Trying to get my head around economic Theory - Book recommendations?

[seadog]

So lately I've been doing a lot of thinking about economics, just personal curiosity, I want to understand how everything ties into everything else. Money, stocks, bonds, interest rates, and what it all serves as a place holder for, actual physical stuff, starting from the basic level, trade economy. I was thinking the best way would be to build up from scratch how economies developed, then I could understand it. A side note if anyone has a good book recommendation that explains it, it would be much appreciated.

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Man A fishes. B cuts wood. C farms apples.

A wants wood for a boat, but A has nothing B wants (food), so the deal doesn't happen, both are worse off. (along with everyone else because now they can't get fish? A point often ignored?).

Man D comes along and makes up apple tokens. Says they serve as a store of value, easier than lugging apples around he says. And everyone likes apples. He creates them out of the blue, and pegs their value to the apple. He give's some to C for apples. Seems like a good gig.

He lends them to A at interest, which B will happily accept in exchange for wood, because he likes apples. Eventually ppl stop trading in tokens for apples, That's the start of currency.

Eventually after A gets wood for a boat, he fishes and trades those fish back to B and C for all their apple tokens

Now A has contributed fish, B wood, and C apples, it got distributed to all three parties, facilitated by D. D got a share of apples, wood, and fish, for doing nothing more than essentially record keeping. Eventually after the money went through the system, it came back to D, and he lost his apples, but kept some for the trouble.

Banks are essentially record keepers?

Is the net amount of money in circulation at any one time 0? Bank creates money. Lends to someone. That person now has 0 net worth. Cash + debt.

[flipstah]

Man A fishes. B cuts wood. C farms apples.

A wants wood for a boat, but A has nothing B wants (food), so the deal doesn't happen, both are worse off

What? I'm confused already.

So the fisherman wants wood for a boat but the fisherman has nothing that the lumberjack wants, which is fish?

Fish is food. :confused:

[Sugarphreak]

...

[Skyline_Addict]

money is only worth as much as what the country it comes from can produce.

[flipstah]

Originally posted by Skyline_Addict
money is only worth as much as what the country it comes from can produce.

Quite true. I'd love me some drachma's right now.

[KrisYYC]

Which school of economic theory are you interested in?

Austrian school (old style free market, like the US in the 19th century)

A good book is "Economics in One Lesson" by Henry Hazlitt.


Keynesian theory is largely what most western countries use today. FIAT currency, manipulation of interest rates, big government spending during recessions etc. Keynesian economic policies are often blamed for causing current economic crisis or at the very least worsening them by proponents of Austrian economics. Austrian economics think governments should stay out of the economy completely and let free market forces balance things out.

[chibwack]

Well, if you want a quantitative understanding just download the level 1 CFA economics textbook. That doesn't really cover a lot of the history behind things, which I'm also interested in (so I'll second that part: anybody have a good "economics in a nutshell" type book?)
But yeah, as far as learning things like effects of interest rate changes, the money creation process, etc, I'd say that cfa book is the most useful as it is meant to cover all bases. I graduated with an econ major so I might be overlooking some things, but that's a start. Schweser level 1 book 2 would be a more condensed, easier to read version of the CFA material as well.

[Marsh]

Try Investopedia.com for the basics, its a good place to start before you start buying books

[TomcoPDR]

Originally posted by flipstah


What? I'm confused already.

So the fisherman wants wood for a boat but the fisherman has nothing that the lumberjack wants, which is fish?

Fish is food. :confused:

I stopped reading after that too. :confused: :confused:

All I know is. You work you get paid, which gives you "paper, money, token, ear wax" that others wants and exchange you goods and services for that you can't produce or do yourself.

[ZenOps]

The modern economy is 98% service based.

We pay people to put basketballs in hoops and pucks in nets, to cut our hair, and to make and distribute nekkid people over the internet.

Money has very little to do with real goods anymore. Other than what people need to eat, and physically need to use services (IE: you need a HDTV to consume services like watching a hockey game) its very rarely used.

Every person has $8 in nickels and $9 in pennies, but over $100,000 in electronic money form.

There comes a slight disconnect when it becomes impossible to determine relative value. IE: Is a top tier lawyer worth $2,000 per hour, or $150 per hour? Is financial advice worth $3.4 million per hour or $25,000 per hour? Or is it all just a numbers game?

[msommers]

Broken_Legs showed me this awhile ago and I learned a lot.

http://www.peakprosperity.com/crashcourse/chapter-7-money-creation

Watch the chapters afterwards as well.

[chibwack]

I posted on another forum looking for books, asking for an overview of the history of economic thought, skipping over the more math type content. They suggested Robert Heilbroner's "The Worldly Philosophers", and then Medema and Samuels "History of Economic Thought" or Schumpeter's "History of Economic Analysis", though those last two are more textbooky. I'm going to grab heilbroner's after work today.

[tpurcell4]

If you want to start from the beginning try Adam Smith's "Wealth of Nations", you will find some of the examples a little out-dated, but should provide a good foundation.

After that it sounds like you're more interested in Micro vs. Macro economics. I could send you a text book from when I took it in University that would give an entry level into micro economics.

Aside from that, you could probably google recommended readings for Micro economic theory.

Cheers,

Todd