You can learn what “credit default swaps” are, and how they brought down AIG, in 10 minutes, thanks to Marketplace Senior Editor Paddy Hirsch. What’s particularly clever is the car insurance analogy, which buys us some quick intuition into a complex topic.
In the book, we discuss the simple trade models that teachers use in Econ 101 — e.g., “You grow apples and I grow oranges. Both of us would rather have some of both. How do we trade?” That’s exactly what Hirsch does … he builds up our intuition via a simple, two-party transaction, and then zooms out to show us how that behavior can explain a catastrophe like the fall of AIG. Really well done.
(Thanks to John H for the tip.)
