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September 23, 2017

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European Union policymakers keep making the same mistakes

PARIS -- Americans call it a Rube Goldberg machine, Britons a Heath Robinson contraption and the Danes a Storm P machine.

The European Union's policymaking system often resembles one of those cartoon designs of an implausibly convoluted system for achieving a simple task — held together by sticking plaster, string, frequent tinkering and plenty of wishful thinking.

What is striking when you compare Europe's policies on agriculture, monetary union and climate change is the similarity of the way the EU keeps bolting on patches and extra wiring to try to fix problems created by its own solutions.

Over the last five decades, the EU has set out to achieve a set of worthy goals by regulating markets — self-sufficiency in food, currency stability, fighting climate change.

Each of these policies created perverse incentives or what economists call "moral hazard," causing unintended consequences such as grain mountains and wine lakes, real estate bubbles and debt overhangs, and the collapse of the carbon price.

When things go off the rails, the EU reflex is never to question or scrap the policy, since political dogma, vested interests and institutional inertia rule out going back on what in Eurospeak is called the "acquis" — European achievements.

The default response is always "more Europe," although not necessarily the most straightforward solution, which is often fenced around with political vetoes.

"In political science, it's called 'past dependence,'" says Helen Wallace of the London School of Economics, an authority on European governance. "You are so locked in by what you have done before that you end up doing a version of it again and again."

While similar behavior exists in national governments and private businesses, the EU is special due to the number of veto holders who can obstruct change, but also because supporters of the European integration project are reluctant to be critical when policies go wrong, she said.

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