What you desire may not be what you get

German Chancellor Angela Merkel admitted on Tuesday that the eurozone was \”facing an exceptionally serious situation\”. She brushed aside criticism that German insistence on bondholder \”haircuts\” from 2013 was fuelling the crisis. \”I will not let up on this because the primacy of politics over markets must be enforced,\” she said.

Interesting thought really.

That someone might desire that politics and politicians beats markets is not unusual. That the desires of some few should beat the desires of all, as aggregated through their actions in a marketplace, is a little more difficult to justify.

But the really important point is that while politics can influence markets, when it comes right down to it markets do have primacy over politics.

No, not because of some lack of will, not because of some lack in the political regulation of markets: simply because all of the people acting as they wish is more powerful than telling people how they should act is. If 500 million of us, the population of the EU, decide that something is so, there\’s pretty much nothing that politics or politicians can do about it.

17 comments on “What you desire may not be what you get

  1. She’s speaking in metaphors. She means something like “German voters shouldn’t have to keep subsidising banksters”. I sympathise.

  2. Merkel’s insistence on a haircut and her desire for political primacy over markets can happily be separate issues but she would not appear to see it that way.

    The haircuts are in a way sensible. Those who stand to lose a lot would get something instead of nothing. But they should be substantial haircuts to minimise the cost to taxpayers.

    Politics having primacy over markets is what created the Euro and what will be the end of the Euro. They need to step back and let it be just a currency rather than an engine for ever greater integration. The credibility of the currency is not at stake but the credibility of those who seek to exploit the currency for political ends (The European Commission) is and that is what taxpayers are being made to pay to protect.

    Their political actions are preventing a rational sorting out of the debt problem – through a mix of partial and full defaults.

  3. “there’s pretty much nothing that politics or politicians can do about it.”

    Isn’t that why have the guns & we don’t?

    OK, that’s at the extreme end but do you really doubt that if the whole house of cards was on the point of crashing down they wouldn’t consider using them?

    The iron grip of central control has been closing ever inreasingly. Look what happens in referenda. If you don’t vote they way you should just keep voting till you do a la Lisbon. One morning we’re going to wake up & realise we’ve let them establish a totalitarian state whilst we were more interested in X Factor

  4. “the primacy of politics over markets must be enforced”

    If the German Chancellor – the Gemran Chancellor FFS – thinks that, then Eruope, not the EU, but Europe is toast.

    This will end very very badly indeed.

  5. Tim: I realise you’re being deliberately hyperbolic here because the point about “markets = aggregation of individual preferences” gets ignored too often.

    And sure, the markets are an aggregation of individual revealed preferences, at a micro level (“I want to buy this thing, and not that thing”).

    But democratic governments are also an aggregation of individual expressed preferences, at a macro level (“I want to be governed according to this set of policies and values, and not according to that set”).

    So what? Well, the point is that what people do and what people say they want are often different. And that “what people do” isn’t necessarily always the right indicator of what they actually want to happen.

    Obvious example: if you could, completely legally through some slightly bizarre loophole, pay no taxes next year, you’d tick that box. I’d tick that box. Even bloody Richard Murphy would probably tick that box, if only because he’s enough of an idiot not to realise how much it’d hurt his campaign.

    But based on your theory above, that means that we don’t want there to be an army, a police force, a court system or a fire brigade – because the aggregation of everyone’s preference not to pay tax would mean that there wasn’t any money for any of the above. Whereas I’m pretty damn certain that we do.

    Tim adds: But that just leads us to revealed preferences. Politics is what we say we want, markets are what we actually want through our actions.

    Anyway, I already know how not to pay any taxes: but don’t, as you note, take advantage of it. (The method is simple, just don’t stay long enough in any one country in a year to be resident there. Usually less than 180 days does it although it can be more complex with your country of domicile.)

  6. But democratic governments are also an aggregation of individual expressed preferences, at a macro level

    Really? I thought democractic governments, as first approximation, followed the preferences of the swing voter. What matters in a democracy is not the total preferences, but the preferences of the groups most likely to switch sides effectively (switching sides while living in a safe seat that would return a sheep if it stood for the right party is not being effective).

    I’m in favour of democracy, but because all the other forms of government that have been tried are even worse.

  7. Tracy W: You slightly overstate your case, I fear. I’d contend that what is true is:

    1. democratic governments tend to follow some of the — ie the most salient – preferences of the swing voter in order to get elected.

    However, (1) is logically consistent:

    2. democratic governments are an aggregation of individual expressed preferences.

    Because, once elected, they often not only throw a bone to the swing voter but also have to please their core vote.

  8. Paul, good point but as I said, to a first approximation. If the core voters don’t have anywhere else to go, their desires will weigh a lot less.

  9. Tim W: sorry, I should have added that the box to be ticked needs to be at no cost to oneself. Spending the year on the run to avoid being tax resident anywhere counts as a cost in my book. And are you really saying that you believe someone who legally avoids tax doesn’t want there to be a police force or army? That seems to be getting onto Murphy territory…

    Tracy: if the party goes too far away from the values of the core voters in trying to please the swing voters, then it can also run into trouble (see: the collapse in Labour’s core vote turnout between 1997-2010).

  10. As the poet put it in his slightly differently phrased version of your title:

    But if you try sometimes, well you just might find
    You get what you need

  11. Didn’t the American congress once try the primacy of politics over the law of gravity once? How did that work out?

    All the bust out currently going on in Europe really means is that some nice assets will soon have different owners. Who will they be?

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