Book Review: Supercycles

I’ve typically not read much on macroeconomics so it was a bit interesting to receive a review copy of Supercycles by Arun Motianey.  Basically Arun discusses what has happened in history from economic point of view while reviewing previous developments in economic theory and then proposes a different take on it, called the Supercycle.  From there he then lays out three possible outcomes for today’s economy: deflation, inflation or stagflation and some suggestions on how to invest in each case (he wisely doesn’t try to predict which will occur since it depends on what the central bank does).

I won’t get into too much detail on what the Supercycle is and how it works since that is most of the book, but I will give you a quick summary.  First imagined there is a pipe from raw goods (commodities) that continues to middle manufacturing all the way to final consumption of a good.  You would notice that the pipe crosses from country boarders as it snakes around the world.  Well the Supercycle is really just a relative price imbalance that causes a cycle of boom and busts down this pipe.  It would sort of look like a large snake eating a pig as it travels down the pipe.  From there we get into all sorts of interesting implications on how that works with a gold standard versus floating exchange rates.

Perhaps the most interesting thing I learned from this book is how even those very smart folks at the central banks of the world don’t entirely know what they are doing.  Their work is only as good as their model is and just about every model has its blind spots.  Hence it is fairly easy for things to go to hell and get a crash that no one saw coming.  Arun actual suggests economists need to start thinking a little bit more like engineers and focus on practical applications for their work.  Being an engineer I ,of course, have to agree a bit.

Overall it was an interesting read for me, but I will caution that at points it got a bit technical.  I’ve never had any formal education on economics and I was able to follow it the text fairly easily.

Now for the fun part of this post.  The double give-a-way.  First I’m giving away a copy of Supercycles.  To enter just leave a comment on this post with a valid email address so I can contact you.  One entry per person.  Open to residents of Canada.  Winner will be determined by random number generator on April 29, 2010 at 8 pm CST.

You can also win on a second contest being hosted by the publisher of Supercycles, McGraw Hill.  To enter that contest go here and you need to enter your name and email address (just like a comment) and that draw closes on April 30, 2010.  Best of luck in both draws.

15 thoughts on “Book Review: Supercycles”

  1. The difference between economists and engineers, which I don’t think can be overcome, is the difference between physical science and social science. Econometrics is an effort to make economics more scientific, but I believe it’s doomed to failure. If all the author was trying to say, however, was that economics should have a practical application, then I agree. However, when we assume to worst-case scenario, that people are all working only for their own self interest, as capitalism assumes, economics may actually foster self-centredness.

  2. @ Robert,

    “If all the author was trying to say, however, was that economics should have a practical application” Yes that is what the author was getting at, sorry I didn’t make that clear in my review.


  3. I have about 40 people I share my financial resource materials with, and this would be a welcome addition to the library!

  4. I would be interested to compare the supercycles with the waves compcet, so count me in for the contest.

  5. Having studied both Micro and Macro Economics, I think it would be an interesting read. I do think Economics has many practical application that are put into use. However, like you said they’re not predictable, so the applications need to be reactive. It’s the central banks mission to keep the inflation rate at 2% +/- 1% and they’ve been doing a great job of that since that goal was given.

    I agree with Robert about the Econometrics failing. I also believe people are all working for their own self-interest. Economics is the study of this behaviour and whether we recognize that or not doesn’t change the reality.

    We buy stuff because we want it, not to give someone a job. We donate time/money because it makes us feel better about ourselves. We’re nice to our friends because we’d lose them otherwise. Just because we’re self-centered doesn’t mean we’re not going to help others. That was Adam Smiths (economic pioneer) point.

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