[.ca] Peddling Prosperity (ISBN 0393312925)

What we know and what we donýt:
To many, Krugman's emphasis on what we don't know about economics is probably disappointing. A whole lot of Peddling Prosperity is devoted to the puzzle of the non-existing productivity growth during the 70s and 80s, and Krugman's conclusion is: we just don't know why productivity had fallen so abruptly. Written in 1994, the productivity surge of the 1990s was just starting, and PK had of course no idea that the high productivity growth would recover. There are some things economist do know, and PK's introduction to Keynes, the attack on Keynes by the monetarists, and the revenge of keynesianism is excellent. Like most real experts, PK is fully able to explain complicated matters in an understandable manner. The story is well written, with plenty of anecdotes to spice it up. PK's distinction between the 'professors' and the 'policy entrepreneurs' is a main theme in the book, but he is taking himself too seriously. Anybody really interested in economics is because it is about people, their needs, their wants, their motivations and so on. That clever economist/professors engage in and policymaking or public debate (as PK himself is heavily into), shouldn't lead to lack of credibility. Krugman is also missing the bottom line in the tax debate: people disagree about the best tax and redistribution policy, not mainly because someone believe this or that system is more efficient, but because it is fairer. And it is quite possible to argue, on the grounds of fairness, both that rich people should pay an awful lot in taxes and that they should pay a little, both coercive sharing and keeping their income. Krugmans brilliant and well-written story about the rise of monetarism during the 1970s earns, and of neo-Keynesians in the late 80s, is great. The best part, though, is his clear explanation of the huge misconception of comparing a nation with a corporation. The comparison is so far-fetched and leading to so much bad policy, yet so normal, that the issue should be dealt with at primary school. And Krugman's explanation is a very good place to start.

Very professional and witty:
Published in 1994, PEDDLING PROSPERITY by Paul Krugman establishes the intellectually substantial foundation of the current political economy columnist for the New York Times. Today he has a name as a leading critic of the tax cutting fiscal policies of a younger President Bush, but this book is proof of his ability to outwit nonsense in the political arena whenever he is sure that the mainstream university professors of economics will back him up. Reading this book was like a roller coaster ride for me, bringing back that sense of uneasiness that I never escaped as long as Nixon was alive. The best evidence that this book was finished before Nixon's death in 1994 is the footnote on page 260 about computing overall productivity according to `a recent study by Robert Lawrence of Harvard University and Matthew Slaughter of MIT: "Trade and U.S. Wages: Great Sucking Sound or Small Hiccup" (forthcoming).' In this great roller coaster ride, Chapter 10 at the end of the book was the sudden dip in total darkness near the end, when a strobe flash and digital camera took a picture of each car in the instant of weightlessness that looks like shock in the prints available where riders exit from the roller coaster cars. There was a warning in Chapter 9 that we were heading in this direction: "So there won't really be a race to see who gets the global jackpot." (p. 242). It just gets funnier than I remember it being at the time. Sudden drops began happening even before this book was finished for the political movement of those `who came briefly to be known as "Atari Democrats," . . . (The label was dropped after Atari moved its production to Asia in 1983.)' (pp. 249-250). The American economy continues to grow, as is usually expected, and the big story in this book is how those who absorb an idea or two from economists promote political remedies when economic problems become too obvious. I like the charts in the book, particularly Figures 1 (p. 25), 2 (p. 42), and 3 (p. 46), which are explained well in the text. Figure 2 has data from 1961 to 1969 showing a clear line, the Phillips curve, with a tremendous increase in inflation for unemployment rates less than 4 percent. Assuming that the 1960s reflected economic reality, "This conclusion was actually written into law: the much-ignored Humphrey-Hawkins bill of 1978 in fact requires the U.S. government to seek to achieve a 4 percent unemployment rate." (p. 43). A larger chart in Figure 3 shows how the events spiraled out of control, with unemployment over 8 percent in 1975 and inflation exceeding 12 percent in 1974, 1979, and 1980. I think Robert Mundell called this moving the Phillips curve in his Nobel Prize Address in 1999 on international currencies in the twentieth century, but Krugman's label for "Figure 3 . . . But that tradeoff fell apart, just as Milton Friedman had predicted." (p. 46) would seem to imply that the curve was fictitious all along. Political economy seems to be more like generating enthusiasm for a particular thing. University economists are so entangled in maintaining their overall big picture that people engaged in a single task are likely to become far too eccentric to suit the professors. Krugman attempts to employ his generalizations about supply-siders like "Robert Bartley, who has run the editorial page of `The Wall Street Journal' since 1972" (p. 83) to "The one figure in the supply-side group who does not at first blush fit the outsider image is Robert Mundell, who is surely the movement's intellectual luminary." If you can believe Mundell's Nobel Prize Address of 1999, Mundell wrote a paper for the IMF in 1961 which suggested tax cuts in the American income tax which did not actually take effect until 1964, but which started a lot of people thinking about how they could increase their income if taxes became less prohibitive. After that worked for a while, Krugman reports: "The fact is that around 1970 Mundell veered off from conventionality in a number of ways. Some of these were superficial: he began to wear his hair long and to speak in a low mumble." (p. 88). It sounds to me like a bad case of young too late but dumber than ever. No sense keeping up appearances when the world fails to conform to professional standards. My own interpretation of what next??? for people in those times is a Heraclitus philosophy: You can't go down twice to the same river. My other favorite wits of political economy do not do well in PEDDLING PROSPERITY, and it is hard to imagine how that could be improved in today's world. "Thorstein Veblen went from his brilliant THEORY OF THE LEISURE CLASS to write a really terrible book (THE ENGINEERS AND THE PRICE SYSTEM) purporting to explain economic slumps." (p. 26). The explanation which follows, of recession being caused by financial conditions when the desire in the marketplace is primarily for more money instead of more goods, called "Keynes's Theory of Recessions" (pp. 26-34) is the intellectual foundation for much of the analysis in this book. John Kenneth Galbraith gets credit for thinking we should "see our political process as a faithful representation of the interests of the only part of the electorate that matters--the relatively well-off top 20 percent of the income distribution." (p. 6). That might be a larger group than the number of people who could vote in America when the United States Constitution was drafted in the 1780s. Galbraith comes up again as an example of "This almost Freudian conflict between professors and pundits is always ready to break out; . . ." (p. 13). In 1967, Galbraith's THE NEW INDUSTRIAL STATE was like a description of the state of mind of people working or directing the tasks of workers. Not a bit like thinking that could win the Nobel Prize in Economics.

