Home > Uncategorized > In Greece, NO is the answer

In Greece, NO is the answer

I guess I have to speak out – not as and advise to the Greek but because it’s too easy to easy and comfortable to stay silent.

NO is the answer.

In the end, it is a question of trust. And I do not trust you, mister Dijsselbloem:

A) Proposing a quadrupling of VAT rates in (large parts of) the main economic and export sector of a country (tourism) in a deeply depressed country is the dumbest micro and macro economic idea of the year. Even taxing deposits is a better idea.

B) Willfully letting a deal explode over a little bit of money which is used to top up income of the poorest pensioners (who increasingly need this money as their health is deteriorating) is the dumbest social idea of the year and shows the explicit cruel intent of the Institutions (hey, mister Dijsselbloem, didn’t mister Drees, your proverbial prudent and teetotaler social democratic predecessor, in 1953 sign the debt relief program for Germany while he also introduced state pensions, especially for the poorest in Dutch society, in 1956, albeit with the caveat that the pension age might have to be raised in the future?). A higher profit tax or a land tax on privatized harbours or whatever are much better ideas.

C) Wasting the once in a generation chance to, together with Syriza, crush corruption and instead sucking up to Schauble will be on your record for ever. Nothing was a better idea.

NO won’t solve the Greek economic and social problems. I’m not aware of any plan B, the banks will stay closed, emergency money will have to be issued and the economy is already nosediving. To me, it’s all incomprehensible, even after reading interfluidity about the stupidity of this all and this zerohedge post about the super seniority of IMF debts (will the ECB have to tolerate a haircut on Greek debts when Greece defaults on IMF debts…?) about it and taking account of the fact that Malta, Cyprus, Italy, Spain and Portugal of course love to see much higher VAT rates in the competitive Greek tourist industry. Greece already had the worst economic crisis of any rich world economy post 1945 – and it is becoming much worse. Because we make it so. Whatever the answer. A YES will reopen the banks – but Schauble will not like that and he will continue to burn Greece – you can trust that guy!

  1. July 5, 2015 at 9:07 am

    It is all a complete expose of the cruelty and unworkable idiocy of the troika’s policies.

    Why is Steve Keen’s IDEA website’s call for “a complementary currency”, a Social Credit for Greece being discussed/planned by the Greek government? Keen and Varoufakis are good friends. There must therefore be an awareness of it.

    • July 5, 2015 at 3:39 pm

      The most obvious idea is this: When the ECB withdraws as lender of last resort for Greek banks, these banks continue to take Euro deposits and loans but they’re uninsured. Soon, because of a bank run or bad Euro loans, banks become insolvent. Euro deposits need to be haircut until good loans equal deposits. At that point the bank of Greece steps in and insures the amount that was haircut, but in drachmas. People can’t complain too much because they’re getting something (drachmas) for Euros they would have lost.

      Thereafter I expect businesses and professionals who deal with tourism or import/export to keep dealing in Euros. They’d have Euro deposit accounts, Euro invoices and Euro bank notes. Euro loans would have to be on super prudential terms, as the banks are uninsured for Euros. Everything else, pensions, salaries, domestic professionals like plumbers and dentists, etc. will mainly use drachmas. I guess people will file tax returns for each separately. It’s not really that hard. Drachma has to be legal tender (i.e. the official currency). Euro just has to be legal to circulate. The infrastructure is there, it needs no encouragement.

      And life will be good. Whoever now earns Euros will still be earning Euros. Whoever isn’t earning Euros because there aren’t enough Euros in Greece will be earning and spending Drachmas. All the black debt in the economy (plumber owes teacher, teacher owes dentist, etc) will unfreeze and be properly monetised. Greece will fare as other disastrous European countries out of the Euro like, I don’t know, Sweden…

      • Blissex
        July 6, 2015 at 2:19 pm

        «Thereafter I expect businesses and professionals who deal with tourism or import/export to keep dealing in Euros. They’d have Euro deposit accounts, Euro invoices and Euro bank notes.»

        And all imports will be in euros, cash with no credit, no letter of credit either.

        As the recently posted graphs show, greek GDP rose between 2001 and 2008 by around 20% while that of Holland and Finland did not, because greek imports also rose by around 20% thanks to loans in euros. Now that source of euros has gone away for a very long time, and germans and the other europeans will not forget how Greece has treated them.

        «Everything else, pensions, salaries, domestic professionals like plumbers and dentists, etc. will mainly use drachmas.»

        And therefore for them the cost of imports will double or treble and he rich people who have hundreds of billions of euros abroad will be able to buy greek assets at very low drachma prices.

        Greece yesterday voted for a massive redistribution from poor greeks (who have only little money in foreign accounts) to rich greeks (who have a lot of money in foreign accounts).

        «Drachma has to be legal tender (i.e. the official currency).»

