The Best Economics Books of 2024

2024 has been a dynamic year for the global economy. What do you see as the five most consequential economic developments during the last year?

One consequential economic development of 2024 may have been the election of Donald Trump which could remake much of the global economic system with a slowdown or even reversal of the process of globalization. A second consequential development was that this slowdown or even reversal of the process of globalization has begun already and is not just based on the views of one person—the Biden administration put 100 percent tariffs on Chinese-made electric vehicles and the European Union followed suit with large tariffs of its own. Third, inflation came down dramatically everywhere—allowing central banks around the world to start cutting rates. But fourth, inflation did not come all the way down to central banks’ targets and by the end of the year there were signs of a resurgence—so investors braced for rates to stay higher for longer. And finally, AI may have been the most consequential development of 2024—but we do not yet know in what way it was consequential. We could look back at 2024 as the beginning of widespread deployment of AI that started to transform our productivity. Or we could look back at 2024 as the year that generative AI started to plateau as it ran out of new high-quality data.

Your first recommendation concerns an economic factor of subsiding salience in the global economy. Please tell me about Shock Values.

The big economic story of the last four years has been the rise and fall of inflation. This is not the first time that inflation has dominated the national conversation or affected politics. Carola Binder, an economics professor, offers a history of inflation and monetary institutions in the United States, studying how they have affected politics, reshaped economic institutions, and upended economic theories. The book has several themes: inflation and disinflation has had a distributional aspect, helping some groups and hurting others; unexpected changes in purchasing power and the value of debts have affected contracting and due process; inflation crises have expanded the role of government; and modern inflation targeting has deep historical roots.

Binder highlights the impacts of inflation on governments, businesses, and economies. As the inflation of the last four years subsides, what do you see as its most marked impacts around the world?

The biggest impact has been that incumbent parties have lost everywhere and inflation is almost certainly part of the problem. High price levels are also still with us. To the degree that wages adjusted upwards by a commensurate amount that does not necessarily matter—if you add a zero to all prices then everything will be the same. But wages do not seem to have fully adjusted, at least not yet, leaving workers somewhat behind. There is evidence that going through high inflation permanently changes the mentality of policymakers but so far that is hard to see as politicians around the world are continuing to push inflationary deficit increases while, in some cases, trying to push their central banks to take steps that would increase inflation still further. The problem is that it is always tempting in the short run to undertake policies that just result in added inflation in the long run—which is why the types of institutional arrangements that Binder describes in her book have been so important in overcoming the natural tendencies of politicians.

Your second book also contains a long historical sweep, this time not just the United States but globally. Why did you choose One from the Many: The Global Economy Since 1850?

If inflation has been the big economic story of the last four years then trade might be the big economic story of the next four years. This book zooms out on the ups and downs of not just trade but other forms of globalization like capital movements over the last 170 years. It focuses on three periods: pre-WW I globalization, interwar delinkage, and globalization/hyperglobalization after World War II. It is well-grounded in the economic literature and considers trade, capital and immigration flows.

It is also readable but with no particular attempt at a unique or original thesis. It’s generally pro-globalization with some nuance and downsides—but ultimately it argues, “globalization is nothing more than the urge to trade and improve the quality of life. These goals are a significant part of our shared humanity. In this view, globalization over the long run has been rising and will continue to rise in the future.”

I’m not sure every politician would agree with that thesis, why do you think so many of them are hostile to globalization and do you still have confidence that it will expand?

First, I should say there is much more hostility to trade in the United States than in many other countries. Research shows there are two reasons for that. First, trade is much less important to the United States than it is to other countries. Most people are employed in jobs that are not producing exports and most of what we buy actually is made in America. That’s a stark contrast from a country like Sweden where workers realize they would not have jobs without exports and consumers understand Sweden cannot produce everything they need. A second factor matters too which is that Sweden, and other countries, have stronger social safety nets than the United States so people are better protected from the downsides of trade.

That said, there is no doubt that there is at least some hostility to trade everywhere. Part of the issue is that there are some people that can be very hurt by trade, for example workers competing with foreign producers, while the benefits of trade are collectively larger but more diffuse. The beneficiaries do not realize the ways in which they benefit and absent a strong personal incentive can fall prey to false zero-sum arguments that treat trade and technology asymmetrically even if technology has actually had bigger impacts on jobs. Finally, some of the recent hostility to trade does reflect a reasonable national security concern about the incredible concentration of certain forms of production in China, a country that is a geopolitical rival to the United States and Europe.