Plain english explanation of economic theories and history:
One of the things that interested me in Krugman is he is one of the most cited current economists. I can see why, he breaks down complicated economic discussion into plain English - and explains how some other people who break down economics in easy-to-understand English are \ounacceptable\c, whether conservative (supply siders) or liberal (strategic traders), and how some of them are not, from Keynes to Friedman. I've been trying to bone up on economics, and this book has helped me understand concepts I've heard the names of before in other sources like rational expectations, monetarism, Keynesianism, supply side economics and so forth. He also gives a picture of the US (and European) economy in the 20th century, and a history of economic thought from the conservative attack on Keynes led by Friedman, to the liberal counter-attack up until 1994, when the book was written. For anyone trying to understand economics, this is a good book, without a right-wing axe to grind since he's a liberal. I've been reading the critiques of capitalist political economy from Marx to his successors (as well as some socialists outside of the Marxian sphere, though the Marxists due dominate socialist economic discourse up to this day), and from that standpoint, Krugman looks something like a bourgeois liberal, but his work is enlightening and seems honest so I recommend it.

Outstanding:
This and "Pop Internationalism" (also by Krugman) are the best popular economics books I've read. The best feature of these books are its translation of textbook micro- and macroeconomics (the kind you learn in Econ 101 and 102) into the language of the op-ed pages. In this language, Krugman is a persuasive voice for academic economics on policy issues such as trade and recession in which public (or at least popular) debate is too often dominated by non-economists. It's not the policy stances he ends up taking that are interesting so much as how convincingly he describes large portions of popular economic debate (for example, the debate about the "competitiveness" of the American economy) as much ado about nothing. It helps that he's usually clear about when he is speaking from the perspective of economics profession as a whole and when he is speaking from his own point of view. The ideas he presents are a lot more lively for his attaching their originators to them; I remember his allusions to Lawrence Summers' arrogance as particularly amusing. His politics are ultimately more critical of Republicans than of Democrats, but his criticisms are novel, thoughtful and much better than the usual blunt arguments we've heard a thousand times over from liberal columnists and talking heads. He is willing to engage the perspective of conservative economists, and is a lot more interested in carefully interpreting a few statistics than in spewing out a whole bunch and hoping their mere mass overwhelms the debate. I'm still a Republican after reading it, but I think I'm a better-attuned one, too.

Great Book:
I never read a book on economics before this one because I could never understand them. I don't know why I picked this one to read, but it was wonderful. It is the first time ever that I have actually understood anything at all about economics. Reading this book was a wonderful experience. Actually out of five stars I would give it ten.