I recently finished reading New Ideas from Dead Economists – An Introduction to Modern Economics Thought by Todd G. Buchholz.
The main premise of the book, is best summarized by the author: “It is striking that so many of the lessons of the great economists still speak to us. Each of their wisest theories has a practical point or analogy today. This book seeks their wisdom by looking at mainstream economics and asking, Who first had these insights and built these durable models? We can learn from the masters.”
Todd then embarks his readers on a journey through the contributions of the greatest economists of our time. Clearly explaining how they analysed the existing models and theories of their time, and their own contributions to advance the filed of economics. He does so, in a very simple style that is accessible to any audience regardless of their background in that field.
What truly sets this book apart is the breadth of content, spanning a period of several centuries. Sufficient depth is included so that one gains an appreciation and broad understanding. The included references make it easy for one to dive deeper into more details. A must read for anyone seeking an introduction and/or a broad understanding of the field of economics!
Below are key excerpts from the book that I found particularly insightful:
1- “Russia’s 1998 debacle teaches us that a market economy must rest on a dependable legal system. A free market does not mean utter chaos; it requires ground rules.”
2- “Economics if the study of choice. It does not tell us what to choose. It only helps us understand the consequences of our choices.”
3- “…as an economist isolates causes and estimates their influence, the degree of influence changes…Economics may not be a “hard” science. But that does not mean it is an easy science. Because it is so fluid, it is hard to hold in place and to study.”
4- “Smith clearly defined the proper role for government: first, providing for national defense; second, administering justice through a court system; third, maintaining public institutions and resources such as roads, canals, bridges, educational systems, and the dignity of the sovereign.”
5- “The point of Ricardo’s analysis: free trade makes it possible for households to consume more goods regardless of whether trading partners are more or less economically advanced.”
6- “By investing, the capitalist gives up the immediate gratification of buying goods. His return on investment pays him for waiting, for delaying his pleasure. If everyone consumes everything now, society will produce nothing new. Thus, profits play a crucial role.”
7- “…four very important areas in which economists have dramatically transformed traditional legal analysis: negligence law; property law; criminal law; and corporate finance.”
8- “There is clearly more to economics than prices, profits, rents, and costs. Laws, morals, fashions, and philosophies all contribute to an economy. They may support it, or they may tear it down.”
9- “What does it mean to be Keynesian? Two basis propositions will suffice here: (1) the private economy may not reach full employment; (2) government spending can spur the economy into filling the gap.”
10- “Keynes cleverly speculates that the way to make money in the stock market is not to be the best corporate analyst, but to be the best at guessing what others think is good.”
11- “This movement, called monetarism, admits that the economy does have an accelerator and a brake, but insists that the accelerator should be marked “higher money supply” and the brake “lower money supply…the monetarists portray the Federal Reserve Board…as the driver.”
12- “With perhaps uncustomary humility, Friedman claims that economists do not know enough about monetary policy to manipulate it wisely.”
13- “We are all Keynesians now, thanks to Keynes. We are all monetarists now, thanks to Friedman. And we are all eclectics now, thanks to a turbulent world.”
14- “This problem emerges again and again in democracies. Motivates organizations trample on the interests of consumers, who individually have a small stake in the outcome. Ultimately, the individual consumers are hurt badly as a national efficiency and income fall.”
15- “Rational Expectations theory predicts that government stimulus does not spur the economy and that government contraction does not hurt…Why do most economists tend to agree with Rational Expectations theorists when they talk about the stock market, yet explode in disagreement when speaking of the macroeconomy? The fact is, the stock market is a more efficient…it is quite liquid…In contrast, real markets for goods and services show more complexity and rigidity.”
16- “…each of the economists we have studied, despite their many differences, warned us that governments always face political pressures to take measures that can ruin good economies…Because even good economic policies often produce victims, economists have a very tough time persuading democratic governments to take good advice. Good economics may not be popular economics, especially in the short run.”
17- “Parents must eventually learn to teach their children how to handle uncertainty – not how to ensure stability.”
18- “For most of man’s life on earth, he has lived no better on two legs than he had on four . Give the economist a little credit for explaining and depicting the brief, shining moments when there has been a difference.”