Learn Economics: A Toolkit
Easy Books on Economics
Start with these two books on economics. If you only read one, then I would recommend that liberals read Sowell and conservatives read Krugman.
- Basic Economics by Thomas Sowell. No math, no graphs, but plenty of meat. Sowell is from the conservative school of economics called monetarism.
- Peddling Prosperity by Paul Krugman. There are three good reasons to read this book about the liberal school of keynesian economics. The first is that you need to give them a chance to make their case. The second is that you can use this book to criticize the far left - ‘even liberal economists like Paul Krugman support free trade.’ The third reason is that the book is a short 180 pages.
Learn Economics With Just a Few Short Articles
Here are a few articles written in plain English that will give a fairly comprehensive sweep through all of economics. If you don’t want to bother with a book, stick to these.
- Price Gougers Should be Shot? Price is one of the most elegant and beautiful methods through which the “invisible hand” regulates free markets.
- Speculators. The “invisble hand” uses speculators to correct an incorrect price, or to encourage conserving a scare resource. This happens automatically without consumers even being aware of the fact that they resource is even becoming scarce - what could be easier?
- The Law of Unintended Consequences. When the government creates policies that interfere with the invisible hand, bad things happen. Tragically, the bad effects are often concentrated on the people that the policy was supposed to help.
- The Division of Labor. We all know that technology makes our lives better. What is less well appreciated is that technology often does its work by making it so that it takes fewer workers to make the same amount of goods. This results in economic trauma to the workers who lose their jobs, but it lowers the cost of living. The fact that we are wealthier today is powerful evidence that this process is a net gain to society.
- When the Invisible Hand Fails. There are a few areas when free markets do not work. This includes environmental issues (external costs) and national defense (public goods).
- Licenses Restrict Competition. Here is agreat article by Mary Ruwart, a former Vice-Presidential candidate from the libertarian party making the standard (and frequently valid) libertarian talking point about how licensing schemes restrict competition and hurt small businesses. New York taxis are her major example. Get the other side of the story here Sometimes the real world is too complicated for simplified economic models.
- Three Economic Myths. If there are just three lesson that I would like to see people take from economics, these are it.
Challenges to Economics
Before even getting onto the articles, economics can only tell us what is good for the economy. It can tell us that there ain’t no such thing as a free lunch for the middle class, because taxing the wealth will result in fewer jobs. But it can’t tell us whether or not we should go ahead and do this because we need to help the poor. That is a separate decision that falls in the realm of morality.
- Economics and Ideology. This is an excellent post on a liberal blog about the (conservative) ideological biases of economics professors. It is a good post, but what makes it valuable is the high quality of the comments. I strongly recommend reading them all.
- Economics and the Irrational Man. A frequent criticism by the left is that free market supports are mistaken in their assumption that people are rational decision makers who can be trusted to make good decision. There is a grain of truth to this criticism, but voters are even more irrational than consumers, and government power corrupts more absolutely than corporate power. In other words, we can’t simply assume that the government will do a better job, it may be even worse.
- Weaknesses of Keynesian Economics. The more liberal school of keynesian economics has had some powerful challenges to free markets. Over time keynesian economics has moderated into a monetary (i.e. Federal Reserve) policy of managed inflation and abandoned most of its interventions into markets.
- Imperfect Competition and Classical Economics. This argument claims that economic analysis is invalid because it assume perfect competition, which does not occur in the real world.
- Consensus Among Economists Polling data of economists to see what they do and do not agree on.
Europe Versus the United States
Comparing Europe to the United States puts the theory into practice. European countries generally have extensive social welfare safety nets, nationalized health care, and more heavily regulated industries than the United States - all of which is financed through higher taxes. If free markets are best, the United States will “win.” If they are not, then Europe will “win.”
- Not The Hidden Unemployment Defense!. Europe has a higher unemployment rate than the United States, leading the left to claim that hidden unemployment explains the difference. But Europe has even more hidden unemployment than the United States (as would be expected because its safety nets make it easier to be a discouraged worker).
- The Myth of the Productive Europe. The left holds up the high hourly productivity of some European countries. But a closer look reveals problems with this. Even in hourly productivity, the United States is outpacing Europe.
- Is Social Democracy a Viable Model for Europe’s Future? The opening salva in a long running debate about Europe’s productivity. Read all the comments, they are some extremely good ones. See Quiggon’s response here and Cowen’s follow up here. This should keep you busy for a while.
Economics Blogs
Here are some good economics blogs:
- Greg Mankiw Who would have thought that a Keynesian would have my favorite economics blog? Greg Mankiw is a wonderful writer with a lot of common sense. He is a staunch supporter of free markets despite being from within the Keynesian school.
- Marginal Revolution Probably the most popular Austrian economics blog. Austrian economics is the most strongly free market oriented school of economics.
- Brad DeLong’s Semi-Daily Journal. The leading liberal economist on the blogosphere. From the Keynesian school. You need to keep up with what he has to say.
Further Reading
- Amazon List on Economics. Here is list of books about economics on amazon. If you find it helpful, please vote to give it positive feedback so more people will see it.
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