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Health and Economic Risk: Social Distancing as a Health Risk Management Tool

Social distancing measures propagated by health experts and belatedly by governments worldwide as a means of health risk minimizer, are yet to unfold their full impact on health risk management caused by the COVID-19. Nevertheless, social distancing poses a high risk to the economic and social life of affected communities globally. Fears of a global economic slowdown have dominated discussions amongst the public, experts of different disciplines, politicians, entrepreneurs, and others. 

What is at stake while implementing social distancing?

Social distancing has slowed income generation among the majority of economic sectors. Consumption and production of certain goods have dropped to the lowest level, while online business models have prevailed to be a necessity for entrepreneurs and employees. Minimal social interaction reduced to digital communication via Skype, Zoom, Facetime, and other social media outlets. The minimum of 1.5 Meters of social distance between individuals in public space puts the society on a psychological test. This amount of economic, social, and psychological pressure seems to cause an explosion of both optimism and pessimism toward the social distancing measures. Differences in reactions are visible amongst different interest groups. Some interest groups are also pleading for ease of social distancing measures. Contrary to those special interest groups, health experts, practitioners, nurses, caretakers, and the health sector, in general, pleads for tight implementation of the social distancing measures.

Fears about the macroeconomic implications additionally add more pressure to efforts of minimizing unemployment, inflation, and global trade dependencies while maximizing investment, private, as well as public spending. Several pandemic-simulation-models oppose the ideal of seeking a quick opening of economic and social life at the cost of unprecedented health risks.

What is riskier? Health Risk or Economic Risk? 

Before making a judgment on whether the health risk or economic risk is riskier than the other, we should seek prudent wisdom. Decisions to be made will need high ethical standards and a balance between exposure to health risk and economic risk. Measures proposed to open economic and social life around the world are disregarding the current health optimization goals at the cost of uncertain short-term economic and social gains. The long-term economic and social impact should be the driving force behind any adjustments to the social distancing measures. Nevertheless, society should not neglect the importance of a democratic decision mechanism. Acceptance of social distancing may depend on the decision mechanisms put in place to safeguard the social, economic, political, technological, ethical, and ecological interests of all members of the society.

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We are in a learning process of how globalization works and could work. 

The global lockdown of borders, trade, tourism, and mobility of people, reveals the vulnerability of our conjoint societies in different aspects. Dependencies on global supply chains, consumption, and mobility have become visible. Large developed economies depending on emerging economies to facilitate their health centers with respiratory machines. Member countries of the European Union closing their borders amid the Corona-Pandemic, which is contrary to the Schengen treaty of 14 June 1985. Developed countries chartered airlines to bring back their citizens from emerging and developing countries. These issues, among many, pose global risks to world democracy, if not dealt with on due time. After the pandemic, the world will have a lot to repair, adjust and negotiate. Does a global democracy exist?

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Economic Policy Adjustments in Germany and in the USA amid Coronavirus-Pandemic and Corona-Crisis

How are Governments courageously dealing with the Coronavirus-Pandemic and the Corona-Crisis? Worldwide politicians are reacting very differently. Reactions to the pandemic have now become a war between optimism and pessimism. While some politicians realize how serious the current health crisis will be, others are busy procrastinating about an optimistic future. Early birds catch the worm and can navigate through the health crisis, taking leadership on flattening the pandemic spread of the Coronavirus. Optimists want to end the economic shutdown and go back to business as usual. Despite the facts: which responsibilities and consequences will a misinterpretation of the health crisis have on the economies? Healthy cows give more milk than sick cows.

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Which solutions to current health and future economic shocks are being proposed by politicians? 

Globally, economies have embarked on unprecedented economic policy adjustments. The Federal Republic of Germany and The United States of America (USA) have passed their economic stimulus packages. Any huge economic policy adjustments seek to alleviate or eliminate the impact of the Coronavirus-Pandemics and the subsequent potential economic risks of the Corona-Crisis in Germany and the USA, although this crisis has a global scope.

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Noting the sequence as well as the simultaneousness of events is the first important issue. The global health shock such as the Coronavirus-Pandemic should first be contained using adequate health measures. Therefore, the total shutdown of the social and economic interactions is unavoidable to contain the spread of the COVID-19 disease. After health recovery has reached the necessary threshold, the politicians should start focusing on the economic shock or what we now call the Corona-Crisis. Pessimists of the economic shutdown are full of the optimism of opening the economy to economic and social activities, but they playing with pandemic fire. No genuine tradeoff between health risk and economic risk would maximize the welfare of the society while facing current facts.

