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Rose Deller

May 21st, 2018, book review: doughnut economics: seven ways to think like a 21st-century economist by kate raworth.

19 comments | 52 shares

Estimated reading time: 5 minutes

In Doughnut Economics: Seven Ways to Think Like a 21 st -Century Economist , Kate Raworth offers a new model for economics, based around the ‘doughnut’, which values human well-being and advocates for a ‘regenerative and distributive economy’. While the book holds multidisciplinary promise and Raworth draws upon appealing and evocative metaphors and examples to convey economic concepts in accessible terms, Maria Zhivitskaya remains unconvinced of the doughnut’s transformative potential.

If you are interested in this book review, you may like to listen to a podcast of Kate Raworth’s lecture ‘Doughnut Economics: Seven Ways to Think Like a 21-Century Economist’ , recorded at LSE on 23 November 2017. 

Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist . Kate Raworth. Penguin. 2017.

One day economic historians might examine Doughnut Economics as an artifact of thinking that emerged as a result of the 2008 financial crisis, deriving its credibility from the fact that economics failed to predict it. Kate Raworth pursued an undergraduate degree in economics in order to set herself on a career path in an organisation such as Oxfam or Greenpeace, ‘campaigning to end poverty and environmental destruction’. However, she found that those issues she cared deeply about were overlooked by the academic study of economics and so, years later, she wrote Doughnut Economics: Seven Ways to Think Like a 21 st -Century Economist to provide a ‘compass’ to help ‘policymakers, activists, business leaders and citizens alike to steer a wise course through the twenty-first century’. An ambitious aim.

The author positions this book as contrarian and revolutionary, and it dissects seven fundamental principles of economics that she feels need to be updated to make economics a useful discipline. Raworth explains that:

rethinking economics is not about finding the correct [school of thought] (because it doesn’t exist), it’s about choosing or creating one that best serves our purpose – reflecting the context we face, the values we hold, and the aims we have.

In her attempt to bring economics more up-to-date, as the subtitle of the book suggests, Raworth depicts humanity’s goals as a doughnut .

The doughnut has social foundation and human well-being in the middle, and is itself ‘the safe and just space for humanity’ and for a ‘regenerative and distributive economy’, surrounded on the outer edge by the ecological ceiling of ‘critical planetary degradation’. The overall target should be to remain within the doughnut to ensure that we neither fall into conditions of social inequality and suffer shortfalls, such as in water and food, nor allow growth to overshoot into threatening environmental collapse. In her words, this model ‘draws on diverse schools of thought, such as complexity, ecological, feminist, institutional and behavioural economics’. This multidisciplinary promise was the most appealing element of the book for me.

Image Credit: ( Ferry Sitompul CC BY 2.0 )

The book is neatly organised around the ‘seven ways to think like a twenty-first century economist’, which are listed on page 26. These principles are underlined by a broad assumption that economics as we know it doesn’t care about either humans or the environment, and therefore the first thing we should do is ‘change the goal’ from GDP growth to the doughnut. The second principle is ‘seeing the big picture’, where Raworth explains that the market is not self-contained, and that the economy is more embedded in society than some economists assume.

Raworth acknowledges the vast influence economics as a discipline has had on the way we think: in particular, the notion of the ‘rational economics man’, which she suggests we need to replace with ‘social adaptable humans’. To demonstrate how unreasonable the ‘rational economic man’ assumption is, she quotes a Wikipedia page that lists 160 cognitive biases. Her argument goes that due to the sheer number of these, economics as a discipline is unhelpful. That seemed like a weak argument to me, not least because Daniel Kahneman, who discovered many of these, won the Nobel Prize in Economics. Using his discovery as a way to demonstrate the weakness of the discipline seems unfair.

The fourth principle is that we need to ‘get savvy with systems’, and appreciate that the real economy doesn’t comply with the supply-demand equilibrium but is instead embedded in dynamic complexity. The fifth and sixth are ‘design to distribute’ and ‘create to regenerate’, as Raworth claims that the assumption that growth reduces inequality and facilitates environmental improvements is false. Finally, the seventh recommendation is that we should be ‘agnostic about growth’:

today we have economies that need to grow, whether or not they make us thrive: what we need are economies that make us thrive, whether or not they grow.

Not surprisingly, three of the seven principles claim that growth doesn’t lead to redistribution of wealth or environmental regeneration and is overall not a helpful goal, which is why Raworth suggests we should rather be redistributive and regenerative by design.

Raworth’s attentive choice of words throughout the book is very attractive: for example, she quotes George Lakoff who summarises the US Conservatives’ use of ‘tax relief’ compared to the US left’s ‘tax justice’, concluding that this subtle reframing ‘helped to channel public outrage and mobilize widespread demand for change’. Her book, too, demands change. Raworth goes all the way back to Ancient Greece to draw on Aristotle’s distinction between the terms ‘economics’ – the ‘practice of household management’ – and ‘chrematistics’ – ‘the art of acquiring wealth’ – to criticise modern economics as being all about the latter. The book is also peppered with charming anecdotes: for example, did you know that the popular board game Monopoly is derived from the original ‘The Landlord’s Game’?

