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Do you take me to be an idiot? Come on.

I've read Easterly's books...they are quite well known. Almost everyone here has, or atleast, should have. You'd be better off assuming that everyone here has read it. That's almost "development econ 101." I assume most people are familiar with Deaton's work as well.

Of course there are social issues associated with modernisation. To take the example of China, many factory workers are migrants and thus do not have the appropriate hukou to be eligible for benefits.

Their kids languish in the villages with no one but grandparents. This is a familiar story repeated millions of times. However, I do not know any Chinese person that says "yes, let's go back to the 1980s! Things were so much better then!"

>They are 'out of poverty' as in they are making more money than less than a dollar a day, but can not longer grow food for themselves

The beauty of specialisation.

The reason they choose to move to the cities and break up their families voluntarily at immense and often unfathomable personal cost is simple: a better life for their children.

Economists also look at measures that go beyond GDP such as the Jones-Klenow measure. I advise you to at least skim that paper.

>for example a man might work in the capital, but live outside it, so he might travel long hours to get there, or simply live at the factory,

Cast your eye back to the industrial revolution in England. Of course there was massive social upheaval. To suggest that future generations of Britons were not better off for it is lunacy. Also, while conditions were bad, life expectancy and income were growing by substantial amounts.

Even a cursory reading of Gregory Clark's excellent "A farewell to alms" will disabuse you of the notion that liberalisation, modernisation and the associated productivity growth are bad things, on net. That there are social costs is undeniable.

To bring us back to the present consider that political parties like the BJP didn't win in India by promising a return to some Jeffersonian farmer's utopia. They won, with 171 million votes in total, by promising to accelerate development (read simply: per capita income growth) not to mention a healthy helping of Hindutva. The opposing Congress party was also promising essentially the same thing: more rapid development so we should add their 100+ million votes to the mix as well.

If that doesn't send a message to you, then I don't know what will.

>you'd be better actually dealing with these critiques in a meaningful manner than 'shoving their faces in the shit that is poverty in the developing world'

There is a place for that. However, for this person to glibly suggest the liberalisation has not been a boon (on net) to tens of millions is insulting. Not to mention unfathomably stupid.

I want to pay someone else to write the following book. And if someone else won't write it, maybe I will.

Applied Mathematics for Economists (max 700 pages)

aka Simon and Blume, but more mature, more compact, more focused.

Chapters:

1. Linear Algebra I (matricies, systems of equations, vector spaces, linear transformations, eigenthings; with applications to linear economic models)
   
2. Partial Differential Calculus (limits and continuity in R^(n); gradient, Jacobian, Hessian; maps from R^(n) to R^(m); implicit and inverse function theorems; unconstrained optimization, Lagrange multipliers, and equilibrium concepts; the focus is on systems of equations as seen throughout economics)
   
3. Multiple Integrals (standard topics with emphasis on applications to probability; the last section would cover Bayesian inference)
   
4. Linear Algebra II (least squares; singular value decomposition; LU, Cholesky, QR, Schur, and other funky matrix decompositions you occasionally use in econometrics; some extended attention is given to quadratic forms and symmetric matricies)
   
5. Theory of Optimization (Lagrangeans, Hamiltonians, Bellmans; the classical results regarding existence and uniqueness; the classical results regarding characterization, regularity, and sensitivity; Berge's theorem)
   
6. Complex Variables and Fourier Series (for the time-series folks)
   
   Prerequisite: Calculus I-II are assumed.
   
   Idea: Calculus III and linear algebra are developed in the first three chapters, with special emphasis on applications to economics. The fourth chapter covers advanced material in linear algebra and even touches on numerical issues. The fifth chapter develops optimization, both static and dynamic, in discrete and continuous time, with applications to economics throughout. The sixth chapter develops the complex variable theory that you need to do proper time-series analysis.
   
   Maybe sneak a chapter on analysis and topology in there. Maybe cut the optimization chapter into two or three pieces.
   
