth on, eh??
I just visited Keen’s website and none of the vides I checked would download on my iPad. Is this just me or do others have this problem. ?
They don’t work for me either. That website is rather old and moribund. Go to his Youtube channel instead.
Well, I suppose I should mention my own introductory econ textbooks, Microeconomics: A Fresh Start and Macroeconomics: A Fresh Start. They didn’t get a whole lot of attention, but they have some positive features. I think the macro book is a lot better overall as a textbook, and anyone interested in how finance and international political economy can be integrated into a basic macro framework should take a look. The micro text was written first and is not as well thought through, in my opinion, although some individual sections (like the theory of the firm) are strong. If I were ever to redo this stuff, I could make a big improvement on the micro side.
Incidentally, the books are written in a way that is intended to be understood without a lot of additional lecturing. My model was science journalism rather than textbook-ese, although the (perceived) need to cover a lot of topics impinged on what I could do stylistically.
I haven’t bought or read this yet (i have a long reading list and am hoping it comes out in paperback by this summer), but watched several of his lectures and read reviews from Michael Roberts and others and this looks like the best single book in economics. You can watch his lectures here. He was a student and colleague of Robert Heilbroner at the New School and is able to clearly explain and analyze classical, neoclassical and heterodox theories in a remarkably clear way using excellent historical data grounded in economic history.
The Great Transformation Karl Polanyi
The Triumph of Conservatism Gabriel Kolko
Theory of the Leisure Class Thorstein Veblen
The Corporate Reconstruction of American Capitalism, 1890-1916: The Market, the Law, and Politics Martin Sklar
Origins of the Federal Reserve System James Livingstone
Super-Imperialism Michael Hudson
The Age of Revolution 1789-1848 Eric Hobsbawm
I’ve started The Great Transformation and definitely intend to finish it. From what I’ve read so far it seems like the underlying premise runs something along the lines of: the end of an international monetary system based upon the gold standard (some way for money to fulfill its function as a store of value?) removed the last credible object for which the oligarchies in various countries could peacefully contend, short of de facto possession of or control over wealth and resources beyond their borders.
Is that about the substance of the book?
My Marxian (not Marxist!) econ prof was always talking about writing a new Principles text, but I don’t think he actually every followed through….John, if you’re out there listening….
While it’s not a finance book per se, my favorite econ text is Labor and Monopoly Capital by Harry Braverman. Braverman is a better economist than most because he spent several years working in a factory on the shop floor. He was a manual laborer before he was an academic, and it shows. Actually, I should probably read it again…
“The Mystery of Capital” by Hernando de Soto
One of the most important books about economics that I have yet seen. I think DeSoto deserves some kind of prize for bringing forward the findings of his research in his 12 year old tome (2003), written well before the financial crisis.
What’s crucial to understand is that all economic systems are bound and created by frameworks of laws. DeSoto is not an apologist for capitalism, but reading this book will help the reader understand how and why capitalism “succeeded” in places where it has flowered. It’s a nice foil to Jared Diamond’s “Guns, Germs, and Steel”, which has a bias for attributing cultural and economic success solely to cultural and/or geographic variables.
DeSoto’s book is very well written; it’s not dry; in fact, for this reader ti was a page-turner.
My takeaway, some 5-6 years after I read it, was helping me understand how law, legal infrastructure, and transaction transparencies are so necessary to the success of capitalism.
That said, following the financial crisis of 2008, deSoto’s book helped me to understand (although it’s not the main point of his fantastic book) how the *perversion and manipulation* of legal structure, law, and financial transparency can rot capitalism to its core.
De Soto is an advocate for the poor, and for increased transparencies. Highly recommended!
Here’s a brief synopsis from the Amazon link, above:
“”The hour of capitalism’s greatest triumph,” writes Hernando de Soto, “is, in the eyes of four-fifths of humanity, its hour of crisis.” In The Mystery of Capital, the world-famous Peruvian economist takes up the question that, more than any other, is central to one of the most crucial problems the world faces today: Why do some countries succeed at capitalism while others fail?In strong opposition to the popular view that success is determined by cultural differences, de Soto finds that it actually has everything to do with the legal structure of property and property rights. Every developed nation in the world at one time went through the transformation from predominantly informal, extralegal ownership to a formal, unified legal property system. In the West we’ve forgotten that creating this system is also what allowed people everywhere to leverage property into wealth. This persuasive book will revolutionize our understanding of capital and point the way to a major transformation of the world economy.”
