I just took out a few books from my bookshelf. What do you think when you see the titles of these books:
Freakonomics – A Rogue Economist Explores the Hidden Side of Everything
The Invisible Hook – The Hidden Economics of Pirates
Why England Lose – And other curious phenomena explained
Selfish Reasons to Have More Kids
We all know this type of books – they are books written by economists (some of them with journalists) about topics, which are normally not considered to be topics that economists should concern themselves with. However, I love these books and other similar books. I am an economic imperialist. Economists have a lot to tell about these topics and of course economists should share their views on topics like this. I strongly believe that any professional football club should hire economists and I equally strongly believe that Orley Ashenfelter, President of the American Association of Wine Economists, has more clever things to say about wine than wine guru Robert Parker.
These books are the kind of books that dominated the economics sections of airport bookstores back in 2006-7. Let’s call these books “economics of life” books. Today nearly all economics books have the word “crisis” in the title. Just think Roubini, Krugman and Stiglitz. These books are Great Recession books.
This is the difference between good and bad monetary policy. When monetary policy is more or less right and secures a high degree of nominal stability nobody cares about macroeconomics. In fact there is really no macroeconomics. Any volatility in prices and nominal (and real for that matter) GDP is “white noise”. When macroeconomics disappears as an empirical phenomenon economists will have to find something less to do. That is why they start writing books about kids, pirates, sumo wrestlers and football.These books are wonderful, but let’s admit it – it is mostly entertainment. However, these books were also relatively well-known books – just think of the popularity of Freakonomics. Freakonomics was published in 2005. I doubt that it would have been such a success if it had been published today.
You can find these kind of books silly and childish, but they are basically a reflection of a period where we had tremendous nominal stability. On the other hand had we maintained nominal stability then nobody would have known Nouriel Roubini. He would just have been a little known scholar at New York University. Not to belittle Nouriel and other macroeconomists, but we are mostly interesting when there is a crisis. Had we not had the crisis then Scott Sumner would certainly have not been blogging and I would probably have been blogging about economics of life issues (I would still love to do that…).
I have on numerous occasions argued that if we ensure nominal stability then we would basically be able to understand the world as a broadly speaking Walrasian world where Say’s law applies. This is why I told Daniel Lin to be happy that he is teaching Microeconomics rather than Public Choice and this is how I think we should teach Economics 101.
Scott Sumner makes a similar point in one of his latest posts where he argues that if we secure nominal stability then we create a world where Casey Mulligan and John Cochrane are always right. Mulligan, Cochrane and other real business cycle (RBC) types basically do not acknowledge the importance of money (See here for a horrible example). RBC models are basically Walrasian models and they make perfectly good sense when central banks get it more or less right. That said, if we have nominal stability why would you want to waste your time with RBC models when you could study wine, pirates and football?
PS some of the economics of life books above were strictly speaking published early in the Great Recession rather than during the Great Moderation, but I am sure you get my point anyway.
PPS to my American readers: football is a sport where you are not allowed to pick up the ball in your hands. You kick the ball.