Six Economic Ideas that Changed the World
Over the summer, The Economist magazine published independent pieces on six big economic ideas that changed the world (or at least modern finance). These have now been collected into a a single brief. Economic students will recognize many, but these should be read by anyone interested in why markets work (or don’t work) in unexpected ways.
Among the best are the classic essay on Information Asymmetry, of special interest to anyone buying a used car (the “Market for Lemons”), as well as an essay on the Nash Equilibrium, best known for both the film A Beautiful Mind as well as the fabled conundrum of the Prisoner’s Dilemma. Other essays seem even more relevant to the current moment, including the Minsky’s “financial-instability hypothesis” on the tendency for long periods of prosperity to sow seeds for an inevitable bust; or a examination of Keynesian fiscal stimulus.
And if the terms seem opaque, the Economist artfully connects them to the more practical side of life, pointing out that information asymmetry has application to modern day policy decisions such as banning credit scores from job applications to deciding how much to spend on (or whether to attend at all) college or graduate school. And if the practical topics don’t interest you, just name drop the, uh, Mundell-Fliming trilemma into your next social gathering, and you should soon have plenty of solo time to catch up on just about anything you want.