Thursday 4 September 2014

Recommended reading - Economics

Several people have written to me asking if I could suggest some books for them to read in order to broaden their understanding of economics. Instead of answering personally each time I've decided to combine the time I've been spending on writing short individualised responses into writing this more comprehensive article.

Hopefully it will be of some use to you, whether you specifically asked me for some recommendations or not.

Who this guide is for
This guide is intended to be useful whether you are an aspiring economics student, a current student disillusioned with the way in which your economics department uncritically pushes the failed neoclassical economic orthodoxy, an economics graduate who is keen to continue broadening their horizons, or someone with no background in economics at all who would simply like to learn more about the subject.

Many of the people to have asked me for reading advice are already economics students, economics graduates or people intending to study economics at university. It is a very positive sign that these guys have realised that there is a lot more to economics than the narrow mainstream neoclassical orthodoxy that has infected and overrun the majority of economics departments, and that they're looking for answers elsewhere.

Several of the other people to have asked me for economics reading tips have admitted that they have very little understanding of economics, which is hardly surprising given that economics courses aren't taught in the majority of UK state schools, meaning that the vast majority of the 93% of state educated kids end up leaving school as functional economic illiterates.

This public lack of basic economic literacy is extremely beneficial to the ruling establishment because it allows them to use all kinds of absolutely ludicrous economic fairy stories to justify their harmful economic policies.

I feel proud that people from many different walks of life have seen me as a reliable person to turn to for advice, and it makes me glad that there are still people out there who want to understand economic issues from different perspectives to the ones prescribed by the neoclassical orthodoxy.

Ha Joon Chang

A very good starting point for economics novices is the book "23 things they don't tell you about capitalism" by Ha Joon Chang. This is a brilliantly written book that rigorously deconstructs some of the many myths and outright fallacies that underpin conventional economics. In my opinion the best thing about the book is the way that Ha Joon Chang uses every day language to explain often quite complex economic ideas. Even if you feel that you're well aware of the flaws in orthodox neoclassical economics already, 23 Things is still worth a read because in my view it's a masterclass in discussing economic ideas in accessible language, which is an incredibly important skill.

I am looking forward to obtaining a copy of his latest book

Inside Job

Another good starting point is the 2011 film "Inside Job" directed by Charles Ferguson which provides an explanation of how the 2007/08 global financial sector insolvency crisis actually came about (spoiler alert - the UK Labour party was not entirely to blame for the global banking crisis as the Tory press would have you believe).

The truth is that the global financial sector insolvency crisis was caused by a toxic blend of greed, corruption, conflicts of interest, poor regulation, moral hazard, ideologically driven deregulations and an alphabet soup complex financial products.

The film gives a great overview of the economic meltdown that would have completely wiped out Wall Street and the City of London without the biggest state subsidies in history to bail out the insolvent financial sector institutions. The book of the same name provides a wealth of more detailed analysis.

Steve Keen

"Debunking Economics" by the Australian economist Steve Keen is an exceptionally good critique of the absolute nonsense that underpins the neoclassical economic orthodoxy. It's harder going than the work of Ha Joon Chang or Charles Ferguson, but it's really worth the effort. A must read for anyone who is intent on looking at economics from outside the narrow spectrum of the neoclassical orthodoxy.

Heterodox economics

Steve Keen talks a lot about heterodox economics in Debunking Economics. If you're intent on learning more about economics it's very important indeed to understand that there is no single unified subject called "economics". There is mainstream economics which is based on the flawed and assumption riddled neoclassical orthodoxy (more like a religious faith system than a social science), and then there are countless other fields of economics which are often classed together under the umbrella "heterodox economics".

There is actually very little in common between the various fields that are lumped together as "heterodox" other than that they have been pushed to the margins by the now completely invalidated, but still widely accepted, neoclassical orthodoxy.

