Nov

30

Modern Principles: Microeconomics by Tyler Cowen and Alex Tabarrok is very modern, very much based on incentives, and the wisdom of markets, and has numerous interesting economic examples and anecdotes. It is well worth reading. I understand it is part of a two part series, the second being macroeconomics. The book is well worthwhile, especially for a non-economist or one who is trying to brush up, or who wants something a bit more technical than Heyne but without any mathematics. The chapter on the stock market is a bit weak however, mainly relying on efficient markets, because for every buyer there is a seller, and it is wrong to think that either group is on average wrong.

A typical example from the book is the British captains who once they were paid for arrivals in Australia from Liverpool, landed 98% of the convicts safely whereas before they were paid by number of passengers embarking from Liverpool, and the survival rate was only 60%.


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4 Comments so far

  1. Glork on December 2, 2009 3:56 pm

    Er, how is the passenger anecdote “a typical example” of the stock market chapter overrelying on efficiency markets?

  2. vniederhoffer on December 2, 2009 6:26 pm

    Yes, they start the book with the captain example. Has nothing to do with efficiency. Just out of order. Sometimes one is hurried too much. vic

  3. Etl World News | Assorted links on December 2, 2009 8:09 pm

    […] 3. Victor Niederhoffer reviews Modern Principles: Microeconomics. […]

  4. vniederhoffer on December 4, 2009 1:15 am

    My review of the book is in an incipient stage. There are so many good things about the book, that it is inappropriate to just cite the lackluster chapter on stocks. Their chapter 5 on the market as an embedded signaling and incentive system is one of the most beautiful chapters on the invisible hand ever written, and it is worthy of rounds of gold coins thrown at them. It's that good. The examples, and the extensions that they give in every chapter make this an exceptionally entertaining and enlightening book, that should be on everyone's shelf. vic

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