Economics Books

"In 1610 a new period of mismanagement began. The aggressive foreign policy of Richelieu... and the extravagance of the court led again to a new and huge floating debt. At this time the term “partisans” was coined: people who had partis, money transactions with the government, and thus became its unconditional adherents."

"Another French state bankruptcy in 1648 eliminated the Italian bankers, mostly Florentines. State revenues by that time had been anticipated three years ahead by borrowing from the partisans who charged the Crown ruinous rates. Even the rentes (perpetual loans) were not always serviced in full. From 1639 French rentes enjoyed a market on the new Paris Exchange."

"Bureaucratization offers above all the optimum possibility for carrying through the principle of specializing administrative functions according to purely objective considerations. Individual performances are allocated to functionaries who have specialized training and who, by constant practice increase their expertise. "Objective" discharge of business primarily means a discharge of business according to calculable rules and "without regard for persons.""

"Soweit es sich hier um „Paria"-Intellektualismus handelt, ... beruht dessen Intensität darauf, daß die außerhalb oder am unteren Ende der sozialen Hierarchie stehenden Schichten gewissermaßen auf dem archimedischen Punkt gegenüber den gesellschaftlichen Konventionen, sowohl was die äußere Ordnung wie was die üblichen Meinungen angeht, stehen. Sie sind daher einer durch jene Konvention nicht gebundenen originären Stellungnahme zum „Sinn" des Kosmos und eines starken, durch materielle Rücksicht nicht gehemmten, ethischen und religiösen Pathos fähig."

"The continual utilization and procurement of goods, whether through production or exchange, by an economic unit for purposes of its own consumption or to procure other goods for consumption. will be called "budgetary management" (Haushalt)."

"Men differ in … social status. … Simple observation shows that in every such situation he who is more favored feels the never ceasing need to look upon his position as in some way “legitimate,” upon his advantage as “deserved,” and the other’s disadvantage as being brought about by the latter’s “fault.” That the purely accidental causes of the difference may be ever so obvious makes no difference."

"Social action, like all action, may be oriented in four ways. It may be:"

"The term "social relationship” will be used to denote the behavior of a plurality of actors insofar as, in its meaningful content, the action of each takes account of that of the others and is oriented in these terms. The social relationship thus consists entirely and exclusively in the existence of a probability that there will be a meaningful course of social action – irrespective, for the time being, of the basis of this probability."

"Every highly privileged group develops the myth of its natural, especially its blood, superiority. Under conditions of stable distribution of power and, consequently, of status order, that myth is accepted by the negatively privileged strata. Such a situation exists as long as the masses continue in that natural state of theirs in which thought about the order of domination remains but little developed, which means, as long as no urgent needs render the state of affairs “problematical.” But in times in which the class situation has become unambiguously and openly visible to everyone as the factor determining every man’s individual fate, that very myth of the highly privileged about everyone having deserved his particular lot has often become one of the most passionately hated objects of attack."

"The principles of office hierarchy and of levels of graded authority mean a firmly ordered system of super- and subordination in which there is a supervision of the lower offices by the higher ones."

"Sociology... is a science concerning itself with the interpretive understanding of social action and thereby with a causal explanation of its course and consequences. We shall speak of "action" insofar as the acting individual attaches a subjective meaning to his behavior - be it overt or covert, omission or acquiescence. Action is "social" insofar as its subjective meaning takes account of the behavior of others and is thereby oriented in its course."

"Bureaucracy develops the more perfectly, the more it is "dehumanized," the more completely it succeeds in eliminating from official business love, hatred, and all purely personal, irrational, and emotional elements which escape calculation."

