The age of diminished expectations..

I just finished this wonderful book by Paul Krugman.  What a terrific book on macro writing. A book which students should be asked to read to understand various lines of reasoning on macroeconomics.

It is sad that I only read this book after such a long time. Whatever we see in world economy particularly US now, was all expected and written by Dr Krugman way back in 1990s.  He goes slightly wrong on his probabilities as he puts worst case scenario of a crisis in US at 25% (20% for things improving and remaining 55% for a status quo). But he clearly put the case of all things wrong in economy when few expected it.

Krugman says there are three kinds of econ writings:

  1. Greek — This one is used by econs to impress on fellow econs or to make their point more crisp. (Well the blogger does not want to use this kind of writing but is forced to..)
  2. Up and Down — This is econs reporting this went up and this down. He says this is real boring stuff and rightly so (though it pays quite handsomely)
  3. Airport — This is the several books available at airports which show either a hopeless picture or a super optimistic position…

The book follows a middle approach to economics mixing the first two writings intelligently. So no Greek but pure logic and up and down to show how things are. What is really good is it gives one views from both the sides (or hands as econs say) giving one a complete understanding of what was going on. Chapters on corporate finance and financial folly are an amazing read where he shows how much of the financial activity was just not adding value….

One may agree or disagree with Krugman’s views, but his style of writing is something all econs should aspire to imitate.

We badly need a revised edition of the book and this time on global economy to get a complete perspective of things since the last edition. We also need something on India as well (may be ask Dr Krugman for help) as we get a lot of airport writing views on India with extreme views. Need a more balanced view of things,,

PS. I tend to read more books these days than working papers. So will try and write/review books as well from hereon

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2 Responses to “The age of diminished expectations..”

  1. arijitbanik Says:

    I like what Stephen Kinsella has written on this; in communicating economics there are 3 parts: science, empirics and rhetoric. The science view is grounded in neoclassical economics and Krugman is a chief proponent of that school, as is pretty much every winner of the Swedish Bank Prize. When people talk about ‘economics’ they are, for the most part, talking about neoclassical economics. The empirics are forwarded by economists who work in capital markets and banking: is there a pattern and if so what is the story to go with it? Finally the rhetorical aspect is about writing in a manner that makes obscure mechanisms appealing. Here there is a rich tradition where Krugman does a good job but there are skilled writers such as McCloskey and John Kenneth Galbraith whose writing is appealing and memorable. In my opinion, mainstream economic journals attempt to be scientific (e.g. peer reviewed) but ultimately are devoid of forward thinking. They are a relic of a bygone era even if they hold high ground amongst the academic community.

  2. Sahib tulsi Says:

    Get hold of Crisis Economics by Nouriel Roubini and Stephen Mihm.It is one of the most engrossing books on crisis and current financial scenario.

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