   The point of the book is to put all of the applied math that you'll actually use on a day-to-day basis in a single, relatively brief textbook. I think it can be done in less than 700 pages. Kaplan crammed all of advanced calculus for physics into 700 pages, so surely it can be done for economics.
   
   What isn't here: There is a market for books on advanced calculus. However, they are all geared towards engineering and physics students. They have a ton of material on differential equations and vector theory that are irrelevant for economists. So I cut all of those bits out and replace them with additional material on matrix analysis and optimization. Basically, I trade the theorems of Green, Gauss, and Stokes for the theorems of Lagrange, Hamilton, and Bellman. It's a reasonable tradeoff. I also throw away the (i,j,k) notation and spend more time on least squares, which would be brought back to its proper home in linear algebra.
   
   I have deliberately left out a detailed treatment of probability and statistics, as they could get their own book (of about 500 pages). I have left out a detailed treatment of numerical methods because they could get their own book as well.

R1:

Today I bring you this WaPo Op-Ed on how the Carrier deal will return business norms back to ones that favor labor and community because firms will fear Trump’s wrath. Here the author offers a distorted view of America’s past, a dysfunctional view of how contracts and norms interact, and a wayward portrayal of economists as unable to fathom agents and systems which do not follow strict mathematical functional forms.

>There was a time in America when there was an unwritten pact in the business world — workers were loyal to their companies and successful companies returned that loyalty by sharing some of their profits with their workers in the form of higher wages, job security and support for the local community.

The author wistfully describes a past that did not exist when businesses and workers in long term marriages because it was what was right and good for the community.

At its heart this period existed because unionization (or more accurately worker bargaining power) made it possible. Certainly on the point of loyalty, unionization decline is the largest contributor to declining tenure (see Bidwell. As unionization fell, this loyalty also disappeared.
However, unionization's decline can largely be explained by the rule of law (right-to-work laws, unionization process etc.) though governing and business norms played a role (to be discussed).

With bargaining power largely reduce, workers had additional difficulty (for better or worse) attempting to hold their jobs in the face of international pressures and especially technological change as countless economist (Autor just to name check one) have documented.

>modern day economists tend to ignore such shifts in social norms because they can’t quantify them in the same way they can quantify trade flows or technological innovation or changes in educational attainment. They assume that social norms change in response to economic fundamentals rather than the other way around.

This is the sort of things that can ruin my work day as a nominally institutionalist style economist. To begin, several Nobel prize winning economists have done significant work studying norms formation and effects such as North, Ostrom, Akerlof, Akerlof again!.

Beyond this, others have built off these works (Ostrom was focusing on the importance of norms, but not specifically addressing the problem) to try to model norm development in game theory example.

In fact, in Samuel Bowles’ Microeconomics, discusses in detail the way contracts influence the norms and institutions of exchange (Chapter 8, p. 265). The long and short of Bowles’ discussion is that norms are well understood, evolutionary, and in the absence of complete contracting have significant influence on the results of exchange.

Norms matter greatly to economists in the event that contracting is incomplete. One would hope, it seems in vain, that contracting between the federal government and American firms is more complete than most contractual situations.

>the new norm is not longer acceptable, and [Trump] intends to do whatever he can to shame and punish companies that abandon their workers.
>He may even have to make an example of a runaway company by sending in the tax auditors or the OSHA inspectors or cancelling a big government contract.

Many economists see the potential change of market norms that will result from government contracts suddenly being less than 100% enforceable as a problem. Coming back to Bowles, he notes that said norms “are sustained by the structure of the market and other social interactions in which traders routinely engage.” If having government contracts and enforcement become less predictable is to be the new norm of enforcement, surely the market response will be to ask government from some premia in contracting to account for uncertainty. New firms may avoid starting their business under the supervision of this government altogether.

Tyler Cowen points out that the new norms that would arise likely involve more complex contractual agreements to skirt restrictions, degradation of U.S. tech advancement, a ramping of favoritism to levels not seen since the Harding administration, potential de facto capital controls, or at best a politicization of the economy with no real rule of law effects.

