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>No, I just assumed you're a rich city dweller who's never actually had to work a day in the field, and look to lose the least, and gain the most from the development of the world.

Spot on. Now we're talking. I sure hope that urbanisation keeps going the way it is. It's almost as if...cities are better. It could also be that I think my ancestors made a great move by coming to the city and I want to encourage and vouch for the process so that millions more can have better lives.

Luckily for me, voters keep voting for higher growth and more development.

"Individuals matter"

Happy? There, I stated the obvious. Would you like me to state other obvious things? 2+2=4 perhaps?

R1:

Today I bring you this WaPo Op-Ed on how the Carrier deal will return business norms back to ones that favor labor and community because firms will fear Trump’s wrath. Here the author offers a distorted view of America’s past, a dysfunctional view of how contracts and norms interact, and a wayward portrayal of economists as unable to fathom agents and systems which do not follow strict mathematical functional forms.

>There was a time in America when there was an unwritten pact in the business world — workers were loyal to their companies and successful companies returned that loyalty by sharing some of their profits with their workers in the form of higher wages, job security and support for the local community.

The author wistfully describes a past that did not exist when businesses and workers in long term marriages because it was what was right and good for the community.

At its heart this period existed because unionization (or more accurately worker bargaining power) made it possible. Certainly on the point of loyalty, unionization decline is the largest contributor to declining tenure (see Bidwell. As unionization fell, this loyalty also disappeared.
However, unionization's decline can largely be explained by the rule of law (right-to-work laws, unionization process etc.) though governing and business norms played a role (to be discussed).

With bargaining power largely reduce, workers had additional difficulty (for better or worse) attempting to hold their jobs in the face of international pressures and especially technological change as countless economist (Autor just to name check one) have documented.

>modern day economists tend to ignore such shifts in social norms because they can’t quantify them in the same way they can quantify trade flows or technological innovation or changes in educational attainment. They assume that social norms change in response to economic fundamentals rather than the other way around.

This is the sort of things that can ruin my work day as a nominally institutionalist style economist. To begin, several Nobel prize winning economists have done significant work studying norms formation and effects such as North, Ostrom, Akerlof, Akerlof again!.

Beyond this, others have built off these works (Ostrom was focusing on the importance of norms, but not specifically addressing the problem) to try to model norm development in game theory example.

In fact, in Samuel Bowles’ Microeconomics, discusses in detail the way contracts influence the norms and institutions of exchange (Chapter 8, p. 265). The long and short of Bowles’ discussion is that norms are well understood, evolutionary, and in the absence of complete contracting have significant influence on the results of exchange.

Norms matter greatly to economists in the event that contracting is incomplete. One would hope, it seems in vain, that contracting between the federal government and American firms is more complete than most contractual situations.

>the new norm is not longer acceptable, and [Trump] intends to do whatever he can to shame and punish companies that abandon their workers.
>He may even have to make an example of a runaway company by sending in the tax auditors or the OSHA inspectors or cancelling a big government contract.

Many economists see the potential change of market norms that will result from government contracts suddenly being less than 100% enforceable as a problem. Coming back to Bowles, he notes that said norms “are sustained by the structure of the market and other social interactions in which traders routinely engage.” If having government contracts and enforcement become less predictable is to be the new norm of enforcement, surely the market response will be to ask government from some premia in contracting to account for uncertainty. New firms may avoid starting their business under the supervision of this government altogether.

Tyler Cowen points out that the new norms that would arise likely involve more complex contractual agreements to skirt restrictions, degradation of U.S. tech advancement, a ramping of favoritism to levels not seen since the Harding administration, potential de facto capital controls, or at best a politicization of the economy with no real rule of law effects.

>Teddy and Franklin Roosevelt understood that. So did Ronald Reagan when he fired thousands of striking air traffic controllers and set back the union movement for several decades.