Raworth suggests that ‘economists need a metaphorical career change: from engineer to a gardener’, which is a quote ironically inspired by Friedrich Hayek, who originally meant it in a laissez-faire kind of way. Raworth beautifully explains that gardening actually entails the hands-on creation of conditions necessary for success. However, while her metaphors are flowery and appealing, they do not offer any real policy advice about how to tackle the complicated issues she highlights. Instead, the book is full of statements such as ‘building diversity and redundancy into economic structures enhances the economy’s resilience, making it far more effective in adapting to future shocks and pressures’; and ‘it is far smarter to create economies that are regenerative by design, restoring and renewing the local-to-global cycles of life on which human well-being depends’. Practical policy questions, such as tackling the complexities of integrated environmental and economic accounting, are outside the scope of her idealistic vision.

Overall, Doughnut Economics is excellent at describing economic concepts in accessible terms, and could be read as an add-on to an introductory economics textbook. Raworth’s in-depth summary of climate change is very well argued and would be useful for challenging climate change denial: in this sense, the book is more about sustainable development than economics.

Raworth criticises economists and politicians for debating ‘economic efficiency, productivity, and growth […] while hesitating to speak of justice, fairness, and rights’, without providing tangible policy recommendations. She calls for bringing ‘humanity back at the heart of economic thought’, and criticises the likes of Harvard and the London School of Economics for promoting ‘research in what are known as the “top” journals, but those journals simply maintain the status quo’. Her plea is to change that and teach history and philosophy in conjunction with economics, which is a useful suggestion that more universities could take on board, perhaps borrowing from LSE’s curriculum for Economic History studies and Oxford University’s Politics, Philosophy and Economics course that has been taught there for almost a century. So, despite the book’s gloomy view of the current state of the world, perhaps not all hope is lost.

Maria Zhivitskaya completed a PhD in Risk Management from the LSE Accounting Department in 2015, worked for Goldman Sachs afterwards, and currently works for Prudential plc. Read more by Maria Zhivitskaya .

Note: This review gives the views of the author, and not the position of the LSE Review of Books blog, or of the London School of Economics. 

About the author

19 Comments

Thanks for the review. I’ve been considering reading the book for a while and might give it a go.

One thought though – maybe Kahneman would be ok with his work (admittedly from what I know of it) being used against economics as it shows that ‘rational economics man’ is flawed.

There are many books out there which are more thoughtful…

• Pingback: EUROPP – Book Review: Doughnut Economics: Seven Ways to Think like a 21st-Century Economist by Kate Raworth

A most helpful review: insightful, balanced, positive, and to the point. Thank you, Maria.

“To demonstrate how unreasonable the ‘rational economic man’ assumption is, she quotes a Wikipedia page that lists 160 cognitive biases. Her argument goes that due to the sheer number of these, economics as a discipline is unhelpful. That seemed like a weak argument to me, not least because Daniel Kahneman, who discovered many of these, won the Nobel Prize in Economics. Using his discovery as a way to demonstrate the weakness of the discipline seems unfair.”

Let’s remember that Kahneman, a psychologist himself, won the Nobel Prize in Economics precisely because he demonstrated the weaknesses of the discipline with regards to “rational economic man” theory, and yet mainsteam economics is still predominantly couched in “rational economic man” theory. So, Raworth is correct to use Kahneman’s work to argue that economics as a discipline is unhelpful, and it seems as like you’re simply scoffing at her use of Wikipedia.

Well said Chris! Clearly humans often make irrational decisions for a multitude of reasons. It was a very odd criticism to make.

In addition, the criticism “Practical policy questions, such as tackling the complexities of integrated environmental and economic accounting, are outside the scope of her idealistic vision.” is also not valid as environmental, social and corporate governance factors are being integrated into investment decision-making for example. Bloomberg, MSCI etc. allow users to access and use ESG data.

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Amsterdam is adopting Kate Raworths Doughnut https://www.theguardian.com/world/2020/apr/08/amsterdam-doughnut-model-mend-post-coronavirus-economy

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The economy and how it impacts families is a burning issue today, as inflation and high interest rates dominate the news in the United States. In the United Kingdom, economics is at the heart of the troubles plaguing the island nation and former empire that changed prime ministers three times in 2022. Throughout the world, too, the economy is a major talking point.

As you read through our list of the seven best books that cover economics, you’ll find diverse and in-depth viewpoints covering how this science plays out in everyday life.

In "Serious Money: Walking Plutocratic London," our best overall book, sociologist Caroline Knowles takes you through the neighborhoods of the capital city, telling stories of how the ultra-wealthy live and work; how they spend their money, marry and divorce; and why London is one of the best places for those with nefarious intentions to hide money from authorities. The Times of London called the book a “latter-day 'Canterbury Tales.'”

