I was on a panel yesterday about the financial bailout, and someone there asked me what they could read to understand the financial crisis. As I've said before, I don't think anyone understands the financial crisis. Ben Bernanke is probably the one guy you would have picked out of all the economists in the US to be in charge during a major financial crisis, and he seems kind of stumped. Nonetheless, you can understand it better.
So, books, a slightly updated version of the list I put up a few weeks ago:
- The Great Contraction by Milton Friedman and Anna Schwartz. Just the 1929-1933 chapter of Friedman's massive work. The book is somewhat technical, but with half an hour on investopedia looking up terms like velocity, it should be accessible to anyone decently intelligent and well informed. Since this is the work that shaped the modern understanding of what happened in the Great Depression, it's well worth diving into.
- The Great Crash by John Kenneth Galbraith. Basically the opposite of the Great Contraction: often technically
outdated, but very accessible, and while much of the economic theory is
questionable, the history is extremely engaging and often quite funny.
- A Short History of Financial Euphoria by John Kenneth Galbraith Same caveats, and praise, as above apply. The book is tiny-readable in one leg of a commute for an average reader.
- Once in Golconda by John Brooks an extraordinarily enjoyable account of life on Wall Street prior to, and just after, the 1929 crash.
- Liar's Poker by Michael Lewis He didn't mean to, but he gave a pretty good primer of the explosion of the mortgage backed securities market in the 1980s. It's also hilarious reading, and we could all use a laugh
- Manias, Panics and Crashes by Charles Kindleberger the definitive primer.
- Extraordinary Popular Delusions and the Madness of Crowds The first attempt to explain why people go so crazy over . . . well, nearly everything.
- Risk and Business Cycles by Tyler Cowen. The authorship speaks for itself.
- The Return of Depression Economics by Paul Krugman Ten years old, but an excellent introduction to many of the current issues.
- The Black Swan and Fooled by Randomness by Nassim Taleb
- The Misbehavior of Markets by Bernard Mandelbrot
- Essays on the Great Depression by Ben Bernanke
- When Genius Failed: The Rise and Fall of Long-Term Capital Management by Roger Lowenstein
- The Panic of 1907: Lessons Learned from the Market's Perfect Storm by Robert Bruner and Sean Carr
- And the Money Kept Rolling In (and Out) Wall Street, the IMF, and the Bankrupting of Argentina by Paul Blustein. This crisis is rapidly spreading to emerging markets; this is the best popular account I've seen of what a currency crisis looks like when you borrow in foreign currency
- Irrational Exuberance
by Robert Shiller
- The Subprime Solution: How Today's Global Financial Crisis Happened, and What to Do about It by Robert Shiller
- Against the Gods: The Remarkable Story of Risk
For publications: the FT, the Wall Street Journal, Barrons, The Economist
Blogs (in no particular order):
The Big Picture
Capital Gains and Games
The Economics of Contempt
That's a big list; few of you will read them all. But almost any of them is a good place to start. I note that the temptation to read only people close to you on the ideological spectrum is a huge mistake; you should try to get as rounded a picture of the thought out there as possible.
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