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Expert: Dr.VSR.Subramaniam - 4/7/2009


Question
Is there relationship between Economics and human psychology ? I think they are unconnected subjects.

Answer

Intangible Components
WELCOME

You have improved the span of knowledge pool of “allexperts” and “me”, by asking a new dimensional question, to extend  the faculty of economics to an alien field of psychology. What you feel is a motivation by your psychology. But  what inducts you to question and confirm  your feeling, is the extension of  your  Economic thoughts. Don’t be surprised if I lead you to a contradictory fact that Psychology  and Economics are linked as well as  an unified subject !!!
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A) PSYCHO- ECONOMICS.

In fact individual (with psychological impetus), cumulatively form a society. The society functions and formulates certain needs, disciplines and way of life (motivating sociology). Many societies with diverse  social motivations are enclosed by a nation with certain and regulations (welfare, law and order = Internal economics ). All the nations in the north, east, west and south (NEWS) on this earth is this World (international form attempting to be in peace or in war (International economics.

Hypothesis#1 – Psychology of the individuals are cumulating towards the Economic stability components of the world, upwards. Psychology is “micro” and Economics is a “macro”
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B) PHYSO-ECOMONIC IMPACTS.

If the psychology of individuals in a nation are disturbed, then the impact at the national and international level is unpredictable. A   productive disturbance could leads to welfare and economic development. A destructive disturbance could result in destruction, Chaos and  economic destruction. But the chances for these 2 disturbances exist in 50 : 50 probability
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1. POSITIVE PSYCHO IMPACTS

a).If the individuals in a rural area, psychologically start feeling that a large family (with many children) is not suitable for their family income, they will sacrifice their natural motivations and reduce the number of children per house hold. Cumulatively, his will bring good for the national economy (less demand for the  essential and other needs, due to controlled population).

b) If the farmers in a village, psychologically start feeling that joint farming is profitable than cultivating pieces of lands, they will pool their lands, forgetting the family and group differences. There will be more production and quality of agricultural produce at lower costs. Ultimately the national economy develops with this type of motivation.

c) If the urban people (in cities)  psychologically start feeling (both at home and office) that we should switch off  the lights and  fans, when there is nobody in the room,  then they will get an automatic urge  to follow this habit. Ultimately it will lead to the conservation of  power at the national level, seeding an essential component in economic development.    
 
d) These could be extended to an unending list of positive psychology in multi areas leading to the Socio-Economic development of every nation.

e) EXAMPLES.

** Mahathma Gandhi (1869 – 1948), won the Indian freedom, by pooling the positive psychological feeling to have “Swaraj” (From 1915 to 1947) among the Indians that “We Indians should not be ruled by a foreigner – British”.. He was attempting a similar psychological feeling against “apartheid” for (Africans + Indians), in South Africa, from 1893 to 1914, where he was a practicing lawyer !! But failed because all the local + expatriates do not want to antagonize the Britishers. (See at http://www.drvsrs.com/sedjr.htm).

** Indira Gandhi (1917 to 1984. Former PM of India.) implemented a 20 point economic program during the period 1974 to 1976, to satisfy   the basic needs of the people (food, shelter and clothing) and tools to take faster economic decisions. This provided a psychological satisfaction to the public and helped the nation to be more disciplined and economically developed during that period (See at http://www.drvsrs.com/igandhi.htm)

Hypothesis#2 – Psychological support of the people is a crucial factor to attain any economic, political and social targets.
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2. NEGATIVE PSYCHO IMPACTS.

a) If all the people in a location psychologically start feeling that the banks are unsafe to keep their money, there will be a rush to with draw mass money. All the bank’s  fiscal position will shatter. This will crate a direct impact in weakening the national economy.

b) If all the people in a location psychologically start feeling that there are indication of famine in the year, they will start hoarding all the  food grains and other needs, expected to be affected by the famine. This will offset the whole economic plans of the nation. In addition, it will offset the demand and supply position of  agricultural and affiliated fields leading to an economic chaos !!!

c)  The list of economic failure due to deserting villages, discontinuing agriculture, closure of business houses and many more economic failure can happen, if the psychological attitude of the domestic people starts degrading.

d) EXAMPLES.

** In early July 2008, IndyMac Bank, a California-based institution, failed. News images showing customers lined up outside the bank's branches to make withdrawals evoked scenes from the Great Depression, the last time in American history when bank failures played a significant role in the country's economic landscape. Unfortunately, the worry IndyMac's failure caused may have left many people unclear about what it means for a bank to fail - and whether or not they should be worried about their own financial institutions. As more and more people make large withdrawals, the bank loses even more cash and becomes less likely to survive the crisis. In extreme cases, even a false rumor that a bank is struggling could lead to a bank run and ultimately a bank failure.
(Source : http://www.totalbankruptcy.com/overview/financial-literacy/lending/understanding...)

** Psychological impact of  Foot ball loss deserted FORNEY on Saturday the December 11, 1966  at 3 p.m.. “Forney, Texas., USA, became a ghost town. The reason for it all, strangely enough, was a football game 200 miles away in Austin. That is where Forney's beloved Jackrabbits played Sonora in the Class A state semifinals Saturday night - and that is where the mass exodus of Forney citizens converged.. But alas, Forney's football faithfuls were souls of heart breaking disappointment before the day was through. Forney's fine team lost to Sonora 39-28”. This had a high negative impact on the business, productive and economic sectors of Forney. It tilted the country planning of Texas in particular and U in general..

