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Posted by u/curiousgal 9 years ago
Ask HN: What are the must-read books about economics/finance?
Hey HN,

I am pursuing an engineering degree in Statistics, I hope to get into finance so I am interested in knowing what books you consider a must-read for someone who doesn't know almost anything about economics (from a philosophical point of view; positive vs normative economics) and finance in general to help them grow intellectually.

Thanks!

reqres · 9 years ago
Please do not look upon popular economics best sellers as a good way to get a rounded economics education. While many have value in critical insight and entertainment, they often offer only a narrow perspective on economics. Novice economists typically lack the ability to critically appraise them without a wider economic framework to work from.

An academic reading list (i.e. university course texts) will provide you a good theoretical foundation as to how economists interpret and model real economic issues. It's important to grasp the plethora of important economic concepts like diminishing returns, comparative advantage and concepts of market efficiency (among many others things) and how they apply within micro or macro economic issues.

With some foundational knowledge in place, a good economist then goes on to relax the underlying assumptions and look for analogues in the real world. This is where the popular reading list come in, often they take a deep dive in specific areas i.e. where traditional economic assumptions break down.

In short, the academic reading list gives you a framework to understand economics. The best seller list tempers that framework with real world exceptions, paradoxes and open questions.

It's a bit disappointing to see a real academic reading list so far down this comment page (I strongly recommend looking at oli5679 suggestions). I doubt HNers would suggest reading up on javascript as a good foundation for a computer science education. Yes, you can become a well rounded computer scientist by starting on javascript. But it's more important to have a grasp on core computer science ideas like algorithm design & analysis and automata.

Retric · 9 years ago
Academic economics textbooks need to be read with a skeptical eye as they tend to be overly simplified. Think of it as a useful framework for future work and a shared language, not an explanation of what actually happens.

Much like how physics textbooks love frictionless surfaces.

marmot777 · 9 years ago
Would an economist go through an entire career and never read, say, John Locke? I don't know the answer. I'm genuinely curious.
dredmorbius · 9 years ago
Economics rather strongly deprecates both history and philosophy, often offering only a brief overview of the former and a highly digested form of the latter.

One windfall of the World Wide Web are the fundamental texts now online. Many legally, through the Internet Archive, or various libraries -- the Online Library of Liberty and Mises.org, as much as I disagree with their ideological bases, have quite good collections. More in the form of illicit copies. LibGen, BookXX.org, and Sci-Hub offer access to many books and articles. Wikipedia is strong in economics, in particular offering biographies of many particular authors and theorists.

Worldcat (https://www.worldcat.org/) will help you track down published books at libraries worldwide.

Having studied economics at Uni, I'm making up for many deficiencies of my curriculum.

yomritoyj · 9 years ago
Quite possibly, just as one can be a productive physicist without reading, say, Einstein, in the original.
rhelsing · 9 years ago
For what it's worth, I really enjoyed Naked Economics by Charles Wheelan, even though it may be considered a popular economics best seller. I though it offered a great introduction to a field I knew very little about.
davidivadavid · 9 years ago
One approach is to go to the MIT OpenCourseWare website, look for the economics department, and look at their reading lists.

Of course, that's going to be mostly academic reading (textbooks, etc.). But if you want to learn the basics, it's probably safer to start there than the pop econ books (and I would dispense with most heterodox reading before you're able to assess them within a larger framework).

Two good books that haven't been mentioned here:

Economic Theory in Retrospect, by Mark Blaug. Very useful to get a good historical grounding in the main ideas that compose today's orthodox economics.

The Applied Theory of Pirce, by McCloskey. Your usual microeconomics textbook, but far more thorough, insisting a lot on grasping the intuition behind the concepts. Available for free from the author's website here: http://www.deirdremccloskey.com/docs/price.pdf

windowsworkstoo · 9 years ago
Definitely agree, esp with the textbooks part - a macro 101 and micro 101 book will do you well.
blahi · 9 years ago
I am very glad this is the top voted answer. Forget investing books and blogs and whatever. All worthless junk. Read the accounting textbooks and figure out valuations. Then you can figure out trading with your stats skills.

