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What to read to understand how economists think
- yevpats 4y agoMilton Friedman - Money and Inflation - https://www.youtube.com/watch?v=B_nGEj8wIP0 https://www.youtube.com/watch?v=B_nGEj8wIP0 I think is under rated talk which explains complex stuff in layman terms.
- zasdffaa 4y agoFrom my non-economics perspective, they seem to have a genius for ignoring externalities (CO2 anyone?), that, and anything they don't want to consider. I can't have any trust in a model/framework that can pick and choose so freely.
- colinmhayes 4y agoEconomists talk constantly about implementing policy that neutralizes externalities. Carbon tax and LVT are among the most cited policies they want to implement. Economists don't write the laws though, and people generally aren't interested in paying their externalities so it doesn't happen.
- BMc2020 4y agoThe Wrecking Crew by Thomas Frank is good for the lay public. Much denser is The Road from Mont Pelerin by Philip Mirowski.
- korax_nyx 4y agoI am an Economist and I don't especially love my profession, so I'm not going to defend its many, many flaws, because it has a LOT. But this comment section is just a dumpster fire of opinions from many people that you can clearly see that never really touched or studied Economics, beyond some article, book or ideology... You know, Gellman Amnesia and all that. It's fascinating to me how tech-related discussions are on point here and this site is a gem, but regarding other topics, they tend to get off the road fast and hard, especially social sciences. I visit HN every day because I am a geek at heart that loves machines since childhood and then I studied people (Economics, Psychology, etc). We know that technology is queen right now and you are on top of the world. Almost everyone here is way, way smarter than me and I know that, but knowledge in one field, no matter how important or powerful it is (like tech right now), does not translate into others, especially social sciences, human behavior, and the like. Despite that, the hubris and the "I'm better than you" attitude on these topics are astonishing. I love this site, it's really a gold mine of very sharp people and responses, just not on some topics.
- bpierre 4y agohttps://archive.ph/EeAXV https://archive.ph/EeAXV
- antegamisou 4y agoAlso look into Capital: A Critique of Political Economy https://www.amazon.com/Capital-Critique-Political-Economy-Vol/dp/1453716548 https://www.amazon.com/Capital-Critique-Political-Economy-Vo...
- notahacker 4y agoKapital is extremely interesting from the point of view of understanding Marx's very singular view of the world, but doesn't tell you much about how modern economists think about modern economies even from a contrasting perspective since neither existed at the time of writing...
- fleetwoodsnack 4y ago“Modern economists” aren’t really a thing, at least in the sense that a consensus or collective understanding of economics is shared by a group denominated as such. There is vigorous disagreement in the field regarding just about everything. The title of the underlying article may more appropriately be, “Popular Economics for Non-Academics.”
- notahacker 4y agoThere is vigorous disagreement in the field regarding just about everything, but some of the few things they agree on (and the key fault lines for what they disagree on) didn't exist at the time Kapital was written.
- cf141q5325 4y agoWhen it comes to understanding how the economy (especially inflation) works i really like the NPR article about how Brazil fixed their inflation. It boils down to inflation being inflation expectation. tldr: They invented a new theoretical currency. All prices were each month listed in the actual price in the old currency and the price in the new currency (that didnt exist yet). And each month the new currency was redefined so that stuff still cost the same in the theoretical currency. They did this for a few months till they declared inflation fixed and creating the new currency that had "proofed" its stability the previous months. And Abrakadabra, people believed and inflation was fixed through the introduction of the Brazil Real. Obvious when you think about it, its not called fiat currency for nothing. >Say, for example, that milk costs 1 URV. On a given day, 1 URV might be worth 10 cruzeiros. A month later, milk would still cost 1 URV. But that 1 URV might be worth 20 cruzeiros. >The idea was that people would start thinking in URVs -- and stop expecting prices to always go up. https://text.npr.org/130329523 https://text.npr.org/130329523
- glofish 4y agoTIL, thanks for the fun read, quite enlightening
- aristus 4y agoThere are only two hard problems in economics: cash invalidation an naming things.
- formerkrogemp 4y agoDon't forget depreciating land..
