Reading Paul Krugman’s book “The Age of Diminished Expectations”

Only now I have a chance to read  “The Age of Diminished Expectations” (3rd edition, 1997). This book is 13 year old, but the topics discussed in it are still very actual.

Krugman is probably one of the best living economists, and he explains rather clearly in the book how and why things are as they are in the US, economically speaking. His explanation may be somewhat oversimplifying, but one can feel from reading the book that Krugman has great insight, and many other (famous or notorious) economists are dead wrong.

Some tidbits from the book:

… Economics has its fair share of hacks and phonies, who use complicated language to hide the banality of their ideas …

… airport economics … most prominently displayed at airport bookstores … is usually fun, rarely well informed, and never serious.

For the economy, the important things, the things that affect the standard of living of large numbers of people are productivity, income distribution, and unemployment

… Old-line leftists … would like to make it a single story: the rich becoming richer by exploiting the poor. But … for one thing, most of our very poor don’t work, which makes it hard to exploit them …

… If the government wants to reduce the inflation rate, it must reduce demand so as to drive unemployment above this [critical] rate. The critical rate of unemployment was dubbed by Friedman the “natural rate”; other economists, disliking the suggestion that there was something good about joblessness, have proposed the alternative “nonaccelerating inflation rate of unemployment,” or NAIRU …

… since we are in no hurry to eliminate the budget deficit, the solution [to the trade deficit problem] isn’t available. Implicitly, the United States has decided to live with its trade deficit for quite a while … [how prophetic !]

… even though inflation is universally regarded as a terrible scourge, most efforts to measure its [direct] costs come up with embarrassingly small numbers …

… In 1980 there were many economists and politicians who thought that double-digit inflation was incurable. They were wrong. On the other hand, there were some economists, including the first Reagan administration’s advisers, who thought that victory over inflation would be cheap. They were also wrong. What happened was that the conventional economic wisdom, which said that reducing inflation would be very costly, proved right; but the conventional political wisdom, which said that these costs would never be paid, proved wrong …

… There are still monetarists, but they almost seem like relics now. Milton Friedman’s forecasts of doom were at first taken seriously, then ridiculed, then ignored …

… Japan [is like] a conspiracy … but one without leaders …


OK, I cited too much from the book already. It’s really a very pleasant read. The book can be found on

To think about it, why is it that so many economists are wrong, and those who are right are often in a minority ? Is that because economics is still closer to religion than science ?

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3 comments to Reading Paul Krugman’s book “The Age of Diminished Expectations”

  • Nkd MonsterID Icon Nkd

    Anh kết luận buồn cười quá. Đấy là vì Krugman viết nên ông ấy không chỉ ra những cái sai của chính mình thôi Tại sao các nhà kinh tế lại sai nhiều a? Bởi vì KHXH không thể chính xác như KHTN và Kĩ thuật. Sao chổi quay trở lại theo đúng quỹ đạo của nó đúng thời điểm bởi trên đường đi nó hiếm khi gặp các dị vật. Nhưng các quá trình kinh tế phụ thuộc vào quá nhiều biến cố bất thường xảy ra trong xã hội.

    Chính vì vậy, trong kinh tế chỉ ra được khuynh hướng phát triển là tốt lắm rồi. Chỉ cần biết giá stock sẽ tăng hay giảm với độ chính xác tương đối là có thể giàu to đúng không nhỉ? Đâu cần biết chính xác sẽ tăng hay giảm bao nhiêu. Thậm chí cũng chẳng cần phải luôn luôn chính xác.

  • admin MonsterID Icon admin


    Cái sai mà mình nói tới, là sai về lý luận, chứ không phải đơn thuần sai về dự đoán. Cũng giống như NKD lý luận sai vậy :D

  • Nkd MonsterID Icon Nkd

    Hi hi, quả là em không đọc kỹ mấy đoạn anh quote. Chỉ nhìn câu kết cuối cùng nên là…:)

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