Paul Samuelson, an American economist and the first American to win the Nobel Memorial Prize in Economic Sciences, once said that ‘economics is a choice between alternatives all the time. Those are the trade-offs’. Today, we will be making some tough choices between some of the most important economics books to ever be written. With such a wealth of writing on the subject; it’s an almost impossible task to whittle it down to just a few books in a single reading list. So, needless to say, this list could never be exhaustive. However, I have been lucky enough to interview some of the finest minds in the world of economics. So, I’ve asked if they wouldn’t mind lending me a helping hand putting together a list of the most important economics books.
Now, let’s discover the most important economics books.
Thinking Strategically is the book that made me fall in love with economics. Without it I’d have dropped the subject completely at university. Thinking Strategically is an introduction to game theory – a mathematical analysis of human vs. human interaction from a tennis match to a salary negotiation. There’s not much maths in the book, but just enough to make the point. The writing is lively and the insights are full of counterintuitive wisdom. Excellent stuff.
It is worth reading through this book and struggling with Keynes to understand how the macroeconomy works. The idea that the market will not automatically need to full employment is an incredibly important concept that is radically at odds with the thinking in academic economics prior to Keynes. It also is at odds with what came to be the standard academic thinking in subsequent decades, as Keynes key insights were narrowed down and squeezed back into the box of mainstream economics. In that view, periods of under-employment were an exception. The book certainly contains contradictions. Keynes was laying out a radical new theory and inevitably got confused himself at points. But it is worth people’s time to read the real thing.
No, this isn’t an economics book. But it is full of economic/statistical arguments and reasoning. It illustrates better than any pure economics book how a company can take advantage of market niches and improve its competitive position. That it also happens to be about baseball makes it even more fun. And while the movie was enjoyable, this is more so—and it has more thought in it, even without Brad Pitt.
The Wealth of Nations is the book that laid the foundation of economics as a discipline, authored by the father of the subject, Adam Smith. The “invisible hand” of markets which he wrote about during the advent of the Industrial Revolution established how markets work through the invisible forces of supply and demand that determine prices and the quantities of goods/services bought and produced. The market economy understood since Smith’s seminal work published in 1776, has been the basis of our prosperity from the 18th century to the present.
This work is very important for its insights on the relationship between markets and society. To my view, the takeaway is that we decide where we want markets and how we want them to work. Too often the market is treated as a natural phenomenon, that it is somehow just given to us by laws of nature. This book points out that the domain of the market is socially determined. The same applies to how we structure markets in the areas where we decide to use them. It is important to recognize that the market is a tool, like the wheel or fire, we decide where and how to use it.
Hidden Order by David Friedman is a brilliant alternative to a microeconomics textbook. Friedman is a libertarian – even more so than his father Milton – and the politics emerge from time to time in this book, but there’s no shame in that. It is scintillatingly clear about how economic theory fits together and full of clever thought experiments.
The best discussion of the origins of economic thinking. Written for the layperson, but up to the highest scholarly standards. If you want to understand the bases of today’s economics—to understand where economics comes from—this is the book to read. It’s also an excellent way to become acquainted with some of the greatest minds in the history of Western civilization, including Adam Smith, Karl Marx and John Maynard Keynes.
This work is often misunderstood as being narrowly an argument about how people buy things to show their wealth. It actually is making a more fundamental point, that people’s consumption is inherently social. They buy items to maintain a standard of living that they consider appropriate based on the society in which they live. This goes against the standard view in economics where consumption is inherently asocial; a person’s well-being depends only on their own consumption of goods and services, not their relative position. There is a growing body of research in behavioral economics suggesting that Veblen’s insight was correct. People feel a loss when they fall behind those they consider their peers, even if their own standard of living is remaining constant or even improving.
My third choice is Information Rules: A Strategic Guide to the Network Economy by Carl Shapiro and Hal Varian. It doesn’t have the same classic status as my other two choices. But although published in 1999, early in the internet age, it’s still the best guide to how the ability to communicate and process information at dramatically reduced costs affects the structure and dynamics of the economy. The book is written as a practical business guide so it’s very readable. It’s interesting to read now in the final chapter on policy the prediction that new digital monopolies would attract the attention of anti-trust authorities, as Hal Varian is now Google’s chief economist. “Don’t expect government regulation to diminish any time soon,” the book concludes.
The Truth About Markets by John Kay presents the flip side to Friedman: where Friedman sees simplicity, Kay warns that markets are a little messier and more socially embedded. Unlike many critics of classical economics, Kay understands exactly what he is chipping away at, and both the genius and the limits of the market. A wonderful book – and prescient in many ways.
It might be unusual to select an economics textbook as one of the most important books, but as the author of this best-selling textbook Paul Samuelson said: “Let those who will, write the nation’s laws if I can write its textbooks.” I should declare that I have also co-authored one titled Macroeconomics (with Graeme Chamberlin) as I similarly believe that textbooks are important. Although many students will not major or specialise in economics, they will often dip their toes into the subject in an introductory course.
Given how central economics is to public policy as well as business and other spheres, textbooks are a crucial part of our education. And thus I chose Samuelson’s work; his legacy, which is evident in this text, includes bringing together the different strands of macroeconomics into its current form of the ‘new neoclassical synthesis.’ His textbook has been in print continuously since 1948 with the 19th edition published in 2009, with later editions updated by Yale’s William Nordhaus. Widely translated and sold worldwide, Samuelson’s book is a pillar of the study of economics.
A mystery novel in which the hero uses economic reasoning to solve the crime. An unusual and neat illustration of economics in action in a different context. The hero, finding himself on a Caribbean Island, St. John USVI, is modeled after Milton Friedman. The pseudonymous authors are two economics professors, Ken Elzinga of the University of Virginia and the late Bill Breit of Trinity University.
Meet the Expert Panel
I am proud to say that a special reading list of the most important economics books has been assembled, by a wonderful panel of economists who have kindly offered their opinion. So, now we have discovered the most important economics books, we must now meet that panel…
Tim Harford is a senior columnist for the Financial Times, a bestselling author and a broadcaster. His books include The Undercover Economist, which is also the name of his FT column in which Tim shares economic ideas behind everyday experiences). Tim is a believer that the power of economics can be used for good and has made his case in all of his speaking performances, including at TED and Sydney Opera House.
Diane Coyle is the Professor of Economics at the University of Manchester in addition to running Enlightenment Economics. She is a Fellow of the Office for National Statistics and a Member of the Natural Capital Committee. Specialising in competition analysis, as well as the economics of new tech and globalisation, Diane is also the author of numerous books, including GDP: A Brief But Affectionate History.
Dean Baker is an American macroeconomist and co-founder of the Center for Economic and Policy Research (CEPR) in Washington, D.C. He is credited as being one of the first economists to have discovered the 2007–2008 United States housing bubble. Dean Baker has written several books, including Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.
Linda Yueh is Fellow in Economics at St Edmund Hall, Oxford University, and Adjunct Professor of Economics at London Business School. Previously, she was Chief Business Correspondent for BBC News and host of Talking Business with Linda Yueh for BBC TV as well as being Economics Editor and anchor at Bloomberg TV. Her latest book is The Great Economists: How Their Ideas Can Help Us Today (US).
Daniel Hamermesh is a Professor of Economics at the Royal Holloway University of London. He is also Sue Killam Professor Emeritus in the Foundation of Economics at the University of Texas at Austin. Impressively, Daniel has held visiting professorships at universities in 4 continents, lectured at over 250 universities in 48 states and 33 foreign countries and his research has been published in nearly 100 refereed papers.