If Economics of the Treaty are Terrible, Why Vote for It?

John McManus’s rather sad and sneering economist-bashing article today gives another public outing to my now-way-over-exposed sentence “All that said, although I think the economics of this treaty are pretty terrible on balance, the arguments favour Ireland’s signing up to it.”

I’ve been getting a number of responses to this sentence along the lines of “Why would an economist vote for a Treaty that he characterises as having terrible economics?”

By way of clarification, I’d like to point out that this was one single sentence in a two-page set of prepared comments for an Oireachtas committee. For anyone interest, the full set of comments can be found here or as part of the official transcript here. The sentence when uttered was not intended as a soundbite or leaflet material. Rather, it came after a long discussion in which I argued that the fiscal rules in the Treaty were too tight when applied across Europe as a whole. I had not mentioned Ireland once up to that point and I believe the context in which it was intended was perfectly clear.

So the “terrible economics” quote, which is being repeated out of context, relates to the wider European debate about this treaty. It was immediately followed by a brief explanation of why I believe Ireland should sign the treaty. Here’s how I concluded my presentation.

Economic policy-making rarely amounts to picking the best possible policy suggested by economic theory. In a choice between an overly restrictive and badly designed fiscal compact and the potential alternative of being denied funding for our fiscal deficit next year – and the more extreme possibilities of sovereign default or exit from the euro – we should stick with the European project and hope, however difficult this may be, that we can work to improve its design in the future.

Given the widespread context-free repeating of the sentence, I can understand why people may have been confused as to what my position was. Less understandable was the characterisation of my position by Sinn Fein’s Peadar Tobin on RTE’s The Week in Politics last night. Tobin said that the three economists quoted on their leaflet all disliked the economics of the treaty but were advocating a Yes vote for (unspecified) “political reasons”.

Frankly, this is nonsense. I am advocating a Yes vote because, for Ireland, I think the alternative  is more likely to involve a quick sovereign default, massive austerity and economic collapse. These are assuredly “economic reasons” not “political reasons”.