Tuesday, 8 November 2011

Which Books To Read About Economics

Somebody sent me an email the other day. The person wanted to know what kind of economics and which books I had been reading. The reason why he was asking was that he'd been reading Debunking Economics by Steve Keen - I highly recommend that text to everybody, never has there been a more comprehensive book about the nonsense that is taught to economic students - and thought I was making sense with the economics that came out of my pen. I have to admit, I felt a bit relieved to hear that. Maybe I'm "escaping from the old ideas, which ramify, for those brought up as most of us have been, into every corner of our minds." (One point to him or her who knows this quote without googling it).

I started thinking about which books were the most important in opening my eyes to real-world economics. I came up with this list, roughly in chronological order.

1. Manias, Panics and Crashes - Kindleberger
2. The Origin of Financial Crises - Cooper
3. Stabilizing the Unstable Economy - Minsky
4. Can "It" Happen Again? - Minsky
5. John Maynard Keynes - Minsky
6. This Time Is Different - Reinhart and Rogoff
7. Animal Spirits - Akerlof and Shiller
8. The Holy Grail Of Macroeconomics - Koo
9. Predictably Irrational - Ariely
10. Debunking Economics (1st ed., just finishing 2nd.) - Keen
11.When Money Dies - Fergusson
12. The Coming Generational Storm - Kotlikoff
13. Theory of Economic Development - Schumpeter
14. A Guide To What's Wrong With Economics - Fullbrook
15. Keynes: The Return Of The Master - Skidelsky
16. How Markets Fail - Cassidy
17. 23 Things They Don't Tell You About Capitalism - Chang
18. Keynes Betrayed - Tily
19. Crisis Economics - Roubini

I can recommend all of those books to everyone. The ones in italic are books that I remember had the utmost effects on my way of thinking about economics problems. I cannot stress how important it is for students, scholars and most importantly teachers in economics to read them! Also, anyone with interest in being able to distinguish between the bullshit and the real-world theory should read the ones in italic - especially Debunking Economics and How Markets Fail.

For those who want to have fun while learning about the markets and the craziness of economic theory I can recommend Predictably Irrational, The Big Short (Lewis) and Too Big To Fail (Sorkin) to name just a handful out of my head.

So start reading people, otherwise no good things are going to happen to this travesty that mainstream economics is today.

And remember: Hicks's IS-LM isn't a Keynesian model. Hicks himself admitted to that 30 years ago. Oh, and finally, in case you didn't know: the market demand curve doesn't slope downwards at all times, it can go up and down like a snake. Also, there is no market supply curve.


  1. I wouldn't recommend Sorkin. I don't think I would recommend Reinhart & Rogoff either, except perhaps for the data. Nicholas Shaxson's Treasure Islands is an excellent piece of work. Fintan O'Toole's Ship of Fools about Ireland is an angry work. A beautifully written history is Liaquat Ahamed's Lords of Finance.

    To think that Krugman still thinks that IS-LM is a good teaching tool. Extraordinary.

  2. I found Sorkin quite a good text but it's more like a novel, I torn through it in 3 days last Christmas. No theory in it but the story is good. Haven't read Shaxson but it looks good, it is hereby on my to-read list. Lords of Finance is extraordinary!

    Regarding the IS-LM... sure, you can use it as a teaching tool to get beginners to understand basic stuff like expansionary or austerity government spending. But the second you introduce it, the teacher has to make it clear it's flawed like hell.

    So it's kind of just better not wasting time introducing it to students and throw it in the bin...

  3. Sæll Ólafur

    Ég datt inn á þennan pistil í gegn um pistilinn sem þú skrifaðir fyrir Pressuna á miðvikudaginn 10. jan. (http://www.pressan.is/pressupennar/Lesa_Olaf_MArgeirsson/hagfraedin-og-hrunid)

    Mér fannst hann alveg frábær. Enda er gagnrýni þörf á menntastofnanir landsins. Sérstaklega hef ég nokkur vel valin orð fyrir viðskiptafræðideild HÍ þar sem ég stunda nám við sjálfur.

    Ég var að spá, er ekkert pláss fyrir A Random Walk Down Wall Street eftir Malkiel á þessum lista hjá þér?

  4. Hi Hjalti,

    Yeah don't be afraid to bombard your teachers with scrutinising questions. They are there to answer them! Since you're a student I'd like to recommend this link to you where you can find discussion about how the world of economics looks like from the students' point of view:


    I haven't read Random Walk - that's the main reason why it hasn't made it on the list. If I ever come across it after I've piled through the list of books that I want to read I'm sure to read it.

  5. Sorry, I should have phrased my comment in English of course.

    Random Walk is a book about investing and it tells you to invest in intrinsic value, not castles in the sky. It also suggests a buy and hold strategy in contrary to massive trading. It's really great, having been first published in 1973 and since then been updated and revised 11 times.

    Thank you for your pointers, I'll make sure to check out your link.

  6. Just found your blog. It looks great. I have a question about these books from a beginners perspective. Would you recommend any (or all) of the above books for a technically competent person (an engineer) with absolutely no formal economics education? (not a single class!) My entire economics education so far comes from "the accidental theorist" by Krugman, and "New Ideas from Dead Economists" by Buchholz. I have recently purchased "Bad Samaritans" by Chang, but haven't started it yet. My concern is not that some of the books might be mathematical - I can handle that. It's that they might not define all their terms or explain models that they refer to - simply assuming the reader has more knowledge about these things than I presently have (especially true when it comes to high finance, CDS, etc.). Would your list change at all for people like me?

  7. Glad you like the site Anonymous. I'd maybe begin with Fullbrook (A Guide to What's Wrong with Economics) as they introduce different topics concerning economics (micro, macro, ethics, aggregation problems, etc.). It also gives you a crash-course in why the ruling School of economics (neoclassical) is seriously flawed and quite frankly not of this world. Check out Economyths by David Orrell (it's cheaper than Fullbrook's) as well. No definitions needed for that one.

    Other than that, it's just something you pick up along the way. If you want to read a market-oriented blog I can point out zerohedge.com - be prepared to Wiki and Google some of the terms they use - and more human-terms-like would be creditwritedowns.com. Check out Steve Keen's YouTube channel as well: http://www.youtube.com/user/ProfSteveKeen

    Hope this helps!