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The Return of Depression Economics Paperback – May 17, 2000


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Product Details

  • Paperback: 192 pages
  • Publisher: W. W. Norton & Company (May 17, 2000)
  • Language: English
  • ISBN-10: 0393320367
  • ISBN-13: 978-0393320367
  • Product Dimensions: 8.5 x 5.4 x 0.8 inches
  • Shipping Weight: 12.8 ounces
  • Average Customer Review: 4.1 out of 5 stars  See all reviews (63 customer reviews)
  • Amazon Best Sellers Rank: #1,352,053 in Books (See Top 100 in Books)

Editorial Reviews

Amazon.com Review

What do babysitting coops and liquidity traps have in common? Lots, according to Paul Krugman. In The Return of Depression Economics, the MIT professor looks at the alarming string of financial crises that plagued various economies around the globe in the 1990s, especially the Asian contagion, and sees an "eerie resemblance to the Great Depression." Instead of the "new world order" promised by the triumph of capitalism over socialism, "the world economy has turned out to be a much more dangerous place than we imagined."

Krugman uses the example of a Washington, D.C., babysitting coop to explain the dynamics of recession and inflation. He examines the remarkable emergence of Asia and the precursors to the Asian mess--the Tequila Effect of the mid-'90s that began in Mexico and Japan's fall in the early '90s into an economic malaise. He then analyzes the underlying reasons for the collapse of the Thai baht and other Asian currencies as well as the subsequent actions of the IMF and the murky role of hedge funds. In the end, Krugman sees the return of depression economics, which "means that for the first time in two generations, failures on the demand side of the economy--insufficient private spending to make use of the available productive capacity--have become the clear and present limitation on prosperity for a large part of the world." It's the same problem that was at the root of the 1930s depression. And while it took a world war to solve that problem, Krugman sees solutions that are far less dramatic but that do require a willingness to chuck obsolete doctrines and think about old problems in new ways.

Over the years, Krugman has earned a well-deserved reputation for translating the jargon that economists speak into something that anyone with an interest--not necessarily a Ph.D.--can understand. The Return of Depression Economics is another timely testament to Krugman's ability to read and interpret the tea leaves of today's global economy. Highly recommended. --Harry C. Edwards --This text refers to an out of print or unavailable edition of this title.

From Publishers Weekly

As an economist in good standing, writes MIT economist Krugman, I am quite capable of writing things that nobody can read. Fortunately, Krugman, author of Slates Dismal Science column, is also quite capable of writing things that almost anyone can read. An accomplished translator of economics into English, Krugman (Peddling Prosperity; The Accidental Theorist; etc.) takes a look at the international financial turmoil of the past two years and concludes that, confident assertions of happy globalizers and bullish day traders notwithstanding, a great depression could happen again. Depression economics is back, he argues, meaning that for the first time in two generations, failures on the demand side of the economy... have become the clear and present limitation on prosperity for a large part of the world. Whether discussing the currency collapse in Indonesia, the travails of Brazil and Russia (and how theyre related) or the failure of hedge funds such as Long Term Capital Management, Krugman writes with invigorating lucidity and forceful opinion. Now as in the 1930s, however, one cannot defend globalization merely by repeating free-market mantras, even as economy after economy crashes. If his message is dire, his tone is light, almost jaunty as he calls supply-side economics a crank doctrine and ably articulates a Keynsian willingness to regulate markets in order to stabilize economies and minimize human suffering. Moving from concrete examples (e.g., the struggles of a Japanese baby-sitting coop) to stinging critiques of head-in-the-sand theorists, Krugman proves himself not only comprehensible but also well worth comprehending.
Copyright 1999 Reed Business Information, Inc. --This text refers to an out of print or unavailable edition of this title.