        The creation and circulation of an alternative currency is explicitly forbidden by the EU treaties. If the greek government tries to pay their euro debts in drachmas someone will sue them in the European Court of Justice, and the greek government will be forced to pay them in euros, or leave the EU.

        What Greece has chosen yesterday is to “do an Argentina” and to endure far more terrible austerity for many more years than the very mild and short one they had so far. Y Varoufakis wrote a very explicit article 3 years ago listing the reasons why that is a terribly bad idea:


        His arguments are still valid.

      • July 6, 2015 at 4:56 pm

        Quite remarkable: the storyboard for the 2015 events in the 5-liner Epilogue of the 2012 article. Thx for the link.

      • Blissex
        July 6, 2015 at 9:37 pm

        «Quite remarkable: the storyboard for the 2015 events in the 5-liner Epilogue of the 2012 article. Thx for the link.»

        His other main 2012 blog post is as topical:


        «The show can’t go on (with more loans that demand DP-killing austerity to pacify the Northern parliamentarians who must approve them).

        [ … ] Greece must default within the eurozone! The Greek state, let me remind you, is quite close to a primary surplus.

        With judicious top-down reductions wages and pensions, plus the issue of tax-bonds, the Greek public sector could finance itself for the foreseeable future.

        All that is needed is that the ECB continues to provide liquidity to the Greek banks. Some say that it cannot do this because it won’t be able to accept Greek government bonds as collateral (since the Greek state will have defaulted).

        True but irrelevant: Greek banks have already posted whatever government bonds they owned with the ECB for collateral. That creek has dried. Nowadays they are posting domestic mortgages and other such paper titles (which are, by the way, no worse in quality to those posted by Italian and Spanish banks).

        All that it would take to allow Greece to stay in the eurozone, in a better state than it is today (and less austerity for that matter), is the continuation of the present ECB policy toward Greek banks.»

        Too bad that the ECB that is forbidden by treaty to deal with insolvent banks and to provide fiscal aid, which is strictly reserved to EU government decisions via treaties.

        Also BTW there was a reply to the post arguing that Greece cannot do an Argentina, saying that they can do an Argentina:


      • Blissex
        July 6, 2015 at 10:10 pm

        To some extent the most amusing bit is that Y Varoufakis in 2012 was arguing for greek austerity:

        «Greece must default within the eurozone! The Greek state, let me remind you, is quite close to a primary surplus.

        With judicious top-down reductions wages and pensions, plus the issue of tax-bonds, the Greek public sector could finance itself for the foreseeable future.»#

        «Europe’s optimal strategy is to let Greece default, to allow the Greek government to find ways to live within its tax take for the next year or so [ … ]»

        «The other two alternatives (more bailouts or a Greek exit) constitute cruel, unnecessary and unusual punishment. For the whole of Europe.»

        Very lucid, Professor Varoufakis.

        Too bad that a greek default triggers by way of international treaty a demand for recapitalization from the “institutions” which means that countries with a big GDP but a troubled economy like France, Italy and Spain need to find a lot of money to send abroad, and even poor small countries like Bulgaria have to contribute to the greek bailout.

        Here is a list of the EU countries with a lower GDP per capita than Greece.

        Nominal GDP per person in 2014:


        $7,752 Bulgaria
        $10,034 Romania
        $13,881 Hungary
        $19,111 Malta
        $20,904 Croatia
        $21,381 Latvia
        $21,408 Portugal
        $23,275 Poland
        $23,876 Lithuania
        $24,417 Slovenia
        $25,049 Estonia
        $25,333 Slovakia
        $19,100 Czech Republic
        $28,237 Cyprus
        $29,635 Greece

        GDP per person at PPP in 2014 according to the IMF:


        $17,860 Bulgaria
        $19,712 Romania
        $20,889 Croatia
        $23,707 Latvia
        $24,942 Hungary
        $25,105 Poland
        $25,859 Greece

        EU official GDP per person by PPP in 2014, with 100% as the EU


        45% BG (Bulgaria)
        54% RO (Romania)
        59% HR (Hungary)
        64% LV (Latvia)
        68% HU (Hungary)
        68% PL (Poland)
        72% EL (Greece)

      • July 6, 2015 at 11:37 pm

        @Blissex it depends on their consumption mix. In the late 80s things like tomatoes, taxi rides, haircuts, rents, ferries, etc. were much cheaper in Greece than in Western Europe. Imports like cameras and electronics were very expensive because they required hard currency, currency was controlled, and there were tariffs (the last two were removed with the EEC/EEA). This made people like farmers, taxi drivers, hairdressers, landlords, sailors, etc. import poor while an elite of emigrants and businesspeople earning currency could afford imports. Although this was an unequal and backward state of affairs, the country was stable and the standard of living was decent. Greece is blessed in that most essentials are domestic goods.

