How an Economy Grows and Why It Crashes

Written on February 9, 2011. Written by .

How an Economy Grows and Why It Crashes attempts to explain the issue of national debt from the ground up through a story about a fictional island nation. Each chapter describes a phase in the evolution of the island nation’s economy, which mimics the economy of the US, but in a simplified manner. At the end of each chapter, there is a commentary that relates the story to the actual economy of the US. The main problem with the book is that there is almost no justification for its conclusions. For example, the argument presented for eliminating barriers to trade is that “it is not the aim of an economy to provide jobs. The goal is simply to maximize productivity.” The question of what would happen if maximum productivity was attained by exporting all jobs overseas is not addressed. The first part of the book does provide a useful picture of money and banking, which is simple enough to be properly explained by example. However, the remainder of the book over-simplifies the complex theory of economics so far that it does more harm than good for the student by suggesting that primitive heuristics can stand in place of solid analysis.

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