Customer Reviews

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Krugman's books as always are very interesting.
Gilles Payet
Whether one agrees or disagrees with his policy prescriptions, he's good in explaining how to think about things.
Reviewer
The Return of Depression Economics is, by far, the best generalist text on the Global Financial Crisis of 1997/98.
M. Mcfarland

Most Helpful Customer Reviews

53 of 61 people found the following review helpful By Professor Joseph L. McCauley on January 18, 2000
Format: Hardcover Verified Purchase
This book is interesting, worth reading, in part because of it's attempt to avoid moralizing and to find instead `mechanical' reasons for economic slumps, and also for its presentation of facts about sequences of events. The book is also short: the presentation and arguments are concise and easy to follow. The mechanics emphasized by Krugman are large (often leveraged) money transfers and leveraged credit. The examples discussed are about Japan, Thailand, Mexico, Russia, and Brazil. Money transfers via hedge funds are nicely discussed.
Japan, seen from a western economist's eyes, presents a problem economy: stable currency and employment (no growth), and high savings (people tend to keep their money in the bank). Krugman labels this no-growth/high liquidity state a `liquidity trap'. He describes a toy economy that provides a model of a liquidity trap, the Washington DC Baby-sitters' Co-op (see also Akerlof's `Market for Lemons', which came earlier). In the baby-sitter's co-op people start with small, equal amounts of script and a state is reached where parents want baby-sitters (demand) and other parents want to baby-sit (supply) but there is no matching of demand to supply because the script supply (money supply) is too small (savings are too high). Krugman's proposed solution to the liquidity trap is to inflate the script supply. That is also his proposed solution for destabilizing Japan's economy and society: to make saving less desirable by inflating the money supply, therefore inducing people to consume and speculate. The interesting thing is that on Thursday, 14 October 1999, that is exactly what the Bank of Japan agreed to do by announcing that they are buying back bonds. So, we now have running an uncontrolled experiment of Krugman's proposal.
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17 of 17 people found the following review helpful By A Customer on July 8, 1999
Format: Hardcover
From the July/August 1999 issue of FOREIGN AFFAIRS: A sober -- and sobering -- appraisal of the past two years of financial history. The book covers the unstable dynamics of financial crises, highly leveraged hedge funds, Japan's deflation and liquidity trap, and other economic pathologies. Krugman argues that deficient demand, which has not appeared on such a global scale since the 1930s, is again a potential problem. When appropriate, countries should pursue an expansionary monetary and fiscal policy -- to revive the "Keynesian compact," whereby they maintain free markets but provide government-assured adequate aggregate demand. Krugman also usefully reminds us that economics is a set of analytical tools applicable to diverse situations, not a rigid set of universal principles. He concludes that the Japanese government should generate inflationary expectations so that the real interest rate can decline further -- an unorthodox conclusion carefully derived from straightforward economic analysis. He tells his story in clear prose, without the diagrams economists love. Masterful at presenting complex ideas in simple and sometimes whimsical parables and analogies, Krugman makes serious analysis fun to read.
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15 of 16 people found the following review helpful By Kirill Pankratov on February 8, 2001
Format: Paperback
The beginning of the previous decade saw the establishment of a new doctrine - and almost unbounded optimism about its power: triumph of markets over states, new role of IMF as a policemen of the world economy, "Washington Consensus" about the strict rules that "emerging market" countries are supposed to follow. Later, in the second half of the decade a new impetus was added - rapid development of the Internet and new telecommunication technologies. The olden stuff of economic theories - business cycle, limits of non-inflationary growth - seemed quaint and irrelevant. Isn't today's economy all about "faster, not bigger", bits, not atoms, megabytes per second, not megatons? Not so fast, argued Paul Krugman in this book. It turns out that problems and issues relegated to the history museum have a knack of coming back with a vengeance.
"The Return of The Depression Economics" doesn't mean that the whole world is about to experience the equivalent of the global "Great Depression" of 1930's. Rather, that many countries are now facing problems similar to big issues that occupied economists and policy-makers in the wake of the great shock of world economy in 1930's. At the core of these problems is a massive and long-term demand failure that some economies experience in the aftermath of previous booms.
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9 of 9 people found the following review helpful By Raed T H Kanaan on December 30, 1999
Format: Hardcover
This is clearly one of the best economics books I have read in recent years. Krugman is not only a brilliant economist, but a wonderful writer. He presents a very interesting insight into the recent Asian and Latin American crises and challenges (in a very intelligent and convincing manner) the prevailing economic ideologies shared by most western governments and multinational agencies (e.g.: IMF). This book was a true pleasure to read. Love or hate him, Krugman will make you think.
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