
Valve Economist Yanis Varoufakis Appointed Finance Minister of Greece - Jacqued
http://www.bloomberg.com/news/2015-01-27/greece-s-new-finance-minister-says-euro-is-like-hotel-california.html
======
JumpCrisscross
Varoufakis wrote a blog post two years ago on the history of political
economic thought on the firm. It also delves into Valve's unique management
culture [1].

"There is one last bastion of economic activity that proved remarkably
resistant to the triumph of the market: firms, companies and, later,
corporations. Think about it: market-societies, or capitalism, are synonymous
with firms, companies, corporations. And yet, quite paradoxically, firms can
be thought of as market-free zones. Within their realm, firms (like societies)
allocate scarce resources (between different productive activities and
processes). Nevertheless they do so by means of some non-price, more often
than not hierarchical, mechanism!

...

Many enlightened corporations do a song and dance about their readiness to let
employees allocate 10% or even 20% of their working time on projects of their
choosing. Valve differs in that it insists that its employees allocate 100% of
their time on projects of their choosing. 100% is a radical number! It means
that Valve operates without a system of command. In other words, it seeks to
achieve order not via fiat, command or hierarchy but, instead, spontaneously."

[1] [http://blogs.valvesoftware.com/economics/why-valve-or-
what-d...](http://blogs.valvesoftware.com/economics/why-valve-or-what-do-we-
need-corporations-for-and-how-does-valves-management-structure-fit-into-
todays-corporate-world/#more-252)

~~~
simonh
The fact that companies do not operate internal markets is well known in
economics. The theory is that there is a balance point between the scale at
which activities are most efficient operating on a command model and the scale
at which activities are most efficicently managed by market mechanisms. The
position of the balance point is different from industry to industry, and also
varies over time with economic conditions. Idealy you want efficient markets,
but also a dynamically responding corporate world that can freely consolidate,
diversify, merge, etc to adapt it's structure to whatever is most efficient as
technology, supply, demand, etc shift in the economy.

This is why command economies tend to be less efficient, because any given
market and corporate structure is only most efficient for very specific
economic conditions. Heavy regulation of companies, markets and things like
employment law tends to freeze their structure in place, so they are unable to
adapt as conditions change.

So markets are only one aspect of an efficient economy. A flexible corporate,
finance and employment environment is the other. Hence the economic
flexibility and strength of the USA. Something as a Brit I'm perfectly willing
to admit to. I'm not saying economic strength is the be-all and end-all of
civil society. I firmly believe regulation plays an important part in ensuring
markets are fair and laws are equitable, but all these things are not mutualy
exclusive.

~~~
TheOtherHobbes
If by 'efficient' you mean 'most consistently profitable', then no, neither
markets nor a 'flexible corporate environment' promote actual efficiency.

In that kind of environment - which is not too dissimilar to the one we're in
- corporations simply hoard money to no great end, and markets crash unless
they're propped up by public subsidies and hand-outs.

This distorts the wider economy and makes real efficiency less likely.

Of course if by 'efficient' you mean 'providing the greatest possible benefit
to the greatest number of people' that would be a very unusual aim in orthodox
economics.

~~~
Pinatubo
On the contrary, 'providing the greatest possible benefit to the greatest
number of people' is a central focus in economics. Start with Pareto
efficiency and go from there if you want to see various ways in which
economists actually define and study efficiency.

~~~
ConfuciusSay
Economists might focus on that, but the point is that in actuality companies
do not focus on 'providing the greatest possible benefit to the greatest
number of people'.