        When the Euro came in 2001 it equalised the prices of the domestic and import consumption baskets, causing a huge one-time inflation spike on domestic goods (from 50% to several-fold) but making imports more egalitarian and more affordable. This appeared like a much more preferable consumption pattern to all demographic groups except pensioners (pensioners wanted domestic essentials, everyone else wanted discretionary imports).

        Because of this shift of preferences to imports, Euros started leaving Greece. High consumption was maintained only by grants and loans that Greece (people, businesses, or the state) had not seriously thought about sustaining. If Greeks had been prudent, consumption of imports and exports alike would be more measured and Greeks would not be as cocky as they were around 2005. In the event, after the GFC, the Euro debt crisis, and five years of austerity, the Greeks’ consumption level on domestic goods and imports alike is very low making Greece objectively poor. Inequality is high, such that there are people lacking food and other people able to purchase iPhones. The latter voted Yes, I think they’re a minority.

        In these dire circumstances, I think a return to drachma and the resulting shift of prices towards the pre-Euro distribution is a benefit. People will once again be be domestic-rich but import-poor and import-unequal. I think this is a better consumption pattern because in my opinion the consumer surplus of being able to eat, pay rent, go on holiday, etc. outweighs the foregone consumer surplus from iPhones. That’s only better because Greece is now poor. When Greece is once again affluent it’ll seek to shift its consumption pattern once again towards imports.

        Also it’s about stocks vs. flows. People are remarkably resilient to losses of stocks, such as deposit haircuts. They don’t like it, but bad things happen in life and once it’s done people get over it. People are much more sensitive to losses of flows, like pension cuts, lost business, or unemployment. A domestic currency comes with a stock loss (haircut) but a huge improvement in actual flows and expected flows (i.e. trust that pensions will be paid even if by the printing press). Again, in a weak, high unemployment, liquidity-starved, confidence-starved economy flows beat stocks for the overwhelming majority of people.

      • Blissex
        July 7, 2015 at 12:14 am

        «making Greece objectively poor.»

        That’s not what the GDP per person at PPP statistics I showed above show. Greece before Tsipras, in 2014, was about as «objectively poor» as it was in 2001.

        «Inequality is high, such that there are people lacking food and other people able to purchase iPhones.»

        Sure, but that like high unemployment is a political choice made by all greek political parties and the majority of greek voters at every election, to make sure nobody pays much taxes, so not even rich greeks pay much in taxes. So the constant demand of the greek left is that the average german should pay the taxes to support the poor greeks, so that the rich greeks don’t have to pay them.

        «people able to purchase iPhones. The latter voted Yes,»

        I would be very, very surprised. The people in Greece who can buy imported durable goods, and there are many of them, even if perhaps not a majority, must have lots of euros in banks accounts in creditor countries, and they certainly voted NO, because it means most likely NO to the euro, and that NO therefore means that, as Y Varoufakis wrote, those with foreign currency will be able (also thanks to being members of the kleptocracy) to buy at very low drachma prices a lot of greek government assets in a giant auction that will happen soon. Rich greeks with a swiss bank account will soon be able to buy their own private island for really cheap.

        For example have you noticed that the Tsipras government over the past few months successfully got rid of all the euros that greek government entities ad in various reserves? Now that auction is practically inevitable if the government wants to pay suppliers of trivial things like oil and medicines and every other imported good. You can’t run a government only on ouzo and olive oil paid for in drachmas. :-)

      • Blissex
        July 7, 2015 at 12:22 am

        «weak, high unemployment, liquidity-starved, confidence-starved economy flows beat stocks for the overwhelming majority of people.»

        The problem is that those drachma flows can’t buy imported goods, and Greece does not produce much of what greek voters want to buy; greek voters for example want to buy oil, medicines, durable good, and all those are imported. And as Y Varoufakis wrote “In sharp contrast, idle productive resources in Greece cannot produce much for which there is increasing demand”.

        As per the title of this blog post “In Greece, NO is the answer”, and this must have made rather happy many people in Germany who think like their finance minister (who has been lobbying for years to help Greece get out of the eurozone and probably also of the EU).

        And that’s enough after so many replies… :-)

      • July 7, 2015 at 1:09 am

        Greece doesn’t produce desirable exports. It does produce desirable domestic goods: food, services, construction, housing, transport. That’s why I argue that drachma is not a bad option. But I agree, let’s close.

  2. July 6, 2015 at 10:10 am

    From Merijn’s link “interfuidity”:

    “Greece should see its debts forgiven, pretty much wholesale. That forgiveness should be understood as a default, with future investors warned. Insured deposits in Greek bank accounts should be made whole, uninsured deposits should be “bailed in”, Greece’s banking system should be integrated into a much more carefully regulated European banking system that eschews investment in individual sovereigns entirely, Germany as much as Greece. Let sovereigns sell securities to the market, where incentives for careful credit allocation are sharper than they are within banks. Let European banks hold only claims against the ECB when they want a risk-free instrument.”