Perhaps most crucially, the author here references a variety of Presidents who enforced their support (or lack therefore) for labor, but did so through the rule of law via various anti-trust acts, the championing and enactment of a large set of labor relations legislation, and the decision to enforce laws enshrined in code 15 years prior that had been previously ignored. As opposed to potentially undermining the rule of law as Trump does by leveraging government contracts and regulation.

A bonus on this point is that—though Reagan’s actions may have signaled willingness from government to support changing business norms by supporting them through rule of law—unionization’s decline had already begun years prior to the changes in business norms Reagan’s ruling supposedly incited.

The study of economics is not one that lacks an understanding of how norms influence market interactions. Though I am not as well versed in studies accounting for changes in norms mathematically, I’d wager someone here could produce good examples of studies that do just this through the use of good instrumental variables.

The Carrier deal will likely change norms in business actions, but those are likely to be related to businesses’ certainty in contracting with government during the Trump presidency. Just as is seen in Trump’s cabinet, the only people left to provide work will be those certain they can take advantage of information asymmetry to get a better deal from U.S. governments. Any mass effort to enforce job retention on a scale much more massive than the Carrier deal will be enacted via law and will be just as harmful to business culture as Cowen and other economist predict, but it will be the changes to contractual enforcement that drive these results and not revolution in norms spurred on by backroom dealing.

Sometimes they do, however, there are infinite ways to be irrational, so adding too many variables has the problem of over fitting. If you have X observations and X variables, you can always perfectly explain the data, NO MATTER WHAT the actual causal chain is. (I can help give intuition here if you don't buy this).

Also, economics in its purest form is rather technical. I think macro is rather technical too, I believe solving a DGSE with just a few frictions is very hard by hand. So in some sense, these assumptions help make the model more easily solvable (useful, if you are doing the base case, like perfect competition).

Sometimes relaxing these assumptions is useful. However, I would arguing some of them are obviously wrong and not useful is engaging in hindsight bias.

I'm not sure if I should be using the silver sticky for this but here goes. I took some basic macro and macro classes a while back as part of my minor and in one of them we had an extra credit reading assignment that I really enjoyed (http://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640). I was just curious what the opinion of the book is on any of the people who are more more informed in general.

Here's the economics guide I typically recommend for newcomers:

Pirate a intermediate micro and macro textbook and do the math problems. Mankiw's macro and Krugman's micro are good for basic stuff. For intermediate+ macro textbooks we used blanchard and Sanjay Chugh's for advanced stuff. I forget what textbooks we used for intermediate and advanced micro but any textbook that has math for the models listed below should be good.

The recommended model order I would say is:

• Supply and demand, PPF's
  
• Utility, derive supply and demand curves from them
  
• Basic neoclassical macro(the supply and demand macro). Fractional reserve banking, how interest works, savings=investment. Basic Keynesian stuff like keynesian crosses, multiplier effect.
  
• Game theory+utility and risk for micro practice, Monopolistic competition and monopoly power
  
• Intermediate Keynesian stuff like ISLM, phillips curve for different expectations of inflation.
  
• Solow Swan immediately afterwards.
  
• Trade theory: Ricardian, HO(HO is kinda crappy but you need it in the event of DRS industries), Krugman
  
• More micro stuff but with lagrangians and more utility.
  
• Advanced macro models. In my Uni we did RBC and New Keynesian stuff with inter-temporal euler equations.

Monetary policy, the most important tool for stabilizing prices and employment (and thus the cycle itself). See C19 or the great depression for examples of what no monetary policy or bad monetary policy looks like. This pretty much covers it.

> the biggest critique of them

I would say the absence of any form of capital (IE growth & mobility goes away) or markets to set prices (IE pretending marginalism does not real) are even more fundamental then the absence of monetary policy.

We are not capitalists. We don't have an ideological devotion to the economic system we have today, we study the emergent system of how humans interact and come up with ways to improve that. Having things like monetary policy and capital systems improves the welfare of everyone, attempting to replace reality with belief (be it collectivism or the Austrian breed of "free markets") might produce desirable outcomes when non-economists are writing about it but in reality wont.