"For the purposes of a typological scientific analysis it is convenient to treat all irrational, affectually determined elements of behavior as factors of deviation from a conceptually pure type of rational action. For example a panic on the stock exchange can be most conveniently analysed by attempting to determine first what the course of action would have been if it had not be influenced by irrational affects; it is then possible to introduce the irrational components as accounting for the observed deviations from this hypothetical course...Only in this way is it possible to assess the causal significance of irrational factors as accounting for the deviation of this type. The construction of a purely rational course of action in such cases serves the sociologist as a type (ideal type) which has the merit of clear understandability and lack of ambiguity. By comparison with this it is possible to understand the ways in which actual action is influenced by irrational factors of all sorts, such as affects and errors, in that they account for the deviation from the line of conduct which would be expected on hypothesis that the action were purely rational."

"The management of the modern office is based upon written documents ('the files'), which are preserved in their original or draught form. There is, therefore, a staff of subaltern officials and scribes of all sorts. The body of officials actively engaged in a 'public' office, along with the respective apparatus of material implements and the files, make up a 'bureau.' In private enterprise, 'the bureau' is often called 'the office.'"

"Characteristics of Modern Bureaucracy"

"IV. Office management, at least all specialized office management-- and such management is distinctly modern--usually presupposes thorough and expert training. This increasingly holds for the modern executive and employee of private enterprises, in the same manner as it holds for the state official."

"I am very unsympathetic to the school that calls itself post-Keynesian. First of all, I have never been able to understand it as a school of thought. I don't see an intellectual connection between a Hyman Minsky, on the one hand, who happens to be one of the oldest friends I have, and someone like Alfred Eichner, on the other, except that they are all against the same thing, namely the mainstream, whatever that is. The other reason why I am not sympathetic is that I have never been able to piece together (I must confess that I have never tried very hard) a positive doctrine. It seems to be mostly a community which nows what it is against but doesn't offer anything very systematic that could be described as a positive theory. I have read many of Paul Davidson's articles and they often do not make sense to me. Some of post-Keynesian price theory comes forth from the belief that universal competition is a bad assumption. I have all my life known that. So I have found it an unrewarding approach and have not paid much attention to it."

"I think that today Keynesian economists primarily distinguish themselves from other economists through their belief that you cannot understand the behavior of our economy on the assumption that it is always at or near a full, or Walrasian, equilibrium, and that you cannot account for the movements that you see in output and employment on the assumption that everything you see is at the intersection of traditional supply and demand curves, and that the movements are only accounted for by shifts in those curves People who think of themselves as Keynesian economists can be divided as to what they would put in place of Walrasian equilibrium. Some of them think that what we observe in the world is a disequilibrium. If the economy is moving toward Walrasian equilibrium, it is doing so very slowly. Another group of Keynesian economists, who are in some ways closer to Keynes, believe that the economy is characterized by multiple equilibria; a modern capitalist economy is capable perhaps of producing a good Walrasian equilibrium, but also a bad equilibrium, that is, a situation with bad welfare properties and without forces that move the economy away from such a situation. I find myself halfway between those two schools of thought. I used to think that the correct analysis would emphasize disequilibrium. Now I have some doubts about that. Either of these approaches is a Keynesian alternative to the idea that the economy should be regarded as being in a Walrasian equilibrium."

"Koopmans complained that macroeconomic models weren't satisfactory because they didn't handle randomness. He talked about building models in continuous time, which is something we're trying to do now."

"Hurwicz talked in 1949 about the need to model strategic behavior. He said that Keynesian models were ignoring the fact that individuals aren't just stupid players who responded passively to what the government did, but that they had the option to change their strategy when the government changed its strategy. That's the rational expectations program. He was ignored for 20 years or more."

"I think that Keynes was certainly a good example of a new paradigm. His work is possibly the best example of a case for which I think Kuhn's theory fits as well as it can in the domain of the social sciences. In a fairly short period of time, Keynes gave a new way of looking at the economy, a way which was widely accepted, at least by the younger generation."

