Reading List

Recession Literature

The best books, articles, and Web sites about the economic collapse.

This is the first installment of “Reading List,” in which Slatewriters discuss which books, articles, and Web sites they are reading about the subject that interests them most. The weekly column appears in both Slateand the Washington Post’sOutlook section.

For connoisseurs of financial folly, commercial irrationality, and general fiscal inanity, these last several weeks have been an all-you-can-eat buffet. In New York, the implosion of Bear Stearns and the serial failure of billion-dollar hedge funds have induced a combination of schadenfreude (I knew those guys never deserved their big salaries) and foreboding (What will this do to the price of that co-op I just bought?). And across the country, the bursting of the real-estate and housing-credit bubble is destroying personal balance sheets.

So what am I, a business/finance journalist and a self-proclaimed expert on bubbles, reading to keep up?

For starters, the article in the February issue of Harper’s magazine by Eric Janszen, a former venture capitalist and founder of, on how “the bubble cycle has replaced the business cycle.” It’s literate, smart, and accessible—the sort of article that every issue of Harper’s, alas, contains only one of. is an exemplary Internet mashup. Irvine, the master-planned community in Orange County, Calif., was in many ways the epicenter of the housing boom. Many of the now-defunct ambitious subprime lenders were based there. And the O.C. housing market was a hothouse of speculation and refinancing. Today, it’s the “seventh circle of real estate hell.” Using realty listings, public records about debt, and YouTube videos of popular songs, an anonymous blogger who goes by IrvineRenter skewers homeowners who paid too much and are now desperately trying to recoup their investments. Realtors who post lame photos, misspell words, or engage in silly promotion-speak also come in for ridicule. At the end of each entry, the blog calculates precisely how much a homeowner—or the bank that foreclosed on his or her property—will lose if the house gets its offering price.

For a macro view of the credit pileup, I rely on Calculated Risk, a blog written anonymously by “a senior executive, retired from a public company, with a background in investing, finance and economics” and “a former bank officer and mortgage lending specialist who is currently on extended medical leave.” The blog distills the news (most of it bad) from the credit world and includes occasionally acid dissections of mainstream financial journalists. Trademark line: “We’re all subprime now.”

We may not all be subprime when it comes to credit. But when it comes to decision-making, we’re all suboptimal. Economic theory tells us that markets—housing markets, stock markets, political markets—are supposed to be efficient machines populated by rational actors. Reality and psychology tell us otherwise. Dan Ariely’s best-selling new book, Predictably Irrational: The Hidden Forces That Shape Our Decisions, may seem at first blush to be just a Freakonomics knock-off. But Ariely, an MIT professor who has Ph.D.s in business and psychology, has done a huge amount of firsthand research on decision-making, and he demonstrates that emotions, expectations, contexts, and social norms all play a huge role. My favorite study is one in which he twice asked male Berkeley undergraduates to answer a series of questions relating to their interest in certain sexual activities—first while imagining they were sexually aroused, and then again when they were actually sexually aroused. (The results can’t be fully described on a family Web site.)

If Ariely’s book is very much of the moment, John Brooks’ Once in Golconda: A True Drama of Wall Street, 1920-1938 is very much timeless. The longtime business correspondent at TheNew Yorker was an elegant master of long-form magazine pieces and books. (The closest analogue working today is Roger Lowenstein of the New York Times Magazine.) Once in Golconda is the rare bubble book that doesn’t end with the inevitable pop. It brilliantly tells the story of the 1920s madness and the great crash, but it also explores the denouement and the seeds of recovery that followed. However bad it may get, Brooks reminds us, we’ve been there before.

This article also appears in the Washington Post’s“Outlook” section.