

They Did Their Homework (800 Years of It) - drallison
http://www.nytimes.com/2010/07/04/business/economy/04econ.html?pagewanted=1&hpw

======
russell
I went over to Amazon to see what the reviews said. Some of them did a decent
job of summarizing the salient points. The crises were characterized by real
estate crashes followed by stock market crashes, followed by an average of 86%
increase in public debt (sound familiar), followed by severe inflation. I
guess that means in a few years my backbreaking mortgage can be paid from my
Starbucks fund.

Unfortunately the authors dont give a prescription. Given that this one was
fueled by hubris and institutional corruption with no political will to fix
it, we are due for more in the future.

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jboydyhacker
\--The book talks about the 18th -20th century versions of all the problems we
face now--currency devaluation, fiat currencies, and excessive borrowing.
While the book talks broadly about the last 800 years of "folly", most of the
data is the last few hundred years or so simply because records were not as
developed.

\--It's really more of a statistical assay than it is a history book. There
are several parts where they actually take a look at the history of the
various defaults like a historian would and in my opinion these are the most
valuable parts. By understanding the players and their motivations at a given
point and time, you can apply the past to current events and somehow get a
weighting of various probably outcomes for the current crisis. Instead, the
book seems to focus on table after table and some of the data by its nature is
going to be incomplete or incongruent.

\--Just to add on to the point above-- while the genesis of every economic
crisis is often novel, they usually end with the same kind of behaviors of
fear and hording. Understanding how that unfolds in each crisis and how policy
makers might prevent that behavior would be valuable to study. The most
important parts of economics is "behavioral " economics. Understanding the
wild spirits is half the battle.

\---There is a lot of noise around these days about economists trying to be
physicists with large econometric models trying to predict exactly what the
economy is going to do. I remember my first stint as a government trade
economist as we tried to use very complex models from the University of
Maryland to predict the impact of trade agreements. I always thought this was
all nonsense as human behavior is the ultimate driver and it's more akin to
modeling the weather than how fast a bullet is going.

\--While I love tables too, there were not a lot of good conclusions from the
data. I wanted more hard and fast rules about when a crisis reaches a tipping
point. In the end, despite mountains of data I don't feel like I was
materially better armed to understand how a crisis will unfold after reading
the book.

~~~
jacobolus
> _I wanted more hard and fast rules about when a crisis reaches a tipping
> point._

I bet everyone wishes we had some of these. It’s not at all clear to me that
hard and fast rules are possible, or if they were, that the widespread
knowledge therof wouldn’t invalidate them by changing the society/market.

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Estragon
It appears that a version of the book is available for free here:
<http://www.nber.org/papers/w13882>

~~~
trebor
But only for those at "subscribing institutions". I don't qualify, so I guess
I have to see if the library has it.

~~~
qq66
I'm at a subscribing institution: <http://www.scribd.com/doc/33887169/w13882>

~~~
arijo
thanks

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drallison
<snip> ... a pair of financial sleuths, Ms. Reinhart and her collaborator from
Harvard, Kenneth S. Rogoff, have spent years investigating wreckage scattered
across documents from nearly a millennium of economic crises and collapses.
They have wandered the basements of rare-book libraries, riffled through
monks’ yellowed journals and begged central banks worldwide for centuries-old
debt records. And they have manually entered their findings, digit by digit,
into one of the biggest spreadsheets you’ve ever seen.

Their handiwork is contained in their recent best seller, “This Time Is
Different,” a quantitative reconstruction of hundreds of historical episodes
in which perfectly smart people made perfectly disastrous decisions. </snip>

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SkyMarshal
This was a really cool study. More of Rogoff's papers on it and related to it
here:

[http://www.economics.harvard.edu/faculty/rogoff/Recent_Paper...](http://www.economics.harvard.edu/faculty/rogoff/Recent_Papers_Rogoff)

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RiderOfGiraffes
Single page:
[http://www.nytimes.com/2010/07/04/business/economy/04econ.ht...](http://www.nytimes.com/2010/07/04/business/economy/04econ.html?hpw=&pagewanted=all)

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joe_the_user
Oh ho ho,

If Ken Rogoff knew the economy was in trouble, he did a good job of hiding
that this 2007 interview: [http://www.onpointradio.org/2007/11/wheres-the-
economy-heade...](http://www.onpointradio.org/2007/11/wheres-the-economy-
headed) (!!)

I don't know where the 2003 starting date came from. Perhaps they started a
different book then and re-purposed it for the present events. Or perhaps he
was hiding stuff in the 2007 interview (though I'd doubt it).

~~~
abstractbill
He clearly states that he _didn't_ know the economy was in trouble:

 _Still, its authors laugh when asked about the book’s opportune timing.

“We didn’t start the book thinking that, ‘Oh, in exactly seven years there
will be a housing bust leading to a global financial crisis that will be the
perfect environment in which to sell this giant book,’ ” says Mr. Rogoff. “But
I suppose the way things work, we expected that whenever the book came out
there would probably be some crisis or other to peg it to.”

They began the book around 2003, not long after Mr. Rogoff lured Ms. Reinhart
back to the I.M.F. to serve as his deputy._

~~~
joe_the_user
Curses, foiled by skimming the article... still,

I would-up confusing the present Rogoff with the Rogoff of 2009, where in this
interview, he talks about being angry towards those who were claiming the
economy was in good shape.

[http://www.businessinsider.com/henry-blodget-rogoff-the-
wors...](http://www.businessinsider.com/henry-blodget-rogoff-the-worst-is-
over-are-you-kidding-2009-3)

Having already seen these two interviews, I've lost the slightest respect or
credence for the fellow...

------
albertcardona
_“They say historians peak in their 50s, once they’ve accumulated enough
knowledge and wisdom to know what to look for,” says Mr. Rogoff. “By contrast,
economists seem to peak much earlier. It’s hard to find an important paper
written by an economist after 40.”_

Anybody has pointers to where this data comes from? What about other
professions?

~~~
jallmann
Mathematics. See the Fields Medal.

~~~
kasterma
I belief the Fields Medal is not only given to people below 40 b/c there are
no older people deserving; I belief it is given to younger people b/c they can
most benefit from getting such recognition.

~~~
sesqu
_The Fields Medal is awarded every four years on the occasion of the
International Congress of Mathematicians to recognize outstanding mathematical
achievement for existing work and for the promise of future achievement.

A candidate's 40th birthday must not occur before January 1st of the year of
the Congress at which the Fields Medals are awarded._