    Yes, a share issue makes no promise of repayment, but allows one to support worthy causes and be delighted when these are successful enough to pay earned bonuses. That’s a good way of expressing what I’ve had in mind: one way how railway preservation societies accept wealthy people’s surplus cash. But I think the implication is that we shouldn’t be financing governments except as an agent for their various ministries, we should be financing their projects and rewarding those running them (on top of their earning a living by doing so) by results. Ruskin’s “stipend” and “crown of wild olive”.

    • July 6, 2015 at 4:46 pm

      “Interfluidity”, of course; and by “accept” I mean “access”. When I wrote of rewarding results I meant jobs at whatever level being done well, which includes management staying within time, resource use and monetary budgets, not acquiring debt to the community in the form of “profit”, i.e. monetary excess. Please excuse an old man’s typos and ellipsis.

      Well done the Greek people! However, I hear Varoufakis has resigned, about which I am not so happy. I would much rather he had used the strength of his position to publically expose the fictitous nature of monetary debt and offer what repayment in kind was possible (e.g. tourist hospitality) for goods supplied on credit by the EU, rather than seek to negotiate a 30% cut in fictitious debt dumped on the Greek people by beneficiaries who should be responsible for any necessary repayment. (That, incidentally, would be automatically resolved by honestly recognising the money in their banks as credit, indebting rather than enriching them if they spend it).

  3. July 6, 2015 at 10:33 am

    A lesson for Heterodoxy
    Comment on ‘In Greece, NO is the answer’

    There have been two essentially different, although intertwined, issues (i) economics, austerity, default, euro/drachma, etcetera, and (ii), democracy, independence, honor, and the European identity of the Greek people.

    No doubt, good answers have to be found for BOTH issues. The problem is that humans are serial thinkers, that is, they can tackle only one problem at a time. Because of this, political economics is an approach that almost guarantees that BOTH issues are botched up.

    Yanis Varoufakis’s task as Greek finance minister and economist has been to solve the economic problem. What he has achieved is something else.

    “Our NO is a majestic, big YES to a democratic, rational Europe!” (Yanis Varoufakis on Twitter 7 July 2015)

    This the perfect moment to recall what the economist’s task is:
    “A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision.” (J. S. Mill)

    Heterodoxy is at the cross-roads and has to decide between becoming a political movement or a scientific endeavor with one and only one goal, that is, to replace Orthodoxy.

    As Keynes put it: “If economists could manage to get themselves thought of as humble, competent people, on a level with dentists, that would be splendid!”

    Seen from the perspective of science, political economics has always appeared as a rare mental disorder, that is, a constant flip-flop between two fundamentally different issues that frustrates the solution of either.

    To recall, economics is a failed science.

    Egmont Kakarot-Handtke

    • Paul Schächterle
      July 6, 2015 at 12:47 pm

      Interesting remark. I see it quite differently.

      Classical economists called their field of inquiry “political economy” — the economy of the “polis”. That is a very apt description in my opinion. The claim that there is an “economics” removed from politics is an ideological claim in itself.

      The economy has a lot to do with the structures of power and the distribution of power. Property itself is a legal construct backed by power and creating power. “Pacta sunt servanda” is a legal construct. Bargaining power is a result of political movements and decisions. Bargaining power influences the value of certain capital positions. Political decisions regarding economic topics can be used by powerful interests to create crises to achieve property shifts and power shifts.

      So in the end economic scientists should always consider political power struggles when analysing a situation and “giving advice”. Sometimes you have to fight for the *political* tools to be able to solve an economic question.

      In Greece a completely failed economic policy has been executed basically by extortion. And to understand the situation you have to consider the power struggles in the background. Private banks wanted to roll over the debt to public enterprises before a probable Greek default. Greek oligarchs and investors wanted to participate in fire-sale privatizations. Conservative and “social-democratic” parties wanted to kill a leftists opponent or competitor. The IMF wants to justify its existence after many “third world” countries avoid them and see them as “economic hitmen”. The EU wanted to prevent a “spill-over”, etc.

      To try to make it a rational discourse again, the Greek government had to reassert a democratic way of decision making.

      So completely independent of the result yesterdays referendum was a huge success.

      • July 6, 2015 at 3:40 pm

        True/false is different from good/bad
        Comment on Paul Schächterle on ‘In Greece, NO is the answer’

        Yes, the Classics called themselves political economists. But at the same time they claimed to do science, even Marx, who arguably was the most political of all political economists. This is where the schizophrenia started. However, as the quote from J. S. Mill shows, it was quite clear from the very beginning what it meant to be an economist who is committed to science.

