It is an empirical fact that in market economies the economic activity shows cyclical patterns. The 19th century French economist Clement Juglar is generally attributed with having formulated the first coherent theory of what are known as business cycles. According to Juglar, the cyclical fluctuations are caused through lags in the adjustment of production.
In a market economy, there is no central planner with a birds-eye view on the whole economic system. Rather, what is produced in the economy is decided in an entirely decentralized manner through the ...
ISET Economist Blog
A blog about economics in the South Caucasus.
May
27
Apr
29
Would you like to buy in a supermarket where the supermarket owner decides what you will get for your money after you made the payment? Such a supermarket would arguably not attract many customers. Yet although this is an odd allegory, a good deal of our consumption we all make in exactly this way – and we are even forced to buy! We pay taxes to the government, and afterwards politicians decide what we get for this money.
Sellers serving private customers have to deliver value for money. You won’t buy a second time in a grocery store if the food was spoi...
Jan
17
Wages and productivity levels differ across countries. For instance, in 2011 the average yearly income in the US was about $53 000, whilst the same indicator was $250 in Madagascar. Clearly then, Madagascar has a competitive advantage in labor cost over the US. But the issue is not so simple because workers in the US operate in a completely different environment (with better capital facilities, more educated colleagues, higher level of technologies, etc.) that determine a much higher productivity level. Higher wages can positively affect productivi...
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