Paradigm Lost: Rethinking Economics and Politics

On 12th to 15th April, a conference will be organised by INET on this theme [Axica Conference Center, Berlin]. For the full program, see here. In its context, on the 13th, I shall be participating in the following session. As I am figuring out the content of my intervention, I would welcome your suggestions. Thanks

The Future of Europe

Wolfgang Münchau, Associate Editor and European Economic Columnist, Financial Times

Markus Brunnermeier, Edwards S. Sanford Professor, Princeton University
Vitor Louçã Rabaça Gaspar, Minister of State and Finance, Portugal
Sven Giegold, Member of Committee on Economic and Monetary Affairs, European Parliament
George Soros, Chair of Soros Fund Management
Yanis Varoufakis, Department of Economics, University of Athens


  • Financialization : a neoliberal path to a Soviet type communism….or something to that effect.

    Would be interesting with Mr. Soros participating.

    • “Financialization : a neoliberal path to a Soviet type communism….”

      That’s “The Global Minotaur” – socialism for the rich.

    • Vaclav Klaus:

      “As an economist I believe in the efficiency of the genuine market economy and don’t believe in any fashionable adjectives attached to it – as social market economy or as information or knowledge economy”

      Great Speech: 17.1.2012 Riyadh Speech: The European Problems As Seen from Prague

  • Hi Yanis

    The conference really rocks!

    It is well-worn (your co-author of Modern Political Economics Nicholaos Theocarakis also mention this in his foreword) but what about something related to whether is the ship that has gone ashtray rather than the shoreline?

  • How to revert from the decadent finance-for-profit to the original inspiration of finance-for-growth.
    You & Gaspar can paint the deadend picture of the current state, Soros can be the devil’s advocate (literally :), Brunnermeier can attest to the theoretical pillars of this possibility and Giegold can provide insights on the applicability and institutionalization of such an idea.

  • Perhaps, finally, you can introduce the concept of cognitive science to the obsolete blank slate rationalism of economics professors…

  • Hello Yanis-

    I have given this some thought but what follows is not original to me: is not easy
    2.everything changes
    3 no-thing remains the same
    everything is a part of everything else
    and interdependent upon each other

    Keep your focus on “…life, liberty and the pursuit of happiness..”


  • I join Dean and others in congratulating you on being invited to this conference. Its a very big deal evidenced by the lineup of participants. I look forward to viewing/reading the proceedings.

    A side note – What little expertise I have in economics derives from my mentor, Gene Tyner, and that other challenging ecological economist, Herman Daly, so I’m very pleased to see the panel: Managing the Global Commons: Growth, Inequality, and New Thinking for Sustainable Economics. Yeah!

    By mid-April “The Future of Europe” may be murkier than it is now, but I would suggest you conccentrate on your ‘modest porposal’ ideas because I don’t really believe ‘political union’ is even remotely within the realm of possibility. Ie; Europe’s future must be developed with the ‘tools’ that are currently available.

    • And… I believe George Soros will (at least partially) defend the takeover of the EU by the financial sector and uphold the notion that an undemocratic bureaucracy is preferable to popular democratic rule.

      Hope I’m wrong about Soros, but he likes to criticize Europe’s leaders for mostly the wrong reasons.

  • Dimitris Milonakis and Ben Fine scripted the indespensible (for me at least) “From Political Economy to Economics” in 2009 and made the argument to put back political economy into economics and return the subject to roots that were pluralistic, diverse and multidimensional. The “scientistic” (as opposed to scientific) approach to the European Crisis by policy makers have been hollow and have not grasped the import of the idea of Europe and Jean Monnet’s legacy. If anyone can articulate a path away from a lost paradigm, I am sure that you will be able to.

  • Yani:

    I have stated before to dislike Stratfor and George Friedman, mainly on grounds of intellectual dishonesty (they are consultants for hire and they tend to adjust the message to please the particular client).

    However, occasionally even the people one disagrees with can offer interesting perspectives.

    Since the topic of your conference is the “Future of the European Union”, I thought you and your readers might find this interesting. For once I think Friedman might be closer to the truth (and since most of his clients are emerging economies, he might be far removed from Europe to have a clearer perspective):

  • Dear Prof. Varoufakis,
    First of all congratulations !
    There are many possible interesting issues ( some of them with a rather radical flavor…) , so please allow to suggest the issue of Demography
    Just for the methological purpose we mark a line between “Economics” – the social structure of human beings ( and groups : Corporations, Unions , etc.) interecting as production/consumption agents and “Politics” – Power interactions between human beings ( and groups i.e. parties, countries, etc. ) as citizens.
    Both spheres have in common the term “human beings” , and are profoundly affected by the structure and the quantity of its population.

    In the case of Europe ,the main development that will mark the future of Europe is its aging population (and in some countries already diminishing) . The implications are profound on so many areas Economic/Political spheres : Common Immigration policy ( See Japan stagnation … Prof. Krugman wrote about that recently ), easing internal labor mobility as shock absorbers ( in addition to fiscal policies ) , welfare state ( and labor prospects for younger generations ) to enhance demographic growth, healthcare policies, Capital and productivity ,and the relative political and economic place of Europe in the World.
    I hope I made myself clear.

  • just try not to fall asleep when Vitor Gaspar is talking. it’s REALLY hard…

  • One interesting way of approaching the subject would be from the point imbalances that are being created between the surplus and deficit in the european economies and offer ways to deal with it. It could be for example that surpluses over a certain amount go to a certain fund that invests in deficit economies. Something like what SDRs were supposed to do when first conceived – not as they were finally implemented. In other words link surpluses to development.
    Of added interest is of course that such an approach could apply to world imbalances for instance CHina vs US.