>Teddy and Franklin Roosevelt understood that. So did Ronald Reagan when he fired thousands of striking air traffic controllers and set back the union movement for several decades.

Perhaps most crucially, the author here references a variety of Presidents who enforced their support (or lack therefore) for labor, but did so through the rule of law via various anti-trust acts, the championing and enactment of a large set of labor relations legislation, and the decision to enforce laws enshrined in code 15 years prior that had been previously ignored. As opposed to potentially undermining the rule of law as Trump does by leveraging government contracts and regulation.

A bonus on this point is that—though Reagan’s actions may have signaled willingness from government to support changing business norms by supporting them through rule of law—unionization’s decline had already begun years prior to the changes in business norms Reagan’s ruling supposedly incited.

The study of economics is not one that lacks an understanding of how norms influence market interactions. Though I am not as well versed in studies accounting for changes in norms mathematically, I’d wager someone here could produce good examples of studies that do just this through the use of good instrumental variables.

The Carrier deal will likely change norms in business actions, but those are likely to be related to businesses’ certainty in contracting with government during the Trump presidency. Just as is seen in Trump’s cabinet, the only people left to provide work will be those certain they can take advantage of information asymmetry to get a better deal from U.S. governments. Any mass effort to enforce job retention on a scale much more massive than the Carrier deal will be enacted via law and will be just as harmful to business culture as Cowen and other economist predict, but it will be the changes to contractual enforcement that drive these results and not revolution in norms spurred on by backroom dealing.

Macro is a fucking disaster and I have no idea - maybe /u/Integralds does but my impression was there was a huge gulf between intermediate macro books and advanced macro books.

For micro, I think the best bridge textbook is the "easiest" advanced textbook - Jehle & Reny.

It's pretty important if you're trying to get a leg up on grad school stuff that when you go through even Jehle & Reny you make sure you can follow their proofs completely - and if you can't, stop there and go figure out what math you need to figure out to follow them.

[edit] Although you can probably get away with skipping the General Equilibrium sections unless you're actually interested in a dead area of micro.

I recommend reading Snowdon and Vane (2005), "Modern Macroeconomics: Its Origins, Development, and Current State." Very concise textbook that covers the history of modern economic thought, from the Classicals to Old Keynesians to Monetarists to New Classicals to New Keynesians and everywhere in between, including an entire chapter on Austrian Econ! In the mainstream econ world, devoting a textbook chapter to a fringe school of thought is rare, indeed, but the book is widely used and even appears on /u/Integrald's recommended reading list in /r/Economics, which you should also check out if you want to learn more about econ and are new to the discipline.

Note: This book is for the advanced undergraduate level, but it's not too mathematical at all and gives a good grounding if you're confused by all these schools. Rest assured, though, that a lot of these controversies have been resolved. On the internet, Austrians and Marxians and sometimes Post-Keynesians seem like they have a lot of influence, but when it comes to publishing in mainstream journals that's not the case.

The reason why you often see "funny maymays" about Austrians and Marxians on this sub is because Reddit Austrians and casual Marxists are often ignorant of the mainstream economic paradigm they are so critical of. In reality, praxeology and dialectics are not inherently bad, but have been used to make some pretty stupid arguments at least online.

> (https://www.amazon.com/Bad-Samaritans-Secret-History-Capitalism/dp/1596915986) If post length were the basis for winning an argument, you'd win. However, you have little idea what you are talking about due to your neoliberal blinders. Try reading the book at the link, which exactly supports the point I made.

Why is your only source a book that supports your prior beliefs? Why is it that a huge majority of economists support free trade, and you choose to disagree based on one book?

Maybe "you have little idea what you are talking about due to your neoliberal blinders" corporate shilling.

Sometimes they do, however, there are infinite ways to be irrational, so adding too many variables has the problem of over fitting. If you have X observations and X variables, you can always perfectly explain the data, NO MATTER WHAT the actual causal chain is. (I can help give intuition here if you don't buy this).

