Economics: The User's Guide

This is my 3rd read for Ha Joon Chang, highly recommend his books, especially this one in case you want to learn how to navigate economics, while maintaining a balanced and nuanced approach

Being a fan of his prior work, I was excited to see that Dr. Chang has written a book on general economics. For better or for worse, the book lived up to its name. This book initially felt to me like the manual that comes with a new gadget that you should really read before using it, but you put it away because the manual has way too many steps and words. The book begins with a detailed discussion on basic concepts like capitalism, money, monopoly, and proceeds to cover different schools of economic thought. Unlike his prior books, it did feel like I really needed to take notes along the way to keep up with the broad scope and depth of the book. I probably got on and off the book several times before I got into it enough to actually finish the book. But just like reading a manual is often times worth the effort and gives you a better sense of how to property use your gadget, the broad and detailed discussions of the book are definitely worth the read. In ways that perhaps only he can provide, Dr. Chang gives readers an alternative take on many of the concepts that mainstream economics or the media doesn’t talk much about, even in mundane subject like the definition of GDP. Perhaps it shouldn’t be too surprising given his background and his prior works that Dr. Chang would provide a different view on things than mainstream economists. However, it did feel like in many parts of the book that things were a bit biased and unjust in that alternative views and interpretation of the evidence was not provided enough, especially in discussing things outside his area of expertise. For example, in discussing ow the “unholy alliance” between short-term investors and professional managers have reduced the ability of corporations to make long-term investment, Dr. Chang cites evidence that the largest US companies now payout 94% of their profits to shareholders compared to 35 to 45% in the decades past. While this is true, the book fails to mention that the percentage of publicly traded firms distributing their profits via dividends or share repurchases has actually gone down over the years. So in recent decades, the payouts are more concentrated in the largest and most mature firms while other firms are more likely to retain profits. One could argue that this is exactly what you would want in an efficient economy where the profits of the old and mature companies to get redistributed to younger firms with more potential, and may have nothing to do with the markets becomes more short-term oriented. This is one of many places in the book where more balanced view would have helped the “users” to see a broader picture. But ultimately, the biases in the book is what makes this an interesting read, and I would not hesitate to recommend this book to anyone interested in delving a little bit deeper into some of the common issues in economics.

I bought a used good copy of this book. It arrived in way better condition then I thought pages were good condition, and only minor smudging on the surface

Ha-Joon Chang's "User Guide" is an accessible, engaging resource for anyone wanting to see the big picture in the complicated universe of economics. Also, the book layout, notes, and index make it an essential addition to any personal reference library. I share with some of the other comments from other readers that I wish I had read this as an undergraduate Econ major forty-plus years ago. The author analyzes vital concepts and the ABCs of economic theories, their strengths, and weaknesses in real-world settings. Chang also addresses the inseparability of economics and policy with their profound social implications, for example, the Pareto criterion about the "greater good." For a comprehensive understanding of the subject, this book is a must-read. However, a baseline of economic coursework (which everyone should have!) will be helpful for a greater appreciation. It is an excellent starting point for individuals seeking to broaden their understanding of the massive field of economics and its relevance to our lives.

I cannot praise Mr. Chang's latest work enough to show how much I appreciate his work in explaining today's economics and how it is ruining this country. I found chapter 8, so far, to the most succinct and lucid explanation of why this USA is failing most of the people. Chapter 8 draws together so many similar but condensed revelations on how the financial portion of the US has failed us all. I especially appreciate his bringing to the fore one of the reasons why the US is failing in the STEM disciplines. Too many very intelligent people have been lured into the world of high finance because of unjustifiable payments. I appreciate Mr. Chang's book so much that I am purchasing a copy for each of my five adult children. Since they all had the good sense and fortune to stay out of that world of financial gimmickry, the book should serve them well.

This book is specifically written for those who understand the importance of the subject to their lives, but despair of ever grasping it in all its maddeningly technical and mathematical detail. Chang takes a subject-matter approach: he treats economics not as a theoretical construct but as a field of study of certain phenomena such as production, labor, markets, and so on. The book is organized by such subjects as well. It can get a little dense in spots, but most topics are headed by an italicized sentence that gives the "executive summary" of the discussion. I think the most important takeaway from this readable and winsome work is Chang's insistence that the purpose is not to convince you that one school of economics had all the right answers - he doesn't believe this himself. The purpose is to help you understand enough about the different ones to see what is better or worse about each of them, their power and their limitations, what they treat and what they leave untreated. All in order that readers may decide for themselves what economic tools have the best chance to promote the kind of world they want to live in.

In a footnote, Chang calls Herbert A. Simon "the last Renaissance Man," and this suggests some comparisons between Chang and Simon. In particular, they are both empiricists who believe in looking at human behavior via a heterogeneous array of local models, rather than a grand unified theory. Chang goes as far, in this book, as saying that Economics is not a science and cannot be separated from politics and history. He presents thumb-nail sketches of the major theories, their assumptions, their political and moral commitments, and their strengths and weaknesses with respect to specific economic issues. He offers plenty of snarky comments about economists' pretensions and shortcomings (quoting Galbraith, for example, to the effect that economic forecasts make astrology look respectable), but the overall effect is far from dismissive of Economics as a discipline. Instead, the reader can be expected to come away with deeper insights into economic issues and greater respect for leading thinkers in this field. The most refreshing aspect of the book, to me, is the continual return to "real-world data." It's odd to notice that mainstream Economics often seems to decouple its scientific pretensions from any concern for real-world data (a point that Herb Simon was fond of making).

