Six big economic ideas [pdf]

Agree about EconTalk, though not as big a Mike Munger fan. (I am partial to Richard Epstein as a guest.)

I cannot speak more highly of the host. Among podcasts about ideas, Russ Roberts is absolutely remarkable and unique in his willingness and ability to give a good-faith, sympathetic venue for ideas with which he disagrees. While he is willing to push back against ideas he doesn't agree with, he is always pleasant and always reminds the listener (and himself) that he is also subject to confirmation bias.

And while the focus is economics and public policy, he will interview nearly anyone with something to talk about. I can't begin to list the things I've learned about bees, the potato chip and snack food industry, prison gangs, etc. Well worth anyone's time.

Strong agree on Econtalk. I don't share Russ Roberts politics, but I think this is one of those cases where the ideological friction makes things better, because I'm regularly surprised by where conversations on the show go.

Can't second the econtalk recommendation enough - I first heard about the show some years ago on HN, and have listened weekly ever since - so I hope a few more people get introduced to the show thanks to this comment thread!

Econtalk looks like a real gem. What other podcasts are out there?

Econtalk is a great podcast. I dream of the day when Paul Krugman will agree to be a guest.

Couldn't recommend EconTalk enough. I'd consider Russ Roberts the standard of what honest intellectual discourse sounds like. Even when you can tell he disagrees with the guest, you can tell he works very hard to make sure he presents their views fully and honestly explore where exactly the differences of opinion form from.

I read Sowell's "Economics in One Lesson" and recommend against it. It's basically a libertarian promotional pamphlet. If one wants an economic education, something like "The Undercover Economist" is much better.

edit: oops, I definitely mixed Sowell and Hazlitt up. Leaving this up anyway, so that the replies make sense. Sorry!

Has anyone read Sowells "Black Rednecks and White Liberals"? It's on my reading list and the premise (that much of black culture is derived from Scottish highland culture) is very interesting.

His writings on economics, and concepts such as leftist intellectuals attempting to establish "cosmic justice" through the use of government intervention, are fantastic. It is hard for me to respect his intellect after reading some of his foreign policy articles though. It's a real shame he promotes the foreign policy he does.

Edit: I dont know if he came up with the "cosmic justice" bit but he certainly popularised it, and that has tremendous value for the public debate.

Would prefer someone did a tl;dr right here.

Akerlof's: If you don't know whether you are being sold a lemon, you probably think you are, and will only pay lemon prices. Hence brands and hence public market information openness.

Minsky: stability begets hubris begets instability in an endless cycle of humanity's economic systems. Governments need big balance sheets to sort that shit out.

Samuelson: free trade with low-wage nations could hurt workers in a high-wage country. Duh.

Keynes: beyond a point, people will not borrow any more no matter the interest rate, thank you very much. When this happens, governments should borrow (at very low rates) and spend to avoid economic malaise and collapse. They should not be austere.

Nash Equilibrium: Watch Beautiful Mind

Mundell-Fleming: A country can only ever do two of these things: fix the exchange rate, decide on interest rates, allow the free flow of capital. It's amusing when they try and do all three, or pretend to be doing something else.

I think in economics when somebody claims that their "predictions came true", it's usually due to luck and not the merits of their theory. You need decades of statistical evidence to support an economic theory, not the events of a few years.

Adding to this, also check out the work of Steve Keen, of Debunking Economics fame. He has been expanding on Minsky for years, and posted quite a few great lectures on his Youtube channel:

http://www.debtdeflation.com/blogs/research/

https://www.youtube.com/user/ProfSteveKeen

1. Akerlof’s information asymmetry: Sellers must use signalling to inform buyers of their product's high quality.

2. Minsky's financial instability hypothesis: Stability makes even high risk debt attractive which leads to a crisis of instability, a "Minsky moment".

3. Stolper-Samuelson theorem: Abolishing tariffs in favor of free trade with low-wage nations can hurt workers in high-wage nations, even when the high-wage nation benefits overall.

