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Volume 5 (19) Number 1 pp. 79-92

Mariusz Maziarz

Institute for Market, Consumption, and Business Cycles Research–National Research Institute, Warszawa, Poland.

A disequilibrium mechanism: When managerial decisions cause macroeconomic instability

Abstract:

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.

pub/2019_1_79.pdf Full text available in Adobe Acrobat format:
http://www.ebr.edu.pl/volume19/issue1/2019_1_79.pdf
Keywords: disequilibrium mechanism, causes of recession, macroeconomic instability, mechanistic evidence, corporate governance, CEOs incentives

DOI: 10.18559/ebr.2019.1.5

For citation:

MLA Maziarz, Mariusz. "A disequilibrium mechanism: When managerial decisions cause macroeconomic instability." Economics and Business Review EBR 19.1 (2019): 79-92. DOI: 10.18559/ebr.2019.1.5
APA Maziarz, M. (2019). A disequilibrium mechanism: When managerial decisions cause macroeconomic instability. Economics and Business Review EBR 19(1), 79-92 DOI: 10.18559/ebr.2019.1.5
ISO 690 MAZIARZ, Mariusz. A disequilibrium mechanism: When managerial decisions cause macroeconomic instability. Economics and Business Review EBR, 2019, 19.1: 79-92. DOI: 10.18559/ebr.2019.1.5