Five Books on Macroeconomics
Recently, Raffaele Rossi offered his recommendations for the best macroeconomics textbooks at Five Books. Here, Arnold Kling offers his recommendations:
Macroeconomic Patterns and Stories, by Edward Leamer. This provides an excellent introduction to the data that are central to macroeconomics—how they are collected and what they mean. Although it is framed as an introductory textbook for business school students, it is valuable for economists at all levels. Leamer wisely steers the reader away from thinking in terms of systems of equations and instead looks for patterns in the data and stories that could explain those patterns. Note that I recently suggested that Leamer deserves a Nobel Prize for his insights into empirical methods in economics.
Manias, Panics, and Crashes, by Charles P. Kindleberger and Robert Z. Aliber. The late Charles Kindleberger was an economic historian, and I believe a historian’s perspective is crucial for looking at macroeconomics. After all, there are no repeatable experiments in macroeconomics, only historical episodes. Kindleberger looks at the most dramatic episodes in history, using the framework of financial instability developed by Hyman Minsky. Kindleberger is a better expositor than Minsky. Also, Kindleberger emphasizes the phenomenon of “displacement,” in which a sudden change in world conditions, brought about by a major new discovery or the outcome of a war, triggers a dangerous mania. My own thinking about macroeconomics is a combination of Kindleberger-Minsky and Fischer Black (below).
The Midas Paradox, by Scott Sumner. Sumner tells the story of the Great Depression, probably the most important episode in macroeconomic history. Sumner believes in a monetarist interpretation of the Depression. Although I personally do not subscribe to this framework, his book provides an outstanding exposition of this important macroeconomic theory.
Exploring General Equilibrium, by Fischer Black. If Kindleberger-Minsky macroeconomics is heterodox, Black’s macro was even more so. Black does away with conventional aggregate demand and aggregate supply altogether, and instead constructs a theory of economic fluctuations based on general equilibrium, with physical and human capital sometimes suffering from rapid obsolescence. Black even denies the relationship between money and inflation! Tyler Cowen wrote, “It’s not an easy book for most people to read, as Black just comes out and states what he thinks, without much in the way of trappings or preliminaries or traditional narrative structure. There are also no models, just strings of statements about models.That said, virtually every sentence has substance.It is one of my favorite books in economics and it still contains many unmined insights.“
Macroeconomics, by J. Bradford Delong and Martha L. Olney. I see this as a textbook that presents what I call the “academic” approach to macro, treating the economy as a system of equations. This is not an approach that I share, but it is certainly important in the history of economic thought. When I read the first edition of this book, I was impressed by its coverage of the topics of economic growth and international macro. A more recent textbook that also emphasizes economic growth is Modern Principles of Macroeconomics, by Tyler Cowen and Alex Tabarrok.
Arnold Kling is the author of Specialization and Trade, which includes chapters that spell out his views of macroeconomics.