The best new books to read about finance

How Economics Explains the World. By Andrew Leigh. Mariner Books; 240 pages; $26. Published in Britain as “The Shortest History of Economics"; Old Street; £14.99

There is no shortage of books on the history of money, for the straightforward reason that publishing them reliably convinces readers to part with theirs. And no wonder. Money is a central part of everyday life, as well as being a route to power or ruin. It is strange, seductive and maddeningly difficult to understand, all of which makes it irresistible. Yet that allure rarely makes it to the page. Money is fascinating. But reading about money can be mind-numbingly dull.

That is certainly not a description that can be applied to “Money", a new book by David McWilliams. Do not be put off by the fact that the author is a former central banker—this is no dry tome on monetary theory. Instead, it is a whistle-stop tour through human history, with money and its engineers as the central characters. It opens with Adolf Hitler’s plot to destabilise Britain by forging £133m (£5.2bn, or $6.9bn, in today’s money) and ordering the German air force to scatter it over the country, hoping to set off hyperinflation. Hitler’s reasoning is also Mr McWilliams’s central theme: money and society are inextricably bound together.

A dizzying array of historical anecdotes follows. Readers are introduced to the Ishango bone, a baboon’s femur from around 18,000BC that may have been used to tally credits and debits. They learn about interest rates in ancient Mesopotamia (about 33% a year for barley), the invention of coins by the Lydians in Anatolia and how Tiberius, a Roman emperor, triggered a credit crunch. Romping through Florence’s creation of one of the world’s first reserve currencies in the medieval era and the financing of the French and American revolutions, Mr McWilliams comes to the present, worrying that central bankers have lost control of money entirely.

It is an impressive journey that fizzes with facts. Yet between the author’s love of a good yarn and fear that a book about money might become boring, it is a shame that some big financial ideas get lost. A chapter on Fibonacci, an Italian mathematician, for example, describes Messina’s bustling port and King Roger II’s architectural tastes over pages, but spends just a paragraph on his ideas about valuing future cashflows (essential for most modern finance) and his popularisation of double-entry book-keeping (the foundation of modern accounting).

Given the scale of the topic, such quibbling may seem harsh. How, after all, can a short book survey the full history of something so vast and remain readable? To find out, read “How Economics Explains the World", by Andrew Leigh, formerly an economics professor at the Australian National University and now a member of the Australian Parliament. In simple, clear language—and less than 200 pages—it does exactly what its title promises.

To Mr Leigh (and plenty of others) economics is the science of how people “maximise their well-being in the face of scarcity". He illuminates how people have become much better at this by charting the number of hours’ work throughout history that it has taken to produce an hour’s worth of light for a household. Our prehistoric ancestors would have had to spend 58 hours foraging for timber; in the late 1700s, it would have taken five hours to make an animal-fat candle that smelled awful. Today less than a second’s work will earn a typical worker enough to flick the switch.

Mr Leigh then canters through the history of human progress, pausing briefly to explain the economic forces and ideas that drove it forward. Why did Europeans colonise Africa rather than the other way round? Because of a better climate for farming and more easily domesticated animals, leading to a bigger agricultural revolution and more wealth and military might. Why do Protestant countries have high incomes? Because 16th-century Lutherans learned to read, which fuelled economic development. Why did American cities grow more quickly than European ones starting in the 19th century? Because American cities were built on grids, making it easier to connect new homes to sewerage and transport.

Along the way, readers meet the big economic thinkers who sought to explain these forces. Both finance aficionados and mere novices will read, savour and return to these books, giving fresh meaning to the concept of “book-keeping".

For more on the latest books, films, TV shows, albums and controversies, sign up to Plot Twist, our weekly subscriber-only newsletter

© 2024, The Economist Newspaper Limited. All rights reserved. From The Economist, published under licence. The original content can be found on www.economist.com