ZEW President Discusses (Im)Balance with Students

The economy is in good shape when it is in balance. But if the economy is not in balance, does that mean it’s in trouble? What effect does a balanced or unbalanced economy have on private households, firms or the country as a whole? And how do we know when the economy is in balance? These are some of the questions addressed by ZEW President Professor Achim Wambach, PhD, in a talk on what balance means for economics at the 30th Heidelberg Symposium on 24 May 2018.

In his talk, Professor Wambach discussed a number of economic theories and ideas about equilibrium from both a micro- and macroeconomic perspective, as well as through the lens of economic policy. He provided an overview of the most common economic perspectives on the subject, ranging from the Nash equilibrium in game theory, to the Solow Growth Model, the concept of steady state and DSGE models. He explained the significance of these theories and models from the perspective of economic policy, using as an example the Keynesian theory of employment equilibrium as well as Germany’s Stability and Growth Law and the economic balance this legislation aims for to underline the relevance of these models in assessing economic prosperity. Given the multiple potential definitions of the term “balance”, Wambach also highlighted the importance of being aware of how differently the term can be interpreted.