Eurointelligence has a couple of pieces on the eurozone crisis this week: the one by Philippe Legrain I linked to yesterday, and this piece by Barry Eichengreen.
And here is a newish blog dedicated to the crisis, produced by the Economist Intelligence Unit.
Bright undergraduates tend to enjoy courses in the history of economic thought — I know I did — but the field is in an even more parlous state than economic history when it comes to the hiring decisions of economics departments. After all, why spend time studying the mistaken theories of the past, when you can study the superior theories that have replaced them?
(OK, perhaps that argument doesn’t seem quite so compelling now as it did a few years ago.)
So I was interested to see David Warsh’s report from the AEA meetings which quoted James Heckman, no less, as making the argument for history of thought courses in Economics PhD programmes. It follows the launching of a blog which promises to “engage current financial news and policy debates from the standpoint of the classics of monetary theory.”
And Brad makes the pitch in characteristically understated fashion here.
A friend of mine has just sent me this link, in which Sarkozy is saying that it is unreasonable for us to maintain our low corporate tax rates while seeking financial aid from Europe:
“I deeply respect the independence of our Irish friends and we have done everything to help them. But they cannot continue to ask us to come and help them while keeping a tax on company profits that is half (what other countries have),” he said.
For a more inflammatory version of the same argument, by an influential French economist, click here. And I was struck on my last trip to France by how ordinary people there are making the link between the Irish bailout and our ‘dumping fiscal’.
There are lots of obvious counters to all this, but I think the more important point is that such responses are inevitable, given the European response to the crisis to date. As two recent articles point out (here and here), the real cleavage in Europe is between European taxpayers and bank creditors (with the ECB being a third interested party, as another body which could help to fill the holes which have emerged in the European banking system). But since the powers that be are ruling out bondholder haircuts and quantitative easing, the only cleavage we are left with in practice is the one between core and periphery taxpayers.
Of course ordinary French and German taxpayers are going to be angry at lending their money to an insolvent state with lower tax rates than their own. Why wouldn’t they be? Of course ordinary Irish taxpayers are going to be angry at having to pay for high interest loans designed to bail out foreign banks. Why wouldn’t they be?
And while ordinary Europeans get angry with each other, with unpredictable political consequences, capital walks away scot free.
The report by Willem Buiter and colleagues on the eurozone debt crisis is available here.
Paul Krugman had a post the other day which pointed out that a lot of US-based economists were skepical about the euro project back in the 1990s, and that their meat-and-potatoes-style analysis actually turned out to have had a lot of useful things to say on the subject.
Patriotism is the last refuge of a scoundrel, and over here there are plenty of people who suggest that it was ignorant outsiders who were skeptical about the euro project. Krugman links to this article which is bound to become a standard undergraduate reference, but I find the recent references by Klaus Regling to ‘outside “experts”, who always seem to know what is good for Europe’ to be more telling given their provenance.
So it seems fair to point out that Irish academic economists also expressed skepticism regarding the euro project during the 1990s, most notably Peter Neary and Rodney Thom. I’m sure Rodney won’t mind if I point out that Peter was not just anybody in the context of the Irish profession, but its most prominent member by far, and someone who went on to become President of the European Economics Association. Here is an article by Neary and Thom, and here is another article by Peter writing on his own.
Nor were Peter and Rodney alone in worrying about the consequences of euro membership for Ireland. Here is an entertaining newspaper column by Jim O’Leary. Indeed, to quote Peter writing at the time,
to my knowledge every university economist who has commented on the matter has expressed grave reservations about our joining EMU if sterling does not.
The key word here is obviously ‘university’, since the pro-EMU Baker, Fitzgerald and Honohan report written for the Department of Finance was an ESRI production. But the point remains that the Neary-Thom view was by no means an uncommon one at the time.
Finally: I don’t think anyone has linked yet to Colm’s Stephen’s Day piece on Estonia and EMU, which shows that even economists are capable of enjoying the holiday season. So here it is.