Another fascinating read is "When McKinsey Comes to Town: The Hidden Influence of the World’s Most Powerful Consulting Firm" by Walt Bogdanich and Michael Forsythe, which investigates the prestigious, powerful consulting firm, revealing where it has failed to live up to its carefully cultivated sterling reputation. The New York Times investigative journalists detail how McKinsey sometimes works for opposing sides without revealing its obvious conflicts of interest and offers its clients advice that can lead to unsafe outcomes. 

Cambridge University political economist Helen Thompson has generated buzz for her "Disorder: Hard Times in the 21st Century ," which delves into the reasons for the world’s instability. Thompson reveals that shakiness is tied to geopolitics, which centers on energy, economics, and how the democracies of the most powerful nations work and interact.

Best Overall: 'Serious Money: Walking Plutocratic London'

Coverage of the ultra-wealthy rarely reveals the reality behind their day-to-day lives—their many houses and super-yachts, the tony schools they attend, their memberships in exclusive clubs, traveling adventures, and the ease and perks that being very well-heeled affords them. Here’s a book that shows you just that. It is especially relevant now, as Britain’s richest-ever prime minister (at least in modern times), Rishi Sunak, a former investment banker, and his wife, Akshata Murty, a tech heiress who reportedly is wealthier than King Charles III, take up residence at No. 10 Downing Street.

In "Serious Money: Walking Plutocratic London," author and sociology professor Caroline Knowles takes you on a slow, satisfying stroll through super-wealthy London, thanks to interviews with movers and shakers, support staff, and consultants. In the context of the Panama Papers and the Paradise Papers, both of which revealed offshore entities used by the global elite, Knowles writes, “London is internationally renowned for its expertise in hiding money.” She is a former professor at Goldsmiths and now a global professorial fellow at Queen Mary, both University of London, and the author of "Flip-Flop: A Journey Through Globalisation’s Backroads and co-author of Hong Kong: Migrant Lives, Landscapes, and Journeys ."

The book features maps of London neighborhoods and stories from 43 individuals, all of whom remain anonymous and are given nicknames. They include:

• Boy, a young entrepreneur and owner of a bar in Shoreditch, a hipster neighborhood adjoining The City, London’s Wall Street
• Quant, an algorithm writer for a bank
• Cake, a former banker and private equities dealer specializing in fintech
• Butler, a butler who has worked in some of London’s wealthiest households
• Journo, a Russian journalist and chronicler of London’s invisible Russian entrepreneurs
• Walker, a family office employee who works on domestic and family services
• Palace, a Notting Hill mom who hails from the landed aristocracy and does volunteer work
• Babysitter, a young woman who explains life in a commuter village
• Traveller, who organizes unusual luxury trips and travel experiences for very wealthy clients 

After observing protests outside the Saudi embassy, Knowles notes, “Just as in London, you are supposedly never more than six feet away from a rat, in [moneyed] Mayfair, you are rarely far from a human rights violation.” Another story tells of a London divorce in which the soon-to-be ex-wife, a former model, asks the court for £500 million annually to fund a lavish lifestyle that includes three staffed homes, steady replenishment of her shoe and jewelry stock, and many other excesses, and is awarded £53 million instead.

Knowles also discusses how plutocratic London co-exists side by side with wealth from the Middle East and Britain; how income inequality was at its ugliest in the lead-up and aftermath of the fire at the low-income-housing Grenfell Tower in 2017 that killed 72 people and displaced everyone living there; and how life among some of London’s wealthy has carried on uninterrupted for generations.

Best Exposé of a Powerhouse Company: 'When McKinsey Comes to Town'

Any employee or ex-employee of a corporation knows that “when McKinsey comes to town,” heads are going to roll, and it could be theirs. In Walt Bogdanich and Michael Forsythe’s riveting, heavily annotated book "When McKinsey Comes to Town: The Hidden Influence of the World’s Most Powerful Consulting Firm," the authors blow McKinsey’s cover as the good guys with integrity and discretion. They detail how this influential, tight-lipped consulting firm plays both sides of the fence, so to speak, by working for opposing sides without acknowledging conflicts of interest and rendering advice to some unsavory clients at the expense of safety and other unfortunate outcomes in the interest of driving up short-term profits for the client and collecting high fees for McKinsey.

Both authors are award-winning journalists who now report for The New York Times. They explain how this “company defined by numbers, spreadsheets, and PowerPoint slides” enjoys near-absolute loyalty from its consultants, sometimes years after they have left the firm, and how that steadfastness proved a challenge in their reporting. Fortunately, some “McKinseyites” stepped forward to proffer insights into the firm’s practices and personalities.

McKinsey faced a disaster of its own making in South Africa, detailed in the chapter “Clubbing Seals: The South African Debacle.” McKinsey came to Johannesburg, hoping to establish a lucrative African foothold. Eventually, the firm became the focus of several government investigations involving “tainted contracts” and other irregularities connected to the country’s railroads and electricity utility, the airline South African Airways, and the financial consultancy Regiments Capital. McKinsey publicly apologized to the South African government several times, but the series of faux pas; links to the influential, corrupt South African Gupta family, and other illegal dealings rendered it mortally wounded in South Africa and left a stain on its global reputation.  

