The following list delineates seven metrics used in Nano-economic theory, how they operate in the economy, and how they challenge other conventional economic models.
• New Business Formation (slides 12, 15, 19): When examining the regional recession in Dallas from 1986 to 1988, the Neo-classical economic model turns to job loss as a measure of economic downturn or recession. The Nano-economic model instead looks at gross change rather than net change; that is to say, instead of focusing only on job loss, Nano-economics accounts for both job loss and job creation to measure economic activity. One of the distinct dynamics associated with Nano-economics is new business formation, which measures the number of jobs created via new businesses. New …show more content…
Data shown on slides 24 to 27 suggest that when the high-technology sector was emerging in Texas in the 1970s, a larger share of the manufacturing base was composed of younger firms (i.e. start-ups). These younger high-tech businesses distinguished themselves by spending more on research and development than other older manufacturers. This suggests that new businesses must be more innovative in order to survive in the market.
• Infant Mortality Rate (slide 28): The infant mortality rate measures the number of firms within a cohort of entry firms that do not survive for longer than one year in the economy. As shown by the graph on slide 28, a high infant mortality rate is linked to a recessive period in the economy. By the same token, a low infant mortality rate can be associated with economic growth. Thus, this metric provides a new understanding of the movements of the economic cycle in conjunction with other metrics—such as changes in GDP, interest rates, and unemployment—used by conventional economic …show more content…
As explained by Kane, the constant creation and destruction of firms provides insight that static economic models lack. Schumpeter states that churn occurs because the economy naturally replaces less efficient and innovative firms with “newer, smaller, and more innovative establishments” that is essential to industrial restructuring (Sutaria and Hicks). Conventional economic models do focus on firm entry and exit, but churn allows for a wider perspective on competition and growth in the
• New Business Formation (slides 12, 15, 19): When examining the regional recession in Dallas from 1986 to 1988, the Neo-classical economic model turns to job loss as a measure of economic downturn or recession. The Nano-economic model instead looks at gross change rather than net change; that is to say, instead of focusing only on job loss, Nano-economics accounts for both job loss and job creation to measure economic activity. One of the distinct dynamics associated with Nano-economics is new business formation, which measures the number of jobs created via new businesses. New …show more content…
Data shown on slides 24 to 27 suggest that when the high-technology sector was emerging in Texas in the 1970s, a larger share of the manufacturing base was composed of younger firms (i.e. start-ups). These younger high-tech businesses distinguished themselves by spending more on research and development than other older manufacturers. This suggests that new businesses must be more innovative in order to survive in the market.
• Infant Mortality Rate (slide 28): The infant mortality rate measures the number of firms within a cohort of entry firms that do not survive for longer than one year in the economy. As shown by the graph on slide 28, a high infant mortality rate is linked to a recessive period in the economy. By the same token, a low infant mortality rate can be associated with economic growth. Thus, this metric provides a new understanding of the movements of the economic cycle in conjunction with other metrics—such as changes in GDP, interest rates, and unemployment—used by conventional economic …show more content…
As explained by Kane, the constant creation and destruction of firms provides insight that static economic models lack. Schumpeter states that churn occurs because the economy naturally replaces less efficient and innovative firms with “newer, smaller, and more innovative establishments” that is essential to industrial restructuring (Sutaria and Hicks). Conventional economic models do focus on firm entry and exit, but churn allows for a wider perspective on competition and growth in the