best books to learn economics

[Frosti85]

I'm currently reading modern money theory from L. Randall Wray

Also reading economics in one lesson, and have read how an economy grows and why it crashes

also read lot of books about the stock market.

Still I kinda feel I dont really have a clue what is going on in the global economy.

I'm especially interested in:

- how the monetary system works.
- general macro economic topics
- economic history

like, if I want to become a global macro hedge fund manager... what would I have to learn ?

or maybe no one really has a clue ?

[Riggerjack]

Milton Friedman is always my go to for economics. He has a great natural teaching ability, he communicates well, which is rare in the field.

He was brought up in the Australian school, (at one point von Mises called him a communist) but then branched out, founding the Chicago school (Austrian logic meets better math).

For light reading, I recommend: https://www.amazon.com/Money-Mischief-E ... B000AQ23N6

It is still some serious thought about economics, but themed on economic misadventures, so it's great for getting a feel for the subject.

Back when he still wrote about economics, Krugman did some good works for Slate. After the Nobel prize and getting the pundit job at the NYT, he clearly decided economics were a distraction from his preaching, and now he directly contradicts his previous work, and basic economics, to endorse his politics.

I like von Mises, but simple principals can only be extrapolated from so many times before the uncertainty exceeds the certainty of the results. I think he tried taking logic farther than it can be applied in a field with so much uncertainty. Also, there is the whole internet trolling of Austrian first principals. He paints a picture of a simple world, with the tools to explain the day to day world around us. This can result in enthusiastic young men trying to convince the whole internet to stop trying to make problems worse. See my posts in the "obamacare not repealed, whoda think it?" Thread for an example, though I'm not young enough to not know better.

[Chad]

A good macro book written after 2008 is The Rise and Fall of Nations: Forces of Change in a Post Crisis World. The author does a good job of identifying macro forces that help shape economies throughout the world.

https://smile.amazon.com/Rise-Fall-Nati ... of+nations

Niel Ferguson is another author who covers macro forces in his books. I don't always agree with him, but he is a good writer and his arguments are sound. Civilization: The West and the Rest is a good book. He also wrote a financial history book titled The Ascent of Money: A Financial History of the World.

https://smile.amazon.com/s/ref=nb_sb_ss ... 68CMXE9P8D

The Jared Diamond books (Collapse and Guns, Germs, and Steel) are also good, but they are not specifically economic books. He focuses on the forces in society and some of those forces are economic.

https://smile.amazon.com/s/ref=nb_sb_no ... ed+diamond

[Dragline]

Praxeology (von Mises's stab at a fundamental belief system upon which everything he taught is based) is kind of a bitch, ain't it?

I suggest you read a book that traces the history of economics before delving into any aspect of the subject in too much depth, as it is fraught with intellectual rabbit holes and over-simplifications of complex systems. Most people use their preferred rabbit hole as an adjunct to their other preferred beliefs or narratives.

A good and relatively easy read for the history tracing back to Adam Smith and carrying through the 19th and 20th Centuries is "Debunking Economics" by Steve Keen. It also explains "textbook economics" and its alternatives quite clearly and succinctly.

Or Schumpeter's mega-history of the subject going back to ancient times, but that is way to daunting for most people and ends where Schumpeter ended mid-20th century.

Note that having a theoretical knowledge of economics would probably make you a bad and overconfident hedge fund manager, because the theoretical worlds of economists are largely maps of territories that don't really exist, or are woefully incomplete at best. This is the lesson of Long-Term Capital Management, which was based on Nobel-prize winning economic theories and models, and was one of the biggest failures ever.

Keynes was one of the few economists who was also a good investor, but you'd be better off reading a biography about his trading than his textbooks.

[ducknalddon]

or maybe no one really has a clue ?

Well it is called the dismal science.

I'm part way through Economics The User's Guide by HaJoon Chang, it's a good read but may be too introductory for you.

[fiby41]

Also see Economics books thread
viewtopic.php?t=6386

[ThisDinosaur]

Recently read Human Action, and I agree with Dragline that its hard to get past the primary assumprions of praxeology if you've already read Kahneman and know that's not how human behavior actually works.

For economic history, A History of Interest Rates is better than its title suggests. For how the monetary system works, the opening chapters of Alpha Strategy is a good, concise explanation of how fractional reserve banking and governments interact. I'd read that before reading something denser, like Man Economy and State.

[BRUTE]

Mises treats human psychology as a complete black box, brute found that Praxeology does not depend in any way on Homo Economicus or any of that stuff.

brute generally likes the Austrians. yea, there's uncertainty, but at least they don't hide it behind math, they just state it outright. just because there's complicated math doesn't make it correct.

key economic insights in brute's opinion:
- subjective value theory (invalidates all of Marx in one fell swoop, Austrians, Mises is good or Rothbard)
- creative destruction (Schumpeter)

[Riggerjack]

Yeah, the black box approach is sound.

But Austrian economics is a love/hate school, either you can accept that you will never understand why 3 out of 5 people make a choice, and study what factors would make that a 2 out if 5 choice, or you can decide which is the "right choice" and obsess over why people make the wrong choice. IE, behavioral economics (what's wrong with people who have the wrong values?).

Where anyone falls on that spectrum seems to have more to do with other values than economics.

[ThisDinosaur]

Mises treats human psychology as a complete black box, brute found that Praxeology does not depend in any way Homo Economicus

A black box that makes rational decisions to get specific outcomes. It doesnt address the possibility that many decisions are made randomly and that the conscious mind justifies them afterward in order to maintain a narrative. Or the idea that any rational choice between two + alternatives requires an irrational emotional attachment to one of the outcomes over the others. Nevertheless, there are some good insights in that book.

