One Dozen or so Books on Economics
One reader asked me: David do you have a Top 10 book list on Economic Theory for beginners? Just finished “The Myth of the Rational Market” and loved it. But I don’t know what to read next. Or let me ask the question another way, should I start with reading books on Austrian economics? Hayek? Misses? Fisher?
I do want to give a list of economics books that I have read that I have found useful. I am an odd duck here, because I have been schooled in the neoclassical theories, and I have largely rejected them. Men, and the institutions of men are more complex than that.
Here’s my dirty secret. Yes, read the Austrian economists, but I have not read any of them. I have come to their conclusions on my own, but my views have also been influenced by Minsky and the Santa Fe Institute. I view economics as ecology.
All that said, here is a list of economics books that I think are valuable, that I have read:
1) Manias, Panics and Crashes, by Kindleberger. Kindleberger explains how crises come into existence in a systematic way.
2) Devil Take the Hindmost, by Chancellor. Chancellor describes the history of crises, and gives significant background data regarding economic crises.
3) The Alchemy of Finance, by Soros. Explains why men are not rational as the neoclassical economists think. Explains nonlinear dynamics — reflexivity, as he calls it.
4) A History of Interest Rates, by Homer. Detailed studies of how interest has played a role in our world again and again, even as idealists attempt to limit or eliminate it.
5) The Volatility Machine, by Pettis. Explains how smaller nations get whipped around by the economics of larger nations. The author is an important read in my opinion at his blog.
6) The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else
7) Against the Dead Hand: The Uncertain Struggle for Global Capitalism, by Lindsey. 
8 ) The Wealth and Poverty of Nations: Why Some Are So Rich and Some So Poor
9) The House of Rothschild: Volume 1: Money’s Prophets: 1798-1848
10) The Birth of Plenty : How the Prosperity of the Modern World was Created
11) The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics
12) The Nature of Economies
My view is that governments should provide a few basic simple rules regarding the economy, and let the courts fill in the details. Economies grow best when they are free, and where the culture concludes that growth is valuable. That is not true everywhere.
Full disclosure: all of the books that I mention here I own, and I bought with my own money. If you enter Amazon through my site and buy anything, I get a small commission, but your prices are he same regardless.
Update: These are books on macroeconomics. I may have a similar post on microeconomics coming. Also, I forgot one book that I recently reviewed: This Time is Different, by Reinhart and Rogoff. They cover why crises happen, but unlike Manias, Panics, and Crashes or Devil Take the Hindmost, they quantify it.
December 30th, 200910:39 am at
I would also suggesting easing into the Austrian “classics”. If you have picked up Mises’ “The Theory of Money and Credit” or “Human Action” be prepared for some heavy (important and insightful mind you) reading. The Mises Institute even has a study guide for “Human Action” (as well as an extensive book store.)
Regards,
TDL
December 30th, 200911:54 am at
Heilbroner’s Worldly Philosophers is a classic survey of economic thought. Read it and you will know more than most economists. Clark’s A Farewell to Alms is magnificent, turning theory upside down with fact.
December 30th, 200912:32 pm at
Hayek’s ‘Road to Serfdom’ has no formulas (good for Political Economy types like me) and is relatively easy to grasp. It is also a fairly small book so you don’t have to invest weeks of your time.
Also, FWIW – ‘Animal Farm’ by Orwell is an incredibly interesting book, although I have not read it in 10 years.
It’s fiction but a darn good read on statism acted out on a rural english farm when the animals take over and create a workers paradise. (haha!)
David, you must be quite the reader. I tried to wade thru the Ferguson book and found it incredibly boring, which shocked me since he is a really good public speaker.
It read more like an academic recitation of fact instead of what I thought should/could have been an interesting journey through history.
One other easy topical book: Tomorrows Gold by Marc Faber. He uses Austrian ideas in his investment thesis and tells a good story.
My picks are probably less deep theory and more application and real world. (although DeSoto is an incredibly good writer). Happy New Year!
December 30th, 20091:22 pm at
Thanks for the comments, and good picks all. I read Heilbroner a long time ago. Yes, the Ferguson book was a slog. It tried to be comprehensive, and ended up plodding at points. I read it when I had more time on my hands.
Faber is a clever guy. I met him at a conference in DC several years ago (2004-5?) where he basically called much, though not all, of what has transpired in terms of the crisis. As did Jimmy Rogers who I met at another conference in DC about the same time. Adventure Capitalist had just come out.
Their theses fit with the ideas of the firm I worked for. All that said, we were too early to the party, and I take my share of the blame there.
December 30th, 20092:25 pm at
I have to disagree with Soros’s “The Alchemy of Finance.” He’s a terrible writer: verbose and unnecessarily dense. I defy anyone to find a paragraph in that book that can not be at least 1/3 shorter than it is. He also has a penchant for taking relatively simple concepts making them needlessly complicated. Which is a shame, since he has some good ideas. A better editor would have been helpful.
Better reads would be “The Origins of Financial Crisis” by Cooper, which explains Soros’s basic idea of reflexivity in a much more readable (and relevant to current events) package and Hayek’s “The Counter Revolution of Science.” The latter critiques modern (post-war) economic theory as scientism rather than science in a more nuanced way than Soros does.
December 30th, 20094:22 pm at
John, thanks for the comment. It is a valid criticism. The book needed a better editor, or, a writer that would accept more editing. Alchemy was a useful book to me when I read it, because it made a lot of things click for me that I later built on.
I’m no Soros fan, but Alchemy put a permanent dent in neoclassical economics for me, and made me start thinking more independently.
December 30th, 20098:36 pm at
Thanks for the list of fresh names, at least for me. Holidays allow a bit more time to get some extra reading in.
December 30th, 20099:02 pm at
I’ve also found many analogies between economics and ecology, if only for the reason that ecology has done a much better job of utilising complexity/non-linear dynamics methods. I didn’t know about Jacobs’ book so thanks for that! Have you read any other books on this theme?
On similar themes, I’d definitely recommend Michael Mauboussin’s “More than you know” which has lots of good material on complex adaptive systems analogies to markets. On Austrian economics, I’d recommend Bruce Caldwell’s book on Hayek “Hayek’s challenge” which has a great summary of Hayek’s work including his work on complexity, as well as a great introduction on Austrian economics.
Minsky’s work has many parallels in ecology, in particular to CS Holling’s work on ecosystem resilience. I wrote up a short note on the similarities here http://www.macroresilience.com/2009/12/06/minskys-financial-instability-hypothesis-and-hollings-conception-of-resilience-and-stability/ .
December 30th, 200910:51 pm at
I liked your article. You have a very promising blog. Do you have an RSS feed?
The Santa Fe has a lot on nonlinear dynamics in investing. Away from that there is Soros, and a few others mentioned in the comments here.
David
December 31st, 200912:46 am at
Thanks! Any feedback’s most welcome. RSS feed is
http://feeds.feedburner.com/MacroeconomicResilience
December 31st, 200912:50 am at
I have added you to my RSS reader. Keep up the good work.