Book review: Whatever Happened to Penny Candy?

Readers of a certain vintage will remember a time when the cheapest lollies in the local dairy were one cent (in contrast, some younger readers probably never used a New Zealand one cent coin, which along with the two cent coin was demonetised in 1990, while the five cent coin was demonetised in 2006). Now the cheapest lollies are much more expensive (ok, I'll admit I have no idea how much more expensive they are, having long since stopped buying them). Anyway, that is a very long-winded introduction to my latest read, Whatever Happened to Penny Candy?, by Richard Maybury. Penny candy in New Zealand being, of course, the one-cent lolly.

I can't recall who recommended this book to me, but it wasn't quite what I expected. The cover suggests that it is "a fast, clear, and fun explanation of the economics you need for success in your career, business, and investments". That would be accurate, if the economics you needed for success was limited to a thinly-veiled rant against monetary policy and inflation, and in favour of small government.

The book was loaded with "what the f***?" moments, such as this:

Inflation is not the same thing as rising prices.

Actually, it is. The definition of inflation is literally "an increase in the general price level in the economy" (from my ECONS101 textbook, the excellent free e-book The Economy by Core). Or, if you prefer Mankiw (the most widely used introductory textbook), then inflation is defined as "an increase in the overall level of prices in the economy".

To be fair, Maybury does make clear that his definition of inflation is an increase in the number of dollars (that is, effectively an increase in the money supply). And to be fair, that was the original use of the word inflation by economists (for example, see this article by Michael Bryan of the Federal Reserve Bank of Cleveland). However, that is clearly not the current use of the term, and despite Maybury's protestations that governments "have redefined inflation to mean rising prices", it was actually economists that did so, and the change had happened by the 1930s according to Bryan's article. So, Maybury's terminology is at least 80 years out-of-date. The arguments against monetary policy decisions might be valid, but to couch them in outdated use of terminology against virtually all currently-understood use of those terms is a little odd.

Another WTF comes from this:

During a depression, businesses go broke and people lose their jobs. Many become poorer. It's all caused by the inflation.

The first two sentences are correct, and few would argue with them. However, to argue that depressions are caused by inflation not only rejects the idea of monetary neutrality, but is effectively diametrically opposed to it. While strict monetary neutrality is probably not a good description of the real world, there is little evidence to suggest, as Maybury does, that business cycles are caused by inflation (by which he means that they are caused by fluctuations in the money supply).

The book does have some highlights though, including interesting descriptions of Gresham's Law, and the origin of the name of the "dollar" (which dates to the "Joachimthaler" in Bohemia in the Middle Ages, later shortened to "thaler"). However, despite those few highlights, I really wouldn't recommend this book to anyone, least of all anyone who want "a fast, clear, and fun explanation of the economics you need for success in your career, business, and investments".