This PDF provides a good overview of the myriad fields that make up "heterodox economics"

Behavoural Economics

Of the many promising heterodox economic fields, I'm particularly interested in behavioural economics, which stands in opposition to the neoclassical position that accurate economic models can be built upon the assumption that human beings act in their own rational self-interest. There is a huge amount of evidence to prove that in reality human beings actually make most of our decisions on an intuitive, non-rational level. Behavioural economics is about trying to work actual human behaviour, and human cognitive processes into our economic models.

If mainstream economics is ever going to make the progression from a pseudo-scientific quasi-religious ideology riddled with ludicrous assumptions and unquestionable core beliefs to become a legitimate social science, I'm certain that developments in behavioural economics are going to play an important part.

Economic inequality

Inequality has always been a theme in economics, but with the rise of the neoclassical orthodoxy it fell out of favour. In recent years inequality has made quite a comeback, so much so that two of the bestselling economics books in recent years directly addressed the theme. "The Spirit Level" by Kate Pickett and Richard Wilkinson popularised the theory that too much inequality is extremely bad for the economy, and the French economist Thomas Piketty further developed the theme that growing inequality is a major threat to economic stability in his book "Capital in the 21st Century".

The 2013 documentary "Inequality for All" featuring Robert Reich is certainly worth some 90 minutes of your time too.

You've got to learn some Marx

Even if you are strongly inclined to disagree with Marxist and socialist ideas, you've got to accept that Marx was a genius of his age and at least look at some of his work.  Many of Marx's criticisms of capitalism hold as true today as they did when he wrote them in the 19th Century.

Das Kapital
and the Communist Manifesto are both freely available on the Internet, so you've got no excuse for not at least taking a look. My personal view is that Marx's critiques of capitalism were immeasurably superior to his predictions about how capitalism might be overthrown. However I urge you to look for yourself and make up your own mind about Marx's ideas rather than blithely accepting other people's parsed, paraphrased, misrepresented or just completely made up interpretations of his work.

If you're interested in finding out a bit more about who Karl Marx actually was, Francis Wheen wrote a decent biography.

But, you should probably read some Rand too

In order to gain a more complete understanding of an issue, it is often necessary to read things with which we strongly disagree. Thus you should probably read some of Ayn Rand's demented frothing. Rand had a powerful influence over the reactionary right-wing in the US, in fact her book "Atlas Shrugged" is still regularly appears on bestseller lists in the US.

One of Rand's inner circle of sycophantic acolytes Alan Greenspan went on to become Chairman of the US Federal Reserve between 1987 and 2005, where he unleashed wave after wave of ideologically motivated deregulations that culminated in the 2007-08 global financial sector insolvency crisis. Reading some of Rand's raving pseudo-philosophy helps us understand the ideological roots of the cult of the individual, greed-is-a-virtue, privatise everything, neoclassical mentality that has now infested the majority of economics departments, central banks, multinational organisations and political parties on the planet.

Orthodox economics

As a sceptic of the mainstream economic orthodoxy and free market dogma I'd caution people to use their critical judgement when reading the work of economists like Freidrich Hayek, Ludvig von Mises or Milton Friedman, but then you should strive to keep your critical judgement in play whatever you read, whether you're inclined to agree with it or not.

I'd also suggest reading some Adam Smith (perhaps Wealth of Nations) and considering how different many of his economic ideas are to those of the modern economic right who have so often championed him.

John Maynard Keynes

It's bit difficult to know what to suggest with Keynes, he was an incredibly influential economist, but his writing style can be somewhat impenetrable. There have been so many interpretations of his work that several distinct schools of Keynesian economics have developed 
(Neo-Keynesians, Post-Keynesians and New Keynesians).

If you are formally studying economics, make sure you have established some knowledge of Keynes for yourself before you learn someone else's interpretation of his work. Here's a link to Keynes' General Theory of Economics, and here's a fairly comprehensive list of books that have been written about him.

