I always feel the same way after I finish one of his books: "Man, that makes total sense, how could anyone reasonably disagree that inequality is skyrocketing/we need universal health care/China needs to revalue it's currency/the Republican Party is insane/free trade rules?" Even his detractors, like the Wall Street Journal editorial crew, or the legions of bloggers who exist only to find fault with his writing, readily admit that he's been immensely successful as a popularizer of economics and as a partisan for his own views. I like him not only because he shares my views as a liberal of the New Deal/Great Society school of thought, but because he has a way of illustrating complex debates in a way that's not only clear, but that seems to me as the way I would have looked at it all along, if only I could have put it into words, and he gives me a solid framework to say why.

It's very cliche to compliment someone as "objective" because they "criticize both sides" (think of all that fawning praise for South Park back in the day) and take a pox-on-both-your-houses attitude towards big issues. I think that's dumb, not only because it assumes that there are only two sides to a debate, and that it's always somehow possible to take an average of each position and make sense (does it really make much sense to invade half of Iraq, or cut income taxes for people whose last names are A-M?), but because it rewards an unthinking "moderatism", where you don't really have to think about what people are saying, only that you want to somehow triangulate yourself and avoid doing any critical thinking. That's exactly what this book is about - criticizing both right-wing proponents of supply-side and Friedmanist monetary theories as well as left-wing proponents of strategic trade theory in a way that illustrates not only why you can't simply say "let's split the difference between these theories and call it a compromise", but also why it's vital to take the time to think clearly about what people are telling you and whether their numbers add up, and why you can't always trust people on your "side".

Peddling Prosperity is very clearly a book aimed at a popular audience, both because most (but not all) numerical exercises are relegated to the appendix and because it's structured as a narrative, of the near-mortal wounds that Keynesian economics suffered in the 70s after its triumphs in the postwar era, the rise of potential conservative alternatives, and those alternatives' eventual failures and the (seeming) Keynesian resurgence in the early 90s. It was published in 1994, so it's a bit out of date, but it's actually very interesting to see echoes of the then-cutting edge worries about Japan and transpose them 15 years to the present-day, since most of the debates about government activism, the deficit, and international competitiveness haven't aged a day. Press releases and popular discussions of issues certainly haven't gotten any more sophisticated, so it's somehow still a breath of fresh air to read explanations of trade or productivity that are aimed at a wide audience without being dumbed-down to sound bites.

Virtually every section, if you read closely, follows an A-B-C sort of script: someone is claiming A must be true, but here is data B, which actually implies C, so therefore they're wrong. This pattern shows up very frequently in his writing, and this book is no exception. Harsh, but always rigorous discussion of the history and reasoning behind various alternatives to Keynesian economics over the years are backed up by charts, graphs, and most importantly, the models behind these ideas. Part of the reason why stupid notions like endless tax cuts for rich people persist in the world, aside from the obvious self-interested aspect of wealthy donors and lobbyists, is because those notions are sold within a seemingly-plausible framework with a strong narrative: by cutting taxes for rich people, they will be able to create more jobs for people and more prosperity than if that wealth is given to other people; the more taxes you cut, the more jobs you create, and conversely, the more taxes you raise on these wealth-creators, the more jobs you destroy. By walking the reader through these implicit models, showing you the data, and giving you the reasons why they're wrong, Krugman both avoids simply throwing out ad-hominems (though there are some barbs in here) and gives you a way to think about future claims. One of the reasons why he has earned such a reputation as a strong liberal is due to his staunch opposition to the Bush tax cuts in 2001 and 2003; reading the math behind why the Reagan tax cuts failed (and, closer to home, why the recent late-2010 extension of the Bush cuts will fail utterly to bring prosperity), you become... not particularly optimistic, let's say, about people's ability to learn from their mistakes.

The subtitle coins an excellent phrase which I am surprised has not gained wider currency: the Age of Diminished Expectations. While this book was written before the Clinton-era boom had really taken off, I remember growing up in the 90s and thinking of it as a time of seemingly permanent growth. Looking from today at the numbers, though - the steady decrease in productivity growth, the increasing inequality, the growing strength of the truly awful movement conservative wing of the Republican Party - I'm amazed at how satisfied people are with such mediocre growth when compared to the global trente glorieuses after the war. It would be easy to despair at the gradual lowering of the bar, but even during his discussion of massive failures, like the monetarist experiments in Thatcher-era Britain, the emphasis is on the math and logic behind why those policies failed, which prevents the book from sounding too depressing even if the conclusions behind it are plenty depressing.