Source : http://www.rootsweb.ancestry.com/~txfhpl/Jackrabbits/article31.htm
Dallas Times Herald, Dec. 11, 1966. by. Tommy Ayers

** Mahathma Gandhi (1869 – 1948) removed the “Jewel in the crown” of the British empire by winning the freedom to India only by  directing the psychological will power against the British rulers. He propagated the concept of “Swadeshi” to use domestically made items (cottage industry) and boycott british goods. This shattered the british  supplies by drastically reducing the Indian demand for many  essential commodities.   (See at http://www.drvsrs.com/sedjr.htm).

Hypothesis#3 – Psychological eruption of the people can shatter  any stable economic, political and social infrastructure. .
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C) PSYCHO-ECONOMICS – AN UNIFIED FORCE

Cumulative Psychology (P) of the individuals and the Economic status (E)of a nation go together.

E α K*ΣP. Where K is the constant of  proportionality. This varies from country to country, changes with time (T) and attitudes (A) of  persons for a selected location.

Or for a nation K α Σ(A,T).

The psychological status of the people in a nation is unified with the economic development status.

a) Developed nations (UK, USA) are surviving with the positive psychological support of their domestic population. But Americans have started loosing their psychological support to the Federal  government, after the activities of past president George Bush, during his tenure . (See “A Push to George (in) Bush at http://www/drvsrs.com/sedsgo.htm)

b) Developing and Under developed nation are never reaching a developed status, because the psychological force in the  domestic population is weak It is due to inadequacy in the basic needs – Food, Clothing and Shelter. Also the  promotion of “Apartheid” among the people by caste, community, se x, income etc.. and promotion of illiteracy, by the elected parliamentarians to keep them in power).
c) After the end of second world war in 1949, the Germany was divided into East Germany following the principles of communism and East Germany on American Republic socialism (In May 1949 divided by the Berlin wall). The people in both partitions were psychologically subjected to the politico-economic impact in their respective shelters. On 9th November 1969, the East germans  broke the Berlin wall and joined with their Eastern partners. (Survival for about 20 years).

Similarly the communist forces in Europe built an empire called “Union of Soviet Socialist Republic (USSR)” in 1922. It was an equal and opposing force to USA in the West. But, it started dwindling and officially dissolved on 31st December 1991 (Survival for about 69 years). The amazing feature is the exclusive state oriented communists sacrificed their principles and adopting the diametrically opposite Capitalism with US assistance and collaborations. !!

Both were due to the “state oriented rule of communism, without any care or incentive for the individuals and their psychological urges”.
See “Communism – A survival analysis” at http:/drvsrs.com/store/page1.html#12

Hypothesis#4 – Psychology and Economics are unified,   functioning and keeping the international balance as  “Psycho-Economic Force”
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D) FURTHER THOUGHTS & REFERENCES.
Economics embraces all faculty and any subject
(See at  http://www.drvsrs.com/smart.htm)
“SOMA BY DRVSRS” at  http:/drvsrs.com/store/page1.html#10
(SOMA = Social Management)
“SED BY DRVSRS” at  http:/drvsrs.com/store/page1.html#9
(SED = Socio-economic Development
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With regards.
DR.VSRS
Store – http://drvsrs.com/store/index.html
Web   - http://www.drvsrs.com  

Dr.VSR.Subramaniam

Expertise

Basically a B.Sc (Physics) from the University of Madras, India. Started the career in production engineering under German and Italian experts. MBA in Management from IIM, Ahmedabad (India). Ph.D (Management) from the University of Bomaby (the first ever awarded in this subject). Headed the computer centres of Multi nationals; "Data Processing expert" of the Commonwealth, London (To implement World Bank and UNDP Computer softwares); "Consultant Adviser" to the Caribbean Development Bank (CDB), Barbados. Associated with Nobel Laureate in Economic Science-1979, Arthur Lewis (Past President of CDB) & 4 more on his introduction. Visiting professor to many universities. A Trained ISO 9001:2000 Quality Auditor. Over 40 years of combined experience in Accounts, Computer Software, Economics, Engineering, Management, Science, Technology, Research & Development and Qulaity systems. Author of over 60 Application Research papers. Currently a free-lance consultant in ISO Quality Systems, Socio-Economic development acceleration, Innovative software designs. Can answer any question in Theoritical/Applied-economics with an in-depth and innovative dimension. I DO NOT ANSWER : 1. STATISTICAL data & analysis. 2. PRIVATE questions, as they do not appear for PUBLIC view & search 3. Examination & Project report oriented questions. Website http://www.drvsrs.com

Experience

Experience in the area Over 40 years in Industrial, Service and Economic development sectors. Socio-economic development oriented expertise (1982-86). With Commonwealth Fund for Technical Cooperation, London as a "Data Processing Expert". With Caribbean Development Bank, Barbados (UNDP,World bank set up) as a "Cnsultant Adviser". See "http://www.drvsrs.com/drvsrs.htm" and "http://www.drvsrs.com/publication.htm". National & International awards. R & D Author at http://ideas.repec.org/e/psu50.html and http://www.ssrn.com/author=360079

Organizations
Intellectual Consultants. A proprietory Research and Development unit under the theme "Innovation. Information & New Concepts"

Publications
See at http://www.drvsrs.com/publication.htm & http://dvsrs.com/store/page2.html

Education/Credentials
See full details at http://www.drvsrs.com/drvsrs.htm (1) D.Litt in Computer Science - 1983. World University, USA. (2) Ph.D - 1975. First management doctorate awarded by the University of Bombay, India, after the inception of the subject. (3) MBA – 1966. IIM, Ahmedabad. India. First batch. 4) B.Sc - 1959. Physics. University of Madras, India

Awards and Honors
Biography is listed in International Who is Who of Intellectuals (UK), Men of Achievement ( UK ), Men of Distinguished Contributions (USA). National and International awards and Citations.

Past/Present Clients
See at http://www.drvsrs.com/software.htm

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