HN Books @HNBooksMonth

Basic Economics by Thomas Sowell.

Spent a few years trying to figure out how Help people without trying to force businesses to do what’s right.

Anytime I hear a new fiscal policy or laws idea I can usually figure out if it’s going to work or cause problems

https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465...

⬐ n0ot

I'll add Economics in One Lesson by Henry Hazlitt. It provides an introduction to economics from an Austrian point of view, and dispells many common economic fallacies. A big takeaway for me is that the consequences of policies, such as providing loans to certain groups of farmers, have consequences that we cannot forsee.

https://www.amazon.com/Economics-One-Lesson-Shortest-Underst...

⬐ lukas099

Knowledge and Decisions by the same is also a great book.

Hard to get better then Basic Economics by Thomas Sowell.

https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465...

⬐ jiscariot

Agreed. And Applied Economics after that. These books change the way you think.

I recommend reading Basic Economics from Thomas Sowell for more examples of how fixing prices and a centralized allocation of prices and resources is terribly inneficient and it backfires terribly bring misery to entire countries: https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465...

Thank you to user on Hacker News that suggested this book in a comment a few years ago. It was eye opening and one of the most important books I've ever read.

Read Basic Economics for a proper foundation.

https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465...

Well meaning redistribution leads to lack of motivation. Why should I work hard if I get paid the same mentality. Leading to shortages.

Cruel competition causes people to work hard to produce the most goods with the least resources. Leading to surplus. Meaning poor people have access to far more now. So much so that historically poor people whom were skinny are now as fat as old world rich people. as food has gotten absurdly cheap.

Absolutely.

This is a great primer for those completely unfamiliar: https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465...

https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465...

https://www.amazon.com/Applied-Economics-Thinking-Revised-En...

Those who do not understand Thomas Sowell[1] are doomed to wonder why reality never quite conforms to their conceits.

[1] https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465...

⬐ mnd999

I am not familiar with Thomas Sowell and realistically I'm not going to read his book to figure out why you cite him here. Could you at least give a hint?

⬐ smitty1e

Wisdom

⬐ namenotrequired

So, how and why does reality never quite conform to the concepts in the article?

⬐ smitty1e

The article outlines the conceited maps of man; the overarching conceit being: the territory can be conformed to some arbitrary map.

Not unlike the counterintuitive way I am telling you the truth, a positive thing, and getting modded down for it in this thread in the most punk-tacular fashion.

> Every year, we think that this cannot possibly continue, and every year it does.

> Until now. As covid and wildfire smoke have atomized us all into whatever living space we can afford, and into a grid of separate video boxes on a screen, the place as it was no longer exists. The forces that kept people here are temporarily gone. Through cratering rents San Francisco is finally proving to opponents of growth that supply and demand apply to housing too.

Intelligent people will twist themselves in knots trying to disprove basic economics. I see long threads on HN all the time of brilliant people convinced that supply and demand is just "far too simple" or "totally disproved" etc. etc.

This book is a classic https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465...

⬐ m463

A friend of mine once told me "Yes, the price of a house here is extremely expensive. But no matter what happens the prices might level off for a while, but they always resume and go up".

He told me that in 1994 and it has been true. Even with massive apple layoffs in 1995. And when the bubble burst in 2000. and the housing crisis.

I think people will move out of the bay area. But I think they will do it the way they always have - sell their house, cash out and retire elsewhere. The others will sit on their low prop 13 ponzi taxes and stay. And people will take their place because elsewhere winter sucks and humidity sucks and rain sucks and salaries suck and yes for some even their traffic sucks.

⬐ beambot

Winter, humidity and rain may be unappealing, but you know what's even worse: months on end of choking smoke & ash. If that's the new normal due to climate change, I think you'll see a lot of permanent displacement.

⬐ m463

Are you talking about washington or oregon? :)

(which had a half-dozen fires PLUS they get winter and rain and... )

⬐ elevenoh

Seattle / Portland / Vancouver do have notably better air quality

⬐ m463

Is it because the constant clouds filter the air? :)

⬐ elevenoh

Yet still far more sunshine hours than most western european countries :)

⬐ juniper_strong

Portland gets winter, but you can just stay inside that weekend.

⬐ closeparen

It’s usually the “supply and” part that people don’t believe; “demand” is less controversial.