The capitalist "doves"

There are many economics commentators who seem to accept most of the core unquestionable faith positions that underpin conventional economics, but who don't fully subscribe to the extreme 
end of the capitalist spectrum (deregulate and privatise everything, massive tax cuts for corporations and harsh austerity for the masses). These guys are by and large supporters of the neoclassical capitalist orthodoxy, but they want to tinker with some of the ancillary beliefs to make capitalism a bit fairer and a bit less ruthless.

There are two positions to take on these guys. One is summed up with the Chomsky quote "The smart way to keep people passive and obedient is to strictly limit the spectrum of acceptable opinion, but allow very lively debate within that spectrum." One might say that economists like Paul Krugman, Jeffrey Sachs and Nouriel Roubini are just providing the lively debate within the limited spectrum that is bounded by "capitalism rules OK". 

My personal view is that it is often worth reading what they have to say, despite the fact a lot of their core assumptions are extremely dubious.

Nouriel Roubini was one of the tiny minority of economists to accurately predict the 2007-08 financial sector insolvency crisis, so his book "Crisis Economics" is worth a read if you want to check out what one of these "capitalist doves" have to say.

Lesser known economists

In my view some of the most interesting economists are people who have been largely forgotten, and rarely ever make appearances in standard economics courses.

Some of most interesting economists I've come across include Pierre-Joseph Proudhon (French socialist and founder of mutualism)  Henry George (American left-libertarian, advocate of Land Value Tax and Basic Income),  Antonio Gramsci (Italian Marxist, defined the term "hegemony") Silvio Gesell (German anarchist and egalitarian, founder of Freiwirtschaft) Kenneth Boulding (Anglo-American economist, philosopher and Quaker, pioneer in systems theory and evolutionary economics) and Hyman Minsky (American Post-Keynesian, developer of the financial instability hypothesis).

I obviously don't agree with everything these guys came up with, but as is often the case, many of the most interesting and challenging voices have ended up being pushed to the sidelines in favour of those who know how to tell the rich and powerful exactly what they want to hear. In the case of economics it's clear that the ruling establishment love to hear that greed, selfishness, lack of empathy, hunger for power and pure 
self-interest are not vices, but virtues.

Economics doesn't exist in a vacuum

Economics overlaps with countless other 
fields of human endeavour. In fact many of the great economists throughout the ages have been recognised as profound thinkers in other important subjects aside from economics. These leading economic thinkers were more than just professional "money men", they were renowned philosophers, scientists, inventors, statesmen, political theorists, activists, mathematicians, social commentators and businessmen as well.

In my view it is of fundamental importance to try to synthesise what we learn about economics with what we already know of the world. In my case I've devoted much of my time to the study of philosophy and politics, which is convenient because these subjects are t
wo of the most natural bedfellows of economics (in fact the three are often formally combined in PPE university courses).
A better understanding of philosophy can provide the cognitive abilities to identify and criticise structurally incoherent economic ideas. A better understanding of political history and familiarity with common political structures and processes helps to clarify how abstract economic theories have been applied in the real world of politics.

The advice to read up on philosophy and politics is a bit vague, so I'll provide details of a few (hopefully) interesting things that broadened my perspective on how economic theories can interact with the subjects of philosophy and politics. Perhaps they may be of some use to you.

  • Bertrand Russell - "Proposed roads to Freedom": If you want to make yourself smarter, read some Bertrand Russell. This is as good a place to start as any.
  • Naomi Klein - "The Shock Doctrine": This book is a meticulously written history and critique of neoliberal politics and economics.
  • Noam Chomsky - Understanding Power: Chomsky is one of the great living intellectuals. It doesn't matter at all whether one agrees with Chomsky's politics, only a fool would claim that the man isn't a genius.
These suggestions are possibly of little use to people of markedly different experiences and mindsets to my own, so if you're more inclined to take a scientific, literary or perhaps business oriented perspective in life, try to consider the crossovers between particular economic ideas and aspects of your other fields of expertise.