Wow, this title slipped my mind.
What DeSoto understands — and David Graebber (an anthropologist) is the only other writer on economics who comes to mind — is the significance of literacy and writing systems in recording existing ‘stuff’ (cattle, pigs, houses, wells) and somehow assigning it a written value that can then be borrowed against, or lent against.
This is a truly original, invaluable book – I discard quite a lot of books, but this one remains in a valued spot on my bookshelf.
Useful follow-on books to De Soto are Fukuyama’s Political Order and Decay volumes. They discuss states, rule of law and accountability, or lack thereof, in various regimes over the years, and their characteristics.
Economics Unmasked by Philip Smith & Manfred Max-Neef
This book, plus wiki pages if you want a bit more background, was the perfect primer before tackling books or lectures by Steve Keen or David Harvey.
Before reading the above, I had read books by Stiglitz, Reich, Wolff, Krugman, Franks, Taibbi, Prins, Greider, Johnson, Chait, Hartmann. All of them left me confused about general economics — about the big picture. Some of them were good reading about details (especially Taibbi and Prins), but none gave a sense of the field. Those books written by economists never revealed the underlying assumptions – assumptions that Keen and Harvey totally debunk.
“Economics Unmasked” opened my eyes – but also left me suspicious. Could the discipline of economics really be that bad? As a physicist I was skeptical — at first I had a hard time believing what they said. So I audited two classes at UC Berkeley – a macro-economics course and history of economics course. The macro-economics course was like a course in religious indoctrination – the cult of Milton Friedman. Smith and Max-Neef were correct – and I couldn’t believe this nonsense was being taught at a UC. On the other hand, the history of economics course was great. Got to read bits and pieces from many: Smith, Ricardo, Malthus, Marx, Hegel, Keynes, Menger, Schmoller, Webb, Arrighi, Lucas, … It provided the necessary background to understand how economics twisted itself into the nonsensical mythology it mostly is today.
And if you want some insight into the instabilities of modern financialization, I’ve found Jack Rasmus’ last too books very helpful – “Epic Recession” and “Systemic Fragility in the Global Economy”.
“As a physicist” I would be interested in your take on Frederick Soddy’s ideas about money and economics. (See my comment above.) Here is the link to download an electronic copy of the book if you haven’t already read it: “Wealth, Virtual Wealth and Debt” As ‘not a physicist’ the idea a grounded a definition of wealth on something more substantial than the rigged financial markets’ monetary valuations (and the banks’ and Federal Reserve’s ‘funny money’), something like the laws of thermodynamics, has a definite appeal to me.
P.S. Thanks to everyone else! So much reading, so little time.
Commodity money should cover it….
Its just another anchor point not unlike gold, with all the inherent problems of trying to imbue an object with ethics or morals.
Disheveled Marsupial… Money that is backed by taxation has no – funny – injected into it…. compared to say bitcoin et al…
Thanks for the link – not sure when I will get around to reading the e-book. I still want to read Hudson’s “Killing the Host” before I tackle another economics book. By the way, Philip Smith, the primary author of Economics Unmasked, was a physicist — and apparently very well read in economics. I think he passed away before his book was finished leaving Max Neef to perform the final edits. Max-Neef is occasionally interviewed on Democracy Now! — worth a listen — and has several interviews available on youtube.
Killing the Host is great – and much more immediately relevant! Reading Hudson is like reading a Readers Digest condensed version of 4000 years of economic thought. I’ve read Economics Unmasked. It has four references to Soddy including this one in the Preface:
The link is to a 1933 version of Wealth, Virtual Wealth and Debt contains a lot of updated material including a “FOREWORD TO THE AMERICAN NATION”.
You (and FC) are in for a treat!
L. Randall Wray, Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems.
It began as a series of blog posts that are available *free* to read online at New Economic Perspectives.
It’s out now. I doubt if there are glaring deficiencies.
The Kindle version is maybe published by Amazon but the book isn’t.
Paperback: 394 pages
Publisher: CreateSpace Independent Publishing Platform; 1 edition (March 10, 2016)
I second anything by L. Randel Wray and anything from his Economics department at the
U of Missouri, Kansas City.
As Billy Mitchell says: spread the word.
Tom, the problem with Wray’s book, as I have had people tell me often enough, is that it is too abstract, which I interpret as having too few concrete examples. I don’t mean to say it doesn’t have any, only that it appears that a number of readers would like many more to help them embed the narrative in their understanding.