- marcosdumay 4y agoThat narrative is highly misleading. Yes, that happened. But the government also did take the finances under control, restructured (literal "changed the structure of", not defaulted) its debits, added controls to the banking system, restructured the banks, pegged the currency to the dollar, made a campaign of price transparency, and a lot of other things.
- unmole 4y agoI really don't understand the appeal of The Worldly Philosophers. Maybe it's just me but I found the explanations of the ideas of each philosopher to be rather muddled.
- santiagobasulto 4y agoI read The Worldly Philosophers a long time ago (I was young) and I loved it. I remember really liking the narrative and the historical background.
- abecedarius 4y agoI found it stimulating in high school (compared to most social-studies stuff). But from recently sampling it in the library: I don't think it mentioned the marginal revolution at all. E.g. Alfred Marshall did get a couple pages, but only as some kind of Victorian eminence who made some technical contributions not worth explaining. (https://en.wikipedia.org/wiki/Alfred_Marshall#Theoretical_contributions https://en.wikipedia.org/wiki/Alfred_Marshall#Theoretical_co... for what I wish the book had told me.)
- intrestingstuff 4y ago
- Bakary 4y agoAnother suggestion in the same vein is Why Nations Fail: The Origins of Power, Prosperity, and Poverty
- vouaobrasil 4y agoNot sure what the article said since it's locked, but I recommend Steven Landsburg's "The Armchair Economist". It's one of my favourite books of all time.
- dredmorbius 4y agohttps://news.ycombinator.com/item?id=32618863 https://news.ycombinator.com/item?id=32618863
- alecco 4y agoFreakonomics?! It's a clickbait book. Wild headling-grabbing claims, bogus data, and dubious methods. It's like saying to learn investing you should watch Jim Cramer's Mad Money. https://en.wikipedia.org/wiki/Freakonomics#Criticism https://en.wikipedia.org/wiki/Freakonomics#Criticism
- transportgo 4y agoThe article states: “Some of the studies discussed in it have been called into question. But the overall lesson is a useful one: incentives matter. ”
- kwhitefoot 4y ago> Economics has a reputation as a dry, heartless subject, full of boring equations. Not if you have any training in a hard science: then you think of economics as something largely devoid of equations and made up of lots of ad-hoc regression analysis and hand waving. This might not be the fault of the economists but of the difficulty of the subject matter of course. But economists really should learn to accompany their predictions with error bars as every undergraduate physicist must.
- imtringued 4y agoEconomists have "hard science" models but those are empirically unreliable. Honestly the boring answer is that e.g. liquidity is the ability to change your mind instantly, which also means that any prediction can become invalid at any given moment. If you want to increase predictability, you would have to encourage people to make decisions as soon as possible and stick with those decisions for as long as possible.
- fezfight 4y agoAs a mechanical engineer (not a hard science), economics has always looked more like history than science. As in, you can build models to show what happened, but not what will happen. Edit: I think Ive had my mind changed enough in this thread to edit this. It's obviously a very deep subject and I've been convinced it has predictive qualities. I definitely dont think of dry equations though, more like psychology, and politics. But I'm looking forward to learning about it and possibly having my mind changed yet further.
- ChadNauseam 4y agoEcon is great at predicting the future. Let’s say your uncle tells you about his new stock trading strategy that’s guaranteed to make him 10% returns per month. Will he be rich two years from now? Econ’s efficient market hypothesis predicts he will not. Or let’s say the president of Japan announces a plan to beat deflation once and for all. He says that next year, he’ll fire their central bankers and hires the ones from Venezuela, give them a 100% annual inflation target, and promise them millions of USD in bonuses if they meet or exceed that target. Even though this plan is going into effect next year, what will you see the next day? (Assuming people believe the president is serious.) Econ predicts you will start seeing inflation immediately. And we see effects like these all the time when looking at how the actions of central bankers effects the economy – if Powell says he’s going to change interest rates, there’s a reaction in the markets when he makes the announcement and not one when he makes the actual change.
