Sunday, June 6, 2010

A Primer on Economics

After yesterday's long and boring post about economics, it occurred to me that perhaps my readership isn't really all that interested in it and would rather hear about me reviewing candy or pictures of my dog.

I can't promise I won't write about economics, but it won't be very often. Trust me.

However, I think an understanding of economics is important. A few points to remember:

  • Economics isn't just about finance and money. The study of economics covers a wide range of things, such as time, preferences, and trade-offs. Economics has a good bit of psychology mixed in it. 
  • The biggest problem people have with understanding economics is separating it from politics. Obviously, this is impossible; the market system of any nation is going to involve political involvement in some fashion. However, saying things like "Buy American!" or "We need a living wage!" sounds great but has a lot more to do with politics than economics. Having that particular opinion isn't wrong, it just isn't about economics. 
  • I firmly believe that teaching a few key, unintuitive concepts are all it takes to allow most people to grasp why the economy works the way it does. Understanding opportunity cost, for example, sounds simple but is subtly complex. Comprehending it is crucial to understanding why businesses and governments operate the way they do.
Anyway, for those who are interested, here are a few books I would recommend. You don't need to read them all, but what they all do is boil the complex issues of economics into a more manageable style. They're all fairly easy to read but still get the important points across. And few of them have graphs. Trust me, this is a plus.

The Armchair Economist by Steven Landsburg. This is one of the first books on economics I read, and it's by far the most useful. It's a little dated--the references are from twenty years ago--but it's remarkable in how he takes every day issues and presents them as economic problems. I'm still not convinced that his explanations are flawless even though the conclusion is right, but the vast majority of the book is a perfect mix of readability and importance. [I would also recommend his other books, Fair Play and More Sex is Safer Sex, the latter being a little bit more detailed than his other two.]

Hidden Order by David Friedman. Probably the most technical of all the books I recommend, it's still very useful. I would maybe read this one last if you are still interested, but it's very similar to the Landsburg books.

Freakonomics by Steven Levitt and Stephen Dubner. I hesitated to add this one to the list, mostly because it's already so well-known and it's also not really insightful about economics proper; it's more about analysis. It's still important, though, and it's also a good example of how not all economics is about finance. (I have not read the sequel, Superfreakonomics, but I suspect it's of equal quality.)

The Undercover Economist by Tim Harford. This is by far the most fun of the books, Harford takes a legitimate look at economics with some lightheartedness. I perhaps would even recommend this first, but it is very similar to the Armchair Economist, and that book is much better as an introduction to economics. This one, however, is much more fun to read. (He has a few other books, too, but I haven't read them, either.)

Parliament of Whores/Eat the Rich! by P.J. O'Rourke. These are both humor books, not economics books, but I still think they are necessary. The latter is probably more important to read from an economics standpoint; however, it's more a travel book about economics than economics itself. Parliament of Whores is more about politics than economics, but it has some of the best descriptions of why the government operates the way it does.

None of these books will give you much in the way of technical economic information; however, at the very least, I think it will introduce you to some of the economic concepts that may explain why businesspeople and policy makers act in ways that seem counter-intuitive.

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