Tuesday, December 10, 2013

My five favorite books of 2013

Last year's list is here. I read these books in 2013, but I'll allow books published in 2012 (the best book I read this year was published in 2010, so I mention it below the list). In no order:

1. The New Geography of Jobs (Enrico Moretti, 2012). Cities matter. Mobility matters. Innovation jobs matter, and not just for the innovators. Manufacturing is overrated as a source of job "multipliers". Geography may explain a large portion of wage and employment puzzles, at least in a mechanical sense. There are secular trends in the US economy that complicate the standard growth vs. cycle dichotomy. This book has directed my thinking on several subjects and probably inspired this post and related ones. Read this book.

2. The Bankers' New Clothes (Anat Admati & Martin Hellwig, 2013). This book persuaded me that equity requirements are probably the best answer.

3. The Alchemists (Neil Irwin, 2013). A good narrative description of the crisis, with a focus on specific central bankers. My opinion of Bernanke was high before, and this did not change that. Irwin tells some mind-blowing stories, like this one. In the comments to that post you'll see Matt Nolan's complaint, which I think is fair. I recall having complaints about some of the economics in this book, but I don't remember what they were (I lost my notes).

4. Misunderstanding Financial Crises (Gary Gorton, 2012). Gorton understands banking; that is probably why Bernanke reads him. I learned much. Recall that Gorton's focus is on (a) inability of the private sector to produce riskless collateral, and (b) the financial crisis as a run on repo, prime broker balances, and asset-backed commercial paper. I am still digesting Gorton as it relates to Admati and Hellwig.

5. Stalin's Curse (Robert Gellately, 2013). Gellately attempts to counter the popular narrative that Stalin was not a committed communist. I do not know this history or literature well enough to evaluate the argument. I simply found the narrative engaging and informative, and it brought me back to issues I have not thought about for some time.

Truly my favorite reading this year was The Big Ditch (Noel Maurer & Carlos Yu, 2010), but it didn't fit my rules for publication date. When we decided to vacation in Panama, I of course downloaded the latest IMF Article IV review (as all tourists do) then went looking for Tyler Cowen's book recommendation (which I found here). After reading and visiting, I concur with Cowen that "people do not spend enough time thinking about the Panama Canal," and I would say Panama more generally (go read all of Cowen's Panama posts). I can't explain the degree to which my Panama experience--of which this book was a key component--has blown my mind this year.

Maurer and Yu are economic historians, which is not the same as historians who write about economics. Their approach to causal inference and measurement is economic and therefore much more satisfying than the hand-waving you find in many histories. Their purpose:

The specific question that this book seeks to shed light on, then, is whether a relatively modern democratic nation, operating inside the strictures of Westphalian sovereignty, was able to leverage its ability to impose military and economic sanctions into sustainable economic gains. Conversely, why did that selfsame nation decide to withdraw from its imperial commitment a few decades later? (5)

The authors show that the answer to the first question is yes ("imperialism paid"), and the answer to the second question is that it was no longer worth the cost. Read this book.

Panama City

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