"House of Debt" by Atif Mian and Amir Sufi

Through a unique and powerful analysis of the Great Recession, Atif Mian and Amir Sufi establish that the main culprit was the over-indebtedness of households, in contrast with the dominant view that the problems in the financial intermediaries and the resulting disruption of credit were at the core. Their analysis yields a set of novel empirical findings that have solid implications about the mechanisms at play leading the economy towards the catastrophe. This enables the authors to provide a theoretical framework for the researchers that strive to write models capable of generating recessions such as the latest. Furthermore, by the same virtue, they manage to provide a valuable evaluation of the policy responses in the face of the crisis. The authors conclude the book with a groundbreaking policy recommendation to avoid similar recessions in the future: replacement of debt with equity-like instruments that provide a better sharing of aggregate risk.