Partially it's because that goal is far more difficult and complex than the
simple aspirations of Greater Taylorism: to increase shareholder value. It's
much easier to increase a stock price than it is to actually provide value for
a large number of people, which leads to cases like IBM who spends billions
buying back their stock while the actual value of their products declines to
near zero.

~~~
Pinatubo
I assumed by "orthodox economics" OP meant the study of economics. If s/he
actually meant corporate behavior then that's of course different.
Unfortunately people often conflate the study of economics with business,
which leads to a lot of confusion.

------
maceo
Wow! I certainly wasn't expecting that.

Mr. Varoufakis has been my favorite economist for many years now, and I think
he has brilliant insights as to reasons for the Eurocrisis. Whether he can
translate his genius into government policy is another matter, but I wish him
the best luck.

I've heard him tell the story about how he became Valve's economist. Mr.
Varoufakis is a regular guest on the popular left-wing podcast, Doug Henwood's
Behind the News. I imagine that Gabe Newell first heard of Yanis through this
podcast, but I can't confirm that. Anyway, Gabe sent Yanis a cold email
explaining to him what Valve is, and asking him to join the team. Mr.
Varoufakis was a long-time economics professor at the University of Athens,
but he was in the process of moving to the University of Texas-Austin. Once he
learned more about Valve and its virtual economy (and I imagine the fat
salary), he accepted the position.

It should be noted that Mr Varfakis is a communist. Part of Gabe's pitch to
Yanis was that he runs Valve on what he calls anarcho-syndicalist principles.
Although I don't know anything about Gabe's politics, I suspect that his
sympathies are not too far from Mr. Varafakis'.

If you want to hear some of his recent thoughts on the Eurocrisis, check out
this interview from a couple months ago. IMO, no one does a better job of
plainly explaining the malaise in Europe better than this dude:

[http://yanisvaroufakis.eu/2014/11/24/taking-stock-of-the-
eur...](http://yanisvaroufakis.eu/2014/11/24/taking-stock-of-the-euro-crisis-
interviewed-by-doug-henwood-for-behind-the-news/)

------
Shivetya
It will be interesting to see if they can pare down some of Greece's military
expenditures, they have over a hundred thousand in their military, nearly
ninety thousand soldiers. Granted the politicians can always point to Turkey
as a threat but I would be very curious how the new administration handles
this.

Side effects of closing some of the nearly 500 military and releasing troops
is not having jobs for them.

~~~
bradleyjg
I'd think the first order of business would be to get tax compliance up. It
wasn't very high to begin with, but since the new year tax revenue has
collapsed completely.

Ref:
[http://marginalrevolution.com/marginalrevolution/2015/01/the...](http://marginalrevolution.com/marginalrevolution/2015/01/the-
greek-fiscal-update.html)

~~~
bobcostas55
Literally every government for the last 35 years has promised to get tax
compliance up. It's not gonna happen. Beware Greeks Bearing Bonds[0] goes into
good detail on the problems with the enforcement bureaucracy and legal systems
that make it so difficult to actually apply the law.

[0]
[http://www.vanityfair.com/business/features/2010/10/greeks-b...](http://www.vanityfair.com/business/features/2010/10/greeks-
bearing-bonds-201010)

------
pillowpants2
For those interested, here is a really interesting video of Gabe Newell at the
Lyndon B Johnson School of Public Affairs talking about some of the in-game
economic problems Valve has faced in the past few years. I think he briefly
mentions Yanis somewhere in the middle of the video.

[https://www.youtube.com/watch?v=Td_PGkfIdIQ](https://www.youtube.com/watch?v=Td_PGkfIdIQ)

------
kaonashi
[https://www.youtube.com/watch?v=HpIsZL5FJVs&t=3m55s](https://www.youtube.com/watch?v=HpIsZL5FJVs&t=3m55s)

Here's a great talk he did on the problems of Maastricht.

~~~
seliopou
Good video, but quite long. If anybody wants a more compressed summary of the
policy points, check this one out:

[https://www.youtube.com/watch?v=ytXgMnm9tHs](https://www.youtube.com/watch?v=ytXgMnm9tHs)

Note that he is a mathematical economist with a PhD (focusing on game theory),
and also a self-proclaimed Marxist. So his ideas and perspectives are very
interesting, to say the least, and at times very unique.

~~~
davidgerard
A Marxist who's into Hayek? Now that's interesting. Where did you find the
Marxism? It's not in his Wikipedia article (which really needs updating).

