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Showing posts with the label tax rates

Decision Making as Output and Bounded Rationality

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  The classical economics theories proceed on the assumption of rational agents. Rationality implies the economic agents undertake actions or exercise choices based on the cost-benefit analysis they undertake. The assumption further posits that there exists no information asymmetry and thus the agent is aware of all the costs and benefits associated with the choice he or she has exercised. The behavioral school contested the decision stating the decisions in practice are often irrational. Implied there is a continuous departure from rationality. Rationality in the views of the behavioral school is more an exception to the norm rather a rule. The past posts have discussed the limitations of this view by the behavioral school. Economics has often posited rationality in the context in which the choices are exercised rather than theoretical abstract view of rational action. Rational action in theory seems to be grounded in zero restraint situation yet in practice, there are numerous restra
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Fiscal Policy-A Note

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  The government without doubt plays a critical role in the economy. Given its volume and domineering presence, one cannot ignore the centrality of the government in giving direction to the macroeconomic plane. The role of course has been controversial and subject to many debates. There exists little consensus on the ideal nature of governmental role. While the classicalists believed the role of government in the economy to be minimal with focus on ensuring law and order, the Keynesians emphasised the centrality of the government intervention. While the classicalists favoured the supply creating its demand, it found its limitations in the Great Depression of 1929; John Keynes formulation was there was lack of demand and the government must step in to create the demand that became the foundation for macroeconomics and thus greater fiscal intervention. While the monetary school emphasised the role of money thus favouring a greater role of the Central Bank in framing the economic trajecto
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Macroeconomics and Firm Decision Making

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  As observed in many past posts, economics has close linkages with real life. As practising managers or entrepreneurs economics helps in undertaking structured analysis and decision making. There are pointers towards increasing returns of decision making using structured tools like economics. Therefore, economics to a business practitioner would be indispensable. It is not that economics offers something new or novel. Many economic theories have been practiced consciously or sub-consciously over centuries by businessmen and others. What economists have done from Adam Smith onwards is to theorize the empirical observations. The empirical observations when aggregated would point to certain patterns which emerge as theory. For long, there were no distinction between macro or micro economics, something came into existence through the thoughts of John Maynard Keynes and his successors. Macroeconomics evolved in a different fashion in contrast to microeconomics. The former sounded glamorous
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