A couple of good youtube channels though! Martin Shkreli's channel and Aswath Damodaran.

Then some books might be beneficial to you but you yourself can be the judge of that. Everybody thinks they get finance and economics. They don't.

forgetsusername · 9 years ago
>All worthless junk

This is a ridiculous statement, especially when combined with the implication that some amateur will be able to "trade", successfully, with a bit of statistical knowledge. The fundamentals of economics and finance are stored in books. If you're starting out, you have a long way to go before you can no longer learn from them.

I do agree with your recommendations for sites. But you're going to get far more out of Prof. Damodaran's "worthless junk" textbook than you will his blog.

dirtyaura · 9 years ago
I just checked Shkreli's channel and it is like a breath of fresh air (never imagined that I'd say something like that about Shkreli). The way he starts to talk about the finance and investing as a career choice - a skill that you sell to other people, instead of trying to money by investing your own money, is surprisingly rare angle in any popular take on investing: https://www.youtube.com/watch?v=ARrNYyJEnFI
arjie · 9 years ago
Wait, Martin Shkreli's channel? The guy who's been indicted on securities fraud?
ohthehugemanate · 9 years ago
Top of my list would be "the ascent of money", by Harvard Prof Niall Ferguson. It explains what money and financial instruments are, by telling the stories of their history. Hes a great story teller, and for each aspect of finance that he explains, there's a story of a famous piece of history which it caused. For example, the application of oriental maths to finance caused a huge boom for Italian bankers, especially including one family, the Medici. That financial boom was responsible for the artistic boom we call Renaissance art. Or how the Dutch republic triumphed over the enormous Hapsburg empire, because the world's largest silver mine couldn't compete with the world's first stock market.

Fantastic read, and a great way to gain financial literacy.

damptowel · 9 years ago
I only watched the tv series but it's basically "finance according to neoclassical economics" which is about as relevant to the real world as Alice in Wonderland.
riffraff · 9 years ago
There is also a TV series based on this book, I think, which is fairly good.
qznc · 9 years ago
I guess this one: http://www.imdb.com/title/tt1358383/

Seems to be available in full and bad quality on Youtube.

kevinburke · 9 years ago
(Economics major and longtime econ book/paper reader here) I very much enjoyed The Cartoon Introduction to Economics as an introduction to microeconomic concepts: http://standupeconomist.com/cartoon-intro-microeconomics/

It's extremely readable and funny and covers most of the situations in real life where you can apply economic concepts to understand why something is the way it is.

Understanding why countries and economies grow (and why some grow faster than others!) doesn't always fall under the "economics" umbrella but is really useful for informing policy (and a useful reminder these days, when both US presidential candidates rail against trade agreements). "From Poverty to Prosperity" lays out a very readable and convincing argument for how countries have grown and become rich. https://www.amazon.com/Poverty-Prosperity-Intangible-Liabili...

For finance I very much enjoyed The Intelligent Investor, which also (apparently) inspired Warren Buffett's investing philosophy. https://www.amazon.com/Intelligent-Investor-Definitive-Inves...

blobbers · 9 years ago
This is a common misunderstanding. Buffett Partnership Ltd., Buffett's initial hedge fund, was very much was guided by the cigar butt style investment principles of Graham.

When Buffett bought Berkshire Hathaway a few years after closing the partnership, his investment philosophy had changed. Your best bet to understand his investing is to simply read his letters.

He may come across as a bit folksy or country bumpkin, but he's fairly clear in his methodology.

