Why Economies Rise or Fall

by Peter Rodriguez

How can a nation create the conditions for economic growth and prosperity, improving people's lives on both the individual and national levels? And what, once these conditions are achieved, can it do to sustain this progress? Do any of the many "isms" under which we organize our economic philosophies hold the answer?

While an insightful understanding of different economic approaches has always been essential for policymakers, it is equally important for those of us who might not steer the economy but must still live and function within it.

Such an understanding is the key to making sense of not only economic events but of "noneconomic" news as well, allowing us to anticipate the economic consequences that can impact both the nation's economy and one's personal economy. And, of course, it sharpens the judgment you already bring to your own discussions of the issues.

In the 24 lectures of Why Economies Rise or Fall, Professor Peter Rodriguez of the University of Virginia guides you through a stimulating and, above all, accessible examination of what economists know and don't know about this elusive search for economic prosperity.

Genres: Economics, Nonfiction, Audiobook

24 pages, Audible Audio

First published January 1, 2010

Reviews

[Clif Hostetler]

I listened to these lectures in the hope that I'd acquire some perspective on why some economies prosper and others don't. The size of the spread between rich and poor countries, as with rich and poor individuals, is wider than it's ever been before. I want to support those measures which will, to the extent possible, relieve the suffering due to poverty throughout the world. I know enough about unintended consequences to know that solutions to these types of problems are not always obvious.

These lectures maintain that no model of macro-economics (large scale) promoted by any particular "isms" of economic theory can insure economic growth. There are examples, both good and bad, that can prove just about any point encountered within economic arguments. However, there are some micro-economic (individual human level) models that reliably promote economic success. These models are based on the truth that, at the micro-economic level, incentives matter and people respond to incentives. However, people don't always respond to incentives in anticipated ways, and incentives are not simple things to create.

So after listening to 24 lectures, am I any smarter about why economies rise or fall? Well, I don't feel all that smart. However, I take comfort in noticing that the professional economists seem to be totally incapable of anticipating future economic collapses. I couldn't help but notice that the bursting of the Japanese asset price bubble in 1991 took all the experts by surprise. Likewise the 1997 financial crisis experienced by the east Asia "tiger" economies apparently took everybody by surprise. And most recently there was the 2008 American recession. It seems that with all these examples to learn from that these sorts of problems could be anticipated and possibly prevented.

I appreciated that the lecturer was willing to admit that economics is not a science, but it's sort of scientish. I presume that means that it is a field of endeavor that strives to appear to be scientific, but it's not really.

[Gilbert Stack]

Peter Rodriguez manages to talk about global economies without getting bogged down in all the “isms” like capitalism and socialism. He looks at the major economic events of the twentieth and early twenty-first centuries and explores both success (the Japanese Miracle, the Asian Tigers, China, India, etc.) and failures (Japan, China, Latin America, etc.) (And yes, I realize some of those nations are in both lists.) It’s a fascinating exploration of various successful roads to the top and why the same models didn’t work for everyone else. There’s also some warning about how economies can take a tumble.

If you liked this review, you can find more at www.gilbertstack.com/reviews.

[Foppe]

