Essential Readings in Economics
I promise that there will be no math
After reading Jason Manning's post on essential sociology, I was inspired to try the same with economics.
Suppose that you would like to read more about economics but without having to work through equations. Here are some recommendations.
For a textbook, I recommend Hidden Order: The Economics of Everyday Life, by David Friedman. Also good is Basic Economics, by Thomas Sowell. For free, you can download Specialization and Trade, by me.
Another book I have recommended before and will recommend here is Information Rules, by Hal Varian and Carl Shapiro.1
For classic articles written in English (as opposed to math), I recommend:
The Use of Knowledge in Society, in which Friedrich Hayek explains why markets solve a problem that cannot be solved by a central planner. Tyler Cowen calls this the GOAT of economics articles.
Production, Information Costs, and Economic Organization, by Harold Demsetz and Armen Alchian. I would be surprised if you can absorb this paper without reading it several times.
I can recommend several lectures given by recipients of the Nobel award.
Economic Performance Through Time, the Nobel lecture by Douglass North, argues for the importance of economic institutions.
The Pretence of Knowledge, Hayek’s Nobel lecture, argues that economics cannot be like the physical sciences.
The Institutional Structure of Production, Ronald Coase’s Nobel lecture, explains how he arrived at two important ideas.
The Constitution of Economic Policy, James Buchanan’s Nobel lecture, gives background on public choice theory.
Most of the valuable work in financial economics is mathematical, but Noise, by Fischer Black is prose. It is probably hard to understand without more background.
“Bank Funds Management in an Efficient Market,” also by Black, is behind a paywall. I asked ChatGPT for a summary, and it hallucinated. Claude 3.5 nailed it. Black does not see betting on the direction of interest rates as a source of bank profits. A related paper is Banking in the Theory of Finance, by Eugene Fama. Again, without more background the meaning and significance of these papers may be elusive.
substacks referenced above:
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Varian liked an essay called The Economy of Ideas, by John Perry Barlow. Although it was written in the days when Net-heads were adamant that “information wants to be free,” it now sits behind a paywall.
For a very basic explanation of economics, I recommend Henry Hazlett's Economics in One Lesson.
Given that the status quo is so far from a Hayekian optimum -- both because of bad positive policy --e.g. immigration restrictions and bad negative policy, eg. no Pigou taxation of externalities -- I'd think the most useful kind of book for the novice would be something on moving from third to second best policies.
I don't know what that would be!