Lukyanov, Georgy (2026) Defensive Pessimism: Growth, Culture, and the Survival of Evidence. TSE Working Paper, n. 26-1784, Toulouse

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Abstract

A common monetary standard can expand credit while weakening the alternative practices needed to recover from its failure and identify its cause. I study a growing credit economy in which safeguarded real settlements supply recovery capacity, matched observations for a reform decision, and apprenticeships in an alternative practice. The efficient reserve grows in absolute size but becomes a vanishing share of the economy. Protection based on a fixed population share therefore eventually fails, even along a path with expanding capacity and evidence. Voluntary cooperation provides only bounded readiness, while cheaper drills can preserve recovery without producing evidence. Apprenticeship and expected political survival reinforce one another, allowing exposed and protected continuations. I characterize protection indexed to the required service and the least-cost funding of replacement if the original institution is cancelled. The resulting arrangement combines verified procurement, training support when needed, and safe real collateral held by an outside custodian.