I found this course very unsatisfying. But while some of the reviews (at the TTC website) suggest this is due to ideological bias at the teaching company, I'm not sure that this is a very useful criticism. The lecturer does seem to strongly buy into the Neoliberal consensus, and as a result has quite a number of things to say that sound quite idiotic if this course really is supposed to be about "what works". A second problem I have with the course is that it's horribly light on content and analysis, and that at least 40% of every lecture consists of repetition -- this may be OK if the intended audience is an highschool/1rst year undergraduate one, but I've come to expect much more from TTC.
The course is about the preconditions needed for economic growth. However, it seems to me that the preconditions the lecturer discusses, and apparently buys into, only apply to very developed economies, whose populations already regard economic growth (rather than social success) as their prime target. This disconnect becomes especially noticeable in the lectures about the "non-western" economies, but even in the lectures about Japan it gets pretty weird. Rodriguez's discussion is pretty much textbook, with very little new insight offered, but the conclusion is simultaneously that Japan is in this (apparently horrible) period of economic "stagnation", while at the same time it's one of the richest countries in the world, which still manages to compete fairly well with all other countries. As such, you might wonder what the problem is, exactly. This never becomes clear. (Obviously, the problem is "no growth", but why this is a problem if there indeed are no meaningful economic repercussions, as the Japanese are still very rich? It seems to me that this conclusion is based on dogma rather than fact.)
Furthermore, there is an overall problem with applying the insights gained in one part of the course to other lectures, which, it seems to me, doesn't really happen. Also, the course does not even manage to stick to analyzing preconditions for economic growth, as Rodriguez frequently does suggestions that border on social engineering in order to get better 'economic growth', which are entirely useless for actual, existing societies that seek to adapt to the demands of the global market while respecting their own cultural traditions. I am not sure if this failing is due to lecturer, or the entire economics profession, as I've seen this more often than just here, but it's still disappointing. Comparative analysis of issues that pop up in different economies is hardly ever done, even though this is a very valid approach, even for a course that aims at being "empirical" (which this course isn't really).
And that this isn't an empirical, non-ism course, is most obvious in the lectures on non-western, 'developing' economies. For instance, in the lecture on "inefficient/informal markets", Rodriguez concludes, from a 'case study' of the attempted entry of Dell into the Brazilian markets, that the Brazilian economy is doomed to fail if it continues on its current course, as value addition is happening 'too inefficiently'; a conclusion he feels is warranted because Dell could not win from grey-market salesmen who knew how to work the Brazilian legal system. What he ignores, though, is that this would only really count as a failure in the western world, or if you assume that instantaneous reformation of entire economies into "Free Market" Western ones are A. possible, and B. desirable. Rodriguez argues that the Brazilians currently working in the grey market "should be able to find employment in some other part of the economy", so that Dell (as the 'most efficient, best product-delivering' company) becomes the biggest player, so that Rodriguez is satisifed that Dell has gotten to its 'rightful' place at the top. That is, Rodriguez, in this 'non-ideological course', suggests that the real, historical Brazilian economy, along with Brazil's citizens, should be replaced by a different population with different desires (to work for Dell, and Dell-like companies), coveting their wage slips, etcetera, as "this would be better for the (currently 'inefficient') Brazilian economy. Never mind that this ignores entirely that this would probably not have been very good for the Brazilian economy, for multiple reasons. First off, it would probably not result in an increase in wages or job security for Dell assembly employees, as I really doubt that Dell pays its employees very well. Additionally, as it would probably have resulted in a large decrease in aggregate wealth, due to capital extraction from the Brazilian economy (as it is likely that Dell would make all profits appear abroad, in some minimum corporate tax regime). Instead, it would have resulted in lots of people suddenly not having jobs anymore, as they would have become 'superfluous' in the new, more 'efficient' economy, which means a lowering of aggregate income, and thus of domestic demand (because those people would not have been able to find alternative employment, as we now see happening in the US). These considerations are of no concern to Rodriguez, however: "That [having an 'inefficient (labor) market'] creates a lot of employment, and it seems characteristic of economies that are different from high-income ones. It may also seem even interesting, but at the end of the day what it does is it breaks this process [of GDP growth]. It keeps more productive firms from winning market share. After all, as ugly as that can be, that's part of the game! That's how it's supposed to work, and that's why free-market societies tend to grow more productive and richer over time. If you interrupt that process, even if it seems to be in a way that is less damaging or apparently fair, you interrupt the overall process of growth."
There are so many presuppositions that you have to swallow before this sounds even remotely appealing that it isn't even funny. The point, in any case, is that he just doesn't like the way the Brazilian economy works, and that he thinks it should be supplanted by another one, in which the Brazilians currently working in the grey market can suddenly find jobs in the regular market, presumably after having been to university, and having gotten a different outlook on life and one's priorities in it (with regard to making money). So how, dare I ask, is this "empirical economics" that 'isn't about isms'? It certainly sounds as neoliberalist as can be. And although Rodriguez makes a few token points about how the US has caused quite a lot of harm in Middle and South America 'in the past', it apparently doesn't occur to him that it is because of exactly these kinds of sentiments that he here so innocently 'suggests' as viable choices for 'developing' economies (don't read: societies) that this happened.
I would really like to see a course on this that is interesting, but I fear you won't be able to find a lecturer in the US that could really pull it off, apart from -- perhaps -- David Harvey, who isn't an economist by trade.

