10 Economics Books That Aren't Boring AND Help You Understand The World Much Better
In Mobs, Messiahs, and Markets, Bonner and freelance journalist Lila Rajiva use literary economics to offer broader insights into mass behavior and its devastating effects on society. Why is it, they ask, that perfectly sane and responsible individuals can get together, and by some bizarre alchemy turn into an irrational mob? What makes them trust charlatans and demagogues who manipulate their worst instincts? Why do they abandon good sense, good behavior and good taste when an empty slogan is waved in front of them. Why is the road to hell paved with so many sterling intentions? Why is there a fool on every corner and a knave in every public office?
2. A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation
Why do markets keep crashing and why are financial crises greater than ever before? As the risk manager to some of the leading firms on Wall Street–from Morgan Stanley to Salomon and Citigroup–and a member of some of the world’s largest hedge funds, from Moore Capital to Ziff Brothers and FrontPoint Partners, Rick Bookstaber has seen the ghost inside the machine and vividly shows us a world that is even riskier than we think. The very things done to make markets safer, have, in fact, created a world that is far more dangerous. From the 1987 crash to Citigroup closing the Salomon Arb unit, from staggering losses at UBS to the demise of Long-Term Capital Management, Bookstaber gives readers a front row seat to the management decisions made by some of the most powerful financial figures in the world that led to catastrophe, and describes the impact of his own activities on markets and market crashes. Much of the innovation of the last 30 years has wreaked havoc on the markets and cost trillions of dollars.
3. Poop Culture: How America Is Shaped by Its Grossest National Product
Poop Culture is an excellent book about a topic that is largely (and unfairly) ignored. Perhaps the greatest asset and the greatest weakness of the book is its breadth. The author covers many different approaches to the topic--from the psycho-social elements of poop (i.e. shame) to the history of the toilet to cultural symbolism to poop in art to the economic/ecologic effects of the way we as a society deal with our poop. It's at once odd and heartwarming to see a diagram of the best way to poop (squatting) or talk of South Park in the same book that also contains theoretical musings on Jonathan Swift and Marcel Duchamp.
4. The Logic of Life: The Rational Economics of an Irrational World
I think that I have read all of the recent "economics of everything" (Harford's phrase) books and this one is, in my view, the best. I also try to keep up with recent research in applied economics and found some gems in these pages that I had missed. The author alludes to about 200 papers and books from recent economics research and presents them in the most reader-friendly way, all in about 200 pages. I call that very efficient. Harford's summary is also a useful antidote to all the "behavioral economics" that the popular press has picked up. The idea that some of us depart from rational choice on occasion is hardly news. The point of this book, that the rational choice model, has amazing power range is worth reiterating.
5. The Black Swan: The Impact of the Highly Improbable
Four hundred years ago, Francis Bacon warned that our minds are wired to deceive us. "Beware the fallacies into which undisciplined thinkers most easily fall--they are the real distorting prisms of human nature." Chief among them: "Assuming more order than exists in chaotic nature." Now consider the typical stock market report: "Today investors bid shares down out of concern over Iranian oil production." Sigh. We're still doing it.
6. The Economic Naturalist: In Search of Explanations for Everyday Enigmas
The book indeed is like Freakonomics in that its purpose is to reveal the economic rational behind everyday matters. It is different from Freakonomics in that it follows a "top-down" approach: each of the book's chapters corresponds to a basic economic principle (for example supply and demand for a chapter, and signals and asymmetric information for another) that is explained via real world examples. So if one can say that the goal of Freakonomics was in reaching the bottom reason/motive of particular phenomena, it can also be said that the goal of The Economic Naturalist is to elicit fundamental economic principles through questions and answers. In this sense the book is more educational.
7. Discover Your Inner Economist: Use Incentives to Fall in Love, Survive Your Next Meeting, and Motivate Your Dentist
The book is full of fascinating stories in which psychology meets economics. The author applies the above concepts and ideas to a wide, wide variety of everyday situations, such as chess, doing the dishes, UN diplomat parking violations, bonuses in the workplace, petty crime, expercise programs, student drinking, tardiness, RSVP's, meetings, going to museums, buying paintings, reading, buying music, toilet seat positions (a very, very important topic), gift giving, pickup lines, personal ads, marriage, being tortured, recognizing liars, gym memberships, shopping, eating and restaurants and getting the best food, "The Seven Deadly Sins", sexual intercourse, beggars, charitable giving, and tipping. WHEW! WOW!
8. The Wisdom of Crowds
In 1906, Francis Galton, known for his work on statistics and heredity, came across a weight-judging contest at the West of England Fat Stock and Poultry Exhibition. This encounter was to challenge the foundations of his life's study. An ox was on display and for six-pence fair-goers could buy a stamped and numbered ticket, fill in their names and their guesses of the animal's weight after it had been slaughtered and dressed. The best guess received a prize. Eight hundred people tried their luck. They were diverse. Many had no knowledge of livestock; others were butchers and farmers. In Galton's mind this was a perfect analogy for democracy. He wanted to prove the average voter was capable of very little. Yet to his surprise, when he averaged the guesses, the total came to 1197 pounds. After the ox had been slaughtered, it weighted 1198. James Surowiecki takes Galton's counterintuitive notion and explores its ramification for business, government, science and the economy. It is a book about the world as it is. At the same time, it is a book about the world as it might be. Most of us believe that valuable nuggets of knowledge are concentrated in few minds. We believe the solution to our complex problems lies in finding the right person. When all we have to do, Surowiecki demonstrates over and over, is ask the gathered crowd.
9. The Paradox of Choice: Why More Is Less
Like Thoreau and the band Devo, psychology professor Schwartz provides ample evidence that we are faced with far too many choices on a daily basis, providing an illusion of a multitude of options when few honestly different ones actually exist. The conclusions Schwartz draws will be familiar to anyone who has flipped through 900 eerily similar channels of cable television only to find that nothing good is on. Whether choosing a health-care plan, choosing a college class or even buying a pair of jeans, Schwartz, drawing extensively on his own work in the social sciences, shows that a bewildering array of choices floods our exhausted brains, ultimately restricting instead of freeing us. We normally assume in America that more options ("easy fit" or "relaxed fit"?) will make us happier, but Schwartz shows the opposite is true, arguing that having all these choices actually goes so far as to erode our psychological well-being. Part research summary, part introductory social sciences tutorial, part self-help guide, this book offers concrete steps on how to reduce stress in decision making. Some will find Schwartz's conclusions too obvious, and others may disagree with his points or find them too repetitive, but to the average lay reader, Schwartz's accessible style and helpful tone is likely to aid the quietly desperate.
10. Crimes Against Logic
This book deserves the widest possible exposure in America, especially so close to the election, because it an excellent primer on how to guard yourself against the faulty reasoning that governs so much modern political discourse - and avoid adopting it yourself. I first heard about the book because one of its points was mentioned in an essay. The point was basically that just because someone has a motive to hold a certain position doesn't necessarily mean that the position is false. This seemed pretty obvious, but as I turned to the media I was amazed at how often politicians use this method, and how easily I had accepted their claims if they lined up with my political preferences.