The subject before 17 economics Nobel laureates gathered in this Bavarian town is no less rousing than where is economics going? And while opening the four-day meet,German Federal President Christian Wulff took the question right to the masters to hazard the line where expertise meets policy-making. Wulff provocatively embedded his speech in the gathering controversy over the European Central Banks bond-buying programme he termed the huge buy-up of government bonds of individual states of the European Central Bank as legally questionable,a statement seen to be reflective of the political mood in Germany about the role it should play in the current debt crisis. He foregrounded the role of politicians in a financial crisis,especially one with too-big-to-fail dimensions,where taxpayers see a smug financial elite as freeloaders. Instead of setting a regulatory framework, he said,governments are increasingly allowing themselves to be driven by global financial markets. How can states regain their leverage? First,he said,politicians must regain their ability to act and not feel dependent on or allow themselves to be led around the ring by the nose by banks,rating agencies or the erratic media. Working for the common good,they must take a long-term view and,if necessary,make unpopular decisions. And: Decisions have to be made in parliament in a liberal democracy. For thats where legitimacy lies. In the panel discussion that immediately followed on sustainability in international economics,Roger B Myerson said that for regulatory rules to restrain moral hazard,reputation matters. Therefore,it is no coincidence that that the great financial centres are located in democratic countries. The ultimate arbiters of reputation can be voters,but for that they must understand the framework. For that,he said,politicians have a job. They must get the rules from the economists and explain them to voters,so that bankers and financial institutions can be held responsible. Myerson,who won the Nobel Prize in 2007 for work that informs regulation schemes,also put forth a robust defence of macro-economics,holding that macro-economists have learnt a great deal to guide policy-making since 1929. However,2008 has made it clear that we need to better understand macro-economic stabilisation,and this needs be informed by a better understanding of micro-economics. Joseph Stiglitz,who won the Nobel in 2001 for analysis of markets with asymmetric information and has since become a celebrity economist,countered Myerson,saying macro-economic models are largely responsible for the economic crisis. On the Eurozone crisis,he said: Its going to take money and guarantees to make the euro work. Its going to take money to make the euro not work. Unfortunately for Germany,its going to lose money one way or the other. The Meetings of Nobel Laureates grew out of a post-War venture to have young researchers in Germany interact with scientists. Annual meetings are held in this scenic island,with its waterfront in Lake Constance providing a Mediterranean scene at the foot of the Alps. Since 1951 Nobel scientists have increased the frequency of their get-togethers here with researchers now drawn from all over the world,and in 2004 a separate meet was instituted for the economic sciences. Over the next four days,economists will discuss subjects as diverse as the Nash equilibrium,poverty and food,and elections and strategic voting.