"If you look back at the 1929 to 1933 episode, there were a lot of decisions made that, after the fact, people wished they had not made; there were a lot of jobs people quit that they wished they had hung on to; there were job offers that people turned down because they thought the wage offer was crappy. Then three months later they wished they had grabbed. Accountants who lost their accounting jobs passed over a cab-driver job, and now they're sitting on the street while their pal's driving a cab. So they wish they'd taken the cab-driver job. People are making this kind of mistake all the time. Anybody can look back over the '30s and think of decisions which would have made millions—purchasing particular stocks, all kinds of things. I don't see what's hard about this question of people making mistakes in the business cycle. From the individual point of view, it's obvious."

"Macro rational expectations, as I have labeled the hypothesis, seems to say that expectations in an economist's model must be perfectly consistent with his model that embodies these expectations. In other words, the agents of his model must all share his views of the relevant economic mechanisms, as well as his data. Why? Because if he holds them they must believe they are God's truth and, if so, rational people can have no other views (and of course we should never ask how they would come by these views and data, that not even other specialists may have heard of yet, let alone accepted). I submit that this view is pretty absurd--I would almost say offensive! I certainly believe that I know more about economics and the economy than (almost) everybody else, and i can even prove it: If everybody shared my vies, then the economy could not be in today's troubles (though it might conceivably be in some different ones!)."

"Herbert A. Simon... used to give us a hard time. He likes to take on the devil's advocate role. In his Sciences of the Artificial he's pretty balanced."

"The only way I feel I understand something is if I can write it down in a model and make it work. I felt that from the beginning. That's why I liked Samuelson's book. He'll take these incomprehensible verbal debates that go on and on and never end and just end them; formulate the issue in such a way that the question is answerable, and then get the answer."

"I do not consider the term "Keynesian revolution" appropriate. [...] It seemed to be a more political event than a scientific event. The Depression discredited the whole profession, people were alarmed about it. The General Theory is a political response to the Depression and to the discrediting of conventional economics that resulted from it.But I should acknowledge that Keynes left an opening for younger econometricians and mathematical economists to take over and to write down models. When their senior colleagues criticized their models, they could say, "Well, these are Keynesian models." And since the older people still hadn't caught up with Keynes, that shut them up. So people like Klein and Tinbergen took over because they had the exciting new methods."

"I believe people can solve complex problems eventually. By repeated trial and error they will get there; but they need a long time. At this point I agree with Herbert Simon. People do not learn immediately, as those rational expectations models seem to imply. I don't believe that. The statement that assumptions do not matter is nonsense. It is funny. Yes, I assume people are consistent in their behavior. I assume that not because I believe everybody actually is, but because I believe, on the average, you do not get too far from it."

"Another big influence was Samuelson's Foundations, which I read when I stated here at Chicago. It's a "how-to-do-it" book. a great book for first-year graduate students. It says, "Here's the way you do it." It lets you in on the secret of how you play the game, as opposed to cutting you off with big words. I think the combination of Samuelson's book plays Friedman's class was what got me going."

"I do not have a theory, nor do I know somebody else's theory that constitutes a satisfactory explanation of the Great Depression. It's really a very important, unexplained event and process, which I would be very interested in and would like to see explained."

"Some of the new classical economists are extremely ideological. If you give them evidence, for example, that fully anticipated money matters, evidence counter to their world view, they say that you're wrong. And if you say that their evidence is wrong, they'll say you're wrong again. I give up! Barro once said to me that there isn't any evidence in the world that fiscal policy is effective. Just open your eyes and see episodes of tax cutting and government-spending increases. How about World War II? That had big effects on real output. His response? ... He sometimes shrugs, he sometimes gives a clearer alternative explanation. Sargent is much more serious. He doesn't come to these economic views from a rigidly maintained ideological position. He's a sort of tinkerer, playing an intellectual game. He looks at a puzzle to see if he can solve it in a particular way, exercising these fancy techniques. That's his thing, so to speak. I think Lucas is a blend of those two, actually. He's not extreme as Barro, he's more open. And he's not quite as technical as Sargent."

"Keynesian economics is the economics of nominal rigidities basically, nominal rigidities everywhere. Fully anticipated money does affect output. Everybody can see that! So, it's right. The fact that it's not as theoretically tidy as Lucas's 1972 Journal of Economic Theory paper is not a reason to throw it away. That's become a minority view in this profession, unfortunately. It wouldn't have been in the '60s."

