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WRONG: Nine Economic Policy Disasters and What We Can Learn from Them 1st Edition

3.7 out of 5 stars 16 customer reviews
ISBN-13: 978-0199322190
ISBN-10: 0199322198
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Seven surprising facts from WRONG: Nine Economic Policy Disasters and What We Can Learn from Them

1. The American Revolution was fomented by Britain’s insistence that Americans should provide the mother country with raw materials at a reasonable price and buy finished products in return. This led to a somewhat bizarre situation in which an American who wanted to wear a hat made of an American beaver pelt could only buy it after the pelt had been shipped to England, turned into a hat, and shipped back to America to be sold.

2. In the 1600s, Sweden managed to have a coin weighing 43 pounds, causing many large scale transactions to be impossible without a cart and horse. Shortly after this mistake, Sweden switched to paper money.

3. The Federal Reserve System is one of the world’s most powerful and well-regarded central banks. It was not, however, America’s first central bank—or even its second. America had established not one, but two central banks 200 years ago—and dismantled them both before the Federal Reserve was formed.

4. In the 1990s Japan suffered from a financial crisis and deep economic recession. The severity of this “lost decade” can be traced to the authorities’ decision to hide the country’s economic problems for as long as possible. This was accomplished by propping up failing banks, in hopes that they would return to profitability when the economy picked up, rather than closing them.

5. Why did Europe switch to the disastrous Euro as a unified form of currency? Consider the following: During the pre-euro era, if a tourist had started in one of the 12 countries that adopted the euro in 2002 with 100 German marks and then traveled to each of the 11 other eurozone countries doing nothing in each except exchange money into the local currency at each stop, and was charged a standard 3 percent per conversion, he or she would have spent about 28.5 percent of the original sum on commissions alone.

6. The German hyperinflation during the early 1920s was one of the most severe on record. The severity of the hyperinflation led Germans to burn banknotes to generate heat and use them as wallpaper. According to one story, a suitcase filled with money was left by its owner on the sidewalk while he went into a store; when the owner returned to retrieve the suitcase, he discovered that a thief had emptied out the money and stolen the now much lighter suitcase.

7. Shortly before Britain’s announcement of the return to the gold standard in 1925, Winston Churchill hosted a small dinner party with both supporters and opponents of the return to gold. According to the only surviving record of that evening, John Maynard Keynes --one of the era’s most articulate opponents of the gold standard--was not particularly persuasive that evening, and in the following days Britain switched to the gold standard which ultimately contributed to the severity of the Great Depression. Could Keynes’ “off night” have brought about one of the worst economic disasters the industrialized world has ever known?


"His writing is every bit as clear as his title...the author piques our interest with spicy historical detail...he has written a lovely tour, admirably brief, through centuries of economic folly." --Roger Lowenstein, Wall Street Journal

"Grossman does an excellent job in picking up the most severe economic policy mistakes, providing a thorough description and analysis of them, and giving us anecdotes linked to the described events. Wrong is a very eloquently written book that leaves the reader with many new insights." --LSE Review of Books

"A splendid book about the history of economic policy making...unlike the efforts of some popular writers to draw lessons from economic history, Grossman has mastered the scholarly literature for the cases he chooses...I have great admiration for this book. Grossman addresses an important question and his judgments are uniformly well reasoned and balanced. He is also an outstanding teacher of economics." --Hugh Rockoff, EH.net

"Engaging... a welcome publication." --Jim McAloon, Victoria University of Wellington, Australian Economic History Review

"Those who do not learn from the past are doomed to, well, not learn from the past. In an age when ideology rather than economic reasoning increasingly drives public policy, Richard Grossman's provocative and entertaining review of historical experience reminds us of how ideology has led us astray before." --Barry Eichengreen, George C. Pardee and Helen N. Pardee Professor of Economics and Political Science, University of California, Berkeley

"The best way to get economic policy right in the future is for aspiring journalists, economists, and policy wonks to read WRONG, a brilliantly concise and entertaining guide to learning from one's mistakes. It's going straight onto my business journalism students' reading list." --Sylvia Nasar, author of Grand Pursuit and A Beautiful Mind

"This is a fascinating book about great economic policy mistakes. If you do not want to be the one who triggers the Great Depression on your watch, or who loses an entire colonial empire because of a small tax, this is the book to read. It even tells you about why we are in the mess we find ourselves in. Full of great vignettes, it is an enjoyable introduction to history's great economic bloopers." --Raghuram Rajan, Eric J. Gleacher Distinguished Service Professor of Finance, Booth School of Business, University of Chicago and Chief Economic Advisor, Finance Ministry, Government of India

"Millions of people have suffered greatly, nations have fallen, and wars have been fought because of economic policy blunders. Yet while statesman and generals constantly restudy and relearn the lessons of Pearl Harbor or Vietnam or Munich, economists too often fail to learn lessons from past failures. That makes this book both novel and important. It should be read by anyone taking up a significant economic policy position and anyone seeking to understand and influence economic policy." --Larry Summers, Charles W. Eliot University Professor, John F. Kennedy School of Government, Harvard University and former President of Harvard University and Secretary of the U.S. Treasury


