Recommended reading (3): Peddling Prosperity

   So far, I have recommended two books for learning microeconomics. Now, let us turn to macroeconomics. However, this is much more difficult. On the one hand, macroeconomics theory is less unified as microeconomics. Even for textbooks, different authors may present you rather different frameworks. On the other hand, a popular book that is a good complement to formal teaching can rarely be found. Normally popular book writers simply focus on the macroeconomic issues that they think are important. They may not bother introducing much about the theories or concepts behind.
    For this reason, I cannot recommend a book as a good textbook complement as what I can do for microeconomics. What I can find is a book that is conducive to learning some important macroeconomics concepts. Though not all of these concepts are taught in a basic course, I think it is worth your while to learn these concepts.
   OK, what is this book? First, the author. He is globally famous for his popular economics writing − Paul Krugman, the Nobel Prize winner in economics in 2008. But he is also a controversial guy. Professor Krugman has recently been recognized by some people, including economists, as a radical. He is accused to be too biased toward the leftist viewpoint (which tends to be more suspicious of the function of free market). Even if he may be biased today, his writings in the past are not, at least not very, biased. In fact, I intend only to recommend one of his earlier books here.
   Krugman has a special talent in explaining difficult economics concepts in an understandable manner. His book The Return of Depression Economics is a good demonstration of applied economics in financial crisis. This book is also recommendable but I personally like his Peddling Prosperity, an older book of his, more.
   This book has indeed introduced some basic macroeconomics that students may have learned in high school or the first year in university. In particular, Chapter 1 is an introduction to those traditional debates among Keynesians, Monetarism and others. Krugman is perhaps biased towards Keynesians but he still did a good job in telling you what rival theories say. If you cautiously ignore the harsh words he uses to attack rivals to Keynesians, you can enjoy the core part - Krugman's excellent skill in explaining difficult theories with simple illustrations or stories. For example, the reason why there are recessions is not explained by dry theory but a major metaphor - it is like what happens in a baby-sitting club. If you already have some basic ideas about macro, reading this chapter can make you feel that you now really understand what these theories say. If you have not learned anything about macro, this chapter may also enlighten your macro sense. If you won't be bothered by Krugman's critical and cynical attitudes, this part can still be considered as a good complement of traditional macro textbook. Of course, you have to be cautious, as I mentioned earlier. 
   However, what fascinates me most by this book is not its introduction of traditional macro (though this part is also good). It is the new ideas about macro, the part that borrows from micro.
   In microeconomics, we will learn a concept called “increasing returns to scale”. This is only one of the many important concepts in microeconomics. But the recent development in macroeconomics is mainly triggered by an intensive application of the concept of increasing returns. Many traditional beliefs on trade, geography and growth are rewritten.
   In Part III, the last part of this book, it introduces the application of this concept in the macroeconomics interestingly. In fact, before I read this book (at that time I was not an economist yet), the macroeconomics that I knew was still some theories either labelled Keynesian or Monetarist and they were mainly about economic fluctuations or short term policies (exactly the topic discussed in Chapter 1 of this book). The world of macroeconomics was already much broader than that but I was so ignorant. Reading Krugman woke me up. This book enables me to understand that macroeconomics is also concerned with something fundamental in the long term. Furthermore, it is amazing that "increasing returns" are so important at macro level. I have really learned a lot from this book. Actually, Krugman himself is exactly the one who triggered the whole wave of new macro theories: his 1970s paper in trade theory with increasing returns kick-started the whole field of new trade theory. In 1990s, his another paper initiated another whole new field - integrating geography and increasing returns into macro. That's the reason why he got the 2008 Nobel prize. Reading this book, you can learn directly these ideas from one of the most authoritative experts in this field.
   Therefore, though reading this book may not help you cope with your exams in macro, this book is recommendable if you intend to learn some important macro things, or learn how to explain difficult things in simple terms.