- neverrroot 4y agoThe economist acts as a pretty good contrarian indicator. What would really help is look at some of the bigs, compare them with each other, follow them over time, see who was right and who wasn’t, and come too your own conclusion. Bonus: chat or follow some old school, based interest rates traders, see what they have to say. Compare them to economists. Then look into the Eurodollar system, and be prepared for a shock.
- boppo1 4y ago>chat or follow some old school, based interest rates traders How do you find someone like this? >look into the Eurodollar system Suggestions for a first foray? Too much financial conspiracy stuff out there.
- nullnein 4y agoMade an account only to suggest checking out Perry Mehrling‘s work. He has a Coursera course for free which will change the way you look at economics entirely. I‘ve studied economics and political economy for years and never seemed to be able to tansfer the micro/macro models to the real world. Perry‘s work doesn’t have to be transferred b/c they come from the world of banking in the first place. Perry is best consumed in lectures. Here one on Eurodollar [1]. [1]: https://m.youtube.com/watch?v=tUi-xTmOCUE https://m.youtube.com/watch?v=tUi-xTmOCUE
- immigrantheart 4y agoIsn’t this the same as whether a fund manager can do well in one year and bad in another? I.e just randomness?
- kkfx 4y agoJohn Maynard Keynes and Rosa Luxemburg writing about capitalism to understand the current economic situation AND why most "mainstream" economists keep a certain direction.
- hirundo 4y agoI can't read the fine article. I've read from economists that the key essay to answer this is "What is Seen and What is Not Seen" by Frederic Bastiat (1840). That introduces the parable of the broken window. Its arguments are reprised in Economics in One Lesson by Henry Hazlitt (1946). Are either mentioned in the article? You can't steelman classical economics without groking these.
- dredmorbius 4y agohttps://news.ycombinator.com/item?id=32618863 https://news.ycombinator.com/item?id=32618863
- itsthemmrvax 4y agoWhy do we care what economists think?
- erdos4d 4y agoIts a very political field and whichever little clique gets the ear of the decision makers that year determines what policies get enacted. I'll grant you that this doesn't matter in practical terms, because we all know that the policies will benefit the rich, not us, but at least you can get a better understanding of how you'll be robbed.
- marcosdumay 4y agoI'm not sure decision makers listen to economists.
- bombcar 4y agoThey listen to the economists providing justification for what they already wanted to do.
- erdos4d 4y agoThey listen to the ones they find useful. I guarantee you "trickle down" wasn't Bush's idea, an econ man put those words in his head, and it was to provide academic justification for giving the rich a big wealth transfer from the working class.
- Aunche 4y agoThis is needlessly antagonistic towards economists. The majority of them are boring academics. The others are employed by the rich to whisper into the ears of politicians as you describe. This is precisely why it's important to learn economics: so you can vote for economically literate politicians who are be better resistant to lobbyists' BS and vote against politicians who are clearly trying to favor special interest groups.
- mbg721 4y agoOnce the 1970s happened and Keynes was accepted, the Revolution was over, wasn't it? My macroeconomics courses in the 2000s basically said, "Yeah, stagflation happened. How bout that," and went back to the G plus E plus I whatever.
- Consultant32452 4y agoThe most important thing to know about the field of economics is the only people who get funding are the people who tell the public that the government should do whatever it was the government wanted to do. Example: you won't get funding if you go around saying there's no such thing as a labor shortage in a market economy, even though this is entry level economics. Why would that tank your career? Because big business has paid the government to pull the right levers to suppress your wages. The solution to a labor shortage is higher wages, but that can't be the government's response to their donors. Technically you can say the truth, but you better not be very loud about it.
- pydry 4y agoThis is how the idea that raising the minimum wage would cause unemployment came to be and how the fact that (up to a fairly high point) it simply eats profits got suppressed.
- qeternity 4y ago> in a market economy > to suppress your wages Can't really tell where you're going with this. The solution to a labor shortage is higher wages. You seem to be suggesting that it should be an increase in minimum wage. In a market economy, you absolutely wouldn't need this if you had a labor shortage...the market would resolve on its own. But we don't have that. We have an economy where millions are paid by the govt to do nothing. This then becomes what employers are competing with.