[Feng Ouyang]

“Why Economies Rise or Fall” is a 24-lecture course in The Great Courses series, taught by Peter Rodriguez and published in 2010. Compared with a typical Great Courses course, it is somewhat more advocative in tone. By examining economic policies and their effects across many countries, Rodriguez attempts to answer a central question: What economic policies are most likely to promote economic development, measured primarily by GDP per capita?

The course’s primary theme is that a free-market economy provides the best foundation for improving productivity because it links rewards to behaviors that benefit society economically. Rodriguez stresses that ideology itself matters less than incentives. As long as a system aligns individual incentives with productive activities, he argues, the economy is likely to grow.

At the same time, Rodriguez acknowledges the shortcomings of a free-market system. Although markets tend to bring supply and demand toward equilibrium, equilibrium is not achieved at every moment. Instead, supply and demand fluctuate around an equilibrium point. As a result, economies experience recessions, inflation, asset bubbles, and other forms of instability. Yet Rodriguez argues that there appears to be no clearly superior method of stabilization, pointing, among other examples, to the disappointing results of some Japanese government interventions.

Beyond incentives, Rodriguez identifies two additional factors that play important roles in the macroeconomy: policy stability and a high saving rate. Both encourage capital investment, which in turn improves productivity by providing businesses and workers with more machinery, better infrastructure, and more advanced technologies.

Policy stability gives investors confidence that they can make long-term commitments without facing unpredictable changes in the economic environment. A high saving rate, meanwhile, provides the resources needed to finance investment. These two factors, together with market-oriented incentives, form the core of Rodriguez’s explanation for sustained economic growth.

The course also examines the role of corruption. Corruption does more than increase transaction costs; it also creates uncertainty. More importantly, it produces the wrong incentives by directing people toward less efficient or less productive economic activities, including participation in black markets or efforts to obtain political favors. For this reason, corruption represents a particularly serious threat to many developing economies.

Another major topic is international trade and globalization. Consistent with his support for free markets, Rodriguez strongly advocates free trade, drawing on the classical theory of comparative advantage. Countries, in this view, benefit when they specialize in activities in which they have a comparative advantage and trade with others rather than attempting to produce everything domestically. Nevertheless, Rodriguez acknowledges that globalization can generate major economic shocks, particularly when capital and jobs move across national borders.

One of the strengths of the course is the clarity and accessibility of its central themes. Rodriguez uses many real-world examples to illustrate abstract economic concepts. These examples reflect his broad knowledge of international economics and include both economic success stories and failures. By comparing different national experiences, he gives the audience a useful set of practical lessons about how economic policies can influence development.

Despite these strengths, the course has several significant limitations.

Its treatment of China seems overly simplified. Rodriguez attributes China’s rapid economic growth since the 1980s largely to the opening of the economy to private enterprise and market forces, both domestically and internationally, including its integration into the global trading system and accession to the WTO. He also identifies several policies that supported Chinese growth, including maintaining a high saving rate, suppressing wages, making substantial public investments in infrastructure, and maintaining policy stability.

However, he does not adequately address the prevailing narrative—promoted by the Chinese government but also taken seriously by many Western scholars—that China owes much of its success to the unique model of “market economy with Chinese characteristics,” in which the government continues to play a critical role. That role extends beyond setting policies and regulations to include state-owned enterprises, state-controlled banks, industrial subsidy policies, and direct government influence over capital allocation.

Understanding China’s economic journey primarily through the lens of free markets and free trade may therefore be a gross simplification. China’s experience arguably illustrates a much more complicated interaction between markets and the state. If the treatment of China is oversimplified in this way, one must also wonder whether the course’s interpretations of other countries are sometimes too simple.

A second problem concerns Rodriguez’s repeated emphasis on stability. Stability is clearly important in his framework, but he never defines precisely what he means by it. This becomes problematic because countries that he describes as benefiting from stability can have very different political and economic systems.

