First commentary of the new year... You have to create a new folder under the 'documents' folder and name it. It is easy when you say: 'Radikal2010'. I have a separate folder for each year; their number is on the rise. In the past, it was just 'a new folder' created at the beginning of each year. But being aware of the rise in their number is a totally different question mark. "I have just created the folder for 2009!"

There is a lot to read! I started reading three books in the last days of 2009. First is titled 'Introduction to Modern Economic Growth'. New book of MIT professor Daron Acemoğlu was published by Princeton University.  It is about a thousand pages and I have read one hundred and forty of that. I will read it again taking notes this time. Now I am reading a book on mathematics. But when I took a look at it, added two other mathematic books to the to-read list. It will be necessary.

Acemoğlu traces back to the year1000 and makes comparisons between countries. Upon these comparisons, he starts to handle with highly important questions. First is:  "Why is there a large difference in per capita income and the productivity of workers between countries?" Second is: "Why do some countries grow rapidly while some others make no progress?"  And the final question is: "What is it that made economic growth permanent over long years and why did permanent growth start only two centuries ago?"

I have to say that, so far I am quite impressed by the book. Recently I haven't seen any book that deals with an issue so thoroughly. The book also gives some observations and inter-country comparisons. Moreover, there are theoretical models developed to explain the observations. Theorems, proofs, shift from simple to more complicated models; and then the comparison of examined models with observations, discussion on applied models and then new models...

To explain income differences between countries, those who work on or have information about growth models will come up with the differences in educational background of labor force (human capital), savings rate, capital stock, or technological advance at first glance. These are correct for sure. But in his book Daron Acemoğlu goes beyond these differences. Where do these differences arise from? Why, for instance, more advance technologies are not used or education level remains quite low in some countries? Are there cultural differences lying behind this? Or is this a result of geographical impacts (laziness- illnesses created by tropical climate or insufficient natural resources)? Or is it just out of luck? Acemoğlu claims that those three elements are not irrelevant but insufficient to answer the three questions he asks. He argues that the important factor is the differences between the institutional structures. And thus the issue naturally locks at political economy, which in fact constitutes the last chapter of the book.

The second book I read is closely related with the earthquake of economic theory.  One is 'Animal Spirits: How Human Psychology Drives the Economy and Why It Matters for Global Capitalism' of Akerlof and Shiller, published by Princeton University. Models that are frequently criticized assume that economic units act rationally when making consumption and investment decisions. But Akerlof and Shiller argue that behaviors based on senses are of higher importance. I am about to finish this interesting book, I will mentioned it again when I do.

It is right time to read the third book, as well: Hyman Minsky's 'Stabilizing an Unstable Economy' had come to light in 1986 and Mc Graw Hill published the book again in 2008. Minsky explains why financial systems are open to crises. The latest crisis increased the popularity of Mynsky' and his studies. I have just started reading this one; I will talk about it once I finish it.

Apart from these, there are academic articles waiting to be read. One of these was written by Goodhart et al who criticize mainstream economic models saying "These models exclude everything I am interested in as an economist!" The article was published in October 2009. Authors aim to enrich mainstream models in a way that they will include a part of the issues Goodhart is interested in (like economic units acting differently or phenomena of bankruptcy). I will also mention this in the future.

Yes, there are a lot of books and articles to read (I did not even mention comic books and detective books). But along with books to read, there is bad news to hear: I made a promise to finish a textbook on monetary economics and financial markets. Fortunately, we will be three authors; I believe my colleagues are studying on it and the drafts of some sections are ready. I also have monetary economics course at TOBB-ETÜ on Mondays. In short, I will have less time for reading. Of course, this is one of the best bad news I have heard.

I wish you all a happy New Year

This commentary was published in Radikal daily on 03.01.2010