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- folli 4y ago
- fithisux 4y agoQuestion: What to read to understand how economists think. Answer: Mein Kampf, just replace Jews with Humans (superset of the Jews).
- hairofadog 4y agoOne problem I have with economics books is that they tend to end with either “and therefore, government spending is bad” or “and therefore, government spending is good”. What I’m really after are non-ideological macroeconomics books that will help a layperson have a better sense of where the economy is headed so I can invest better, not books that would help me make better decisions if I were running a country, which I’m not.
- Ilverin 4y agoEven finance experts like Matt Levine use index funds. Unless you are mega rich and have connections, you almost certainly have no advantage against the many people who work 100 hours a week trying (and often failing) to beat the market.
- XorNot 4y agoPeople do beat the market, but the thing is if you can beat the market then you don't need to accept public money - you become a private trading firm and trade with your own money and keep all the profits. That's the issue: successful firms which beat the market don't keep doing it on behalf of other people for very long.
- bombcar 4y agoThe “active funds don’t beat index funds” studies showed they actually do - before expenses. After expenses the net return was lower.
- nly 4y agoIf that's the case why bother taking external money? Answer: because they make more money from the fees than they do by "beating the market" The truth is if you beat the market by pure luck once you can market your shit fund and lure in thousands more investors for decades.
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- marcosdumay 4y agoYou know, there are plenty of undergrad and graduation level textbooks, whose goal is exactly that article's title. Nothing wrong with specialized, focused studies on one subject or another, and popular press. But they won't do what the title says.
- neilv 4y agoI went there to see how economists think... and they showed me a big tracking consent form that doesn't label the toggle buttons for whether I'm opting-in or opting-out.
- golemotron 4y agoAny first year Calculus textbook.
- mattacular 4y agoHard pass
- bannedbybros 4y ago
- marban 4y agoClassic: How The Economic Machine Works by Ray Dalio https://www.youtube.com/watch?v=PHe0bXAIuk0 https://www.youtube.com/watch?v=PHe0bXAIuk0
- amelius 4y agoIs anyone keeping track of how often economists are right versus wrong?
- Banana699 4y agoThe closest thing that I know of is Philip Tetlock, he made a 20-year-long experiment where he asked a variety of "experts" about political events like the fall of the Berlin Wall, and recorded the results.
- peteradio 4y agoThe thing about making a prediction is that you don't really have much control over your experiment. I would bet that most rigorous predictions end up invalidated by some stated or obviously implied caveat.
- carapace 4y agoThere's really no point. If there are any successful economists other than Jim Simons they keep real quiet. As anonporridge points out in a sib comment ( https://news.ycombinator.com/item?id=32620572 https://news.ycombinator.com/item?id=32620572 ) economies are too dynamic for a naive economics to work.
- amelius 4y agoThere's something to it. But I don't believe the "type 2" dynamics point: if it were the case, then surely there must be some fixed-point you can reach if you take into account that your predictions become public.
- carapace 4y ago> there must be some fixed-point you can reach if you take into account that your predictions become public. Yes, in a few different ways I think. You have to make predictions or, equivalently, employ strategies that do not depend on secrecy. E.g. "evolutionarily stable strategy" (ESS). A strategy that does well in the presence of copies of itself (and mutants.) https://en.wikipedia.org/wiki/Evolutionarily_stable_strategy https://en.wikipedia.org/wiki/Evolutionarily_stable_strategy Any business that does not depend on secrecy could be considered an example. (There's an old hippie business book "Honest Business: A Superior Strategy for Starting and Managing Your Own Business" by Salli Rasberry and Michael Phillips https://en.wikipedia.org/wiki/Michael_Phillips_(consultant) https://en.wikipedia.org/wiki/Michael_Phillips_(consultant) "a founder of the Briarpatch Network. As a banker in 1967 he organized Mastercard.") You can e.g. buy a fax machine and encourage other people to get them too. The classic network effect: "the phenomenon by which the value or utility a user derives from a good or service depends on the number of users of compatible products. Network effects are typically positive, resulting in a given user deriving more value from a product as more users join the same network" https://en.wikipedia.org/wiki/Network_effect https://en.wikipedia.org/wiki/Network_effect
- sbf501 4y ago"The Armchair Economist", Steven Landsburg https://en.wikipedia.org/wiki/The_Armchair_Economist https://en.wikipedia.org/wiki/The_Armchair_Economist Extremely approachable book with fantastic examples explaining somewhat complex concepts.
