Monthly Archives: June 2013

Economics Textbooks

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Steven Clarke asked in a comment on an earlier post about recommendations for an intro economics textbook. Here are my thoughts. Others might want to add their comments.

He has started reading Samuelson, which is a good choice – a classic – so carrying on with it is fine.

The current market leader is Greg Mankiw’s [amazon_link id=”0030259517″ target=”_blank” ]Principles of Economics[/amazon_link] – apparently it has 70% of the US market.

Others often used in UK undergraduate courses are:
Sloman – [amazon_link id=”0273763121″ target=”_blank” ]Economics[/amazon_link]
Lipsey and Chrystal – [amazon_link id=”0199286418″ target=”_blank” ]Economics[/amazon_link]
Begg – [amazon_link id=”0077107756″ target=”_blank” ]Economics[/amazon_link]

There is a CC download of an intro textbook by Preston McAfee – I haven’t read it but it looks pretty encouraging and is free so might be worth looking at for comparison.
http://www.mcafee.cc/Introecon/

The trouble with the textbooks in economics is that they contain things we economists know to be wrong. The brilliant John Sutton at LSE has long complained about this, and Steve Keen made much of it in [amazon_link id=”1848139926″ target=”_blank” ]Debunking Economics[/amazon_link]. So it is also worth reading some of the more popular books that don’t cover the technical grounding but do explain what economists actually do. My favourite is Tim Harford’s [amazon_link id=”0349119856″ target=”_blank” ]The Undercover Economist[/amazon_link]. My own book Sex, Drugs and Economics (pdf) is fabulous, and free, but a bit out of date. I’m not so keen on [amazon_link id=”0141019018″ target=”_blank” ]Freakonomics[/amazon_link] – it’s a good read but takes to a gimmicky extreme the Becker school of economics that says you can analyse decisions to commit crime or have babies or get married just like decisions to buy a new pair of shoes. There is some insight in this but it’s not the whole story.

[amazon_image id=”0349119856″ link=”true” target=”_blank” size=”medium” ]The Undercover Economist[/amazon_image]

Finally, Geoff Riley of Tutor2u has a great booklist of enrichment reading specifically for economics students.

Town and country

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This week I read [amazon_link id=”1444723391″ target=”_blank” ]Scarp[/amazon_link] by Nick Papadimitriou. I was expecting something like Richard Mabey’s [amazon_link id=”0956254551″ target=”_blank” ]The Unofficial Countryside[/amazon_link] or [amazon_link id=”0099539772″ target=”_blank” ]Edgelands [/amazon_link]by Michael Symmons Roberts and Paul Farley, or perhaps Iain Sinclair’s [amazon_link id=”0141014741″ target=”_blank” ]London Orbital[/amazon_link]. Scarp is set in my part of the world, the northern and western fringes of London. And I love these books about the way the countryside invades the city – the buddleias in railway sidings, the rampant ivy over a tumbledown garage, the supposedly rare but actually common as muck newts on every building site, the red kites hovering over the A40 and so on.

Also, we can’t be reminded often enough that the UK is a mainly rural country; as Kate Barker’s reports set out (see the 2006 Interim Report on Land Use Planning), only 8.3% of the land in England is urban, less still in the other three nations.

[amazon_image id=”1444723391″ link=”true” target=”_blank” size=”medium” ]Scarp[/amazon_image]

I enjoyed Scarp but it’s stranger and ultimately more moving than the other books listed above. It’s also a memoir, in effect, of an unloving, lonely and poor London childhood. I don’t know if it’s strictly autobiographical, but it strikes me as an authentic account of the experience of all too many children. Beautifully written, almost magical realist in some passages, odd, revealing.

Teaching economics

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One of the reasons this week has been busy is that I spent yesterday at a fantastic INET-hosted workshop on undergraduate curriculum reform. Regular readers will know I’ve had an interest and involvement in this since organising a conference co-hosted by the Bank of England and Government Economic Service in 2012, which was summed up in [amazon_link id=”1907994041″ target=”_blank” ]What’s The Use of Economics[/amazon_link].

[amazon_image id=”1907994041″ link=”true” target=”_blank” size=”medium” ]What’s the Use of Economics?: Teaching the Dismal Science After the Crisis[/amazon_image]

The workshop had participants from the US, Chile, India and Turkey as well as the UK contingent. In some of the universities represented, curriculum reform is already under way. There is of course an interaction between the content of the curriculum, both in terms of topics covered (eg is economic history in or out?) and the approach to economics involved, and the pedagogy. I think we all got quite inspired by the possibility of improving the way young people are taught economics, although there will be a lot of work in developing materials and working out how to encourage different universities and academics (not to mention students), facing a range of incentives and pressures, to change.

It was interesting to see what textbooks people use and what they think about them. Greg Mankiw’s [amazon_link id=”184480870X” target=”_blank” ]Economics[/amazon_link] is a market leader in many countries, but none of the participants yesterday like it. Many use Hal Varian’s [amazon_link id=”0393935337″ target=”_blank” ]Intermediate Microeconomics[/amazon_link] and think it is a great book but many dislike the approach to economics is has embedded: start with individuals and firms and consider them at length, then after many chapters put them in a perfectly competitive market, and in the last small section consider departures from that ideal – and non-existent – situation.

