Recapping on tweets today.
The dominant narrative in discussions of Greece is that if Greece wants further relief from sovereign debt, those who pay for it want something in return, in particular something that makes it less likely that Greece will have to be subsidised again. The way creditors see it, that something is the catch-all ‘structural reform’. Which means changes that bring the institutions and markets of Greece closer to the norms of European capitalism.
Given that, many watching Syriza’s opening salvos at the head of Government have been dismayed by them announcing that they will raise the minimum wage, halt privatisations, and hand out free food and energy to those in poverty. These things seemingly lower the natural rate of output in Greece.
However, if you look at this through the lens of Acemoglu and Robinson’s account of institutions and markets, this may not necessarily be as bad…
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