The United States, Japan, and China provide a good comparison. U.S. policies can change significantly as control of the White House and Congress shifts between political parties, yet the underlying constitutional and institutional framework remains relatively stable. Japan has experienced frequent changes in prime ministers, while the same political party has often remained dominant, and economic policy has generally shown considerable continuity. China has a stable one-party political system, yet actual policies can sometimes change rapidly. Following Deng Xiaoping’s pragmatic “feel for the stone when crossing the river” approach, Chinese policymakers have often experimented with policies and adjusted them quickly. In extreme cases, regulatory changes can transform or virtually eliminate an industry, as occurred with the after-school tutoring sector.

These examples raise an important question: What exactly constitutes “stability” in Rodriguez’s framework? Is it political stability, institutional stability, regulatory predictability, continuity of economic policy, or something else? Without distinguishing among these forms of stability, the concept remains too vague to function as one of the course’s central explanations for economic development.

The course would also have benefited from a much more detailed examination of the 2008 global financial crisis. Such a case study could have provided an ideal opportunity to explore the vulnerabilities of a free-market system: how an enormous financial bubble can form, how risks can accumulate without being properly recognized, how a financial crisis can spread rapidly across national borders, and how different government policies can produce different paths of recovery. Unfortunately, Rodriguez discusses the crisis only in passing. Given the timing of the course, which was published shortly after the crisis, this represents a major missed opportunity.

Another issue is that the course tends to present free markets, high saving rates, and stability as separate pillars of economic growth, when in reality they are deeply interconnected.

For example, the saving rate is sensitive to interest rates, which are at least partly determined by market forces. The presence of attractive investment opportunities can increase demand for capital, potentially raising interest rates and encouraging additional saving. Saving behavior is also intertwined with stability. A stable environment may encourage long-term investment and therefore support higher levels of saving. On the other hand, instability can also encourage people to save more as protection against future risks.

Yet savings generated under these two conditions may have very different economic consequences. Savings accumulated because households and firms are confident about future investment opportunities are not necessarily equivalent to precautionary savings accumulated because people fear economic instability. These relationships among markets, stability, saving, and investment deserve much more exploration than the course provides.

The discussion of globalization also gives insufficient attention to geopolitical risks. Rodriguez briefly acknowledges that international commerce takes place across different sovereign jurisdictions with different laws, policies, and cultures. However, he does not fully address the possibility that trade and financial systems themselves can become instruments of political or military power.

A country may use restrictions on trade, access to strategic goods, financial sanctions, or even participation in an international financial network such as SWIFT as tools for political or military objectives. This reality complicates classical free-trade theory. Free trade may be economically optimal during “normal times,” but governments and businesses must also consider what happens when normal trading relationships break down.

To be fair, the weaponization of trade and financial relationships became far more prominent in public discussion during the 2020s, particularly following the pandemic, the Russia-Ukraine war, and the global trade war during the Trump administration. A course published in 2010 could not have fully anticipated these later developments. Rather than a flaw in the course, this illustrates why our understanding of globalization must be continually updated.

Another sensitive issue is the trade imbalance. Rodriguez briefly discusses trade imbalances and explains how currency exchange rates can influence them. However, the course should also have emphasized the relationship between trade balances, domestic investment demand, national saving, and fiscal policy.

Trade balances emerge from a complicated interaction of domestic saving, investment, government borrowing, capital flows, exchange rates, and international demand. Rodriguez may not have had enough time within the constraints of the course to explain these relationships in detail. Nevertheless, he could at least have conveyed more clearly that trade balances are sophisticated macroeconomic phenomena that cannot be reliably managed through a single policy instrument such as tariffs.

The course also suffers from unnecessary repetition. Rodriguez presents a clear theme and generally does a good job introducing and summarizing each topic, but he repeatedly returns to the same central statement: a market economy promotes growth because it rewards higher productivity. While repetition can reinforce an important concept, in this case it becomes excessive. At times, it gives the impression that the course has been watered down and that material that could have been explored in greater depth has instead been replaced by restatements of the central thesis.