~~~
digi_owl
I don't think he can be nailed down to Marxism or any other -ism. He seems to
be part of a eclectic gang of economists that find insight and inspiration
everywhere, by simply putting reality ahead of thought models.

~~~
davidgerard
I figured that from Marx plus Hayek :-)

~~~
thomasz
Correct me when I'm wrong, but are those two not economists who gave a flying
fuck about empiricism?

~~~
davidgerard
Marx was writing when it wasn't even called economics. Hayek was fine with
empiricism, you may be thinking of his later followers Rothbard and von Mises.

------
j2kun
He started a blog about his experiences at Valve [1], but stopped shortly
after starting it. I was a bit disappointed, because the posts were very well
written and insightful. I'd guess now he really has no time for it.

[1]:
[http://blogs.valvesoftware.com/economics/](http://blogs.valvesoftware.com/economics/)

~~~
thu
Same for the Linux part of their blogs subdomain.

But Varoufakis still blogs at
[http://yanisvaroufakis.eu/](http://yanisvaroufakis.eu/)

~~~
j2kun
Yeah, perhaps it's sad but I'm more interested in the synthetic economic
systems of a game than the macroeconomics of the world. Somehow the former is
more honest (probably because one has all the data).

------
antman
This [1] is one of his books that gives a bleak view on global economic
politics. It's a comprehensive view, and it does not include a happy ending.
[1] [http://www.amazon.com/The-Global-Minotaur-Economic-
Controver...](http://www.amazon.com/The-Global-Minotaur-Economic-
Controversies/dp/1780324502)

~~~
cbgb
I found this book to be the most elucidating book on the 2008 financial
crisis. Unlike other books that focus solely on the American economy,
Varoufakis spins a narrative which places the American economy at the center
of an increasingly complex and flawed global economy. The book makes it clear
why the American economy's failing had such a dire effect on the rest of the
world's economies. Moreover, it describes how the world economy developed in
this way, starting all the way back to just after the second World War.

------
WhitneyLand
Tangentially, what is the main reason for all the protest against the EU? I
understand that people in Greece are suffering and that's a terrible thing.
However from a lay perspective it seems Germany et al are just trying to help.

~~~
tomp
Germany is a nation that has benefited enormously from a single currency
(according to my understanding).

A large source of currency fluctuations are trade imbalances. If a country
exports more than it imports, its currency appreciates. If it imports more
than it exports, it depreciates. For example, if USA imports from the UK are
bigger than it's exports to the UK, then USA will be buying GBP with USD (on
average), so the value of GBP will go up relative to USD. This would in turn
make UK products more expensive to Americans, so they would buy them less,
correcting the trade imbalance.

If Greece, Italy, Spain etc. still had their own currencies, they could simply
depreciate them (actually, it would happen naturally, as a consequence of
trade imbalance) and so reduce their debt in real terms (similar to what has
happened to Iceland). If Greece's currency would depreciate, imports would be
more expensive for Greeks, so they would import (spend) less, while Greek
exports would be cheaper worldwide, so they would export (earn) more.

Conversely, Germany's currency would appreciate, again because of trade
imbalances (they export more than they import).

Because of EURO, this hasn't happened, and won't happen - the trade balances
are averaged, making Germany's currency (EUR) less valuable than it should be,
and Greece's currency (again EUR) more valuable than it should be. This
benefits Germany, because it can sell its cars cheaper, but isn't helping
Greece, because Greek olive oil and tourism experiences are more expensive
than they should be.

The short-term solution is for Germany to admit this advantage and help the
under-performing countries (by giving them money, not just loans, and
correcting the trade imbalances this way). In the long term, a single currency
should lead to a single fiscal government (like in the US).

~~~
Patrick_Devine
I wish more people understood this. Germany has benefited enormously because
of the euro, and yet you see a lot of belly aching about the southern European
countries.

Countries really only have two valves to throttle their economies. Interest
rates (which Greece now has the highest in the European Union), and printing
more money.