That scarcity exists and can't simply be willed away is why collectivism does not work in reality.

I've taken a course on public economics, we used this textbook by Stiglitz. You can find it online if you look around. It's pretty good but it's long so not exactly casual. Still, it doesn't get very technical so it's pretty accessible. The important chapters are the ones under welfare economics and the first few chapters on taxation, that might be a good starting point.

RI:



[If you don't want to read it all, I've marked my specific criticisms with bolded brackets below.]

This is bad methodology of econ, not bad econ per se. I hope this is allowed. I am posting this because the methodological debate this user is referencing is important to understand for young economists and laymen alike. I will first develop his argument and then attack it.

Disclaimer: I am not a professional economic methodologist. I have not taken fields exams in methodology (they don’t exist). I have only studied the topic beyond Friedman’s Essay on Positive Econ. Econ methodology is the study of the philosophical principles underlying economic reasoning. It is related to philosophy of science and philosophy of economics. See here for more info. I don’t claim to be a good philosopher. Criticism is welcome. Post me to /r/badphilosophy if you have to.



The linked user argues that mainstream economists compose economic “laws” which are not intended to hold throughout space and time, regardless of context, but rather are intended to hold only in specific time-space contexts (e.g., Stagflation in the 1970s U.S., industrialization in 19th century Japan). These “laws” (we would call them models) are only meant to describe the specific contexts for which they were developed, and so are not much use beyond that. Further, the user argues that mainstream economists base this view of contingency of economic “laws” on empirical evidence; it can be demonstrated with data that the critical assumptions of one model do not apply to contexts outside of the one for which the model was built.

The linked user contrasts this view with those of certain Austrian economists who believe in immutable econ laws which apply to all space-time contexts, and that empirical evidence can only illustrate, rather than support or contradict, these laws which are developed via some deductive framework. If the premises are true, and if the premises entail the conclusion, then the conclusion is also true. The conclusion need not approximate what we observe, only the assumptions. The fundamental axiom, “humans act,” is seen by this user and some other Austrian economists as undeniably true, and so conclusions derived from this and other minor premises must then also be undeniably true, regardless of empirical evidence to the contrary (I develop this argument with more nuance later). See Rothbard’s article in Southern Econ Journal for more on this view. By the user’s own admission, “This does indeed limit how much can be done and shown with Austrian Economics quite a bit, although nowhere as much as mainstream economists think.”

The user believes that the mainstream method produces models “which, by their own admission, will one day be false and useless.” He means, again, that mainstream models are meant for only the contexts for which they were originally built and are “useless” in other contexts.

***

Now that I’ve hopefully faithfully expounded the user’s argument, I can now criticize it.

First, let’s be clear about terminology. Mainstream economists are no longer interested (for the vast majority of cases) in constructing immutable economic laws. Gone are the days of Adam Smith and Karl Marx. Malthus was right about the pre-industrial era, but failed to recognize mechanisms through which his own “law” would become inapplicable to the industrial era. See Acemoglu and Robinson (2015) for more on the rise and fall of general laws in economics. Social behavior is contingent on context. We as economists must always be conscious of the external validity of our models.

Modern economists work with, speak in, and think through models, which are contingent on time and space, but which are not “useless” outside of the space-time contexts for which they are originally developed. [Criticism 1:] Models are, by definition, logical constructions and thus follow the same assumptions-conclusions structure as praxeological reasoning. Models are tautologies whose implications are dependent entirely on the assumptions. The user seems to believe that mainstream models are not deductive. This is just plain false. (I retouch on this criticism later, in case this is a bad portrayal of what the user meant.)

Rather, we develop deductive models and then test whether both the critical assumptions and the conclusions approximate reality. Critical assumptions are those which, if relaxed, would change the substantive results of the model. Friedman (1953) failed to consider these, which I explain in more detail here.

