Tyler Cowen linked to a new blog by Chris House:
My guess is that the important insights of these earlier contributions have been, more or less, adequately incorporated into modern textbooks. I’m fairly sure that few modern biologists read Darwin’s original Origin of Species, and even fewer modern mathematicians read Euclid’s Elements. If you want to have a good understanding of modern geometry and number theory, you should simply read a good college-level mathematics text on the subject. The same holds for the study of evolution. As great as Darwin’s contribution was, our modern understanding of evolution now eclipses his. This is the reason behind my casual dismissal of the idea of reading the original General Theory. If you want a good understanding of these ideas, you are better served by consulting say Mankiw’s intermediate-level Macroeconomics than by reading Keynes or Hicks. For a somewhat more advanced treatment, you can take a look at Chapter 10 in Blanchard and Fisher (1989).
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I could of course be completely wrong. I recall Christy Romer saying that her decision to spend one of her summers in graduate school reading Friedman and Schwarz’s A Monetary History of the United States was one of the best decisions she ever made. In a course on the history of thought, or on the rhetoric of economics, I would expect the students to read selections of the originals. And, of course, there are ideas in the earlier works that are poorly understood, underappreciated or simply forgotten. Remember though, there is a probably a reason these ideas were not incorporated into the contemporary narrative of economics.
I’m in no position to give grad students advice, as I’m a bit out of touch with modern econ programs. But I will say that whatever modest success I’ve had with this blog is mostly due to my reading of economic history and the history of thought—two fields that I believe are closely intertwined. A few examples:
1. I found that the macro environment during the interwar years is much more interesting than post-WWII, mostly because the government did all sorts of wild and crazy policy experiments. What if the world’s central banks sharply raised their gold reserve ratios, and depressed the global money supply? What if the US devalued the dollar sharply and unexpectedly during a period of zero interest rates and 25% unemployment? What if the government suddenly and unexpectedly ordered all firms to raise their nominal hourly wage rates by 20%? All three of these experiments occurred in just a 5 year period. Yes, the macro data wasn’t quite as good back then, so economists looked at how asset prices responded to policy shocks—which is the right way to do it in any case!
2. The interwar economists saw this stuff going on and the results helped inform their policy views. It turns out that there are many ways of thinking about the macroeconomy, which is almost infinitely complex. Consider the identification problem for monetary shocks, which still hasn’t been solved. Should monetary policy be thought of in terms of the price of money (Mundell) the quantity of money (Friedman) or the rental cost of money (Keynes)? During the interwar years many economists thought of policy issues using a very different mental framework from what economists use today. And I would argue that researchers familiar with these alternative perspectives (Christy Romer, Robert Hetzel, David Glasner, etc.) tended to have more useful things to say about the recent crisis than those who were not.
Modern macro seems to have a certain methodological homogeniety, with the DSGE approach being particularly popular. Even if it is the best single approach (and I’m not convinced it is) it still might be better for the field if researchers tried all sorts of different approaches so that they would be better prepared for crises like 2008. We are like a city of 10 million clones where no one has immunity to bird flu. Nick Rowe has a new post showing that from a certain perspective the New Keynesian (interest rate oriented) way of thinking about the world is really strange, and yet almost everyone thinks that way. Recall that many of our most famous macroeconomists had little to say about the failures of monetary policy in 2008-09, with Romer/Hetzel/Glasner, etc., being notable exceptions.
PS. It’s debatable as to whether the General Theory’s best ideas are incorporated into IS/LM-style textbooks. But even if they are, I would suggest students look at the Tract and the Treatise, which are better books. And then read Fisher, Cassel, Hawtrey, Pigou and the others.
PPS. Here’s a post on bubbles I did over at Econlog.