Burton Malkiel's classic A Random Walk Down Wall Street is being reissued in a post-credit crunch, financial crisis edition this month. It will be interesting to see his response to the post-crisis critique of financial economics, and especially of course the (hiss, boo) Efficient Market Hypothesis. The book's title refers, of course, to the original finding that active selection of stocks by professional investors delivered returns no better than those generated by investing according to the toss of a coin (a random walk).

That finding has since been successfully challenged by Andrew Lo and Craig MacKinlay in their A Non-Random Walk Down Wall Street. They have developed techniques for finding the predictable elements of stockmarket movements. But despite this, one empirical regularity remains true: professional investors do not outperform the market (and still charge retail investors high fees). Nassim Taleb has caught the popular imagination with his blasts against stockmarket professionals in The Black Swan and Fooled by Randomness. He shows that pure luck can amply explain seemingly star performances on Wall Street. But the father of the Efficient Market Hypothesis, Eugene Fama, has also recently confirmed the failure of investment professionals to add value. One can only conclude that too few professionals have bothered to read Lo and MacKinlay.

There's another interesting perspective on stockmarket patterns, and that's econophysics, which describes price moves using non-linear mathematics to spot bubbles building over a long period. Didier Sornette's Why Stockmarkets Crash: Critical Events in Complex Financial Systems describes this type of work very clearly.

What is the ordinary investor to make of all this? My advice is to buy John Kay's marvellously straightforward and sensible book, The Long and Short of It, and do what he says. That certainly includes not paying high management fees to fund managers.

I noticed in one of the year-ahead round-ups that Malmesbury has badged itself as the UK's Philosophy Town, with an annual Hobbes festival. I particularly love the sound of its

for obvious reasons.

Hobbes is a particularly interesting philosopher for economists because he is the origin of the idea of self-interest as the basis for human behaviour, something for which you can acclaim or blame him depending on your perspective. The extent to which he relies on an extreme and unrealistic view of humanity is often overstated, I think. (There's a good summary of the debate here.) Many of his works are readily available online (here is Leviathan at Project Gutenberg), so you can make your own mind up. I'm not sure anyway that Hobbes's thought is really appropriate for our own political context. Although he's historically important for originating a number of key ideas – another is the distinction between state and civil society – he was  a man of his own disordered and war torn times. Our 21st disorders are very different.

I've been reading chapters from Edward Barbier's Scarcity and Frontiers: How Economies Have Developed Through Natural Resource Exploitation, a newly published history of the role resources have played in economic development from the dawn of recorded time to the present. It's a book that truly deserves the adjective 'magisterial', and I think it's going to prove an important text for both economic historians and development economists.

The central question Barbier poses is deceptively simple. If natural resources were such a blessing at different times and places in the past – think of the American Frontier, for example, or the Britain of the Industrial Revolution – why are they so often a 'curse' now? Economies which have already developed on the whole manage their resources to the benefit of growth, but amongst the developing and poor economies only the BRICs (Brazil, Russia, India and China) seem to benefit from their endowments of resources. In other cases the resources are a source of macroeconomic instability at best and violent conflict at worst.

Prof Barbier answers the paradox with a 'frontier expansion hypothesis'.  A frontier can be horizontal – adding land – or 'vertical' – for example mining a new discovery. Natural resources are a blessing when their exploitation creates substantial economic rents which are captured and reinvested into productive activities in other sectors of the economy. The large-scale rents have stemmed from a number of phenomena at different times. For example, serfdom or slavery – Evsey Domar's 'free labour' – is one way. Windfalls from price booms or new discoveries, as in the gold rush, is another. Thirdly, technological developments can achieve the same result.

The resource curses of contemporary times thus stem from either benefits from resource exploitation which are too low, relative to the economy, and/or from a failure to reinvest the benefits into other dynamic sectors.

The final chapter of the book looks in detail at the complex reasons for this failure. It starts with the stylized facts of modern resource-dependent economies in the developing world. For one thing, they remain resource-dependent and do not diversify, and the more resource-dependent, the greater their poverty. There is often pressure on land and water, and a high proportion of the population is concentrated in fragile land. The context of the global economy differs markedly from that in earlier eras of resource development, particularly in the much smaller share of world output accounted for by primary products: technology and human capital are far more important resources now. Finally, the poorest countries have weak institutions – as often noted – so the benefits of natural resources are not invested wisely. It is probably clear from this that Barbier incorporates a number of other suggested explanations, such as the 'Dutch disease' impact on exchange rates, or hypotheses about corruption, into his overarching 'frontier expansion hypothesis'.

