Chapter 1 — Further Reading

The chapter introduced four foundational ideas. Each has a substantial literature behind it, much of it accessible to a beginner. Below are sources we recommend if you want to go deeper. Each entry includes a short note on what the source is and why it is worth your time.

Books on the economic way of thinking (general)

Charles Wheelan, Naked Economics: Undressing the Dismal Science, W. W. Norton, 2019 (3rd edition) A genuinely fun introduction to economic thinking that does most of what this textbook does, in a more conversational format and at half the length. If you find a chapter of our book too dense, Wheelan's chapter on the same topic might unstick you. Highly recommended.

Tim Harford, The Undercover Economist, Random House, 2005 Harford writes the Financial Times' "Undercover Economist" column and hosts the BBC podcast More or Less, which is a model of how to do public economic literacy honestly. This book applies economic thinking to coffee shops, supermarkets, used cars, and other everyday situations. Light, smart, persistent.

Steven Landsburg, The Armchair Economist, Free Press, 1993 (revised 2012) A classic from a more libertarian-leaning economist. Some of the politics will not appeal to all readers, but the chapter on incentives ("Why Movie Theaters Charge a Premium for Popcorn") is one of the best short introductions to incentive thinking in print.

Russ Roberts, The Choice: A Fable of Free Trade and Protectionism, Pearson, 2007 A short fictional dialogue about international trade between the spirit of David Ricardo and a contemporary American manufacturer. Not strictly about Chapter 1's topics, but a model of how economic thinking can be presented through narrative — and a useful preview of Chapters 3 and 9.

On opportunity cost specifically

Frédéric Bastiat, That Which Is Seen, and That Which Is Not Seen, 1850 The original essay on what we now call opportunity cost. Bastiat, a French economist and politician, told the parable of "the broken window" — a young boy breaks a baker's window, and a passerby argues that it's actually good for the economy because the baker has to hire a glazier, who buys bread, etc. Bastiat patiently explains the fallacy. The whole essay is online for free; it's about 30 pages and remains the clearest statement of why "stimulus from destruction" is wrong. (Available at fee.org and other archives.)

Robert Frank, "Why Is Cost-Benefit Analysis So Controversial?" Journal of Legal Studies, 2000 A deeper academic look at how opportunity cost gets applied in policy debates and why people sometimes resist the framing.

On marginal thinking

Alfred Marshall, Principles of Economics, 1890 The book that introduced the marginal revolution to a wide audience and that defined the shape of economics teaching for over a century. Long, but the introductory chapters are surprisingly readable for a 19th-century textbook.

Daniel McFadden's Nobel Lecture, "Economic Choices," American Economic Review, 2001** McFadden won the 2000 Nobel Memorial Prize for work on discrete choice models — how to mathematically model situations where people choose among discrete alternatives at the margin. The Nobel lecture is technical in places but the framing of how marginal thinking applies to real choices is excellent.

On incentives and unintended consequences

Steven Levitt and Stephen Dubner, Freakonomics, William Morrow, 2005 The book that made "incentives matter" famous in popular culture. Some of the empirical claims have been criticized (the abortion-and-crime chapter especially), but the basic framing — that people respond to incentives in surprising ways and that economists' job is to find the surprises — is the best popular treatment available.

Lucas W. Davis, "The Effect of Driving Restrictions on Air Quality in Mexico City," Journal of Political Economy, 2008 The empirical paper that documented the failure of Mexico City's Hoy No Circula policy. Technical in places, but the introduction and conclusion are accessible to a beginner. This is a model of how careful empirical work can show that a sensible-sounding policy didn't work as expected.

Sam Peltzman, "The Effects of Automobile Safety Regulation," Journal of Political Economy, 1975 The original "Peltzman effect" paper. Peltzman argued that mandatory seatbelt laws had not reduced traffic deaths as much as expected because drivers compensated by driving more aggressively. The empirical finding is contested, but the principle — risk compensation as a response to safety devices — is well-documented in many other contexts. Worth reading the original.

On the limits of the economic way of thinking

Amartya Sen, Development as Freedom, Anchor Books, 1999 Sen, the 1998 Nobel laureate, argues that human well-being should be evaluated in terms of capabilities (what people are able to do and be) rather than just in terms of consumption or income. The book is a serious challenge to the "everything reduces to economics" view that some economists hold, written by an economist. Required reading if you want to understand the boundaries of the economic lens. We will revisit Sen in Chapter 38.

Michael Sandel, What Money Can't Buy: The Moral Limits of Markets, Farrar, Straus and Giroux, 2012 A philosophical critique of the tendency to use markets and economic analysis for things that — Sandel argues — should not be commodified. Not anti-economics, but pro-thinking-carefully-about-what-economics-should-and-should-not-decide.

Esther Duflo, Economist as Plumber, Yale University Press, 2017 A short essay by the 2019 Nobel laureate (with Banerjee and Kremer) on what economics is good for and what it isn't. Duflo argues that economists should think of themselves as plumbers — fixing specific problems with specific tools — rather than as engineers designing whole systems. The framing is humble and useful.

On positive vs. normative

Milton Friedman, "The Methodology of Positive Economics," 1953, in Essays in Positive Economics, University of Chicago Press The classic statement of the positive-vs-normative distinction by one of the 20th century's most influential economists. Friedman argues that economics as a science should focus on positive predictions and treat normative debates as separate. The essay has been criticized — many later writers have argued that Friedman's positive-normative wall is harder to maintain in practice than he claims — but it is the document everyone in the methodology debate is responding to. About 40 pages.

Podcasts and ongoing literacy

Tim Harford, More or Less, BBC A weekly half-hour podcast on the use and misuse of statistics in public life. Excellent for developing critical reading of economic claims. Harford is honest, funny, and unsparing about bad statistics regardless of which side they support.

EconTalk with Russ Roberts, Hoover Institution A weekly long-form (1+ hour) interview podcast about economics. Roberts is a thoughtful conservative economist whose interview style emphasizes humility and disagreement-friendliness. The archive is enormous and includes interviews with Nobel laureates from across the ideological spectrum.

Planet Money, NPR A more entertainment-style podcast about economics in the news, often built around a particular story or character. Good for hearing how working economists talk about real problems.

Online resources

Khan Academy — Microeconomics and Macroeconomics Free video lectures and exercises that cover most of what's in this textbook (plus more). If you find any chapter of this book confusing, watching the corresponding Khan Academy video as a second pass is often helpful.

MRU (Marginal Revolution University) Free video lectures by economists Tyler Cowen and Alex Tabarrok, organized as semester-length courses. The introductory micro and macro courses cover most of this textbook's territory and are clear, friendly, and short-form.

FRED (Federal Reserve Economic Data) Not a reading source per se, but the most important free data source for economic education. fred.stlouisfed.org. Familiarize yourself with it now; you will use it in every chapter from here forward.

The IGM Forum at the University of Chicago Ongoing surveys of top economists about contested questions. Useful for finding out what professional consensus actually looks like (and where it doesn't exist). Cited frequently in this textbook.

A reading order recommendation

If you have time for only one of the books above before continuing to Chapter 2, read Wheelan's Naked Economics (especially Chapter 1, which covers the same ground as ours in a different voice).

If you want a serious look at the limits of economic thinking, read Sen's Development as Freedom (introduction and first three chapters).

If you want to develop the habit of fact-checking economic claims, subscribe to Tim Harford's More or Less podcast.

You don't have to do any of this to keep reading the textbook. Chapter 2 awaits you whenever you're ready.