How do economies work?

What makes a country more economically advanced than others?

The way an economy is managed (or mismanaged) will have a tremendous impact on people’s lives in terms of the work opportunities they are provided with, their levels of income, their ability to save and consume, the availability of products to buy, as well as their ability to look after their families and to retire.

I did not enjoy my economics studies. I have always felt that what I was being taught had very little linkage to reality. Economies are primarily impacted by the behavior of human beings, who do not always act in a rational way. Too often psychological behavior is absent from economic theory. The extensive use of mathematics, in an effort to provide scientific rigor, often misrepresents reality as a result of model assumptions which do not take into account the irrational behavior of people.

In my professional life, I have felt equally frustrated by an inability to make much sense of market participants’ views. When defining their views, people will generally first consider the economic paradigm or theory that they most closely associated with, and then express their opinions in accordance with that paradigm or theory, often using overly complex vocabulary. Every country, region or city has its own economic specificities, which tend to evolve over time. Reality will tend to be significantly misrepresented when using one economic theory to explain economic realities across locations and across different periods of time.

Over the past few years I have tried to ‘un-learn’ what I have been taught about economics, spend less time reading about various theories and more time observing people and societies as a whole. The level of interconnections between various stakeholders and the sometimes irrational behavior of market participants makes understanding how economies work a rather complex task. In this blog I’ll be sharing my thoughts on various economic topics, drawing on current events, trying to keep things as simple as possible. Hopefully I’ll improve my own understanding of those matters in the process. I’ll start out by exploring a number of common themes in economics and then apply that knowledge to specific countries. We’ll see where this leads to.

thomasgrandjean81@gmail.com