The book, the database and the two authors — 800 years in table form
Chapter 1 of 15 · 12 min
This Time Is Different: Eight Centuries of Financial Folly was published by Princeton University Press in January 2009 — that is, written while the financial crisis it analyzed was still going on. The authors were two of the world's most credentialed crisis researchers: Carmen Reinhart, born in Havana, professor at the University of Maryland and later Harvard Kennedy School, and Kenneth Rogoff, Harvard professor, chief economist of the IMF 2001–2003 — and in another career a chess grandmaster. The course begins with what makes the book unique: not the story, but the database.
The starting point is a simple observation that no one had previously made quantitatively: the crisis literature teems with stories but lacks accounts. Reinhart and Rogoff — hereafter R&R — built over eight years a database spanning 66 countries and eight centuries, from medieval monarchs' coin clipping to Iceland's bank collapse 2008, and recorded every crisis with start and end year in country-by-country appendices. The book's core is not a thesis about a mechanism but a frequency table: how often have sovereign defaults, banking crises, currency crashes and inflation episodes actually occurred, in which clusters, with what consequences? The title is mockingly intentional: the four words »this time is different« are, the authors write, history's most expensive sentence — quoted by policymakers and investors right before every major collapse.
The differentiation against the neighboring courses in AK1A's library is the course's most important frame, so we say it directly and openly. Kindleberger's Manias, Panics, and Crashes is NARRATIVE HISTORY: Minsky's five-phase cycle gives the mechanism — displacement, boom, euphoria, profit taking, panic — but builds on selected cases studied in narrative order. Galbraith's The Great Crash 1929 is ONE SINGLE CASE told with a sharp pen: the feeling, the folly, tick by tick.
This Time Is Different is THE DATA: no main story, no single hero, but tables and appendices that make all of economic crisis history searchable, countable and — in its end — replicable. The three books do not contradict each other; they answer different questions. Kindleberger answers WHY crises arise. Galbraith answers HOW it feels when they do. R&R answer HOW OFTEN and HOW DEEPLY — the base rates that every serious risk model needs.
For AK1A the frequencies are precisely the key. Scenario work without base rates is guesswork; a risk matrix without historical magnitudes is decoration. R&R's tables give both: the probability basis (how common is a severe banking crisis in a rich country? — far more common than 2006's consensus believed) and the magnitude basis (chapter 8's aftermath figures). But the course also has a second, darker thread revealed in chapters 12 and 13: the same two authors, the same database — and yet in 2010 they ended up in one of economics' greatest replication crises when an Excel error in a follow-up article became the intellectual foundation for austerity policy worldwide, until a doctoral student found the error 2013.
The lesson for AK1A is doubly important for precisely that reason: the database is gold — and data without verifiability is a belief. Both lessons shall be given full space.