The Accidental Theorist and Peddling Prosperity by Paul Krugman - Book Report/Review Example

The Accidental Theorist Paul Krugman was the recipient of Noble Prize in Economics for the year 2008 and is considered as one of the most liberal columnists and economists of the country. His theories on international trade as well as economic geography are considered as one of the most important contributions to the field of economics. It is often said that world of Krugman is entirely different from those of ordinary economists who fail to present such a vivid and simple explanation of economics and its theories. The ideological thrust behind the arguments of Paul Krugman indicates an entirely new way of thinking. The Accidental Theorist is also an effort in same direction by Krugman to present his unscathed arguments and criticism of modern economic arguments. He is also an active contributor to the national press and contributed hundreds of op-ed columns for New York Times and online magazine “Slate”. His book “The Accidental Theorist” is also a collection of his writings for the online magazine “Slate”. This book was published in 1999 by W.W. Norton & Co and is still considered as one of the best books ever written by Krugman. This book, though deals a lot with economics however, it deliberates on different issues of importance and spells out the clear economic philosophy and ideas of Krugman. The depth and variety of economic opinion offered in this book is considered as simply unmatchable as Krugman spelled out his major theoretical theories and opinions at great length. This book comprises of 27 short essays written mainly on economics however, most of them are considered as worth reading because of the sheer power of arguments made by the author. It is however, critical to note that since this book is a compilation of 27 short essays therefore the overall theme of the book is diversified and does not focus only on single topic. The range of topics discussed not only include a case against growing variations in the application of taxes by the government but also the role of middle class within American society and how their economic preferences are shaped by factors external to their own reach. Apart from this, this collection of essays also discusses Chinese international trade as well as economy of Japan and the consequences of its failure on the world economy. The overall style of Krugman in this book is considered as more conventional as well as informal however, he is believed to be too serious in presenting alternative views about those issues which are often left out. His overall argument is based on the assumption that a little bit of extra thought and effort can provide plausible explanations of various economic phenomenon rather than immersing oneself into large plethora of data. Though this book is not considered as a substitute of a typical text book but is considered as a book which provides a thorough understanding of various economic concepts with real life application of economic concepts. What is also significant to note that Krugman has not taken a clear and definite line of action i.e. his thoughts in this book are neither considered as right nor left but offer a middle ground in understanding more complex economic issues. As such he attacked almost everyone having any formal economic theoretical background. Though he is normally considered as a Keynesian economist advocating greater role of fiscal policy in achieving economic growth however; he also considers Keynesian economics as irrelevant for modern thought. He very vehemently comments on Keynesian economics in following manner: “The simple Keynesian story is one in which interest rates are independent of the level of employment and output. But in reality the Federal Reserve Board actively manages interest rates.... [T]he unemployment rate... will be what Greenspan wants it to be, plus or minus a random error reflecting the fact that he is not quite God.... And so all the paradoxes of thrift, widow's cruses, and so on become irrelevant.... [A]n increase in the savings rate will translate into higher investment after all, because the Fed will make sure that it does.”(Krugman, 1999). The above taken directly from the book indicates the overall philosophy and approach of Krugman in this book. His annoyance over the inter-lapping of the roles of monetary and fiscal policy authorities can easily be sensed from this paragraph that he considers both the government as well as FED playing dual roles in managing the economy and as such blurring the subtle line between fiscal and supply side economic theories and ideas. His approach has not to omit the history and its important pieces but he tends to omit those pieces of history which make it messier and attempt to distort the history and its impact on the lives of individuals. (Glaeser, 2007). The essays which are presented in this book present the most complex ideas of economics in a manner and level which is understandable to most ordinary individuals. What is also significant about this study is the fact that it enforces and increases the desire of ordinary individuals to look for clearer explanation of the economic principals and their impact on the lives of ordinary individuals. Krugman’s this book succeeds in providing a very interesting and stimulating debate on various economic ideas and concepts of economics. The major strength of this book is therefore the ability of the writer to provide a balanced political view of the most pressing economic issues faced by US. On the other hand, major weakness of this book is the fact that it is focused too much on adapting the tone and attitude which is often considered as harsher by the Critics of Krugman. The overall style adapted by Krugman is relatively more straight and to an extent more derogatory to some. Many also believe that Krugman was relatively softer on some issues whereas on other issues his stance and arguments were relatively stronger and forceful. Overall this book and ideas presented in this collection of essays is worth reading for any individual looking for practical solutions to most pressing economic problems faced by US and world today. PEDDLING PROSPERITY Peddling Prosperity is another important contribution by Paul Krugman discussing most important economic concepts from view point of ordinary individuals. This book was originally published in 1995 by