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Opinion
Megan McArdle

No Easy Exit From the Euro

Even discussing a dissolution of the euro zone makes a crisis more likely.
Destroying the euro would be messy.
Destroying the euro would be messy.

Keith Humphreys ruminates on the folly of the euro, and why the governments involved can't even seem to bring themselves to consider the possibility that the euro should be abandoned. Paul Krugman has remarked that, "The euro was best understood as a plot by Italian technocrats to get themselves German central bankers." As he adds, "This was not, it turns out, a good idea."

Humphreys, who is a psychologist, not an economist, wonders if the eurocrats are committing a fundamental cognitive error: The euro area "falsely assumes that re-arranging the consequences of and responsibilities for financial decisions would not affect subsequent financial decisions by participants (be they individuals, businesses, elected officials or bankers)."