"The hypothesis was more or less buried during the '60s. Arrow used it in his paper on learning-by-doing in the '60s. Prescott and I used it in that paper of ours on investment. People were aware of it, I didn't understand then how fundamental a difference it mad econometrically. I didn't realize that if you took it seriously you had to rethink the whole question of testing and estimation. I guess no one else did either, except for Muth."

"Herbert A. Simon... was rightly complaining about some, if not a lot, of the economic literature at the time that he was moving away from economics. I have a couple of comments. I think a lot of the models that we have now, with the dynamics and the uncertainty, address a lot of the observations that were troubling Herb Simon. He is, by the way, a big proponent of positive economic methods."

"The great distinguishing mark of the common man is that he is helpless within the rules of the game as it is played in the twentieth century under the enlightened principles of the eighteenth century."

"But it is not usual to speak of the kept classes as the uncommon classes, inasmuch they personally differ from the common run of mankind in no sensible respect. It is more usual to speak of them as "the better classes," because they are in better circumstances and are better able to do as they like. Their place in the economic scheme of the civilized world is to consume the net product of the country's industry over cost, and so prevent a glut of the market."

"There are all degrees of this helplessness that characterizes the common lot. So much so that certain classes, professions, and occupations -- such as the clergy, the military, the courts, police, and legal profession -- are perhaps to be classed as belonging primarily with the vested interests, although they can scarcely be counted as vested interests in their own right, but rather as outlying and subsidiary vested interests whose tenure is conditioned on their serving the purposes of those principal and self-directing vested interests whose tenure rests immediately on large holdings of invested wealth."

"But the gravest significance of this cleavage that so runs through the population of the advanced industrial countries lies in the fact that it is a division between the vested interests and the common man. It is a division between those who control the conditions of work and the rate and volume of output and to whom the net output of industry goes as free income, on the one hand, and those others who have the work to do and to whom a livelihood is allowed by these persons in control, on the other hand. In point of numbers it is a very uneven division, of course."

"So also it is plain that national pretensions in the field of foreign trade and investment, and all the diversified expedients for furthering and protecting the profitable enterprise of the vested interests in foreign parts, run consistently at cross-purposes with the keeping of the peace."

"But the kept classes also comprise many persons who are entitled to a free income on other grounds than their ownership and control of industry or the market, as, e.g., landlords and other persons classed as "gentry," the clergy, the Crown – where there is a Crown -- and its agents, civil and military. Contrasted with these classes who make up the vested interests, and who derive an income from the established order of ownership and privilege, is the common man. He is common in the respect that he is not vested with such a prescriptive right to get something for nothing. And he is called common because such is the common lot of men under the new order of business and industry; and such will continue (increasingly) to be the common lot so long as the enlightened principles of secure ownership and self-help handed down from the eighteenth century continue to rule human affairs by help of the new order of industry."

"The income which goes to these subsidiary or dependent vested interests is of the nature of free income, in so far that it is drawn from the yearly product of the underlying community; but in another sense it is scarcely to be counted as "free" income, in that its continuance depends on the good will of those controlling vested interests whose power rests on the ownership of large invested wealth.Read more at location 2162"

"But the divine right of national self-direction also covers much else of the same description, besides the privilege of setting up a tariff in restraint of trade. There are many channels of such discrimination, of diverse kinds, but always it will be found that these channels are channels of sabotage and that they serve the advantage of some group of vested interests which do business under the shelter of the national pretensions. There are foreign investments and concessions to be procured and safeguarded for the nation's business men by moral suasion backed with warlike force, and the common man pays the cost; there is discrimination to be exercised and perhaps subsidies and credits to be accorded those of the nation's business men who derive a profit from shipping, for the discomfiture of alien competitors, and the common man pays the cost; there are colonies to be procured and administered at the public expense for the private gain of certain traders, concessionaires and administrative office-holders, and the common man pays the cost. Back of it all is the nation's divine right to carry arms, to support a competitive military and naval establishment, which has ceased, under the new order, to have any other material use than to enforce or defend the businesslike right of particular vested interests to get something for nothing in some particular place and in some particular way, and the common man pays the cost and swells with pride."

