In furtherance of my general objective to pick up general knowledge from all aspects of life, I have been trying to read more widely. Economics and macroeconomics as a topic feels a little strange and rusty to me, however, since the last time I was properly educated on the subject was when I was studying it at the junior college level (when I was 17 to 18 years old).
Thinking that it is a bit of a pity to let my knowledge of economics fade away without doing anything to maintain my memory of it, I have been trying to re-familiarise myself with the concepts. In attempting to do so, I picked up How an Economy Crashes and Why It Crashes, by Peter D. Schiff and Andrew J. Schiff (“HECWIC“). My experience with books on economics are that they usually assume that their readers already gain a certain level of familiarity with macroeconomic concepts, and thus they don’t usually function well as introductory books to economics concepts. Therefore, I expected myself to be re-reading sentences, trying to get it to click in my head, and doing more googling in the course of my read.
HECWIC was a pleasant surprise in how easy it was to consume. In this book, Schiff provides a bird’s eye view of current US macroeconomic policy through the lens of a narrative that spans throughout the book, complete with pictorial illustrations, on three men living on an island. Serving as an easy introduction to macroeconomics, the first half of the book explains the basic ideas of the components of an economy, the relationship between savings and credit, how an economy expands, and moves on to how this propels growth and economic development. This gradually makes way to the birth of the government and the republic and the narrative slants towards demonstrating how government influence (which is motivated by political considerations) sometimes creates incentives that distort the free market, creating inefficient resource allocation which creates the cyclical effect of economic booms and crashes.
It is easy to see that the narrative has a clear end goal in mind and is focused on fitting its narrative to that end – that Keynesian economics of expansionary monetary policy comes at its costs – mainly making future generations bear the cost of today’s uninhibited spending. The island-nation in the narrative depicts the US senate and its economy and its events in recent history (with just slight differences in the names used just so that they remain recognisable, where the changes made are for comedic effect and appeal). Towards the end of the book, the narrative also references Sino-US relations by introducing another neighbouring country.
All in all, HECWIC is a good introductory book to macroeconomics and why and how US macroeconomic policy has developed the way it has. Its humour and comedic style also make its concepts easier to digest, and it is definitely recommended for those who finds macroeconomics is too difficult to comprehend or boring. However, one should be more cautious in seeking to rely solely on this book to frame one’s knowledge on the topic – in simplifying macroeconomic concepts, the narrative makes multiple analogies to established systems which are based on certain key assumptions. I am no macroeconomist, but it is clear that these assumptions do not hold absolute as the world is multi-dimensional and there are many factors at play in shaping policy decisions. That said, this is absolutely a light-hearted, fun and witty book which I definitely recommend for all ages – no matter what level of macroeconomics knowledge you have.
(This post is not sponsored. Link to the book can be found here.)