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Saturday, January 15, 2011

Macroeconomics

As I go through school I'll review my textbooks, I consider them a perfectly legitimate way to get close to 52 books a year. Besides that idea, if a class is worth taking a textbook is worth reading. This last semester one of my classes was macroeconomic theory, which is going deeper into the variables that move the economy such as money supply, interest rates, the marginal propensity to invest or save and so on.

Before I took this class I thought I was much more interested in microeconomics. Macroeconomics focuses on what moves large groups of people to make changes while microeconomics tends to focus on smaller groups. After this class though I'm impresses at how much macroeconomics matters.

What interests me most about the subject is how logical and explanatory the models are at explaining what has happened in the past, yet how poor they are at giving a good explanation of what will happen in the future. The models are constantly refined and pondered over and updated.  It reminds me of psychology which attempts to look at the human mind and discover a pattern of behavior that will have some predictive power over future behavior and allow us to change it. The more I learn about social sciences the more I realize that either we as humans behave in completely random ways when unexpected events happen, or that we know so little about ourselves that these pursuits are far from being exhausted.

My favorite part of the course was wrapping my head around IS/LM/BP models. It was so fascinating to see how changes in local interest rates may change the economy and foreign exchange rates. It also finally explained all that time in algebra playing with matrices, and learning how to manipulate three lines to find an equilibrium point. I imagine the math gets really fun and mind bending when you're not treating the lines as straight.

The other best part of the course was the professor, Ron Olive. I think this review on his rate my professor page sums it up perfectly:

Get the Book. If you're looking for an easy class go elsewhere. If you want to learn Economics take Ron Olive. 10 Problem Sets, 2 take home tests and one in class final (T/F, matching, definitions) He will make you work for it, but grades fairly.

The Froyen book was a perfect companion to this teaching style, it explained the models well, showed the math and explained the concepts perfectly. It's one of those books that I really wanted to keep, but Amazon's textbook buyback program offered a price far too lucrative for me to pass it up. Also, the glorious thing about textbooks is that I will be able to buy it back for a few paltry dollars once a new version comes out in a year or so. If you're looking to learn economics, I'd say buy this book and if you're looking for a companion class, I would seek out Professor Olive and take his course.

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