Krugman writes that "this book is, at bottom, an analytical tract." But the publisher shows that it considers this a lightweight throwaway by not providing an index. In general I will not read a nonfiction book without an index but this one is worth reading. ( )

This is a short book, very accessible and surprisingly (given the title) easy to read.

Mr. Krugman describes several recent economic downturns around the world -- their causes and the effect of government actions to return to economic growth. This was an interesting and informative look at comparative public policy.

Mr. Krugman has two basic messages. First, there is an important role for economic stimulus programs in a serious recession. Second, banking needs to be regulated, whether provided by banks or other institutions. While he makes a clear case for his second assertion, his case for stimulus spending wasn't as strong. Stimulus spending can lead to rapid inflation, new asset "bubbles" and unmanageable debt loads for some countries. More importantly, I don't think increased stimulus spending addresses the underlying case of the 2008 crisis, which was a lack of solvency in the global financial system.

I don't think I learned much about economics, but did learn about economic policy. I wish the author had included a bibliography and/or better cited his references. ( )

http://bactra.org/weblog/algae-2009-0... ( )

Comparison of Krugman with a book by Soros: In an attempt to understand just what happened in the economy. To that end I added two books, one was by George Soros The Crash of 2008 and what it means which I happened to see at the library and picked up. The other was by Paul Krugman, The Return of Depression Economics and the Crisis of 2008 which I had to wait for a few months for my hold at the library to come through.

Having read them, I suspect I understand as much as I expect to, and that it is not really understanding what happened that is my problem, but really making sense of an economic system that is really only expanding or contracting and how that feeds into consumerism, to make sure it is expanding rather than contracting. Before I go on I should say that the Krugman book is vastly better for the understanding. The Soros book was mainly concerned with his personal theory of what he calls Reflexivity, at least that was the only thing that he really explained. He talked about a lot of other things including buying short and buying long, which I finally got the definition of in Paul Krugman's book.

The main idea of reflexivity is that it is really impossible to know what will happen when you buy and sell stocks, because the act of buying and selling stocks itself influences the market. At one point he goes so far as to compare it with the Physics principle of indeterminacy and say that it cannot be known.

Well, I think he overstates things to say that they can't be known. A lot of the unknowns that caused people to invest when they shouldn't have were deliberately hidden, and not the same as the idea that you can not know both the speed and the position of an atom. It also seems rather obvious. A lack of confidence that feeds on itself and causes the bank failure or currency failure or whatever that the lack of confidence is about is pretty well known. Krugman's book is a lot more specific in giving concrete examples of this, as for example when a credit failure by Mexico caused problems for Argentina (which had not been having probems at that point) simply because of over-generalization that what was true of one Latin American country might be true for another. One of Krugman's examples was how Soros manipulated the devaluation of the British pound. Soros did things like ostentatiously exchange British currency for other currency, and himself or others in his group started rumors and so on. It turns out this was probably a good thing for the British economy as a whole which allowed their exports to expand and so on.

Anyway, I wouldn't bother with the Soros book, if I were you. I continued reading after the first couple of chapter just because he is involved in the markets and I thought his experience might spill out. It did a bit.

Krugman, on the other hand writes in a much more accessible way. A lot of it is about the formation of bubbles, such as in dot coms, savings and loans, housing. He explains the idea of moral hazard - another thing Soros mentioned in passing - basically when the party taking risks is not the party that will pay if an investment doesn't pay off - either because funds are specifically guaranteed like bank accounts or because they are deemed too big to fail and end up being propped up by the government when they look like they are going to fail, or because, although not specifically guaranteed, the damage to ordinary citizens is such that government is not willing to allow it to happen and the person taking the risks counts on that.

He talks about the lessons learned in the depression, one part of which is the need to stimulate the economy and/or add to the money supply when a recession or constriction of the economy threatens. Another was the regulations put in place on financial institutions to prevent the kind of risks that led to the financial crisis before the depression. The first lesson is still taken to heart but various things happened to the second. There was overconfidence in how well the economy could be managed that caused people to agitate and allow a loosening of regulation. At the same time a lot of financial institutions were created that were not part of the regulated, public set - things like auction-rate securities and hedge fund management, which have become huge and are mostly unregulated.

Anyway, enough about that. I would recommend the Krugman book which does a good job of making sense of a lot of this, though still leaving me with a sense of the chaos and illogic of capitalism. Among other things I became aware of a number of world crisis, and also some efforts to over come them that I had not even known existed. ( )

The Call Number in our library is HB3716 K77 2009. I have read up to and including page 61 as at (Mon)6-7-2009.