Real economy
In economics, the term real economy ( real sector ) is understood to mean a part of the overall economy that includes the production , distribution and consumption of goods and services . In the economic models, this sub-area is referred to as the goods market versus the money market ( monetary sector or financial sector ).
General
This division of the economy as a whole into real and monetary sectors (“ classic dichotomy ”) comes from neoclassical economic theory . In contrast, both Keynesian and Marxist economic theory reject this dichotomy .
Interaction between the real and financial economy
Economics aggregates all economic subjects whose main task is related to goods economic activities. This includes all non-banks and non-financial companies, their investments in real capital , the goods and labor markets , trade and consumption. Typical economic sectors are agriculture , industry and service companies with non-financial activities. The time horizon plays an important role in the interaction between the real and financial economy .
Since the financial sector has a higher reaction speed and higher volatility of rates or returns than the prices / wages in the goods and labor markets, the financial markets can process new information faster than the real economy. Joseph Schumpeter makes this clear in his metaphor about a dog (which symbolizes the financial economy) who follows his sedate master (real economy) on a common promenade - even if the dog runs ahead and then lags behind: At the end of the promenade, both are again together. "The (state) finances are one of the best points of attack for the investigation of the social gears ... as well as in the symptomatic meaning - insofar as everything that happens is expressed in the financial economy".
Effects of financial crises on the real economy
The real economy is a complement to the financial sector because the latter provides value-added infrastructure. However, around 95% of added value comes from the real economy. The complementary interdependence between the financial and real economy is often used to explain financial crises . The financial crisis from 2007 onwards was mainly caused by a lack of or faulty risk management within the financial sector. This crisis spilled over the real economy. In economics, attention is drawn to the imbalances between the real and financial economies. While the global real economy was quantitatively 2: 1 superior to the financial sector around 1980, today it is clearly inferior at 1: 3.5. This considerable disproportionality expresses risk potential and shows that money capital is in abundance. While between 1872 and 1950 the risk premiums in the real economy and the financial economy were roughly the same (4.17% and 4.40%), they drifted significantly apart between 1951 and 2000 (2.55% and 7.43%). This indicates increasing market risks in the financial sector. The market risk is in this imbalance especially in an overshooting (overshooting) resulting speculative increased speculative bubbles that last until in the slower real economy, the new equilibrium is established.
Individual evidence
- ↑ Klaus Spremann / Pascal Gantenbein: Financial Markets: Fundamentals, Instruments, Connections , 2013, p. 74.
- ↑ Joseph Schumpeter: The Crisis of the Tax State , in: Rudolf Hickel : The Financial Crisis of the Tax State: Contributions to the Political Economy of State Finances , 1976, p. 329 ff.
- ↑ Horst Gischer / Bernhard Herz / Lukas Menkhoff : Money, Credit and Banks: An Introduction , 2012, p. 3.
- ↑ Armin Günther: Complementor Relationship Management , 2014, p. 146 f.
- ^ Sheets for German and international politics , issues 1–4, Pahl-Rugenstein-Verlag, 2009, p. 9.
- ^ Eugene Fama / Kenneth French : Business Conditions and Expected Returns on Stocks and Bonds , in: Journal of Financial Economics vol. 25, 1989, p. 23 ff.