Germany, Greece and the Marshall Plan

A must-read-again exchange between Hans-Werner Sinn and Albrecht Ritschl on the topic.

The European Parliament elections in Greece will take place against a backdrop of increasing disillusionment with politics among Greek citizens

The European Parliament elections in Greece will take place against a backdrop of increasing disillusionment with politics among Greek citizens

The Second Economic Adjustment Programme for Greece Fourth Review – April 2014

http://ec.europa.eu/economy_finance/publications/occasional_paper/2014/pdf/ocp192_en.pdf

ΑΛΦΑ ΒΑΝΚ Εβδομαδιαίο Δελτίο Οικονομικών Εξελίξεων

http://www.alpha.gr/files/infoanalyses/weekly25042014.pdf 25/4/14 

Hans-Werner Sinn at Project Syndicate "Europe’s Next Moral Hazard"

The critical limit beyond which creditors become anxious has been raised significantly by the bailout architecture put in place over the last two years. This will bring a few years of calm as debt levels climb steadily to that limit. Then the storm will come, battering ordinary citizens, while today’s leaders remain high and dry, drawing pensions.

How poorer nations benefit from EU membership (BUT NOT Greece) | vox

How poorer nations benefit from EU membership | vox

Greece as the outlier

Overall, these results show substantial increases in per capita GDP for all countries that joined the EU in the 1980s and in 2004, with one exception – Greece. The results suggest that Greek per capita GDP would have been higher if Greece had not joined the EU in 1981. But does this imply Greece would be better off leaving the EU as quickly as possible? Obviously not. From 1981 to 1995, growth rates in the EU were relatively higher, and Greece experienced divergence (Vamvakidis, 2003). The opening up of the uncompetitive domestic industry may have been too sudden.⁴ Yet, entry into the economic and monetary union represents a turnaround, with growth rates faster than in the EU for 1996-2008, driven by shipping, tourism, and the financial sector. Mind the latter is one of the few sectors in which structural reforms were implemented (Mitsopoulos and Pelagidis 2012.) Until the Eurozone crisis, integration delayed a broad range of structural reforms in Greece. Signs are that this is now slowly changing (Fernández-Villaverde et al. 2013).

The Economist 's Free Exchange Blog adds:

The sliver of hope for Greeks, if there is one, is that this state of affairs suggests that an improvement in macro and micro policy could lead to really rapid catch-up growth, as Greece finally reaps the benefits of full integration with the EU and makes up its current output shortfall. But what a long, painful, disillusioning road to get there.

Robert Kaplan : "Why the European Union Will Survive"

Why the European Union Will Survive

Piketty, Krugman, Stiglitz, and Durlauf on 'Capital in the Twenty-First Century'

h/t Mark Thoma

Piketty, Krugman, Stiglitz, and Durlauf on 'Capital in the Twenty-First Century' (video)

Deborah Boucoyannis at WP/MonkeyCage : "Adam Smith is not the antidote to Thomas Piketty"

Are steep concentrations of wealth a market reward of success? Or, as studies are increasingly showing, the result of political pressure by the rich

Robert Solow ( Nobel Prize, 1987) "Thomas Piketty Is Right"

this is a serious book.

Tyler Cowen reviews Thomas Piketty's Capital at FA

At the core of Piketty’s story are the tragic consequences of capitalism’s success: peace and a declining population bring notable gains, but they also create a society dominated by wealth and by income from capital. In essence, Piketty presents a novel and somewhat disconcerting way of thinking about how hard it is to avoid growing inequality. Yet there are flaws in this tale.

Book Review: Policy Alienation and the Power of Professionals: Confronting New Policies by Lars Tummers

Book Review: Policy Alienation and the Power of Professionals: Confronting New Policies by Lars Tummers



also here (pdf)

Abstract:      

Nowadays, public policies often focus on economic values, such as efficiency and financial transparency. Public professionals often resist implementing such policies. We analyze this using the concept of ‘role conflicts’. We use a novel approach by conceptualizing and measuring role conflicts on the policy level, thereby linking policy implementation and social psychology research. We construct and test scales for policy-client, policy-professional and organizational-professional role conflicts. Using survey data, we show that policy-professional and policy-client role conflicts negatively influence the willingness of public professionals to implement policies. Concluding, we conceptualized and measured three role conflicts that can occur during policy implementation.

