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Macroeconomics J2$ A different take on the circular flow of payments model of how the economy works on a macro level.

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Presentation on theme: "Macroeconomics J2$ A different take on the circular flow of payments model of how the economy works on a macro level."— Presentation transcript:

1 Macroeconomics J2$ A different take on the circular flow of payments model of how the economy works on a macro level

2 Frederick Soddy Nobel Prize in Chemistry in 1921 for his work on radioactivity Inspired the field of ecological economics Became dismayed with the Chemistry as a discipline about the time of WWI and turned to economics, specifically political economy Ideas were generally discredited at that time, but in fact he was an early proponent of abandoning the gold standard, market-determined foreign exchange rates, fiscal policy as a tool for stabilizing the macroeconomy, and government agencies responsible for collecting and reporting economic statistics. Also argued against fractional-reserve banking.

3 Circular Flow Chart of the Macroeconomy
A Traditional View J2$ Income Markets for Factors of Production Factor Payments Factor Pmts Borrowing & Saving Private Saving & Borrowing Financial Markets Govt Borrowing Taxes Net of Transfer Pmts Taxes Net of Subsidies Households Government Firms Borrowing & Saving Govt Purchases Imports Rest of the World Revenue Exports Investment Consumption Market for Goods & Services

4 Circular Flow Chart of the Macroeconomy
A Traditional View J2$ Income Markets for Factors of Production Factor Payments Factor Pmts Borrowing & Saving Private Saving & Borrowing Financial Markets Govt Borrowing Taxes Net of Transfer Pmts Taxes Net of Subsidies Households Government Firms Borrowing & Saving Govt Purchases Imports Rest of the World Revenue Exports Investment Consumption Market for Goods & Services

5 Circular Flow Chart of the Macroeconomy
A Traditional View J2$ Income Markets for Factors of Production Factor Payments Factor Pmts Borrowing & Saving Private Saving & Borrowing Financial Markets Govt Borrowing Taxes Net of Transfer Pmts Taxes Net of Subsidies Households Government Firms Borrowing & Saving Govt Purchases Imports Rest of the World Revenue Exports Investment Consumption Market for Goods & Services

6 Circular Flow Chart of the Macroeconomy
A Traditional View J2$ Income Markets for Factors of Production Factor Payments Factor Pmts Borrowing & Saving Private Saving & Borrowing Financial Markets Govt Borrowing Taxes Net of Transfer Pmts Taxes Net of Subsidies Households Government Firms Borrowing & Saving Govt Purchases Imports Rest of the World Revenue Exports Investment Consumption Market for Goods & Services

7 Circular Flow Chart of the Macroeconomy
A Traditional View J2$ Income Markets for Factors of Production Factor Payments Factor Pmts Borrowing & Saving Private Saving & Borrowing Financial Markets Govt Borrowing Taxes Net of Transfer Pmts Taxes Net of Subsidies Households Government Firms Borrowing & Saving Govt Purchases Imports Rest of the World Revenue Exports Investment Consumption Market for Goods & Services

8 Circular Flow Chart of the Macroeconomy
A Traditional View J2$ Income Markets for Factors of Production Factor Payments Factor Pmts Borrowing & Saving Private Saving & Borrowing Financial Markets Govt Borrowing Taxes Net of Transfer Pmts Taxes Net of Subsidies Households Government Firms Borrowing & Saving Govt Purchases Imports Rest of the World Revenue Exports Investment Consumption Market for Goods & Services

9 Circular Flow Chart of the Macroeconomy
A Traditional View J2$ Income Markets for Factors of Production Factor Payments Factor Pmts Borrowing & Saving Private Saving & Borrowing Financial Markets Govt Borrowing Taxes Net of Transfer Pmts Taxes Net of Subsidies Households Government Firms Borrowing & Saving Govt Purchases Imports Rest of the World Revenue Exports Investment Consumption Market for Goods & Services