Also, economics in its purest form is rather technical. I think macro is rather technical too, I believe solving a DGSE with just a few frictions is very hard by hand. So in some sense, these assumptions help make the model more easily solvable (useful, if you are doing the base case, like perfect competition).

Sometimes relaxing these assumptions is useful. However, I would arguing some of them are obviously wrong and not useful is engaging in hindsight bias.

On another subject, may be of interest to some. cc /u/mberre /u/commentsrus So I just got this little book. It's quite interesting so far, particularly those with econ history interests. The Industrial Revolution: A Very Short Introduction When buying it I underestimated just how Very Short of an introduction it is. But part way in it seems well written and pretty informative. Would recommend.

https://www.amazon.com/gp/product/0205060633/ref=oh_aui_search_asin_title?ie=UTF8&psc=1

Not a paper but this is the book I used in my class. It seems pretty widely used after a quick google search. Foreign Affairs usually has some good stuff, and Foreign Policy is also okay but it has gotten a little "Forbes-y" in that it's mostly turned into a bunch of bloggers.

Monetary policy, the most important tool for stabilizing prices and employment (and thus the cycle itself). See C19 or the great depression for examples of what no monetary policy or bad monetary policy looks like. This pretty much covers it.

> the biggest critique of them

I would say the absence of any form of capital (IE growth & mobility goes away) or markets to set prices (IE pretending marginalism does not real) are even more fundamental then the absence of monetary policy.

We are not capitalists. We don't have an ideological devotion to the economic system we have today, we study the emergent system of how humans interact and come up with ways to improve that. Having things like monetary policy and capital systems improves the welfare of everyone, attempting to replace reality with belief (be it collectivism or the Austrian breed of "free markets") might produce desirable outcomes when non-economists are writing about it but in reality wont.

That scarcity exists and can't simply be willed away is why collectivism does not work in reality.

RI:



[If you don't want to read it all, I've marked my specific criticisms with bolded brackets below.]

This is bad methodology of econ, not bad econ per se. I hope this is allowed. I am posting this because the methodological debate this user is referencing is important to understand for young economists and laymen alike. I will first develop his argument and then attack it.

Disclaimer: I am not a professional economic methodologist. I have not taken fields exams in methodology (they don’t exist). I have only studied the topic beyond Friedman’s Essay on Positive Econ. Econ methodology is the study of the philosophical principles underlying economic reasoning. It is related to philosophy of science and philosophy of economics. See here for more info. I don’t claim to be a good philosopher. Criticism is welcome. Post me to /r/badphilosophy if you have to.



The linked user argues that mainstream economists compose economic “laws” which are not intended to hold throughout space and time, regardless of context, but rather are intended to hold only in specific time-space contexts (e.g., Stagflation in the 1970s U.S., industrialization in 19th century Japan). These “laws” (we would call them models) are only meant to describe the specific contexts for which they were developed, and so are not much use beyond that. Further, the user argues that mainstream economists base this view of contingency of economic “laws” on empirical evidence; it can be demonstrated with data that the critical assumptions of one model do not apply to contexts outside of the one for which the model was built.

The linked user contrasts this view with those of certain Austrian economists who believe in immutable econ laws which apply to all space-time contexts, and that empirical evidence can only illustrate, rather than support or contradict, these laws which are developed via some deductive framework. If the premises are true, and if the premises entail the conclusion, then the conclusion is also true. The conclusion need not approximate what we observe, only the assumptions. The fundamental axiom, “humans act,” is seen by this user and some other Austrian economists as undeniably true, and so conclusions derived from this and other minor premises must then also be undeniably true, regardless of empirical evidence to the contrary (I develop this argument with more nuance later). See Rothbard’s article in Southern Econ Journal for more on this view. By the user’s own admission, “This does indeed limit how much can be done and shown with Austrian Economics quite a bit, although nowhere as much as mainstream economists think.”

