BERKELEY – A decade ago, the 2008 Nobel laureate in economics, Paul Krugman, wrote a little book entitled The Return of Depression Economics . It sank like a stone.
The East Asian financial crisis of 1997-1998 was sharp but short and quickly cured once the IMF realized that feckless governments were not the problem and then United States Treasury Secretary Robert Rubin parachuted the New York banks into South Korea’s economy. The collapse, not long after, of the dot-com bubble in 2000-2001 brought on not a depression but merely an output decline so mild as to barely warrant the name “recession.”
Now Krugman is back with a revised and expanded version of his book, and, sadly, the timing is perfect. For there is a much better case to be made today than there was in 1998 that we should be thinking in terms of “depression economics.”
But the book does not tell us what “depression economics” is supposed to replace. So let me try my hand at defining non-depression economics: