You’ll Need the Knowledge to Help Build a New Economy
People are beginning to realize that long after the COVID-19 crisis is over we will spend years repairing the economic damage it is causing. There seems to be a nascent interest in learning about how economics work. That’s a good thing, I think, because we will all be on the front lines of building a new economy very soon.
I received a message from someone asking for suggestions on books that might help build a working knowledge of economics.
I’m delighted to help.
Economics can get arcane very quickly, so I think it’s important to give some thought to building an understanding. I think that to understand current economics you need to understand what happened in 2008. The 2008 catastrophe was not just a normal recession when buying and selling slowed down.
It was the end of the Industrial Revolution.
What had stared in 1698 to with the invention of the steam engine ended in 2008 with the near collapse of the global banking and finance system.
Everything we knew about how economies work was based on the observing the evolution of the Industrial Economy. After 2008 much of that knowledge was no longer relevant. Concepts like jobs and productivity no longer meant what they once did.
For example, traditional assembly line factory jobs disappeared. The era of people standing in a line, each adding something to a product until the product was complete was finished. The concept might still have some relevance, and assembly lines manned by robots might exist, but traditional assembly lines no longer contribute to the economy.
The jobs the old industrial economy provided have been replaced with gig work. However, gig jobs blink in and out of existence only for as long a need for it exists. We might have had a 3.5% unemployment rate until recently, but more people are out of the labor force than ever before because there isn’t even enough gig work to go around.
Think of it:
A 3.5% unemployment rate, but at the same time half the people making money earn less than $35,000 a year. Something is very wrong.
So, let’s start with how things began to change in the run up to 2008.
Before Elizabeth Warren became a hard charging liberal Democrat and social justice warrior on the lookout for new political fights, she was a Harvard law professor specializing in bankruptcy. In 2008 she gave a presentation of her research into how the changing economy was impacting families. It’s interesting and surprising. Much of her presentation was incorporated into her book The Two Income Trap. The video of that presentation is a wonderful introduction to modern economics. It lasts about an hour.
Watch the video and read the book.
Next, move onto either or both of Martin Fords books, Lights in the Tunnel and Rise of the Robots. Fords books go deeper than Warrens, examining how new technologies impact labor markets – that is, workers and the companies employing them.
Now we can start getting into how entire economies work. This is where banks, insurance companies and large corporations come in.
I highly recommend Rana Foroohar’s book Makers and Takers. She does a great job of making the 2008 understandable.
By the time you get through those you’ll have a sense of topics and authors that appeal to you.
A few others that I found eye opening and clearly written.
The Age of Oversupply by Daniel Alpert makes the argument that technology has made things so inexpensive that 20th century laws of production and demand becoming less relevant.
Finally, to really get into the nuts and bolts of finance and economics, tackle Nouriel Roubini’s Crisis Economics, a blow by blow description and criticism of the role of banks in the 2008 debacle. The Only Game in Town, by Mohamed A El-Erian picks up on the story and traces banking mis-steps through about 2016.
The End of Work by Jeremy Rifkin. It was written in 1995, but reads like Rifkin could channel the future. His chapter on how technologies of the 1920’s emptied the South of share croppers with the creation of good paying jobs in the steel belt is an eye opener.
War for Gold, by Kwasi Kwarteng. It’s an economic history of European looting of precious metals from Mexico and South America and how that greed destroyed royal empires.
The Rise and Fall of American Growth, by Robert Gordon made quite a splash in econ circles a couple of years ago because of the argument that economic expansion has come to an inflection point. We are still using technologies based on 19th century science, and they have played themselves out. The book is as thick as a bible and full statistics and charts. I read it cover to cover, but I’m a geek. It might work well as a reference book for most people.
There are plenty more. Economics doesn’t have be dull, and there are writers capable of producing engaging and informative books. That’s why I suggest starting with Warren and Ford. After that you’ll be on your way.
One other thing. Kindle is great for recreational reading, like romance novels or science fiction, but I pull my hair out looking for a passage I remember and want to re-read. Hard covers are really inexpensive now – usually less than Kindle, even with shipping. They last a lot longer too, and you can sell them to a local bookstore and spread the joy.
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