        Economics has been, but is not longer, about the economy of the polis. Nowadays it is about the world economy. Because of this, there is no such thing as an American, European, or Greek economics as there is no American, European, or Greek physics or mathematics. Economic laws apply everywhere.

        Of course, economics is intertwined with politics. As a matter of fact, political economics has hijacked theoretical economics. The conclusion from this is that economics has to emancipate itself from politics.

        The only relevant criterion for economics as a science is true/false and not whether it serves any political party, or social group, or nation.

        To instrumentalize economics for any power struggle whatever is the original intellectual corruption in economics and incompatible with the ethics of science. The fact of the matter is that it is simply beyond human capacities to be a politician and a scientist at the same time. All this is long known.

        “But if a man occupies himself with investigating the truth of some question for some ulterior purpose, such as to make money, or to amend his life, or to benefit his fellows, he may be ever so much better than a scientific man, if you will — to discuss that would be aside from the question — but he is not a scientific man.” (Peirce)

        So, eventually a decision has to be made. To be more precise, (i) you can look at the actual economic conditions in a country like the US or Greece and come to the conclusion that they are unacceptable for a number of good reasons and therefore have to be changed; this is a political decision, or (ii), you can look an economics and come to the conclusion that it is unacceptable according to well-defined scientific criteria and therefore has to be changed; this is a scientific decision.

        What I say is that to flip-flop between the two spheres has not yielded results for over two hundred years. The proof is in the dismal state of economics as a science and of too many economies as the inevitable pratical result. False theory makes bad policy. As economists our task is to fix the former.

        Egmont Kakarot-Handtke

  4. Blissex
    July 6, 2015 at 11:13 am

    «“Our NO is a majestic, big YES to a democratic, rational Europe!” (Yanis Varoufakis on Twitter 7 July 2015)»

    The democratic representative of 95% of Europe’s population have also democratically said NO to Greece. Very rationally too.

    Also the treaty that enabled the greek bailout and under which the rest of the eurozone paid a lot of money to spare Greece the huge costs of a default expire last Tuesday. In order to give an euro more to help Greece either to avoid full default or to reduce its impact will have to be approved democratically by that 95% of the EU. After Greece’s vote there are zero chances of that happening. That is how democracy works: the votes of the 95% count for more than those of the 5%, especially if the 95% are subsidizing the 5%.

    If there was any democratic issue it was that the governments of the 95% so far have been subsidizing Greece even if popular opinions in their countries was strongly against it.

    Like them I am happy that Greece voted “NO” and rejected the offers of generous help from the other EU countries,and chose to join the drachmazone. I hope that the portraits of Tsipras and Varoufakis will be on the 10 million and 100 million drachma banknotes so that greeks will be constantly reminded of who brought them there every time they buy a newspaper or a load of bread :-).

  5. Blissex
    July 6, 2015 at 2:34 pm

    «Greece already had the worst economic crisis of any rich world economy post 1945»

    That’s ridiculous: the graphs you and Ruccio posted showed that Greece GDP in 2014 before SYRIZA got power was at the same level as in 2001, like Holland and Finland.
    They also show that Greece in 2001-2011 had a big fat greek party of imports bought with loans they never intended to repay, engaging in what is called a “fraudulent bankruptcy”, but let that pass for now.

    Is that a “worst economic crisis” that has afflicted Holland and Finland? Why aren’t you campaigning for the “institutions” to help Holland and Finland?

    • merijnknibbe
      July 6, 2015 at 7:14 pm

      Dear Blissex,

      You’re right. Holland and Finland are doing, in a historical perspective, really bad. But it does not compare with Greece.

      It doesn’t matter if we look at investment, government expenditure, unemployment of consumption – these all went down (up in the case of unemployment) with double digits. I do not know of any economist who does not call this a grave crisis. Contrary to the Netherlands and Finland, Greece however managed to increase productivity quite a bit, post 2001, which turns out to be a lasting achievement. This, however, meant that a comparable GDP development between 2001 and 2014 led to very high unemployment in Greece. The increase in production up to 2008 was real – demand was, alas, shaky as it was, indeed, based too much on private credit.

      I actually know a little about Holland (The Netherlands). Interestingly, the Great Depression, World War II and stagnation between 1948 and 1953 led to a situation where per capita GDP only surpassed the 1929 level in 1953. That’s 24 years (mind that The Netherlands were the last country to leave the Gold Standard). Unemployment was low, however, despite the fact that agricultural wages were increased to the level in manufacturing. This was, to an extent, caused by a choice by the Dutch government to freeze rents (land rents, house rents) and increase labour and capital income excluding rents (wages, ‘mixed income of the self employed, profits). In Greece, the opposite more or less happens: wages were cut while interest rates on existing loans weren’t and while interest rates on new loans -wel, are there any…It is a choice in favour of interest income and creditors instead of households and wages, mixed income of the self-employed and profits in the non-financial sector. At this moment, unemployment in The Netherlands is not low but at least much, much lower than in Greece.