Here are some links you may find helpful: http://www.rbcpa.com/WEB_letters/WEB_Letters_pre_berkshire.h...

http://www.berkshirehathaway.com/letters/letters.html

Enjoy.

thanatropism · 9 years ago
I mean, much of Graham's "investment philosophy" has been thoroughly invalidated by the Modigliani-Miller theorem published in the 1960s. But like Deepak Chopra, he's still around!
marklgr · 9 years ago
What's your take on it?
atdrummond · 9 years ago
Indeed, Buffet worked at Graham's (the author of The Intelligent Investor) partnership.
AndrewKemendo · 9 years ago
The following list will introduce you to Western Economic Philosophy as it relates to modern history specifically. This list is weighted heavily toward neo-classical economics and does not get into computational model based economics - specifically microeconomics, which comprises the bulk of economics education today:

Schumpeter - History of economic analysis

Adam Smith - Theory of Moral Sentiments

Kaynes - The General Theory of Employment, Interest and Money

Marx - Capital

Benjamin Graham - The Intelligent Investor

Galbraith - The Affluent Society

Galbraith - The Great Crash

Milton Friedman - Capitalism and Freedom

Nassim Taleb - Black Swan

Ron Suskind - Confidence Men

Scott Patterson - Dark Pools

If you want to delve into heterodox economics afterward, start with the following:

Hayek - Individualism and Economic Order

Mises - Human Action

Rothbard - Man, Economy, State

jnordwick · 9 years ago
All of those are very dated and you won't learn much about modern economic thought from them. Many of those people (Keynes, Marx, Graham, etc...) are like reading Freud. Very little of what Freud wrote has made into modern psychological though. It is more of his methodical approach that brought psychology into the modern age. The same can be said of many on that list. They brought a rigor of thought to economics that it might have been lacking; it isn't really that their ideas have passed the test of time. The 1970's for example almost caused the destruction of Keynesian thought with its basically impossible high inflation and high unemployment until the neo-Keynsians patched it up enough to limp forward.
AndrewKemendo · 9 years ago
I think it's safe to say that Keynes works are the foundation of modern macroeconomics. His economic cycles are doctrine in economic planning. Moreover he has been invoked increasingly post 2008 recession.
wyclif · 9 years ago
All of those are very dated

I think he knows that, since he added a disclaimer right at the top saying these are all heavily weighted towards neoclassical econ (i.e. "modern books" ≠ new books). Which is another way of reminding the reader that they are generally older books.

nstj · 9 years ago
I respectfully disagree - would you be able to provide some more contemporary options?
throwaway729 · 9 years ago
This reading list probably isn't a good starting point.

But it's a good thing to do right after the starting point. Understanding the major influential figures, what their ideas were, and how those ideas were justified is important context. Each of the people on this list continue to reverberate through political economics in the most significant ways imaginable.

So it's up to OP if s/he wants to take the "classical works" route. But I'll just mention that if s/he does, this is a good list. Both in terms of the people selected and the books selected for each person.

zhte415 · 9 years ago
This time it's different?

Irrational Exuberance by Robert Shiller could be on the list above.

anxman · 9 years ago
Excellent list. This is basically an undergraduate Econ degree here.

I would also add Veblin to this list of authors.

Also, one of my favorite overviews of economists is The Worldy Philosophers.

techbio · 9 years ago
Thorstein Veblen? Also, may be off center or not, but, Peter Bernstein "Against the Gods".
cryoshon · 9 years ago
Your list is very similar to my own. I think a philosophical approach will set the proper state of mind for thinking about the specifics of the more modern theories.
dredmorbius · 9 years ago
That's a pretty good list, though I have to take exception to your suggestions for heterodox economics all coming from the Hayek-Mises-Rothbard Austrian/Libertarian tradition. There's considerably more to heterodox economics than Libertarian school.

"Heterodox economics" is an umbrella term used to cover various approaches, schools, or traditions. These include socialist, Marxian, institutional, evolutionary, Georgist, Austrian, feminist,[3] social, post-Keynesian (not to be confused with New Keynesian),[2] and ecological economics among others.[4]

https://en.m.wikipedia.org/wiki/Heterodox_economics

Steve Keen offers a fairly compelling criticism in Debunking Economics.

