10 Best Political Economy Books | A Guide for Investors

Donald Trump’s second presidential term corresponds with a changing perspective on economic policies and the global market. Although most investors focus on practical aspects, such as fundamental and technical analysis and stock trading skills, those who understand macroeconomics are more likely to succeed in the shifting market. This guide will recommend the ten best political economy books to help you prepare for the future.

Why should investors learn about political economy?

The most obvious question for retail investors is: why should anyone devote precious time and effort to reading about the abstract theory of political economy when they could be spent on much more practical investing skills?

Well, the political economy sheds light on a broader context of market forces and economic trends. Crunching numbers and following companies’ fiscal reports is relatively straightforward. However, when the government behind a national market changes course from laissez-faire (free market) to a form of protectionism, most investors will remain clueless about its effects and potential next steps. 

The government and the market are inextricably linked. When governments change course, once fundamental market rules get thrown out of the window. How severely can this affect you? It depends on your understanding of the political economy, or how well you are prepared, and how quickly you can adapt.

Why is political economy important?

Here’s why investors should read some of the best political economy books:

• Complex market trends. The fundamental market drivers are supply and demand, but the market also interacts with laws, the government, and the rest of society. In addition to supply and demand, prices are determined by government policy, various regulations, and geopolitical relations. Understanding these factors can help investors deal with market changes beyond everyday financial analysis;

• Economic cycles. The common assumption of retail investing is that the market will continue expanding, but history has witnessed severe economic recessions. Political economy gives insights into the causes and handling of inflation and financial crashes. This knowledge can help investors prepare for downturns, recover quickly, and make more resilient portfolios during volatile periods;

• Policy effects on investments. Taxes, interest rates, and other government policies directly affect investment returns. Furthermore, the government favoring a sector, e.g., renewable energy, has a positive effect on its performance while negatively affecting competing sectors (e.g., fossil fuels);

• Global economic trends. Political economy emphasizes international markets and studies how political dynamics affect the global market, like exchange rates, commodity prices, and multinational corporations. Individual investors can learn how to assess better the impacts of politics on the worldwide market, such as the ongoing trade war between the U.S. and China;

• Populism and disruptive political trends. Political economy is deeply interested in political developments that can disrupt financial markets, such as populism, radicalism, and isolationism. Retail investors who are aware of these trends and their effects become more adaptive and resilient in adverse financial climates.

10 best political economy books for investors

Okay, so now you know why you should read about political economy. We’ve selected the ten best political economy books that can inform retail investors about the relationship between government policies and the market:

1) The Wealth of Nations, by Adam Smith (1776)

A seminal text in economics, The Wealth of Nations laid the foundations of the contemporary market nearly 250 years ago. It spearheaded free markets, competition, and the economy’s ‘invisible hand’ while exploring the concepts of economic growth, division of labor, and wealth distribution.

So yeah, the first entry on this list is a two-and-a-half century-old book. While it is not essential reading for practical tips, it does illuminate all the relevant concepts that help run the modern economy today.

2) Basic Economics, by Thomas Sowell (2000)

Designed as a ‘citizen’s guide to economics,’ Basic Economics explains the principles of different economic systems, such as feudal, socialist, and capitalist, without equations and scientific jargon. 

In everyday language, Sowell analyzes economic policies by their incentives rather than proclaimed goals, aiming to teach the reader to deal with modern political economy from scratch.

3) Principles of Political Economy, by John Stuart Mill (1848)

John Stuart Mill, a leading public intellectual of his time, combines classical economics with social philosophy, essentially creating the predecessor of modern political economy. Principles of Political Economy explores production, distribution, and the role of government in dealing with issues such as market failures and wealth inequality.

The book calls for increased production efficiency while stressing the importance of moral considerations toward workers and broader society. It predicts debates about capitalism, socialism, and other forms of economic policy well decades before they had taken sway over the world.

4) Why Nations Fail, by Daron Acemoglu and James A. Robinson (2012)

Why Nations Fail: The Origins of Power, Prosperity, and Poverty combs through history for answers to why some countries get rich while others do not. 