Right now because the Greek economy is in a log jam, they're suffering from
deflation and a shrinking economy. Interest rates have to be high so that the
government can continue to borrow money to keep the country running, but that
means companies aren't leveraging capital to expand.

If Greece weren't part of the Euro, it could simply print more cash, which
would reverse the deflationary pressure and allow the government to bring down
interest rates. It would also mean the flow of trade from Germany to Greece
would probably balance out more because the domestic economy in Greece would
be cheaper than importing German goods.

~~~
shazow
> It would also mean the flow of trade from Germany to Greece would probably
> balance out more because the domestic economy in Greece would be cheaper
> than importing German goods.

I read this a lot but I don't quite understand why--How does a unified
currency prevent the domestic economy in Greece from being cheaper than
importing German goods?

Why can't the local Greece industry lower prices (as it would effectively with
a falling local currency), thus driving more domestic purchasing and exports
since it would be comparably cheap to neighbouring countries?

The only thing I can think of is that it's hard to synchronize the discount of
an entire industry, and nobody wants to go first. Having a local currency and
printing more money allows you to do that across the board.

~~~
Patrick_Devine
> The only thing I can think of is that it's hard to synchronize the discount
> of an entire industry, and nobody wants to go first. Having a local currency
> and printing more money allows you to do that across the board.

That's exactly right. The key point is time.

If you have to wait for your economy to contract, you're still borrowing tons
of money to keep the country afloat. You're paying high interest rates on that
debt, while at the same time you're losing tax receipts as more and more
people are no longer paying taxes but instead are on the dole.

------
xkarga00
Varoufakis is a great economist and his placement as the Finance Minister is a
smart move from the new government. At this point I would like to suggest
reading _To Future And Back_ by I. Pitsouli[1]. Somewhere in it, there is
suggested (or prophecized if you wish) that in years to come scientists will
replace politicians in governments. Well, that has already started happening
and is right IMO because science is closely related to philoshopy which in
turn by definition deals with problems related to reality, existence, values,
etc. ie. the everyday problems most politicians seem to ignore nowadays.

ps. Varoufakis definitely needs to revisit Bitcoin though[2]

[1] [http://www.amazon.com/Future-Back--More-than-Prophecies-
eboo...](http://www.amazon.com/Future-Back--More-than-Prophecies-
ebook/dp/B004C44G5K/ref=sr_1_3?s=books&ie=UTF8&qid=1422303976&sr=1-3&keywords=pitsouli)

[2]
[https://news.ycombinator.com/item?id=7841186](https://news.ycombinator.com/item?id=7841186)

~~~
simonebrunozzi
Why do you say he has to revisit Bitcoin? Genuine question, just curious to
hear your thoughts about his view.

~~~
atmosx
Maybe he didn't read closely enough his thoughts. Actually, Varoufakis from
his twitter account said that since there is this post around[1] by our
beloved Berlinese internet-economist TechieChan he didn't had to analyze BTC
any further.

A couple of points he made are:

* He believes that the BTC market can be manipulated by big players easily. * Having a central bank regulating your economy is a good thing, because you know to whom point the finger when shit hits the fan. * He understands that liberals like the perception of _freedom_ that bitcoin gives but it's ultimately false.

All points which I share and believe although I have bought and sold BTC in
the past. These are not insights really, these are elementary economics. It's
strange that programmers who understand algorithms and cryptography can not
wrap their around these things. It always amazed me, I can't explain it :-/

[1] [http://www.techiechan.com/?p=1954](http://www.techiechan.com/?p=1954)

~~~
xkarga00
Maybe reading his post twice wasn't enough. Or maybe it's just that Bitcoin is
not just "money" but the whole underlying technology ie. the blockchain is
about to introduce huge changes into things we have been used to do in a
certain way.

~~~
atmosx
The post was about Bitcoin (the currency) not bitcoin (the protocol). You read
it twice and didn't get that part? :-P

~~~
xkarga00
Well, that's exactly why Varoufakis has to revisit Bitcoin. Because the
protocol's pros outweight by far the currency's cons.

