

It all began with a strange email (2012) - siddg
http://blogs.valvesoftware.com/economics/it-all-began-with-a-strange-email/

======
huhtenberg
Currently the Finance Minister of Greece.

It was in the news that he (or possibly the prime minister) said that they are
planning to employ an "unorthodox" strategy that "have never been tried
before" to pull the country from the mess it is in. One one hand it's
interesting to see what comes out of it, but on the other it sounds quite a
bit like gambling. Except this time it's with the real economy.

~~~
meric
It's a game of chicken and Yanis is an expert in the field.

He is an author of multiple books on game theory.

[http://www.amazon.com/Game-Theory-A-Critical-
Introduction/dp...](http://www.amazon.com/Game-Theory-A-Critical-
Introduction/dp/0415250951) [http://yanisvaroufakis.eu/books/game-theory-a-
critical-text/](http://yanisvaroufakis.eu/books/game-theory-a-critical-text/)

Greece is in trouble. There is no way they could repay the debt if they tried,
unless they confiscate everyone's savings. The only sensible thing is to
default on the debt, as had happened many times before when investors made the
imprudent choice bought government bonds that were never going to be paid
back. It is only then the toxic assets can be cleansed out of the economy so
it can continue to grow, rather than being stuck in some sort of bad zombie
bank equilibrium like Japan had been for the past 20 years.

~~~
huhtenberg
> It's a game of chicken

It's a game of Germany getting fed up with paying for the rest of the EU. I
think it's a safe bet that if Greece is going to show a middle finger to the
EU, the EU will have no choice but to reciprocate. Spain and Portugal were in
a similar situation as Greece, but if you are to believe Frau Merkel, the
austerity policy is working for them and they are recovering well.

~~~
moe
_but if you are to believe Frau Merkel ... [Spain and Portugal] are recovering
well_

Spain has an unemployment rate[1] of 24%.

Is it optimism or cynicism to call that "recovering well"?

[1]
[http://countryeconomy.com/unemployment/spain](http://countryeconomy.com/unemployment/spain)

~~~
chez17
It bothers me when people post statistics out of context. If the unemployment
rate was 48% and now it's 24% that's an amazingly successful policy to cut
unemployment by half. If it was 12% and now it's 24% clearly something is
wrong if unemployment doubles. Honest question, what is going through your
mind when you post a statistic like that with absolutely context? How, to you,
does this prove a point one way or the other?

~~~
glenstein
I think the context in this case is the usual, everyday awareness of typical
unemployment rates, which politically conscious individuals tend to have.

For instance, at the very least people probably have heard that U.S.
unemployment has been anywhere from 9% to 5% in recent years. And we know that
things were pretty bad when unemployment was 9%, and surely 24% is a lot worse
than 9%.

If you were good at U.S. history, you might recall that our great depression
had similar unemployment rates. There's just about no context where that's a
good number.

~~~
eru
I grew up in parts of East Germany that had 27% for years. Not pretty.

------
inflatablenerd
If anyone is interested, Yanis also guested on the EconTalk podcast in 2013,
talking about Valve's corporate structure and plans for solving Greece's
financial woes.

[http://www.econtalk.org/archives/2013/02/varoufakis_on_v.htm...](http://www.econtalk.org/archives/2013/02/varoufakis_on_v.html)

------
winslow
Side note: Yanis Varoufakis is now the Greek Finance Minister.
[http://yanisvaroufakis.eu/](http://yanisvaroufakis.eu/)

I'm disappointed Valve employees don't blog anymore. Abrash is now at Oculus
and I doubt Yanis works with Valve anymore. The linux team seems to have gone
silet on blog post.

~~~
Mahn
How did he go from economist at Valve to finance minister in Greece?

~~~
mcv
As the article points out, Valve hired him because of how he described the
Germany-Greece relationship, and Valve had a very similar problem with virtual
economies.

Apparently he was going to experiment with those virtual economies and learn
some useful lessons about real economies. I'd love to know what exactly he did
at Valve, but if he learned something useful there, that might help with the
Greek-German problem.

~~~
DrStalker
In a few years from now it's going to be really interesting to see what
lessons from Valve turned out to be helpful in the real world.

------
nailer
For anyone unaware, this man is now the Greek finance minister, and will
attempt to get Greece out of bankruptcy.

