One of the fallouts of the global financial crisis, especially after the collapse of Lehman Brothers in September 2008, has been the questioning of the credibility of much of what passes for economic science, whether delivered by the mathematical adepts of sophisticated financial modeling in the business world or by academia. This kind of economics promised a rational world of ever-increasing prosperity and stability. It was rather dismissive of economic history, which was cast off as an obsolete discipline based on old-fashioned, low-technology techniques. The only value economists saw in history was as a mine for microeconomic data that could be fed into complex mathematical models. By contrast, economic history (which is often rather gloomy) now looks rather more interesting and important. Carmen Reinhart and Kenneth Rogoff have delivered a powerful and eloquent statement explaining why.

Reinhart and Rogoff’s story is about the dismal cycle of recurring economic and financial crises. That cycle depends on historical ignorance. Financial innovators, as well as academics and politicians, want to tell stories about why the old boom-and-bust cycle is dead. They invariably think that “this time”, their own time, is different, because the present is completely different compared to every past experience. The most memorable political exponent of this thesis is the currently rather vulnerable British Prime Minister Gordon Brown, who as Chancellor of the Exchequer repeatedly claimed to have created a new economic framework that would end “the violence of the repeated boom-and-bust cycles of the past.”

The most important lesson of the book is already revealed in the title, “This time is different.” As Reinhart and Rogoff put it, the damaging syndrome of blindness to history holds that