Winter brain food

Judging by temperatures over Christmas, we'll be spending more than a few evenings huddled around the wood stove this winter.

Judging by temperatures over Christmas, we’ll be spending more than a few evenings huddled around the wood stove this winter.

It’s a great opportunity to catch up on the latest in economics, especially if econo-scrooges in your family didn’t give you any Adam Smith for Christmas.

Last year provided a bumper crop of the best kind of economics: insights into human behaviour, rather than the boring graphs we suffered through in Economics 101.

The financial crisis was the big story. We won’t know for years – and economists won’t agree about it anyway – on how the crisis will turn out. But there are some great reads on how it all got started.

The Big Short by Michael Lewis is the place to start. He’s the London School of Economics grad who wrote the classic and highly entertaining Liar’s Poker describing his time as a Salomon Brothers bond trader in the 1980s.

Liar’s Poker was a searing critique of Wall Street, but as Lewis points out, too many young bankers took it to be a “how-to manual” instead.

All of which allows Lewis to put the recent crisis in revealing perspective and in clear English, so that you can actually understand how people made (and lost) billions in MBSs, CDOs and other infamous acronyms. But best of all, he tells a fascinating narrative of the quirky outsiders who figured out how to bet against the herd and “short” the housing market and make fortunes in the process. Hence The Big Short’s title.

More Money than God: Hedge Funds and the Making of a New Elite by Sebastian Mallaby is another fascinating read.

It also tells the stories of a group of outsiders who challenged conventional thinking on topics as diverse as investment strategies, incentives and how to organize a business. The fact they became absurdly rich doing it adds spice to the story, as does the fact most of the rest of the world have blamed them, at one point or another, for almost every economic malady you could think of.

Finally, on a lighter note, put Soccernomics on your list. The 2010 paperback edition was lent to Yukonomist by a soccer-loving Whitehorse journalist and is a fun read.

Financial Times columnist Simon Kuper and economics professor Stefan Szymanski use statistics to systematically take apart soccer’s most cherished myths.

They also chronicle the improbable rise of Olympique Lyonnais. New managers took this team from provincial obscurity to seven successive national championships, a European record, using statistical analysis to find undervalued players other teams wanted to trade. This will sound familiar to those who read Moneyball, one of Michael Lewis’s earlier books, which told a similar story about baseball’s Oakland A’s.

Good economics also penetrated television in 2010, which is a good thing since the idiot box has done even more than traditional Economics 101 to give the profession a bad name. Instead of watching economists flounder as they try to explain the trade deficit in fifteen second sound bites on the nightly news, now you can enjoy The Ascent of Money by Niall Ferguson. The four-part PBS series, based on the book of the same name and available on DVD, tells the story of money from its earliest days to the financial crisis. Ferguson connects the dots between history and the financial world, from the Incas to how the British used their bond market to persistently outspend larger and richer France during the great wars of the 18th century.

The history of Canada might be different if Louis XV had been able to afford a bigger fleet in 1759.

And no 21st century literature scan would be complete without podcasts. Yukoners can thank Steve Jobs for making it possible to listen to economics while chopping wood or driving the truck home from the moose hunt.

Planet Money, by National Public Radio, is superb.

In 2010, it partnered with ProPublica on a deep investigative piece in the same territory as The Big Short. The result was a revealing – and alarming – piece called Inside Job on how hedge funds and bankers conspired to game the real-estate-finance market. Their firsthand reporting from an aid project in Haiti was also fascinating, as was their attempt to illustrate the global trade system by tracing the source of the cotton in their T-shirts back to the farm it came from. Best of all, they eschew jargon and keep their commentary snappy and insightful.

The Economist’s podcasts are also worth downloading. The magazine continues to be the gold standard for thoughtful, fact-based reporting on financial topics, and their podcasts are a worthy extension of the brand.

Finally, for readers who get through everything above, there’s a new biography of Adam Smith by Nicholas Phillipson. Robert Skidelsky, author of a magisterial three-volume biography of economist John Maynard Keynes, calls this page turner “a feast of both writing and erudition.” Adam Smith: An Enlightened Life has won kudos from The Atlantic, The New Yorker and the Wall Street Journal.

Yukonomist hasn’t read this one yet, but if Skidelsky’s 1,844 pages on Keynes are any guide, then even the Yukon winter may not be long enough.

Keith Halliday is a Yukon economist and author of the Aurore of the Yukon series of historical children’s adventure novels.