A close relative of mine has just started a university degree with an economics component and I’m looking to help him out a bit. Since a good few economists and teachers of economics read this blog, I’m interested in what you recommend as a really introductory text aimed at someone with no prior knowledge of the subject. Suggestions in comments, with reasons, and, perhaps some indication of whether the text in question would be a good or bad fit depending on whether the reader has a more mathematical or literary brain.
From the category archives:
Economics/Finance
The Socialists won a surprise victory (or at least plurality) in the recent Austrian elections. The outcome appears to promise a departure from power for Jorg Haider, although the combined vote of the far-right parties was still 15 per cent, which is disappointing.
For CT election-followers, the outcome is of interest in another respect. According to the reports I’ve read, all the polls and all the pundits got this one wrong. So, if betting markets got it right, that would be pretty strong support for claims about the wisdom of crowds. But my (admittedly desultory) scan hasn’t produced any info. Can anyone point to market odds for this outcome?
I’ve been on the road for the last week or so, gradually making my way by tramp steamer to Australia. By coincidence, I was on “ABC”:http://www.abc.net.au radio’s “Background Briefing”:http://www.abc.net.au/rn/backgroundbriefing/stories/2006/1740584.htm programme on Sunday, talking about gift and market exchange in the world of human organ and tissue procurement. There’s a “podcast of the show”:http://www.abc.net.au/rn/podcast/feeds/bbg_20060917.mp3 available if you want to listen. The topic is easy to treat in a glib or sensationalistic way, but I thought Ian Walker (who wrote and presented the show) did a really good job with it. There’s a lot of good first-hand material from organ and tissue donors, recipients and bankers, alongside stuff from me, “Virginia Postrel”:http://www.vpostrel.com/weblog/ and others.
There’s been a lot of discussion about claims that world oil output is going to reach a peak some time soon. If you look at the recent numbers, there’s a pretty good case to be made that world all output has already reached its peak at about 73 million barrels a day, a level reached in mid-2004, and sustained for the past two years.
Jeffrey Sachs, William Easterly (and Bono for that matter) can stop their bitching, Christopher Hitchens has “an explanation”:http://www.mirror.co.uk/news/topstories/tm_objectid=17550835&method=full&siteid=94762-name_page.html for a good deal of global destitution:
bq. … the mass murder of people on aeroplanes is a leading cause of poverty.
If only Larry Summers were still in post, he could have offered Hitch a job. (shamelessly stolen from “Marc Mulholland”:http://moiders.blogspot.com/2006/08/political-economy-of-under-development.html ).
“Tyler Cowen”:http://www.marginalrevolution.com/marginalrevolution/2006/08/the_libertarian.html at _Marginal Revolution_ today.
bq. The libertarian vice is to assume that the quality of government is fixed. … If the quality of government is fixed, the battle is then “government vs. market.” Not everyone will agree with libertarian views, but libertarians are comfortable on this terrain. … But sometimes governments do a pretty good job, even if you like me are generally skeptical of government. The Finnish government has supported superb architecture. The Swedes have made a good go at a welfare state. The Interstate Highway System in the U.S. was a high-return investment. … The libertarian approach treats government vs. market as the central question. Another approach, promoted by many liberals, tries to improve the quality of government. This endeavor does not seem more utopian than most libertarian proposals. The libertarian cannot reject it on the grounds of excess utopianism, even though much government will remain wasteful, stupid, and venal. More parts of government could in fact be much better, and to significant human benefit and yes that includes more human liberty in the libertarian sense of the word. Libertarians will admit this. But it does not play a significant role in their emotional framing of the world or in their allocation of emotional energies. They will insist, correctly, that we do not always wish to make government more efficient. Then they retreat to a mental model where the quality of government is fixed and we compare government to market.
