Economics is an important academic discipline that is essential to understanding the modern market, politics, and life in general. Economics can be used to help you insight into what is going on around you in many areas of your life. This guide will provide you a good introduction to learning this important subject.
Economics is a heavily math-based discipline, but when first starting learning you may want to avoid the mathematics and concentrate on the general principles instead. This guide will focus on providing readings to understand the underlying principles and philosophies of economics rather than the mathematical application of said principles, as these will generally be of more value to the layman.
In addition, economics is generally split into two general fields: micro-economics, which studies individual economic behavior, and macro-economics, which studies the economy as a whole. Microeconomics is simpler, so, you would probably want to begin by focusing on micro and put macro to the side for the moment.
While studying economics, ideas from historical economic thinkers, such as Smith and Ricardo, will be referenced. While the ideas of the classics, like the Wealth of Nations, are important, much of what they have written has been expanded, improved upon, and explained better by more modern economists, so reading them will probably not be the most beneficial use of your time unless you like primary sources or are interested in a deeper study of the history of economics. The Wealth of Nations, for example, was an important book, but its benefit to learning modern economics is limited.
Here's where to begin:
- There are a large number of guides to economics which can teach you the basics. Two good introduction are Naked Economics by Charles Wheelen, which is an engaging introduction that will teach you the basics of the discipline, and Economics in One Lesson by Henry Hazlitt, a classic, easy-to-read primer on basic economic concepts. Start by reading these two books.
- If you enjoy comics and cartoons, Bauman and Klein's Cartoon Introduction to Economics can be an enjoyable introduction. Volume One focuses on Microeconomics, while Volume Two focuses on Macroeconomics.
- If you enjoy satire, PJ O'Rourke's Eat the Rich is an amusing and informative comedic book that can teach you some simple economic concepts.
- Next you should read Basic Economics by Thomas Sowell. It is a longer, more in-depth introduction to economics, but is still a fairly simple read. Between these three books you will have a good understanding of the fundamental concepts of economics.
These are by no means the only introductory books to economics, but they are three simple, recommended ones.
- Recently, there has been a new trend of economists releasing popular economics books which analyze a variety of interesting situations through the lens of economics. These books are a good read as they are both entertaining and will show you how economic principles apply to real world situations. Start with Steven Levitt's Freakonomics and SuperFreakonomics simply because Levitt is the one who popularized this genre.
- Now that you have a basic introduction to economics, you can read through New Ideas from Dead Economists by Todd Buchholz. This will provide you with an accessible introduction to the main schools of economics and their historical development.
- Knowing the general schools of thought in economics you can then begin to research each particular school of economics. You should start with the main schools of mainstream economic thought, which consist of two main, the classical paradigm and the Keynesian paradigm and their respective evolutions and offshoots, which together form the neoclassical synthesis. This is the dominant economic paradigm and mixes primarily neoclassical microeconomics with primarily Keynesian macroeconomics, and as such most of the previously listed books would fall somewhere in these two schools and/or their synthesis. Distinguishing the modern forms of the neoclassical and Keynesian schools is not simple as the two have evolved alongside each other and each has adapted to the critiques of the other, many of which are quite technical and will likely be beyond beginners.
- Neo-classical economics - This school and its offshoots focuses on traditional economics principles such as equilibrium, utility optimization, and rational actors within the free market. Most of the books already listed will introduce the concepts neoclassical economics, as it is the dominant paradigm, particularly in micro-economics. The microeconomic portions of a standard textbook, such as Gregory Mankiw's Principles of Economics or any of the previously mentioned introductory books will show the basic thinking of this school of thought.
- Keynesian economics - This school and its offshoots argues that the free market does not always optimize efficiency and argues for the state intervention, especially during recessions, and a mixed economy to stabilize the free market. Again, this is part of mainstream economics, particularly macro-economics, so most of the previous listed books will have some level of Keynesian economic thought in them. The macroeconomic portions of a standard textbook, such as Principles of Economics, will show the basic thinking of Keynesian thought. Krugman's Peddling Prosperity will provide an introduction to modern Keynesian thought.
