Tuesday, September 11th, 2012 10:54 am

European Debt

Question A: Even if all the official-sector funding that Greece received from 2010 through August 2012 is written off, propping up Greece to buy time for the rest of Europe to prepare for Greek default has been better for citizens of the Eurozone outside of Greece than a policy that would have cut off funding sooner.

Responses
 

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel

Responses weighted by each expert's confidence

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel

Question B: A substantial sovereign-debt default by some combination of Greece, Ireland, Italy, Portugal and Spain is a necessary condition for the euro area as a whole to grow at its pre-crisis trend rate over the next three years.

Responses
 

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel

Responses weighted by each expert's confidence

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel

Question C: Unless there is a substantial default by some combination of Greece, Ireland, Italy, Portugal and Spain on their sovereign debt and commercial bank debt, plus credible reforms to prevent excessive borrowing in the future, the euro area is headed for a costly financial meltdown and a prolonged recession.

Responses
 

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel

Responses weighted by each expert's confidence

Source: IGM Economic Experts Panel
www.igmchicago.org/igm-economic-experts-panel

Question A Participant Responses

Participant University Vote Confidence Comment Bio/Vote History
Acemoglu Daron Acemoglu MIT Disagree 6
Bio/Vote History
         
Alesina Alberto Alesina Harvard Disagree 6
Bio/Vote History
         
Altonji Joseph Altonji Yale Did Not Answer
Bio/Vote History
         
Auerbach Alan Auerbach Berkeley Uncertain 3
Bio/Vote History
         
Autor David Autor MIT No Opinion
Bio/Vote History
         
Baicker Katherine Baicker Harvard No Opinion
Bio/Vote History
         
Bertrand Marianne Bertrand Chicago Uncertain 1
Bio/Vote History
         
Chetty Raj Chetty Harvard No Opinion
Bio/Vote History
         
Chevalier Judith Chevalier Yale Uncertain 2
Bio/Vote History
         
Currie Janet Currie Princeton Uncertain 2
Bio/Vote History
         
Cutler David Cutler Harvard Did Not Answer
Bio/Vote History
         
Deaton Angus Deaton Princeton Agree 7
Bio/Vote History
         
Duffie Darrell Duffie Stanford Agree 7
An immediate default would have left some Euro zone banks unprepared, and possibly have generated runs. That risk is now reduced.
Bio/Vote History
         
Edlin Aaron Edlin Berkeley Uncertain 5
Bio/Vote History
         
Eichengreen Barry Eichengreen Berkeley Uncertain 1
Earlier restructuring of Greece's private and official debt would have been better, but IGM's "cutting off funding" language is ambiguous.
Bio/Vote History
         
Fair Ray Fair Yale Uncertain 5
Bio/Vote History
         
Goldberg Pinelopi Goldberg Yale Agree 7
Bio/Vote History
         
Goldin Claudia Goldin Harvard No Opinion
Bio/Vote History
         
Goolsbee Austan Goolsbee Chicago Uncertain 6
Bio/Vote History
         
Greenstone Michael Greenstone Chicago No Opinion
Bio/Vote History
         
Hall Robert Hall Stanford Did Not Answer
Bio/Vote History
         
Holmström Bengt Holmström MIT Uncertain 5
Buying time was sensible at least initially. In retrospect it looks like a bad call.
Bio/Vote History
         
Hoxby Caroline Hoxby Stanford Did Not Answer
Bio/Vote History
         
Judd Kenneth Judd Stanford Uncertain 1
Bio/Vote History
         
Kashyap Anil Kashyap Chicago Disagree 5
Better to have backstopped all the banks and let Greece default in early 2010 -- contagion was manageable then if the banks were supported
Bio/Vote History
         
Klenow Pete Klenow Stanford Uncertain 1
The IMF seems to think so, but it's not clear to me.
-see background information here
Bio/Vote History
         
Lazear Edward Lazear Stanford Disagree 6
Danger of contagion has been overstated.
Bio/Vote History
         
