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March 28, 2012


Dick Pountain

Ringen's article is interesting. I'm currently reading Kahneman and several of his themes crop up here: asymmetrical reluctance to acknowledge losses v willingness to gamble on gains; experts' overconfidence in their own expertise etc. etc.

But another angle worth considering is economists as ideological actors telling horror stories that are intended to be self-fulfilling - to precipitate the crisis they predict - in order to, say, destroy the EU, kill off welfare states, curb public spending and so on. Paradoxically enough, politicians in democracies no longer have the luxury of such ideological recklessness, hence Merkel's admirable sang froid.


I'm less impressed with Ringer's article than you (which is interesting, because I suspect I have a lower opinion of economists than you do.)

The first problem I have with the article is that it seems to think Europe's politicians have done the right thing, which is hard to square with the fact that serious action at the beginning of the crisis could have put it to bed for 5 or 10 years, which would have made transition in the periphery much less painful. Ringen's celebration of current policy says that he thinks what has happened and will happen in Greece are the eggs that needed breaking to make this omelette. Further, current policy is explicitly neo-liberal and implicitly shock doctrine. We are seeing the death of European welfare states.

The second problem is that Ringen seems to think the crisis is over, when cautious forecasters always expected:

a) Merkel's policy to kick the can down the road to, well, kick the can down the road a couple of years. So here we are a couple of years...

b) That the can kicking hits the real test when it comes to one of the big economies, and it looks like Spain is going to be the one. Austerity, as seen in Greece, damages the economy and exacerbated the debt problem - hard to decrease the debt level as your economy shrinks. So it's really hard to square the triumphalist tone with reality.

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