A related problem is that many economic concepts and theories are presented as relatively closed-ended conclusions. Rodriguez does acknowledge the complexity of economics in several places, but the course would be stronger if it emphasized more consistently that the concepts being presented are only basic analytical tools rather than definitive explanations of economic reality. He could have done more to remind listeners that the course provides a foundation for understanding economics rather than a complete framework, and he could have encouraged them to explore competing theories and more advanced analyses.

Overall, “Why Economies Rise or Fall” is an excellent introduction to classical economic thinking, particularly the basic concepts underlying market economics. Its greatest strength is its ability to connect fundamental economic ideas with real-world examples drawn from many countries. For beginners in economics, this approach makes abstract concepts easier to understand and demonstrates their practical relevance.

At the same time, the course is limited in both scope and depth. Its strong commitment to the explanatory power of free markets sometimes leads to oversimplified interpretations of complicated national experiences, particularly China’s. Important concepts such as stability are insufficiently defined, relationships among saving, investment, markets, and stability deserve deeper treatment, and major subjects such as the 2008 financial crisis, geopolitical risks to globalization, and the complexities of trade imbalances receive too little attention.

The course is therefore most valuable as a starting point rather than as a comprehensive explanation of why economies succeed or fail. It provides a clear framework for thinking about incentives, markets, investment, saving, institutions, corruption, and trade. But many of the questions it raises become more complicated once one moves beyond introductory economic theory. For a beginner, that foundation is useful; for a reader seeking a deeper understanding of modern economic development, it should be followed by more nuanced and more contemporary treatments of the subject.

[Said]

Nice overview of economic principles but overly simplistic

The lectures do not really explain why certain economies rise or fall beyond some overly broad possibilities.

[Max Patiiuk]

5+

The best book on economics I ever read - qualified a lot of things I was unsure about or didn't even know

Favorite quotes (a small subset):
"Good economics is all about ensentivising productive behavior"
"Neither far right, not far left seemed to have produced great success - all successful economic are somewhat in the middle, with bias toward more economic freedom, but even that is not always a given"
The most important point: "People respond to incentives". "But, people don't always respond the way you think the will"
(on the U.S. trade deficit with China) "Yes, they are saving excess dollars that they don't spend on U.S.-manufactured products - what they do with those excess dollars is buy other things that we sell - like our assets - those goods in the capital and financial accounts - they buy things like stock, and bonds, and capital. and land. And that means very important things for the citizens of the U.S. - it means that we get lower interest rates (after all, there are more people willing to invest and financial resources to back us). It also means we get higher asset values. And so some of the things that we care the most about (i.e the value of our 401k, and value of our properties) are in some sense determined much more by the actions in China than there are by people in the U.S."
"In contrast to a 'top down control bee hive' there is a bee hive without a central plan, the queen doesn't issue a plan - they all have their own ideas and their own incentives, but they realize that they need each other for different things. It's a buzzing, crazy kind of bee hive, but in fact, the bees are happier, and they produce a lot more honey and they are growing. All they have are their own scehems, and their own ideas, but it comes out better. Private vices like the pursuit of self interest, the pursuit of self-love or profit actually result in public virtues"
"Yes, foreign competition can displace local workers. At the same time, it means that you can import the highest quality goods. You can import the best made computers in the world, you don't have to relly on the locally-manufactured one. You can import the best steel, the best food, the best anything into the products you make"
(on small 1-person companies in Brazil outcompeting Dell because they were cheaper by virtue of being in the gray economy, thus not having to follow regulations and pay all the taxes/wages) "They were successful because they resulted in a little bit of steeling at least, certainly the software and avoiding the tariffs. Another reason they weren't that productive is that they haven't had economies of scale - most of these informal firms were actually building less than 100 computers per yet - so they really had no economies of scale. They were working for very little because they were earning very little and their efforts weren't worth quite as much - and without that scale they weren't as productive. And so their resources, with their time and talents would have found a better use in a healthy economy. It's not the best talent that won, and not the best design either - it was really a product of the state and it's particular failure"
(quoting John Maynard Keynes) "The ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood - indeed, the world is ruled by little else. Practical men who belive themself to be quite excempt from any intellectual influence are usually the slaves of some defunct economist"

[Carlos]