Best Biography of an Economist: 'Empathy Economics'

Janet Yellen is a rare individual. She is a highly accomplished woman and scholar in a male-dominated profession and is now the first female U.S. Treasury secretary . She has held the other two top economic policy jobs in the nation—chair of both the Federal Reserve and the Council of Economic Advisers —and was the first woman in both posts. In Owen Ullmann’s meticulous and laudatory "Empathy Economics: Janet Yellen’s Remarkable Rise to Power and Her Drive to Spread Prosperity to All," he outlines Yellen’s philosophy of lifting up those from the economic ladder’s lowest rung and her humanity, which stands out in the brutal world of Washington politics.

Yellen grew up in Bay Ridge, Brooklyn, N.Y. She is the daughter of a physician who employed a pay-what-you-can policy for his patients and a former elementary schoolteacher mother, who also ran her husband’s practice after he had a medical setback. Ullmann, an award-winning journalist, takes the reader from Yellen’s happy, stable childhood, where she observed economic disparities among the patients who visited her father’s office. He recounts the gender discrimination she has faced at universities and throughout her career, as well as her 1978 marriage to George Akerlof, who won the Nobel Prize in Economics.

He details her stints at the Fed—including her firing by then-President Donald Trump, who said in a staggeringly superficial pronouncement that she was too short to be Fed chair, a job she had been doing well for four years before Trump took office—and her professional life today. Ullman writes of Yellen: “One signature achievement involves climate change: For the first time, she made it the focus of every aspect of the financial world that the Treasury supervises.”

A speech to her Treasury Department staff after her confirmation shows how Yellen’s earliest experiences are still with her. “My father was a doctor in a working-class part of Brooklyn, and he was a child of the Depression,” she said. “He had a visceral reaction to economic hardship, telling us about patients who lost their jobs or who couldn’t pay. Those moments remain some of the clearest of my early life, and they are likely why, decades later, I still try to see my science—the science of economics—the way my father saw his: as a means to help people.”

Best on Economic Fault Lines in Today’s Unstable World: 'Disorder: Hard Times in the 21st Century'

The University of Cambridge political economist Helen Thompson writes about long-standing political rivalries among the great powers in her well-received "Disorder: Hard Times in the 21st Century," short-listed in September 2022 as one of the Financial Times ’ best books this year. The book’s subtitle is a homage to author Charles Dickens and “his meditation on industrial civilization pitted against ‘the innumerable horsepower of time’” in "Hard Times: For These Times."

Today’s pressure points and shocks, writes Thompson, are in economics, technology, military strength, and domestic political resilience. She notes that disruption in the last decade has been wrongfully attributed to populist nationalism in the context of the financial crisis of 2007 and 2008 and the plummeting of a “purportedly liberal international order,” adding that “at the systemic level, much remains unexplained, not least because energy has gone unrecognized as an important cause of the geopolitical and economic fault lines at work.”

Thompson builds her message around three histories—geopolitical, which centers on energy; economic; and democracies—all of which she ties together to help explain the growing instability in the world today.

Best Collection of Opinions: 'Economics and the Left'

In "Economics and the Left: Interviews with Progressive Economists ," editor C.J. Polychroniou presents 24 economists “whose lifework has been dedicated to both interpreting the world and changing it for the better,” in their own words and on various topics. These include their home countries, modern monetary theory (MMT) , Marxian and Keynesian perspectives, how their upbringing and parents helped to form their economic views, and the impact of COVID-19.

The group includes:

• Brazilian Nelson Henrique Barbosa Fihlo
• Briton Diane Elson
• American, specifically Californian, Teresa Ghilarducci
• Chinese, now U.S.-based, Zhongjin Li
• Turkish, now U.K.-based, Ozlem Onaran

Polychroniou is a political scientist, political economist, author, and journalist who has taught and worked at numerous universities and research centers in Europe and the United States. About the economists, the Bloomsbury Publishing website writes that “they are all people dedicated to the principles of egalitarianism, democracy and ecological sanity. The result is a combustible brew of ideas, commitments and reflections on major historical events, including the COVID-19 pandemic and resulting global economic recession.”

Best on Economic Pursuit as the New Religion: 'Work Pray Code'

Religions, their services, and rituals are often the go-to destination for many individuals outside of work as a place of faith and fellowship. They also help people develop an identity and sense of belonging and purpose.

Yet that’s not the case for some tech workers in Silicon Valley, according to University of California-Berkeley sociologist Carolyn Chen in "Work Pray Code: When Work Becomes Religion in Silicon Valley ." In sync with their employers’ aim in Silicon Valley, these white-collar employees have created a “theocracy of work,” she argues, now willingly accepting “spiritual” sustenance from their workplace and employers.