Dani Rodrik, IMO, captures the practice of modern modeling in his latest book, saying that economics is a library of models which apply to certain contexts based on how well their critical assumptions approximate reality. If a model is determined to apply appropriately to a certain context, and if its conclusions are shown to not match reality via empirical analysis (data, statistical analysis, qualitative methods, what-have-you), then the model is determined unable to explain reality in this particular context, and we’ll need a new model with appropriate critical assumptions but with a focus on different causal mechanisms. [Criticism 2:] A model is not “useless” in all contexts other than its original context; rather, it’s applicable to a certain type of context.

The user argues that mainstream models have no external validity. [Criticism 3:] Actually, the external validity of a model is limited by what its critical assumptions say about reality. Our library of models is a toolbox. If we have a nail, we need a hammer. If we have a screw, we need a screwdriver.

Further, Rodrik argues that economics progresses by expanding its library of models. The user admits that certain Austrian economists develop models which they believe apply to all contexts, and that this then limits the scope of their discipline. Thus, this variant of Austrian economics is actually practicing the same method as mainstream economists, but are limiting their library of models only to those with critical assumptions approximating all possible contextual realities (if such a thing is possible). The number of “praxeological models” or “economic laws,” as the user would describe them, is thus obviously very small, if not zero.

The user does not deny social contingency, but rather advocates a form of economics which only studies contexts which our model’s assumptions will approximate every time. [Criticism 4:] This has been determined by mainstream economists to not be a worthwhile endeavor, or even a possible one. Context matters. <-- This is a fundamental principle of several fields of economics, most famously institutional econ.

[Criticism 5:]**As for his criticism of econometrics, it’s clear he has no idea what quasi-experimental methods are. That is all.

It's a bit dry, but "Globalizing Capital" by Barry Eichengreen has been really enjoyable.

It gives you a brief history of global monetary systems, from metals to bimetal to gold to ForEx and then gives deeper analysis of the contemporary atmosphere. I'm not doing it justice, honestly.

Alternative R1:

> The reason economists use mathematics is typically misunderstood. It has little to do with sophistication, complexity, or a claim to higher truth. Math essentially plays two roles in economics, neither of which is cause for glory: clarity and consistency. First, math ensures that the elements of a model—the assumptions, behavioral mechanisms, and main results—are stated clearly and are transparent. Once a model is stated in mathematical form, what it says or does is obvious to all who can read it. This clarity is of great value and is not adequately appreciated. We still have endless debates today about what Karl Marx, John Maynard Keynes, or Joseph Schumpeter really meant. Even though all three are giants of the economics profession, they formulated their models largely (but not exclusively) in verbal form. By contrast, no ink has ever been spilled over what Paul Samuelson, Joe Stiglitz, or Ken Arrow had in mind when they developed the theories that won them their Nobel. Mathematical models require that all the t’s be crossed and the i’s be dotted. The second virtue of mathematics is that it ensures the internal consistency of a model—simply put, that the conclusions follow from the assumptions. This is a mundane but indispensable contribution. Some arguments are simple enough that they can be self-evident. Others require greater care, especially in light of cognitive biases that draw us toward results we want to see. Sometimes a result can be plainly wrong. More often, the argument turns out to be poorly specified, with critical assumptions left out. Here, math provides a useful check. Alfred Marshall, the towering economist of the pre-Keynesian era and author of the first real economics textbook, had a good rule: use math as a shorthand language, translate into English, and then burn the math! Or as I tell my students, economists use math not because they’re smart, but because they’re not smart enough.

https://www.amazon.com/Economics-Rules-Rights-Wrongs-Science/dp/0393246418

The criticism (pros and cons really) of modelling have been addressed here ad nauseam.

Monetary policy's kind of uncharted waters for macroeconomists; it's not a big deal, so it hasn't been researched much. Pretty much the only thing I can think of is this somewhat obscure and esoteric work. It hasn't made a very big splash in the field, but it's worth a read if you're interesting in monetary economics.

I would also recommend Mathematics for Economists. It covers a lot of the different fields, but only as they apply to economics.

It's not as rigorous as a whole course in optimization or real analysis, but it covers the important bits.

