Friday, July 03, 2009

The Economist on the Kindle

You can now get a subscription to the Economist on the Kindle (or Kindle readers on devices like the iPhone).

Economics is the red pill. It explains how the world really works. Whereas a normal newspaper will report an event as inexplicable, The Economist might explain how it's the expected result of an economics concept, like decreasing marginal returns, incentives, opportunity cost, etc.

For example, last year a hurricane took out oil refinery production in the south. The result was long gas lines, with people waiting hours to get gasoline. Typical news stories talked about how the government should act to reduce prices, shorten lines, and crack down on "gougers". Economics explains that the gas lines are the direct consequence of the government's anti-gouging law, and that if the government allowed "gouging", prices would rise a little bit and the lines would disappear.

If you know basic economics, The Economist is a great explanation of the news. If you don't, then it's a great use of the news to explain basic economics. Or, a combination of both: I studied economics in college, but it wasn't until I started ready The Economist that I really started to grok the subject.

If you want to learn economics, I recommend Principles of Economics by Greg Mankiw.

PS: The Economist has a left-wing bias like much of the rest of the media, but at least it's a saner left-wing bias. For example, it believes in global warming, but correctly points out that the "cap-and-trade" mechanism used in Europe (and soon to be used in the United States if the Senate bill passes) is expensive and corrupt, compared to a more efficient and transparent carbon tax.

PPS: The Kindle isn't the future of publishing, but it certainly fits my lifestyle of heavy reading and traveling.

PPPS: This CNN story on the upcoming federal minimum wage increase is another good example. Economists believe that increasing minimum wage increases unemployment. The Economist magazine mentions this when reporting on minimum wage, other news sources (like CNN) don't.


Mike said...


I would like to address some points in your post concerning The Economist. I am in a unique position as:

a) a previous subscriber to the newspaper...
b) based in the south...
c) working in Info Sec...
d) for a financial services company in the oil industry.

First, you confuse the science of economics with the classical economic school of thought. This is like attributing to all of computer science what only the object oriented designers believe, or saying that all of architecture would have us do as the modernists have done.

Second, The Economist is biased to the libertarian right: it advocates free markets and reduced governmental interference in social matters. Refreshingly, the paper is one of the few mainstream publications which does not hide this bias. See: here
and here. They are British, nuanced, and are not hard-liners as many explicitly right-wing publications, so it is sometimes easy to confuse them as a left-wing magazine.

Third, I'm sorry, but you are chewing the blue pills if you think that anti-gouging laws cause long gas lines.

During the worst of the market fluctuations following Hurricanes Katrina and Rita, I had to cancel a business trip due to the questionable availability of gasoline. Nothing to do with the industry I was in, but because my CIO didn't think he could commute to work.

In the case of Georgia, the "gougers" came first. They were followed by panicking consumers, then long lines, then an undue strain on public works as police departments throughout the state had to be called out to conduct traffic and resolve violent altercations, (my mother was caught in a couple of those.) Then as rioting seemed inevitable, our otherwise conservative Governor Sonny Perdue signed an executive order enacting an anti-gouging law. Three years later during Hurricane Ike, Governor Perdue pre-emptively enacted the anti-gouging law. There were long lines again, yes. But order was maintained and we all pretty much got to work on time.

2005 press release
2008 press release.

Thank you.

Robert Graham said...

Your first point is fair, but unfortunately there are no distinctions in economics like there are with "astrology" vs. "astronomy" or "chemistry" vs. "alchemy". I was talking about the scientifically rigorous, descriptive economics.

As to your second point, "libertarian" isn't inherently left or right. The Economist is a great example of how libertarianism can be left-wing.

Third, gas-lines vs. price-controls is part of every introductory college textbook on economics. If I'm smoking something, so are they.

Lastly, I too live in Georgia. It looked like classic economics in action to me.

jbmoore said...

If economics is such a great science describing human behavior and commerce, then why were most of the economists caught flatfooted with the latest financial crisis that has the hallmarks of a depression? With the exception of Roubini in 2006 (who was not widely believed until it happened), Stiglitz, and Schiller, to name a few of the bigger names, most economists got blindsided. Now, many of these guys can't decide whether we will have massive deflation, massive inflation, or massive deflation followed by massive inflation due to the Fed's quantitative easing (which means that the US will just print more money to lower its debt making us all collectively poorer). Meanwhile, the ordinary folks like you and me are watching our retirements and possibly our livelihoods whither away. Right now, IT is holding its own, but who needs a computer when you've lost your job because your company has run out of credit and your house because the mortgage servicer won't modify your mortgage because it's been sliced and diced into mortgage backed securities. We might have been better off reading goat entrails. The portents might have been more accurate than the economics forecasts in 2005-2006 with the exception of Roubini who isn't just an economist, but a historian as well. The big question for the economists though is why so few of them saw this train wreck coming since the warning signs were there. That is their job. Why was Roubini one of the few lone voices of reason in the wilderness?

Robert Graham said...

If economics is such a great science describing human behavior and commerce, then why were most of the economists caught flatfooted with the latest financial crisis that has the hallmarks of a depression?

If doctors are so smart, why can't they cure cancer? There is a range of things that economics reliably predicts, and a range of things they aren't sure about.

Economists disagree on a lot of things, but these are the advanced things on the frontier of economics. They don't disagree on the basics.

Why was Roubini one of the few lone voices of reason in the wilderness?

Everyone knew there was a housing bubble. He's just a baffoon who gets a lot of press for predicting further doom.

Anonymous said...

Economics is just one way of *trying* to understand how the world works. Economic models attempt to reduce an infinitely complex world into something more manageable. Experimental social science is another way to attempt to understand the world. Agent-based simulation is yet another. All of these approaches have strengths and weaknesses. Whoever hypnotized you did a good job. Wake up.

Robert Graham said...

Economics is just one way of *trying* to understand how the world works.

It doesn't *try*, it succeeds.

That's why you have a "Council of Economic Advisers" advising the president, but not councils of those other things you mentioned. It's why there is a Nobel Prize for Economics, and not those other things you mentioned.

Anonymous said...

You're confusing the economy with economics. Economics fails to properly predict almost everything because we don't have math for complex systems. Wake up.