The user believes that the mainstream method produces models “which, by their own admission, will one day be false and useless.” He means, again, that mainstream models are meant for only the contexts for which they were originally built and are “useless” in other contexts.

***

Now that I’ve hopefully faithfully expounded the user’s argument, I can now criticize it.

First, let’s be clear about terminology. Mainstream economists are no longer interested (for the vast majority of cases) in constructing immutable economic laws. Gone are the days of Adam Smith and Karl Marx. Malthus was right about the pre-industrial era, but failed to recognize mechanisms through which his own “law” would become inapplicable to the industrial era. See Acemoglu and Robinson (2015) for more on the rise and fall of general laws in economics. Social behavior is contingent on context. We as economists must always be conscious of the external validity of our models.

Modern economists work with, speak in, and think through models, which are contingent on time and space, but which are not “useless” outside of the space-time contexts for which they are originally developed. [Criticism 1:] Models are, by definition, logical constructions and thus follow the same assumptions-conclusions structure as praxeological reasoning. Models are tautologies whose implications are dependent entirely on the assumptions. The user seems to believe that mainstream models are not deductive. This is just plain false. (I retouch on this criticism later, in case this is a bad portrayal of what the user meant.)

Rather, we develop deductive models and then test whether both the critical assumptions and the conclusions approximate reality. Critical assumptions are those which, if relaxed, would change the substantive results of the model. Friedman (1953) failed to consider these, which I explain in more detail here.

Dani Rodrik, IMO, captures the practice of modern modeling in his latest book, saying that economics is a library of models which apply to certain contexts based on how well their critical assumptions approximate reality. If a model is determined to apply appropriately to a certain context, and if its conclusions are shown to not match reality via empirical analysis (data, statistical analysis, qualitative methods, what-have-you), then the model is determined unable to explain reality in this particular context, and we’ll need a new model with appropriate critical assumptions but with a focus on different causal mechanisms. [Criticism 2:] A model is not “useless” in all contexts other than its original context; rather, it’s applicable to a certain type of context.

The user argues that mainstream models have no external validity. [Criticism 3:] Actually, the external validity of a model is limited by what its critical assumptions say about reality. Our library of models is a toolbox. If we have a nail, we need a hammer. If we have a screw, we need a screwdriver.

Further, Rodrik argues that economics progresses by expanding its library of models. The user admits that certain Austrian economists develop models which they believe apply to all contexts, and that this then limits the scope of their discipline. Thus, this variant of Austrian economics is actually practicing the same method as mainstream economists, but are limiting their library of models only to those with critical assumptions approximating all possible contextual realities (if such a thing is possible). The number of “praxeological models” or “economic laws,” as the user would describe them, is thus obviously very small, if not zero.

The user does not deny social contingency, but rather advocates a form of economics which only studies contexts which our model’s assumptions will approximate every time. [Criticism 4:] This has been determined by mainstream economists to not be a worthwhile endeavor, or even a possible one. Context matters. <-- This is a fundamental principle of several fields of economics, most famously institutional econ.

[Criticism 5:]**As for his criticism of econometrics, it’s clear he has no idea what quasi-experimental methods are. That is all.

(https://www.amazon.com/Bad-Samaritans-Secret-History-Capitalism/dp/1596915986) If post length were the basis for winning an argument, you'd win. However, you have little idea what you are talking about due to your neoliberal blinders. Try reading the book at the link, which exactly supports the point I made.