Economics needs more thinkers with diverse "real life" experience and new perspectives to offer. What it certainly doesn't need is any more of the kind who have devoted the majority of their study hours to the uncritical rote learning of neoclassical economic dogma and little else.
The Keiser Report

Max Keiser is a controversial figure, but in my view he's probably done more to popularise economics reporting than any man since the dawn of the television age. Max and his now wife Stacey Herbert present the first half of the thrice weekly Keiser Report show, and in the second half of the show Max interviews a guest, often someone with economics expertise, but occasionally others too. Some of his more offbeat guests have included 
Frankie Boyle, George Galloway, Kerry-Ann Mendoza (AKA Scriptonite Daily), Russell Brand and Mark McGowan (AKA The Artist Taxi Driver).

I don't see eye to eye with Max Keiser on everything, he's too much of a "gold bug", he is too keen on the Austrian school of economics and he doesn't interview nearly enough left-libertarians for my liking. But one thing is for sure, The Keiser Report is guaranteed to give you food for thought, especially if the guest is an interesting one.

If you watch nothing else of the Keiser Report, at least try a couple of episodes featuring the aforementioned economist Steve Keen (episode 4, episode 77episode 226, episode 418episode 500).

Tax-Dodging and Capital flight

Tax-dodging and capital flight are two important subjects in contemporary economics. I've written short introductory articles on both of these interrelated subjects. If you would like to learn more about the alarming scale of tax-dodging, and why it is such a major economic problem you could read "Treasure Islands: Tax havens and the men who stole the world" by Nicolas Shaxon, or you could take a look at Richard Murphy's Tax Research UK blog or the Tax Justice Network website.  
Rethinking economics
Rethinking Economics is a global movement to promote pluralism and critical thinking in economics courses. The movement arose out of a protest by Manchester University students against the uncritical teaching of the neoclassical economic orthodoxy in their economics department, despite the fact that huge swathes of neoclassical economic theory have clearly been completely refuted by the global financial sector insolvency crisis and the massive state bailouts. 
The Manchester students are called The Post Crash Economics Society, and in 2014 they won  university society of the year at the 2014 NUS Awards.

Positive Money

Positive Money is a movement which attempts to educate the public about the nature of money, how most of it is created out of nothing by private banks and rented out to the public as interest bearing loans, why this is a problem (inflationary bubbles and ever increasing levels of debt), and what they propose to do about it (giving monopoly power to create money to a kind of central bank-politburo).

My view on Positive Money is surprisingly similar to my view on Karl Marx. They have correctly identified flaws in the economic system and have attempted to inform the public of the problems - which is highly commendable, but their proposed solutions leave quite a lot to be desired.

Whatever your views on the nature of currency, Positive Money are definitely worth keeping an eye on.

My own work
I have written several articles on economic subjects, I suppose this is one of the main reasons that people have asked me for advice on economic matters. So my economics articles are probably the main reason that this article even exists.

I have written about many subjects ranging from the absolute basics (the difference between a debt and a deficit) through economic ideas that lots of people tend to grasp intuitively without realising there are specific economic explanations (Marginal Propensity to ConsumeHidden InflationFiscal Multiplication) to much more complicated things (Information AsymmetryCredit Default SwapsQuantitative Easing).

I have also written a number of articles on Universal Basic Income and I intend to write a lot more about alternative currencies at some point in the future ...

Social media

I have set up a Twitter list of interesting economics related accounts. Feel free to do a spot of cherry picking of interesting accounts to follow, or to suggest other accounts you believe should be added to the list.


I hope this short guide to learning more about economics has been of use to you. 

If you would like to offer more economics recommendations in the comments section, please go ahead. 

 Another Angry Voice  is a not-for-profit page which generates absolutely no revenue from advertising and accepts no money from corporate or political interests. The only sources of income for  Another Angry Voice  are small donations from people who see some value in my work. If you appreciate my efforts and you could afford to make a donation, 
it would be massively appreciated.

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