I’m a fan of Ha-Joon Chang, a “heterodox” economist who has made a name for himself by pointing out the drawbacks to orthodox economics. Chang is not exactly an outsider (he’s a Reader — equivalent to an American associate professor — at Cambridge), but his critique of mainstream economics gives outsiders useful insights that might protect them from over reliance on overly formal (and thus mainly useless) models. Peter Boettke claims (with cause) that “mainstream” economics left the path of “mainline” economics after World War II, when mathematical economics rose to dominate the field. This resort to “mathterbation” has, IMO, weakened the discipline by making most research both inaccessible to lay readers and inaccurate in terms of “findings” (read Skidelsky). Such weaknesses explain why experimental, behavioural and institutional economics have grown so quickly in the past 20-30 years — mainstream economics just doesn’t help with important questions or facts. I downloaded this book on the prodding of one of my students as well as my own curiosity. I wanted to read a book that “gives us the tools we need to understand our increasingly global and interconnected world often driven by economics.” The short answer is that it does not. Chang's book is not going to be helpful to the average reader with little knowledge of economics as Chang’s method of listing many schools of economic thought (before discussing the pros and cons of each school) will leave most readers confused. Worse, in my opinion, is that Chang oversimplifies — often to the point of caricature — complex sets of ideas that few economists buy into 100 percent. Chang, in other words, is battling with paper tigers in front of an audience that may not know what a real tiger looks like, and without the realities that a real tiger-fighter might need to consider. In my review of Freakonomics, I say that that book presents a series of entertaining “just so” stories that will be good for cocktail conversation but counterproductive to anyone seeking to understand how economists think. Chang’s book has the same problem but for different reasons. Freakonomics fails because it puts too much weight on case studies. Chang fails (in terms of educating readers) because he puts too much weight on theoretical quibbles. My advice here is the same as there, i.e., that readers seeking to understand the economic way of thinking read Economics in One Lesson [free download]. Putting that heavy remark aside, I DO recommend this book to graduate students in economics seeking a quick and dirty overview of the various schools of thought and how they overlap and contradict with each other. I would advice they read it AFTER reading Heilbronner’s Worldly Philosophers because his “history of economic thought” explains how the current schools emerged. After reading these two books, it makes a lot of sense for those students to read primers or handbooks in each school as a counterpoint to the neoclassical (often more mathematical than useful) perspective they might get from Mas Colell, Whinston and Green — the doorstopper we used in graduate school that was as rigorous as it was useless. I would NOT recommend this book for non-economics gradate students because they will walk away with the (mistaken) opinion that “economists can’t agree on anything, so I can ignore economic thinking and make up my own version of human behaviour.” For those students, I would recommend Heilbronner (to see the depth and evolution of economic thinking) in combination with a course in microeconomics (to understand why demand slopes down), with a finisher looking into the economics of non-market goods. (I’ll be reviewing Ostrom et al.’s book on common pool resources soon!) For readers looking for more detailed criticisms, I’ll give only a few because I make over 70 notes in the text and don’t want to bore all of us with so many details. Early on, Chang notes that Europe’s GDP grew by less between 1000 and 1500 than China’s did between 2002 and 2008, but this measure of “material progress” (growth) misses much of what people care about (development). I doubt that any historian would agree that Europe did less in 500 years as China did in six (read this). Chang is a “macro guy” and Keynesian from South Korea, so he’s clearly got a different perspective from me (a micro guy and institutionalist from California), but I found myself constantly amazed by his oversimplified explanations for large scale events (e.g., how declining colonialism lead to World War I or that “Soviet industrialization was a big success… due to its ability to repel the Nazi advance”). In these cases — and many more — I had counter examples to his claims. That doesn’t matter in terms of who’s wrong or what school is right, but it indicates a deeper problem: Chang’s habit of oversimplifying in ways that cannot be generalized (the same problem that Freakonomics had). This may be my perspective as a “micro foundations” guy, but Chang is the one who needs to substantiate (or more carefully state) his claims, and his lack of caveat or rigour undermines both those claims and the rest of his “reasonable perspective.” I would have loved to read more of Chang’s insights into South Korea’s development as an competitive exporting economy led by conglomerates under a military dictatorship, but that discussion was not in this book (perhaps it is in others). That said, his summary of economic policies in the Reagan years is a shallow and partial caricature that leaves out the importance of higher interest rates in reducing inflation and the role of trade (including imports of Korean cars!) in producing America’s Rust Belt. It was frustrating to miss so many important facts (and perhaps even economic policies!) in those discussions. I could go on, but I’ll stop. Bottom Line I give this book THREE STARS because it does not “explain how the global economy actually works--in real-world terms” (and so on), but instead offers a series of mini critiques on economic thought that would be useless — or misleading — to the average reader. I recommend that anyone interested in a quick and entertaining summary of Chang's main message watch this 11 minute RSA video.