The U.S. has had more than 70 years to come to terms with the Great Depression, and we really thought we knew how to avoid another one, says Paul Krugman. “It wasn’t supposed to be possible. Then came the current crisis.” So how to explain the Great Recession of 2008? Krugman suggests a combination of factors: First, he thinks we “mislearned” some of the lessons of the Crash. We developed an “unwarranted belief that it was easy for the Federal Reserve to prevent the crisis.” We forgot how difficult it is to get “policy traction” when financial markets are really unstable, and conveniently overlooked how things had “gone awry in the past” when we deregulated the banks in more recent years. We grew too literal-minded in our notion of banks, imagining “a big marble building with a row of counters, with Jimmy Stewart,” when in fact, we’d created new institutions that used deposits to make innovative but sometimes disastrous investments. We didn’t immediately recognize the 21st-century version of bank runs, which didn’t involve mobs in the street but “investors refusing to roll over their repos.” Not only did we get a replay of the collapse, but we’re witnessing a replay of the response as well, including “obvious failures to understand the depth of the problem.” Big government is again under attack, even though it has “protected the system from total meltdown.” Just like the ‘30s, some say we’ve passed the worst — when, says Krugman, “this thing ain’t over.” Many economists project years of higher unemployment, “years of huge suffering.” And instead of acknowledging these continuing impacts with appropriate moves to support the economy, “we’re withdrawing policies from the economy quite soon,” he says, repeating another mistake from the past. Politics plays a large part in this sorry rerun. Officials feel they can only pass partial remedies through Congress. But in this case, “half a loaf may be not much better than none,” because “if the economy still looks ...