⬐ rlanday

I’ve been trying to explain to YIMBY-type folks for years that while, yes, supply and demand are both important, it’s extremely rare that the price of an asset will crash due to increased supply. It’s almost always due to decreased demand. E.g. the price of taxicab medallions in New York did not fall because the government increased the number of medallions; it was because Uber and Lyft decreased the demand. People sometimes reply, “but that’s the same thing!” I don’t think it is though. Obviously if the number of available medallions went up, we might see a similar effect, but that’s not what actually happened: the political situation restricting the supply never went away.

⬐ runako

> extremely rare that the price of an asset will crash due to increased supply

The history of commodities such as crude oil and natural gas are potent counterexamples. For that matter, semiconductors fit the bill as well.

⬐ robotresearcher

and online music and movies, low-end smartphones, operating system software, ...

Is it extremely rare for supply to crush prices? Or is it more that we stop thinking about valuable things once they become super cheap commodities?

⬐ sumtechguy

This is usually comes from a confusion of upfront costs and ongoing.

For example a printing press. To use old tech as an example. The press itself is wildly expensive. So I will have to divide that price across all things I sell using that press. However once the press is paid off my marginal costs are little more than cost of paper, shipping it around, and paying someone to run/fix the press. Computer chips are made of silicon one of the cheaper materials to buy out there. The up front costs of setting up a foundry is akin to buying a printing press. An older tech foundry can still make marginal money as the big cost is already been paid for. Everything after is marginal.

⬐ rlanday

Books and computer chips aren’t really assets (unless they’re collectibles, I guess), they’re commercial products, so I’m not sure my argument really works.

⬐ sumtechguy

A large company would most certainly consider a computer an asset would they not? Until it is paid off and/or can no longer provide value to them?

Your argument is with medallions is mostly correct. They had an artificial constraint on an environment. With the artificial constraint they act like assets and not permits. However once a good that was equivalent showed up the value of the asset value did fall. A market will tend towards MR=MC (marginal rev=marginal cost). However in the medallion case the supply was artificially constrained. So a floor was created. This moves the price people are willing to pay up the demand curve instead of lower near the usually lower mr=mc spot. In this case as the population grew but the number of allowed taxis did not the price went up because demand went up but supply did not. Once another good showed up that demand curve changed as less people were willing to pay that amount as well as more supply. This is the madness of economics. The demand curve always changes.

Chips are mostly worthless because there are so many of them and better fab equipment exists and the capex of the machines to make them was paid off decades ago. So their depreciation is very quick (much like cars). Rarity does play into price as well. As some people do like the idea of owning a rare thing.

You also have part of it with your comment here. Assets rarely 'hold' value for a long term. If you do not move the value around your total monetary value will depreciate. The medallion case was an artificial constraint so the value rose because demand remained high enough. Once a new supply came in the real price showed up. Housing can act like this too in artificially constrained environments. Rent control, poor tax structures, poor zoning, etc can all cause this. If you get a situation where the owners work with the gov (medallions and the taxi commission and the cities) they will write laws to artificially constrain growth to limit their asset depreciation. That is usually called regulatory capture.

For these sorts of arguments I like to say 'if everyone suddenly had 1 billion dollars what would you pay for a loaf of bread?'. Most people would say '1-2 dollars'. But what about next week when the company realizes people will pay 1000 dollars for one? Would you still buy it? Would your friends? It usually shows that the demand curve is not static and value is a moving market in and of itself.

⬐ rlanday

Online music and movies: I think this basically all started with Napster which essentially allowed people to steal music instead of paying for it. That seems like a decrease in demand to me. I think an increase in supply in this context would be e.g. an increase in the amount of music and movies being produced.

Low-end smartphones: Apple’s charging record prices for its new iPhones so I don’t think the availability of low-end smartphones caused any sort of crash in the price of smartphones. Rather, it’s a new market category.

Operating system software: I’m not sure what you’re getting at here. The price of Windows has been relatively stable for decades despite the availability of free alternatives like GNU/Linux. Apple stopped charging separately for its OS and now essentially bundles a subscription into the cost of its hardware. I don’t think it’s ever been popular to charge separately for the operating system on mobile phones.

⬐ rlanday

Sure, the prices of oil and natural gas go down sometimes, or grow more slowly, because of increased supply, but let’s look at the graph of oil prices post-WWII:

https://www.macrotrends.net/1369/crude-oil-price-history-cha...