Global policy versus national policy

The Coronavirus remains a global pandemic that demands a globally coordinated response of all economies. A pandemic never abides by the politicians’ timeline of decision-making. Neither does the Health crisis wait for dispute resolution about the superiority of global health policy and national health policies of nations. Instead, the pandemic would continue to ravage the world population, if poorly managed.

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The exponential rise of the Coronavirus infections around the globe has revealed how vulnerable the health systems, even in most developed G7 countries, have become. The competition of systems has begun. Each nation evaluating the effectiveness of the political response of other nations. Does it help when the USA compares itself with China, Germany, Spain, and Italien? China’s health system is not the same as in the USA. The non-ignorable reality is that a nation cannot entirely combat global Coronavirus-Pandemic only with its national policies. Economies need to cooperate with the global community to find a common goal. Surely, globalization is an opportunity and a threat. Globalization requires a diversity of strategies to utilize the benefits and to curb the losses.

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Federalism, Devolution of Power and Competition of Economic Systems

The high competition between different levels of government could interrupt the management of both the economic and health crisis. At the lower levels of governments, local authorities, starting with the mayors in cities in lower levels of local governments and governors in federal states are overpressured to find quick solutions to a quick-spreading pandemics. Higher levels of government, heads of states and government (presidents, prime ministers, monarchs) and the like, are overwhelmed by the events caused by the Corona-Pandemic due to belated attention to facts.

Who is responsible for implementing the policies? Facing the challenge to come up with solutions to the pandemic, the world leaders in all levels of government have been engaging in a war of blame and facts. Blaming each other of responsibility and communication problems reveal the unpreparedness.

Who should and must do what? Federal governments blaming state governments and vise versa. Healthy conflict is allowed to gauge ideas. All levels of government should harmoniously work together. Judicial functions, as well as legislative functions of government, should also be protected. By doing diligent deeds and public service, the pandemic should not harm the representation of the people.

Market Economy System Versus Social Market System

No doubt, the political leadership globally is at the crossroad between the tradeoff between health and economics. Both nations, Germany and The USA, have federal government systems with elected state governments in a power-sharing system. On the one side, the German economic system applies the social market order, which combines the allocative market system with a redistributive social system. Contrary to that, the market economy system is the American way of life. To capture the difference, answer the following questions. What happened to ObamaCare in the USA? What could have happened to ObamaCare in Europe? The differences in political and economic systems may explain the difference in the enacted economic policy adjustments.

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Health Economics and the Coronavirus: How do Pandemics contribute to Innovation?

The Coronavirus has caused the Corona-Pandemic disease COVID-19 ravaging human health around the globe. But are we at the edge? Will health scientists find solutions to this pandemic? How can the Coronavirus Pandemic contribute to innovation? Will medical researchers discover the healing vaccine to combat the coronavirus? Behavioral solutions have already been put in place to curb the spread of the virus. Social distancing is now a global model of behavior that should lead to lower infection rates, while society aims at finding a technological solution soon. The world needs quick-testing kits, vaccines, containment technologies, among other medical solutions to contain the disease. The implications of the pandemic are still salvaging through the economies. How can innovation change the social game?

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Innovation Contest between Germany and The United States of America

This challenge is the global task for medical research centers, the medical technology firms, chemical industry. Other sectors of the economies will have their required measures. Two researchers at the John Hopkin University of Medicine in Baltimore, Maryland (USA) have developed a screening test that would allow the health system to test about 1,000 patients daily by early April 2020. It currently takes up to 24 hours to get the results, but the researchers aim to innovate the test to take a short as 3 hours to get the test outcomes. In Tuebingen, Germany, a firm, CureVac, “…[want to focus] on the development of mRNA-Based Coronavirus vaccine to protect people worldwide”. Media reports that the innovation contest to find medication against the Coronavirus has become a competition between Germany and the United States of America.