W.W. Warton & Co and comprises of 320 pages. The description of the book as provided on Amazon.com suggest following “The past twenty years have been an era of economic disappointment in the U.S. They have also been a time of intense economic debate, as rival ideologies contend for policy influence. But strange things have happened to economic ideas on their way to power--they've been hijacked by policy entrepreneurs who offer easy answers to hard problems. “1 This description of the book provides very accurate prediction of this book’s overall theme as well as economic and political philosophy of Krugman. This book, in its essence, is a criticism of policy formulation process within US and how good economics thoughts and ideas are hijacked and circumvented by those who are interested more in Policy formulation rather than providing good economic solutions to the most emerging problems faced by US. This book discusses the most modern economic history of US and attempts to make a clear case against modern economic thoughts and various prejudices that they create. His analysis of the various schools of thoughts of economics in US is great in its simplification as well as depth of the argument as deftly analyse the liberal and conservative ideas prevailing within US mainstream academia as well as political landscape. The major argument behind this whole book is the basic assumption that when faced with a choice of choosing between good economics and good politics, the policy makers in US often prefer to choose between good policy making. By providing an scathing criticism of economy history of US he is of the opinion that different governments in US tend to prefer more of good politics. Krugman is of the view that the economic history of US is more ingrained with the fact that good politics have been adapted for negotiating with bad economic problems. What we also see in the arguments presented in this book is the fact that more and more developed countries are considering running the countries like large corporate entities. The passion for competition, according to Krugman, will do more economic harm to developed nations as compared to other options. The myth that the competition can provide more prosperity to the nations is a pure myth according to Krugman because loosing to different world markets does not necessarily means the opportunity to gain prosperity is lost. It is because of this reason that he was quite critical of the Clinton administration’s various policies and arguments to compete with other developed nations of the world. What is also significant in the arguments of Krugman presented in this book is the fact that he has been quite vocal and sometimes direct for his criticism of the policies adapted by various governments of US and how more reliance on arbitrary calculations have led to the loss of prosperity and economic welfare for most of the US citizens. This book also presents how the various policy responses were made to the supply side economics. By presenting economic history of US, Krugman suggest that different policy makers in US first purposely opposed the supply side economics however same policies were subsequently adapted to follow supply side economics. Similarly, those policy makers who were famous for their position on the fiscal economics adapted policies which were markedly different from those that have been pursued by them. His most important criticism of the supply side economics is also ingrained in the fact that most of the opinion makers in US were mostly those who were not purely economists but belonged to different positions. Relying too much on complex data and calculations a case was made in favor of supply side economics thus advocating the case of lesser role of government in the affairs of the firm.(Neubauer,1996). If one follows the systematic criticism of the various opinion and policy makers- the first group identified by the Krugman comprises of economics professors who major influence behind the policy were making process in US in the past. Krugman clearly establishes the diminishing role of Economic Professors in the Policy making process and as such policy entrepreneurs took over the job of policy making and influenced most of the policy making process within the country. He also presented the reasons for this decline in the role of Economic professors in Policy making also as he believes that the Professors generally lack the ability to understand real life application of their theories. The models developed by Economists are so theoretical in nature that the assumptions based on which these models are constructed simply fail to provide real life solution to most emerging problems of the US economy. Krugman in this book also made a lot of criticism of Clinton administration and its strategic trade policy. The marked deviation that was observed during Clinton administration saw a new policy framework of international trade emerging rather than relying on the free market trade policies as suggested by Heckscher-Ohlin model of free trade. Krugman also attempted to present his own ideas on the policy making process and how it should be formulated in order to reduce the conflict of interest between policy making and economic policies. He advocates that in order to improve the economic productivity of US, it is important that the US must reduce its budget deficit and make a strategic shift from pursuing supply side economic policies. In a nutshell, this book is also a great contribution from Krugman on economics and policy making. Anyone interested in understanding how the policy making framework in US have been developed over the period of time and role of different individuals in such policy making process shall read this book. This book is also critical due to the fact that it attempted to synthesize economics with politics. References 1. GLAESER, E (2007) The World according to Paul Krugman New York- The Sun, Available: http://www.nysun.com/arts/world-according-to-paul-krugman/64281/ Last accessed 24th August, 2009. 2. Krugman, P (2000) Paul Krugman, the Accidental Theorist University of California, Available: http://econ161.berkeley.edu/Econ_Articles/reviews/krugman_accidental.html Last accessed 25th August, 2009. 3. Neubauer , F (1996) PEDDLING PROSPERITY: Book Review http://home.teleport.com/, Available: http://home.teleport.com/~neubauer/krugman.html Last accessed 25th August, 2009 Read More