Five Books to Teach the Macroeconomy in 2026

And the assignment that gets students to read 300 pages in 3 weeks

The Liberal Arts Ledger is BACK!

This Substack has been on hiatus for the last year because I’ve been busy with teaching, research, and service. Gotta do what they pay me to do first, right?

But now it’s summer, I’ve got Claude Code to help with data cleaning (AMAZING), and I’m working on some very fun new posts.

Very nerdy.

Deep in the weeds.

On topics like:

• What is up with the Earnings Test in that One Big Beautiful Bill? Should LACs be worried?

• Why a smaller provision of the OBBB might really hurt for some Liberal Arts Colleges

• What’s new in the Economics of Higher Education

• How AI has changed what I teach and how

• Do we really need all those Vice Presidents?

But first! A post about pedagogy and the macroeconomy in 2026.

A couple years ago I had to step up to teach Principles of Macroeconomics for the first time because a colleague went on sabbatical. I do know something about how the macroeconomy works (I was a research assistant at the Federal Reserve Board from 2005-2007), but I haven’t taken a class in macro since 2008 so my knowledge definitely needed a refresh. I decided to read a few pop nonfiction books to help me prep.

I loved them! Loved them so much that I made the students read them too, with accountability from a new kind of assignment I made up called The Competitive Book Club.

In this post I’ll tell you about the assignment I came up with, share what I learned from the books we read, and maybe even convince you to put a few books on your summer reading list. Are you teaching Principles of Macro sometime soon? You should read these books.

What is The Competitive Book Club?

Kids these days can’t read whole books. Their attention spans are too short, they only like easy dopamine hits, and they can’t keep complex ideas in mind across long stretches of time.

Phooey. They can too. They just need incentives and practice.

Hence: The Competitive Book Club.

In groups of 3-4, students are assigned to read a whole popular press nonfiction book of my choosing. They read the book, then present what they learned and how it relates to class material, three times, a third of the book each time. Presentations are graded by me and each of the students in the audience, with scores and comments for the group overall and for each presenter individually. I share those comments with the presenters, so they get lots of feedback to improve their content and presentation skills over time. I put multiple choice questions about the books on the midterm and final exams, so the audience has a vested interest in learning from the presenters and giving effective feedback. At the end of each round of presentations, the class votes on which group taught them the most. The winning team gets 2 extra credit points on the next exam and the runners-up get 1 extra credit point.

Leave it to an economics professor to make reading books competitive.

But it works! In anonymous surveys, 78% of students say they read all of their book. 69% say they learned a lot from watching the other students’ presentations. And 78% say they are better presenters because of the feedback they got from the class.

Oh, and did I mention that we do all of this in 3.5 weeks? I teach at Colorado College, where we live and learn on the Block Plan. One course at a time, for both professors and students, an entire 4 credit hour class in 18 days. Yes, with proper encouragement, my students read a 300 page nonfiction book in less than a month, in addition to regular textbook reading and problem sets. Go Tigers!

So, which books do we read and what did I learn?

The Rise and Fall of the Neoliberal Order by Gary Gerstle

The main thesis of the book is that societies coalesce on “political orders,” eras in which the major parties accept a set of ideas and then fight over the details. There were two political orders in the US in the 20th century: the New Deal Order from the late 1930s through the late 1970s, and the Neoliberal Order from 1980ish to maybe 2015. We’re currently transitioning to a new political order, and no one knows exactly when it’s going to consolidate into something durable, which ideas both parties will accept, and what details we will fight over next.

A key idea of political orders is that they solidify when leaders from both parties endorse similar policy ideas. The New Deal Order was characterized by a strong federal government that regulated the economy. Go ahead and call it Keynesian Economics and add redistribution, social safety nets, and industrial planning. The New Deal Order crystallized when Eisenhower expanded Social Security and built the Interstate Highway System. The New Deal Order fell apart because of the pain of stagflation in the late 1970s. The Neoliberal Order actually started under Jimmy Carter, when he started deregulating the airline industry on the advice of Teddy Kennedy. The main ideas both parties largely accepted during the Neoliberal Order were globalization, smaller government (loved that budget surplus under Clinton), and market based solutions for social problems. I’m thinking in particular of the 1990 Clean Air Act, which introduced cap-and-trade emissions credits and passed with overwhelming bipartisan support. And of course Obamacare: it was Mitt Romney’s idea, he did it first in Massachusetts, and then Obama federalized the plan.

