Thursday, December 29, 2011

Five top "economics is fun" books

Daniel S. Hamermesh is Sue Killam Professor in the Foundation of Economics at the University of Texas at Austin and Professor of Labor Economics at Maastricht University. His most recent book is Beauty Pays: Why Attractive People Are More Successful.

He shared five top books on "economics is fun" with Sophie Roell at The Browser, including:
The Worldly Philosophers
by Robert L Heilbroner

Let’s go on to the book by Robert Heilbroner, The Worldly Philosophers.

This is the oldest book I’ve chosen by far. The first edition came out in 1953 – I read it in my senior year in high school. That’s one of the reasons I love this book. We had what was called the Honours Social Studies class. The teacher was quite sophisticated, a very unusual guy. He had an MA from Harvard.

Is this in Texas?

Heavens no! It was suburban Chicago. The median family income in our suburb in 1960 was $3 different from the national average. It was, quite literally, middle class. We took this class and six weeks of it was an economics unit, and he assigned this book. It’s what got me into economics, quite frankly. I am an economist today because of this book.


Let me tell you why. The book did two things. Firstly, it talked about the problems economists deal with. At that time I was terribly interested in public policy and wanted to improve the world. I still am, but I’ve sort of given up hope on much improvement being possible. The other reason is that a number of these essays, at least in that edition, had a few equations. I was quite good at math – not great, but good. I thought, “Here is a chance to use math and think about something in a formal way which, along with being useful, is just a wonderful combination.” For me, that was just glorious. We also had anthropology, sociology and government, but they all just paled by comparison. It was the beauty of the formality and the specificity of economics which to me was demonstrated in that book. So it had tremendous influence. In the mid-1990s, I actually wrote Bob Heilbroner, and this was really bad of me. I wrote: “Your book got me into being an economist. I wish some of your more recent books had inspired me as much as this one did.” That wasn’t a good thing to say. The guy was quite far left – he wrote a lot of stuff which I felt was rubbish. But this book is just beautiful, it really is.

At this point it might be worth mentioning that it’s subtitled “The Lives, Times and Ideas of the Great Economic Thinkers” – so it starts with a chapter on Adam Smith, and then goes through, covering Malthus, Marx and so on.

Most of the prominent economists of the first half of the 20th century and before are discussed. It’s not just the ideas, it’s to give a feel for the people as people. I won’t go through them all, but I’ll just tell you the ones that intrigued me. I’m very interested in Keynes, personally. He was an amazing character, a tremendous investor. He made a fortune on the stock market, he was probably bisexual, he was very heavily involved in the Bloomsbury group. I also like David Ricardo, partly because he was of Jewish origin. He too made a bundle. I visited the synagogue where he was brought up, in East London. I also like Joseph Schumpeter, who ended up at Harvard. He had a tremendous reputation as a ladies’ man. He said, “I always wanted to be a great economist, a great lover and a great horseman, and I regret life has only granted me two of the three.” When he went to Harvard people were worried that he’d chase after the wives of his colleagues in economics. After he went to a department party, he said, “Gentlemen, your wives are safe.” I can’t remember if that story is in the book or not. [Heilbroner was one of Schumpeter’s pupils.]

Here is one of the questions I wanted to ask you, with regards to Heilbroner’s book. With the economics profession, in the aftermath of the financial crisis, being somewhat in disrepute

Stop! Stop, stop, stop. The economics profession is not in disrepute. Macroeconomics is in disrepute. The micro stuff that people like myself and most of us do has contributed tremendously and continues to contribute. Our thoughts have had enormous influence. It just happens that macroeconomics, firstly, has been done terribly and, secondly, in terms of academic macroeconomics, these guys are absolutely useless, most of them. Ask your brother-in-law. I’m sure he thinks, as do 90% of us, that most of what the macro guys do in academia is just worthless rubbish. Worthless, useless, uninteresting rubbish, catering to a very few people in their own little cliques.

I’m not sure most people in the outside world would make a distinction between macro and microeconomists.

I know. It’s up to us to educate them. I got this line from a friend in architecture the other day. He said exactly the same thing. I went through the same litany, trying to disabuse him of this notion. It’s like pushing a stone up a giant hill. It’s not going to get me very far, I agree. But nonetheless it is the case that most of us, and most of what we do, remains tremendously useful, tremendously relevant, and also fun!

The point I was going to make is that with the public perception of economics being on the negative side right now, and the limitations of economics being highlighted in the media, this book, The Worldly Philosophers, is just fantastic at showing what an amazing thing economics was, what amazing insights it brought to bear on the world. People just hadn’t thought about things in that way before.

I agree, and a lot of the insights are still very much valid. Nonetheless, all the people in the book have been defunct for at least 60 years now. There have been some great economists since then, in the last 30 to 40 years. For example, George Akerlof, with his notion of asymmetric information and the failure of markets. It’s a truly brilliant idea and it’s ubiquitous in our lives. There’s Gary Becker, who in my view is the top economist of the last 50 years. His notions of family bargaining and how families behave are terribly important, and affect how, in the end, we all think. These guys who Heilbroner is talking about and the other ones of the last 50 years – none of whom is a macro person, by the way – have had equal influence. It goes on. It just is no longer stuff that is relevant to the macroeconomy. Unfortunately that’s a very important area and we have been derelict on it.

What’s the solution, do you think?

I do believe in markets. People are interested in being useful in this profession. It doesn’t mean the people who were the bad guys from the last 20 years in macro are going to be doing anything different. They’re incapable of doing anything different! But markets do work and the dead and useless get shoved aside by the young and useful. I’m a tremendous optimist. I do believe markets work and that people run to fill niches. There’s an obvious niche here, and you’re already starting to see it being filled. I’m sure the journals in academe are going to reflect this change too.
Read about Hamermesh's other "economics is fun" books.

The Worldly Philosophers is one of Sheena Iyengar's six favorite books.

--Marshal Zeringue