Thomas Sargent 's 12 Economics Principles

Economics is organized common sense. Here is a short list of valuable lessons that our beautiful subject teaches.

1. Many things that are desirable are not feasible.
2. Individuals and communities face trade-offs.
3. Other people have more information about their abilities, their efforts, and their preferences than you do.
4. Everyone responds to incentives, including people you want to help. That is why social safety nets don’t always end up working as intended.
5. There are trade-offs between equality and efficiency.
6. In an equilibrium of a game or an economy, people are satisfied with their choices. That is why it is difficult for well-meaning outsiders to change things for better or worse.
7. In the future, you too will respond to incentives. That is why there are some promises that you’d like to make but can’t. No one will believe those promises because they know that later it will not be in your interest to deliver. The lesson here is this: before you make a promise, think about whether you will want to keep it if and when your circumstances change. This is how you earn a reputation.
8. Governments and voters respond to incentives too. That is why governments sometimes default on loans and other promises that they have made.
9. It is feasible for one generation to shift costs to subsequent ones. That is what national government debts and the U.S. social security system do (but not the social security system of Singapore).
10. When a government spends, its citizens eventually pay, either today or tomorrow, either through explicit taxes or implicit ones like inflation.
11. Most people want other people to pay for public goods and government transfers (especially transfers to themselves).
12. Because market prices aggregate traders’ information, it is difficult to forecast stock prices and interest rates and exchange rates

h/t Ezra Kline and Jim Rose 

Update:  Chris Dillow's "Alternative Principles" 

Sreve R. Waldman on "Universal Basic Income"

Its purpose is to alter people’s behavior, to render them more risk-tolerant, to increase their bargaining power in wage negotiations. Macroeconomically, a universal basic income might provide a low-frequency “reset” to positive interest rates, but it should not be adjusted monthly or quarterly like a central bank policy instrument. A universal basic income should be determined like the minimum wage, via acts of Congress. 

Paul Krugman reviews Piketty's "Capital" at NYRB

Thomas Piketty, professor at the Paris School of Economics, isn’t a household name, although that may change with the English-language publication of his magnificent, sweeping meditation on inequality, Capital in the Twenty-First Century.

Andrew Hussey at The Observer interviews Thomas Piketty

Occupy was right: capitalism has failed the world

Mohamed A. El-Erian at Bloomberg View : "What Greece Could Tell Us About Ukraine"

As tensions escalate in the eastern part of Ukraine, the country's officials are in Washington looking to put the finishing touches on an agreement with the International Monetary Fund that provides immediate financial relief and opens the doors to help from others. Given the situation on the ground, these already-complex negotiations must find a way to balance economic, political, security and social considerations. Also, the parties need to come up with a lot of money to cover the country’s financing requirements. In thinking about these tough challenges, I found myself wondering whether they could have any connection to last week’s successful bond issuance by Greece. If not yet, they possibly will down the road.

Greece’s quick return to international capital markets stands in sharp contrast to the experience of Latin American countries in the 1980s, Russia after its 1998 debt restructuring, and Argentina after its 2001 default. It reflects a change in investors’ willingness to forgive and forget in today’s more globalized financial markets, especially when the offending sovereign has strong backing from the official sector.

The Economist : “The slumps that shaped modern finance”

History is a good place to look for answers. Five devastating slumps—starting with America’s first crash, in 1792, and ending with the world’s biggest, in 1929—highlight two big trends in financial evolution. The first is that institutions that enhance people’s economic lives, such as central banks, deposit insurance and stock exchanges, are not the products of careful design in calm times, but are cobbled together at the bottom of financial cliffs. Often what starts out as a post-crisis sticking plaster becomes a permanent feature of the system. If history is any guide, decisions taken now will reverberate for decades. 

Free Exchange/The Economist : "The Greek miscalculation"

... in joining the E.E.C./E.E.....!
... ή γιατί ΚΚΕ και ΠΑΣΟΚ(πρίν 1981) είχανε δίκιο!!