Ha-Joon Chang, of LSE, has several books providing criticisms and overviews of economics, his Economics: the user's guide is a light and readable overview. http://www.worldcat.org/title/economics-the-users-guide/oclc...

(It's worth noting that Ha-Joon Chang tends toward a Marxian view and in particular is a contrarian in trade and development concepts. I happen to think his views have merits.)

There are several books which cover the history of economic thought, from more and less inclusive perspectives. Roger Backhouse's The Ordinary Business of Life is extraordinarily dry, but reasonably encompasses the mainstream. http://www.worldcat.org/title/ordinary-business-of-life-a-hi...

Heilbroner's The Worldly Philosophers is a classic: http://www.worldcat.org/title/worldly-philosophers-the-lives...

For heterodoxy, I'd add to the Austrian side:

Herman Daly on ecological economics. http://www.worldcat.org/title/ecological-economics-principle... ul it in f l. Erick D. Beinhocker's The Origin of Wealth: Evolution, complexity, and the radical remaking of economics strikes me from reviews and a brief overview as one of the more interesting recent books on economics. I've yet to read it in full. http://www.worldcat.org/title/origin-of-wealth-evolution-com...

There's slew of other books, many quite bad, on the subject. I'm largely convinced economics is vastly overdue for a robust remaking. I'm not convinced that will happen.

(It was my degree subject at uni. I've been trying to comprehend it and rationalise its vast internal contradictions and inconsistencies since.)

youdontknowtho · 9 years ago
How heterodox are Hayek and Mises compared to Milton Friedman. I'm not trolling here. I'm actually asking. I thought that they were essentially proponents of similar theories? I'm the definition of a layman though, so I could easily have that all wrong.
analogwzrd · 9 years ago
I haven't read enough of Friedman to argue details, but I do know they were from different economic schools. Mises and Hayek were of the Austrian school. Friedman was in the Chicago school. As far as heterodox, Friedman seems to have enjoyed more political and social influence than Hayek and Mises ever did.
eropple · 9 years ago
Von Mises in particular is largely regarded as a crank, and his followers worse, by the econ wonks I count as friends. I have heard it described by an econ-wonk friend along the lines of, "I don't agree with Friedman's conclusions but I recognize the universe in which he lives. If Von Mises told me the sky was blue, I would have no choice but to check."
ianai · 9 years ago
The similarity between Galbraiths 1929 and what happened in 2008 blew me away.
dredmorbius · 9 years ago
That is an excellent and highly readable book. Most of Galbriath's are.
mazeway · 9 years ago
Isn't Nassim Taleb opposed to neo-classical economics?
tomrod · 9 years ago
Great suggestions!
soVeryTired · 9 years ago
I work in a quant hedge fund - I'll give you my take. The first thing I would point out is that there is a massive difference between academic theory and practice. I don't want to turn this into an anti-academic rant, but I do want to emphasise that we value very different things. For this reason alone, most of what you read in most textbooks won't do you much good.

Personally I wouldn't place too much emphasis on outside knowledge. Basic knowledge of economics wouldn't hurt, but don't go nuts. Khan academy will give you more than enough theory. You don't want to spend all your energy developing a skill that a trained economist applicant will crush you at. Neither should you focus too much on e.g. stochastic analysis. In the real world, no-one cares whether a stochastic process is previsible or progressively measurable. But knowing how to derive Black-Scholes couldn't hurt.

So far I've msotly talked about what you shouldn't read. I'll try to talk a little bit about what you should. Read the financial press. The FT or the wall street journal, depending on where you're based. Read finance blogs. Frances coppola is good. So is the Bank of England's blog. Check out Alphaville at the FT too. You'll be expected to know what's going on in the world right now. Could you explain what QE is? For a finance job, that's more important than knowing what the IS/LM model says. What's been going on in China recently? What do you think about their currency outflows?

