Book review: Economics Explained

I just finished an old book, Economics Explained, by Robert Heilbroner and Lester Thurow. This was the "newly revised an updated" edition, from 1998! I can't remember how this book was recommended to me, but the subtitle is "everything you need to know about how the economy works and where it's going". I'm not sure it quite lives up to that billing, and not just because the book is now quite dated. The book's purpose is to "simplify and clarify the vocabularies and concepts you will need to understand what is going on in the economic world and whether it is working smoothly or not". On that score, the book performs much better, not least because much of the core of economic understanding remains similar to 20 years ago.

However, I found the book to be somewhat unbalanced, but that might simply reflect my personal bias. They devote some 139 pages to macroeconomics, and just 32 pages to microeconomics. The macroeconomics section is able to be explained without resort to a single diagram (other than presenting some data), whereas the microeconomics section launches into a diagram on the third page. If it is possible to explain macroeconomics without diagrams, it is certainly possible to do the same for microeconomics.

That gripe aside, and the obvious datedness of some of the material, the book is a good read. It was interesting to read what Heilbroner and Thurow saw as the big economic problems of the time. The fact that they devoted the first chapter of that section to inequality, including some incredulous references to the ratio of CEO pay to that of the average worker, shows that in some respects we are still trying to solve the same issues that confronted us two decades ago.

Some parts of the book were quite refreshing, including the authors' insistence that the answer to many questions was "both yes and no" (which reminded me of my macro lecturer Brian Silverstone's response to almost any question: "It depends on your model"). They also noted many times that decisions are often political, not economic.

I liked that there was a fair amount of economic history, especially early in the book. However, there is also a lot of assumed knowledge of particular historical details, where it isn't clear that a modern reader would necessarily be able to place all the references (e.g. the New Deal is mentioned only in passing, but without further context). The material is also, as may be expected, very US-centric.

Despite that, there is a lot to like about the book, such as the section on government deficits, where they noted that:

...we should be debating not whether the government may or may not run a deficit, but whether its expenditures in excess of revenue reflect investment or consumption.

There are no doubt lessons there for current debates over 'budget responsibility' rules in New Zealand and elsewhere. However, this isn't so much a book for the modern reader, although those with an interest in how economics was explained in the mid-late 1990s might find it interesting.