An economist’s view of world history

Even the inclusion of the word shortest in the title of this book on the history of economics may not be enough to prevent potential readers from expecting a dry dissertation heavy with graphs and pie charts.

They couldn’t be more wrong.

Andrew Leigh’s 228-page The Shortest History of Economics is a punchy, insightful and highly accessible romp through the ages that explains the pivotal role this often-maligned discipline has played in shaping the world.

The Assistant Treasurer, the Assistant Minister for Competition, Charities and Employment, an economist and a prolific author, Leigh is well qualified to take readers on a journey of economic discovery.

Beginning with the motivation behind our ancestral hunter gatherers’ decision to grow crops and build cities and moving on to the transformative impact of new technologies such as the air conditioner and artificial intelligence, Leigh weaves an engaging narrative that explains how economics has evolved throughout the centuries and why it matters.

From the opening page, this story proceeds at a galloping pace, name-checking famous economists and their work, and explaining in simple terms economic concepts and how they have shaped the most momentous moments in human history.

There are the big rocks such as revealing the hidden economic forces behind war, innovation and social transformation.

Then there are the quirky historical nuggets that add colour to the bigger picture.

Who knew, for example, that the original inventor of the board game Monopoly intended it as a warning on the perils of capitalism?

Or that the invention of the plough not only revolutionised farming but fuelled gender inequality? The reason lies in the upper body strength necessary to cultivate a field this way.)

In its entirety, though, this is a book about the power of ideas and their potential to shape people’s lives.

Those ideas include institutions such as the World Bank, created as a mechanism to raise the living standards of the poorest nations. Or the International Monetary Fund as a bulwark to help countries avoid fiscal crisis.

Time and again Leigh highlights and gives context to significant economic moments and concepts throughout history that resonate with our own times.

A brief explanation of the altruistic activities of the Medici family in 15^th- century Florence, for example, shows that philanthropic giving is far from a new concept.

The fear of job losses from disruptive technologies such as AI are echoed in the 19^th-century Luddite protests sparked by the invention of mechanical knitting machines in the industrial revolution.

Amid multiple inquiries currently underway into possible price gouging by big supermarket chains, Leigh uses the lack of competition in the sector to illustrate the economic concept of monopsony – which first emerged in the 1930s – to describe a scenario in which a seller has pricing power over its suppliers.

Similarly, he chronicles the evolution of state-sponsored welfare and taxation reform, and how these twin levers have been used to progressively lift people out of poverty (revised stage three tax cuts anyone)?

Rising level of home ownership did the same thing, emerging as one of the chief drivers of wealth equalisation in the decades following the First World War.

The evolution of central banks as independent arbiters of monetary policy – particularly their role in tackling rising inflation – will strike a chord with millions of mortgage holders in Australia today.

Likewise, the genesis of the federal government’s Measuring What Matters Framework can be traced to Indian economist Amartya Sen, who as a nine-year-old boy witnessed the devastating 1943 Bengal famine that killed three million people.

His later theories on the importance of “human flourishing” significantly influenced the UN’s Human Development Index, which ranks countries on a broader set of indicators than economic output alone.

As Leigh says, “what lies at the heart of economics is wellbeing, not income.”

Discussing how income gaps between countries and rising inequality over the past generation may have had an adverse impact on happiness, Leigh says,“One of the best arguments for a redistributive welfare state and progressive taxation is that a dollar brings more pleasure to someone who does not have many dollars to begin with.”

It is insights such as these that will resonate with anyone on the front line of the not-for-profit and charity sector who witness the consequences of unequal wealth distribution and the cost-of-living crisis every day.

From technological innovation in ancient China to the trade monopoly of the Dutch East India Company, and from US president Franklin D Roosevelt’s New Deal to the world’s response to the seismic disruption of the covid pandemic, the book’s success lies in Leigh’s ability to use an economy of words to tell a sweeping tale of the history of economics in an informative and engaging way.

As other reviewers have noted, readers will emerge with a clearer idea of why we are richer, live longer, have healthier children and are happier and more productive than our ancestors.

As Leigh writes, “This book has told both sides of the story – how open markets have brought millions out of poverty, and why it is essential to address market failures for economies to prosper.

“Capitalism doesn’t guarantee the wellbeing of those who lack capital.”

Early in the book, Leigh says his book sets out to do three things:

• Tell the story of how capitalism and the market system emerged
• Discuss the key ideas and people who have shaped the discipline of economics
• Outline how economic forces have affected world history.

While he achieves these goals, there is one premise that ties these themes together throughout.

“From education to entrepreneurship, from socialising to the share market, economics can help you live a better life.”

The Shortest History of Economics, by Andrew Leigh, $27.99 Black Inc Books