Hello and welcome to my blog – the ecoptimist.
In my job, as a macroeconomist based in London, we understandably spend a lot of time thinking about ‘tail risk’ scenarios of what could happen if the euro crisis goes nuclear. This is often to the detriment of considering ‘central’ scenarios in which Europe muddles through the crisis and sets up institutions that will make a repeat much less likely in the future.
From conversations over the last few weeks, I’ve started to wonder whether this focus has led some of my colleagues to lose sight of what a realistic scenario for the euro area might look like. The pessimistic focus of our work, along with a sometimes over-simplified 24-hour newsflow, frames the way that we view the wider outlook.
As a result, I know a lot of people who now expect – not fear as a tail risk, as I do, but actually expect as a central scenario – that the euro area will break up in the next few years amid economic depression, social unrest and nationalistic rabble-rousing.
But can that really be something to expect? In other words, does Europe really fail in 50% + 1 of the probability distribution of possible outcomes?
I think not. In fact, I’m cautiously optimistic about the longer-term outlook for Europe, albeit acknowledging that there will be bumps in the road over the next few months and years. I’ll elaborate on this in future posts. But suffice to say, I think that Europe’s problems are more about political coordination than inexorable economic logic – and I think these coordination problems are far from as insurmountable as many clever people assume.
Over the next few weeks and months then, I’ll try to back up this assertion (and others!) with facts, data and analysis, along with a healthy dose of quality economic news and research from across the web. These are certainly interesting times for Europe and the world – and I’m sure I’ll have plenty to talk about!
the ecoptimist 
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