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Greek agriculture and the EU – inconvenient truths

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Slightly different version published in ekathimerini

Incidentally, the European Court of Justice just ruled that subsidies of almost 500 million euros given in 2008-2009 to the farmers by the Greek government, are illegal. They will now have to be paid back, who knows how.

The deepest harm inflicted on Greece by the EU, among the many benefits, is probably that it has maintained a large agricultural sector. Hundreds of thousands of young Greeks, instead of working hard in creative ways to gain a better future, just sit around waiting for European subsidies to materialize. Instead of utilizing their skills to create useful knowledge and innovation, they devote themselves to devising EU-fooling tricks and ways to block Greek roads.

Notwithstanding what most Greeks think, the country is not truly agricultural – only about 13% of the population works in the sector. However, thanks to the EU’s Common Agricultural Policy, the Greek farming sector remains unusually big by European standards. Greece has the most farmers per capita after Romania, definitely more than the number that is needed or what the market would sustain.

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The greek fiscal “drama”: comparing Greece to Argentina and other absurdities

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…and how investor ignorance could make Greece suffer similar problems to Argentina

Thin markets can be very fickle. Even before the hurricane that hit financial markets couple of years ago and the continuing turmoil, asset valuations often had big swings without obvious changes in fundamentals. Such instability is larger in markets that lack liquidity and where there is a dearth of information about fundamentals.

Greek bonds have been hit strongly in the recent months. The election of a new Greek government in September with the subsequent revision of the country’s predicted fiscal deficit for 2009 from 6% to about 12% seems to have been the proximate cause. Greece’s combination of a really large deficit and a large public debt was already forcing it to pay slightly higher interest rates than most eurozone countries. The added uncertainty about greek statistics and a heightened risk aversion among investors almost doubled the interest investors ask to hold greek debt. A flood of articles has come, trying to explain the “Greek drama”, often from people who have never written about Greece before. It is no wonder that their analysis is very often flawed (besides abusing tons of ancient Greek clichés, a near failsafe index of the commentator’s dated information?).

Read moreThe greek fiscal “drama”: comparing Greece to Argentina and other absurdities

Economics Nobel 2007: Playing games and designing mechanisms

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At last. Mechanism designers got their Nobel prize. But did they deserve it?

For me economics became a science sometime around 1945* with John von Neumann’s and Oskar Morgenstern’s Theory of Games and Economic Behavior. Naturally, this book was only an outline of things to come and far from finishing the edifice we call today game theory. It took the subsequent efforts of people like John Nash, John Harsanyi, Reinhard Selten, Robert Aumann and Thomas Schelling to complete this beautiful structure of clear rationality expressed through elegant mathematical formulation.

The first Nobel prizes however for the masters of this field came only in 1994 (Harsanyi, Nash, Selten). Maybe it is the traditional reluctance of the Swedes to acknowledge the importance of new fields, or other reasons, it does not matter. But it seems that since 1994 they are trying to correct their mistake by awarding prizes to all the other aforementioned researchers and also people who I consider to be related to GT like William Vickrey, Vernon Smith etc.

It seems microeconomics and especially game theory are accepted now as one of the strongest tools in the social sciences with applications from biology to sociology. Mechanism design is one of these applications and it was chosen to be honoured this year, with the Nobel prize going to Leonid Hurwicz, Eric S. Maskin and Roger B. Myerson “for having laid the foundations of mechanism design theory”.

Mechanism what?
So what is mechanism design and was this honour warranted?

Read moreEconomics Nobel 2007: Playing games and designing mechanisms