Know how to code. At least one of Python, Matlab or R for the buy side, one of Java or C++ for the sell side.

Most importantly, though, you should be able to demonstrate enthusiasm. Any given junior quant role will get hundreds of applications, and some demonstrable interest will put you head and shoulders above the pack. A link to some decent analysis on github would do (none of the hundred or so applicants to the last position we advertised did that). Play with some financial data. Quantopian is apparently a good resource.

I've talked about how to prepare for a general finance job. The specific reading you should do will depend on exactly what job you want. Do you want to be a quant? If so, buy side or sell side? Read up on the difference. Go check out efinancialcareers, have a look at the skills they're asking for within each sector, and take it from there.

oli5679 · 9 years ago
I'd recommend textbooks or corsera rather than pop econ books.

Mostly Harmless Econometrics - Angrist and Krueger

Principles of microeconomics - Mankiw (beginner)

Intermediate microeconomics - Varian (intermediate)

You also want to cover finance and time series - I don't know what would be good there.

tvanantwerp · 9 years ago
For someone coming from a totally different field, I'd actually recommend the opposite approach: start with pop-econ to actually develop an interest, then move on to more serious academic works. Starting from zero, a textbook risks being far too boring to stick with. Best to generate an interest first, then dive deeper once you've got a context and hunger to know more.
oli5679 · 9 years ago
Yeah, I think the best econ and finance journalists are more captivating than a textbook. I'd recommend Matt Levine, Tim Hartford, anything in the Economist magazine Paul Krugman's early essays (before he became a political columnist) as well as the Freakonomics and econtalk podcasts as a general introduction.
riffraff · 9 years ago
I second the suggestion of mankiw's book, covers a lot, it's well written and mixes both interesting anecdotes and actual "theory".
chestervonwinch · 9 years ago
How would compare Mankiw's Principles of Micro / Macro separately vs. his single, Principles of Economics text? Some background: I'm a graduate student with little time, but this election cycle has motivated me to learn some basic economics / history in my spare time.
xapata · 9 years ago
Mankiw's text is decent, but heavily influenced by his politics.

Regardless of who you read, it's good to be skeptical and consider their personal agenda.

RockyMcNuts · 9 years ago
As a start, take some economics courses, intro Micro and Macro. (Check https://www.coursetalk.com/ https://www.class-central.com/ )

Actually the first book I'd recommend would be The Worldly Philosophers, a readable history of economics

https://www.amazon.com/Worldly-Philosophers-Economic-Thinker...

A couple of more right-leaning books - Hayek, The Road to Serfdom https://www.amazon.com/Road-Serfdom-Fiftieth-Anniversary/dp/...

Friedman, Capitalism and Freedom https://www.amazon.com/Capitalism-Freedom-Anniversary-Milton...

Less right-leaning

The Marx-Engels Reader https://www.amazon.com/Marx-Engels-Reader-Second-Karl-Marx/d...

shermablanca · 9 years ago
Good recommendations.

I would add that once you've understood the basics, subscribe to the economist magazine and try your best to understand the articles. Look up what you don't know until you feel comfortable reading and discussing the issues.

Whatever you do, avoid zero hedge. While there can be some intelligent and cogent analysis on there, it's mostly doom and gloom.

RockyMcNuts · 9 years ago
FWIW this would be my list of books every investor should read, which is different from what you should read to work in finance but anyway ...

Capital Ideas: The Improbable Origins of Modern Wall Street by Peter L. Bernstein. A lively introduction to the theoretical foundations of modern finance and their history, Markowitz, Sharpe, etc. https://www.amazon.com/Capital-Ideas-Improbable-Origins-Mode...