- NeutralForest 4y agoTalking about Economics on HN, what could go wrong
- napoleon_thepig 4y agoBrace yourselves for people commenting with a lot of confidence in what they're saying, but without actually having read anything about the topic.
- NeutralForest 4y agoYeah the average take on this thread is abysmally bad.
- LiberationUnion 4y agoSome of them might be trolls trolling to get their kicks. As always, I brace myself for trolls everywhere online.
- dtgriscom 4y agoBack in the early '80s I took course in regulation from one of the leading experts in railway regulation. She was great, and the main idea I took away from it is "don't regulate if the market will naturally fix itself." So, the big question when deciding whether some issue needs to be controlled through regulation is whether the market will function well without regulation. (In most of the examples she gave, it would.)
- culi 4y agoWho was she?
- lock-the-spock 4y agoThat misses about 95% of reality. To mention just one key factor: without government intervention you end up usually with a monopoly or oligopoly. Not to mention safety standards, labour protection, quality and warranty, ... Without regulations and often intervention all goes to pieces. to directly counter your argument: no railroad ever developed without government intervention and at least funding, guarantees and land grants.
- seibelj 4y agoCan you name an example of a monopoly that has developed in the last 50 years that didn’t occur because of crony capitalism?
- leed25d 4y agohttps://www.goodreads.com/author/list/23458.John_Kenneth_Galbraith https://www.goodreads.com/author/list/23458.John_Kenneth_Gal...
- dredmorbius 4y agoThe Age of Uncertainty if you'd like a good overview to start with. <https://en.wikipedia.org/wiki/The_Age_of_Uncertainty https://en.wikipedia.org/wiki/The_Age_of_Uncertainty> His The Great Crash: 1929 remains amazing. And his son (James K.) is also an economist, pretty good.
- leed25d 4y agoI will look in to the younger. I am hoping that he has the same droll, dolorous, dare I say, ghastly demeanor
- albertop 4y agoHow to Think about the Economy: A Primer [0] - is a great starting point. [0] - https://mises.org/library/how-think-about-economy-primer https://mises.org/library/how-think-about-economy-primer
- sieste 4y agoAmong the few econ books I read I most enjoyed Modern Principles of Economics[1] by Tyler Cowen. https://www.goodreads.com/book/show/6659172-modern-principles-of-economics https://www.goodreads.com/book/show/6659172-modern-principle...
- greatpostman 4y agoThink? Economics doesn’t work. A small minority of all the theory developed has any relevance to the real world
- jrm4 4y agoEconomics is .. mostly just not good as a discipline. Micro can be pretty useful to individuals, but Macro is literally no better than astrology, and perhaps worse because people have a better sense of astrology's limitations. It's important to study economics primarily not because "it's good at predicting things," but more to understand how most everything is made up and then people use economics to back into ideas. Roughly, the problem is not just "All models are wrong, and some are useful," but additionally that "many models are harmful and unchecked."
- rufus_foreman 4y ago>> Macro is literally no better than astrology, Macroeconomics: "Macroeconomics is a branch of economics that studies how an overall economy—the market or other systems that operate on a large scale—behaves" Astrology: "The divination of the supposed influences of the stars and planets on human affairs and terrestrial events by their positions and aspects" Astrology is irredeemable. If current macroeconomics is no better than astrology, that is an opportunity. >> Micro can be pretty useful to individuals This is the crazy part. Micro relies on assumptions that just aren't true. Micro is much closer to astrology than macro. If you build an extensive mathematical framework on top of assumptions that are not just false, but sort of crazy, you've got nothing.
- JumpCrisscross 4y ago> Micro relies on assumptions that just aren't true I'm going to assume this refers to the rational actor assumption? If so, it's like Econ 102 that this is an Econ 101 simplifying assumption, similar to our ignorance of friction and turbulence in Physics 101.