Levin Jonathan Levin Stanford Did Not Answer
Bio/Vote History
         
Maskin Eric Maskin Harvard Agree 7
Bio/Vote History
         
Nordhaus William Nordhaus Yale Strongly Agree 8
Bio/Vote History
         
Obstfeld Maurice Obstfeld Berkeley Uncertain 9
Bio/Vote History
         
Saez Emmanuel Saez Berkeley Uncertain 3
Bio/Vote History
         
Scheinkman José Scheinkman Princeton Did Not Answer
Bio/Vote History
         
Schmalensee Richard Schmalensee MIT Uncertain 5
Bio/Vote History
         
Shin Hyun Song Shin Princeton Agree 8
Bio/Vote History
         
Stokey Nancy Stokey Chicago No Opinion
Bio/Vote History
         
Thaler Richard Thaler Chicago No Opinion
Bio/Vote History
         
Udry Christopher Udry Yale No Opinion
Bio/Vote History
         
Zingales Luigi Zingales Chicago Disagree 3
I do not think it has been better for Greece either
Bio/Vote History
         

Question B Participant Responses

Participant University Vote Confidence Comment Bio/Vote History
Acemoglu Daron Acemoglu MIT Strongly Agree 7
Bio/Vote History
         
Alesina Alberto Alesina Harvard Strongly Disagree 8
Bio/Vote History
         
Altonji Joseph Altonji Yale Did Not Answer
Bio/Vote History
         
Auerbach Alan Auerbach Berkeley Uncertain 3
Bio/Vote History
         
Autor David Autor MIT No Opinion
Bio/Vote History
         
Baicker Katherine Baicker Harvard No Opinion
Bio/Vote History
         
Bertrand Marianne Bertrand Chicago Uncertain 1
Bio/Vote History
         
Chetty Raj Chetty Harvard No Opinion
Bio/Vote History
         
Chevalier Judith Chevalier Yale Uncertain 1
Bio/Vote History
         
Currie Janet Currie Princeton Uncertain 1
Bio/Vote History
         
Cutler David Cutler Harvard Did Not Answer
Bio/Vote History
         
Deaton Angus Deaton Princeton Agree 4
Bio/Vote History
         
Duffie Darrell Duffie Stanford Disagree 7
More restructuring might help a lot if managed carefully. But I don't see that this this a necessary condition for growth.
Bio/Vote History
         
Edlin Aaron Edlin Berkeley Uncertain 3
Bio/Vote History
         
Eichengreen Barry Eichengreen Berkeley Uncertain 1
Without getting into "necessary but not sufficient" quibbles the EZ is not going to grow at its pre-crisis rate in the next 3 years, period.
Bio/Vote History
         
Fair Ray Fair Yale Uncertain 5
Bio/Vote History
         
Goldberg Pinelopi Goldberg Yale Disagree 6
There are many ways to transfer wealth from the North to the South; default is not the only option.
Bio/Vote History
         
Goldin Claudia Goldin Harvard No Opinion
Bio/Vote History
         
Goolsbee Austan Goolsbee Chicago Disagree 5
even that won't work
Bio/Vote History
         
Greenstone Michael Greenstone Chicago No Opinion
Bio/Vote History
         
Hall Robert Hall Stanford Did Not Answer
Bio/Vote History
         
Holmström Bengt Holmström MIT Agree 6
Bio/Vote History
         
Hoxby Caroline Hoxby Stanford Did Not Answer
Bio/Vote History
         
Judd Kenneth Judd Stanford Disagree 3
Bio/Vote History
         
Kashyap Anil Kashyap Chicago Uncertain 3
ECB could inflate things away (and maybe the OMT is the first step) which is another form of default.
Bio/Vote History
         
Klenow Pete Klenow Stanford Disagree 1
Necessary condition is just too strong. There's a lot of uncertainty in any forecast, including upside as well as downside.
-see background information here
Bio/Vote History
         
Lazear Edward Lazear Stanford Uncertain 5
Bio/Vote History
         
Levin Jonathan Levin Stanford Did Not Answer
Bio/Vote History
         
Maskin Eric Maskin Harvard Agree 6
Bio/Vote History
         
Nordhaus William Nordhaus Yale Disagree 5
Bio/Vote History
         
Obstfeld Maurice Obstfeld Berkeley Uncertain 9
Greece has already defaulted, and its government debt still looks unsustainable.
Bio/Vote History
         
