On Tuesday evening the Barcelona GSE hosted an institutional session of the EEA-ESEM Congress at its Bellaterra campus location that featured a thirty-minute talk by President of the European Commission Mr. José Manuel Barroso.
President Barroso was joined at the plenary table by Prof. Antoni Castells, Minister of Economy and Finance of the Government of Catalonia; Prof. Andreu Mas-Colell, Chairman of the Barcelona GSE; and Prof. Nicholas Stern, President of the European Economic Association (EEA).
Welcoming the audience of EEA and Econometric Society (ES) members to Catalonia, Minister Castells highlighted the Catalan economy as “one of the most dynamic of Europe” and emphasized that governments must play a key role, together with the market, to overcome the crisis.
President Barroso, Prof. Antoni Castells, Catalan Minister of Economy and Finance, and Prof. Andreu Mas-Colell, Chairman of the Barcelona GSE.
President Barroso’s speech, “Overcoming the Crisis: Challenges and Opportunities,” reflected on the vital role that economists should play in creating the policies that will bring the global economy out of crisis, even as the world takes a hard look at the possible failure of current economic analyses to predict the crisis in the first place. [Download the full text of President Barroso's speech [pdf]
“It is a curious coincidence that I am attending your annual congress for the first time just when the economics profession is coming under scrutiny,” he said. “Many people…are asking why you failed to see the crisis coming. Others even argue that you helped to cause it.”
He went on to note that while some economists did warn of an impending crash, many governments and institutions relied too heavily on mainstream economic models that can provide useful approximations but also fail to describe completely the complex nature of human behavior.
“In the end, the failure to predict and head off the crisis was a collective failure. A failure on the part of economists, but also banks, regulators, supervising and - yes - politicians too,” President Barroso said.
Rather than dwelling on who was to blame for the crisis, he went on to discuss the opportunities it presented for new theories and research in economics.
Deputy Governor of the Bank of England Prof. Charles Bean discussed the web of interconnected risk exposures in the British and worldwide financial markets.
“The crisis has unleashed a great deal of fresh thinking in economics. Macroeconomists are apparently re-examining their models. Financial economists are revisiting the influence of incentives on market efficiency…there is new research too on policy responses to crises…on how to conduct monetary policy when interest rates are close to zero, on interactions between fiscal and monetary policy, and on the effects of fiscal stimulus.”
President Barroso told the audience that the new research and theories that will emerge in the near future will be essential to politicians and policy makers, who will continue to rely on advice from economists. “Your advice will be more necessary than ever as we face the daunting challenges which lie ahead,” he said.
He then outlined briefly some of the specific economic challenges and opportunities facing the European Union before fielding questions from the audience. During this Q&A he spoke frankly about issues such as national versus European solutions considered the first days of the economic crisis; the usefulness of economic summits; dollar trade talks; and the strength of the euro.
The institutional session was followed by the Schumpeter Lecture, delivered by Prof. Charles Bean, Deputy Governor of the Bank of England, and attended also by Minister Castells. In his lecture, “The Great Moderation, the Great Panic and the Great Contraction,” Prof. Bean discussed the web of interconnected risk exposures in the British and worldwide financial markets. He illustrated why this web of risk exposure made it so difficult to foresee or to pinpoint weaknesses in the complex new varieties of assets that have become commonplace in recent years. [Download Prof. Bean's presentation slides [ppt]
President Barroso at the GSE's Bellaterra campus on Tuesday evening during the institutional session of the 2009 EEA-ESEM Congress.