The first big crash was at the end of 1985/the beginning of 1986, which Wikipedia says was due to falling demand (e.g. people consuming energy):

https://en.wikipedia.org/wiki/1980s_oil_glut

There was a temporary spike in 1990 after Iraq invaded Kuwait. I guess you could argue that the price went back down because the supply changed.

There was a crash in 1997–1998 that was partially due to increased supply but also due at least in part to the Asian financial crisis. The next big crash was from June 2008 to February 2009, again due to a large financial crisis. There was another crash in June 2015-February 2016 due to a stock market crash in China, and finally we get to the massive crash this year driving futures prices negative, which was of course due to COVID-19 reducing demand for travel.

⬐ runako

The thing to keep in mind re: oil in particular is that a stable oil price is indicative of increases in supply to match the more or less continuous increase in demand over most of that period.

The big dislocations you cite obscure the fact that demand rose for most of the period, demand was rising. So another way to read the chart is that demand-weighted prices declined most of the time, with occasional spikes. Either way, you can see in the charts the increased supply effect of e.g. fracking being deployed widely in the price response.

One could also look back to 2008 to see the impact of increased supply on pricing of e.g. real estate.

⬐ rlanday

2008 was, again, a demand crash: a lot of people could no longer afford to pay their mortgages and speculators stopped buying properties under the assumption that they would be guaranteed to be able to resell them at a profit after a relatively short period of time.

⬐ ng12

What's the point? NYC could have issued more supply to reduce the price. The fact that they chose not to until the demand for them dropped has no bearing on the supply/demand relationship.

⬐ rlanday

> NYC could have issued more supply to reduce the price.

Not really, taxi medallion owners are a powerful special interest group. Just like Bay Area homeowners.

My other favorite YIMBY argument is that the Bay Area would have super cheap housing if only it were more like New York. New York has (had?) some of the most expensive housing in the entire world. Sure, there are zoning laws and regulations that could be changed to build even more housing, but the primary issue is not that New York has less housing than other parts of the country. To the contrary, the cheapest places to live in the US tend to be have the least dense housing.

The issue is that there are not a fixed number of people who want to live in a given area; if there were, every new unit built would allow someone else in the area to either not be homeless or to live with fewer roommates. Really what happens in practice in a high-demand city (conceptually, at least) is the additional supply causes prices to drop by some amount, which attracts new residents attracted by the drop in prices until the housing costs almost as much as it did before. So it’s definitely getting more crowded, with the associated problems, but the effect on housing prices is fairly small in comparison.

The fact that housing prices in the Bay Area create such a concentration of people who work in tech by driving everyone else out contributes to the region’s culture in important ways, some positively and some negatively. My favorite theory (from Date-onomics) is that this causes the local gender ratio to skew predominantly male, which causes the single straight men in the area (while this certainly does not describe the entire labor force, it describes a substantial portion) to work harder (both because they’re trying to stand out to attract a partner and also because they’re less distracted by dating).

⬐ closeparen

>is the additional supply causes prices to drop by some amount, which attracts new residents attracted by the drop in prices until the housing costs almost as much as it did before

This is a description of supply and demand, not some kind of trump card against it. Notice that more people are getting their preferences satisfied. That's the point.

⬐ ng12

> Not really, taxi medallion owners are a powerful special interest group. Just like Bay Area homeowners.

And YIMBY-type groups fight against these artificial restrictions on supply. That's not an argument that the fundamentals of supply and demand doesn't apply.

> is the additional supply causes prices to drop by some amount, which attracts new residents attracted by the drop in prices until the housing costs almost as much as it did before

That's the definition of demand: the number of people who would buy a good at a given price.

⬐ dnissley

I think this is a fair counterpoint, but the counter-counterpoint would be that decreased housing prices are just one of an array of benefits that increasing housing supply would bring about.

⬐ ch4s3

> I’ve been trying to explain to YIMBY-type folks for years that while, yes, supply and demand are both important, it’s extremely rare that the price of an asset will crash due to increased supply

I don't think anyone in the YIMBY movement (as far as I'm aware) believes there would be a crash in prices. I think the position is that increased supply with help stem the rapid growth in prices.

