Regular readers now this but from the traffic it seems like some new folks are tuning in for the Euro-Crisis debate.
On video I have a tendency to smile and laugh a lot. I am also a generally happy-go-lucky type of person. This combined with my sloughing off of long term issues has people often mistake me for a Pollyanna. That is someone who thinks everything will be ok.
Ironically – or not – I believe the exact opposite. Everything will definitely not be ok. I often tell my students: if you ever find yourself worried sick about whether or not things are going to turn work out, don’t worry, things are definitely not going to work. Everything is going to go horribly, horribly badly.
This is the essence of life. We are not forever. Our institutions are not forever.
Indeed, in a relatively short time, we and all the things that matter deeply to us will be annihilated. They will not exist at all and they will never come back. Not at least as we would think of such. There will be no faint hint of them in the background of the universe or spirit occupying another plane.
All things we care about are at their heart information – particular arrangements of the building blocks of reality – and entropy eats information. Everything we care about will be gone.
Indeed, what we mean by the passage of time is ultimately the direction in which we and the things we care about die. The two are fundamentally inseparable because they are defined in terms of each other. Why we perceive death and time the way we do is a separate question, but there can be little doubt about the basic story here.
This is part but not the entire reason why I am so focused on making sure that policy addresses immediate suffering and is less concerned about the long-run.
The other is that I think we have far, far less control even over the “near long run” say the next 50 years or so, than we think. Its highly unlikely that we as policy makers are going to do something right now that radically alters the course of even the next 25 years.
As economists we can see that institutions matter, but if development economics has taught us anything it is that we cannot simply write down a set of institutions hand it to policy makers and walk away. There are fundamental reasons why institutions rise and fall and they do not appear to be due to the wisdom of the institution makers.
Yet, as impotent as we are in the long run, we are very powerful in the short run. This is because we have discovered a few levers that have profound impacts on short term human experience. One of them is the printing of money.
It didn’t have to be the case that money was so powerful. We can imagine a world where it is not. But, in this world money and its management are a very big deal. This extends, though somewhat less so, to credit systems in general. Credit matters a lot. We also have the power to influence credit. Again, we can imagine a world where we didn’t but this is not the world we live in.
In this world, runs do happen. In this world credit markets have multiple equilbria and in this world we can influence which equilbria comes to pass. This has profound short run consequences and should not be ignored.
Trying to avoid causing people undue pain should be our major goal. This is why I focus like a lase beam on a strategy of preventing the world possible shorterm outcome – a global financial meltdown – from stemming out of Europe.