10 Circular Flow Chart of the Macroeconomy
A Traditional View J2$ Income Markets for Factors of Production Factor Payments Factor Pmts Borrowing & Saving Private Saving & Borrowing Financial Markets Govt Borrowing Taxes Net of Transfer Pmts Taxes Net of Subsidies Households Government Firms Borrowing & Saving Govt Purchases Imports Rest of the World Revenue Exports Investment Consumption Market for Goods & Services

11 Circular Flow Chart of the Macroeconomy
A Traditional View J2$ Income Markets for Factors of Production Factor Payments Factor Pmts Borrowing & Saving Private Saving & Borrowing Financial Markets Govt Borrowing Taxes Net of Transfer Pmts Taxes Net of Subsidies Households Government Firms Borrowing & Saving Govt Purchases Imports Rest of the World Revenue Exports Investment Consumption Market for Goods & Services

12 Circular Flow Chart of the Macroeconomy
A Traditional View J2$ Income Markets for Factors of Production Factor Payments Factor Pmts Borrowing & Saving Private Saving & Borrowing Financial Markets Govt Borrowing Taxes Net of Transfer Pmts Taxes Net of Subsidies Households Government Firms Borrowing & Saving Govt Purchases Imports Rest of the World Revenue Exports Investment Consumption Market for Goods & Services

13 Circular Flow Chart of the Macroeconomy
A Traditional View J2$ Income Markets for Factors of Production Factor Payments Factor Pmts Borrowing & Saving Private Saving & Borrowing Financial Markets Govt Borrowing Taxes Net of Transfer Pmts Taxes Net of Subsidies Households Government Firms Borrowing & Saving Govt Purchases Imports Rest of the World Revenue Exports Investment Consumption Market for Goods & Services

14 Circular Flow Chart of the Macroeconomy
A Traditional View J2$ Income Markets for Factors of Production Factor Payments Factor Pmts Borrowing & Saving Private Saving & Borrowing Financial Markets Govt Borrowing Taxes Net of Transfer Pmts Taxes Net of Subsidies Households Government Firms Borrowing & Saving Govt Purchases Imports Rest of the World Revenue Exports Investment Consumption Market for Goods & Services

15 Circular Flow Chart of the Macroeconomy
A Traditional View J2$ Income Markets for Factors of Production Factor Payments Factor Pmts Borrowing & Saving Private Saving & Borrowing Financial Markets Govt Borrowing Taxes Net of Transfer Pmts Taxes Net of Subsidies Households Government Firms Borrowing & Saving Govt Purchases Imports Rest of the World Revenue Exports Investment Consumption Market for Goods & Services

16 Circular Flow Chart of the Macroeconomy
A Traditional View J2$ Income Markets for Factors of Production Factor Payments Factor Pmts Borrowing & Saving Private Saving & Borrowing Financial Markets Govt Borrowing Taxes Net of Transfer Pmts Taxes Net of Subsidies Households Government Firms Borrowing & Saving Govt Purchases Imports Rest of the World Revenue Exports Investment Consumption Market for Goods & Services

17 Circular Flow Chart of the Macroeconomy
A Traditional View J2$ Income Markets for Factors of Production Factor Payments Factor Pmts Borrowing & Saving Private Saving & Borrowing Financial Markets Govt Borrowing Taxes Net of Transfer Pmts Taxes Net of Subsidies Households Government Firms Borrowing & Saving Govt Purchases Imports Rest of the World Revenue Exports Investment Consumption Market for Goods & Services

18 J2$ Model of An Ecological Economic System Natural Capital
Costanza, R., June Bioscience, Vol. 51, No. 6 Model of An Ecological Economic System J2$ Positive Impacts on Human Capital Capacity Well Being (Individual & Community) Ecological Services / Amenities Solar Energy Complex Property Rights Regimes Consu mption (Based on Changing, Adapting Preferences) Individual | Common | Public Natural Capital Human Capital Social Capital Manufactured Capital Limited Substitutability Between Capital Forms Restoration, Conservation Wastes Evolving Cultural Norms & Policy Education, Training, Research Economic Production Process Goods & Services GNP Institutional Rules, Norms, etc. Building Inves tment Negative Impacts on All Forms of Capital Decisions about taxes, community spending, education, science and technology, etc., based on complex property rights regimes Waste Heat

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