  • Dear Yanis,

    I do see that your financial analysis has a good proximity to the real problem.

    However, being myself a self supported person (started work with 5 drachma per day and reached a…) but I have not the public access you have, I would like you to stress the below points when you address the public.

    We have to work hard in all directions and display a high degree of collective actions.

    Without hard work we will go nowhere.

    The seeds of the future are Morality, Family, and Education. If we can develope all of us these basics the rest will follow, justice, equality, wealth distribution, you name it.


  • Hi Yanis,
    I also congratulate for having it made to the lion’s mouth…
    I would have liked to come and bring some interesting friends, I would have paid a conference fee… But only invited people are accepted to the event.
    I really hope this is going to be put in the internet and I hope it is going to be influencial.

    Personally, I think the following issues are essential:
    – bank regulation; Dodd-Frank-act or something similar
    – restoration of democracy in Europe, opposed to what you call bankruptocracy
    – rethink dependence of politics to economic theory and bias.

    I would not hesitate to begin with your personal experiences during this crisis in Greece. Let people feel that it is not solely about economic theory, but about the lifes of people…

  • Have you seen this (hurried journalistic, but well-taken) contribution?:

    “The usual criticism of economists is that they missed the crisis: they preferred their models to reality, and those models took no account of the mischief that could be caused by bankers running wild. Of all explanations, this is the most comforting; all academics need to do next time, presumably, is look a little harder – ideally with a grant from the taxpayer.

    But economists didn’t just fail to spot the financial crisis – they helped create it. They provided the intellectual framework and drew up the policies that helped caused the boom – and the bust.”

  • A reason for the instability of the present economic system is the compounded return on invested capital. Accumulated investments grow exponentially in time and are unstable in the Lyapounov sense (Minorski 1962, “Non-linear Oscillations”). At some level he socio-economic system is unable to deliver the expected returns. Some unscrupulous experts create instruments which appear to be immune to the systemic limitation. Eventually the stress created between reality and fiction breaks down the system. If the exponential function is left unchecked, it becomes the underlying cause of crises and other problems in the world. Addressing imblances is one way of alleviating the problem, but it only postpones the inevitable, crisis. Addressing imbalances establishes longer range financial/economic order which will make the next crisis even more severe. One can eliminate the instability generated by this macroeconomic variable by using newly created wealth/value, not as return on investment, but for using toward material improvements in society. Most likely there are other sources of instability as well. It would be useful to analyze a “complete” set of macroeconomic variables using methods described in “Foundations of Complex Systems`by Gregoire Nicolis & Catharine Nicolis. Would there be interest at this conference on the analysis of root causes of crises ?An orderly redressing of socio-economic priorities may be another possible topic of interest. Karl Polanyi habnd referred to priorities with his cncept of èmbededness`in his `Ghe Great Transormation: The Political and Economic Origibns of Our Time`, published in 1944, reprinted in 1957 and 2001. Economic considerations should be in the service of social and quality of life considerations, not the other way around as it seems to be still now. Are economists interested in comparing trends in actual quality of life indices to trends of macroeconomic varialbes? If not, why not? It is clearly evident that democracies in the present state are not able to handle either economic nor social needs very well. Lobbysists, special interest groups, privately funded institutes, experts and other influential individuals distrort democracy and make it ineffecftive. To stimulate creative discussion and minimize such distrotions would the following idea be of some interest? Instead of electing national assemblies, choose rpresentatives from the total population using a lottery. Ths selection should be considered a form of civic obligation (with good pay). For those who out of hand dismiss it, one can ask: would any owner of a business consider ever managing it by going to vote perhaps once every four years, choosing from two or three options presented to run his or her buusinessÉ

  • Dear Yani,

    The key thing is staying focused on a simply-stated message which your audience can follow. Also,the title of the agenda item you are invited in (“The Future Of Europe”) is not specific to the current economic crisis, it is much broader and easier to loose focus. With this in mind, here are my suggestions:

    1. Choose your audience.
    Your audience is not the panelists but the people watching. This is important because during the debate every participant will try to pull the conversation where he wants to and the moderator is more likely to favour the “big names” and ask follow-up questions that move the conversation in their direction. You must not get dragged in to this. It may be tempting to want to follow Soros down an obscure path when you feel you can “nail” him, but do not be tempted because you will lose your focus and your audience.

    2. Choose your message
    I suggest a simple structure:
    a) Describe the structural issue, the “root-cause” of the failure (for e.g. excessive and prolonged imballance in accumulation of wealth).
    b) Propose the solution (for e.g. a mechanism to re-invest surpluses from rich regions to poorer ones). Be sure to dispell the myth that this will be bad for rich nations or that it is equal to charity for poor nations.
    c) Suggest how this could be implemented, i.e. the steps to go from (a) to (b). This is the most difficult part but it is essential because many people who understand your message still do not believe it to be feasible.

    3. Keep it simple – not simplistic
    The term “Global Surplus Recycling Mechanism” does not mean anything to your audience (remember: the average people watching). Use descriptive language, for e.g. “Richer countries should enact policies which discourage their corporations from investing their profits on Wall Street but encourage them to invest them back into real, value-creating, projects and businesses in poorer regions”.

    Throughout the debate try to stay clear of pigeonholing others or being pigeonholed yourself by others. The easier ones would be “the anti-capitalist” or “the Greek representative” or “the federalist” (or anti-federalist). I think you are already pretty good at this,but one can never be too careful against attempts to discredit him with such primitive methods.

    Finally, try to imagine the other panelists in their underwear. It always helps to keep one’s feet on the ground!

    Good luck and I will be awaiting this with great anticipation!

    PS.: A lot can be said about the future of Europe, in the context of the rights and wrongs of European unity. In another comment I will expand my view on this.

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