From an economist’s point of view, there are two striking aspects of This Time Is Different. The first is the sheer range of evidence brought to bear. Reading Reinhart and Rogoff is a reminder of how often economists take the easy road—how much they tend to focus their efforts on times and places for which numbers are readily available, which basically means the recent history of the United States and a few other wealthy nations. When it comes to crises, that means acting like the proverbial drunk who searches for his keys under the lamppost, even though that’s not where he dropped them, because the light is better there: the quarter-century or so preceding the current crisis was an era of relative calm, at least among advanced economies, so to understand what’s happening to us one must reach further back and farther afield. This Time Is Different ventures into the back alleys of economic data, accepting imperfect or fragmentary numbers as the price of looking at a wide range of experience.
The second distinguishing feature is the absence of fancy theorizing. It’s not that the authors have anything against elaborate mathematical modeling. Professor Rogoff’s influential 1996 book Foundations of International Macroeconomics, coauthored with Maurice Obstfeld, contains literally hundreds of fairly abstruse equations. But This Time Is Different takes a Sergeant Friday, just-the-facts-ma’am approach: before we start theorizing, let’s take a hard look at what history tells us. One side benefit of this approach is that the current book manages to be both extremely useful to professional economists and accessible to the intelligent lay reader.
The Reinhart-Rogoff approach has already paid off handsomely in making sense of current events. In 2007, at a time when the wise men of both Wall Street and Washington were still proclaiming the problems of subprime “contained,” Reinhart and Rogoff circulated a working paper—now largely subsumed into Chapter 13 of This Time Is Different—that compared the US housing bubble with previous episodes in other countries, and concluded that America’s profile resembled those of countries that had suffered severe financial crises. And sure enough, we had one too. Later, when many business forecasters were arguing that the deep recession would be followed by a rapid, “V-shaped” recovery, they circulated another working paper, largely subsumed into Chapter 14, describing the historical aftermath of financial crises, which suggested that we would face a prolonged period of high unemployment—and so we have.