All of that said, the benefits of globalization are so large that I believe it is more like a dandelion that can thrive in any conditions than an orchid that needs to be carefully nurtured. There are bumps in the road but we will always have a lot of it.

That leads to your third choice. Behind the Curve: Can Manufacturing Still Produce Inclusive Growth?

The biggest driving force behind politicians misleading the public about trade is the desire to restore a lost heyday of highly paid manufacturing jobs for men without college degrees. This book provides a comprehensive, global, and factually grounded rebuttal to this hope. Full disclosure: Its author, Robert Lawrence, is my colleague at Harvard and the Peterson Institute for International Economics, but I am recommending this because it is the most reliable and comprehensive book on a very important topic.

Lawrence shows that the decline of manufacturing employment in countries around the world (yes, it is also declining in China) was not primarily the result of free trade or other policy choices but instead mostly due to technological advances that require fewer people in production and changing consumer tastes. As people get richer, they buy more services. Moreover, policies that attempt to help protect manufacturing are at best ineffectual and at worst can set back inclusive growth by raising costs for consumers or hurting other workers. He argues for alternative policies to help workers cope with the continued changing economy.

What does “inclusive growth” mean and how can it be achieved?

Lawrence does not sugarcoat the economic situation facing workers in the United States and around the world. He chronicles the fall and then rise of inequality and the people and places that have fallen behind. He also recognizes that the decline of manufacturing played a role in these problems. But he is passionate—or I should really say analytical—about why industrial policy is such a limited and often counterproductive way to solve these problems given that the vast majority of workers facing challenges are not in manufacturing and new manufacturing will employ fewer and fewer workers. Instead, Lawrence pushes for more support for people rather than industries, focusing on assistance for transitions, apprenticeship programs and wage insurance for older workers who cannot get a better paid job.

Next, you’ve named a fourth book by Raghuram Rajan, an economics professor and former head of India’s central bank, and economist Rohit Lamba. Please tell us about Breaking the Mold.

Breaking the Mold picks up where Behind the Curve breaks off, arguing that the same forces that Robert Lawrence analyzes will prevent India from following the East Asian manufacturing-led development path. Instead, to become a richer country India will need to focus on the service sector. Doing this, they argue, will require both better rule of law and governance and more investment in the main input into the service sector—education—focusing on people instead of heavy subsidies to manufacturing.

Although the book is specifically about India its broader analysis and lessons are relevant for a wide range of emerging economies and an interesting window into what might be the most important economic story of the next four decades.

How Economics Explains the World, your final recommendation, connects economics to the broad sweep of human history. Why should we buy this book?

If you read just one economics book in 2024—and perhaps if you just read one economics book in your life—it should be this book by Andrew Leigh, an Australian economics professor turned elected politician. How Economics Explains the World is a relatively short and easy read, proceeding chronologically from the advent of agriculture to the present day. Underlying it is an immense wealth of scholarship and economic ideas about economic history, the process of growth, and economic concepts like opportunity cost and thinking on the margin that are almost invisibly woven into the fabric throughout the book.

One of the few certain conclusions from the anti-incumbent election outcomes of 2024 is that people around the world were angry at their governments, particularly, if polling is to be believed, over pocketbook issues. How does Leigh’s work resonate with the state of economic policymaking and public trust in government institutions?

As an elected politician, Leigh has continued to publish books that are relevant for the public policy issues he works at on his day job. In this case, the overarching theme of the book is enthusiasm for the enormous progress we have made economically, the importance of economics in helping foster that progress, but also enthusiasm for a more robust social safety and appreciation of the role of government in addressing myriad market failures. In this sense, it feels like a contribution to what many are beginning to call “an abundance agenda”.

Finally, based on your experience as Chair of Obama’s Council of Economic Advisers, how do you suggest that governments recalibrate their economic policy apparatuses in 2025?

In 2025 central banks will continue to do the important work they do stabilizing the economy in the short run. Governments should be focusing on the long run, particularly how to increase economic growth and ensure it is more shared and sustainable. The United States has had decent productivity growth but it is terrible in Europe, slowing in China, and mixed in the rest of the world. Technologies like AI offer a hopeful way out of this disappointing situation but ultimately it will take bigger investments in people to advance and harness innovation. These investments in people can also help ensure that this growth is shared. Finally, for growth to be sustainable governments around the world are going to have to start worrying a bit more about high and rising debt levels—and acting a lot more on the threat of global climate change. I don’t expect much or all of this to happen in 2025 but I will keep pushing for it.