I think this is a difficult question to answer without more of an idea where you stand now.

In general, assuming someone has a bachelor's degree and didn't completely skip on all the math, I'd suggest Mathematics for Economists by Simon & Blume, and after or concurrently with that, Advanced Microeconomic Theory by Jehle & Reny. Simon & Blume should cover most of the math that you need to understand Jehle & Reny in sufficient detail.

If you want to read and understand macro papers, I'm pretty sure things are going to be a lot harder. I'm not the person to ask in that case, anyway.

[edit] Also I should mention that acquiring these books in a perhaps less than legitimate fashion is possible, and not very hard.

>>modern day economists tend to ignore such shifts in social norms because they can’t quantify them in the same way they can quantify trade flows or technological innovation or changes in educational attainment.
>They assume that social norms change in response to economic fundamentals rather than the other way around.
This is the sort of things that can ruin my work day as a nominally institutionalist style economist. To begin, several Nobel prize winning economists have done significant work studying norms formation and effects such as North, Ostrom, Akerlof, Akerlof again!.

I think your formatting failed there, it appears like one quote, whereas I think the seconds part is supposed to be your response. Pretty confusing to read.

Econ news today that excited me:

1. Paul Romer is the new chief economist at the World Bank.
   
   
2. Dani Rodrik, the globalization "skeptic" who wrote the primer on economic methodology, is [profiled by the IMF]
   (https://www.imf.org/external/pubs/ft/fandd/2016/06/pdf/people.pdf).
   
   
3. My former professor released a book on the economic history of Manhattan's skyline.
   
   
4. Increased supply may finally be coming to the U.S.'s most expensive cities. Makes a good point that new luxury apts decrease demand for middle-tier and low-end apts, thus easing up rent for all.
   
   
5. Andrew Gelman covers cases of scientific trickery in top econ journals.

This is US specific, but gives a pretty unbiased overview of the many different tax systems.

This Time Is Different has a good 100 pages on it: https://www.amazon.com/This-Time-Different-Centuries-Financial/dp/0691152640.

Also this Critical Review is more holistic: http://criticalreview.com/crf/current_issue21_23.html.

I think they did a book treatment on that as well haven't read it but my buddy who is an econometrician recommended it: https://www.amazon.com/Caused-Financial-Crisis-Jeffrey-Friedman/dp/0812221184

You thinking more Poor Economics or Why Nations Fail? There's also some good stuff on urbanization's role in development in Triumph of the City which has a lot of implications for developed-world city policy too.

Not a direct answer to your question, but if this is a subject you're interested in I cannot recommend Adam Tooze's Wages of Destruction enough.

The pure mechanics component consists of multivariable differential calculus, a little bit of multivariable integral calculus, and a bit of linear algebra; plus substantial comfort what might be called "systems of equations differential calculus." The fastest way to cover this material is to work through the first five or so chapters of Kaplan's advanced calculus book or something similar. Do the exercises. Your basic Stewart Calculus doesn't adequately cover the systems-of-equations part and Kreyszig's Advanced Engineering Mathematics book is at the right technical level but has all the wrong emphasis and coverage for economists. Kaplan's book isn't ideal, but it's about as close as you're going to get. (This is a hole in the textbook market...)

The theoretical portion mainly consists of basic point-set topology and elementary real analysis. The fastest way to cover this material is to chop through the first eight chapters of Rudin's undergraduate book.

Yale has a lovely set of Math Camp notes that you should also work through side-by-side with Kaplan and Rudin.

To see economic applications, read those two books side-by-side with Simon and Blume's book.

The first chapter of Debreu's Theory of Value covers all the math you need to know and is super slick, but is also far too terse and technical to realistically serve as your only resource. Similarly you should peek at the mathematical appendices in MWG but they will likely not be sufficient on their own.

Advanced Macro

https://www.amazon.com/Advanced-Macroeconomics-Mcgraw-Hill-Economics-David/dp/0073511374

> I can't think any person would consider them a reasonable alternative to taking a minimum-wage job and just subsisting, because eventually even they would no longer be available as alternatives.