When reading this post, it’s hard not to think of Albert Hirschman’s brilliant little book, _Exit, Voice and Loyalty_. Hirschman’s theoretical innovation is precisely to assume that quality (of organizations, of products etc) _isn’t_ fixed, and that there are different mechanisms through which we might imagine that quality would be improved. “Exit” – the threat of switching to a competing organization – is one such mechanism, and it’s one that libertarians will be very comfortable with, as it’s greatly enhanced by free markets or market-like competition under many circumstances. The other is voice – which refers to more directly political actions, of argument, protest, criticism etc, and which doesn’t seem to me nearly as congenial to libertarians, because it suggests that faulty organizations and governments can be made better without recourse to market mechanisms. Indeed, under some circumstances, increased opportunities for exit may reduce the ability of voice to bring through change. Authoritarian regimes frequently allow some critics to go into exile, for fear that they’d become rabble-rousers at home.
Which makes me curious. What do libertarians think about Hirschman’s arguments? Do they read him? Do they have a sophisticated response?
Update: Alex Tabarrok points me to an “old post”:http://www.marginalrevolution.com/marginalrevolution/2005/09/the_tragedy_of_.html of his, which rightly points out that under some circumstances exit and voice can be complements.
“Alex Tabarrok”:http://www.marginalrevolution.com/marginalrevolution/2006/08/fiasco.html
bq. In Fiasco Thomas Ricks’ says the war on Iraq and subsequent occupation was ill-conceived, incompetently planned and poorly executed. I have no quarrel with that. What dismays me is that anyone expected any different. All wars are full of incompetence, mendacity, fear, and lies. War is big government, authoritarianism, central planning, command and control, and bureaucracy in its most naked form and on the largest scale. The Pentagon is the Post Office with nuclear weapons. If this war has been worse on these scores than others, _and I have my doubts_, we can at least be thankful that the scale of death and destruction has been smaller. At the Battle of the Somme there were a million casualties and 300,000 deaths over the course of a few months. If we remember previous wars more fondly this is only because those wars we won. Incompetent planning and poor execution are not fatal so long as the other side plans and executes yet more incompetently. Is this a suggestion to put the current war in context? Not at all. It is suggestion to put government in context.
This is not a good argument. That the massive bureaucracies of war involve waste and duplication is undeniable (although history doesn’t give us any reason whatsoever to believe that markets would do a better job). But to say that the incompetence with which the Iraq war was conducted was simply business as usual is not only to get Rumsfeld _et al._ off the hook for the quite specifically personal incompetence that they displayed and are still displaying. It’s to make a general claim that can’t be supported using the evidence that you claim is supporting it. An incompetently conducted war does not a general case against government make. Indeed, if you wanted to make a polemic case for a strong state and _against_ market reforms, you could quite easily use post-war Iraq as an example of how “massive contracting-out of military work to private actors”:http://www.guardian.co.uk/international/story/0,3604,1103566,00.html, “mass demobilization of an army”:http://www.washingtonpost.com/ac2/wp-dyn/A63423-2003Nov19?language=printer and “privatization and free trade”:http://www.harpers.org/BaghdadYearZero.html lead inevitably to political disaster. Not that I believe the Iraq experience actually supports so sweeping a claim – while the decisions in question all were bad ones in the context of post-war Iraq, this context is not generalizable. The argument that post-war Iraq demonstrates the badness of privatization everywhere would be a very poor argument indeed. But then, so is the argument that the Iraq war demonstrates the badness of government everywhere.
I’m still not entirely comfortable about assuming that CT readers are necessarily interested in the stuff I put on the Guardian blog. But this bit on the current attempt by the UK government to stop people pretending to be Plymouth Brethren in order to take advantage of a tax loophole given to them (no really) is pretty ontopic. I’m more interested in comments about what this says about the politics of tax policy than in boilerplate rants about why the government shouldn’t give any special treatment to religious groups, so I thought that having two comments sections on this piece would give me two chances of not having the discussion end up going that way.
Attention Conservation Notice: Over 1500 words on a wacky quasi-socialist economic scheme, from someone utterly lacking in credentials in economics. The scheme does not respect the sanctity of private enterprise, but at the same time would not reduce the alienation of labor one iota. Includes a lengthy quotation of a game-theoretic impossibility result.
In the previous installment in this series of modest proposals for the reform of corporate governance, I looked at ways of making the incentives of the managers of large, publicly-held corporations align more closely with those of their long-term shareholders. This left alone the question of the beneficiaries of corporate value; assuming that the managers are busily working to maximizing their revenue streams, who benefits from their industry and diligence? Having just read Mark Greif’s great essay on redistribution in n+1, I would like to make a suggestion. (Issue 4; long excerpt here, as pointed out by Matt in the comments.)