In higher education, the ideas of the Neoliberal Era resulted in less public investment in higher education while at the same time championing universal access. This is when student loans became more available and expected, because in your personal corporation of one, taking on debt to invest for future earnings just makes sense. It helped a lot that the earnings premium for college graduates expanded through 2000, then leveled but did not narrow through the 20-teens.

The Neoliberal Order fell apart mostly because of the 2007-9 financial crisis and the decade long recovery that increased income and wealth and status inequality. Notable to me, this is also when trust in higher education started to deteriorate. The Neoliberal Order worked because people believed that rewards were connected to investments in understandable ways. For a lot of people, it doesn’t feel like that anymore. It looks like the earnings premium for college graduates has started to shrink (even before AI hit the scene), and the gap between the unemployment rate for new college grads and high school grads is clearly narrowing.¹ Higher ed is just one example of an investment payoff that is more variable than people expected, and I think it’s exactly this kind of uncertainty that caused the downfall of the Neoliberal Order.

Now we’re in something new. Gerstle published his book in 2022, and at that time he wasn’t ready to say what he thought the next political order would be. I have more solid ideas now. As do my students! This book is great in part because in their last presentation of the term, this team looks at recent data, political rhetoric, and policies proposed to try to articulate what ideas they think both parties are accepting now.

21st Century Monetary Policy by Ben Bernanke

Bernanke’s book is our other long history of the American Economy. It’s basically a history of the Fed from the Great Inflation of the 1970s through COVID. How did we get from double digit interest rates under Volcker to the zero lower bound and Quantitative Easing under Bernanke?

For me as a teacher, this book was essential because monetary policy is the part of macro that changed the most since I last took a macro class. I knew I needed education in this area, and Bernanke delivered. His book is thorough, but very readable.

I also love this book as a pair to Gerstle’s. If you were only exposed to the ideas in Gerstle’s book, it might be easy to think that the Fed is full of Bad Guys who broke the social compact through the crisis of 2007-9, with their inequality exacerbating bank bailouts and quantitative easing. Bernanke’s telling makes clear that the Fed was doing the best they could in extremely difficult circumstances. There were no good options available when the commercial paper market froze and money market funds “broke the buck,” so the Fed had to experiment with policies they knew had downsides. While rich with technical detail, his narrative made me really feel how difficult it must have been to choose from a set of bad options that you know will have ambiguous outcomes. Bernanke’s book humanizes the Fed.

This year Bernanke’s book has been especially unfortunately relevant. We’re in a macroeconomy uncomfortably similar to the one Chairman Volcker faced in the late 1970s and early 1980s (baby stagflation?). President Trump has pressured Chairman Powell even more overtly than President Nixon did Chairman Burns. The new Fed Chairman Warsh was confirmed as the President faced pushback from Senators of his own party because they don’t like his threat to the independence of the Fed. The Supreme Court is expected to rule on a different challenge to Fed independence any day now (I think it’s going to be 8-1 in favor of Fed independence, or maybe 7-2). When things are going well, talking about the Fed is boring. Talking about the Fed has been anything but boring this year, but at least my students can read the news, understand it, and express an informed opinion about it all.

China’s Economy: What Everyone Needs to Know by Arthur Kroeber

The US has been the unchallenged global economic hegemon for decades, but that dominance seems to be waning. I figured I should know something about the rival that we may or may not be caught in a Thucydides Trap with. (Shout out to Hum 110 at Reed College for making me read the History of the Peloponnesian War. It’s amazing how much that liberal arts foundation seeps into my understanding and teaching of macroeconomics in 2026.)

Kroeber’s book is arranged topically, not sequentially, and it includes a chapter on every facet of the Chinese economy you might want to know about. It really does cover What Everyone Needs to Know. My biggest take-aways were that while China’s growth was catalyzed by state-owned enterprise reform and the expansion of markets and private enterprise (check out those ideas of the Neoliberal Order, crossing international borders), the more important force was probably the most massive rural-to-urban migration in all of human history. China integrated a billion people into the global economy, lifting those people out of poverty and bringing a staggering amount of resources and human ingenuity into the fold. The chart below from Our World in Data (one of my favorite websites, second only to FRED) shows the number of people in China living at different income levels from 1981 to 2022. You can see that in the early 80s, nearly everyone in China was desperately poor. Till the early 90s, the number of very poor people held steady while the number of middle class people increased. After the mid 90s and especially after China joined the WTO in 2001, the number of people living on less than $3 a day plummeted to essentially zero. It is the most rapid transition from a very low income country to an upper middle income country that has ever happened. That is an amazing fact that I think young economists need to know.

