Beth Plutchak Consulting LLC

Grow Your Business/Grow Your Community

direct feedback, aaah if only

Ever since coming across the idea of “opportunity cost” in one of my introductory economics classes I have been obsessed with looking at the opportunity cost of whatever choice I have made (my Dad simply called this second-guessing yourself). Anyway, early in my banking career, when I was doing loan documentation, there was a lot of downtime between projects. This was at the beginning of the EU while they were still discussing the technicalities surrounding moving to the Euro. I came up with what I thought would have been a great research project if I had gone on to get a Phd in economics.

If you remember, one of Jane Jacobs’ theories surrounded the importance of currency as a feedback mechanism essential to allow cities/regions to become net exporters rather than net importers. The idea was to compare the economic vitality of the Eurozone countries that adopted the Euro and to see if not having local currencies did have a dampening effect on the national economies. The later break-up of the Soviet Union offered the opposing data-set:  nations that were using one currency, now using separate currencies.

I never did a detailed study, but for many years I have been using the apparent success of the Eurozone, compared to the former Soviet nations to assert that Jane Jacobs’ was wrong regarding currency as a feedback mechanism. My husband called me yesterday from a business trip, to tell me Jane Jacobs has been proven right. The debt status of Spain, Portugal and Greece have been downgraded and the Euro is in trouble. Probably, has more to do with the international economic situation, though – just saying.

A direct feedback mechanism that tells us precisely when economic policies or economic development programs are successful would be a fine thing. I’ve been fascinated by Jane Jacobs because of her reliance on her own observations without being tainted in the canon of classical economics. I was never exposed to her in an economics class, of course. I first became aware of her in a biology class I had to take to meet my breadth requirements. Unfortunately, something as useful and simple as direct feedback doesn’t exist. Some of the analysis coming out of the new study of Complexity Economics may give us some useful tools, however.

What do you think?

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Information

This entry was posted on 2010/04/29 by in Economic Analysis, Economic Development and tagged , , .
%d bloggers like this: