A disequilibrium mechanism: when managerial decisions cause macroeconomic instability

• Authors: Mariusz Maziarz
• Languages of publication: EN

Abstracts

EN

The paper aims to develop our understanding of the processes and mechanisms leading to economic instability. The research design and methods: the paper employs a simple game-theoretic model aimed at depicting why the mechanism connecting nonmaterial motivation of managers and the propensity of economic systems is unstable. The findings are as follows: managers, driven by the nonmaterial value of work, choose strategies that maximize the likelihood of prolonging their employment. Shortsighted CEOs may prefer strategies that offer smooth returns and an unlikely “catastrophic event.” If the unification of strategies occurs, the situation leads to a crisis and recession in the long run. The model put forth in this paper is shown to resemble the mechanism of the 2007-2008 financial crisis.

Keywords

EN

disequilibrium mechanism, causes of recession, macroeconomic instability, mechanistic evidence, corporate governance, CEOs incentives

• Publisher: Uniwersytet Ekonomiczny w Poznaniu. Wydawnictwo Uniwersytetu Ekonomicznego w Poznaniu
• Journal: Economics and Business Review
• Year: 2019
• Volume: 5 (19)
• Issue: 1
• Pages: 79-92

Dates

published

2019-03-22

Contributors

author

Mariusz Maziarz

• Polish Institute of Economics, Aleje Jerozolimskie 87, 02-001 Warszawa, Poland, [e-mail]

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Identifiers

DOI

10.18559/ebr.2019.1.5