The Economics Anti-Textbook: A Critical Thinker’s Guide to Micro-Economics, by Rod Hill & Tony Myatt, Zed Books, 2010
Workbook based on powerpoint slides, for the 1st volume of Capital, from the Rosa Luxemburg Foundation
Thanks to all. I have been wanting the same thing FC asked for, this couldn’t have come at a better time. Will be heading to the library soon!
Come to this site daily and real economics sort of rubs off on you.
How much longer will we wait for a marble bust of Yves to be on sale to subscribers. I need to burn a few joss sticks before it each morning, please
Depends on what FC wants to do with what they learn. If they are looking for some understanding to help them advance in a corporate position in our rentier economy, they would best not stray far from the neo-liberal orthodocy.
If they want to understand economics in furtherance of being a left-liberal policy wonk, all of the suggestions here (except Marx) are good. To those economists already mentioned, I would add Thomas Palley, and Michael Hudson, who both have their own websites.
If they want to forge their minds into a sharp weapon to actually effect a radical change in our status quo, then I think most of the suggestions above can be ignored. Except, EXCEPT, for Michael Hudson. Just visit his website and start reading whatever strikes your fancy.
However, FC specifies a “primer.” What immediately comes to mind is Jon Larson’s 1992 Elegant Technology: Economic Prosperity from an Environmental Blueprint. This is a complete departure from mainstream economics: just look at the Table of Contents (Larson has posted most of the book online, chapter by chapter, but trying to get the links is exceeding my motel bandwith this evening.) Larson’s chapter on Money is a must-read for everyone, just because of its discussion of usury.
Hudson has an excellent book, with the first chapter or introduction discussing the fact that there were three schools of political economy which developed in the 19th century: 1) British school of Smith, Malthus, and Ricardo; 2) Marx; and 3) what used to be known as the American School. The British school is what we are practicing now, and it has recreated an oligarchy. Not surprising, since it was a justification for the British oligarchy and empire. Marx’s school has been tried in various forms and to various degrees, and has never succeeded without the intervention of a Red Army and the secret police.
Which leaves the American School. Though it is deliberately ignored by mainstream economists, it is the only school of political economy that has resulted in actual industrial development of national economies in conjunction with some degree or another of political freedom. The American School was used in Germany (look up Friedrich List) and in Japan (look up E. Peshine Smith). The development of fascism in those countries can properly be understood as a reaction against the ideas of the American School by nearly feudalistic oligarchical elites in those countries. Carroll Quigley’s Tragedy and Hope is startlingly truthful about this, though he never, ever mentions or recognizes the fight between these different schools of political economy.
Is there a good book on the American System? Not that I know of. But I do highly reccommend Securing the Fruits of Labor: The American Concept of Wealth Distribution, 1765-1900, by James L. Huston (1998). Huston actually develops the phrase “political economy of aristocracy” to describe the USA founders’ approach to understanding economic and wealth inequality.
I am surprised and disappointed no one suggested John Kenneth Galbraith “Faced with the choice between changing one’s mind and proving that there is no need to do so, almost everyone gets busy on the proof.”) . I would stress two of JKG’s books as good economics primers: Money: Whence It Came, Where It Went (1975) and especially Economics in Perspective: A Critical History (1987), which is exactly what its title says, and has the great added benefit of often being amusing.
JKG is clearly influenced by Veblen. Though reading Veblen will not help anyone learn the favorite terminology of today’s economic high priests, it definitely will inoculate you against their ideological fetishes. The best, of course, is Veblen 1898 The Theory of the Leisure Class. (Marx will explain why there is exploitation in a capitalistic economy; what Veblen supplies can be used to explain why there is exploitation in BOTH capitalistic and socialistic economies. In other words, don’t waste your time with Marx if you really want to influence coming events; study Veblen.)
Once you get most of this material read, I would suggest Veblen’s The Engineers and the Price System (1919). I’ve been cogitating how to write about this idea: look at any introductory economics textbook, and it will inform you that economics is the study of how societies allocate scarce resources. Well, Veblen was the first to point out that in advanced industrial economies, many resources are no longer scarce, but have become quite plentiful. However, the role of business managers has become the supervision of SABOTAGE of the production process in order or create artificial scarcities to support prices and profit margins.
Note how neatly the idea of scarce resources fits with the British School of Malthus. The American School stressed, beginning with Hamilton’s 1798 Report to Congress on Manufactures, the productive power of labor using machinery, as the means of creating wealth. Always keep in mind that there has been a continual conflict between the American School and the British School for control of the American Economy. Michael Hudson is particularly good on this history, so regularly visiting his site is important.
