Five Great Economics Books

Originally posted here.

1. That Which Is Seen and That Which Is Not Seen, Frederic Bastiat

This essay is almost single-handedly responsible for sparking my interest in economics. If you don’t have any economic understanding, this is sure to give you several “lightbulb” moments. Though two centuries old, it is still the best introduction to the economic way of thinking I know of. The book addresses common economic myths—like the idea that government programs can boost the economy—with clarity and wit. Henry Hazlitt’s Economics in One Lesson is essentially a modern revision of Bastiat, and it is also excellent, but I still find Bastiat’s style and frequent sarcasm unbeatable. Start with this book, and if you’re not intrigued by what you learn, you can have your money back.

2. Beyond Politics, Randy T. Simmons

This is a fine introduction to the field of Public Choice Economics. Just when you thought you had come to the end of epiphanies after reading Bastiat, you discover Public Choice and the lightbulb goes on hyperdrive as you see economic thinking applied to the political process. This book is a must for anyone who thinks democracy is the cure for the world’s ills, or that electing better politicians is the key to securing liberty. In fact, I would be so bold to say that if you engage in any type of efforts to reform policy without a knowledge of Public Choice, you are acting irresponsibly and doing more harm than good. Beyond Politics will open your eyes and clear your head.

3. Economics for Real People, Gene Callahan

This is an incredible book. It’s not only fun to read and at times humorous, but it’s immense scope is dumbfounding given its reasonable length. If you want to understand economics from the very first principles and see how things like the law of demand are derived, this is your book. It is an introduction to the Austrian School of economics, so you will not have math and charts and graphs, but logic as your guide. If you have no mainstream economic knowledge, start with this book before you take a class and become polluted by make-believe models and regressions. If you already have mainstream economic knowledge, read Economics for Real People and be refreshed!

4. The Fatal Conceit, F.A. Hayek

Hayek is not always easy to read, but this is his best book in terms of readability, and I think his most profound in terms of possible applications. Hayek’s most interesting work focuses on the role of information in the economy, and how amazing markets are at giving us information to act on. The Fatal Conceit is the opposite side of that coin; how deluded central planners are to presume to have enough information to make good decisions absent the market process. This book is short, but after you read it you will want to apply these Hayekian insights elsewhere. I suggest reading some Thomas Sowell to follow the rabbit trail.

5. Human Action, Ludwig von Mises

I know, I know, this book is really big. Some people complain Mises is hard to read. I could not disagree more. His writing is very structured, his arguments very logical and clear, and his conclusions groundbreaking. Human Action is one of those very few books that every thinking person should read. This is the more sophisticated version of Economics For Real People (but don’t worry, real people can read this too!). Mises takes aim first at the methodology of economics as a discipline, then builds a comprehensive theory of economics from the ground up, and uses it to expose all manner of fallacies in socialist and mainstream economic thought. Before you either embrace or dismiss the Austrian School of economics, you have to read Human Action. After you read it, you will start to see everything else through a Misesian lens, and you will be the better for it. This book changed my life!

I decided to stop at five books, but I am going to add a little caveat to sneak in a few more.  The granddaddy of the discipline, and still probably the single most insightful book that launched political economy as we know it is Adam Smith’s The Wealth of Nations.  When paired with his Theory of Moral Sentiments, you get the moral backdrop.  Everyone talks about Smith, but really reading and rereading him firsthand is unbeatable, even if challenging at times.

For a more modern intro to basic economic thinking than Bastiat or Hazlitt, Stephen Landsburg’s Armchair Economist is a great book.  It’s got a lot of non-intuitive insight, but on a more solid foundation than some of the Freakonomics style stuff.  If you have an interest in economic history or you are grappling with questions about economic booms and busts and the growth of government, Crisis and Leviathan by Robert Higgs is your book.

Finally, some readers may have noticed that my economic reading list includes nothing of what people call economics today. Between the five books above I don’t believe there is a single chart or graph. There is no talk of determining someone’s utility function, no calculus, and none of the stuff that most people associate with the discipline. That is because I think most of that stuff is bogus and has nothing to do with understanding how the economy works. If you are unsatisfied with my dismissal of what most economics courses teach, and in particular if you are curious to learn about macro economics, I highly recommend Micro Foundations and Macro Economics by Steven Horwitz. Read it after you have read Economics for Real People and preferably also Human Action, and it will help you relate those principles to the things your professors talk about.

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