Chen is an associate professor of Asian-American and Asian diaspora and comparative ethnic studies at the San Francisco-area university. She notes that some Silicon Valley employers willingly take on the pastoral roles that ministers, rabbis, priests, and imams once handled. In addition to doling out pay and providing traditional perks such as company cafeterias, which were common in paternalistic companies like the film company Eastman Kodak in the 1950s and ’60s, tech companies now assume maternalistic roles. Their perks can include wellness offerings—yoga, massages, and mindfulness classes—and 24/7 foods and snacks that are often gourmet in quality and cater to a variety of tastes and ethnicities.

Most tech workers at knowledge hubs come from elsewhere, be it a foreign country or another part of the U.S. They arrive in Silicon Valley with virtually no network, so they commence forming their connections and identity in the tech workplace. Chen’s research and interviews also show that some formerly religious individuals abandon their faith practices upon relocating to Silicon Valley. They then put the energy and fervor they once injected into their spiritual life into tech startups and jobs—a trend more prevalent among workers in their 20s, 30s, and early 40s than in older techies.

“Silicon Valley indeed killed the Buddha,” writes Chen, who also authored "Getting Saved in America: Taiwanese Immigration and Religious Experience." “But they have replaced the Buddha with another religion’s leader, the productivity leader in the religion of work. Like the dry cleaners, chefs, masseuses, and executive coaches, he’s there to ‘awaken’ tech workers to their full productivity.”

Best for Making Economics Simple: 'Talking to My Daughter About the Economy or, How Capitalism Works—and How It Fails'

Sometimes, the “soft science” of economics warrants a series of simple explanations that build as new concepts are presented. That’s the approach taken by former Greek finance minister and University of Athens economics professor Yanis Varoufakis in "Talking to My Daughter About the Economy, or How Capitalism Works—and How It Fails ." While nearly everyone can benefit from this book, beginners in economics will gain the most.

The author begins with the chapter “Why So Much Inequality?” a question that his daughter, Xenia, asked him when she noticed the economic disparities among children in the world. He spells out the ancient beginnings of markets, surpluses , the advent of writing, debt, money, and the state. In subsequent chapters, he delves more deeply into the birth of a market society , the marriage of debt and profit, banking, and pandemics. Varoufakis is also the co-founder with Croatian philosopher Srećko Horvat of DiEM25, the Democracy in Europe 25 organization, a pan-European organization that aims to restructure European treaties.

Final Verdict

If you want to pull back the curtain on London’s vast wealth and secretive world of its mega-rich, then spend time with "Serious Money: Walking Plutocratic London" by sociologist Caroline Knowles. She used her interviews with representative individuals in London and surrounding areas and research to paint a vibrant portrait and create a satisfying read about where Londoners spend, hide, save, and invest their “serious money.”

Michelle Lodge knows how to find the best of its kind in the book world. She has been published in Publishers Weekly and was an editor and writer for Library Journal , both of which cover books and the industry. While a book review editor at Library Journal , which recommends books for public library collections, she selected a number of top books on economics for review. She was also the editor of the On Wall Street Book Club, in which she reviewed books and interviewed authors on a podcast.

Seeking out a diversified field of books on economics requires lots of reading, including releases from book publishers and industry consultants, a passel of contenders, as well as publications, such as the Financial Times , The New York Times , the London Review of Books , and Bloomberg, and consultations with many experts. Lodge also pulled her resources together by collecting recommendations from Investopedia Financial Review Board members and Investopedia editors. Lodge’s aim is to present the reader with factual, actionable books that are well-written, enjoyable to read, and cover the bases in subject matter and expertise. Her goal is also to tap into a diverse pool of new and established writers, whose coverage reveals the many influences on and perspectives about economics.

CNBC. " Britain's New PM Is Almost a Billionaire — With a Net Worth of Twice That of King Charles ."

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The Economist Guide to Financial Markets: Why They Exist and How They Work (Economist Books) Paperback – January 28, 2014

• Print length 304 pages
• Language English
• Publisher The Economist
• Publication date January 28, 2014
• Dimensions 5.5 x 0.88 x 8.5 inches
• ISBN-10 1610393899
• ISBN-13 978-1610393898
• See all details

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About the author, product details.

• Publisher ‏ : ‎ The Economist; 6th edition (January 28, 2014)
• Language ‏ : ‎ English
• Paperback ‏ : ‎ 304 pages
• ISBN-10 ‏ : ‎ 1610393899
• ISBN-13 ‏ : ‎ 978-1610393898
• Item Weight ‏ : ‎ 10.4 ounces
• Dimensions ‏ : ‎ 5.5 x 0.88 x 8.5 inches
• #162 in Bonds Investing (Books)
• #302 in Commodities Trading (Books)
• #4,459 in Finance (Books)

About the author

Marc levinson.

Marc Levinson is an independent historian, economist, and author. He spent many years as a journalist, including a stint as finance and economics editor of The Economist. He later worked as an economist at JP Morgan Chase, managed a staff advising Congress on transportation and industry issues at the Congressional Research Service, and served as senior fellow for international business at the Council on Foreign Relations. For more information, check out his website at www.marclevinson.net.

