Guide to Recommended Readings for Week 2 The Measure of All Things

The recommended readings are, unless explicitly labelled otherwise, just that: recommended, not
essential. They mostly elaborate on a point discussed in the lecture or that is otherwise related the week’s
lecture topic. I try to arrange them in approximately descending order of usefulness but this week it was
more difficult to rank them. If you have limited time (and who doesn’t?) read what seems to be the most
interesting to you.

1. “The Price Makers vs the Value Hunters” by Chris Joye: “Growth investors” aim to pick
companied expected to grow at above average rate. “Value investors” aim to pick stocks selling for
less than justified by their expected cash flows. Chris Joye explains the different mindsets and
methods of value investors and growth investors. Which kind are you?
2. “Recent Economic Developments – 9 March 2022” by Philip Lowe, Governor of the Reserve
Bank of Australia: Philip Lowe is an excellent economist. This address, delivered on 9 March 2022,
is on four important issues – (1) The resilience of the Australian economy and some of the major
uncertainties, including the invasion of Ukraine by Russia. (2) The journey towards full employment
in Australia. (3) The recent inflation data. (4) The implications of these developments for monetary
policy in Australia. If you intend to predict interest rate changes, this address is a good place to start
your research.
3. “On Risk and Uncertainty” by Guy Debelle: This article is from 2010 but the advice provided
on the distinction between risk and uncertainty and the value of judgement remains as relevant as
ever. Incidentally, Debelle recently announced he was resigning as Deputy Governor of the RBA to
become the CFO of Fortescue Future Industries which aims to produce zero-emission green
hydrogen from 100% renewable resources.
4. “The Puzzle of Low Interest Rates” by Greg Mankiw: Interest rates determine asset prices.
Harvard economist Greg Mankiw provides a summary of some probable reasons why interest rates
are low by historical standards. Useful for thinking about the long-term direction of interest rates.
5. “Is US Economic Growth Over?” by Robert Gordon: Gordon is a well-regarded economist who
argues that the biggest boost to economic growth from technological progress happened in the first
half of the 20th century and it is not likely to happen again and so developed economies face
permanently lower rates of growth. This can explain low interest rates.
6. “On Economics and Finance – Ketchup Economics” by Larry Summers”: Summers, an
influential economist and former president of Harvard University, explains the difference between
economics and finance. Finance theory deals with relative prices only; it has nothing to explain the
overall level of prices. What this means is that finance can explain why asset prices are low if interest
rates are high but it cannot explain the level of interest rates.
7. “The War Puzzle: Contradictory Effects of International Conflicts on Stock Markets”: This
(2015) research paper shows that the effect of war on the share market is not what we might expect.
Useful for thinking about the impact of the war in Ukraine on financial markets.
8. “Leaving Russia for Morals or Money” by Matt Levine: Levine writes a daily commentary on
finance for Bloomberg. He explains complex finance in a way both easy to understand and funny.
This recent column shows how complicated it can get for companies trying to satisfy their
stakeholders and do the right thing.
9. “Stock Market Stimulus”: Price is a function of supply and demand. This recent (March, 2022)
study shows how some of the money spent by the US and Hong Kong governments to support
people during the coronavirus shut-downs ended up pushing up prices in the share market. It’s a
readable example of behavioural finance research

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