- Chicago School - The Chicago school is a form of neoclassical economics that has been very influential in the last half century. It rejects Keynesian thought, and interventionism and advocates free markets. Milton Friedman's Free to Choose and Capitalism and Freedom will introduce the basic principles of this school.
- Beyond the mainstream schools are the heterodox schools of economics, which present alternative views to and critiques of mainstream economics. Many of these schools of thought are small, held by fringe groups, and not accepted by most economists. Most are critical of capitalism, with the notable exception of Austrian economics. The three most important heterodox schools are:
- Austrian economics - Unlike most heterodox schools, the Austrians embrace the free market and reject state intervention, but reject the modelling of mainstream economics. An Introduction to Austrian Economics by Taylor provides a short, dense introduction to the school, while Economics for Real People by Callahan provides a more readable but longer introduction. If you desire more, Rothbard's Man, Economy, and State provides a very thorough grounding in Austrian economics, whileHuman Action by Mises was the book that formed the basis of Austrian thought.
- Marxian economics - Marxian economics are based on Marx's political and economic philosophy and rejects economics and its capitalistic assumptions. A popular introduction to Marxian economics is Mandel's An Introduction to Marxist Economic Theory. Wolff and Resnick's Economics: Marxian versus Neoclassical and Contending Economic Theories: Neoclassical, Keynesian, and Marxian compare Marxian economics to mainstream economics. The latter is fairly recent and builds upon the former, which was released 25 years ago. If you are interested enough in Marxian economics, you can read Marx's Capital, which forms the basis of Marxian economics, but is a very heavy work.
- Institutional Economics - This school focuses on role of institutions in shaping economic behaviour. The Evolution of Institutional Economics outlines the history of institutional economics. Veblen's The Theory of the Leisure Class is a classic in institutional economics, while John Common's Institutional Economics codified it.
- Here are a few other important schools of analysis within economics that may be of interest:
- Behavioural Economics - Behavioural economics is a relatively new school of economics which criticizes the rational actor assumption of economics and tries to study the effect of human factors on economic decisions. It is generally within neoclassical theory and is having increasing influence, but is not fully accepted. Ariely's Predictably Irrational is a solid popular introduction to behavioural economics, as is Akerlof and Schiller's Animal Spirits. Choices, Values, and Frames by Amos Tversky provides a number of academic essays on the concepts behind behavioural economics. Furubotn's Institutions and Economic Theory provides an introduction to new institutional economics.
- Game Theory - Game theory is the study of strategic decision making and is often used in economics. David Morton's Game Theory: A Nontechnical Introduction provides an introduction to game theory without math, but game theory is a heavily technical and mathematical discipline, so to get much further understanding will require understanding mathematics. For those with some level of mathematical ability, Luce's Games and Decisions: Introduction and Critical Survey provides a higher level introduction, while Binmore's Playing for Real is a comprehensive, university-level textbook on game theory. Von Neumann's Theory of Games and Economic Behavior is the classic book that started it all, and provides an excellent introduction, but requires a high level of mathematical ability.
- Public Choice Theory - Public choice theory is the application of economics to political science and can be helpful in understanding how economics. Public Choice: An Introduction by Iain McLean provides a fairly short introduction to public choice, while Public Choice III by Mueller provides a comprehensive introductory academic text to public choice theory. Tullock's The Calculus of Consent was a founding work of the public choice school.
- Finally, if you are want to move beyond the basic theory and philosophy of economics to learn the mathematics and application of it, you will generally need to get university-level textbooks. The most popular introductory university textbook on economics is Gregory Mankiw's Principles of Economics. Simon and Blume's Mathematics for Economists will provide you with the fundamentals of the underlying math of economics. These two books will get you started in learning the fundamentals of the application and mathematics of economics.
- If you really want to jump in to the math, you can move into learning econometrics, which is the application statistical methods to economics. It can be difficult, but if you want to give it a try, Introductory Econometrics: A Modern Approach by Woolridge is a good introductory textbook.
By this point you'll know the basics of economics and you should know enough to develop your own learning plan from here. Any further study you do should come from what you've found interesting in what you've read.