~~~
tomp
More precisely, he will attempt to get Greece _into_ bankruptcy - the
situation before the elections was relatively sustainable (AFAIK), as far as
the debtors are concerned, but the problem was that Greece and its people were
being sucked dry - taxes increased, spending cut, public companies firesold,
widespread unemployment (25%, youth 50%), GDP collapse (20%). Greeks didn't
want to live like this (would you), especially since only they were suffering,
not the institutions that were lending them the money in the first place
("every addict has a drug dealer").

The new party, Syriza, which Yanis is a part of, is trying to reduce the debt
burden in a way that would be acceptable to the rest of EU, e.g. by shaving
off part of the debt / delaying the repayment / restructuring it so that it's
only paid when the economy grows (as German debt after WWII) - which
_technically_ is a bankruptcy.

~~~
nailer
Well exactly, he's acknowledging that Greece is bankrupt rather than cash-
poor.

------
camperman
OK, the penny just dropped for me. This is the same Yanis who wrote a
masterful analysis of destruction and the Eve economy. The same guy who's an
expert in game theory. The guy who is now finance minister of Greece.

~~~
MikeTV
Link to the referenced analysis, for those interested like me:
[http://yanisvaroufakis.eu/2014/01/30/war-spikes-in-the-
eve-o...](http://yanisvaroufakis.eu/2014/01/30/war-spikes-in-the-eve-online-
universe-a-political-economists-account/)

------
pimlottc
Should be tagged (2012)

~~~
mbesto
Should be tagged....when it was submitted 3 years ago:
[https://news.ycombinator.com/item?id=4114295](https://news.ycombinator.com/item?id=4114295)

~~~
notfoss
Holy cows, I got a very strong sense of Deja Vu, just after reading the first
few paragraphs. I immediately jumped to the "posted" field and realized that I
had already read it earlier, most likely through the same link that you have
posted.

------
kindofanger
The last reported Gross World Product was 74.31 trillion dollars.

[http://www.indexmundi.com/world/gdp_%28official_exchange_rat...](http://www.indexmundi.com/world/gdp_%28official_exchange_rate%29.html)

Current global debt is in excess of 100 trillion dollars.

[http://www.bloomberg.com/news/articles/2014-03-09/global-
deb...](http://www.bloomberg.com/news/articles/2014-03-09/global-debt-
exceeds-100-trillion-as-governments-binge-bis-says)

That alone is enough to illustrate the situation. If you must have a cherry on
top, worldwide derivatives are likely in excess of 1 quadrillion dollars.

[http://business.time.com/2013/03/27/why-derivatives-may-
be-t...](http://business.time.com/2013/03/27/why-derivatives-may-be-the-
biggest-risk-for-the-global-economy/)

Regulation is a nice thought.

~~~
eru
> That alone is enough to illustrate the situation. If you must have a cherry
> on top, worldwide derivatives are likely in excess of 1 quadrillion dollars.

That's the `notional' of the derivatives. That's more or less a made up
number, and has not much to do with how much money actually changes hands.

The way the notional derivatives are defined, you'd actually want to see huge
numbers there. It means that exploitable price differences are so small, that
you need lots of gearing to make money off of them. Small price difference ===
other market participants get a fair price on buying and selling.

------
stingraycharles
Needs [2012] in the title, especially because this man is now the Finance
Minister of Greece, as pointed out by many others.

------
Aissen
So what did they learn ? It was a very promising blog, but for all we know,
nothing came out of his time at Valve. Even a failure to learn anything new
would be an interesting report with regards to what they did (or didn't do)
with the games' economies.

------
drabiega
The bit about Econometrics seems a bit out of place and wrongheaded. I know
this is a popular criticism of Economics in general, but I've always thought
it rather non-nonsensical.

~~~
SapphireSun
What's wrong with it? If you can't run a controlled trial, then it's hard to
finger causality. You can consider parallel natural experiments as occur in
different polities, but there are so often many confounding factors.

You can grow more confident in a strategy as the stats pile up, but it's not
nearly as cut and dried as a physics experiment.

------
hurin
(2012) label please.

