Review

Paul Krugman is often heralded by many as a writer capable of putting complex economic theory and ideas in simple, understandable English, and his book Peddling Prosperity is no exception.  First a brief biographical sketch on Paul Krugman.  Krugman received his undergraduate degree from Yale, and a Ph.D. in economics from MIT.  He has taught at Stanford, Yale, MIT, and Princeton, and currently writes a regular column for the New York Times.

Krugman begins Peddling Prosperity with his perspective on the economics profession, namely the distinction between academics and so-called "policy entrepreneurs."  Krugman details the process by which policy entrepreneurs came to power.  During the 70's, the "magic" of the economy began to sizzle away; both growth and productivity began to slow, and academics failed to give policy suggestions that explained these phenomena.  Policy entrepreneurs -- though frowned upon by the academic community -- were able to provide such theories to bring the "fizz" into the economy once again.

Krugman then shows how this divergence in economic thought broke out into its extreme between followers of Keynes and Friedman.   Keynes, the author of The General Theory, advocated a strong interventionalist fiscal and monetary policy while Friedman and followers of rational expectations called for no government intervention because the economy, in the long run, was self correcting.  However, Krugman shows that even to this day, we cannot say with certainty which school of thought best explains why the magic of the economy died in the 70's.  To demonstrate the ambiguities, Krugman presents many examples that lend credibility to both monetarist and Keynesian beliefs.

In the end, the reader gets an extremely in-depth analysis of Keynesian and monetarist ideas.  The reader finds his personal beliefs swinging back and forth between Keynesian and monetarist because the evidence Krugman provides for both sides is so convincing and so concrete.  I found this back-and-forth to be very enlightening and really made me think hard about economics.  I strongly suggest this book to anyone who wants to do the same.

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