The Best Books and Research on Economics in 2017
(Bloomberg View) -- This was the year economic thinking took a backseat to political battles. But even as attention was focused on policy battles over health care and tax reform, economists were quietly talking about how to make the economy more productive and more equal. Here is a list of some great books and papers that emerged from this turbulent year:
1. “The Rise of Market Power and the Macroeconomic Implications,” by Jan De Loecker and Jan Eeckhout
Economists really started to focus their attention on the problem of monopoly power in 2017. True monopolies are rare in the modern economy, but people are starting to notice that many U.S. industries are starting to concentrate into a few big players. De Loecker and Eeckhout claim that this phenomenon is responsible for a number of the ills plaguing the economy during the past few decades -- falling wages, rising inequality, slower productivity growth, reduced economic dynamism and a fall in labor’s share of national income. Their paper, though it made a big impact, was only one of several studies, including some by top researchers, all pointing in the same direction. Expect economists to continue focusing on the problem of monopoly power in the years to come.
2. “The Complacent Class: The Self-Defeating Quest for the American Dream,” by Tyler Cowen
My Bloomberg View colleague took a look at the U.S. economy and society and saw a story of stagnation -- falling productivity, declining geographic mobility, fewer startups, fewer people moving between jobs and more people dropping out of the workforce. He wove all of these trends, as well as his own cultural observations, into a story of “complacency” -- of a society that had become so good at delivering us the things we already know we want that it never prods us to get out and find new goals and new dreams.
3. “Housing Constraints and Spatial Misallocation,” by Chang-Tai Hsieh and Enrico Moretti
As cities become more important to the U.S. economy, the problem of NIMBYs -- local landowners who oppose urban growth -- has received a lot more attention. In San Francisco and other hot-tech hubs, rent has skyrocketed as demand has increased with no concomitant increase in supply. Hsieh and Moretti attempt to quantify just how much this is hurting the economy, and they come up with some pretty eye-popping numbers. Even if those numbers turn out to be too high, there’s a growing economic consensus that urban land-use restrictions are a problem that needs fixing.
4. “Economism: Bad Economics and the Rise of Inequality,” by James Kwak
Economists are often frustrated with how their field’s ideas are oversimplified and distorted by political operatives looking to justify tax cuts and deregulation. In “Economism,” University of Connecticut law professor James Kwak traces how free-market ideologues managed to convince the world for more than two decades that they had economic science on their side, and the damage that this misuse of economics caused.
5. The Ongoing Macro Debate
Since the end of the Great Recession, macroeconomics debates have been out of the news, and blog wars have turned to other topics. But academic economists are still quietly debating whether the dominant macro methodology -- called dynamic stochastic general equilibrium, or DSGE -- has been overused or misapplied. Johns Hopkins University’s Anton Korinek, a DSGE practitioner, offered a comprehensive critique of his own field, while the Massachusetts Institute of Technology’s Olivier Blanchard was slightly more restrained. Meanwhile, the London School of Economics’ Ricardo Reis offered a very reasonable defense of modern macroeconomics, while the University of Washington’s Fabio Ghironi argued that DSGE is changing in positive ways. There were more polemic criticisms and defenses as well. In any case, the debate continues.
6. “WTF?: What's the Future and Why It's Up to Us,” by Tim O’Reilly and “Machine, Platform, Crowd: Harnessing Our Digital Future,” by Andrew McAfee and Erik Brynjolfsson
Lots of people are worried about new technology and its impact on the economy. Will automation make humans obsolete? Will platform businesses become giant monopolies? Will the online economy kill the suburbs? How will tech affect inequality? These questions are hard to answer, but media entrepreneur Tim O’Reilly and business professors Andrew McAfee and Erik Brynjolfsson don’t shy away from the task. McAfee and Brynjolfsson stay focused on the implications for careers and businesses, while O’Reilly’s wider-ranging book contemplates how economic systems can be transformed to spread the benefits of new technology more equitably. Both broadly agree that machine learning and online platforms are the most transformative trends.
7. “The New Urban Crisis,” by Richard Florida
Star urbanist Richard Florida returns to the printed page with this book about the challenges facing cities. Florida’s work is a more readable, popularly oriented introduction to a phenomenon economists have been talking about for years now -- the shift of the U.S. economy toward knowledge industries, and how this increases demand for urban living. Cities, Florida argues, have become engines of inequality, and a more equitable urban policy is the key to spreading the wealth around.
8. “The Power of Bias in Economics Research,” by John P. A. Ioannidis, T. D. Stanley, and Hristos Doucouliagos
With economics rapidly turning from a theoretical discipline into an empirical one, it was inevitable that people would start discovering large, systemic problems in the ways that economists analyze data. Disquieting results have been appearing for several years now -- many economics experiments have failed to replicate, finance researchers have found that most asset-pricing research doesn’t hold up, and economists are finding that some of their most common empirical techniques are less reliable than they believed. Now, Stanford University medical professor John Ioannidis, famed for his skepticism of empirical research, has turned his attention to the economics profession. Sampling a huge set of economics papers, he discovered that many probably don’t have enough data to prove the claims they make.
9. “Gender Stereotyping in Academia: Evidence from Economics Job Market Rumors Forum,” by Alice H. Wu
This brilliant paper by an undergraduate student hit the economics community like a bombshell. Using text-mining software to analyze the conversations on an anonymous forum dedicated to discussing econ academia, Alice Wu found that sexism toward female economists was rampant. The result was followed by a flood of testimonials about sexist attitudes and incidents, leading to a long-overdue discussion about how to reduce gender discrimination in the economics profession.
10. “Economics for the Common Good,” by Jean Tirole
Nobel Prize-winning economist Jean Tirole isn't known for his public policy advocacy -- instead, he’s the consummate academic, penning highly mathematical theories that only a few people are qualified to understand and apply. But in “Economics for the Common Good,” Tirole descends from the ivory tower, offering a number of ways that he believes economic models can inform public policy debates on a huge variety of pressing issues.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Noah Smith is a Bloomberg View columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
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