Thursday, March 25, 2010

Roger E. A. Farmer's "How the Economy Works"

Roger E. A. Farmer is Professor and Chair of the Economics Department at UCLA. The author of numerous books and journal articles, he is a Research Associate of the National Bureau of Economic Research and of the Centre for Economic Policy Research. He is a contributor to the Financial Times Economists' Forum and, in 2000, received the University of Helsinki medal in recognition of his work.

He applied the “Page 99 Test” to his new book, How the Economy Works: Confidence, Crashes and Self-Fulfilling Prophecies, and reported the following:
I had two major goals in writing How the Economy Works: Confidence, Crashes and Self-fulfilling Prophecies. The first was to provide a jargon-free, concise and understandable history of economic thought from 1776 to the present day that would stand the test of time as a reference guide both for the general reader and those with a specialist knowledge of economics. The second was to provide a new theory and policy, that if widely adopted, could prevent future financial crises and the accompanying human misery of mass unemployment from reoccurring in the future. The technical details of my theory are explained in a companion book, Expectations, Employment and Prices.

Economic literacy is as important to citizenship as literacy in mathematics and the physical sciences. It is more important than ever that the public understands how economists’ beliefs influence the government policies that are now having such an profound impact on their everyday lives.

Why is there so much disagreement over the causes of recessions? What went wrong in 2008, and how can we fix it? Who was Keynes, and why are his ideas relevant today? What is the role of the Federal Reserve and other central banks around the world and how do they affect your life? Does it really make sense for governments to spend hundreds of billions of taxpayers’ money that they don’t have? I answer all of these questions and I illustrate the answers with examples.

Page 99 drops the reader right in the middle of a chapter that describes how economists explain the persistence of unemployment. This is the most challenging chapter in the book for the general reader to comprehend but is central to my argument about unemployment and economic theory. I have made the book as easy to read as possible but I have not been patronizing with the reader by trivializing hard ideas. Page 99 is a good example of this approach.

One of my favorite pieces of scientific literature is the book QED by Richard Feynman. In it, he explains the theory of quantum electrodynamics to the layman in simple English. In How the Economy Works: Confidence, Crashes and Self-fulfilling Prophecies, I have tried to do for modern macroeconomics what Feynman did for modern physics. You, the general reader, must be the judge of whether or not I have succeeded.
Learn more about How the Economy Works at the Oxford University Press website and at Roger E. A. Farmer's website, where you will find five video trailers of the author's description of the book's contents.

--Marshal Zeringue