The Essays of Warren Buffett : Lessons for Corporate America by Warren E. Buffett. In his own words...you can also find many if not all online, on Berkshire website https://www.amazon.com/The-Essays-Warren-Buffett-Corporate/d...

Buffett: The Making of an American Capitalist by Roger Lowenstein. Insightful biography...The Snowball was written more recently with Buffett's approval, but would read this one first https://www.amazon.com/Buffett-American-Capitalist-Roger-Low...

Common Stocks and Uncommon Profits and Other Writings by Philip A. Fisher. It's not widely appreciated, but Warren Buffett's method is 50% Ben Graham and 50% Phil Fisher. If you can find value stocks that are also great franchises, and hold onto them for dear life, you will be rich... if you also bet big, operate companies well, don't screw up, live in a bull market era and survive long enough, maybe as rich as Buffett. https://www.amazon.com/Common-Stocks-Uncommon-Profits-Writin...

The Intelligent Investor: A Book of Practical Counsel by Benjamin Graham. Classic introduction to value investing https://www.amazon.com/The-Intelligent-Investor-Practical-Co...

Unconventional Success: A Fundamental Approach to Personal Investment by David F. Swensen. Asset allocation, and the perils of mutual funds...leading endowment investor of our time (Yale) gives his advice for individuals https://www.amazon.com/Unconventional-Success-Fundamental-Ap...

The Most Important Thing: Uncommon Sense for the Thoughtful Investor by Howard Marks. Lessons in investing... at any time, any one of them can be 'the most important thing' and so they all are jointly and severally 'the most important thing'. https://www.amazon.com/The-Most-Important-Thing-Thoughtful/d...

The Investor's Anthology: Original Ideas from the Industry's Greatest Minds (Vols 1 and 2) by Charles D. Ellis (Editor), James R. Vertin (Editor). Essays from a broad selection of writers https://www.amazon.com/The-Investors-Anthology-Industrys-Inv...https://www.amazon.com/Classics-II-Another-Investors-Antholo...

The Money Masters; The New Money Masters; Money Masters of Our Time, by John Train. Methodologies of all-time great money managers, in their own words https://www.amazon.com/The-Money-Masters-John-Train/dp/08873...https://www.amazon.com/Money-Masters-Time-John-Train/dp/0887...https://www.amazon.com/New-Money-Masters-John-Train/dp/08873...

Market Wizards; The New Market Wizards; Hedge Fund Market Wizards, by Jack D. Schwager. Interviews of successful traders https://www.amazon.com/Market-Wizards-Jack-D-Schwager/dp/088...https://www.amazon.com/The-New-Market-Wizards-Conversations/...https://www.amazon.com/Hedge-Fund-Market-Wizards-Winning/dp/...

Manias, Panics, and Crashes: A History of Financial Crises by Charles P. Kindleberger. Why good markets go bad https://www.amazon.com/Manias-Panics-Crashes-Financial-Inves...

Reminiscences of a Stock Operator by Edwin Lefevre. Fictionalized biography of a famed early-20th century trader https://www.amazon.com/Reminiscences-Stock-Operator-Edwin-Le...

A Random Walk Down Wall Street: The Best and Latest Investment Advice Money Can Buy by Burton G. Malkiel. Reality check from an efficient market theorist https://www.amazon.com/Random-Walk-Down-Wall-Street/dp/03933...

This is a rollicking good read on links between Shannon, Kelly, Thorpe, who wrote 'Beat the Dealer' and was maybe the first hedge fund legend https://www.amazon.com/Fortunes-Formula-Scientific-Betting-C...

And maybe something on technical analysis, but not really sure what to recommend...a lot of people view it kind as mumbo jumbo, but I kind of think fundamentals are like playing your poker hand, technicals are like playing the opponents' tells...the chart gives you an idea of who owns it at what price, what levels might make people rethink positions. Maybe this one as an easy intro, dumb title notwithstanding https://www.amazon.com/Stan-Weinsteins-Secrets-Profiting-Mar...