Friday, July 17, 2015

Greece is a victim of Framing

SRW says that Greece, and the European crises, is a victim of framing:
The European crisis is a crisis of bad framing. Characterizing Europe-wide credit problems in terms of national actors, then fixing that characterization into place via intersovereign lending, were deeply pernicious, deeply destructive, errors. I don’t doubt these errors arose more from increments than ill intentions. There were pressures and interests and paths of less resistance — no need for any vast conspiracy. [2] The international framing was convenient to domestic constituencies throughout Europe. In every country, elites find it convenient to deflect passions to an external bad actor rather than take responsibility for mistakes at home. Sometimes on the merits they have a case, sometimes not. Regardless, inflaming passions against another nation is always a terrible choice. Even when a dispute really is a zero-sum conflict of interest between two nations, great diplomacy is called for. That may be a lot to ask for, but it is what civilized countries do.
I agree, but I don't think the problematic frames are "Greeks are lazy and corrupt" or "Germans are cruel and stingy". The problematic frame is "money is like gold" and "nations are like households".

The MMT crowd calls responsible management of fiat currency "functional finance" because it looks at the function fiat money plays in an economy -- as a general ledger entry to track obligations -- and rids it of the inherent value it holds as a store of value, implicit in the "sound finance" frame. In "sound finance", the nation, as a family, needs to have a rainy day fund of savings in case of bad times. In practice, this is disastrous as functionally, the nation needs to run deficits so it's people can net save and be employed, thus maximizing real value.

If you want a find a villain, look at the economics profession which continues to model money and finance as if it was a lump of gold instead of a spreadsheet entry. They are like the doctor's at Vienna General.


2 Comments:

Blogger Greg said...

" I don't think the problematic frames are "Greeks are lazy and corrupt" or "Germans are cruel and stingy". The problematic frame is "money is like gold" and "nations are like households".

Couldn't agree more!

11:30 AM  
Blogger blaoism said...

In philosophy of sciences, it is called "theory-ladenness". You can have two competing theories producing competing descriptions of the same phenomenon. So, this boils down to whose theory is better: that of sound finance, or that of functonional finance. If asked in this way, things would be clear.

1:21 AM  

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