Month: November 2013

When we are talking about a framework to measure the success of any government policy, we should also have a framework for what constitutes good policy. For this we need some normative principles. Walter Eucken’s list, despite originating in another place and another era, may be a good starting point for such an exercise.

It is a strange world. Even the most ardent defenders of the European Central Bank’s interest rate cut last week do not claim it will have any effect. All they say is that it underlines ECB President Mario Draghi’s commitment to save the euro “whatever it takes”. It was a psychological signal to markets rather than a meaningful change of policy, so they argue.

To ensure markets are competitive, the best option governments have is to keep markets contestable by new entrants. Even the vague potential of market entry can discipline established companies.

Perhaps the next time the US government wants to criticise some European governments for poor economic policies, they could turn their attention to the least competitive ones instead. And the next time the US Treasury submits a report on international currency manipulation, maybe they could have a closer look at what the US Fed is doing. The cause of the problems may be closer to Washington than to Berlin.