Overcoming the British school insistence on scarce resources is going to be crucial to our planet’s survival. We are at the point in advanced industrial economies where only 20 or 25 percent of the labor force is actually required to produce all that is needed. The elites can maintain control only by maintaining the illusion of scarcity. And, yes, as I ponder this problem, certain socialist ideas are looking more and more important.
Three books worth reading:
lombard street – walter bagehot
austerity history of a dangerous idea – mark bylth
the volatility machine – michael pettis.
You should be reading michael’s blog anyway.
I enjoyed “The Origin of Wealth” by Eric Beinhocker. Good introduction to complexity and complex adaptive systems. To compliment Mandlebrot, Didier Sornette’s book, “Why Stock Markets Crash”, is a good read on markets for technical types.
Go to website for the Henry George Institute and enroll in their several online course. You will learn about the original authentic economics which is THREE FACTOR – land, labor, capital – as opposed to the two factor (labor, capital only) corruption of economics that is the basis of neo-liberal economics. You will learn how a fundamental tax reform (untax wages and production, collect the unearned income of “economic rent” from land and natural resources) can and does build a fair free market economic with a fair distribution of wealth.
I recommend “Legacies of Great Economists” and “History of the U.S. Economy in the 20th Century”. Both are courses by Professor Timothy Taylor, available online. I’ve been through both of these courses. There are a bunch of other economics courses available from the same website that sells Taylor’s courses. For basic economics, I suggest taking an introductory economics course at a college or university. Without a knowledge of basic economics, you’re likely to be lost when trying to understand media discussions of subjects like interest rates, liquidity trap, zero bound, depression and recession, monetarism, what the Federal Reserve does, Keynesianism, how bonds work, money supply, etc.
Partha Dasgupta’s “Economics – A very short introduction” is a succinct account of economics in its entirety (economic history, development, welfare and values all make appearances). He’s got a solid acknowledgement of what the discipline can claim and what it cannot. Short enough to read in a day.
The pair of Tim Harford “Undercover Economist” books actually provide solid layman accounts of the mainstream. The first book covers mostly micro while the second book covers macro.
I would say that to start with the beginning – you have to start with understanding what money is. Once you figure out money, the rest of the understanding kind of follows.
Economics is like rain dancing – they dance, and sometimes rain comes. Nobody can offer a coherent explanation as to why, though, just that maybe this dance step or the other dance step made it happen.
Once you know about clouds and condensation, the rest of the understanding kind of follows.
And once you understand money, you can judge economics writings for yourself.
A. Mitchell-Innes is in my view the towering genius in understanding money:
Lots of great ideas–I’ve revised my reading list for the summer!
One thing, while it can be good to become familiar with the terminology in standard economics textbooks, as Steve Keen and numerous contributors to this discussion have noted, the standard texts’ foundation is overflowing with simplistic ideological drivel. And if the economics profession has taught us anything, it has taught us that once you fill people’s head with enough economic drivel, it can cripple the brain’s ability to ever think critically again. So for anyone who feels they nevertheless need to understand the standard story, a good text that can help immunize readers from the plague of neoliberal stupidity is “The Economic Anti-Textbook” by Hill and Myatt (already mentioned), which parallels the standard neoclassical micro text, first by briefly introducing the same ideas, and then by showing where these ideas have been disproven by other Neoclassicals (usually Saltwater), Behavioralists, Post-Keynesians, and reality [I have been teaching this text to undergraduates, and it has the added advantage of helping them learn to think critically–thus dooming their future careers in economics]. The authors apparently are working on a Macro Anti-Textbook, which I am looking forward to.
Another, more basic, but even easier to read book is “Economics for Everyone” by Jim Stanford, which no one has mentioned. It is a good intro to the field of economics, economic history and politics, and the basic economics of the real world. It would be a good book to read before Keen (which, while excellent, is a bit dense to begin with).
Finally, regarding the American School: while Hudson’s “Killing the Host” is excellent, it is much more focused on the current situation. However, Michael Lind’s “Land of Promise: An Economic History of the United States”, spends much more time on the history, ideas and development of the American School, from Hamilton, through Clay, Carey, Lincoln, etc. While Lind is not an economist, he is a good writer and he does do a good job of putting American economic history into a political context. Also, the book requires no foundation in economics to understand, and could be good to read before Hudson.