Reading List

What is the Reading List?

I'll be compiling here a list of books, articles, blogposts, and other reading materials that I find cool, interesting, educational, and/or generally worthwhile, and I'll be updating it on an ongoing basis as I continue to find more stuff.

The list as of June 7, 2012:

This time the reading list has a theme: money! Each of the articles, books, or video clips in the list explains a particular aspect of how money works—where it gets its value from, what keeps the system from collapsing, and how it is regulated. Money is fascinating, in part because it's one of those inventions of the modern world that we all rely on but hardly bother to question. Once you do start questioning, though, you fund that the plumbing of the international financial system runs deep.

One aspect of money that I really enjoy is how it represents not so much a technological innovation as much as a mental one. Unlike electricity, or semiconductors, or antibiotics, the innovation of money didn't require any wizardry over Nature. The paper on which we record our money is generally cheap and worthless. Instead, the major innovation was in fundamentally shifting the way we think about value, and transactions. Money made it possible to commensurate all sorts of seemingly incommensurate values, to save, to invest, to compare investments, to plan for the future, and the like—but not because money has any of these powers intrinsically, but rather because we gave it these powers by believing in it. It's truly quite remarkable how that works.

I've ordered the reading list from least to most advanced. If you have any comments on the material, add them to the blog post about this update.

The Ascent of Money — Niall Ferguson — link.

I mentioned this documentary in a previous blog post about the stock market, but it's worth repeating. Niall Ferguson's history of money is what has rekindled my interest in money with such passion. His thesis is that behind the major events of history, there are important financial stories in the background that influence the outcome considerably. Weaved together are tales of the connection between the Civil War and cotton-backed bonds, the decline of the British aristocracy and declining estate values, the French Revolution and French financial meltdown, the Renaissance and foreign exchange. Hearing these stories makes me wonder how much of modern history is written in the halls of finance.

Introduction to Banking — Khan Academy — link.

This series of videos from the Khan Academy offers an excellent introduction to how banks work. Indirectly it explains a lot of questions that seem to have been lost in the recent anti-bank furor, such as: Why do banks exist? What value do they add to society? Why is the health of banks so important to the economy?

You'll also find answers to a lot of questions that would fall into the Things-I-Always-Wanted-to-Know-but-Was-Too-Afraid-to-Ask category, like: Where does fiat money get its value? What are Treasury Bills? How do banks make money? What does Ben Bernanke do? And many many more.

An Introduction to Capital Controls — Christopher Neely, Federal Reserve Bank of St. Louis — link.

Some countries require citizens to submit an application to the government explaining why they want to exchange their local currency for dollars. More commonly, countries restrict residents from exchanging more than a certain amount of currency per day, or charge fees for doing so. Why would they do this? This article helps answer why.

The price of making money — CNN — link.

What is seigniorage? — NPR's Planet Money — link.

Did you know that dollar bills are made from cotton? Since money has a manufacturing process like any other good, it has a cost that its manufacturers (the government) have to bear. Rising cotton prices have increased the cost of printing a note by 50%.

Of course, the cost of producing paper currency is still significantly less than it is worth. So where does that extra value go? To the government. The technical sounding term seigniorage refers to the profit that the government makes from printing money. See the Planet Money article for more.

Walzer, Michael. Spheres of Justice: A Defense of Pluralism and Equality. New York: Basic Books, 1983.

Sandel, Michael. What Money Can't Buy: The Moral Limits of Markets. New York: Farrar, Strauss, and Giroux, 2012.

What are the proper limits on money? This is the difficult question that both these political philosophers seek to answer in their respective books.

We've already decided with a bloody civil war that people should not be bought and sold. But is there anything else that shouldn't exist in markets? What about buying one's way out of the draft? Or selling one's citizenship? Why do we cringe about markets in some goods and not others, and how does that help us delineate the moral limits of markets?

International Finance — Prof. Barry Ickes, Penn State — link.

These are the course materials for Prof. Barry Ickes's course on International Finance. The course seems to cover everything that comes up when you have multiple currencies: exchange rate regimes, optimal currency zones, currency crises, and more. These materials will probably only make sense to people who have had some intermediate economics before.

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