Wednesday, May 23, 2012

It's Political, Not Economic

It saddens FLG that news programs keep asking economists to comment on the European financial situation.  The euro was and is a political, not an economic creation.  The issues involved aren't economic at all, they're political.

Think about it.  Greece would've already defaulted if it weren't for political intervention by Germany and the rest.  The present uncertainty in Greece isn't about the economics or finances. They're catastrophic. It's about whether Greece or Germany will cave to the other politically. Likewise, the contagion effects beyond a Grexit will be determined by politics as well.  Specifically, how much money printing the Germans will allow the ECB to do to backstop Spanish banks.

The primary variables at play are exogenous international politics, not endogenous economic issues.  Asking economists about these things is silly.  Sure, you can ask them what they think would happen given some hypothetical political scenario, but that's not very helpful.  FLG can come up with that himself.

What would be helpful would be to get some informed opinions on what the likelihood of various political outcomes are.  Economists aren't the people to ask about those.  What FLG would like more of are interviews with people who have insight into how the respective governments are thinking about these issues.  Sure, nobody knows for sure how these things will turn out, but economists are definitely the wrong people to ask.  They assume rational actors who will maximize benefits and minimize costs, which doesn't always happen in international politics.

So, please, news programs, stop asking economists to comment on what is entirely a political issue.  Also, economists, please stop commenting on what is a political, not an economic issue.  Your economics PhD doesn't give you carte blanche know-it-all status. 


The Ancient said...

Your economics PhD doesn't give you carte blanche know-it-all status.

Herb Stein used to say that economists make predictions about the future only because politicians ask them to -- and not because they have any particular insight into future events.

That's about right.

(Krugman gets to play Mr Know-It-All only because he's now doing something other than economics, courtesy of the Times.)

Anonymous said...

"Economists today primarily serve the needs of powerful interests at the expense of society in general"

"At the core, economics is about politics and about power, and the question for the economists is whose power are you going to serve as an expert."

Robert Johnson - Executive Director of INET (Institute for New Economic Thinking)

Nowadays, giving a lad a degree in economics is like giving a kid a stick, they both soon learn the joy of bashing things. Just ask Krugman.

George Pal

The Ancient said...

It seems a return to the drachma bodes ill for the object sex industry.

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