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Customers find the book informative, insightful, and easy to read. They appreciate the excellent overview and good amount of detail on how financial markets work. Readers also mention the vocabulary is easy to understand and read.

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Moneyweek book review: The Undercover Economist

Tim Harford's book, The Undercover Economist, is a lively and witty introduction to the seemingly baffling claims of economics.

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"Few mothers are thrilled to learn that their daughter is dating an economist," says John Kay in the FT. Most people think economists are obsessed with interest rates, GDP statistics and other tinder-dry issues often discussed with dizzyingly complicated graphs. Enter Tim Harford, who over the past few years has written weekly articles in the FT applying economic principles to everyday life issues have ranged from flossing teeth to buying leeks and has now produced a book to show that economics is far more intriguing and relevant than most people believe.

Harford's "concise and elegant" book is a "lively and witty" introduction to the subject, showing that popular economics needn't be "an oxymoron", says Paula Hawkins in The Times. Harford explains why a good second-hand car is almost impossible to find and why organic bananas are never displayed next to normal ones on a supermarket shelf. He also explores why we pay so much for coffee, especially in key locations such as railway stations, a discussion he bases on David Ricardo's 1817 treatise on agricultural rents.

Just as meadows command high rents if the grain they produce is valuable, prime location coffee- bars cost their owners a bundle in rent because customers are prepared to fork out more. "Rush-hour customers are so desperate for caffeine and in such a hurry that they are practically price-blind," says Harford. Furthermore, coffee-bar owners are adept at teasing out price-insensitive customers by offering small variations to drinks at virtually nil cost to the company at vastly different prices. In short, it seems high coffee prices are largely our own fault. Harford also goes beyond the everyday, tackling China, environmentalism, development and globalisation, outlining why boycotting firms using sweatshop labour is counterproductive and how struggling developing countries can escape poverty.

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Harford's book "leads the reader to the point" where seemingly "outrageous" statements by economists seem sensible, says Tim Worstall in The Daily Telegraph. Anyone confused by "how the world works" will benefit from reading it. The FT's Martin Wolf agrees: Harford shows that the "powerful underlying ideas of economics can illuminate every aspect of the world we inhabit".

The Undercover Economist is published by Little, Brown, and costs £17.99

Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.

Google is fending off legal challenges from both the EU and the US. But would breaking it up actually work?

By Dr Matthew Partridge Published 24 September 24

US Election Donald Trump is at the center of the US election yet again, but not for good reason. Will there be a peaceful handover of power in 2025?

By Dr Matthew Partridge Published 23 September 24

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PEOPLE, POWER, AND PROFITS Progressive Capitalism for an Age of Discontent By Joseph E. Stiglitz

A diverting Beltway pastime during the heyday of the Washington Consensus was to gently mock Joseph E. Stiglitz. It was remarkably easy for pundits to wave away his prestigious awards (Nobel Prize in Economics) and positions (World Bank chief economist, chairman of Bill Clinton’s Council of Economic Advisers) and dismiss his warnings about “market fundamentalism” as overripe hyperbole. In 2004 the financial columnist Sebastian Mallaby described Stiglitz as “like a boy who discovers a hole in the floor of an exquisite house and keeps shouting and pointing at it.” Fifteen years later, the house that capitalism built looks rather shabby. Maybe, just maybe, more people should have taken Stiglitz seriously.

This is certainly what Stiglitz, now a professor of economics at Columbia , is hoping for with his latest book, “People, Power, and Profits.” He argues that the American system of capitalism has fallen down and needs government help to get back up again. “People, Power, and Profits” builds on Stiglitz’s earlier work and adds some pretty big ambitions. In the preface, he writes: “This is a time for major changes. Incrementalism — minor tweaks to our political and economic system — are inadequate to the tasks at hand.” In the introduction, he adds: “It is not just economics that has been failing but also our politics. Our economic divide has led to a political divide, and the political divide has reinforced the economic divide.”

Stiglitz’s diagnosis of what ails the American economy will have a familiar ring to anyone who has followed these debates. The rules of the game have been stacked in favor of the haves over the have-nots. This has widened economic inequality and increased the concentration of market power among leading firms in every sector, slowing down broad-based productivity growth. These firms and wealthy individuals are converting their riches into political power, further revising the rules to entrench their position at the top. They advocate for tax cuts and the deregulation of everything except intellectual property rights. Anyone who relies on countervailing institutions, like public education, labor unions or social safety nets, loses out.

“People, Power, and Profits” goes beyond diagnosis to treatment. At the core of Stiglitz’s plan is the strengthening of the state. “The view that government is the problem, not the solution, is simply wrong. To the contrary, many if not most of our society’s problems, from the excesses of pollution to financial instability and economic inequality, have been created by markets.” He proposes a whole host of reforms, including significant investments in public goods like basic research, more stringent regulation of firms and measures to preserve and protect the voting franchise.

