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Again and again: This time it’s $150,000,000,000.00 of German tax payer money for Greece. Why?

July 20, 2012

German tax payers,

The 4th annual meeting of the very young Academy of Behavioural Economics is taking place in New York City in September 2012. I presented my paper on the “war” between classical finance and behavioural finance at the 3rd annual meeting of the Academy at UCLA last year. Dear Germans, it is your money, not Merkel’s, so would you like to know why she decided to bail out Greece with your money – again? Angela Merkel, Barack Obama and all the other head of states in Europe and America have never heard of behavioural economics because the new discipline started by Nobel price winner in economics, Dr. Kahneman (2002) is young. They studied Smith’s The Wealth of Nations (classical economics).

What is the difference? Here are a few applied tenets of behavioural finance:

1. No government can be as responsible and careful handling your money for you without your supervision. Some of it will be wasted on projects without accountability (Greece, Spain, Ireland, etc.).

2. Behavioural economics requires that tax payers money is used in essential manufacturing, road building and repairs, education for job skills, medical research, computer training, community parks and  recreation, productive employment, and so on. The emphasis is on behavioural accountability.

3. Classical economics requires that tax money is used to balance the budget and prevent inflation, pay outstanding bills, pay executive salaries to retain top executives, maintain liquidity in markets, and so on. The emphasis is on legislative accountability, not behavioural accountability.

Conclusion: Never allow bailouts without knowing and supervising what the money will be used for!!!

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