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GURU offers a second reading list with books recommended by our readers. The first list is available here.
This is certainly one of the most influential works in the history of economics. Many ideas and concepts were born with this book, and its release made a revolution in economic thought. No wonder Keynes is called the founder of macroeconomics: before him, economists considered individual markets and their interactions, as well as the behavior of individuals in these markets. Keynes proposed to consider the economy as a whole.
He was a well-furnished mind, and it was common for Keynes to bring together economics, mathematics, philosophy and psychology in his works, as well as attention to individuals, their emotions and irrationality (for this reason he is often called the forerunner of behavioral economics).
To a large extent, his ideas were based on the concept of uncertainty, so the central role in his work is given to expectations that influence instant economic decisions.
The General Theory of Employment, Interest, and Money is based on three pillars: effective demand (the total level of spending in the economy, which determines the level of output and employment; meanwhile, producers respond to expected demand – GURU), expenditure multiplier and the theory of interest rate (Liquidity preference theory), Alessandro Roncaglia, the author of the book on the history of economic thought The Wealth of Ideas, says.
Keynes showed that the classical approach to economics, based on the idea of minimal government intervention in the economy, is not able to provide full employment and economic growth. Since the level of employment and economic welfare of society are determined not by savings and investments in the classical sense, but by the general demand for goods and services, it means that at certain moments it needs to be supported. So Keynes made a revolutionary for that time assumption that in an economic downturn, the state should actively intervene in the economy, stimulating demand through government spending, tax cuts and interest rate change. Thus, Keynes emphasized the role of public policy in ensuring economic stability and prosperity.
Almost 90 years have passed since the release of The General Theory of Employment, Interest, and Money, and economists are still arguing about what Keynes wanted to say. There is an immense literature on Keynes' thought: one can say that there is not a single aspect of his theories that does not have many interpretations, Roncaglia writes about Keynes' rich legacy. And these interpretations gave rise to many streams of economic thought, both consonant and arguing with him.
This book is a collection of papers by 12 Nobel laureates on a wide variety of economic phenomena, factors and problems: crises, employment, natural resources, financing retirement, game theory, etc.
For example, Paul Krugman, in the chapter on recessions, talks about the various characteristics and consequences of economic downturns, as well as ways to overcome them. “A depression is, by definition – by my definition, anyway – a situation in which the normal policy measures we take to fight recessions, mainly interest rate cuts by the central bank, are insufficient. Yet this does not mean that nothing can be done. The key is to think differently,” he urges.
Robert Solow (read about his legacy here) writes about sustainable development, showing how economic tools can help to use natural resources more responsibly. Solow argues that unregulated use gives space for irresponsible behavior that produces negative impact on other people and on the environment in general, so “the temptation is always to propose that some expert central body should decide on the appropriate pattern of use of the resources, and impose it on the individuals and firms actually engaged in resource-using activities.” However, in most cases, a policy using market mechanisms is preferable, since the necessary information is scattered throughout the economy and inaccessible to any central authority, while in certain situations a variety of tax incentive and subsidy schemes can be designed, Solow says.
This book is a study on how GDP has become the main instrument for measuring economic growth and development. The author tells about the history of the indicator, its role in shaping economic policy and its impact on people's welfare.
Coyle shows that GDP is not just a statistical indicator of how good or bad things are in a country's economy, but also an important measure of freedom and human opportunities created by a capitalist market economy. GDP reflects, although not without flaws, the level of innovation and opportunities that open up to people. And by using it to measure an economy that increasingly consists of services and intangible goods, we measure our creativity and mutual concern for each other, Coyle argues.
Although GDP as an indicator was conceived by Simon Kuznets (1971 Nobel Prize winner) to measure the real welfare of people, it does not always accurately reflect it, including due to a change in the original idea of Kuznets. Nevertheless, criticism of GDP is often unfounded: it is a measure of economic activity, not an indicator of social equality, well-being or environmental sustainability. GDP and welfare are different things, although there is a close connection between them, Coyle writes.
Instead of rejecting GDP, she urges the search for additional indicators that could give a more complete picture of economic and social development, such as the human development index.
“We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of,” Edward Bernays says in the very beginning of his book, introducing the reader to reality. This work of Sigmund Freud's nephew is a book on ruling masses, and exploring the mechanisms of manipulation of public opinion used by governments, corporations and public figures.
For Bernays, propaganda is an integral part of everyday life. He believes that modern societies are too complex for everyone to form an informed opinion on each issue on their own. Therefore, the systematic use of propaganda is a necessary tool for the functioning of democracy. “Propaganda will never die out. Intelligent men must realize that propaganda is the modern instrument by which they can fight for productive ends and help to bring order out of chaos,” Bernays writes.
“The conscious and intelligent manipulation of the organized habits and opinions o f the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power o f our country.”
Creating circumstances, using authorities and opinion leaders, appealing to emotions – the tools of a propagandist, which Bernays writes about, are diverse. The methods and techniques proposed by him formed the basis of modern practices in the field of advertising, marketing and public relations. For example, the creation of circumstances is a technique by which a previously uncommon idea – say, the need for a music room – is introduced into the public mind. Arranging it in the house will be natural for a person because they have been told that it is so. The most important thing is that in the end a person perceives the idea as his or her own.
In our complex civilization with its invisible government, propaganda becomes a bridge across the gap between intellectuals and the working class, Bernays cynically admits. People “will always need food, crave amusement, long for beauty, respond to leadership.” If people start to understand their requests better and get tired of the old methods, then new, more subtle ones will appear (a prophetic remark, isn't it?). “The only propaganda which will ever tend to weaken itself as the world becomes more sophisticated and intelligent, is propaganda that is untrue or unsocial," Bernays warns.
How did a small group of traders gain great political power by supporting the Libyan rebel army during the Arab Spring or by helping Saddam Hussein sell his oil? Journalists Javier Blas and Jack Farchy answer this and many other unexpected questions in their book The World for Sale. They show how in the modern world, commodities and raw materials have become the most important subjects of trade and commercialization. The authors also explore how corporations, governments and other organizations influence the formation and then control information flows and our thinking, creating the political and economic reality of the day.
As a result, Blas and Farchy present an overview of the most significant deals, which may be of interest to those who want to understand the economic mechanisms of modern society.
Below is a list of other books suggested by our readers:
The Financier by Theodore Dreiser (1912)
A Course on Microeconomics by Rustem Nureev (2005)
Your own financier: How to spend wisely and save correctly by Anastasia Tarasova (2016)
Macroeconomics by Nicholas Gregory Mankiw and Mark P. Taylor (1994)
