Dr. John Psarouthakis
This is the introduction of a paper of mine published in a related journal that I will post in the Business Thinker when that can be done. The title of this article is “An Economic Model of Government Expenditures and Economic Development” The journal is Economics and Finance Notes.
The economy is a complex system in which firms, households and government interact to determine the process of wealth creation and,ultimately, the economic well-being of the nation. Economic theory has traditionally focused on the analysis of each subsystem (firms, households and government), however it has created a high controversy in the study of the complete system behavior, as well as the relevant role of the government in the macroeconomic context. Despite this controversy, firms and governments share certain objectives. Both are social organizations created to add value for stakeholders and voters through, at least, reducing transaction costs in the economy.
Poor performance of governments tend to generate negative externalities for the economy (or higher transaction costs) that are reflected in macroeconomic variables such as output, involuntary unemployment, slowdown of profitability and capital creation and/or utilization, and increase in inflation. In other words, the economic performance of the overall system depends significantly on the government involvement needed to reduce transaction costs given the characteristics of the economy.
Continue reading An Economic Model
Dr. Periklis Gogas
Department of Economics, Democritus University of Thrace
The Greek debt crisis led to an unprecedented reduction in the country’s real GDP by 26.5%. This recession is one of the largest crises that the world economy has ever seen. For comparison, the Great Depression in the US in the later 1920’s resulted in a GDP reduction between 25% to 30%. Moreover, the Great Depression lasted for four years, while the Greek crisis reaches almost 8.
Simply stating that Greeks lost 26.5% of their income paints a gruesome picture. The true impact of the crisis is even worse. We compare current Greek real GDP to the one in 2009 just before the crisis. By doing so we are not taking into account a very significant stylized fact of every economy: growth. All economies show a strong positive trend in their GDP time series. This is the result of a steady growth in the factors of production, i.e. human and physical capital. The available human-working-hours increase due to population growth and the amount of physical capital stock also increases over time as a result of investment in fixed capital. Last but certainly not least, an additional very important factor for continuous growth is the improvement in technology. Technology significantly increases the productivity of both human and physical capital.
Continue reading What is the real cost of the Greek crisis?
Dr. John Psarouthakis, Executive Editor, www.BusinessThinker.com and former founder and CEO of JPIndustries, Inc., a Fortune 500 industrial group.
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The preface in my book “Technology Imperative: What Jobs, Jobs, Jobs Really Means in the 21st Century”
My editor and I sat over coffee discussing several possible book projects. If pressed for a working title that day, I might have tried to jam in as much content as possible to describe the concept—something like Technology, Unemployment, Globalization and What America Must Do to Regain Prosperity, Bring Its Economy Back to Life, and Survive in the New Century. That mouthful sums up the plot (if a non-fiction commentary can be described as having a plot) I had in mind.
In truth, every time I began to explain it I became distracted by the subplot That is, these “must do” priorities for confronting and conquering an impending national crisis have failed to capture the public imagination despite dire consequences if we fail. Our politicians seem not to understand what is happening. Some ignore the clear facts, while others bark and circle like sheep dogs herding the populace toward the worst possible outcome. The daily mainstream news report has done little to help. I thought I was conveying frustration as I discussed these things, but my editor saw more and offered his own brief working title. “For the moment,” he said, “I am going to call this your ‘Angry Book’.”
Continue reading What Jobs, Jobs, Jobs Really Means in the 21st Century