"And it is a divine right of the nation to use its discretion and offset this inordinate efficiency of its common stock of knowledge by adroitly crippling its own commerce and the commerce of its neighbors, for the benefit of those vested interests that are domiciled within the national frontiers."

"At home in America for the transient time being, the war administration has under pressure of necessity somewhat loosened the strangle-hold of the vested interests on the country's industry; and in so doing it has shocked the safe and sane business men into a state of indignant trepidation and has at the same time doubled the country's industrial output."

"He knows, of course, that the profits of business go to the business men, the vested interests, and to no one else; but he is still beset with the picturesque hallucination that any unearned income which goes to those vested interests whose central office is in New Jersey is paid to himself in some underhand way, while the gains of those vested interests that are domiciled in Canada are obviously a grievous net loss to him. The tariff moves in a mysterious way, its wonders to perform."

"So long as industry is managed with a view to a profitable price it is quite indispensable to guard against an excessive rate and volume of output. In the absence of all businesslike sabotage the productive capacity of the industrial system would very shortly pass all reasonable bounds, prices would decline disastrously and overhead charges would not be covered, fixed charges on corporation securities and other credit instruments could not be met, and the whole structure of business enterprise would collapse, as it occasionally has done in times of "over-production." There is no doing business without a fair price, since the net price over cost is the motive of business. A protective tariff is, in effect, an auxiliary safeguard against overproduction. Incidentally the fact that its imposition does not result in insufferable hardship serves also to show that the new order of industry is highly productive, quite inordinately productive in fact."

"Already the vested interests are again tightening their hold and are busily arranging for a return to business as usual; which means working at cross-purposes as usual, waste of work and materials as usual, restriction of output as usual, unemployment as usual, labor quarrels as usual, competitive selling as usual, mendacious advertising as usual, waste of superfluities as usual by the kept classes, and privation as usual for the common man."

"All these peoples that now hope to be nations have long been nationalities. A nation is an organization for collective offence and defense, in peace and war, -- essentially based on hate and fear of other nations; a nationality is a cultural group, bound together by home-bred affinities of language, tradition, use and wont, and commonly also by a supposed community race, -- essentially based on sympathies and sentiments of self-complacency within itself."

"They are apparently moved by a feeling that so long as the established arrangements are maintained they will come in for a little something over and above what would come to them if they were to make common cause with the undistinguished common lot. In other words, they have a vested interest in a narrow margin of preference over and above what goes to the common man. But this narrow margin of net gain over the common lot, this vested right to get a narrow margin of something for nothing, has hitherto been sufficient to shape their sentiments and outlook in such a way as, in effect, to keep them loyal to the large business interests with whom they negotiate for this narrow margin of preference."

"As is true of the divine right of kings, so also as regards the divine right of nations, it is extremely difficult to show that it serves the common good in any material way, in any way that can be formulated or verified in terms of tangible performance."

"By use and wont, in the Liberal scheme of statecraft as well as in the scheme of freely competitive business, implicit faith has hitherto been given to the remedial effect of punitive competition and the punitive correction of excesses by law and custom. It has been a system of adjustment by punitive afterthought. All of which may once have been well enough in its time, so long as the rate and scale of the movement of things were slow enough and small enough to be effectually overtaken and set to rights by afterthought. The modern -- eighteenth-century -- point of view presumes an order of things which is amenable to remedial adjustment after the event. But the new order of industry, and that sweeping equilibrium of material forces that embodies the new order, is not amenable to afterthought. Where human life and human fortunes are exposed to the swing of the machine system, or to the onset of national ambitions that are served by the machine industry, it is safety first or none."