The topic for my BrisScience talk tomorrow night is Economics: The Hopeful Science. The name, obviously, is an allusion to Carlyle’s characterization of economics as ‘the dismal science’. In choosing it, though, I was under the common misapprehension that Carlyle was attacking Malthus, and his prediction of a stationary economy with a subsistence wage, that could be raised only through ‘moral restraint’.
It turns out, however, that the phrase actually occurs in Carlyle’s defence of slavery, charmingly entitled, Occasional Discourse on the Nigger Question*, and that the primary target is John Stuart Mill and other economists who favored wage labour over slavery.
As a good neoclassical, neoliberal economist, Brad DeLong is acutely aware that the market system is not natural at all, but a delicate historical anomaly. He is worried that it is so familiar to his students that they will find alternate modes of social organization almost incredible; accordingly he wants to mess with their heads:
Would making Berkeley’s first-year economics Ph.D. graduate students this fall read short biographies of William Gates and William Marshall as a way of getting at the idea that there are non-market societies that work very differently from our own today–would that be a teaching idea of extraordinary brilliance or of total insane lunacy?
The rest of the post is an extended excerpt from the New York Review of Books review of a biography of William Marshal (which goes on to my to-read list). The question I have is, what should DeLong make his students read, to give them a vivid sense of just how differently production and distribution could be and have been organized? Argonauts of the Western Pacific, perhaps? Gilgamesh?
And: those of us who teach things other than economics, what books do or should we hand out as ice-axes for our students’ frozen seas? ( This one is mine.)
Brisbane readers of CT should already be aware of the BrisScience lecture series. The speakers so far have all been from the natural sciences, but I’m talking on Monday July 31 at the Ithaca Auditorium, City Hall, on the topic “Economics: The Hopeful Science”. The general theme is that economic progress and environmental sustainability are naturally* complements rather than substitutes.
I’m sure lots of you will want to fly in for this event, but may be concerned about the associated greenhouse gas emissions. Fortunately, although Australia is not a Kyoto signatory, Australian states are getting into the carbon credit business and (for now at least) it’s surprisingly cheap to offset a long-distance flight. More details here.
*a loaded term which I’ll try to justify in the talk
I wish Daniel would post more on CT and less on the Guardian’s Comment is Free site, partly because I worry that regular CT readers may sometimes miss his pieces. Today he has “a really interesting article”:http://commentisfree.guardian.co.uk/daniel_davies/2006/07/dumping_dumping.html arguing that agricultural subsidies aren’t always bad for the global poor and, indeed, by lowering prices for Africa’s consumers, may often be good for them. That definitely goes against the conventional wisdom (both left and right) in blogdom. Definitely worth a read.
(one of these things is not like the others … )
I’m reading Paul Krugman’s _Peddling Prosperity_ which I’m enjoying a lot, both the bits that I agree with and the bits that I disagree with. But one thing struck me as a little odd.
[click to continue…]
I just finished reading Julian Betts’s essay “The Economic Theory of School Choice” in his (excellent and remarkably inexpensive) edited collection Getting Choice Right. For the most part I don’t expect to find really new ideas about school choice in what I read, so it was a thrill to find something I hadn’t encountered before. The contributors all assume (correctly in my view) that school choice is an inevitable feature of the education system, so the issue is how to get it right — in other words, how to make it as efficient and equitable as possible (self-styled opponents of school choice tend to support the de facto status quo, a school choice system riddled with inefficiencies and inequities).
The most obvious barrier to a school choice being efficient and to it being equitable is the fact that in a choice system schools get to choose students, leading, one presumes, to a concentration of advantaged students into popular schools. Defenders of choice usually offer three solutions to this problem; lotteries (preventing schools from choosing); quotas (allowing them to choose but limiting their ability to select for advantage) and weighted student funding (allowing them to choose, but giving them incentives to choose disadvantaged children, and compensating schools which get landed with high concentrations of disadvantage). (I suggest a combination of these in my proposal at the end of School Choice and Social Justice).
So what’s new in Betts’s paper?