Saez Emmanuel Saez Berkeley Agree 3
Bio/Vote History
         
Scheinkman José Scheinkman Princeton Did Not Answer
Bio/Vote History
         
Schmalensee Richard Schmalensee MIT Agree 3
Bio/Vote History
         
Shin Hyun Song Shin Princeton Agree 8
Bio/Vote History
         
Stokey Nancy Stokey Chicago No Opinion
Bio/Vote History
         
Thaler Richard Thaler Chicago No Opinion
Bio/Vote History
         
Udry Christopher Udry Yale Uncertain 1
Bio/Vote History
         
Zingales Luigi Zingales Chicago Disagree 5
Bio/Vote History
         

Question C Participant Responses

Participant University Vote Confidence Comment Bio/Vote History
Acemoglu Daron Acemoglu MIT Strongly Agree 7
Bio/Vote History
         
Alesina Alberto Alesina Harvard Strongly Disagree 9
Bio/Vote History
         
Altonji Joseph Altonji Yale Did Not Answer
Bio/Vote History
         
Auerbach Alan Auerbach Berkeley Uncertain 3
Bio/Vote History
         
Autor David Autor MIT No Opinion
Bio/Vote History
         
Baicker Katherine Baicker Harvard No Opinion
Bio/Vote History
         
Bertrand Marianne Bertrand Chicago Uncertain 1
Bio/Vote History
         
Chetty Raj Chetty Harvard No Opinion
Bio/Vote History
         
Chevalier Judith Chevalier Yale Agree 2
Bio/Vote History
         
Currie Janet Currie Princeton Uncertain 1
Bio/Vote History
         
Cutler David Cutler Harvard Did Not Answer
Bio/Vote History
         
Deaton Angus Deaton Princeton Agree 4
Bio/Vote History
         
Duffie Darrell Duffie Stanford Disagree 7
The question leaves no other options for avoiding meltdown. There are other options, including muddling through with ECB support.
Bio/Vote History
         
Edlin Aaron Edlin Berkeley Uncertain 2
Bio/Vote History
         
Eichengreen Barry Eichengreen Berkeley Uncertain 1
More debt restructuring is coming. But I would not unconditionally forecast a "costly financia meltdown" in its absence. It depends on Mario
Bio/Vote History
         
Fair Ray Fair Yale Uncertain 5
This question and the other 2 are too broad. Many other things matter and these are not held constant in the questions.
Bio/Vote History
         
Goldberg Pinelopi Goldberg Yale Disagree 7
Structural reforms are essential. But again, default is not the only way to reduce the debt burden of Greece, etc...
Bio/Vote History
         
Goldin Claudia Goldin Harvard No Opinion
Bio/Vote History
         
Goolsbee Austan Goolsbee Chicago Disagree 6
misaligned exchange rates mean slow growth. slow growth means no solving the problem, regardless
Bio/Vote History
         
Greenstone Michael Greenstone Chicago No Opinion
Bio/Vote History
         
Hall Robert Hall Stanford Did Not Answer
Bio/Vote History
         
Holmström Bengt Holmström MIT Agree 4
The timing and character of the default matters a lot for the consequences. EZ needs to be better prepared for it.
Bio/Vote History
         
Hoxby Caroline Hoxby Stanford Did Not Answer
Bio/Vote History
         
Judd Kenneth Judd Stanford Disagree 3
Bio/Vote History
         
Kashyap Anil Kashyap Chicago Uncertain 3
Again inflating is the alternative -- a clean restructuring is probably better, but inflation may be the path of least resistance.
Bio/Vote History
         
Klenow Pete Klenow Stanford Disagree 1
I think it's still possible for a virtuous cycle without more defaults.
Bio/Vote History
         
Lazear Edward Lazear Stanford Uncertain 5
Too toug to predict business cycle activity let alone the effect of a particular factor on it in this case.
Bio/Vote History
         
Levin Jonathan Levin Stanford Did Not Answer
Bio/Vote History
         
Maskin Eric Maskin Harvard Agree 6
Bio/Vote History
         
Nordhaus William Nordhaus Yale Uncertain 5
Bio/Vote History
         
Obstfeld Maurice Obstfeld Berkeley Uncertain 9
Bio/Vote History
         
Saez Emmanuel Saez Berkeley Agree 2
Bio/Vote History
         
Scheinkman José Scheinkman Princeton Did Not Answer
Bio/Vote History
         
Schmalensee Richard Schmalensee MIT Agree 3
Bio/Vote History
         
Shin Hyun Song Shin Princeton Strongly Agree 9
Bio/Vote History
         
Stokey Nancy Stokey Chicago No Opinion
Bio/Vote History
         
Thaler Richard Thaler Chicago No Opinion
Bio/Vote History
         
Udry Christopher Udry Yale Uncertain 1
Bio/Vote History
         
Zingales Luigi Zingales Chicago Agree 3
Bio/Vote History
         

10 New Economic Experts join the IGM Panel


For the past two years, our expert panelists have been informing the public about the extent to which economists agree or disagree on important public policy issues. This week, we are delighted to announce that we are expanding the IGM Economic Experts Panel to add ten new distinguished economists. Like our other experts, these new panelists have impeccable qualifications to speak on public policy matters, and their names will be familiar to other economists and the media.