Other than the bottom-line magnitudes involved, the thing which stands out most is Greece's awful, and stunningly anomalous, performance. One immediately imagines this must be due to the euro crisis. It isn't; the estimates only run through 2008.  

Chris Dillow at Stumbling and Mumbling : ""Capital"and "Labour""

My point is instead that "capital" and "labour" don't necessarily map neatly into profits and wages, nor onto "workers" and "capitalists". Wages of workers and bosses can both be a share of the return on capital. 

Felix Salmon at Reuters/Opinion : "Five explanations for Greece’s bond yield"

The biggest news in the sovereign debt world this week has come from Greece, which managed to sell some €3 billion in new 5-year bonds at a yield of just 4.95%.

On the same topic, Cyrus Sanati believes that "Greece's economy is still a huge mess"

OpenEuropeBlog : "Greece exits the wilderness and returns to the markets"

this outcome has left a few people scratching their heads and wondering what this means for Greece and the eurozone – both of which continue to struggle when judged on a broader set of data indicators. Below, we try to address some of these questions in a reader-friendly Q&A. 

Martin Gilens & Benjamin Page : "Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens"

h/t Mark Thoma

economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while mass-based interest groups and average citizens have little or no independent influence (pdf)

Christina Romer : "The Aftermath of Financial Crises Doesn't Have To Be That Bad" (video)

via Mark Thoma , The Aftermath of Financial Crises Doesn't Have To Be That Bad 

Fabius Maximus : "More debate about who predicted the Great Recession, and lessons learned"

Summary: The comments on the FM website often have Socratic dialogues, clashing views in the search of truth. Yesterday we had one at the intersection of several of our long-standing themes: debt, deflation, economic theory, making forecasts, and the credibility of experts. Participating was the distinguished economist Steve Keen, discussing if he “predicted” the Great Recession.

Hugo Dixon : Reuters : "Greek rebound is astonishing"

Greece is undergoing an astonishing financial rebound. Two years ago, the country looked like it was set for a messy default and exit from the euro. Now it is on the verge of returning to the bond market with the issue of 2 billion euros of five-year paper. 

Matthew Yglesias at new site "Vox" : ""The short guide to Capital in the 21st Century""

M. Yglesias condenses the 696 pages of Piketty's Capital in the 21st Century  

Philippe Legrain : Project Syndicate : ""Europe’s Bogus Banking Union""

It [ECB] has repeatedly prioritized the interests of banks in “core” countries and proved more pliable to political pressure from Berlin and Paris than from Madrid or Rome, let alone Dublin or Athens.  

Gideon Rachman ; FT; "The eurozone faces problems that are beyond the control of the president of the ECB" (sub-heading)

The borrowing costs of Spain, Italy and even Greece have fallen sharply – easing the pressure on their economies and government finances. But the underlying economic situation in many eurozone countries is still grim. And the political consequences of prolonged slumps are only just beginning to emerge.

Jens Weidmann : France's budget policies 'test case' for euro fiscal rules : Reuters

"A currency union needs its members to aim for stability... Part of that is having an orderly budget and part of that is sticking to agreements," 

An analysis of the policy conditions attached to IMF loans... EURODAD

Loans from the International Monetary Fund (IMF) largely come with policy change conditions attached – conditions that the IMF has played a significant role in developing

Orderly debt reduction rather than permanent mutualisation is the way to go | vox

Orderly debt reduction rather than permanent mutualisation is the way to go | vox

Zsolt Darvas and Guntram B. Wolff of Bruegel

Europe's social problem and its implications for economic growth | Read more at Bruegel http://www.bruegel.org/publications/publication-detail/publication/823-europes-social-problem-and-its-implications-for-economic-growth/

the share of social expenditure is similar in Greece and Denmark, but while the Danish system is able to reduce income-inequality by 45 percent, the Greek can reduce it only by 20 percent

Conservative Climate Panel Warns World Faces 'Breakdown Of Food Systems' And More Violent Conflict | ThinkProgress

Conservative Climate Panel Warns World Faces 'Breakdown Of Food Systems' And More Violent Conflict | ThinkProgress

George Monbiot, The Guardian :"So, after the IPCC report, which bit of the world are you prepared to lose?

Richard Schiffman, Reuters/Comment : "The bill for climate change is coming due"