Andrew Leigh has been a Professor of Economics at the Australian National University and served in the Australian House of Representatives. His How Economics Explains the World is a clear and concise guide to a topic most people don’t understand. Leigh uses examples and stories to make his points. Here’s a good example:
“In 2005, Canadian blogger Kyle MacDonald vividly illustrated [economic principles]…by trading his way from a red paperclip to a house. First, he traded his paperclip for a fish-shaped pen. Then he traded the pen of a hand-scrulpted doorknob. Then he traded the doorknob for camp stove. This went on until his fourteenth and final trade: swapping a movie role for a small house. At each step, MacDonald valued the new item more highly than the old item–but he traded with someone who valued the old item more than the new. MacDonald didn’t just get himself a house–he did so through fourteen trades that made another person better off.” (p. 158)
Trade tends to improve the economic state of both parties. That’s why Trump’s plan to impose tariffs (taxes) on trade is a Bad Idea. Some ideas that seem good have Unintended Consequences. You would think shifting from a hunter-gatherer mode to an agricultural society would be an improvement. But, that brings changes:
“The societies that emerged from the agricultural revolution were often highly unstable. During its 500-year history, the Roman Empire had seventy-seven emperors. Half were murdered, and still more died in battle or by suicide. Just one-third of Roman emperors died from natural causes. In one exceptionally brutal eighteen-month period, Nero died by suicide. Galba was murdered. Otho died by suicide and Vitellius was murdered.” (p. 18)
That kind of carnage was unknown in hunter-gatherer societies that were always on the move. Later, more violence sprung up in what we mistakenly consider “civil societies”:
“….[Shakespeare lived] in an age of slavery and superstition. During the 1500s and 1600s, nearly one million people were killed for the crime of witchcraft.” (p. 43)
Without regulation, abuses grow. “Heroin was marketed by Bayer from 1898 to 1910 as an over-the-counter cough suppressant. Cocaine was added to Coca-Cola until the early 1900s. In 1913, one expert claimed that nearly a quarter of the US doctors were addicted to morphine.” (p. 80)
Of course, economists can be colorful characters, too. Take John Maynard Keynes, the originator of Keynesian Economics, for example: “Keynes was a collector of Picassos, Renoirs and Matisses, and an investor who was multimillionaire by today’s standards. He kept diaries of his sexual exploits (with men and women), recording sixty-five encounters in 1909, twenty-six in 1910, thirty-nine in 1911, and so on.” (p. 89)
Ignorance of economic principles is not bliss. “…Mao [Zedong] demanded that people eliminate sparrows, on the basis that they ate grain. The campaign called on people to make so much noise that the sparrows died of exhaustion. Millions of sparrows died, which meant that they were not around to eat the locusts that devoured much of the following year’s crop. Eventually, Mao imported 250,000 sparrows from the Soviet Union to restore the eco-system. Crop losses contributed to a 40% drop in rice and wheat output between 1957 and 1961, and a famine that killed tens of millions.” (p. 118)
Andrew Leigh wrote How Economics Explains the World to help us live a better Life. I think he succeeded! GRADE: A
