How an Economy Grows and Why It Crashes

Understanding how all the pieces of an economy fit together can be a daunting task—especially when the experts can't seem to do it. But when you get down to the basics, it is much easier than you may think. 

In their new book How an Economy Grows and Why It Crashes (Wiley, $19.95, 978-0-470-52670-5, May 2010) brothers Peter and Andrew Schiff use illustrations, humor, and accessible storytelling to take economics off its lofty shelf and put it back on the kitchen table where it belongs.  For those who would normally prefer watching paint dry than delving into economic concepts, the book could not have come at a more opportune time.  

To illustrate (literally) their reasoning why the direction of our current economic policy is hopelessly misguided, the Schiffs have conjured a straightforward story of fish, nets, savings, lending, trade, job creation and inflation. 

The tale is set on a tropical island where three stone-age inhabitants scratch out a meager existence by catching fish with their bare hands. But when one enterprising islander discovers how to make a net, the entire island economy begins growing and diversifying. The economy expands until an activist government, worthless “Fish Reserve Notes” and runaway consumer spending eat away at the island’s economic foundation. When a runaway “hut glut” of island dwellings finally gives way, things fall apart very quickly.  

With wit and humor, the book discusses the roots of economic growth, the uses of capital, the destructive nature of consumer credit, the proper duties of banks, the role of interest rates in regulating economic activity, the advantages of free trade, the causes of inflation, the origins of the asset bubbles, and many other topical principles of economic theory. Along the way, they lampoon those politicians and economists who they believe are the source of our current difficulties.

The 220 page book, which includes more than 150 original illustrations by artist Brendan Leach, is partially based on a work previously published in 1985 by the Schiff's father, Irwin A. Schiff, an economist and anti-tax crusader. The younger Schiffs have expanded and updated the central allegory for a new generation.

The book may appear simple on the surface but it will leave readers with a powerful understanding of How an Economy Grows and Why it Crashes.