      • Blissex
        July 6, 2015 at 11:51 pm

        «At this moment, unemployment in The Netherlands is not low but at least much, much lower than in Greece.»

        But that has very little to do with the debt crisis or the EU: that fact is the result of a very political choice by PASOK, ND and SYRIZA because:

        * The EU treaties that PASOK, ND and SYRIZA all agree with explicitly forbid a fiscal transfer policy. The fiscal policy is the main responsibility of national governments and that was agreed, as it was agreed that the ECB should not engage in fiscal policy at all. Still Greece receives €5 billion a year no-strings-attached as fiscal transfer from the EU, mostly from Germany, and that is 2-3% of greek GNI. That to me seems very generous. Greek voters seem to have voted NO to that, despite Varoufakis warning 3 years ago about “the domestic ramifications over loss of agricultural subsidies, structural funds” if Greece ended up suspended from or outside the EU.

        * If there were a chance for a democratic choice of the majority of the EU voters to redistribute income across national borders far bigger the current net transfers, then the EU left should lobby for that, for an EU mechanism for welfare run by the EU itself, not wasting enormous time and political credibility by demanding the handing out of enormous bailouts and hidden subsidies and other free or conditional gifts to a country that has proven over and over again that it is run by a kleptocracy to which all parties belong, with a corrupt or ineffective state administration that cannot be fixed in the short or medium term.

        * Regardless, greek GDP per person in 2014 was at a midrange value in the EU. Certainly Greece has the GDP per person to operate a redistributionist policy among its own citizens, supporting the same level of employment there was in 2001. Sure, all the greek parties like the idea of redistributing from average germans (who don’t vote or bribe in Greece) to poor greeks rather than from rich greeks (who vote and bribe in Greece) to poor greeks, but that’s a political choice about winning elections in Greece, and quite democratically those average germans may well not agree with that choice.

    • Blissex
      July 6, 2015 at 11:09 pm

      «the graphs you and Ruccio posted showed that Greece GDP in 2014 before SYRIZA got power was at the same level as in 2001, like Holland and Finland.»

      That was only roughly… The EuroStats site has lots of useful “official” information, and one can play with various of their table builders. This for example is a table of some selected countries GDP per person at PPP as % of EU average:


      and these are the numbers for Greece, usefully subvided in 3 parts: “import boom”, “plateau during austerity phase 1”, “small reduction during austerity phase 2”:

      2001 78.2%
      2002 77.2%
      2003 81.5%
      2004 82.6%
      2005 85.3%
      2006 85.9%
      2007 88.5%
      2008 89.7%
      2009 92.7%
      2010 91.9%
      2011 92.7%
      2012 89.4%
      2013 85.3%
      2014 82.9%

      As it can be seen accodring to this particular time series there has been no catastrophic collapse in greek GDP per person, indeed GDP per person at PPP as a percentage of EU average has slightly increased between 2001 and 2014.

  6. Paul Schächterle
    July 6, 2015 at 5:26 pm

    Re: Egmont Kakarot-Handtke: “True/false is different from good/bad”
    I believe I have a somewhat different view regarding 1. the role of the Greek referendum as well as regarding 2. the object and role of an economic science in general.
    I agree that “economics” (the discipline) and politics are intertwined. IMHO that happens in the very unfortunate way that neoclassical economists actually do make politics by giving advice towards a very specific and highly disputed set of policies, but hide their political attitudes and beliefs behind a veil of pseudo-science.
    The Greek referendum, now, tried to take back the actually *political* questions from the realm of pseudo-scientific experts (who were also actors in several power struggles behind the scenes as explained in my first post) back to where it belongs: the political sphere and the sovereign — the people.
    More generally I would also argue that the economy (the object of inquiry) and politics are intertwined, too.
    That happens in the way that “economic laws” have very much to do with actual man-made laws. In my view economic facts are *not* like physical facts or mathematical relationships. Economic relationships sit on top of the social (incl. legal) relationships and technological and natural circumstances that exist in a particular society. So economists who claim certain “economic laws” should also reflect on the foundations of those laws.
    Also the tasks that economic scientists set themselves are political to a certain degree. You say:
    “[…] you can look an economics and come to the conclusion that it is unacceptable according to well-defined scientific criteria and therefore has to be changed; this is a scientific decision.”
    I absolutely agree. But the choice of those well-defined scientific criteria *is* a somewhat political question.
    So taking political questions into account when doing economic research is not flip-flopping in my opinion.

    • July 6, 2015 at 9:14 pm

      Beware of the 9th circle
      Comment on Paul Schächterle on ‘In Greece, NO is the answer’

      (i) I agree about the “unfortunate way that neoclassical economists actually do make politics by giving advice towards a very specific and highly disputed set of policies, but hide their political attitudes and beliefs behind a veil of pseudo-science.”