So, there are perhaps 3 alternatives here:

• Get a MW job and subsist.
  
• Get a MW job and look for a better paying job in the evenings.
  
• Go into debt to look while looking for a better paying job.
  
  Not clear to me why the second isn't an option.
  
  ***
  
  > That said, would you recommend any books to start with economic modeling? It could be I'm misunderstanding something fundamental.
  
  Check out Sam Bowles microeconomics. I'm working out of Chapter 8.
  

>a book is the thing you do when you can't get a theory past the peer-review process.

http://www.amazon.com/gp/product/0307719227

http://www.amazon.co.uk/Midas-Paradox-Depression-Economic-Instability/dp/1598131508/ref=sr_1_1?ie=UTF8&qid=1452277093&sr=8-1&keywords=scott+sumner

https://www.amazon.com/gp/offer-listing/0393352242/ref=pd_lpo_sbs_14_t_0?ie=UTF8&refRID=5TTKGAJF1M8TNC11TN79

R 1

So to buy A Random Walk Down Wall Street in bulk, these bastards are charging 17.16 a copy, around $5 more than what it would cost individually on friggin' Amazon.

[Something something EMH is crap]

Thanks

ORLY.

Snapshots:

1. Graeber's "Against Economics" - archive.org, archive.today
   
   
2. here. - archive.org, archive.today
   
   
3. primer on health care for macroecon... - archive.org, archive.today
   
   
4. Economics of the Public Sector - archive.org, archive.today
   
   
5. Feldstein's 2005 Presidential Addre... - archive.org, archive.today
   
   
6. model joint micro-macro government ... - archive.org, archive.today
   
   
7. Thoughts on the State of Macro. - archive.org, archive.today
   
   
8. Economic Culture Wars - archive.org, archive.today
   
   
9. textbooks - archive.org, archive.today
   
   
   
   I am just a simple bot, not a moderator of this subreddit | bot subreddit | contact the maintainers

https://www.amazon.com/Microeconomic-Theory-Andreu-Mas-Colell/dp/0195073401

Only if you're no pussy

For macroeconomics we used 'Macroeconomics: A European Perspective' by Blanchard, Amighini and Giavazzi. It is focused on the eurozone though so I'm not sure how helpful it is. There also seem to be a Canadian version and an international version, the Canadian version is crazy expensive though (at least if I convert it to euros and compare it to my book), or are those normal textbook prices in Canada?

I mean, it is this sub's favorite meme

Quoted from his EconTalk segment: (link here)

>There's a very interesting thesis that Jared Diamond's Guns, Germs, and Steel sort of formulated, which is that really the geographic factors determined where early civilizations blossomed, and that, almost in a deterministic way, shaped which societies are more developed today. And we go in detail about why we sort of disagree with the thesis and why it's not really capable of explaining the patterns of what we see around us today; but they are interesting sort of variants of this. But the one that I think is more kind of popular among journalists and academics is a sort of cultural hypothesis. Max Weber was the person who developed the most famous example of this, or the Protestant ethic and constructive process; and Catholics. That's not as popular perhaps today. But if you sort of ask people why China is doing so well: Well, it is about Chinese culture. Why the Mexicans aren't doing so well or why sub-Saharan Africa is poor: It's all about national cultures or some cultural traits shared by a variety of individuals; or it would be Muslim versus non-Muslim. And again, we try to explain why such explanations are very limited. China has had the same Chinese culture but it did extremely badly under Mao... they did extremely badly 40 years ago when they had terrible incentives under Mao, and suddenly started doing well when the incentives changed. And all the while the same people in Hong Kong were doing very well. That should tell you something.

Pretty much everything in this book

My favorite: Encouraging Jewish emigration through violence while suffering a severe foreign currency shortage and then putting a punitive tax on the emigrants, thus shooting themselves in the foot twice.

Really, Nazi economics were a whole new level of fucked up.