[...]... fish 2 HOW AN ECONOMY GROWS AND WHY IT CRASHES Fortunately, the island was surrounded by an abundant population of strangely homogeneous fish, any one of which was large enough to feed one human being for one day However, this was an isolated place where none of mankind’s many advancements in fish-catching technology had arrived The best these guys could do was jump in and grab the slimy buggers by hand... vegetables had to be planted and picked by hand, and what if we didn’t even have sacks in which to carry the harvest? Imagine if we had to make clothes and furniture without factories… without even scissors or nails? 10 AN IDEA IS BORN Despite our intelligence, we would be no better off, economically at least, than chimps and orangutans Tools change everything and create the possibility of an economy Spears... capital through his self-sacrifice! 7 HOW AN ECONOMY GROWS AND WHY IT CRASHES That night, while Baker and Charlie slept with full stomachs, Able dealt with hunger pangs while images of luscious fish danced in his head However, his pain was more than overcome by his hope that he had done the right thing and that a bright, fish-filled future awaited The next day, Baker and Charlie made much sport of Able’s... as he awkwardly handled his strange new device After a few minutes he got the hang of it and in no time snagged a doozy 8 AN IDEA IS BORN Baker and Charlie stopped laughing When, in just another hour, Able landed his second fish of the day, the boys were in awe After all, it generally took them all day to get just one fish! From this one simple act, the island’s economy was about to change in a very big... shovels help us plant crops, and nets help us catch fish These devices magnify the efficacy of our labor The more we can make, the more we can consume, and the more prosperous our lives become The simplest definition of economy is the effort to maximize the availability of limited resources (and just about every resource is limited) to meet as many human demands as possible Tools, capital, and innovation... prestige than universities that could not Inevitably economics departments began to favor professors who supported those ideas Austrians were increasingly relegated to the margins Similarly, large financial institutions, the other major employers of economists, have an equal affinity for Keynesian dogma Large banks and investment firms are more profitable in the Keynesian environment of easy money and loose... our history and gold headed towards $800 per ounce In 1972 Irwin set out to write his first major attack on how Keynesian economics was putting the United States on an unsustainable economic course His book The Biggest Con: How the Government Is Fleecing You, enjoyed wide-spread critical acclaim and decent sales Among the many anecdotes the book contained was a story about three men on an island who fished... Able rolled the dice to build his net, the island had no store of savings His willingness to take a chance and go hungry led to the island’s first piece of capital equipment, which in turn produced savings (for the sake of this story we will assume that fish do not spoil) This spare production is the lifeblood of a healthy economy 9 HOW AN ECONOMY GROWS AND WHY IT CRASHES TAKEAWAY or all species, except... eight years later, after so many readers had commented to him about how much they loved the * To read Irwin’s complete testimony, please see Appendix A of The Biggest Con: How the Government Is Fleecing You, (Freedom Books, 1978) xx INTRODUCTION story, he decided to develop an entire illustrated book around it How an Economy Grows and Why It Doesn’t was first published in 1979, and went on to achieve quasi-cult... economies with low interest rates So whereas the Keynesians look to mitigate the busts, Austrians look to prevent artificial booms In the economic showdown that followed, the Keynesians had a key advantage xiii INTRODUCTION Because it offers the hope of pain-free solutions, Keynesianism was an instant hit with politicians By promising to increase employment and boost growth without raising taxes or cutting . Schiff and Andrew J. Schiff. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada. Based on Irwin Schiff ’s book, How an Economy Grows. CRAS H E S AND WHY IT PETER D. SCHIFF ANDREW J. SCHIFF John Wiley & Sons, Inc Illustrations by Brendan Leach CRAS H E S AND WHY IT Copyright © 2010 by Peter D. Schiff and Andrew J. Schiff large fi nancial institutions, the other major employers of economists, have an equal affi nity for Keynesian dogma. Large banks and investment fi rms are more profi table in the Keynesian environment