A commonsensical book for children giving a resounding three cheers to the power of free markets without undue bias.
Pai, Roopa. So You Want to Know About Economics. Red Turtle/Rupa Books, 2017. 172 pp.
A few days ago, I took my son to a children's book fair in his school. Amongst the colourful collection of Geronimo Stiltons, Captain Underpants, Wimpy Kids and Nancy Drews, one book caught my attention. It was titled So You Want to Know About Economics (2017) by an author I had not previously heard of, Roopa Pai.
What really impressed me about the book was that it was endorsed by Raghuram Rajan, former Reserve Bank of India governor. Rajan wrote (on the front cover): "This short, entertaining, well-written book is a quick and irreverent introduction to Economics." And, on the back, he continued: "If you never had the time to plough through dreary Economics textbooks, but still want a flavour of its key concepts, illustrated with examples from daily life, this is the book for you."
Now, I really respect Rajan for his pro-free market views (I read his Fault Lines (2010) with rapt attention) and if he could give such a positive endorsement, I felt it must be quite apt for my son.
My son is 13 years old and I have had with him, from time to time, free-wheeling conversations on economics. I especially wanted him to know the difference between capitalism, communism, socialism and totalitarianism and to understand that profit is not really a dirty word. I also wanted him to appreciate the benefits of living in a democracy, however flawed it may be.
I started by giving a cursory glance through the book to see what stuff it contained and, to my surprise, ended up reading it completely in one go!
Roopa Pai (I learnt from the internet) was trained as a computer engineer but then switched to journalism writing for Target among other outfits. She has written over 20 books for children and has won the Children's Book Trust Award. She also won the Crossword Popular Award for Children's Writing in 2016 for The Gita for Children. Apparently, she "did not know the first thing about [economics]" before writing this book.
Pai starts off with an imagined debate between the mercantilists of the 17th and 18th centuries and Adam Smith, whose Wealth of Nations was published in 1776. Mercantilism is based on a win-lose proposition (a "zero-sum game") that the only way to get rich is by making someone else poorer. Mercantilism made Europe very rich but it was a bad deal for the colonies.
Smith proposed that trade could be a win-win game and wealth is not a limited quantity but can be created by new ideas and endeavours. Pai says that "Smith's arguments were clearly sound. It explains why, a few years after The Wealth of Nations was published, England began to sidle slowly away from mercantilism towards Adam Smith's brand-new idea for a very different way of doing business."
The author then goes on to talk about macroeconomics and microeconomics. In macroeconomics, she seeks to answer questions such as:
- Where does the government get its money from? And what does it do with it once it has it? (covers taxation and government spending; there are even sections on black money and demonetisation).
- How come my parents never ate a Maharaja Mac in India when they were my age? (talks about Nehruvian policies and protectionism and liberalisation).
- Why doesn't the government simply print more money so that everyone has some? (talks about inflation and its various forms such as demand-pull and cost-push inflation).
- What does India buy when it goes shopping? (covers things like Consumer Price Index and Wholesale Price Index).
- How come one Indian rupee is only worth about 1.4 US cents? (talks about exchange rates, gross domestic product and purchasing power parity).
In the chapter on microeconomics, Pai talks about the law of supply and demand and how the market fixes prices of goods. It also talks of price elasticity and stuff that go against the price-elasticity of demand logic (eg ultra-luxury goods).
The discussion on monopoly, oligopoly and monopsony and that on externalities were well crafted. The book even has a section on behavioural economics and Richard Thaler's "nudge effect".
If there is one shortcoming, it would be that the book suggests that banks are funded more through money printing than through savings. There is also seemingly a preference for an inflationary bias in the economy. (I know, all governments favour inflation rather than deflation but this was not always so. Economists like Peter Schiff believe that even deflation is good for the economy and governments need not be scared of deflation.)
To sum up, a good introductory commonsensical book for children giving a resounding three cheers to the power of free markets without undue bias towards socialism (or Marxism or Keynesianism or Monetarism).