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Monday, May 07, 2012

Review: End this depression now!

I'm a big fan of Paul Krugman, and his latest book, End this depression now! made it to my kindle as a pre-order, something I hardly ever do.

The thesis of this book is that our current recession (which Krugman considers a depression) is easily cured with existing tools in our knowledge of economics, dating all the way back to the great depression and Keynes' theory of employment. Krugman provides data and evidence for this, and then goes on to debunk opposing views one at a time, providing a fair explanation of the opposing explanation (more fair than they deserve, in many cases), and then explaining how his proposed solutions would work better.

You might think that the book is mostly focused on the USA, but Krugman spends a fair amount of time on the EU, and the Eurozone, discussing how the Euro contributes to the Eurozone's malaise. Interestingly enough, Krugman does not propose dismantling the Eurozone, which makes a solution to their economic problems much less tractable than if he had assumed that the Euro would go away, at least for the European periphery.

Would his policy prescriptions be adopted? In an ideal world with an educated citizenry that understands that prescribing more of a depression is poor policy, there's no question something would already have done. However, when examining history, even FDR had a hard time getting the New Deal passed, and that turned out to be insufficient until world war 2 came along. Neither Obama nor Romney are as enlightened as FDR, so I expect that we will muddle along until the housing crunch plays itself out.

Nevertheless, if you want to understand the financial crisis, how it played out, and how the economy in aggregate works, you can hardly turn to a better writer than Krugman. His use of the baby sitting coop as a metaphor for the economy makes the grasp of complex economic concepts clear even to those who are not economics junkies like me, and the only problem with this book is that not enough people will read it.


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