--Alfred Marshall's Principles of Economics
When I started reading this monograph, I was totally awed. This edition looks special (Unabridged Eighth Edition); the content looks special (all in sentences instead of adjectives and nouns); the appendices look special (so many interesting topics covered); the index looks special (for so lengthy a book, 6 sub-books, 55 chapters and 700 pages, no index at all); even the paper touches special, you could feel the unevenness of printed letters, and most importantly, this is Alfred Marshall.
Marshall's most important contribution, as far as I know, is laying foundations of marginal analysis in economics. There will be no economics in the modern sense without marginal analysis. Consumers are choosing among different products to equalize marginal utility. Producers are deciding production schedule to weigh marginal benefit and marginal cost. Equilibriums for labor, capital and land, the so called agents of production, and any other products are pinned down by marginal utility and disutility comparison. Monopolist maximize profits by marginal analysis too. So, from consumption, production, to market equilibrium, and income distribution, everything is contained in this framework of marginal analysis. If I'm asked to sum this book in one sentence, I would say 'marginal analysis repeated more than 1000 times'.
Marshall stuffed all mathematical deductions in the appendices and footnotes, so that this book is readable by anyone with basic English literacy. On the other hand, for an Economics textbook, if there's no math involved, the author must need succinct logic and sophisticated writing skills to convey as many clear messages as possible to the readers, just as Adam Smith did in his Wealth of Nations. I have to say Marshall's writing skills fell much short of Smith's. The coverage and depth of this book is also far more inadequate compared with Wealth of Nations. Book I to Book IV and part of Book V are written relative well, but after second half of Book V, the analysis becomes too redundant and too detail-oriented. I found it hard to even locate the topic sentence in each section. Sentences are written in a rather awkward fashion that I'm nearly lost in grasping the author's intent.
For quite a long time since I began studying Economics, the relation between Economics and Mathematics has caused much confusion to me. Firstly, there are too many mathematical equations. Linear or nonlinear programming, real analysis, KKT, Bayesian, time series analysis, and etc. Why do we need all these mathematical deductions? Sometimes I asked myself, whether I am studying the social science Economics, or I'm studying abstract Mathematics? Economics has to be a social science first, then there comes mathematics. Secondly, there are too many assumptions which are solvable but too unrealistic. For example, I can't accept the fact that economists use utility function as simple as natural log or quadratic form or CES. This seems random and unscientific. Have they done enough empirical research to prove this to be or approximately be the actual utility function of the representative consumer? In DSGE models, we simply assume several sectors maximizing their respective utility or profit function, without considering possible interaction between these sectors. Is this structure realistic? If these are not the case, the whole economics fashion is built on sand.
Recently, several incidents changed my narrow mind regarding the above confusions. I realize in some extent the current mathematical and unrealistic form of economics might be the only reliable way to conduct economic research.
As regards the mathematics confusion, a Chinese economist, Yang, Xiaokai wrote a text book 'Principles of Economics'. In the first chapter, he states that mathematics serves two functions in economics. Because mathematical language is more cogent, succinct, coherent, and logical, it fastens speed of economic thinking and communication, Besides, it also makes economic laws more convincing. Without a proper mathematical form, economist A could argue his law is more superior, while economist B could do the contrary, and the audience simply couldn't dictate who is right. Mathematical model renders this judgement possible. The very example Yang gives is Marshall. I gained the direct experience of Yang's theory in reading Principles of Economics by Marshall. Without mathematics, he has to expand the only idea of marginal analysis into more than 600 pages.
As regards the unrealism confusion, recently I read a paper by Richard Thaler in The American Economic Review (July 2016 issue). He compared traditional economics models based on rational agents as physics model in vacuum. These models are far from reality, but more realistic behavioral economists only add airborne friction to ideal vacuum models. At this stage, behavioral economics is empirical science of small steps of improvement, still unable to revolutionize the whole economics structure. Xiaokai Yang also talked about this in his book. He says economics at the current stage is like alchemy, still far from more scientific chemistry.
In a nutshell, if we want to understand worldly affairs on a theoretically convincing ground, we have to learn, use and develop economic mathematical models, plus as realistic as possible assumptions. This is the best we can get now.
Marshall did several other things very well. He states the history of Economics clearly in appendix B, from mercantile, to physiocrats, then to Adam Smith, Ricardo, Mill, American school, French economists, German school and others. He also included brief excerpts of each major economist all over his books. This is the first time I truly understand the story line of Economics. He also gives several brilliant expositions in regard to education and personal development. How to keep man from degenerating (Book III, Chapter VI), impact of hopefulness, freedom and change on men's vigor (Book IV, Chapter V), purposes of general and technical education (Book IV, Chapter VI), importance of broader view for children (Book VI, Chapter IV), and others are truly enlightening.
It is told that Marshall was very good at mathematics. When a new paper on mathematics was published in his university, Marshall would get the paper at the first available moment, only copy the first line and last line on a blackboard, then finish remaining deduction by himself. We can't expect every classic in economics to be as great as Wealth of Nations. If we ignore lack of mathematical deduction in this book, it is still a classic and worth reading.