The EC is out today with their autumn forecast, (here’s Ireland specifically (.pdf)) and the numbers don’t look great for Ireland in the short term.
Headlines:
Domestic demand to remain, ahem, subdued, until 2014;
Labour markets weak, especially construction.
Fiscal pressures to continue.
They’ve revised downward their forecast for growth from 1.9% to 1.1% for next year.
Super.
Eamon Quinn reports in the WSJ here.
There will be an event in the ESRI on November 30th on behavioural economics and public policy, co-organised by ESRI and the UCD Geary Institute. Keynote speakers are Robert Sugden, Professor of Economics at University of East Anglia and David Halpern, head of the behavioural insights team at the Cabinet Office. Details of how to register for the keynote sessions are on the ESRI website here (though the event is fully subscribed so just a waiting list for now). There will be a full day of talks prior to this and details of that programme are here.
My main purpose with this post is to point to some literature. People attending might be interested in some of the following links and reading:
Russell Sage Foundation reading list on behavioural economics here
Publications of the Behavioural Insights Team in the Cabinet Office are available here
The Chicago Law Review piece “Empirically Informed Regulation” by Cass Sunstein is a detailed account of the ideas and applications in this area over the last number of years.
The Brookings Institute publication “Policy and Choice: Public Finance through the lense of behavioural economics” is one of the best available introductions to this area.
New book on behavioral foundations of public policy edited by Eldar Shafir will likely be a required text in this area in the future. It covers many areas of policy and the behavioural science underpinning them.
Nudge by Thaler and Sunstein is a very influential account of the libertarian paternalism idea of how behavioural economics should be applied
The outline of a future European monetary union less vulnerable to crises than the current Franco-German design is beginning to emerge. It will need a banking union, including centralised supervision and resolution, as well as some common system of deposit insurance to curtail destabilising runs. It will also need stronger bank equity with minimum non-equity capital that can be bailed in when banks get into trouble. Sovereign debt ratios are now so high that future rescues by national treasuries will simply not be feasible, so the cost of debt to European banks will unavoidably be higher. The monetary union could do with a common macroeconomic policy – Europe as a whole is almost as closed an economy as the US.
But getting to first base in a re-designed monetary union means sorting out the current mess, and the willingness to accept and distribute losses is absent, largely because of the persistence of the belief that the crisis was caused principally by fiscal excess, and that sinners should pay. Sinners in this case means debtors.
There have been numerous papers arguing that the origins of the crisis were not fiscal, but principally monetary. Here’s another one, with references to some more:
http://www.hnb.hr/dub-konf/18-konferencija/mccarthy-ocallaghan.pdf
The European economy faces a re-building task on a scale corresponding to the aftermath of a (small) war. One of the lessons of twentieth-century European history is that allocating blame is not a good re-construction strategy after wars. The current impasse bears comparison to the ‘sinners should pay’ response to WW 1.
After WW 2, with lessons learned, the blame-game was avoided to a considerable degree. It does not matter (except perhaps to lawyers) what caused the mess. What is the feasible allocation of costs (infeasible allocations include pretending that the Greek default was big enough, for example) that offers the best prospects of economic recovery?
The costs have not all been incurred – failing to distribute the costs already incurred lets them grow.