Archive | October 2012

Good economists know that they know nothing

Stochastic models are a virus, which infected economic theory and practice in past twenty years. But it’s not their fault. They played their role. They were pretty useful in many instances and, at least, they managed to generate great profits for many years to one overblown industry. They are really not to blame. In the same manner as we can’t blame the Pythagorean theorem, if we use it to guess tomorrow’s lunch menu.

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The eurocrisis can still be solved. If we want to

Source: Reuters

Some politicians seem to enjoy the crisis so much that you shouldn’t expect them to solve it.

The solutions to the European crisis are surprisingly simple, well-known and increasingly gaining support even from sceptical economists. The solution would be imminent if the politicians opened their eyes and pulled their heads out of the 1980s’ paradigm. Whether it can happen is a different question.

The European crisis is a consequence of two and practically only problems: the cyclical crisis of demand and the systemic crisis of eurozone institutions. The debt and financial crises are mere symptoms. If we solve the demand-led vicious circle and rectify the institutional set-up of the common currency, the debt and financial crises will cease to be an issue.

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