~~~
atmosx
Okay than this is a misunderstanding. I am sure Varoufakis was talking about
the currency. There is no doubt whatsoever that the protocol is one of the
most important technological advancements of the past decade, maybe of the
21st century.

------
gadders
Smart. Does this mean I can have a vote and decide to not pay for any games
from Steam now?

~~~
luch
You're implying Greece did take Euro money without any intention to repay
other countries. The reality is much more nuanced.

Greek did take part of a fund destined to boost their economy, like Western
european countries with the US's Marshall Plan. Whether the investments made
with this money were profitable or not it's up to debate, but the end game (as
for Spain, Portugal and Italy) always were to improve the greek economy and
middle class in order to strenghten the overall euro economy.

Now that the "southern" euro countries are in deep financial troubles, Euro
bons were lended to them, not donated. Thoses bonds has to be repayed fully,
but without sucking dry the Greek economy or burdening it for too long
(western countries have a rap sheet of taking advantage of African countries
in debt).

Please do not mistake Greeks for their representatives.

~~~
fuj
What about forging documents to get accepted in the eurozone? Forging
documents to get more loans? The rampant corruption on every level of the
Greek society? [1] Obviously this is not politically correct, so downvotes are
expected.

[1]
[http://en.wikipedia.org/wiki/Tax_evasion_and_corruption_in_G...](http://en.wikipedia.org/wiki/Tax_evasion_and_corruption_in_Greece)

~~~
kalkin
Politicians from parties who now get 3-4% of the vote lied years ago (to the
Greek public as well as EU bankers), so let's take Greek workers' pensions,
crush their unions, slash their social services, and offer no jobs or future
to 60% of Greek young people. The bankers may not get their money anyway,
since the debt is still increasing, but at least the Greeks* will get what
they deserve!

*may not apply to the elites who actually bankrupted the country, who don't rely on government services and can keep their money in Swiss accounts

~~~
arethuza
Out of interest, where do you think the money to pay for pensions, social
services and create jobs for young people will come from in Greece in the
future?

Surely these all have to be set at a level that is actually sustainable by the
Greek economy?

~~~
lmm
Greece is what I might call cashflow positive - its government is taking in
more money than it's spending in its business of running the country. It's
only the bond repayments that are pushing it down.

Government spending should be countercyclical - and smart creditors (which,
sure, a government beholden to populism can't always be) would realize that.
Prop up the economy now, get growth up again, and _then_ cream off some
"repayments" when times are good - I'm sure a contract could be structured to
specify that they'd repay their bonds in proportion to e.g. growth above 3%.
Running Greece into the ground benefits noone, not even Germany. But sadly,
decades on, politicians are still ignoring Keynes.

Or they could have simply defaulted. It's worked out pretty well for Iceland.
The argument as I understand it for every nation being perpetually indebted is
that it ensures outsiders have an interest in that country being successful -
if you own Greek bonds you're less likely to invade Greece. But if your
bondholders are forcing a lot of suffering on your country, maybe the costs
outweigh the benefits.

------
curiouslurker
The site (ibtimes) is full of malware and spammy ads. Beware!

~~~
dang
Can anyone suggest a better URL for this story?

Edit: It seems Bloomberg has the most substantive article that isn't behind a
paywall, so we've changed to that from [http://www.ibtimes.co.in/valve-
economist-yanis-varoufakis-ap...](http://www.ibtimes.co.in/valve-economist-
yanis-varoufakis-appointed-finance-minister-greece-621689).

------
koichi
Does this mean that hats are going to be the new Greek economy?

~~~
dangerboysteve
I was going to write the exact same thing!

------
_njy_
λ is greek: HL3 confirmed

------
CyberDildonics
To bad the Greek government doesn't own Steam, then they would have more to
export than just Ouzou.

~~~
sebkomianos
*Ouzo.

------
AdmiralAsshat
Proposed solution to Greece's financial woes: free Bill's hat for everyone.

