This is a great book,
and given the post financial crisis criticisms of mainstream economics it is
relevant and timely. It is also accessible and easy to read for anyone
interested in how economists actually think and work, rather than the stereotypes
of unrealistic assumptions and ideological biases typically found. Most of the topics
would be understood by interested non-economists, and be particularly useful for
people who are unclear about how economics progresses by developing new models that
generally complement, not replace, older ones.
The first part of the
book explains economic thinking, and the role of the models that economists use.
The basic idea is that there are many valid models, and the challenge is to
know which is applicable to a specific problem or issue. This is the main point
of the book and is a message worth repeating: different models have different
applications, there are no wrong models, only badly and inappropriately applied
models. Rodrik thus regards contemporary economics as a
collection of models, not as single grand theory (or a quest for one). The
economist’s craft lies in knowing which model is appropriate to the task at
hand.
Another important point is that all
the big, ultimate answer type models have proved to be disappointing when
confronted with economic conditions they do not incorporate. Thus Keynesian
models didn’t work in the 1970s with stagflation, and new classical models led
to the 2007 financial crises and had little to contribute to policy responses. It
is not necessary to discard these models, but there are others that are more
appropriate for the circumstances. There are a number of good examples of how
this works in practice.
Rodrik’s writing
style explains things in a way that is both illuminating and sensible. There
were moments when I found myself seeing economics from a new perspective, something
that does not happen often, and there were many new ideas I hadn’t come across
before. Also, there was nothing I disagreed with, despite the book’s wide
scope and the range of topics covered. I recommend it to anyone interested in
economic policy, or economic theory.
Rodrik’s blog page is at http://rodrik.typepad.com/dani_rodriks_weblog/
A video of him presenting the ideas
in Economics Rules is at https://www.youtube.com/watch?feature=youtu.be&t=29m&v=Yxbcb7hxZP0&app=desktop