Rodriguez is the rare economist that doesn’t claim to have an answer for economic growth and focuses instead on what we can glimpse from the economic history of the world. This humbling perspective makes the book vaguer than I had anticipated but perhaps more valuable in expanding the rigid prescriptions of the “-isms”, as he likes to refer to capitalism, socialism, communism, etc. Rodriguez thus shares the economic successes and failures of societies that followed any and all paths to economic growth. He is honest in highlighting the difficulty in arriving at any final recipe for growth when so many disparate approaches have seemed to work, until they didn’t. He thus focuses on the trade-offs for different approaches, the need to adapt when conditions change and the all-important factor of societal buy-in for any strategy to work. This human factor helps him explain how recipes that “should” seem to work, will not do so when the citizens affected don’t believe in it or support leaders through painful transitions. Rather than give answers Rodriguez shares with the reader the complexity of the problem and the many paths open for potential growth when the right conditions align.

[Nick Heim]

Kind of takes a battle axe to every ism possible. Capitalism, Marxism, socialism, and libertarianism highlighting examples of how pure ideology has failed in multiple instances.
Rodriguez also dismisses conspiracy theories about global banking cabals and state actors repressing smaller Economies. While also acknowledging that larger states and Economies do have the ability to "set markets on fire." However, he asserts that the overall problem of market manipulation is to complicated for any one state to solve. Largely due to micro economic influences

The only complaint is he kind or presumes people and states are rational actors. He also completely ignores the machinations of empire. In so much as he fails to explore the direct link between Economies and the power of a state to wage war. He also doesn't consider the incentives for a state to have an offensive action in a foreign economy. Not necessarily a grand plan. But a targeted hit job. Ironically he alludes to it in the end when discussing saving economies vs investment economies and the 2008 financial crisis.

Overall REALLY good overlook of macro economics with one glaring blind spot.

[Don Heiman]

In 2010 The Teaching Company released Virginia University School of Business Prof. Peter Rodriquez’s 24 lectures “Why Economies Rise or Fall” parts 1 & 2. His course covers the theoretical underpinnings on how 19th and 20th century economies impact current global economic achievements as well as stunning failures. His discussions about corruptions, 200 years of economic shifts, technological changes, and political structures are fascinating. His lectures also profile the economic inter relationships between human behavior, free markets, and social structures. These relationships unlock “economic secrets” of Asian tiger economies and economic growth events. His 397 page course guides and transcript books are very well done. I especially liked his glossary of economic terminology and bibliography. (P)

[Steve]

A light, repetitive sermon, target audience: mid high school. The speaker prefers a wealth of general adjectives, rarely uses numbers (not many years, values, dollar figures), doesn't throughly or consistently cite his (re)sources, except Adam Smith. A very basic course, a lengthy monologue on a night train, or a 1h public library talk. DNF.

[Andrew]

Can be dry at times, but also some good points of how some of the events happened in our world.

[David Pulliam]

Interesting ideas and thoughtful comparison of various economies.

[Tim Grunkemeyer]

I was very disappointed with "Why Economies Rise or Fall". Professor Rodriguez is a great speaker,
but he really teaches you very little.

Professor Rodriguez mentions very few statistics,
but instead speaks in generalities. His lectures
are filled with fluff and repetition.

This lecture series may be appropriate for high
school students, but if you have been to college
don't waste your time and money.

[Robert]

The more I read about economics the more I realize that nobody really understands economics all that well. This supports one of the points that Rodriguez makes, that economics is not an exact science, because it's impossible to design controlled experiments. And the rules are always changing. Public sentiment and popular ideas influence economies as much as the weather, monetary policy and other major factors. Interesting perspectives.

[Brian]

This lecture series won't answer the question in the title. While Rodriguez makes it clear that history tells us that free markets generally help economies, he provides so many examples of why a policy works in one country but is disastrous in another that it quickly becomes clear that these lectures fail to address the topic.

[Ken Hamner]

Very comprehensive set of lectures.

[Trung Nguyen Dang]

The course shows the complexity of the economies and that it's truely difficult to analyse or build a strong and sustainable economy. One wrong issue can lead to huge unintended and adverse outcome.