The Return of Depression Economics and the Crisis of 2008

The Nobel Prize-winning economist explains how we got here and how we might get out
It's easy to see why Paul Krugman's The Return of Depression Economics was ignored when it was first published in 1999. In the heady days of the Internet economy and amidst the feting of Alan Greenspan, the most celebrated Fed chairman ever to hold the office, who wanted to listen to a somewhat obscure economist warning us about irresponsible fiscal policy and stock bubbles?

Now that Krugman has received a Nobel prize, and now that most of the predictions he made in The Return of Depression Economics have come true, perhaps this update will garner the audience it deserves. Krugman's thesis remains simple but provocative: the cycle of economic growth and recession, which many economic experts long considered "conquered," is not so easily slain. Krugman cites the Latin American economies of the '90s — many of which imploded spectacularly in spite of government intervention — as evidence. He also looks at the strange case of Japan, which remained stubbornly stuck in a decade-long economic stagnancy despite the application of every available form of fiscal policy.

To these, Krugman can now add America's current crisis — which bears disturbing resemblances to the earlier crises in Asia and Latin America. He first offers a compelling, lucid explanation of how the country reached this point — required reading for anyone who wants to understand its chances of beating this recession. Krugman prescribes solutions for the ailing economy, a mixture of standard Keynesian theory and lessons learned from ill-fated predecessors.