The book concludes: “The problem of underdevelopment, and particularly the persistence of poverty and lack of economic opportunities among the world's poorest people, may be inextricably linked to the poor management of land and natural resources.” (p633) And Barbier ends with a discussion of the way ecological pressures are exacerbating these problems as well as presenting new challenges everywhere. He takes comfort from the fact that modern growth does not depend as heavily as economies did in the past on the exploitation of natural resources. Resources that were abundant up to the 20th century will be scarce now. However, “a critical driving force behind global economic development has been the response of society to the scarcity of key natural resources.” The challenges are different, but the conditions for a successful response are the same as they have always been.

I should add that this is not a light read, but a large and scholarly book – I picked out the chapters which looked most interesting. There are 3 or 4 chapters of particular interest for the modern issues. Barbier's over-arching hypothesis seems sufficiently capacious to include a number of more specific hypotheses about economic development. This isn't intended as a criticism; indeed, the point about the need for  productive investment into other parts of the economy seems absolutely spot on, looking at the absence of diversification in so many developing countries.

Scarcity and Frontiers is an important addition to the research looking at the crucial role nature plays in our economic well-being, joining books like Jared Diamond's Collapse and Thomas Homer-Dixon's Environment, Scarcity and Violence (also interesting for his interest in the dynamics of complexity – see the article at the top of this page) and older texts such as Joseph Tainter's The Collapse of Complex Societies.

This is a key and expanding literature for our dawning Era of Scarcity.

It's taken me some time to work through Kaushik Basu's Beyond the Invisible Hand: Groundwork for a New Economics. The book has a lot of game theory examples, which I always find rather hard going, especially as the basic strategic insights often seem straightforward. It's quite a philosophical work as well. But the argument is clear enough.

Basu says that the methodological individualism of economics is flawed – and hence the invisible hand doesn't exist. Instead, he argues, people often behave according to social and cultural norms and beliefs, and not according to their rational self-interest. Furthermore, he argues that taking due account of the importance of custom and culture makes it more likely that inequality can be reduced than would be the case if the economy did consist of selfish individuals. He writes: “A fundamental step in broadening the scope of economics is to recognize that the feasible set of actions open to individuals is much larger than our models make it out to be.” (p27) What's more, the feasible set evolves over time.

For example, it's custom that means most of us do not steal other people's wallets when we have the opportunity to do so, or break the traffic laws when there is no policeman around. But the accepted norms can and do change. Most people most of the time do not act as a literal interpretation of rational individualism might suggest.

To emphasize the importance of custom and trust, Basu paints a picture of what an economy actually based on individual selfishness would look like – the nightmare of Kafka's The Trial. “[Kafka] concurs with Smith about the forces that can be unleashed through atomistic individual actions, with no centralized authority, but broadens our canvas of understanding by making us aware that while these can be forces of efficiency, organization and benevolence, they can equally be those of oppression and malignancy.” (p56)

It's an effective way of giving trust its due in the way we think about the economy. But I would make two observations about Basu's argument. One is that the point is by now rather familiar and many economists – maybe even most – would not dispute it. (It really came home for me on reading the 2000 paper by Ed Glaeser and Jose Scheinkman, Non-Market Interactions.) Nevertheless, models based on rational self-interest remain an extremely useful tool. Not only is it illuminating to try to understand departures from their predictions but in fact they often have strong predictive power, for in many circumstances people do behave in the way the conventional models assume.

The second is that Basu is chief economic adviser to India's Ministry of Finance. My experience of and reading about India suggests to me that it is a country very far from suffering from the excesses of deregulated markets under the influence of a conservative economic ideology. On the contrary, India still seems to have an excess of custom and convention rather than an excess of 'free' markets. So I suppose this book is aimed at Anglo-Saxon orthodox economists to try to persuade them, using their own techniques such as game theory, of the error of their ways. But in which case, the book is probably pushing at an open door, as many mainstream economists are already sympathetic to the general point even though remaining unconvinced of the need to ditch completely conventional models. You can hardly pick up a mainstream journal now without finding an article about trust or culture.

So this is another book pitched as an attack on mainstream neoclassical economics that, although far more sophisticated than many in the genre, fails to acknowledge the way the mainstream has developed or the breadth of views within it. Professor Basu obviously doesn't share the political views of some orthodox economists but that doesn't mean we need a new economics.

Rather, what economists need to do is to keep on chipping away at the huge areas of our ignorance about the economy, and especially the macro-economy and financial markets. When economists can disagree so fundamentally, about the deficit for example, we are obviously not in the realm of hard science. For me, that's a situation that cries out for more work, and more data, and, sure, some new modelling approaches. But please can we get over the obsession with overturning all of existing economics before getting on with it?