      If there is a scientific analogon to Dante’s Inferno ALL political economists will eventually meet again in the 9th circle.

      (ii) The Greek referendum was a political manifestation and has to be accepted as such. It compares directly to political manifestations of the other European democracies which are uncomprehending.

      (iii) When I speak of economic laws I clearly do not mean man-made laws but objective and testable structural laws. I agree, of course, that in economics any silly behavioral assertion is illegitimately advertized as a law.

      (iv) You say “those well-defined scientific criteria *is* a somewhat political question.” That criteria are to some extent negotiable is in fact the representative economist’s greatest self-delusion. The scientific criteria are material and logical consistency. And there is absolutely no way around this. There is true/false and nothing in-between. Economists know that neither Walrasianism nor Keynesianism nor the rest satisfies these criteria.

      “… suppose they [the economists] did reject all theories that were empirically falsified … Nothing would be left standing; there would be no economics.” (Hands, 2001, p. 404)

      Because of this, economists have moved from science’s true/false to Hollywood’s good guy/bad guy. Actually, that’s more fun for all.

      (v) The task of Heterodoxy is to refute Orthodoxy according to well-defined scientific rules and not to complain about political bias. It is too easy to return this compliment and thus all ends with the pluralism of false theories and the uneasy coexistence of confused confusers.

      Economics has to get out of politics before it drowns with it in idiocy. Better one iota of knowledge than a heap of opinion.

      Egmont Kakarot-Handtke

      Hands, D.W. (2001). Reflection without Rules. Economic Methodology and Contemporary
      Science Theory. Cambridge, New York, NY, etc: Cambridge University Press.

      • Paul Schächterle
        July 6, 2015 at 10:33 pm

        I am by no means against theorising as a part of an economic science.

        How to name the economic science that is not business administration but deals with societal economic problems is a separate question. Call it “economics” if you like. Call it “political economy” if you are more inclined to classical economic theory than to neoclassical theory. (Unfortunately there exists also a branch of neoclassical economics that calls itself political economy, so maybe that’s not the best term to choose.) Call it whatever.

        In any case I think that for a lot of questions to give a true/false statement you have to consider political questions. This has nothing to do with making good/bad statements as a part of the economic science.

        For example to decide what a country like Greece should do in the current situation you have to first set a goal – which is definitely a political question –, only then can you make a true/false statement about how to achieve that goal. And answering how to achieve that goal may require the consideration of many more aspects than economic “laws”.

        Also I am just pretty sceptical about the postulation of economic laws that supposedly hold like laws of physics.
        Laws of physics are so well defined in terms of dimensions and units of measurement that they are testable in many constellations – and they are tested.

        For an economic law to have the same quality you would need very thorough definitions – including dimensions and units of measurement. But already the available economic units of measurement are either ill-defined (e.g. “units of labour”) or overly broad and variable (e.g. “working hours”) or are very dependant on a lot of other variables (e.g. all references to money even if very specific).

        I mean, we should try, but we should not see it as an easy task.

      • July 7, 2015 at 9:54 am

        Heterodoxy’s big fat Greek error
        Comment on Paul Schächterle on ‘In Greece, NO is the answer’

        You say: “I am by no means against theorising as a part of an economic science.”

        Theorizing is not a nice add-on, it is the very task of science. What we expect from physics is the correct theory of how Nature works, from the universe down to the smallest particle. Along the same line, we expect from economics the correct theory of how the economy works. Theory is not some exotic and inconsequential speculation, it is the incorporation of knowledge — the best thing we can achieve as humans.

        The situation in economics is this: what has been produced in the last 200 years has objectively not much scientific value. Take Newton and Smith as the base line, then physics has arrived in the meantime at quantum theory while economics has not even produced something like the law of the lever.

        Could it be that economists have been too much occupied with playing political games and writing pamphlets instead of doing serious scientific work?

        The crucial point is this:
        “Whatever knowledge we possess is either knowledge of particular facts or scientific knowledge.” (Russel, 1961, p. 620)

        What you can learn in business schools and most universities is knowledge of particular facts, eg. how the Federal Reserve System or the gold standard works. This is all good and fine and useful but it is NOT science.

        Heterodoxy criticizes Orthodoxy, and rightfully so. But here care has to be taken. Is it on political grounds or on scientific grounds?

        My point is this. BOTH Orthodoxy and Heterodoxy is mired in political economics. What they have BOTH produced so far is good practical political ammunition but scientific crap.

        In my view Heterodoxy is not another political movement, nor a charity for the Greeks that suffer much from financial deficits but most from deficits in institution-building which cannot be repaired by throwing money at it. In my view, Heterodoxy’s task is to get economics out of the political swamp and to make it a science.

        You say “I mean, we should try, but we should not see it as an easy task.”