Written by two winners of the 2024 Nobel Prize in Economic Sciences, this book draws on fifteen years of research to reveal how ideologically different political and economic institutions make or break nations’ economies. Furthermore, it opines on the trajectory of China’s and America’s economies and their mutual relations. 

5) The General Theory of Employment, Interest, and Money, by John Maynard Keynes (1936)

A cornerstone of Keynesian thought, The General Theory of Employment, Interest, and Money revolutionized economics and economic cycle management by advocating for active government intervention to reduce unemployment and stimulate growth during recessions.

It is relevant today as ever, especially in the context of the political debate about minimal government interference and regulation and government bailouts and stimulation packages, which is causing the current division between the Democrats and the Republicans. 

6) Capital: A Critique of Political Economy, by Karl Marx (1867)

Many have praised and reviled Marx’s Capital, which remains one of the most notorious and influential texts about economics and labor. It argues that capitalist profit relies on surplus value taken from workers and explores the power dynamics between the classes.

Termed as ‘the Bible of the working class,’ the book (wrongly) predicted the replacement of capitalist systems by a system of common ownership. Nonetheless, it is filled with fundamental insights about how politics interact with the market. 

7) The Road to Serfdom, by F. A. Hayek (1944)

Another formative treatise on political economy, The Road to Serfdom, argues that centralized economic planning leads to tyranny and the loss of freedom. Conversely, Friedrich Hayek finds a correlation between personal liberty and the free market.

Written in 1944, when support for the Soviet economic model was at its peak, this book warns against the dangers of state control and collectivist aspirations, as it leads to horrors not unlike Nazism and Fascism. 

8) It’s OK to Be Angry About Capitalism, by Bernie Sanders (2023)

Published in 2023, It’s OK to Be Angry About Capitalism is the freshest critique of the current economic system aimed at widespread wealth inequality and corporate greed. Penned by the progressive Senator Bernie Sanders, it promotes policies like universal healthcare, fair wages, and wealth taxes as keys to a fair and dignified American society.

In his newest book, Sanders sketches out a path toward an improved democracy based on economic rights as one of the fundamental human rights. Whether you agree with his opinion or not, the senator makes crucial observations about the ongoing economic issues of the current decade.

9) Free to Choose: A Personal Statement, by Milton and Rose Friedman (1980)

Milton Friedman, the winner of the 1976 Nobel Prize in Economical Sciences, has passionately argued against government intervention in the market. Free to Choose: A Personal Statement discusses the erosion of freedom and standard of living caused by excessive laws, regulations, and spending by the federal government. Additionally, it outlines the necessary steps to a healthy economy.

The book has become a staple of neoliberal economic thought, and its emphasis on personal freedoms and competitive markets continues to influence policies to this day. 

10) The End of the World is Just the Beginning, by Peter Zeihan (2022)

From the perspective of a globalized economy, Zeihan’s glimpse into the future is apocalyptic. In fact, The End of the World is Just the Beginning: Mapping the Collapse of Globalization predicts the end of globalization, the ensuing economic fragmentation, and self-sufficient regional economies. 

Based on the aging population, fragility of supply chains, and geopolitics, the book predicts the end of the global market but also gives insights into navigating a localized and resource-independent economy. This potential future is grim, but if it becomes true, investors who extract valuable lessons from Zeihan’s writings will come out on top.

(bonus) Hillbilly Elegy, by J. D. Vance (2016)

President Donald Trump‘s vice-presidential candidate has humble roots, which he was ready to disclose in a memoir that captures the struggles of America’s white working class.

Hillbilly Elegy is a story about a family gripped in a cycle of poverty, addiction, and instability, but also an observation of the cultural and economic challenges of rural communities in the United States. 

Vice President J. D. Vance makes keen observations about the social pressures on the working class, which has reached its breaking point, and the possible consequences of a condescending attitude toward a whole layer of society.

The bottom line

This was a list of the 10 best political economy books for individual investors. Although it contains different books with sometimes contrasting views of our current political and economic systems, each has its own unique observations and lessons about macroeconomics.

Sometimes, knowing the practical aspects of stock trading is not enough to become the best possible investor; you also have to know about the political forces that govern the market. This knowledge will improve your investing decisions and allow you to adapt to various adverse and beneficial trends that emerge in our globalized economy.

Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.

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