Saturday, August 18, 2012

Why Do European Economists Write Why do European Economists write Letters while US Economists Endorse Candidates?

Simon Wren-Lewis asks. I answer. In real authentic East of the English Channel Europe, economists don't endorse candidates, because elections don't matter.

Neither do they endorse gymnasts, because our Democracy is about as decorative as the Olympics.

Quick pop quiz explain the policy differences between the Berlusconi government and the Center left governments ? If your answer is that Berlusconi's governments try to eliminate the independence of the magistratura (judiciary plus prosecutors) I say "Bicamerale." If your answer is that Berlusconi will ignore any law and any court rather than take frequencies from Berlusconi I say "La Sette." If you argue that Seniore Bunga Bunga has no respect for fiscal restraint or rectitude, I say Tremonti.

The fact is that Italian public policy has been based on the twin principles that the very rich are above the law and that budgets must be (roughly) balanced, since I arrived here in 1989 (or at least since 1992). There was, in theory, a historic election (the second in a row) in 1996 when the new majority included the Communists (not just the ex Communists the proudly still Communists). It was so radical that the budget was communicated to the cabinet responsible to this majority a few days before they made it public. It was written by civil servants at the Treasury Ministry and included no significant changes.

Wren-Lewis knows how to identify the policy making establishment in Europe (also including the UK). He notes that the establishment is New Keynesian because central banks use New Keynesian models. Note that he doesn't claim that candidates for elective office use such models. Because they don't matter much.

OK over there (West of the Channel) the last election made a difference. Also maybe maybe it will matter that for the first time in human history French Socialists have a President and an absolute majority in both houses of Parliament (not that the Communists held Mitterand back much -- but that was long ago).

I think that over in the USA the very serious villager consensus is powerful. But over here it is just about everything. Sacrificing one's reputation in order to have a tiny possible effect on an election is absurd here. European economists don't do anything that disreputable, because policy influence is based on reputation and not anything done by vulgar voters.

This has its advantages. Europe doesn't dive into huge un necessary deficits because of an election. Policy doesn't depend on butterfly ballots and hanging chads.

But the second recession in 4 years hitting before 2008 real GDP is surpassed has no noticible effect on the policy debate either.

it was decided in the 1990s that reducing budget deficits was is and always will be the paramount aim of public policy.

Democracy is messy, but a sober, disciplined well order march over a cliff isn't ideal either.

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