        No it’s not easy — to become another frog in the swamp is much easier.

        Egmont Kakarot-Handtke

        Russel, B. (1961). The Basic Writings of Betrand Russel, Chapter Limitations of
        Scientific Method, pages 620–627. London: Routledge.

      • Paul Schächterle
        July 7, 2015 at 11:00 am

        OK I think we’re stuck here in two different frames of view. My final comment:
        I still think there is a difference between “political economics” in your sense and “political economy” in the classical sense.
        The latter has nothing to do with writing political pamphlets but is recognising political facts as a part of reality – the reality we try to understand as scientists.
        Also I seem to have a different view of science on a basic level. Theorising is not the only task in science. The collection of knowledge about particular facts *is* part of science. On what basis could you otherwise come up with theory? Postulating theoretical causal relationships is of course part of science but only if they are backed by facts, as opposed to armchair theorising without reference to reality and without testability.
        Also actually we have some advances in the field of economics. We have the system of national accounts. It deserves scrutiny but it is not nothing.

      • July 7, 2015 at 12:58 pm

        In science, NO is the answer
        Comment on Paul Schächterle on ‘In Greece, NO is the answer’

        OK then, here is my final comment.

        You say: “The collection of knowledge about particular facts *is* part of science. On what basis could you otherwise come up with theory?”

        Yes, this is an essential part of science and I never characterized science as fact free arm chair phantasy. I agree with you that utility theory is a fact free arm chair phantasy, and general equilibrium theory too, and DSGE, and so on. That is why Orthodoxy is not a science.

        But a scientific fact is not what you get by simply looking out of the window or into the newspaper. The physicists never saw a quant but arrived at this ultimate reality by a long, long chain of theoretical reasoning. So you need a theory to get hold of reality. You cannot ‘see’ the economy without a theory.

        This is what J. S. Mill told economists.
        “Since, therefore, it is vain to hope that truth can be arrived at, either in Political Economy or in any other department of the social science, while we look at the facts in the concrete, clothed in all the complexity with which nature has surrounded them, and endeavour to elicit a general law by a process of induction from a comparison of details; there remains no other method than the à priori one, or that of ‘abstract speculation’.” (Mill, 1874, V.55)

        And this is what Popper said.
        “Indeed, there is no such thing as an uninterpreted observation, an observation which is not theory-impregnated.” (Popper, 1994, p. 58)

        And this is what Marx already knew.
        “That in their appearance things often represent themselves in inverted form is pretty well known in every science except political economy.” (Marx, 1906, VI.XIX.7)

        So, what we can agree upon about Orthodoxy and Heterodoxy and political economics is this:
        “If one takes seriously what Popper says about falsifiability and the critical attitude, then the methodological practice of economics is not only mistaken, it is stupid and intellectually reprehensible.” (Hausman, 1992, p. 275)

        Is this acceptable to an economist with a scientific conscience? NO is the answer!

        Egmont Kakarot-Handtke

        Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge: Cambridge University Press.

      • July 7, 2015 at 1:38 pm

        Complete References. Sorry!

        Hausman, D. M. (1992). The Inexact and Separate Science of Economics. Cambridge: Cambridge University Press.
        Marx, K. (1906). Capital: A Critique of Political Economy, Vol. I. The Process of Capitalist Production. Library of Economics and Liberty. URL
        Mill, J. S. (1874). Essays on Some Unsettled Questions of Political Economy. On the Definition of Political Economy; and on the Method of Investigation Proper To It. Library of Economics and Liberty. URL http://www.econlib.org/library/
        Popper, K. R. (1994). The Myth of the Framework. In Defence of Science and Rationality., chapter Science: Problems, Aims, Responsibilities, pages 82–111. London, New York, NY: Routledge.

  7. July 6, 2015 at 10:02 pm

    Is this going to be part of the answer?

    ‘By the people for the people’: British man collects €1.80mn in 8 days to help Greece.


  8. Blissex
    July 6, 2015 at 10:26 pm

    «By the people for the people’: British man collects €1.80mn in 8 days to help Greece.»

    Look at the numbers I just posted above as to nominal and PPP-adjusted GDP per person.

    Who is collecting a penny for Bulgaria? Who is filling endless blog pixels for Bulgaria?

    The only reason I can imagine for this obsession by middle class leftists for Greece is that they love their fashionable, beautiful, edgy, “resolutionary socialists” and could not care less for what they regard as dumb, ugly, unstylish peasants in Bulgaria. The fashionista leftistas seems prepared to waste enormous political capital on the serial scammers and time wasters in Greece, and not a moment on boosting EU support and investment for their poorest regions. Look also at this chart and select “Operating budgetary balance” and click “sort”.


    After Poland it is Greece that receives the biggest net transfer from the EU, and per-head it is 2-3 times larger than that of Romania and Bulgaria.

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