Economics Books to Read
Hi guys,
Does anyone have any recommendations for any good books to read providing a good insight into Macroeconomics (for relative beginners). Something that is also good for entry level Investment Banking interviews.
Thank you.
Capital by Thomas Piketty
Yeah, if you want to sound like an idiot.
If you read books to just talk about them with friends, that's an idiotic thing to do. It's a solid book as a foundation and enables you to understand broader macroeconomic concepts. It's a foundation to build upon, not the one and only book you read.
No it isn't. Theoretically, it's fundamentally flawed at its core and it is riddled with pure data manipulation.
https://www.ft.com/content/c9ce1a54-e281-11e3-89fd-00144feabdc0 https://www.bloomberg.com/view/articles/2017-10-23/piketty-s-inequality… http://www.thefiscaltimes.com/Articles/2014/05/25/Piketty-Book-Problem-…
I'm assuming you studied Fama's efficient market hypothesis at school right? I can find numerous papers contradicting it, yet it is still widely taught in B-Schools around the world because as a basis it gives a basic understanding of markets. Economics are social sciences full of opinions and interpretations, they aren't physics or maths.
Knowing that Piketty's overall theory is that the inequality of wealth distribution has risen exponentially and continues to rise makes me question why you are so strongly against his book. Also, from multiple sources, it looks like his data errors aren't as significant as you make them out to be.
"Others digging into the data have suggested that the FT’s claims are not quite as strong as the newspaper suggests. “FT is massively overstating its case re: Piketty,” conservative columnist Reihan Salam tweeted. “Conservatives shouldn't get roped into this one.”
The biggest concerns appear to involve Piketty’s data on the U.K., but the FT’s charts using revised data for France and Sweden, for example, still look nearly identical to Piketty’s own. For a more detailed comparison and critique of the data issues, see here, here, here, here and here."
http://www.thefiscaltimes.com/Articles/2014/05/25/Piketty-Book-Problem-…
**Regarding the data that Piketty & Giles used:
"They essentially agree. While it’s quite natural for a journalist to emphasize the differences between his findings and those of a famous author, the most striking fact is how closely The F.T.'s analysis agrees with Mr. Piketty’s. Their preferred time series for the evolution of wealth inequality in the United States, Britain, France and Sweden are remarkably similar." ** https://www.nytimes.com/2014/05/25/upshot/a-new-critique-of-piketty-has…
http://www.demos.org/blog/5/23/14/pikettys-us-wealth-figures-match-rece…
Oh god here we go.
Except there is no "exponential growth" in wealth inequality. See link below (you can ignore the qualitative commentary and just focus just on the charts).
Again, even with Piketty's manipulated data, there is no "exponential growth."
http://www.businessinsider.com/the-ft-accusation-against-piketty-2014-5
Here we go with this shit. Every time I debate a liberal I have to go through this bullshit of who can cite the most google sources that supports their position. The fucking articles you linked don't even deny that he manipulated the data, they just downplay the extent to which he manipulated data.
And they're wrong, by the way. What you see is that Piketty created a false upward drift starting in the 80s. This was intentional. It was to place the blame on Reagan's tax policy. In reality, the upward drift didn't start until the 90s with the dot.com bubble and easy monetary policy.
That said, even if we ignore the whole "who can spam the most google links" approach, Piketty's theory is fundamentally incoherent.
It's well known that "r > g." That's the whole basis of finance, actually. "g" is a function of "w" (wages) and "r" (return to capital). Capital's return is riskier (lower priority given in distribution of payments - reflects residual return) and thus commands a higher return. Thus it's a tautology to say that "r > g," where "g" is a blended rate. So absolutely nothing interesting there.
Now why is he wrong? Well his theory, like Marx's, assigns fixed categorizations to individuals. It draws clear dividing lines between laborers and capitalists where there isn't one. A laborer can own capital and simultaneously generate "w" (wages) and "r." In fact, this is extremely common in the US and in much of the developed world. So while "w" may decline in a relative sense, it's offset by the gain on "r."
In addition, his analysis ignores the diminishing returns on "r" (as laid out in every growth theory out there) as well as its volatility. The excess return on "r" is a function of its volatility - it's why wealth inequality declines rapidly during economic downturns (excess returns on "r" wiped out). The point is that capital's return is equal to that of wages when risk-adjusted.
His whole theory is shit and unoriginal. It was a lot of hype by liberals hoping to get some sort of support from the economics community (where there really isn't any) and he's been exposed as a fraud.
Let's move on.
Because you hold Piketty in such high regard, I just purchased his book =)
On a side note, from an IB perspective, I'd definitely stick to the Friedman more than the Piketty. One of the things that I love about this line of work is the strong libertarian and free-market tendencies which are more common in banking than in most fields. Not sure if you'll be a big hit at the office pounding the table on Piketty.
The best book for beginners.
https://www.amazon.com/Macroeconomics-N-Gregory-Mankiw/dp/1429240024
Surprised no one has recommended the granddaddy of them all: The Wealth of Nations by Adam Smith
Milton Friedman's Capitalism and Freedom Justin Fox's The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street anything Thomas Sowell
The trouble with macroeconomics as seen on this very forum is that no one has really nailed it down. All the theories out there are various versions of being wrong. Some more wrong than others of course. On that thought, if you really want an accurate overview of the field, I recommend Modern Macroeconomics Its Origins, Development and Current State.
https://www.amazon.com/Modern-Macroeconomics-Origins-Development-Curren…
Basically, the book has a chapter on every major school of thought and then has interviews with the leaders of every major school of thought. The book isn't trying to push any agenda. At almost 500 pages, it is an intro book since it covers a little of everything but at the same time, it is a serious text. The trouble is that macroeconomics is a complicated subject.
The simpler and popular Mickey Mouse texts out there like Picketty are really trying to push one agenda or another. You can learn something from those books also, but it's going to be a one-sided view of a very complex subject with many many different points of view.
Another idea is to read some Friedman and then pickup a Picketty or a Krugman. My main point is that no author is actually definitive on what encompasses this field. And many of the theories actually contradict each other.
Come from an economics background, my two cents:
When Genius Failed by Roger Lowenstein
Some that haven't been mentioned: The Black Swan, Freakonomics (4fun)
Basic Economics by Thomas Sowell, and anything authored by Milton Friedman.
Someone threw MS at me for this? Really? Christ, there are some serious little bitch-made weasel retards on this site. The absolute state of WSO.
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I just read "How Asia Works" by Joe Studwell and found it super informative.
As an introduction to macroeconomics I would recommend "A Concise Guide to Macroeconomics" by Ross. Not sure why you would read macroeconomics to dazzle interviewers in IB, though. Just read WSJ/FT/Bloomberg on a regular basis - nobody in IB is gonna ask you to explain AS-AD or IS-LM models.
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