The Best Economics Books of 2022

The economic must-reads of 2022 are the topic of our talk. Before we talk about your five books selection, what five factors shaped the economy in 2022?

The spread of inflation around the world, and its persistence, are number one. Number two, the Russian invasion of Ukraine that sent commodity prices skyrocketing with reverberations around the world, which have been especially serious in Europe. Number three, the weakening of global growth—although it’s held up better than would have expected given points one and two; and in many countries around the world, the unemployment rate is close to the lowest it has been in fifty years. Number four is financial markets. We have had a synchronized global tightening of monetary policy. Interest rates have risen a lot, and that has caused asset markets to fall and some particularly frothy markets like crypto to collapse. And number five is China’s separate path. The world was largely reopened for most of 2022, whereas China is probably going to end the year more closed than it began—with very serious consequences for its economy and the global economy.

Turning to the books: Your first selection is a broad sweep. Tell us about economist Oded Galor’s The Journey of Humanity.

I have a soft spot for extremely broad histories like Jared Diamond’s Guns, Germs and Steel and Joseph Henrich’s The WEIRDest People in the World. I particularly appreciated The Journey of Humanity because it is an ambitious and deep story about the past tens of thousands of years of economic development that is also well grounded in a growing economics literature into the deep origins of growth that is rigorous, empirically grounded, and peer-reviewed—a literature that Oded Galor has been an important contributor to. The book synthesizes and extends this literature, it is not just ungrounded speculation but the product of genuine scholarship.

Galor’s headline idea is that the Malthusian view of the world was largely correct for tens of thousands of years—that as humans improved their technology, they mostly made more humans rather than higher incomes per capita. When humanity eventually reached the point where growth finally took off, it did so extremely unevenly. Galor interprets the take-off in growth as a virtuous circle between education and technology, which has left us with enormous global inequality. Almost everyone in the world used to be poor; now some people are very rich, while others remain very poor. Galor locates the roots of global inequality in factors that go back tens of thousands of years, including geography and genetic diversity, which have been mediated and reshaped through culture and political and economic institutions—along with a dose of contingency.

Is The Journey of Humanity a vessel for a grand unified theory of economics?

Some sweeping histories become a bit like the cosmology you get from modern physics. You get a grand story that’s internally consistent and consistent with data, but you’re not sure that it’s true. Galor’s evidence, which was published in top economics peer-reviewed journals, helps him coalesce a convincing argument. The deepest argument, but not the only one, is: If you have lots of genetic diversity, it’s hard for people to cooperate and if you have very little genetic diversity, it’s hard to have the variations that can lead to excellence, and so, you want something in between. That’s certainly not all there is to the story of economics. Am I a hundred percent sure it is true? No. Am I excited to have his formulation in mind as I attempt to understand our world? Absolutely.

Slouching Towards Utopia by Berkeley economist, Brad DeLong is your second selection. Please tell me about this one and why you’d recommended it.

Slouching Towards Utopia is a rich, nuanced story of the interplay of politics, economics, and ideas and how they shaped progress. It is a great book to read right after The Journey of Humanity because Brad DeLong focuses on the 140 years when most of humanity’s economic growth has taken place.

Brad DeLong does not try to develop a single simple, unified theory. Instead, his account emphasizes contingency, periods of progress, periods of regress, and ways in which ideas mattered. He focuses on the battle between Friedrich Hayek’s idea of free markets and Karl Polanyi’s ideas about the need for regulation. Brad believes political leaders do matter. All these factors are important if you want to understand why some economies grew in certain decades, but not others, or why, for instance, the United States became richer than Argentina, and why inequality fell for a while and then rose for a while. It portrays progress as halting, non-linear and not necessarily destined to continue.

DeLong portrays 1870 as a hinge point in economic history, citing the 1871 version of John Stuart Mill’s Principles of Political Economy, which says “Hitherto it is questionable if all the mechanical inventions yet made have lightened the day’s toll of any human being.” The Industrial Revolution had been underway for about a century by 1870. Do you agree with DeLong’s case for that hinge?

Growth picked up after the Industrial Revolution but slowly at first—with virtually no progress in per capita incomes for most workers and losses for some. Growth and innovation picked up dramatically later in the century with larger increases in per capita income and a much wider spread of that growth. So something really has been special about the last 150 years.