- worik 4y ago> I'm going to assume this refers to the rational actor assumption? Yes. And: * More is better * Demand curves are smooth * Demand curves are deterministic * Everything happens on the margin * Information is free * Ethics does not influence behaviour. * Nature allows steady states That are the flawed assumptions just off of the top of my head. If you spend years studying economics (like I did) then some these assumptions get questioned some of the time. But they all break down, regularly. The micro economic models work in snapshots, but the interesting part is in the breakdown. The models are useful when they are not very interesting.
- openfuture 4y agoThis article couldn't be further from the truth! All you need to read is this comment. Economists don't think, they feast. Mostly on the blood of the innocents but sometimes also on the bounties of nature or, rarely, on the delusions of idealists. Therefore what you must do is to learn how to feast, this is easier said than done since you cannot feast alone (unless you are the blessed one). Nonsense such as "the economist" must be guarded against with thick sarcasm, maybe even borderline surrealism, this way you can shock your sense of discrimination into the configuration required to believe in the local tax authority. Which is a requirement for attending their feasts and learning the basics of economics.
- paulpauper 4y agoRegarding Freakonomics: Some of the studies discussed in it have been called into question. But the overall lesson is a useful one: incentives matter. This seems inherently contradictory. How can we draw lessons or inferences if the data is wrong or not what it purports to be?
- gtvwill 4y agoLol it's because most folks mistake economics for a science when it's actually just a grouping of mostly wrong hypothesis. They'll believe any shit their fed.
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- treeman79 4y agoHard to get better then Basic Economics by Thomas Sowell. https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465060730 https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465...
- jiscariot 4y agoAgreed. And Applied Economics after that. These books change the way you think.
- wikitopian 4y agoEconomics should be thought about like sports, with the corporations as athletes, countries as teams, regulators as referees, and citizens as owners. If you don't keep it competitive and rewarding for the athletes, there's no money for the owners of the franchises to share. Moralizing either in favor of the owners (socialist demagoguery) or the players (capitalISM) ends up harming the game.
- cutler 4y agoMarx's theory of surplus value, as expounded in Das Kapital, was what really opened my eyes when studying Economics at university. After reading about his labour theory of value I realised all the textbook economics I'd been spoon-fed from Lipsey's "Positive Economics" during my 2 years of A-levels (UK) was just an apologetic for the prevailing capitalist system.
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- msla 4y agoHow does the Labor Theory of Value account for the value of art?
- cutler 4y agoMarx was primarily addressing the value of commodities, ie. economic value, but extending it to works of art: the number of socially necessary hours required to create a piece of work. That's not the same as market value though both exist. Art creation isn't really addressed by this as the labour pool for a piece of art is exactly one whereas the Labour Theory of Value is about social production.
- msla 4y ago> the number of socially necessary hours required to create a piece of work. Who decides how many hours of work spent on a piece of art are socially necessary? > Art creation isn't really addressed by this as the labour pool for a piece of art is exactly one This is definitely not true of things like films and novels.
- cutler 4y agoSocially necessary is an averaging concept and is an essential part of the theory. Look it up in Das Kapital. Marx was concerned with social production, not individuals.
- wrp 4y agoThis collection of papers may be more appealing to the HN crowd. They give a more technical critique of the practice of economics. Alfred S. Eichner. (1983). Why Economics is not yet a Science. 1. Introduction. 2. What do we mean by asking whether economics is a science? 3. Modern empiricism and quantum-leap theorizing in economics. 4. Ideology, methodology, and neoclassical economics. 5. A behavioral theory of economists' behavior. 6. The development of contemporary mainstream macroeconomics: Vision, ideology, and theory. 7. How economists misuse mathematics. 8. Institutional analysis: Toward progress in economic science. 9. Why economics is not yet a science. The unifying theme of the papers is that there is no empirical support for the foundational propositions of the dominant theoretical framework. They argue that for economics to become a science, it must shift its focus to testable claims. I think the best chapter is 7. The author's field is optimal control theory, and he argues that it is misapplied to economics.