The writ­ing that shaped eco­nomic think­ing

The Denver Post - - BUSINESS - By Noah Smith

The past year was dom­i­nated by the bit­ter pres­i­den­tial elec­tion. But dur­ing the pre­cious, brief mo­ments when I was able to un­plug from the mad­ness and read about eco­nom­ics, I found a lot of great ma­te­rial in 2016. Here is a list of 10 ex­cel­lent eco­nom­ics books and pa­pers — the first nine of which I read — that should be ac­ces­si­ble to the gen­eral public.

1. “Con­crete Eco­nom­ics: The Hamil­ton Ap­proach to Eco­nomic Growth and Pol­icy,”

by Stephen S. Co­hen and J. Brad­ford DeLong. This slim, read­able book could change the way you think about eco­nomic pol­icy in a sin­gle plane ride. Co­hen and DeLong take the reader on a whirl­wind tour of U.S. eco­nomic his­tory, show­ing that in each era, the U.S. gov­ern­ment had a very spe­cific plan for the econ­omy. It was only af­ter 1980, the au­thors claim, that the gov­ern­ment quit hav­ing big bold vi­sions, and let the econ­omy go wher­ever the whims of the mar­ket took it. As a re­sult, they say, fi­nance took over. Co­hen and DeLong call for a re­turn to the days of big, bold devel­op­ment pol­icy.

2. “The Wealth of Hu­mans: Work, Power and Sta­tus in the Twenty-First Cen­tury,”

by Ryan Avent. The “rise of the ro­bots” sce­nario is on ev­ery­one’s mind. Will tech­nol­ogy such as ma­chine learn­ing make most hu­man work­ers ob­so­lete, leav­ing us to rely on gov­ern­ment largesse? Or will we find new ways to com­ple­ment the ma­chines, as we did in the In­dus­trial Rev­o­lu­tion? Avent isn’t the first writer to strug­gle with this ques­tion, but this book is the best so far when it comes to the eco­nom­ics of the is­sue. The short and frus­trat­ing an­swer: We just don’t know yet whether hu­mans will go the way of horses.

3. “The China Shock: Learn­ing from La­bor-Mar­ket Ad­just­ment to Large Changes in Trade,”

by David Au­tor, David Dorn and Gor­don Han­son. This is the pa­per that shook the world of eco­nom­ics. Look­ing at lo­cal data, Au­tor et al. found that im­port com­pe­ti­tion from China was dev­as­tat­ing for Amer­i­can man­u­fac­tur­ing work­ers. Peo­ple who lost their jobs to the China Shock mostly didn’t find new good jobs — in­stead they took big per­ma­nent pay cuts or went on wel­fare. The au­thors also claim that the China Shock was so big that it re­duced over­all U.S. em­ploy­ment. This pa­per has thrown a huge wrench into the free-trade con­sen­sus among economists. It also might help ex­plain the elec­tion re­sults. Ex­pect to hear it cited again and again.

4. “Ris­ing Mor­bid­ity and Mor­tal­ity in Midlife Among White Non-His­panic Amer­i­cans in the 21st cen­tury,” by Anne Case and An­gus Deaton. This is the other must-read econ pa­per of the year. Case and Deaton find that very bad things have been hap­pen­ing to non­col­lege-ed­u­cated white Amer­i­cans — drug abuse, al­co­holism and sui­cide are way up. The prob­lem is so bad that death rates are ris­ing for this group, even as they fall for ev­ery­one else. These prob­lems also might have some­thing to do with the elec­tion — peo­ple in the places hit hard­est by drug abuse tended to shift to­ward Don­ald Trump.

5. “Phish­ing for Phools: The Eco­nom­ics of Ma­nip­u­la­tion and De­cep­tion,” by Ge­orge Ak­erlof and Robert Shiller. This is an­other book in­tended to make us re­con­sider the en­tire way we think about the econ­omy. In­stead of a world of ra­tio­nal ac­tors who are mostly suc­cess­ful in us­ing their re­sources to ful­fill their de­sires, Ak­erlof and Shiller sug­gest we think of the econ­omy as a jun­gle full of trick­ery, mis­takes and con­fu­sion. They pro­vide a num­ber of ev­ery­day ex­am­ples of ex­ploita­tion, de­ceit and cog­ni­tive bias.

6. “Eco­nom­ics Rules: The Rights and Wrongs of the Dis­mal Sci­ence,” by Dani Ro­drik. This one is for eco­nom­ics nerds. Ro­drik, an ac­com­plished but of­ten re­bel­lious econ­o­mist, waxes philo­soph­i­cal on the uses and abuses of eco­nomic mod­el­ing. He points out a lot of very real fail­ings of eco­nomic mod­el­ing, and takes some fa­mous peo­ple to task, but also de­fends the pro­fes­sion against many of its harsher crit­ics. In the end, Ro­drik be­lieves that good eco­nom­ics comes down to good judg­ment.

7. “The Pro­duc­tion of Hu­man Cap­i­tal in De­vel­oped Coun­tries: Ev­i­dence from 196 Ran­dom­ized Field Ex­per­i­ments,” by Roland Fryer. This pa­per is the de­fin­i­tive summary of what economists have learned about ed­u­ca­tion meth­ods. Fryer has col­lected a huge num­ber of real-world tri­als of things such as school vouch­ers, char­ter schools and in­ten­sive tu­tor­ing. Un­for­tu­nately, tu­tor­ing was the only thing that re­ally worked. 8. “The Trou­ble with Macroe­co­nomics,” by Paul Romer. Many peo­ple have crit­i­cized macroe­co­nomics over the years, es­pe­cially since the fi­nan­cial cri­sis. But per­haps none have done so as force­fully as Romer, the new chief econ­o­mist of the World Bank. Romer takes his fel­low macroe­conomists to task for fail­ing to rec­on­cile their the­o­ries with real­ity. 9. “The Seat­tle Min­i­mum Wage Study.” One of econ’s big­gest, bold­est pol­icy ex­per­i­ments was un­der­taken in Seat­tle by the Uni­ver­sity of Wash­ing­ton two years ago — a steady rise in the min­i­mum wage, which will reach $15. Now some pre­lim­i­nary re­sults are in. The rise in the min­i­mum wage isn’t hold­ing back em­ploy­ment very much, but it has re­sulted in some work­ers get­ting their hours cut.

10. “The No­bel Fac­tor: The Prize in Eco­nom­ics, So­cial Democ­racy, and the Mar­ket Turn,” by Avner Of­fer and Gabriel Soder­berg. This is the one I haven’t read yet, but I’m ex­cited to do so. I have al­ways sus­pected that the Eco­nom­ics No­bel — ac­tu­ally a prize awarded by the Bank of Swe­den, named af­ter the fa­mous No­bel Prizes — ex­er­cises an un­due in­flu­ence on the field.

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