⬐ rlanday

I’ve seen people do things like compare Seattle and SF housing prices and say, “see, they’re growing more slowly in Seattle because they’re building more!” Even if that’s the case (possible, but there might be other factors at play as well)…that doesn’t solve housing affordability for anyone. It was still getting more expensive, just more slowly.

⬐ closeparen

Taking your boot off the patient’s windpipe might not heal her, but everything else you try is going to work better if she can breathe.

⬐ davidw

There are areas of economics where it's more complicated than simply 'supply and demand'. Positive network externalities, things like that, but by and large supply and demand are a good place to start. And it is very applicable to housing.

⬐ cylon13

Definitely a good place to start. It's astounding how many people you can find yourself in a discussion with who haven't gotten as far in economic understanding as grokking supply and demand, but are adamantly proposing what amounts to complex economic policies with many effects.

⬐ avgDev

And I have another book to read, my book collection is starting to become like my steam collection.

⬐ vaidhy

While supply and demand is a good model, it is at the end of day, still just a model. Even as a model, it is not easy to apply to real-life situations. Measuring supply and demand is not easy. Constraints on supply and demand change all the time. Complements and supplements change all the time. Second and third order effects which take a long time to show, but have massive impact cannot be easily predicted and measured. Finally, the supply and demand logic requires a perfect market, which does not exist.

It is great model when you have perfect information. I would like to present the Economics Anti-Textbook - https://www.amazon.com/Economics-Anti-Textbook-Critical-Thin... for a more nuanced approach.

[Edited for missing a word]

⬐ mbesto

> opponents of growth that supply and demand apply to housing too.

Wait there are people who don't believe that supply and demand exists in housing? What does that even mean? This is easily provable...

⬐ aidenn0

There are people who argue that housing is insufficiently fungible for an increased supply to lower prices.

⬐ stainforth

Developers or property owners will just wait out a recession/depression. They won't rent below a certain amount. They may just demolish their building.

⬐ flurben

It is common among the general population to believe that: "When developers build new things it makes my home value and property taxes go up."

It is VERY difficult to get them to understand that they have the cause-and-effect reversed : In fact, it was the increase in value that triggered the new development.

⬐ stale2002

> there are people who don't believe that supply and demand exists in housing? What does that even mean?

The most good faith, steel-manned way that I can interpret these types of statements, is to interpret it as "Supply and demand in one area of the market have little effect on other areas of the market, especially those areas that are currently subject to existing government regulation and programs".

EX: If someone has been living in a rent controlled, or low income housing, for X number of years, it is correct to say that building a few more high end condos, is not going to reduce this person's rent (barring implausible situations, such as building hundreds of thousands of new housing units).

Yes, it might reduce the rent of people renting high end apartments, but it is not going to effect the rent of people who are, by definition, not paying market price for apartments, due to rent control.

⬐ birdyrooster

Did you forget how miserable the rest of the country is to live year round? The Bay Area supplies the excellent weather and we demand it.

⬐ chewz

> brilliant people convinced that supply and demand is just "far too simple" or "totally disproved" etc. etc.

These silly people - Keynes, Marx, few Noble laureates...

⬐ flurben

You have severely misunderstood Keynes and Marx, if you think they "disproved supply and demand."

⬐ pydry

>I see long threads on HN all the time of brilliant people convinced that supply and demand is just "far too simple" or "totally disproved" etc. etc.

Then there are those who think econ 101 has all the answers.

https://en.wikipedia.org/wiki/Veblen_good

If they taught physics they wouldn't be teaching us the law of gravity. They'd be teaching us the law of "what goes up must come down".

⬐ sumtechguy

There are 2 curves in any market. The demand curve and the supply curve. The supply curve is usually fairly easy to figure out (borderline trivial). The demand curve on the other hand does very odd things and tries to measure things there is no measurement for. Even economies where there is no real price and there is only a monopoly has to conform to the two curves. Most economic policies fail because of poor forecasting of external items on changes in the demand curve. For example maybe I had an egg for breakfast and that made me feel full for lunch. So I do not want to eat a hamburger at any price for the rest of the week. Yet the demand curve would predict I would buy it at a particular price.

Economics a lot of hand wavy predictions. It is good at saying what happened after the fact but usually makes poor predictions. Most sciences would say the model is broken.