[Riggerjack]

A black box that makes rational decisions to get specific outcomes. It doesnt address the possibility that many decisions are made randomly and that the conscious mind justifies them afterward in order to maintain a narrative. Or the idea that any rational choice between two + alternatives requires an irrational emotional attachment to one of the outcomes over the others. Nevertheless, there are some good insights in that book.

No. But this is a common critism of Austrian economics. Only used by people who never studied it.

The assumption in AE, is that there is no way to know the motivation of another human being, but that we can assume that their actions are rational, given their values. Thus, a person with strong community ties may choose not to engage in a profitable activity, but someone without those ties may do so. This is rational in Austrian economics (where individuals are expected to act in their own best interests, as they define them), and irrational in behavioral economics (where individuals are expected to conform to the values of the economist).

What I have seen is Austrian economics appeals to people who can intuit price mechanisms, and behavioral economics appeal to people whose political views are threatened by economics. Or, at least, I only see strong preference for BE over AE among those who also have strong progressive stances.

As we are talking mental models for abstract worldview, it's an entirely subjective filter. Use what works for you.

[ThisDinosaur]

A black box that makes rational decisions to get specific outcomes. It doesnt address the possibility that many decisions are made randomly and that the conscious mind justifies them afterward in order to maintain a narrative. Or the idea that any rational choice between two + alternatives requires an irrational emotional attachment to one of the outcomes over the others. Nevertheless, there are some good insights in that book.

No. But this is a common critism of Austrian economics. Only used by people who never studied it.

Define "studied." I've read two books on the subject (AE). What did I miss? And how is BE a progressive worldview? Isnt it just based on incorporating known sociological effects into older economics models? Its not a blemish on economics that some of its old ideas are now obsolete. Thats how any good science works.

[Campitor]

Basic Economics by Thomas Sowell

A good read for the basics behind economics without any fancy graphs or the need for math gymnastics.

[Riggerjack]

https://mises.org/library/what-do-austr ... n-rational

You seem to have missed this.

The only people who bring up behavioral economics when I am talking about economics are progressive, and seem very uncomfortable with capitalism, in general. Each will say they like it, then point out all the ways it disappoints.

I agree that free markets do not give optimal results in many cases, nor do they work in a vacuum. I commonly agree with progressive goals, it is their methods that put me off. Progressives tend to push for political solutions to problems created by political solutions. See the obamacare not repealed thread for examples. The same folks arguing that we need single payer healthcare, are the same people who bring up the same silly arguments about AE.people aren't rational. AE is heterodox, etc. Maybe, if a self proclaimed conservative used the same arguments I wouldn't associate it with progressives, but that hasn't been the case. Throw in progressive distrust of markets, and yes, it seems clear that a political ideology has definitive effect on economic models chosen.

It's only a mental model, so I try not to get drawn into arguing about it. I'm not very good at not getting drawn into arguing, though.

[Riggerjack]

Behavioral economics looks like this. Design experiment, there will be one correct choice, as defined by the testor. The "correct choice" will be chosen by some participants, not by others.
From this, they concluded that people are not rational, markets are not efficient, and we can safely throw the old models showing how badly my current politics will go wrong right out. This is very comforting to people who know that there is a fairer distribution of resources, but disconcerted by the vast history of progressive experience with "unintended consequences". If there is an entire science showing that there is a right and wrong way to do things, and the right way involved using tools you aren't comfortable using,it can be comforting to think that science is bunk. Thus the coincidence of progressive thought, and embracing behavioral economics.

Personally, the ideas of behavioral economics is fun to study, but like game theory, the results are dependent on test conditions. If they make you more comfortable with the world, that is fine by me.

As I said, economic models are just mental shorthand. Arguing mental models never convinces anyone, in my experience.

My own economic views are probably most closely associated with Milton Friedman and the Chicago school. Yet I believe all economic models to be thoroughly flawed, or we could use them predictively.

[BRUTE]

Define "studied." I've read two books on the subject (AE). What did I miss?

which books?

[ThisDinosaur]

How would praxeology explain this:
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3724120
Or this:
https://www.google.com/amp/s/whyevoluti ... -will/amp/

Summary:many decisions are made in the brain spontaneously before we are aware we have made them. Mises says every decision can be explained as a thinking person trying to scratch a specific itch, even if he's misinformed about the best way to do that. Or if he would be better off ignoring the itch altogether. He takes pains to point out this is a distinctly human thing to do. Ignoring that the line between a "decision" (see links above) and a reflex is almost arbitrary at the neuroanatomical level. By Mises' definition, worms and the spastic limbs of people with upper motor neuron injuries are "rational."

Also, the last half of that link, Riggerjack, makes a flying leap to a bizarre conclusion that rejecting this praxeology hypothesis means you must prefer state intervention in peoples lives.

[ThisDinosaur]

@brute
Human Action, and Man, Economy, and State.

[BRUTE]

@brute
Human Action, and Man, Economy, and State.

those are the two most defining works about AE, so if those won't do it, nothing will. maybe it is like Riggerjack said: all individuals pick and choose the theory that explains their personal view of the world best.

[BRUTE]

How would praxeology explain this:
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3724120
Or this:
https://www.google.com/amp/s/whyevoluti ... -will/amp/

Praxeology would not explain consciousness or the lack thereof. in fact, brute does not believe in consciousness, but believes in (deterministic) Praxeology. there is a thread somewhere on this forum where he explains it, but doesn't have the link handy.

since Mises treats the economic agent as a black box, it doesn't matter if the agent is conscious or not. Mises himself doesn't state this, but brute thinks Praxeology could be used to describe the economic interactions of animals, or even computers.

"humans are irrational" is no more an attack on Misesian Praxeology than "but it's cold outside" is a counter to physics. not even wrong. irrelevant.