To give the public a broad sense of their views on policy issues, each new expert has responded to a selection of 16 statements that our panel had previously addressed. We chose these 16 statements, which cover a wide range of important policy areas, because the original panelists' responses to them were analyzed in a paper comparing the views of our economic experts with those of the American public. You can find that paper, by Paola Sapienza and Luigi Zingales, here. The paper, along with other analyses of the experts' views, was discussed during the American Economic Association annual meetings, and the video can be found here.

The new panelists' responses to these statements can be seen on their individual voting history pages. Our ten new economic experts are:

Abhijit Banerjee (MIT)
Markus K. Brunnermeier (Princeton)
Liran Einav (Stanford)
Amy Finkelstein (MIT)
Oliver Hart (Harvard)
Hilary Hoynes (Berkeley)
Steven N. Kaplan (Chicago)
Larry Samuelson (Yale)
Carl Shapiro (Berkeley)
Robert Shimer (Chicago)


Please note that, for the 16 previous topics on which these new panelists have voted, we left the charts showing the distribution of responses unchanged. Those charts reflect the responses that our original panelists gave at the time, and we have not altered them to reflect the views of the new experts.

We have also taken this opportunity to ask our original panelists whether they would vote differently on any of the statements we have asked about in the past. Several experts chose to highlight statements to which they would currently respond differently. In such cases, you will see this "revote" below the panelist's original vote. We think you will enjoy seeing examples of statements on which some experts have reconsidered.

As with the 16 previous statements voted on by new panelists, these "revote" responses are not reflected in the chart that we display showing the distribution of views for that topic: all the charts for previous questions reflect the distribution of views that the experts expressed when the statement was originally posed.

About the IGM Economic Experts Panel

This panel explores the extent to which economists agree or disagree on major public policy issues. To assess such beliefs we assembled this panel of expert economists. Statistics teaches that a sample of (say) 40 opinions will be adequate to reflect a broader population if the sample is representative of that population.

To that end, our panel was chosen to include distinguished experts with a keen interest in public policy from the major areas of economics, to be geographically diverse, and to include Democrats, Republicans and Independents as well as older and younger scholars. The panel members are all senior faculty at the most elite research universities in the United States. The panel includes Nobel Laureates, John Bates Clark Medalists, fellows of the Econometric society, past Presidents of both the American Economics Association and American Finance Association, past Democratic and Republican members of the President's Council of Economics, and past and current editors of the leading journals in the profession. This selection process has the advantage of not only providing a set of panelists whose names will be familiar to other economists and the media, but also delivers a group with impeccable qualifications to speak on public policy matters.

Finally, it is important to explain one aspect of our voting process. In some instances a panelist may neither agree nor disagree with a statement, and there can be two very different reasons for this. One case occurs when an economist is an expert on a topic and yet sees the evidence on the exact claim at hand as ambiguous. In such cases our panelists vote "uncertain". A second case relates to statements on topics so far removed from the economist's expertise that he or she feels unqualified to vote. In this case, our panelists vote "no opinion".

The Economic Experts Panel questions are emailed individually to the members of the panel, and each responds electronically at his or her convenience. Panelists may consult whatever resources they like before answering.

Members of the public are free to suggest questions (see link below), and the panelists suggest many themselves. Members of the IGM faculty are responsible for deciding the final version of each week’s question. We usually send a draft of the question to the panel in advance, and invite them to point out problems with the wording if they see any. In response, we typically receive a handful of suggested clarifications from individual experts. This process helps us to spot inconsistencies, and to reduce vagueness or problems of interpretation.

The panel data are copyrighted by the Initiative on Global Markets and are being analyzed for an article to appear in a leading peer-reviewed journal.

chicago booth