Two books I didn’t know about that were recommended yesterday were Joel Watson’s [amazon_link id=”0393929345″ target=”_blank” ]Strategy: An Introduction to Game Theory[/amazon_link] and Jonathan Gruber’s [amazon_link id=”1429278455″ target=”_blank” ]Public Finance and Public Policy[/amazon_link].

[amazon_image id=”0393929345″ link=”true” target=”_blank” size=”medium” ]Strategy: An Introduction to Game Theory[/amazon_image]

Positive, normative and provocative economics

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Last night it was my privilege to give the annual Pro Bono Economics lecture. I’d be delighted to hear people’s comments on it. (It would be even more pleasing if you’d look at the website and consider making a donation to their work.)

Many people in the audience have been enthusiastic, but one macroeconomist has taken great offence at my criticism of macro. I daresay I was too provocative – Dave Ramsden of the Treasury, chairing the evening, diplomatically described it as ‘challenging’ – but it does simply amaze me that so many (but not all) macroeconomists don’t think anything much needs to change in their area. Anyway, views welcome.

In the chat afterwards, somebody recommended to me [amazon_link id=”0521033888″ target=”_blank” ]Rational Economic Man[/amazon_link] by Martin Hollis and Edward Nell. The blurb says:

“Economics is probably the most subtle, precise and powerful of the social sciences and its theories have deep philosophical import. Yet the dominant alliance between economics and philosophy has long been cheerfully simple. This is the textbook alliance of neo-Classicism and Positivism, so crucial to the defence of orthodox economics against by now familiar objections. This is an unusual book and a deliberately controversial one. The authors cast doubt on assumptions which neo-Classicists often find too obvious to defend or, indeed, to mention. They set out to disturb an influential consensus and to champion an unpopular cause. Although they go deeper into both philosophy and economics than is usual in interdisciplinary works, they start from first principles and the text is provokingly clear. This will be a stimulating book for all economic theorists and philosophers interested in the philosophy of science and social science.”

[amazon_image id=”0521033888″ link=”true” target=”_blank” size=”medium” ]Rational Economic Man[/amazon_image]

I’d like it to have been a bit more specific about the authors’ doubts, but it sounds intriguing.

Richard Davies of The Economist (@RD_Economist on Twitter) has recommended [amazon_link id=”0631194355″ target=”_blank” ]Three Methods of Ethics[/amazon_link] by Marcia Baron et al.

[amazon_image id=”0631194355″ link=”true” target=”_blank” size=”medium” ]Three Methods of Ethics: A Debate (Great Debates in Philosophy)[/amazon_image]

I can see I’m going to have to improve my philosophy to continue in the vein of the Pro Bono lecture.

UPDATE: Paul Kelleher (@kelleher_) recommends [amazon_link id=”041588117X” target=”_blank” ]Philosophy of Economics[/amazon_link] by Julian Reiss

[amazon_image id=”041588117X” link=”true” target=”_blank” size=”medium” ]Philosophy of Economics: A Contemporary Introduction (Routledge Contemporary Introductions to Philosophy)[/amazon_image]

The Scarlet Letter for economists

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An econometrics paper that can make you laugh? Yes, Ed Leamer, famously the author of a 1983 paper, Let’s Take the Con Out of Econometrics (pdf), has a superb 2010 article in the Journal of Economic Perspectives, Tantalus on the Road to Asymptopia – it’s free access,  only moderately technical, and brilliant.

Leamer’s theme is the same in the more recent paper as in the earlier one, the need for a profound culture change in empirical economics:

“Can we economists agree that it is extremely hard work to squeeze truths from our data sets and what we genuinely understand will remain uncomfortably limited? We need words in our methodological vocabulary to express the limits. We need sensitivity analyses to make those limits transparent. Those who think otherwise should be required to wear a scarlet-letter O around their necks, for “overconfidence.””

The point is that the available economic data will always support a range of different theories, and Leamer advocates sensitivity analyses that illustrate the spectrum of parameter values and theories consistent with observed data. Economists need to go back to 1921, he argues, and read Keynes’s [amazon_link id=”B0080K73L6″ target=”_blank” ]Treatise on Probability[/amazon_link] and Frank Knight’s [amazon_link id=”0486447758″ target=”_blank” ]Risk, Uncertainty and Profit[/amazon_link]. Both books point out that decisions are subject to three-valued logic (yes, no, don’t know) whereas economic theory assumes away the large territory of don’t know.

I strongly agree with Leamer’s conclusions:

“Ignorance is a formidable foe, and to have hope of even modest victories, we economists need to use every resource and every weapon we can muster, including thought experiments (theory), and the analysis of data from nonexperiments, accidental experiments, and designed experiments. We should be celebrating the small genuine victories of the economists who use their tools most effectively, and we should dial back our adoration of those who can carry the biggest and brightest and least-understood weapons. We would benefit from some serious humility, and from burning our “Mission Accomplished” banners. It’s never gonna happen.”

He, like me, is profoundly sceptical about macroeconomics: “Our understanding of causal effects in macroeconomics is virtually nil, and will remain so.”

I must go away and read Leamer’s 2009 book, [amazon_link id=”364207975X” target=”_blank” ]Macroeconomic Patterns and Stories[/amazon_link].

[amazon_image id=”364207975X” link=”true” target=”_blank” size=”medium” ]Macroeconomic Patterns and Stories[/amazon_image]