Greek crisis requires massive reforms

Nobel laureate and Washington University economist propose herculean overhaul

Christopher Pissarides winner of the 2010 Nobel Memorial Prize in Economic Sciences, and Costas Azariadis, professor of economics in Arts & Sciences at Washington University in St. Louis, say development is the only solution to the fiscal and social problems facing Greece today.

In a paper published on the Greek Economists for Reform website, Pissarides and Azariadis “predict that market reforms will not succeed unless they are supplemented by powerful pro-growth policies.” The two economists recommend massive changes to the national economy and investment to reverse years of corruption and mismanagement.

In terms suited for a Greek tragedy of epic proportions like the current crisis, the economists say the future rests on a choice between virtue and vice. “The dire state of the economy forces Greek citizens to choose between economic virtue and economic vice,” they write.

“Virtue is the hard choice of pushing aside special interests and political dynasties, of opening the country to all those who want to work, produce, create jobs and wealth. This choice is hard because households, businesses and government will have to work more and learn to behave as though they were in a different society like Cyprus, Ireland or Germany.

“It is doubly hard because special interests will not surrender without fighting on city squares, highways, airports and harbors without blackouts, closures, smashed windows, burned automobiles and a flood of strikes,” they warn in the paper, “Development is the only solution: 17 proposals for a new development strategy”.

Public protests against new austerity measures are already daily occurrences in Greece.

Azariadis and Pissarides collaborated at the London School of Economics where Pissarides is professor of economics and holder of the Norman Sosnow Chair in Economics. Pissarides and Azariadis co-authored and published an article about unemployment dynamics in the European Economic Review in 2007.

Azariadis is the Edward Mallinckrodt Distinguished University Professor in Arts & Sciences at Washington University in St. Louis. He co-authored an article on the life and work of Pissarides, published Oct. 16 in the leading Greek newspaper, Kathimerini, with Yannis M. Ioannides, of Tufts University.

Ioannides is also a co-author of the paper, cited above, with Azariadis and Pissarides.


Pissarides was awarded the Nobel Prize for his work on the economics of unemployment, especially job flows and the effects of being out of work. He shares the prize with Peter Diamond of the Massachusetts Institute of Technology and Dale Mortensen of Northwestern University, who also specialize in “analysis of markets with search frictions” in the words of the Nobel committee.

Azariadis says the Nobel Prize was well deserved by all three fellow economists. “Over the last 30 years they have put together a new way of analyzing unemployment. Their collective efforts are called ‘search theory’ and are taught to students all over the globe.”


“Search theory helps us understand how and why auto workers are unemployed in Michigan while nurses are hard to find in California,” says Azariadis.

“It also explains why apartments are vacant in Brooklyn while many prospective tenants are still house hunting; why lots of men and women keep looking for the ideal mate instead of settling for less.”