The return of depress on economics

In this book, the author surveyed the economic crises that had swept across America in 1930s, Japan in 1970s, Latin America in 1980s, Asia in 1990s and around the world in mid-2000s. The author also pointed out that these crises “like diseases that have become resistant to antibiotics, the economic maladies that caused the Great Depression were making a comeback (inside the book jacket).”

The author tells a very interesting story about a baby-sitting cooperative: an association of about 150 young couples who are willing to baby-sit each other’s children. When babies are sat, the baby-sitters will receive the appropriate number of coupons from the baby-sittees. These coupons can then be used to exchange for baby-sitting services when the couples see fit (p.16-20, 68-75).

This system automatically ensures that each couple will provide exactly as many hours of baby-sitting as it receives over time. However, it requires a fair amount of coupons in circulation.

What would happen if:

(1)       there were couples wanted to save the coupons they earned from baby-sitting in the winter to use in the summer?

(2)     there were couples tried to accumulate coupons as reserves for future use?

(3)     there were couples who would have been willing to go out more often if they could have gotten access to extra coupons?

(4)     couples confidence declined?

And the most import of all, how to solve these problems?

If you are wondering about how the story of this baby-sitting co-op relates to the financial crises that mentioned above, you better read this book. It is very inspiring.

Krugman, Paul (2009). The return of depress on economics. NY: Norton.