Big Ideas in Macroeconomics -- A book review

4 September 2014

A very good book. To read. Detailed, learned and thorough. Also deeply flawed.

The first problem is tone. It’s a book that reads like a catechism of a minor cult, spending more time trying to answer objections from more established religions than actually making a point. Athreya keeps mixing up his roles, he’s the teacher but he’s also the evangelist. Every few pages the teaching is interrupted by yet another zealous sermon answering unasked questions of very marginal connection to what is being taught. Reminds me of econ grad school.

Chapter 4 is where the tonal problems are greater. No sooner has Athreya explained, brilliantly, what the limits and the merits of aggregation are that he jumps on the pulpit. Modeling heterogeneity, he says, brings inevitably to eugenics-lite: blaming poor people for being lazy, profligate and of the wrong race. It is the rethorical flourish of the true believer, speaking more about the preacher than the scripture.

In this book there is a smaller, better book waiting to be extracted. A clear, concise guidebook for 1st year grad student to read whenever they get lost. This would be good. Very good. Grad student burnout is real and terrible and this could help. But the author just keeps wasting time on political statements that make no sense. If you say that debt forgivness hinders credit markets, unemployment benefits create unemployment, government is time inconsistent and that bubbles can never be identified you can’t just turn around, 320 pages in, and say macroeconomics doesn’t support lassez-faire. If you strawman every critic and outside voice you can’t then complain people critical to your point of view haven’t paid enough attention. Write the scout handbook or write the J’accuse, but not both.

The second problem is scope. For a book about macroeconomics there is very precious little of it. Again, just like econ grad school. Where is inflation? What do central banks do? Is unemplyoment only frictional or caused by social security? What about trade and exports? Topics like sticky prices and monopolistic competition get 2 pages before being promptly dismissed as bunk. Money is mentioned only once to showcase overlapping-generation models. Not a word on government expenditure or austerity.

If this book had been called “big ideas in micro-economics”, would the content have changed at all?