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One of the best things to read in preparation for first-year micro (or along with it) is
Hirshleifer / Riley's "Analytics of Uncertainty and Information;" a very intuitive
introduction to these key topics. Billed as a graduate micro textbook, but not formal
enough for today's demands, is "A Course in Microeconomic Theory" ☼ by Kreps -
some enjoy it as a conceptual starter that covers all the major topics (though, for an
appetizer, it's a bit too calorific - long-winded - for my taste). Gibbons' "Primer in Game
Theory" (alternate title" "Game Theory and Applications" ☼) is an idea for a preview of
game theory with many interesting examples.
One will typically need a specialized game theory book from the second term (although
MWG cover game theory in some depth). Osborne / Rubinstein's "A Course in Game
Theory" and Myerson’s “Game Theory: Analysis of Conflict” are good and reasonably
priced. Fudenberg / Tirole’s “Game Theory” is an extensive, more formal, treatment.
Tirole’s “The Theory of Industrial Organization” is the standard in that subfield
(preferable, in my opinion, to the more recent "Industrial Organization: Theory and
Applications" ☼ by Shy, although that includes new topics). The burgeoning importance
of agency theory called for a dedicated textbook, which is now available from the Tiroles
of information economics, Laffont / Martimort ("The Theory of Incentives").
MATHEMATICAL ▼
ECONOMICS
De la Fuente “Mathematical Methods and Models for Economists” (Cambridge, 1e: 2000)
Comprehensive and lucidly written. A bargain at the price.
If Simon / Blume is hard going, then (you should be rather worried and lose no time but)
grab Chiang's "Fundamental Methods of Mathematical Economics," which will take you
by the hand through everything you should already know (but no real analysis).
(Incidentally, Chiang's other book, "Elements of Dynamic Optimization" is not worth
getting: it's in continuous time, whereas in much of modern macro you want discrete
time.) Should the "Fundamental Methods" address critical needs, you might as well invest
another fifteen dollars for Schaum's "Outline of Mathematical Economics" (by Dowling),
with a wealth of solved problems.
A little book of pure math that squeezes all the best definitions and proofs into a pocket-
sized format, Rudin's "Principles of Mathematical Analysis" ☼ (or "Baby Rudin"), would
come highly recommended as a reference if it weren't so outrageously priced outside the
☼ markets. More advanced treatments like Royden’s “Real Analysis” and Rudin’s “Real
and Complex Analysis,” ☼ which cover functional analysis, measure theory, and complex
numbers, become useful in the second term and second year. If you want to learn
measure theory (which eventually is necessary for micro theory and econometrics, but ...
down the road), the best introduction is Capinski / Kopp's "Measure, Integral and
Probability." Kelley's "General Topology" is a terrific old text; for a concise introduction
to basic topology at the right price, see the Dover edition of Mendelson's "Introduction
to Topology."
MACROECONOMICS ▼
There are many approaches to teaching first-year macro, but roughly we could group
them into those that consistently work with special cases of the neoclassical growth
model and those covering an eclectic range of models with diverse assumptions and
occasional handwaving about micro foundations in favor of an interesting result. The
former school of thought is sometimes labeled as "freshwater" (since its proponents are
located around the Great Lakes), and the latter as "saltwater" (as it is popular along the
US coasts). My impression is that the "freshwater" school is carrying the day and
dominating the modern literature, but not everyone would agree. There is now a nice
introduction to dynamic programming, numerical methods, stochastic growth, time series
econometrics etc. all in one small book: Adda / Cooper's "Dynamic Economics:
Quantitative Methods and Applications." It's an ideal and reasonably priced entry to
"freshwater macro."
The gaping void in the market for books on the mathematical foundations of
econometrics is about to be redressed by the forthcoming titles by Bierens and
McFadden (see the online lecture notes for the manuscripts). Gallant’s “An Introduction
to Econometric Theory” runs along the same lines, but is quite brief, and somehow not
an entirely satisfying book to learn from. Billingsley’s “Probability and Measure” ☼ is a
higher-pitched, well-regarded probability text that also develops measure theory.
Shiryayev's "Probability" is its equally admired competitor. (But both are difficult books if
you're not well-trained in analysis.) White's "Asymptotic Theory for Econometricians"
covers the same class of topics, perhaps more accessibly (and certainly more concisely).
Good review books in econometrics, albeit not at the technical level of graduate school,
are Johnston / DiNardo’s “Econometric Methods” ☼ and Verbeek’s “A Guide to
Modern Econometrics.” ☼ That intimidating tome by Judge et al., "Introduction to the
Theory and Practice of Econometrics" ☼ offers a very nice, comprehensive approach to
estimation at a closer look, and it's at the right technical level. Davidson / MacKinnon's
“Estimation and Inference in Econometrics” is popular with econometricians and
supposedly "deep;" it may offer more detail and rigor than initially needed. Then there's a
whole series of graduate econometrics texts by Gourieroux / Monfort, reportedly much
in the French tradition of excellent precision and terrible pedagogics.
The standard specialty text for time series is Hamilton’s exhaustive “Time Series
Analysis.” Enders' "Applied Econometric Time Series" ☼ is a far more basic and
selective introduction. For limited dependent variables, there's Maddala’s “Limited-
Dependent and Qualitative Variables in Econometrics.” For panel data, Baltagi’s
“Econometric Analysis of Panel Data” or Wooldridge's "Econometric Analysis and Panel
Data," or yet Hsiao's "Analysis of Panel Data." (They're all said to be excellent,
particularly Wooldridge is popular.) "Nonparametric Econometrics" is covered in the
book of that title by Pagan / Ullah.