It’s Time To End This Greek Tragedy
Sometimes it’s better to do something – anything – rather than nothing at all. That’s the lesson of the old parable of Buridan’s ass, where the poor animal is faced with two haystacks and, unable to decide which is bigger, dies of hunger. It’s just as applicable today to the crisis in the euro area.
For over a year, policymakers there have been dithering about how to end the fiscal crisis that has thrown Greece and other nations into disarray. Part of the fault lies with local politicians; the Greeks haven’t even been able to form a government, let alone choose a coherent path for fiscal and monetary policy. Another part lies with the leaders of Germany, France, and other countries that have been desperate to defend the euro area’s integrity and their compatriots who are owed money. The last part of the fault lies with the International Monetary Fund, which has offered just enough support to keep the crisis going without imposing sufficient conditions to end it.
All of these parties have been guilty of dithering, arguing, and refusing to compromise. As a result, markets and economies around the world have been under a paralyzing cloud of uncertainty for months on end. One of the biggest risks to the recovery in the United States, for example, is continued slow growth in Europe, which now seems inevitable for at least another year.
For that reason, President Obama and his counterparts should be on the phone every day urging the Europeans to do something, anything, as long as it’s definitive. They would be acting on a well-known principle that the Nobel laureate economist Herbert Simon called “satisficing,” a word combining “satisfying” and “sufficing”. When faced with a decision where the cost of identifying and pursuing the optimal choice is high, Simon reasoned, a good-enough but readily identifiable choice should be selected instead. In other words, Buridan’s ass should have just flipped a coin and chowed down.
Without a doubt, the Europeans are facing a much more complicated decision. But they still have some clear and distinct options. These include allowing Greece to default in an orderly way, choosing for Greece to leave the euro area, declaring an end to bailouts for Greece and perhaps other countries, or setting down clear and binding conditions for all of the above to happen.
So far, they have chosen none of these, despite the fact that the options have barely changed in the past year. But delaying has consequences; the longer national economies are mired in a downturn, the harder it is to get out. It’s time to act. It’s time to munch some hay.
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