Holding people accountable for their past is O.K., but imposing a standard of purity, in which any compromise or misstep makes you the moral equivale… - Paul Krugman

The history of of the study of the location of economic activity is more like the story of geological thought about the shapes and location of continents and mountain ranges. The location of production is an obvious feature of the economic world. Indeed, I began to get interested in economics as a schoolchild by looking at those old-fashioned maps of countries that used picturesque symbols to represent economic activity: sheaves of wheat to represent agriculture, little miners' carts to represent resource extraction, little factories to represent industry, and so on. And yet there is almost no spatial analysis in mainstream economics.

Milton Friedman was not surprised. In 1968, in one of the decisive intellectual achievements of postwar economics, Friedman not only showed why the apparent tradeoff embodied in the idea of the Phillips curve was wrong; he also predicted the emergence of combined inflation and high unemployment, which Paul Samuelson dubbed "."

Here’s what the IMF did: In Asia (as opposed to Brazil, which as I said was a sort of caricature of the Asian programs) it did not tell countries to defend the values of their currencies at all cost. But it did tell them to raise interest rates, initially to very high levels, in an attempt to persuade investors to keep their money in place. Some vociferous critics of the IMF—most notably Harvard’s Jeffrey Sachs—said that this was very much the wrong thing to do. Sachs believed, in effect, that Asian countries could and should have behaved like Australia, simply letting their currencies decline until they started to look cheap to investors, and that if they had done so, the great slump would never have happened.
What the IMF said in response is that Asia is not Australia: that to let the currencies fall unchecked would have led to “hyperdevaluations,” and that the result would have been both massive financial distress (because so many businesses had debt denominated in dollars) and soaring inflation. The trouble with this rationale is, of course, that the massive financial distress happened anyway, thanks to high interest rates and the recession they helped cause. So the IMF at best avoided one vicious circle only by starting another.