A cruel irony of “People, Power, and Profits” is that in arguing the free market has declined, Stiglitz is competing in an extremely crowded marketplace. The genre of “How has America gone wrong?” is overstuffed; we are living in a golden age of authors telling Americans that we no longer live in a golden age. Given the plethora of books on this topic, does Stiglitz’s stand out?

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Book Review: ‘America First’ is a resonant history of FDR’s fight against isolationist movement

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Historian H.W. Brands’ “America First: Roosevelt vs Lindbergh in the Shadow of War” barely mentions former President Donald Trump or the 2024 election. But it could be one of the most relevant books to read for this year’s presidential campaign.

Brands has written a resonant history of how Roosevelt fought behind the scenes — and eventually publicly — against the “America First” movement whose name was later appropriated by Trump, who is seeking a return to the White House in this year’s election.

The book chronicles how aviator Charles Lindbergh became the charismatic face of the “America First” movement that arose in the wake of the WWI and urged against the United States’ intervening overseas as Adolf Hitler rose to power.

Brands expertly displays the control President Franklin Delano Roosevelt displayed in approaching the movement during his early years in office, despite seeing the threat it could pose to foreign policy in the long term.

“Their policy was really ‘America alone,’ at a time when the United States needed all the help it could get in dealing with the existential challenge of militant fascism,” Brands writes.

The book also displays how Roosevelt maneuvered around Lindbergh during his rise, trying to avoid aggravating the aviator’s followers as the U.S. inched closer toward involvement in Europe. Brands tells how Lindbergh’s rhetoric fueled his rise as “America First” spokesman but also led to his downfall, culminating in a 1941 speech widely condemned for its antisemitism.

Brands shows great restraint in avoiding for most of the book in drawing parallels between Roosevelt’s fight with isolationists to today’s politics, and some conservatives’ opposition to spending more on overseas wars. But his straightforward history is an important guide for understanding the legacy of the movement that Lindbergh led.

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Book Review: “Paper Soldiers: How the Weaponization of the Dollar Changed the World Order”

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Paper Soldiers: How the Weaponization of the Dollar Changed the World Order Saleha Mohsin Penguin/Portfolio, 2024; xx + 282 pp. Recognizing pivotal moments in history as they unfold is a challenging task, yet certain events unmistakably signal shifts in established orders. Before February 2022, the United States Treasury had seized foreign nations’ exchange reserves and restricted access to the dollar-based Society for Worldwide Interbank Financial Telecommunications (SWIFT) system, but this generally involved small, recalcitrant rogue states. With the levying of these measures against Russia—a G7 nation, global commodity producer, and nuclear power—it was clear even to casual observers that a significant threshold had been crossed. The weaponization of the US dollar—which, despite years of systematic debasement, has remained the global reserve currency and fundamental unit of account in international commerce—marked the start of a new era.

In Paper Soldiers: How the Weaponization of the Dollar Changed the World Order , by Bloomberg reporter Saleha Mohsin, the path of dollar policy up to that point is traced with a particular emphasis on the fiscal side. Following a very brief primer that runs from the Legal Tender Act of 1862 through the collapse of the Bretton Woods agreement in 1971, Mohsen takes readers from milestone to milestone in the last four decades of the greenback, starting with the Plaza Accord in 1985. From the well-known to the scarcely recalled, US Treasury secretaries from Robert Rubin and Steven Mnuchin to John Snow and Lloyd Bentsen are viewed through the prism of their commitments to strong or weak dollar policies and the consequent impacts on constituencies ranging from US labor to foreign investors. Debt ceiling fights, the September 11 attacks, and the ascendance of Trump are some points of interest along the way.

Among the highlights of the book are fascinating glimpses into some of the most secretive subdepartments of the US Treasury. One such, located in a dusty, unremarkable building only accessible to individuals with a top secret security clearance, is the Office of Foreign Assets Control and its staff of lawyers, intelligence officers, and sleuths who manage the “game-over blacklist” of the Specially Designated Nationals and Blocked Persons List (SDN). Readers are introduced to the unelected officials who give an ever-growing raft of US sanctions and other dollar-based penalties its teeth.

The book is not intended as an academic publication, and much of its discussion on complex topics is adequately tailored for an educated lay audience. But one might have expected some recognition, however tacit, that a money whose relative value is driven by verbal interventions is an absurdity in both practical terms and historical context. The fundamental strength of commodity-backed money lies in its precise definition of monetary units based on specific weights and purity standards, which in turn lead to stable prices, the ability to calculate economically, and so forth. Thus, when we read of the tremendous gravitas arising from Trump treasury secretary Steven Mnuchin’s comment that US dollar policy would see no change “as of now,” with trillions of dollars potentially pinwheeling on the choice of three words, it becomes immediately apparent how far America has strayed from its foundational principle of hard money.