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Synergy between Health and Economics: Oil-Price-Crash or Corona-Crash

Health shocks can also cause economic shocks (ceteris-paribus). The coronavirus pandemic is one of the health shocks that might unravel another global economic shock. Why is that the case? Fact number one, health is a basic human need. Consequently, the satisfaction the health needs requires human decision-making in all economies. Decision-makers face the challenge of managing the synergies between health and economics amid a health shock. How is the Scenario? Simultaneously, economic shocks unveil themselves amid health shocks as the pattern of decision-making changes with time. The time-lagged impact of change in decision-making is revealed through market reactions and is observable. Markets not only react to consumer choice and entrepreneurial decisions but also react to government decisions.

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Macroeconomic objectives of Economic Policy

All macroeconomic objectives could be affected by health and economic shocks. The potential reactions of markets are; the increase in market price volatility, the demand and supply shocks, among others. Economists of different schools of thought may differ in their economic forecasts, but the assumptions of any approach should be tested and empirically evident. The objective of the scientific approach should be to explain the global economic impact of the coronavirus. In the coming days, we will have the chance to observe; how strong or weak the global impact of the health and economic shocks will be in different economies around the world.

What is Health Economics?

Health Economics is the scientific branch of economics that deals with healthcare provision (supply) and healthcare utilization (demand) and how society makes coordination choices to meet the healthcare needs of its population. Economics as behavioral science influences health economics as a subbranch through the contribution of economic thought to healthcare issues. For example, we may see the solution to the following question: what are the most important behavioral choices of society that would help find the first-best allocation of healthcare goods and services in a world of scarce resources. The Coronavirus-Pandemic is the current health issue that is stress-testing our healthcare systems on a global scale. How we will deal with the pandemic depends on the behavioral incentives and contingencies to be resolved. In summary, health economics is the branch of economics that deals with the decision-making of how to allocate resources to health provision in economies. European countries have compulsory social welfare systems that coordinate health risks, while some economies have a voluntary system of insurance or no backup system in place.

How did the world economies react to the coronavirus pandemic outbreak?

It all started with the coronavirus pandemic outbreak somedays before 31.12.2019 in the Wuhan province in China. The first cases of the COVID-19 were reported to the World Health Organization by the Chinese government officials. Days after the World Health Organization reported the decease outbreak to the public on 05.01.2020. Globally, the reactions remained moderate and optimistic towards the ability to resolve the emerging disease. As reality became more prevalent and the cases wouldn’t be contained in China but spread around the world, the world Governments reactions as decision-makers were divergent and showed less global coordination. China put a whole province under quarantine, while most countries continued with life, as usual, giving out mild health alerts to the public.

Belated reaction of Governments

Maybe, the governments wanted to buy time to set up contingency plans, consult with experts on how to manage the unavoidable risks. The belated plan of actions by governments might have accelerated the spread of the coronavirus.

Economic slowdown, hoard purchases and travel bans

Simultaneously, the staggering impact of economic activities due to production stops in China channeled a global slowdown on the delivery of goods, services and the global supply (value) chain. The imposed travel bans and quarantines could heavily hurt the mobility of the people, the global flow of migration and tourism around some hotspots. Public life (e.g. traveling, local transport, retailing, etc.) in affected regions had been slowed down due to quarantines imposed by Governments, leading to hoarding behavior, the closing of industries and production, travel bans and other limitations to public life.

Global oil crash or Corona-Crash in Financial Markets

As expected, the impact was still to become visible in public life. The economic pressure has slowly become visible through reactions in financial markets. Financial markets are volatile markets, which adjust their valuation of assets in very short periods.

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The oil-price-crash on 09.03.2020 agitated the global financial markets three months down the path. The reason for the price downfall was caused by the OPEC negotiations, which ended without a compromise. The over-production of oil, coupled with low demand for oil, led to the downfall of the oil price in the stock exchanges around the world.

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Corona-Crash 2020 and the impact on the global economy

Monday 09.03.2020, will historically be remembered as the Global Corona Crash, a global health shock, that hit almost all economies worldwide. What will be the global macroeconomic and microeconomic impact of the Corona Pandemic? The financial markets reacted to the global coronavirus pandemic with a negative trend this Monday, as the Worldwide COVID-19 (Coronavirus) cases reached a new record of above 110,000 cases globally (See figure below). From an analytical viewpoint, three analytical parameters are relevant. There is a need for a relative scale, measurement of speed, and acceleration of the spread of the coronavirus. Firstly, the relative values could be the number of confirmed COVID-19 cases per 100,000 population and location. Secondly, the speed could be measured in days as the rate of transmission over time, meaning that the new confirmed CIVID-19 cases are reported per day and location. Thirdly, the acceleration of the disease could also be measured as the change in the rate of transmission over time, meaning that the marginal change of the rate of transmission is reported of one unit change in time.