4. Keynes' fiscal stimulus and multipliers: Every government dollar spent stimulates the economy multiple times, by subsequently being spent by the recipients.

5. Nash equilibrium, game theory and the prisoner dilemma: Rational actors make choices based on what they think other actors will do. This leads to stable but sometimes sub-optimal scenarios.

6. Mundell-Fleming trilemma: Pick two: Fixed exchange rate, monetary autonomy or free flow of capital. You can't have all three.

Because it involves things that are way beyond Economics and you could say are part of the never ending Cultural War (which sounds terrible but it has a bright side, differently from militar action wars the cultural war has as trench your mind, your values, your lifestyle and casualties are ideas that can't prevail). Example: Political Correctness is a weapon in the cultural war. A battlefield is the moral ground https://en.m.wikipedia.org/wiki/Culture_war

Math can be brief, you don't need to run experiments and interpret them.

Physics can (often) perform the same experiment over and over in different circumstances to resolve a question quickly.

Economics can perform an experiment once every decade, or even once every half century. For example, what would be the effect of the US government sending cash to every US citizen? We've done that three times, once under Carter, once under Bush, and once under Obama. The data needs to be analyzed thoroughly to see as much as possible the effects of the stimulus, and what was coincidence.

You can't produce a "great depression" on demand; you have to wait for the next one to come along. In the mean time, you talk about it.

In addition to the other commenters, I would also add that the more the rigor, the more concise the language used to express it can be. I once heard the comment "Math is a purely manmade language". I think that is true, and its language can be really, really terse, usually because everything that builds on foundational principles can be rolled up into even more terse language. Physics, chemistry etc. less so because it is an observation of the stuff around us, which starts getting more ambiguous. People cannot even agree if economics is a science, it certainly does not possess much rigor (in the sense of reproducible experiments) and it intersects too much with human behavior which is wildly unpredictable.

In my experience is like economists like to use weird words (at least in spanish) for example instead of using the word "promedio" (average), when there are only two numbers they call it "semi suma" (that would be the sum of multiple numbers divided by 2).

Some parts of economics are more like a social science. Other commenters have already pointed out that there is limited ability to perform traditional hypothesis-testing experiments.

Other parts of economics are more like philosophy. Which models and metaphors describe economies and economic decisions best? Is cash like blood? Are there invisible hands? Are interest rates levers or throttles? To what degree do groups think the way individuals do?

These sorts of things don't lend themselves to Greek letters, operators, functions, and so on.

Well, I don't know how much uninformed about economics you actually are, but I think that at least part of this perceived verbosity is due to you being acquainted with it through stuff aimed at lay people. The Economist is a sort of popular economics reporting magazine (a "pop-econ" magazine). The stuff they write is aimed at a general audience.

Though admittedly economic articles are do seem verbose when compared with math or physics articles. But there's a lot of variance in their verbosity, too: theoretical articles are pretty much just math. Empirical guys on the other hand are always somewhat verbose, as they like having some plausible stories behind the mechanisms they're testing or to explain why their instrumental variable is exogenous. The literature of subfields are/were almost entirely verbose, such as in the case of the old institutional economics.

I'd say that it all boils down to: how wide the intended audience is; how established is a field or subfield is; how do new articles fit in with the older literature. When all you've got in your head is some hazy philosophical point, trying to formalize it from the outset will probably just alienate you from the discipline. So older literature will be, on average, more verbose than current literature. On the other hand, if all people do is point out more and more new issues, and if every new article is "orthogonal" to each other, they might never produce a succint framework (in which case it all turns into philosophy). And this goes for other fields too: mathematics was a verbose field too until some of it's ideas became common sense, and so was physics. Economics is still undergoing a lot of changes, and will probably undergo a lot more as economists focus themselves on narrower issues and as more data is collected.

It's because economics is more sociology than math or science.