The ending section about the rise of the strategic traders in the Clinton administration is a model of analytical clarity - the presentation of subtle economic logic about how the budget of a national economy is not like that of a company's balance sheet and all the mischief that that fallacy immediately brings to mind Obama making exactly these mistakes with his Council on Competitiveness, chaired by the CEO of a company that has outsourced thousands of jobs and shuffled around billions in taxable income. So even though the endless recurrence of terrible economic ideas will not end anytime soon, the book offers invaluable perspective on their sources and how to evaluate them. The focus is always on the data, and while Krugman may not always be right (his dismissal of critics of Japan's trade surplus in the 90s sits oddly with his criticism of China's seemingly very similar trade surplus in the 00s, even given the vastly different economic circumstances), he gives you all the tools and ammunition you need to form a coherent counter-argument. ( )

Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations by Paul Krugman (1995). This book and the previous one I reviewed were not read with an e-reader, and it's a shame because I would have liked to have highlighted passages for easy copying & pasting here as I can with a Kindle book. I have now sold just about every book I own that is available as an ebook somewhere.

Early Krugman is remarkable for his bi-partisan criticism and attempts to give his opponents some benefit of the doubt. Krugman is basically dealing with three issues in this book:
1. The Great Stagnation of productivity since 1973 (see posts below).
2. Republican economic snake oil in the 70's and 80's.
3. The experiences of conservatives in power in the U.S. and the U.K. in the 1980s (and the beginning of the European common currency).
4. New economic thinking in the realm of trade and development in the 1980s.
5. Democrat economic snake oil in the late 80's and early 90's.

Krugman makes the point that how well or badly (depending on how you look at it) the economy performed in the 1980s and early 90's had almost nothing to do with the Reagan administration. Presidents and congresses don't determine the resources, capital, and technical knowledge a society possesses, and the Fed had more to do with the fluctuations in the 80's.

Krugman is concerned "policy entrepreneurs" took sound conservative theories from Milton Friedman, Martin Feldstein, and Robert Lucas and warped them into politically potent snake oil of "supply-side" economics. Much of what Krugman wrote in 1994 could have been written in 2011 (and indeed has been repeated by him ad infinitum). He is upset at Republicans for not better policing themselves in this regard.

Krugman also blasts Robert Reich and other Democrats that he calls the "strategic traders," who advocate a sort of industrial policy toward U.S. manufacturing. He criticizes Clinton too, for Clinton was a policy wonk that was deep in the weeds on this stuff. These policy entrepreneurs took the ideas of Krugman and other trade theorists of the early 80's and warped it into some mishmash about globalization and competitiveness. Great quote:

"If you hear someone say something along the lines of 'America needs higher productivity so it can compete in today's global economy,' never mind who he is, or how plausible he sounds. He might as well be wearing a flashing neon sign that reads: 'I DON'T KNOW WHAT I'M TALKING ABOUT.'"


Krugman's data-driven analysis is great, it makes me want to re-read some of his columns to see if he's not majorly contradicting himself these days.

Krugman's remarks on the Thatcher experience are rather crass, IMO. He notes that the U.K. had a productivity jump that the U.S. didn't have, but doesn't think it was necessarily because of the privatization and de-regulation pushed by Thatcher. He's critical of how that process was handled. This is a good book to read parallel with Commanding Heights because Krugman has a different take on the Reagan/Thatcher revolution.

He also bemoans the European experiment to create a common currency. Only Krugman would claim that Finance Ministers and economists from Europe could get together and agree on a course of action when none of them know what they're talking about. (This is a common Krugman remark).

Basically, Krugman states that the Reagan Administration was responsible for three things:
1. Cutting marginal tax rates, particularly for the top income earners.
2. Increasing government spending and the debt/GDP ratio.
3. Maybe the huge increase in income inequality between top and bottom (but this was seen all over the world...)

Krugman notes that the top marginal rates were probably too high, but still criticizes the cut as a politician would -- the tax cut benefited the rich more than the poor. But when you have a 70% MTR that needs to be cut, it's politically impossible because you can't cut the MTR for the lower-income earners by the same amount--and Krugman ignores that in his critique.

Krugman also points out that the deficits/debt that the Reagan years acquired weren't a drag on the U.S. economy, probably shaving only 3% off of what GDP would have been from 1980-1990. But the way the Administration cut investment spending in response to the deficits may have had other long-term effects.

It's hard to look at the data Krugman presents and say "Reagonomics is horrible," and Krugman never makes that claim-- he's simply blasting the supply-siders who claim that "Reagonomics solves all of our problems and creates magic increases in productivity" without any evidence to back it up.

I recommend this book highly, and would use it in certain classes without hesitation. 4 stars out of 5. More international perspective/context would have been better. To see how Krugman hasn't really changed all that much, read this recent column about him in New York Magazine. ( )