Product Details

  • Hardcover: 296 pages
  • Publisher: Oxford University Press; 1 edition (October 24, 2013)
  • Language: English
  • ISBN-10: 0199322198
  • ISBN-13: 978-0199322190
  • Product Dimensions: 8.3 x 0.9 x 5.8 inches
  • Shipping Weight: 9.6 ounces (View shipping rates and policies)
  • Average Customer Review: 3.7 out of 5 stars  See all reviews (16 customer reviews)
  • Amazon Best Sellers Rank: #841,083 in Books (See Top 100 in Books)

Customer Reviews

Top Customer Reviews

Format: Hardcover Verified Purchase
This is a clear, serious, but user-friendly overview of some great economic policy disasters, written by a leading economic historian. Grossman's Wrong will interest anyone wanting to learn more about why the Irish starved, or why the Allies though they could make the Germans pay (and seven other sad but important episodes). It will do well as a companion text in economics courses, and is an ideal gift for anyone interested in business and economics.

Timothy W. Guinnane, Professor of Economics, Yale University
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Format: Hardcover
"Wrong" presents nine historical examples of bad economic policy and ascribes an underlying cause: economic ideology. Grossman contends that, "Ideologically based policy comes about when decision makers grab hold of a key idea and use it as their one and only guide to economic policy" to the exclusion of "sound economic analysis." Grossman cites as examples of these flawed intellectual guideposts outdated ideas such as mercantilism, war reparations, and the gold standard among others. Is there a solution? Grossman argues that transparency of process, diversity of decision makers, and a willingness to reconsider long-held beliefs are all necessary to resist the urge of policymakers to defer to conventional wisdom. If bad policy still results from this improved process, it must be recognized and reversed as soon as possible.

This book can be revelatory or glib depending on a reader's familiarity with economics and economic history. Grossman patiently describes economic concepts to make the book accessible to a wide audience. Some chapters, like those on the Irish famine and the early United States central banks, were more interesting for their historical facts than for Grossman's economic analysis. The book is a quick read and will broaden a reader's appreciation of economic history, but it lacks any new or significant ideas.
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Format: Hardcover
Richard Grossman’s book describes nine major economic policy mistakes. It is written for the general audience with economic concepts explained along the way in a clear, concise manner. This book is important because it demonstrates just how much damage well-intentioned economic policymakers are capable of causing.

Three chapters deal with policies that were instrumental in causing the Great Depression of the 1930s. The reparation payments demanded from Germany following World War I helped bring about the Depression in Germany and Adolph Hitler’s rise to power. Britain’s return to the gold standard in 1925 at the wrong exchange rate, once described as “the worst monetary mistake of the twentieth century” (which is saying a lot!) set the stage for monetary policies in the U.S. and elsewhere that started the worldwide recession in 1929. The 1930 Smoot-Hawley tariff was another ill-fated policy, helping turn the recession into the Great Depression. How much damage can economic policymakers cause? A decade of economic misery in virtually every country in the world, followed by World War II and the Holocaust. That’s why these issues are important.

Another chapter deals with the European monetary union and the economic problems that arrangement has caused. Grossman expresses optimism that the issues can be successfully resolved. Given past episodes in European history, let’s hope he is right.

The variety of the remaining topics is impressive: British policy that was instrumental in causing them to lose their North American empire, the lack of a central bank in the U.S.
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Format: Hardcover
A delightful book. I highly recommend this book, both because it is a fun read and because it will make you a more enlightened citizen.

Rather than a dry tome on economics, the book is more like nine fascinating short stories, carrying the reader through one adventure after another, the adventure always being an economic disaster. One might expect that such a book would be a real downer, but that is not so. Somehow, we always recover and live happily ever after --- at least, until the next disaster. In some sense, it is like a whodunit. The crime is solved in the end, and that solution is the delight.

Today, we see a great ideological economic divide across the nation. In fact, that is may be our major problem. Richard Grossman, a leading economic historian, shows what can happen if outmoded or wrong-headed ideologies are followed rather than the use of careful economic analysis. He has chosen nine economic policy mistakes more, spaced over the last two hundred and fifty years, three before World War I, three after World War II and three in between, as illustrations.

The presentation is geared so that non-economists are given enough background as the need arises to understand the issues. The economics is so smoothly woven into the fabric of the book that one hardly notices. So you don’t have to be an economist to enjoy the book.

And enjoy it you will. This is very well written, neither belaboring economic points, nor talking down to the reader.
Keep in mind that the author makes no claims that these are the only or even the biggest mistakes over this period of time. The Great Depression is not one of his nine, presumably because we’ve already heard so much about it.
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