The steps in this paper are: (1) to recall the S = I relation and its position in macro-economics, (2) to observe how this equation is very relevant again with the renewed relunctance of banks to finance investments, (3) to point out that consumer durables are investments too, (4) to highlight...

Economic theory needs a stronger defence against unwise application of mathematics. Mathematicians are trained for abstract thought and not for empirical science. Their contribution can wreak havoc, for example in education with real life pupils and students, in finance by neglecting real world...

Arrow’s Impossibility Theorem in social choice finds different interpretations. Bordes-Tideman (1991) and Tideman (2006) suggest that collective rationality would be an illusion and that practical voting procedures do not tend to require completeness or transitivity. Colignatus (1990 and 2011)...

The theory of institutional traps, i.e. ineffective but stable institutions or behavior norms, is develope din connection with economic reforms. Mechanisms are described that cause a system to get into a trap and ways of going out of it are analyzed. Concepts of transformation costs and...

In our previous papers (Polterovich V., Popov V., 2007; Polterovich V., Popov V., Tonis A., 2006) it was shown that democratization (increase in the political rights index of the Freedom house in 1970-2000) can negatively affect economic growth, if the quality of institutions at the beginning of the...

The welfare state was created after 1950 with counterproductive mechanisms and this caused high inflation and high unemployment and stagnating growth by 1970, called stagflation. Since 1970 governments redressed the welfare state but did not succeed in finding workable mechanisms. They rather...

This paper analyzes economic policies in resource rich countries and various mechanisms of resource curse leading to a potentially inefficient use of resources. Arguments are provided in favor of "conditional resource curse" hypothesis: resource abundance hampers growth if institutions of a...

One of the main obstacles for successful economic development is the formation of institutional traps, inefficient yet stable norms of behaviour. Domination of barter exchange, arrears, corruption and black market activities are examples of institutional traps that have hampered reforms in...

Democratic nations are advised to have parliaments select the chief executive by the Borda Fixed Point method. The current practice of having direct popular elections using systems that have originated in history is inoptimal and actually quite undemocratic since winners are selected who don’t...

Two myths have harmed many economies throughout the world. One is the theory of absolute advantage of central planning over the market mechanism, and the other is the belief that efficient markets develop spontaneously and quickly enough if appropriate economic legislation is established....