888 Posts Found

Evidence is revealing the power, limits, and confounding effects of monetary policy.

Editor’s Note: this article is from 2017 and mostly looks at Fed influences during and after the economic crisis of 2008, but the analysis is still interesting, and perhaps even timely considering the Trump administration’s attempts to influence or even control the Fed this year (2025).

Content: Article | Author: Dee Gill | Source: University of Chicago | Subject: Economics

High-skilled workers reap outsized income gains.

Content: Article | Authors: Howard R. Gold, Kevin M. Murphy, Robert H. Topel, Thomas Piketty | Source: Capital Ideas | Subject: Economics

We see this correlation between well-being and higher earnings. What’s important is that whatever’s contributing to that ability to earn higher earnings, that ability for the country to be richer, is, in some way, contributing to higher well-being to the population.

And so people who say what they care about is higher well-being do have to be concerned with economic growth. Now, that said, it’s also … [ Read more ]

Content: Quotation | Author: Betsey Stevenson | Source: McKinsey Quarterly | Subject: Economics

This idea that all that mattered was your income relative to others was an idea known as the Easterlin paradox. So we did the simplest possible thing an economist could do, which is we gathered as much data as we could from all around the world. And we confirmed it’s absolutely true that within a country at a point in time, richer people are happier … [ Read more ]

Content: Quotation | Author: Justin Wolfers | Source: McKinsey Quarterly | Subject: Economics

There are a large number of people who say the measure of a country is not its GDP—it’s the smiles, it’s the hugs, it’s the joy. It’s more than just that. It’s the meaning. And that’s true. But that doesn’t make economics irrelevant. It just says we should measure those things.

Content: Quotation | Author: Justin Wolfers | Source: McKinsey Quarterly | Subject: Economics

It’s common sense that people routinely make irrational decisions—“misbehave”—yet economics models stubbornly assume that everyone is perfectly rational. Behavioral-economics pioneer and Nobel prize winner Richard Thaler explains the divide between Econs and Humans, and the role of “choice architecture” in enabling long-term goals.

Content: Thought Leader | Authors: Jim Guszcza, Richard H. Thaler | Source: Deloitte Review | Subject: Economics

Sometimes borrowing makes sense, to borrow to invest into something productive. But if you borrow just to consume, then eventually you get in trouble and your debt ratios become too high relative to your need to pay back your debts over time. It could be a problem for households, for the business sector, financial institutions, for governments, for a country as a whole.

Content: Quotation | Author: Nouriel Roubini | Source: McKinsey Quarterly | Subjects: Economics, Finance

If we’re going to live on average to age one hundred, we are certainly not going to be retiring at 65 or anything close to 65, because we’re not going to be able to earn enough money prior to 65 to finance retirement to one hundred.

We’re going to have to rethink retirement, we’re going to have to rethink careers, and we’re going to have to … [ Read more ]

Content: Quotation | Author: Myra Strober | Source: McKinsey Quarterly | Subject: Economics

[Central banks] have installed enormous and more or less permanent backstops for financial systems and transformed lending of last resort into comprehensive “first response” functions against financial crises.

Content: Quotation | Author: Leon Wansleben | Source: strategy+business | Subject: Economics

Many perceive the markets as short-term oriented, forcing management to worry only about quarterly earnings. Our research shows that successful companies are typically those with longer-term horizons. There are plenty of investors who have long-term horizons as well, but they generally need to talk to a company only once or twice a year to make their decisions. Short-term investors are noisier. They probably drive the … [ Read more ]

Content: Quotation | Author: Tim Koller | Source: McKinsey Quarterly | Subjects: Economics, Finance

We … tend to regulate to prevent a repeat of the previous crisis rather than look in an unbiased manner at points of future vulnerability.

Content: Quotation | Author: Mike Jakeman | Source: strategy+business | Subjects: Economics, Risk Management

For the economy to grow, we need banks to accept the risk of lending, but we also need them to take the right amount of risk. Too little, and no one can borrow. Too much, and the system blows up. The rub: figuring out what that right amount is. Doing so has proven extremely difficult, even as the increasingly necessary role that banks perform has … [ Read more ]

Content: Quotation | Author: Mike Jakeman | Source: strategy+business | Subject: Economics

The Corporate Gini Index is a barometer of a competitive landscape. In other words, it measures the strength of the all-or-nothing force in an industry. The higher an industry’s index score, the more dominant a few players are within it.

In those industries in which digitization has had the greatest effect, the Gini Index tends to be high. The correlation is related to the widely observed … [ Read more ]

Content: Quotation | Authors: John Sviokla, Kelly Barnes, Miles Everson | Source: strategy+business | Subject: Economics

Dysfunctions … occur when we don’t debate value — when [value is] just presented as “this is how the economy works.” So it becomes very easy for some actors in the economy to present themselves as value creators, and in the process extract value, because the difference — what’s value creation, what’s value extraction — is no longer part of the way we think about … [ Read more ]

Content: Quotation | Author: Mariana Mazzucato | Source: strategy+business | Subject: Economics

The twin problems I see in modern-day capitalism are the fact that the financial sector is financing itself and industry itself has become financialized, obsessed with short-term quarterly returns. To change that system, you need to debunk the pillars on which those behaviors are based. The problem with the maximization of shareholder value approach is that it has dismissed the role of other actors in … [ Read more ]

Content: Quotation | Author: Mariana Mazzucato | Source: strategy+business | Subjects: Capitalism, Economics

Value in capitalism has fundamentally been created collectively through different types of actors coming together to solve problems. Workers have contributed. The state has contributed. Of course managers and people on the ground have contributed, but we need a body of thought within economics that really captures that collective value creation.

Maximization of shareholder value is a very narrow approach to understanding value. Indeed, it is … [ Read more ]

Content: Quotation | Author: Mariana Mazzucato | Source: strategy+business | Subjects: Capitalism, Economics

As soon as you take innovation seriously, you start having to throw up in the air so many of the things we learn in mainstream economics: unique equilibria, representative agents, perfect competition. Indeed, the mathematics that we’re taught in mainstream economics departments mainly comes from Newtonian physics. It allows nice, smooth curves to be drawn where there is a maximum point (important if firms are … [ Read more ]

Content: Quotation | Author: Mariana Mazzucato | Source: strategy+business | Subjects: Economics, Innovation

Technocratic management, no matter how brilliant, cannot unwind structural inequalities.

Content: Article | Author: Daniel Markovits | Source: The Atlantic Monthly | Subject: Economics | Industry: Consulting | Company: McKinsey & Company

If you can rely on people to do what they say they’re going to do—without costly coercive mechanisms to make them dependable—a lot of things become possible.

Content: Quotation | Authors: Francis Fukuyama, Jerry Useem | Source: The Atlantic Monthly | Subjects: Economics, Organizational Behavior

Trust is to capitalism what alcohol is to wedding receptions: a social lubricant. In low-trust societies (Russia, southern Italy), economic growth is constrained.

Content: Quotation | Author: Jerry Useem | Source: The Atlantic Monthly | Subjects: Capitalism, Economics