Micro, Macro, Meso, and Meta Economics

A third role for the IMF is macro prudential supervisor.

Macro refers to the larger, to the bigger picture.

View macro molecules and prepare publication quality images of them

Doing so provides a natural linkage between micro and macro, because the micro level rules and institutions typically imply macro level consequences.

And we don't even need to confine ourselves to this macro vision.

The WEF s focus is squarely on the macro level.

And the macro is that it might be good for the economy, or the nation as a whole.

The differences that remain concern how we understand the relationships between the various reforms and the macro environment.

But recent bad macro news has been bad for markets, owing to the perception of policy inertia.

Third, domestic macroprudential and microprudential policies increase resilience.

Economically, therefore, the federal budget cushions regional shocks automatically through discretionary action and stabilizing transfers to the states.

He also promises an immediate 5 cut in non defense discretionary spending in 2013, on top of the huge cuts already scheduled to take effect.

The budget cuts discretionary spending (other than defense and homeland security) by nearly 1 , and slashes as many as 150 domestic programs.

Evict the state from direct economic activity, curb its discretionary powers, and both economic efficiency and governance will improve.

Central bankers, however, seem to want to try macro prudential tools first (and sometimes exclusively).

I have argued for growth linked bonds since my 1993 book Macro Markets .

These steps would require the IMF mission teams to become more diverse, bringing financial sector expertise in addition to the traditional macro and fiscal skills.

Bad macro news can be good for markets, because a prompt policy response alone can boost asset prices.

In this model, the economy needs a state that eagerly lends an ear to business, and, when necessary, greases the wheels of commerce by providing incentives, subsidies, and other discretionary benefits.

The simplicity and elegance of micro and macro models make them useful in explaining the price mechanism and the balance or imbalance of key aggregate economic variables.

Financial markets and institutions with global reach need a global macro prudential regulator, not just a loosely organized college of supervisors.

A new global Financial Stability Board is trying to make sense of all this, and also to work out a new macro prudential mechanism reflecting system wide risks.

Meanwhile, in developed capital markets, we are busily reinventing these macroprudential instruments, to use the term now in vogue in Basel. We can now see the utility of a more flexible toolkit to respond to excessive credit expansion, or asset price bubbles, where the manipulation of short term interest rates can be a blunt instrument or, worse, a double edged sword.

Meanwhile, in developed capital markets, we are busily reinventing these macroprudential instruments, to use the term now in vogue in Basel.

Every outstanding American international macroeconomist who went to MIT, among them Jeffrey Frankel, Paul Krugman, Maurice Obstfeld and Ken Rogoff, was Rudi's student.

Since 1953, China has framed its macro objectives in the context of five year plans, with clearly defined targets and policy initiatives designed to hit those targets.

But now reflation may be creating asset price bubbles, and the hope that macro prudential policies will prevent them from bursting is so far just that a leap of faith.

At both the micro and the macro level, development projects and economic growth can do much to alleviate some of the structural causes of political violence.

In addition to the macro and micro aspects of economics, understanding supply chains in private and public goods and services in China requires mezo (institutional) and meta (system wide) analysis.

In countries (for example, Sweden) where recourse loans allow seizure of household income to enforce payment of mortgage obligations, private consumption may plummet as debt payments (and eventually rising interest rates) crowd out discretionary spending.

Befitting the continent s strong macro trends, the survey found a high degree of optimism among urban African consumers 84 of respondents expect their households to be better off in two years.

By contrast, the economists Kurt Dopfer, John Foster, and Jason Potts have developed a Macro Meso Micro theory of evolutionary economics in which an economic system is a population of rules, a structure of rules, and a process of rules.

The reason is microeconomic, not macroeconomic you can sell only so much steel or auto parts at home, and labor productivity in service industries does not match that of export oriented activities.

Part of the reason for this may be that economic reform must now move from the macro level to the micro level, from trade and monetary policy to the web of legal and financial impediments entangling small business.