Knowing this fact also colors everything I hear about China and their economy. It’s easy to not fight much over distribution when the size of the pie is growing rapidly. That was the wind in the sails of the Neoliberal Order too (partly blown by the integration of China into the global economy; I hope Reagan and Thatcher thanked Deng Xiaoping). But a society can only make the biggest economic transition in global history once. What’s going to happen now that China can’t rely on growth due to structural change and they have to start playing the game of growing through efficiency and innovation like all the rest of the developed economies? Will they continue to rise in economic power? And what might trigger that Thucydides Trap?

Chip War by Chris Miller

Taiwan. An invasion of Taiwan might trigger the Thucydides Trap. Why? Chips.

The Taiwan Semiconductor Manufacturing Company (TSMC) currently fabricates (fabs) 90% of the world’s most advanced chips. You know, the ones needed to train and use AI models. If China were to take over Taiwan (err, take it back? Taiwan became Taiwan when the Nationalist Party lost the civil war to the Communist Party in mainland China and retreated to the island of Taiwan; Kroeber talks about this too), the US and its allies could lose access to those very important chips.

But wait, doesn’t Nvidia (US company) make the chips for AI? Yes and no. Nvidia designs many of the important chips, but like most other chip design shops Nvidia uses what’s called a “fabless model,” whereby they design the chips but somebody else makes them. The chip fabricator (TSMC for the advanced Nvidia chips) is called the foundry.

I don’t think you can understand global economics and politics today without knowing something about how chips get made. The fabless and foundry business models of chip making have spread the manufacturing process out across the globe, and a series of actual or near literal monopolies (e.g. ASML’s lithography machines, Japanese super high purity hydrogen fluoride and fluorinated polyimides) means there are bottlenecks throughout. Discussions of international trade in Principles of Macro classes usually start and end with boring graphs of maximized economic surplus and deadweight loss triangles, but trade also creates stability through integration and vulnerability from interdependence. I teach macroeconomics at a liberal arts college, so I use my professor’s prerogative to get students interested in economics by also talking about history, power, and international politics.

The most interesting idea I picked up from this book is how and why companies might cater to different markets and how that affects innovation. In the US before globalization took hold, chip companies could sell their most advanced products to the Department of Defense at basically whatever price they wanted no matter what delays came up. They didn’t experience a lot of pressure to produce things reliably, not for the government, and not for consumers either. In Japan after World War 2 there was no equivalent of the DoD because they were banned from having a military, so chip makers had to produce for the consumer market instead. Eventually companies like Sony were making so many chips for price sensitive consumers (especially after Walkmans were introduced) that they were inspired to improve their production techniques to minimize defects, maximize yields, and maximize profit. That adoption of a zero-defect culture turned out to be exactly what was needed to produce ever smaller, ever faster, ever better chips. Morris Chang, founder of TSMC, learned the same lesson when he worked at Texas Instruments. He saw first hand in Texas how his production lines improved when he tested them at max capacity, and later saw how TI’s plant in Japan achieved yields double those achieved in Houston. The advantages of learning-by-doing compound, so you should only do what you do best, and let someone else figure out the other parts of the process. That is the genius of the fabless/foundry model.

I’ve been thinking about this a lot lately in the context of AI development. It’s notable to me that OpenAI, Anthropic, and Google put their models in consumer products first, before trying to work with the government and other large entities. They may say out loud that they have “peaceful AI mandates” but I think they remember what happened for Sony and TSMC. They’re selling me AI at a discount because they know they will learn faster through volume.

Our Dollar, Your Problem by Kenneth Rogoff

I added this one to my list because Stephen Miran (Chair of the Council of Economic Advisers and simultaneously Governor at the Federal Reserve Board, first person to hold positions in both the Executive Branch and the Fed at the same time) said he wanted a Mar-a-Lago Accord to reduce the value of the US dollar on purpose. I think that’s a terrible idea and I need the students (and now you) to know why.

Roughly 80% of oil transactions are denominated in US dollars, even when US entities have nothing to do with the deal. The dollar is preferred for oil transactions and many other international trade deals because the US dollar is the dominant currency of the world. Everybody accepts dollars, because you can always trade dollars for something, so everybody wants dollars, and everybody has some dollars. It’s a very circular thing.

The fact that the US dollar is the dominant currency of the world confers an enormous privilege on the US, its government, and its consumers. Everybody wants to keep some dollars on hand, just in case they need them for an unexpected transaction or to stabilize an exchange rate. Most entities park their dollar holdings in US Treasury Bonds or sometimes other US assets. In other words, they buy our debt. They loan us money. The fact that people want to hold US government debt pushes interest rates on that debt down. That makes it less expensive for the US government to run deficits and spend money. Mortgage rates and car loan interest rates are tied to the interest rates on US Treasury Bonds, so regular US consumers benefit from low interest rates due to dollar dominance too. Sometimes non-US entities don’t want only US Treasury Bonds, they want to buy other dollar denominated assets too. Things like: the stocks and bonds of US companies. This pushes investment costs down and valuations up.

The downside of US dollar dominance for the US is the trade deficit. Non-US entities have to get their dollars somehow, and they get them by trading stuff for dollars. The balance of stuff-for-dollars across the border has to be tilted enough so that more dollars end up outside the US and more stuff ends up inside it. That is the trade deficit. The fact that the trade deficit is a direct cause and consequence of dollar dominance is called the Triffin dilemma.

President Trump has been clear for many years that he does not like the size of the US trade deficit, so in some ways it makes sense that he would want to reduce dollar dominance. However, his administrations have shown no sign of reducing government debt (in fact the deficit, how much is added to the debt each year, got larger as a fraction of GDP during the first Trump administration even though the economy was doing well), so weakening dollar dominance without first reducing government debt is just going to increase interest rates for everyone. I worry that the size of the US government debt is already becoming an issue, and I just don’t see the logic in accelerating a slow moving problem into a crisis.

I was nervous about assigning this book to Principles students. After all, by definition they have almost zero exposure to economics! And I’m going to ask them to understand international finance and the Triffin Dilemma?? Well enough to present it to others? Really?

Yes really. They’ve done beautifully. Both times I’ve assigned a team to this book, that team has won Book Club for the week at least once.

New books on my reading list this summer, that I might assign to students in the fall

The Road to Serfdom by Friedrich von Hayek

I have never read Hayek myself. I know! It’s a shame! First on my list to remedy this summer.

King Dollar by Paul Blustein

I liked Rogoff’s book fine but I LOVED Paul Blustein’s previous books so I’m curious to see if this one might work even better.

Breakneck: China’s Quest to Engineer the Future by Dan Wang

I learned a lot from Kroeber’s book, but it’s long and seems to be meant for policy wonks. I’ve heard great things about Dan Wang’s book from both Noah Smith and Tyler Cowen, and it’s written to appeal to a popular audience.

North and South by Elizabeth Gaskell

The kids these days do think that they are the first human beings in history to live through a major technological revolution. What did it feel like to live through the last major economic transformation, the Industrial Revolution? Can I really add a 19th century novel to my Principles of Macro syllabus? I guess we’ll see!

Coming up next at the Liberal Arts Ledger

That One Big Beautiful Bill takes effect on July 1, 2026 and it has a LOT of provisions that will affect higher education. One of them is the Earnings Test: if graduates of a college program don’t earn as much money as high school graduates, then students in that program can no longer use federal student loans to finance their education. THIS IS A BIG DEAL.

But how exactly are they planning to measure whether college graduates earn more money than high school graduates? Does the Department of Education even have income data for all graduates? (Preview: No, they’re literally banned by law from gathering it.) Some college grads make plenty of money early while others take longer to find their footing. What kinds of sample sizes are we talking about here? How will very small programs be evaluated? And we make up a lot of majors at my school (e.g. my department’s Business, Economics, and Society major). What even counts as a “program”?

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1. Is this because of AI? Maybe not. A new working paper by economists at the NY Fed, University of Virginia, and Harvard suggests that remote work may be responsible for the increases in young adult unemployment.