I selected the French economist Jacques Attali because he is a man of many facets. Founder and former President of the European Bank of Reconstruction and Development, author of more than 40 books, advisor to President Francois Mitterrand from 1981 to 1991, once minister of finances, J. Attali now specializes on micro-finance and new technology. He recently presided the CLCF - the Commission for the Liberation of Growth created by Nicolas Sarkozy to study specific issues and offer suggestions and recommendations about the economic crisis. I chose the following articles because they illustrate basic economic concepts. The first one, Get Down to Business, deals with the economic crisis and the different economic stimulus plans launched by the governments. The second one, The Vain G-20 was published the day before the G-20 Pittsburgh summit.
J. Attali explains in the first article that governments should strongly stimulate consumption and investment to respond to the crisis. I will try to explain J. Attali’s position by illustrating those two economic concepts (consumption and investment).
As Keynes’ consumption equation states (C = a Y + b, with Y = revenue), households’ consumption depends on their current revenue. By decreasing the revenue, the rising of the unemployment rate leads to a decrease in consumption. However, other reasons can explain this decrease. Indeed, households’ choice between consuming and saving depends on the amount of their current revenue but also on their future revenue (M. Friedman, A. Modigliani). Thus the pessimistic economic forecasts and the decrease of households’ confidence lead households to increase their savings by reducing their consumption. The decrease of the households’ consumption can also be explained by their impoverishment: Modigliani’s consumption equation (C = a (W/P) + b Y with W = wealth and P = prices) takes into account the wealth of households. The collapse of the stock exchange and the real estate market lead to a