Alternative R1:

> The reason economists use mathematics is typically misunderstood. It has little to do with sophistication, complexity, or a claim to higher truth. Math essentially plays two roles in economics, neither of which is cause for glory: clarity and consistency. First, math ensures that the elements of a model—the assumptions, behavioral mechanisms, and main results—are stated clearly and are transparent. Once a model is stated in mathematical form, what it says or does is obvious to all who can read it. This clarity is of great value and is not adequately appreciated. We still have endless debates today about what Karl Marx, John Maynard Keynes, or Joseph Schumpeter really meant. Even though all three are giants of the economics profession, they formulated their models largely (but not exclusively) in verbal form. By contrast, no ink has ever been spilled over what Paul Samuelson, Joe Stiglitz, or Ken Arrow had in mind when they developed the theories that won them their Nobel. Mathematical models require that all the t’s be crossed and the i’s be dotted. The second virtue of mathematics is that it ensures the internal consistency of a model—simply put, that the conclusions follow from the assumptions. This is a mundane but indispensable contribution. Some arguments are simple enough that they can be self-evident. Others require greater care, especially in light of cognitive biases that draw us toward results we want to see. Sometimes a result can be plainly wrong. More often, the argument turns out to be poorly specified, with critical assumptions left out. Here, math provides a useful check. Alfred Marshall, the towering economist of the pre-Keynesian era and author of the first real economics textbook, had a good rule: use math as a shorthand language, translate into English, and then burn the math! Or as I tell my students, economists use math not because they’re smart, but because they’re not smart enough.

https://www.amazon.com/Economics-Rules-Rights-Wrongs-Science/dp/0393246418

The criticism (pros and cons really) of modelling have been addressed here ad nauseam.

Monetary policy's kind of uncharted waters for macroeconomists; it's not a big deal, so it hasn't been researched much. Pretty much the only thing I can think of is this somewhat obscure and esoteric work. It hasn't made a very big splash in the field, but it's worth a read if you're interesting in monetary economics.

I would also recommend Mathematics for Economists. It covers a lot of the different fields, but only as they apply to economics.

It's not as rigorous as a whole course in optimization or real analysis, but it covers the important bits.

Start here: https://www.amazon.com/Industrial-Organization-Applications-Oz-Shy/dp/0262691795

Then read: https://www.amazon.com/Theory-Industrial-Organization-MIT-Press/dp/0262200716

Then fill it with these: http://marginalrevolution.com/marginalrevolution/2017/08/fall-2017-ph-d-industrial-organization-reading-list.html.

And if you're feeling frisky: https://www.amazon.com/Economic-Institutions-Capitalism-Oliver-Williamson/dp/068486374X.

Williamson might be the best intermediate step if you want something between Chase and Shy. Let me know if you want something more. My research is IO heavy.

>>modern day economists tend to ignore such shifts in social norms because they can’t quantify them in the same way they can quantify trade flows or technological innovation or changes in educational attainment.
>They assume that social norms change in response to economic fundamentals rather than the other way around.
This is the sort of things that can ruin my work day as a nominally institutionalist style economist. To begin, several Nobel prize winning economists have done significant work studying norms formation and effects such as North, Ostrom, Akerlof, Akerlof again!.

I think your formatting failed there, it appears like one quote, whereas I think the seconds part is supposed to be your response. Pretty confusing to read.

Econ news today that excited me:

1. Paul Romer is the new chief economist at the World Bank.
   
   
2. Dani Rodrik, the globalization "skeptic" who wrote the primer on economic methodology, is [profiled by the IMF]
   (https://www.imf.org/external/pubs/ft/fandd/2016/06/pdf/people.pdf).
   
   
3. My former professor released a book on the economic history of Manhattan's skyline.
   
   
4. Increased supply may finally be coming to the U.S.'s most expensive cities. Makes a good point that new luxury apts decrease demand for middle-tier and low-end apts, thus easing up rent for all.
   
   
5. Andrew Gelman covers cases of scientific trickery in top econ journals.

Snowden and Vane? Inty recommended it to me a while ago, and I found it helpful as a map: https://www.amazon.com/Modern-Macroeconomics-Origins-Development-Current/dp/1845422082

You thinking more Poor Economics or Why Nations Fail? There's also some good stuff on urbanization's role in development in Triumph of the City which has a lot of implications for developed-world city policy too.

Advanced Macro

https://www.amazon.com/Advanced-Macroeconomics-Mcgraw-Hill-Economics-David/dp/0073511374

ORLY.