The Best Introduction to Economics in Print
If this writer were to claim that Peter and Andrew Schiff have created the master work of introducing basic Austrian economics that could be clearly understood by anyone of middle-school age and older, I would be only partly incorrect in describing their new book, How an Economy Grows and Why It Crashes.
The genius of this book comes from neither Peter nor Andrew Schiff, however. Much of the credit belongs to Irwin A. Schiff, who created the first draft of this introduction to Austrian economics back in 1985. The Schiff brothers acknowledge that this story would best be described as a riff on the original. But Peter and Andrew Schiff have perfected their father's already brilliant work, which had some presentational shortcomings. The sons have new illustrations by Brendan Leach, and additional material that brings the text up to date.
In other words the Schiff brothers have, as good capitalists have done for generations, improved the works of their forebears and risen to new heights. Lew Rockwell of the Ludwig von Mises Institute is in the habit of saying that the best introduction to Austrian economics is Tom Woods' brilliant Meltdown. Although he has been correct on that point, he may no longer be.
This short, easy read is a work of genius, illustrating economic concepts using a simple island economy of three people — Able, Baker, and Charlie — dependent upon their livelihood by fishing with their hands. The authors explain how the three improve their lives by creating capital (fishing nets and other technology) through risk-taking investment, under-consumption, and savings. The economic basics are outlined in the first 90 pages of this book, including money (fish on the island economy), inflation, and banking. The subject matter is covered almost in comic-book style.
The second part of the book attacks Keynesian controlled economy economic fallacies that politicians have pushed since the New Deal, employing fishy/nautical names for historical figures who took part in development or government destruction of the island economy such as Franky Deep (Franklin Delano Roosevelt), Buddy Goldfin (Barry Goldwater), and Ally Greenfin (Alan Greenspan). Peter Schiff even makes a cameo in the mythical island fish world as Piker Skiff, an accurate economist who's laughed at on talk shows by conventional political operators. This matches the real world, as Peter Schiff was indeed laughed at on numerous talk shows in 2006 and 2007 for accurately predicting the current Great Recession and explaining in detail why and how it would happen.
The genius of this book is that even a middle-school economics student could understand the basic concepts outlined in this book. As a teacher of high-school students, I can testify that this book could be understood by even the most basic of my students. It would make an excellent textbook for an Introduction to Economics course in any high school or middle school.
While children should be able to understand the concepts outlined in this book, adults desperately need to understand these concepts as well. But most don't. This book could be an easy cure for economic ignorance, as most adults could absorb it in a few hours. The Schiff brothers take on the greatest economic myth of the modern era: Deflation is bad, but inflation is good. They note in digressions from the book's narrative that during a recession prices need to fall in order to rebalance the economy. Recessions should be deflationary. Falling prices will cushion the blow of low employment. Somehow, modern economists see falling prices as a never-ending abyss toward demand destruction. They forget that when prices fall far enough, people start spending again. The process allows unneeded inventories to be worked off, and for prices to fall to a level justified by underlying supply and demand. By keeping prices artificially high, inflation prevents this from happening.
June 8, 2010
Thomas R. Eddlem [send him mail] is a high school history teacher in Southeastern Massachusetts and a freelance writer who contributes to The New American, Examiner.com, AntiWar.com and — of course — LewRockwell.com.
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