Economists Got This One Right

Over at Marginal Revolution, one of the few blogs I read every day, economist Tyler Cowen cites his early 2009 piece in the WQ in a sobering post on the future of the euro. In that article, "Last Man Standing," Cowen wrote:

“It has become increasingly clear that the problems in European governance are severe – and I am referring to the wealthier nations, not Bosnia and Albania. The European nations are tied to each other through the European Union and the euro, but they don’t have a good method for making collective decisions in contentious times….

Spain, Italy, and Greece, which have all lost their premier AAA credit rating, may require some form of financial aid. The Germans might look to spread this burden around Europe, but there are few places to turn. France and the Netherlands could chip in, but the hat cannot be passed very widely.”

In his Marginal Revolution post, Cowen notes that he wasn’t the only economist who saw trouble coming in Europe. (But what about the political scientists? After all, the euro crisis is at bottom a political failure.) “It is sometimes asserted that the economics profession should lose some status because so few economists predicted the U.S. financial crisis. I’m not sure economists should be judged by their ability to predict asset price movements, but grant the point. The euro crisis is now here, and it seems our profession should win some of its status back.”