Skip to Main Content
Dynamic Economic Decision Making: Strategies for Financial Risk, Capital Markets, and Monetary Policy
book

Dynamic Economic Decision Making: Strategies for Financial Risk, Capital Markets, and Monetary Policy

by JOHN E. SILVIA
August 2011
Intermediate to advanced content levelIntermediate to advanced
381 pages
12h 3m
English
Wiley
Content preview from Dynamic Economic Decision Making: Strategies for Financial Risk, Capital Markets, and Monetary Policy

Chapter 3

Cyclical and Structural Change

You can't argue with a hundred years of success.

–William I. Walsh1

Actually, you can argue with success when the environment changes around you. The economic world is changing and success is fleeting. In the early 1950s, A&P, which was then the leading grocery chain in America, ranked only behind General Motors in annual sales. America's tastes changed. They wanted choices, not the limited availability associated with the Great Depression and World War II periods of thrift. A&P stores did not provide the level of variety, nor cleanliness, expected by the new, growing middle class suburban households that began to emerge after the war. America's tastes had changed and the offerings of A&P did not.2

FORCES OF ECONOMIC SUCCESS

Three forces interact to drive economic success: economic activity, historical bias, and the parameters of future success.

1. Economic activity provides the overall flow of information and sets the character of surprises and our decision framework. Yet, in practice, decision makers conduct stress tests, risk assessments, and simulations that do not deal with the cyclical nature of economic behavior. Most business and public policy decision makers are not trained to deal with or think in terms of the business cycle. Forecasting for most consists of straight-line projections from a spreadsheet. Also, dealing with the business cycle demands a set of assumptions and the interaction of those assumptions can require scenario ...

Become an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
and much more.
Start your free trial

You might also like

The Economics of Commodity Markets

The Economics of Commodity Markets

Julien Chevallier, Florian Ielpo

Publisher Resources

ISBN: 9780470920510Purchase book