Thursday, February 19, 2015
Why economics fails: politics
Kruggers and others go on at length about this topic, but it's easier to get across by way of illustration. So, here's the educational and professional background of the people involved in the present Eurocrisis to help you understand the situation on the ground in Europe.
First, the candidates for the Sensible Party, with their economic experience underlined:
Yanis Varoufakis - After training in mathematics and statistics, he received his economics doctorate in 1987 at the University of Essex. Before that he had already begun teaching economics and econometrics at the University of Essex and the University of East Anglia. In 1988, he spent a year as a Fellow at the University of Cambridge.
From 1989 until 2000 he taught as Senior Lecturer in Economics at the Department of Economics of the University of Sydney. In 2000, he moved back to his native Greece where he became Professor of Economic Theory at the University of Athens. In 2002, Varoufakis established The University of Athens Doctoral Program in Economics (UADPhilEcon), which he directed until 2008. From January 2013 he taught at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin.
[In other words, a somewhat prestigious professor of economics.]
Mario Draghi - He was born in Rome, where he studied at the Massimiliano Massimo Institute and graduated from La Sapienza University under the supervision of Federico Caffè. Then he earned a PhD in economics from the Massachusetts Institute of Technology in 1976 with his thesis titled Essays on economic theory and applications, under the supervision of Franco Modigliani and Robert Solow. He was full professor at the Cesare Alfieri Faculty of Political Science of the University of Florence from 1981 until 1994 and fellow of the Institute of Politics at the John F. Kennedy School of Government, Harvard University (2001).
From 1984 to 1990 he was the Italian Executive Director at the World Bank. In 1991, he became general director of the Italian Treasury, and held this office until 2001.
[In other words, a very prestigious professor of economics who's also helped run the world.]
Next, the candidates for the Silly Party, with whatever little they have going for them underlined:
Angela Merkel - Merkel was educated in Templin and at the University of Leipzig, where she studied physics from 1973 to 1978. Merkel worked and studied at the Central Institute for Physical Chemistry of the Academy of Sciences in Berlin-Adlershof from 1978 to 1990. After being awarded a doctorate (Dr. rer. nat.) for her thesis on quantum chemistry, she worked as a researcher and published several papers.
[In other words, after making it as far as miserable postdoc slave labour in a physics lab, in a Communist country with no economics whatsoever, she went into politics.]
Jeroen Dijsselbloem - He studied agricultural economics at Wageningen University (1985–1991), majoring in business economics, agricultural policy, and social and economic history, for which he received his academic degree of ingenieur in 1991, which is equivalent to a Master of Science degree. Dijsselbloem did research in business economics at the University College Cork (1991) in Ireland, but he did not receive a degree from this university.
[In other words, he did actually get as far as (what looks like) a transdisciplinary Master's with economics, but then he gave up and went into politics.]
Wolfgang Schäuble - After completing his Abitur in 1961, Schäuble studied law and economics at the University of Freiburg and the University of Hamburg, which he completed in 1966 and 1970 by passing the First and Second State Examinations respectively, becoming a fully qualified lawyer.
In 1971 Schäuble obtained his doctorate in law, with a dissertation called "The public accountant's professional legal situation within accountancy firms".
Schäuble entered the tax administration of the state of Baden-Württemberg, eventually becoming a senior administration officer in the Freiburg tax office. Subsequently he became a practising registered lawyer at the district court of Offenburg, from 1978 to 1984.
[In other words, though he took a bit of economics, he ended up chucking it in to become an accountancy lawyer, then went into politics.]
And thus, real economics will lose out to politics yet again.
This is (yet another reason) why you don't buy Europe at a 15 forward P/E, you sell it.