books economics

The importance of knowing a little economics

I’ve just started reading John Lanchester’s Whoops! Why everyone owes everyone and no one can pay, a much recommended book on the financial crisis. In the introduction, he talks about the knowledge gap between the world of finance and the average citizen. “There is a need to narrow that gap” he says, “if members of the financial industry are not to be a kind of priesthood, administering to their own mysteries, and feared and resented by the rest of us.”

It’s a good point. Ha-Joon Chang says something similar in 23 Things they didn’t tell you about capitalism. Explaining why he wrote the book, he suggests that everybody needs to understand a little more economics.”Without our active economic citizenship, we will always be the victims of people who have greater ability to make decisions, who tell us things happen because they have to and therefore that there is nothing we can do to alter them, however unpleasant and unjust they may appear.”

Indeed. If more of us understood economics, we’d be a whole lot angrier about the financial crisis. The media might have had some tougher questions in response to George’s Osborne’s budget, or the treasury’s forecasts for the economy. Fewer of us might have voted Conservative, if more of us had understood in advance what austerity measures and deficit reduction actually meant. And certainly more of us would shout “bollocks” every time a politician tells us that “there is no alternative“.

Economics sounds complicated and boring, but getting a grasp of the fundamentals is not as difficult as it first appears. ‘Active economic citizenship’, as Chang puts it, doesn’t mean we all need to become experts: “We don’t need to be expert epidemiologists in order to know that there should be hygiene standards in food factories, butchers and restaurants. Making judgements about economics is no different: once you know the key principles and basic facts, you can make some robust judgements without knowing the technical details.”

So where to turn to get those fundamentals?

I’d certainly recommend Whoops to those looking to understand the financial crisis, and Chang’s 23 Things for that matter. I’ve also appreciated David Smith’s book Free Lunch: Easily digestible economics, which gives a round-up of the major thinkers. David Boyle’s Money Matters is a useful introduction. His book with Andrew Simms, The New Economics, is a very readable critique of mainstream economic theory and the alternative approaches that would bring it back in balance.

Anyone else got a recommendation?


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