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Showing posts with the label twin balance sheet recession

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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Institutional Disruption and Economic Downturn

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The budget documents have gone into print and all eyes are on Nirmala Sitaraman as she presents the Annual Budget for 2020-21 in the Lok Sabha on Feb 1. To state her task is arduous is perhaps an understatement. By most accounts, the budget of 2019-20 was let down in operational terms given the timing of the budget. The government fresh from an unprecedented election victory would have pressed for radical reforms but chose to state the vision without any corresponding reformist measures. Despite economic announcements, more of corrective response to economic happenings, doubts prevailed over the efficacy of the economic handling. To add to the woes, there was a sharp downturn with the GDP/GVA experiencing an abating growth for six consecutive quarters. Perceptibly, India’s economic woes were presumed to be its own creation despite global headwinds. As a matter of fact, the significant headwinds across the globe do not seem to be reaction to one single large crisis but to host of mic
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