If there is a flaw in Paper Soldiers , it is that at junctures it takes a turn toward the unduly romantic. While political statements such as “A strong currency needs a strong democracy” (242) and “Faith in democracy and faith in markets go hand-in-hand” (225) evoke sentimentality, they are vastly at odds with economic history and lived experience. Democracy, markets, and the relative strength of currencies are nowhere nearly as linked as the ornate, reductive, and fundamentally inaccurate picture painted by Clinton administration treasury secretary Robert Rubin.

Indeed, Lipscy (2018 , 938) finds that whatever advantages democratic governance may have over the alternatives, financial crises are more common in democracies: “[It] is a striking regularity that can be traced back to the early nineteenth century, and perhaps even earlier. The finding is robust to a variety of controls and model specifications. The association is also robust across time periods: the relationship exists in the nineteenth and twentieth century, before and after World War II, and before and after the collapse of the Bretton Woods System.”

More recently, Hansen (2023 , 356) reports that “in a sample of up to 96 developing countries . . . democracies have worse credit ratings and [credit default swap] spreads and are more likely to default than their autocratic counterparts when foreign reserves are low relative to external debt. . . . I also show that large debt burdens increase credit risk mainly in more democratic countries.” Why? Hasanov and Bhattacharya (2023 , 286) believe that features of democratic governance render them susceptible to economic fragility: “For example, political constraints and prevailing political conditions may usher in unsustainable macroeconomic policies. Concerned about being punished by the electorate, democratic governments could implement unnecessary but popular economic policies to sustain popularity.” On the specific relationship between currencies and governance, less than a decade ago Steinberg , Koesel , and Thompson (2015 , 357) noted that

somewhat surprisingly . . . currencies crises are no more or less likely in democracies than in civilian or military dictatorships. However, one political regime stands alone for its superior ability to prevent currency crises: monarchies. Our data analyses uncovered a monarchic advantage—that is, a robust negative correlation between monarchic regimes and the likelihood of currency crises. The results also demonstrated that a major reason why currency crises are exceedingly rare in monarchies is that this regime type adopts unusually prudent monetary and foreign reserve policies.

Professor Hans-Hermann Hoppe identifies the vastly disparate incentive structures of democracies and monarchies of key importance in explaining trends which have persisted for centuries. First, on the character of the government apparatus in operation,

the defining characteristic of private government ownership is that the expropriated resources and the monopoly privilege of future expropriation are individually owned. . . . In contract with a publicly-owned government the control over the government apparatus lies in the hands of a trustee, or caretaker. The caretaker may use the apparatus to his personal advantage, but he does not own it. . . . A private government owner will tend to have a systematically longer planning horizon, i.e., his degree of time preference will be lower, and accordingly his degree of economic exploitation will tend to be less than a government caretaker. . . . Hereditary monarchies represent the historical example of privately-owned governments, and democratic republics of publicly-owned governments. (Hoppe 1995 , 95–100)

Nowhere is the dichotomy between democracies and monarchies clearer than in the monetary realm. As Hoppe elucidates in Democracy: The God That Failed ,

it was only under conditions of democratic republicanism—of anonymous and impersonal rule—that [monopolies of irredeemable government paper money] was accomplished. During World War I, as during earlier wars, the belligerent governments had gone off the gold standard. Everywhere in Europe, the result was a dramatic increase in the supply of paper money. In defeated Germany, Austria, and Soviet Russia in particular, hyperinflation conditions ensued in the immediate aftermath of the war. Unlike earlier wars, however, World War I did not conclude with a return to the gold standard. Instead, from the mid-1920s until 1971, and interrupted by a series of international monetary crises, a pseudo gold standard—the gold exchange standard—was implemented. . . . As a result . . . a seemingly permanent secular tendency toward inflation and currency depreciation has existed. (Hoppe 2001 , 57–58)

Democracies, like all forms of government, operate on the principle of a monopoly on coercion; markets operate on the basis of money prices responding to supply and demand, which is in turn driven by entrepreneurship, competition, voluntary exchange, and cooperation. Both serve different objectives; neither implies, much less requires, the other.

Paper Soldiers is a worthwhile read. General readers with an interest in economic policy are likely to find the vignettes depicting the inner machinations of dollar management at the US Treasury interesting, although academic readers may find portions of the book oversimplistic. Sound money proponents will find not a confidence-inspiring narrative of deft currency choices in an increasingly volatile and unpredictable world (whether or not that was the author’s intention) but rather a brief history of the increasingly manipulated, ungrounded scrip of a beleaguered, and perhaps declining, empire. Yet that account is not without value.

Submitted : August 06, 2024 CDT

Accepted : August 10, 2024 CDT

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Written with wit, style and a formidable command of detail, this book places the successes and disasters of the 20th century in their economic context. In doing so, it provides insights into how things have gone wrong in more recent years—and what must go right if catastrophe is to be avoided in the current century.

Power Failure. By William Cohan. Portfolio; 816 pages; $40. Allen Lane; £35

A monumental study of the firm founded in 1892 as the General Electric Company. Its story makes clear how important brilliant people are to business success—and how their brilliance can sometimes become a dangerous vulnerability. ■

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