Streets of Gold, by Stanford economics professor Ran Abramitzky and Princeton economics professor Leah Boustan, covers roughly the same period as Slouching Towards Utopia. Tell us about the book and why you’ve selected it.

Streets of Gold focuses on one of the most important economic issues, immigration. Like The Journey of Humanity, this book is grounded in a deep, broad set of published, peer-reviewed research that its authors and others have conducted in recent years. Their research and this book sharpen our understanding of the changing patterns of immigration and their economic impact.

Since Streets of Gold is embroidered with exemplifying stories, is it more readable than the average peer-reviewed article?

Absolutely. It is incredibly enjoyable and readable. The authors, in a way that is very rare for economists, find small stories that paint big pictures for the points they make. The first is the myth of rags to riches; in both earlier generations and today, immigrants generally did not climb the ladder that quickly. Their second point is that immigrant children have been highly mobile and that mobility has been similar across generations, although it varies depending on where your parents come from. The third point is about how the pattern of assimilation today is like the pattern of assimilation in the past, with regards to things like adoption of American names, moving out of ethnic enclaves and marrying out of one’s ethnic group.

Moving on, Of Boys and Men is not a book a browser would find in any store’s economics section, albeit it’s by a senior fellow in economics at the Brookings Institution. What is it about and why have you chosen it?

Although his training is not in economics, Richard Reeves draws on economic research, as well as research from the fields of sociology, psychology, and political science, to tell an under-told story. The book explores the problems faced by boys and men, the roots of those problems, and possible policy solutions.

As chairman of the Council of Economic Advisers under Barack Obama, you underscored that the impediments to immigrants’ and women’s participation in the workforce had a cost for the economy of the United States as a whole. What is the economic impact of the growing gender gap in education and skills acquisition for men? Why should we care that men are immiserated?

Richard Reeves does not pit his argument against any argument related to the difficulties women face. If somebody says nuclear proliferation is a problem, it does not mean they don’t care about climate change. Similarly, to say there are a set of problems faced by boys and men that need a policy solution, does not mean that you don’t think there are a set of problems facing girls and women that need a policy solution.

We tried to bring attention to both sets of issues when I ran the Council of Economic Advisers. One issue that we documented is that for decades—from the 1950s through the present—men’s employment has been falling fairly steadily; it is the equivalent of a massive recession happening in slow motion over several decades. The increasing disparity between the degree to which males and females attend college and an even bigger disparity in the degree to which males and females graduate from college and go on to grad school is indicative of a lot of potential being lost.

Reeves devotes an entire chapter to this issue along with other chapters on education and culture. He then goes on to explain the problems, grounding his explanation in a rich mixture of economics, culture and biology. Finally he devotes considerable space to proposing policy solutions, ranging from an effort to get more men to teach elementary school to more radical ideas like making the default that boys start school a year later than girls.

Finally, please tell me about Chip War by economic historian Chris Miller.

Microchips are one of the hottest economic topics of 2022. A chip shortage was part of the inflation picture over the last year and a half. Microchips are among the biggest economic flashpoints between the United States and China. Continued progress in microchips is central to American economic growth.

Chris Miller tells us the history of how microchips were developed, emphasizing the critical role of the government, and especially defense procurement. He gives us a description of how microchips became the single most complex global good, with different pieces and aspects of the technology located in the Netherlands, the United States, Japan, Korea, and especially and most importantly, Taiwan. And he gives us a discussion of the risks that a literal war in Taiwan or an economic war of the type that we are seeing the beginning of could pose for this incredibly important, complex and globalized technology.

If you could add titles to publishers’ catalogues about economic drivers that you anticipate will be important in 2023, what would you suggest?

Humans are always the most important driver of economic growth, and they were an important part of the story in every one of the five books that I recommended. There is almost no limit to the study that can be done to try to understand the human aspects of economic growth.

In 2023, the spotlight will grow on the levelling-off and potential reduction of globalization that we’re going through. This will be a big issue going forward. Fifteen years ago, there was a whole raft of books about globalization. We might start to want to read or research and write about de-globalization, as we might be in the beginning of that process.

And finally, the rehabilitation of industrial policy is an area of increasing importance. ‘Industrial policy’ used to be an insult levied against ill-conceived government plans; now, governments around the world are increasingly comfortable getting directly involved in industry. I’m not sure if that is a good thing or a bad thing, but it is one of the many things worth reading about in 2023.

Part of our best books of 2022 series.