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Financial markets adjust to Corona-Crisis

The corona health crisis continued to have an impact on the global financial markets, with global indices like DAX30 falling from above 13500 points in mid-February 2020 to below 11000 Points on Monday, 09.03.2020, a loss of more than 21 %. Similar negative trends of indices were observed in other financial markets. Will the heavy losses be recovered in the future? Such dynamics of financial markets in such times of uncertainty should be part of the market expectations, choice, and decision-making processes. The only optimistic perspective is a historical view, which may not have any additional information about the future trend. In 2019 the Dax had a performance of up to 25% profitability rate. The critical issue soon is how the global slowdown on production, distribution, as well as the consumption of certain goods and services, will affect the world economy. All sectors of the world economy will get their macroeconomic and microeconomic share of the coronavirus-effect. How is preparedness and rigidity of the world economies? Will the stress-test be mastered?

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The Technique of Scientific Writing in Economics

Since I started training individual students from several economic faculties in German Universities about the technique of scientific writing, they asked me where they could find some inspiration to get an appropriate topic for their Bachelor and Master thesis. Depending on the regulations of your university, the supervising professor or lecturer may suggest a specific topic (area of research). Another alternative, the lecturer may give you handouts as an inspiration (starting point) for your research and expect that you will define your own specific research question and then consult with them to fix the final topic. Before your spend a lot of time beating about the bush on how to come up with a convincing draft, your proposal should contain the following ingredients: (research topic, abstract, table of content that shows a clear argumentation line, list of literature sources, model, methodology).

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How to design your Economic Research Topic for your Thesis

To arrive at your final convincing draft, you will need to observe the following subprocesses.

1. Define the Economic Problem in your Thesis

Designing your economic research topic begins with the definition of the economic problem you would like to review and analyze, e. g. such a topic “The impact of global trade imbalances on the European Union (EU)”. In such a topic, the economic problem is the “global trade imbalances”, while the “European Union (EU)” limits the context of the analysis.

2. Construct a Mind-Map for your Economic Problem and Context

At this point you should draw a mind-map depicting two general areas: (a) global trade imbalances and (b) European Union (EU), connected with an arrow from (a) to (b) to resemble (c) “Impact of, which is your main focus in dealing with the economic problem and the chosen context. Using a mind-map you can develop relevant keywords relating to your topic and potential theories that relate to each topic area, e. g. in (a) global trade imbalances is a macroeconomic topic on international trade, while (b) European Union (EU) is also an economic topic of economic policy (institutions), economic integration, international economics as well as international trade. This should give you a hint about the topics you should be familiar with or the literature you should consult.

3. Create spontaneous Mind-Maps and Literature-based Mind-Maps

Each time you need an idea for your thesis contract a mind-map out of your spontaneous knowledgebase. Afterwards use literature sources to construct literature-based and specific mind-maps of what a certain source delivers to you. Now you should have more than one mind-map that talk about the same topic, but from different perspectives (inspiration). Look for commonalities between your spontaneous ideas and the literature sources. Apply critical thinking: ask yourself, why there are differences and whether other sources may help to bridge the gap or not.

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The magic square and hexagon of macroeconomic policy objectives of an economy

Each national economy, in accordance with its economic order, pursues a number of quantitative and qualitative economic policy objectives in order to maximise the social welfare and economic welfare of an economy. The quantitative economic policy objectives are grouped together under the magic square, while the qualitative objectives add two more objectives to the magic square to form a magic hexagon.

” What is the magical about this from the perspective of economists? Probably it’s the resulting harmony and conflict between macroeconomic policy goals.”

Hypothesis to Review
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The Magic Square

The magic square consists of four macroeconomic economic policy objectives: steady economic growth, high employment, stable price levels and a balanced foreign trade regime.

The magic hexagon

The magic hexagon is created by adding two qualitative macroeconomic economic policy objectives to the magic square: the fair distribution of wealth, income, assets and resources and the sustainable use of the environment.

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