The Veblen good that you mention is one of those examples. Where raising the price creates a desirability that should not be there. That is because pricing is a signal of scarcity. Some people desire the idea they have something scarce and others dont. Which makes demand curves hard as even the price you pick changes the curve!

⬐ bgorman

Basic microeconomics teaches that demand is a schedule of what customers are willing to pay at various price points, and that businesses need to apply "marginal" analysis aka calculus to optimize profit. There is nothing about the basic building blocks of microeconomics that makes it incompatible for the analysis of luxury products.

Most product are not luxury products and a large portion of the world lives in poverty, so naturally most Econ 101 discussions of microeconomics will deal with commodity products e.g. bread.

Like anything worth learning, it is far more important to understand the basic principles of the subject than to learn details about specific applications. That is memorization over understanding.

⬐ 8ytecoder

Market alone is almost never the solution. I know an angel investor living in a rent controlled apartment in the most desirable neighbourhood in SF. Put a cap on income for rent control. Allow market to function.

Any property that follows planning rules, is in the right zone and follows rules for low income/below market rate housing, allow it to be built without delay.

Fix stupid zoning laws that make building anything over two stories illegal in a huge swath of the city.

(An example is using tradeable floor space index to regulate zones instead of fixed height based codes)

You can do all of this and build public transit options to keep the quality of life stable. It’s possible. It requires will to execute and a multi year or even multi decade plan.

I'm surprised no one has mentioned Basic Economics[1] by Thomas Sowell.

It's a fairly detailed book but it's worth the time. If you're too busy to read a whole book, you might want to take a look at "Economics in One Lesson" [2] by Herny Hazlitt.

The foundation for economic education[3] has some great articles too about economics and public choice.

[1]https://www.amazon.com/Basic-Economics-Thomas-Sowel/dp/04650... [2] https://fee.org/media/14946/economicsinonelesson.pdf [3] https://fee.org

Basic Economics, Fifth Edition: A Common Sense Guide to the Economy by Thomas Sowell

https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465...

I enjoyed Thomas Sowell’s Basic Economics

https://www.amazon.com/gp/aw/d/0465060730

Thomas Sowell is brilliant at highlighting the unexpected nature of many parts of economics as well as the countless government policies initiated in the name of helping the poor or lower class that end up either doing little to help or, more often, ultimately helping the upper-middle class and above the most.

He helped me grow beyond a cliche idealistic libertarian worldview into something much more practical and based in real world policy.

I highly recommend his 'Wealth, Poverty and Politics': https://www.amazon.com/Wealth-Poverty-Politics-Thomas-Sowell...

Or for something more lightweight see his book 'Basic Economics': https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465... --- Despite it's name it's not an economics 101 guide, it basically a teaching-through-example guide by listing policy after policy that were implemented in the realworld, for ex:

- rent control in NYC/Toronto in the 1970s which severely reduced access to affordable housing, disincentivized building maintenance, incentivized arson, and gave countless upper/middle class residents cheap rent for beautiful properties

- various industry licensing pushed by market incumbents not protecting consumers, such as interior designers requiring 4yr bachelors degree to choose the colorscheme of an apartment

- etc, etc

He digs into their good intentions but unintentional self-defeating side-effects. Many of which have countless analogies to today (see Uber vs Black cabs in London).

After reading it I'm hardly surprised Japan's economy has stagnated, to the point where it's almost so obvious it saddens me. They are one of the worst proponents of the type of heavy handed economic-intervention he critiques.

Thomas Sowell's Basic Economics book was a great introduction, too, though I didn't always agree with some of the politics.

[1] https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465...

for a completely diferent view on economics I recomend the book "Basic Economics"[1] written by Thomas Sowell [2] 704 pages without a single mathematical formula or graph.

[1] https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465... [2] https://en.m.wikipedia.org/wiki/Thomas_Sowell

I only found one book that I could actually get through, but it is written by a controversial guy who many people consider an out-of-touch war hawk.

https://www.amazon.com/Basic-Economics-Thomas-Sowell/dp/0465...

But the book itself was written before he became controversial, is VERY readable and approachable, and I would particularly recommend it if you have already tried to learn economics before and stopped because you could not stand the sheer tedium.

Also, the other commenters are right about how the stuff you read in microeconomics simply wouldn't scale to macro (so don't expect it to help you invest and stuff).