Differences in how money is used between rich and poor people turned out in the euro crisis

BySpyros Papaspyropoulos

European Central BankYaInternational Monetary FundIs a model that can solve the optimization problem assuming that "only one consumer" existsRepresentative individualWe have used it to predict the future of the economy. However, "representative individuals" could not foresee the fiscal austerity measures adopted by European countries in 2010, it turned out that the actual human does not act as expected by the model. Economists says economic policies must be able to respond to both, not to mention one, as the poor and the wealthy people take different actions and reactions to austerity measures and stimulus measures is.

Economists Discover the Poor Behave Differently From the Rich - Businessweek
http://www.businessweek.com/articles/2013-11-07/economists-discover-the-poor-behave-differently-from-the-rich

A representative personal model used by the European Central Bank and the International Monetary Fund is that economists advocated between the 1970s and the 1980s saying that "everyone is acting intelligently and planarly with money" It was made based on opinion.

For example, Mr. Olivier Blanchard, chief economist at the International Monetary Fund, said in 1990, "When the government tightens the wallet to shrink the deficit, households say" economic problems are firmly controlled by the government " I am going to increase my expenditure. " As Blanchard says, if all humans are taking the same action as a reasonable and predicted model, there is no need for action data on consumer's economic policy.

ByJohn

Based on the idea that "human beings behave differently" from the early 1990'sMicro economyPer Krusell and Tony Smith, who began studying the model, said, "At that time, even if we talked about the microeconomic model to college seniors, we would not have been opposed to it." However, the paper on the microeconomic model summarized by Mr. Krusell later won the prize at Princeton University and Yale University.

A representative personal model was derived from Greece in 2010Euro crisisAt the time of making a forecast that "the budget deficit will gradually settles down", the European countries will accept the fiscal austerity proposal, not as expected. When the International Monetary Fund actually reviewed the financial program in Greece, the actual decrease in gross domestic product is more than three times the value predicted by the representative personal model. Ultimately, the IMF has submitted a report that acknowledges that mathematical assumptions using representative personal models are wrong.

ByJoanna

Mr. Christopher Carol, who is at Johns Hopkins University, published a paper that supports the microeconomic model by Mr. Krusell and Mr. Smith at the European Central Bank meeting in October 2013. Carroll said "The wealthy human beings are super rational, they are planning ahead for the future considering measures such as tax, but because people in the poor need more money than their income, It gets consumed immediately though it gets it"Explained the difference in how to use money between rich and poor people.

Mr. Krusell and Mr. Smith 's paper based on the theory that "money usage and behavior are different in wealthy people and poor people" did not attract attention for more than 10 years, but Krusell was asked by the following European Central Bank It is said that it may be a way to analyze the economic problems of European countries that are still affected by the euro crisis, from a new angle to the extent that there is a request for a speech at the meeting.