Is It Different?

There is an excellent article in the July 4 issue of The New York Times. It's about Dr. Carmen Reinhart and Dr. Kenneth Rogoff and the work they've done studying financial panics, the lessons learned, and the lessons not learned. Their research culminated in their book This Time Is Different.

Now, before you dismiss it as "just another theory of what caused this recession", you need to read the article (and maybe the book). Although the work is relevant to the current situation, it is more about the way smart people (including economists) continually make mistakes and repeatedly fail to see the next big disaster. It's not as much about poor theory as it is about human nature. We tend to think we're immune to "the same mistakes", to believe "this time is different". But it often isn't really that different.

I would also recommend a couple of things to accompany the review. The first is this long interview (over an hour) with Dr. Reinhart by Russ Roberts on EconTalk. The second is this shorter interview with Dr. Rogoff by Kai Ryssdal of Marketplace. And finally, here is a transcript of an appearance by both Dr. Reinhart and Dr. Rogoff at the Carnegie Council.

All in all, this is good material for your Saturday or Sunday morning coffee.