The golden rule of the enterprise economy is the formula. What is the golden rule of the economy?

The golden rule is the moral maxim, which is related to the need for reciprocity in bilateral relations. Its essence is very simple: you need to treat people as you want them to behave towards you. The golden rule of economics is the fundamental principles underlying consumption. Current expenses should be covered by taxes, and loans should only be investments in a better future. We will apply this principle also in everyday life. You need to think several times before the next time to take a new smartphone on credit. In order not to make such mistakes, let's understand what is called the golden rule of the economy.

The initial philosophical significance

Before we proceed to what is called the golden rule of the economy, let us consider the concept in its broadest sense. The golden rule, or the ethics of reciprocity, is a moral maxim or principle that manifests itself in the form of a positive or negative aspect:

• Everyone should behave the way he wants them to treat him. This principle can be expressed in a positive or directive form.
• Everyone should not behave the way he does not want others to treat him. It is expressed in a negative or prohibitive form.

It is easy to note that the implementation of a positive version of the prescription is much more difficult in everyday life. The golden rule in this way encourages people not only not to ignore the needs of others, but also to share their benefits with them, as well as to support them.

In religion

The concept, which is called the golden rule of the economy, lies at the heart of Christianity, Islam, Hinduism and Buddhism. The concept appeared in ancient Egypt. It was called "Maat" and was first mentioned in the story of eloquent peasants (2040-1650 BC). In it, we first encounter a positive prescription, which later becomes part of the golden rule. In the late period of Ancient Egypt (664-323 BC) on the papyrus, the second negative part of the moral principle we are considering today was recorded.

Modern explanation

The term "golden rule" became widely used in the early 17th century in Britain, for example, it occurs in the work of Charles Gibbon. To date, it is found in virtually every religion and ethical tradition. The golden rule can be explained in terms of philosophy, psychology, sociology and economics. Basically, it all comes down to the ability to empathize and the awareness of the people around them. Richard Swift said that if the golden rule of the economy is not met, then this indicates a decline in the state (society). And now we will consider specifically what the concept is.

The Golden Rule of the Enterprise Economy

The state is a big organization. In fact, the central government and local self-government are its management. What is considered the golden rule of the economy is manifested in every operation in the business world. This is the basis for the so-called honest conduct of business. Any enterprise must use its own funds to pay off its current expenses. Of course, you can always take. But this will only bring a short-term effect. Therefore, loans are allowed only as investments in infrastructure, research and other projects. Only such loans will benefit future generations. The golden rule of the economy, the formula of which has just been considered, is the basis of plans for balancing the budget in the US. Some experts even say that it should be used during recessions. The government should cut back on the range of social services that it provides. But is not this period of the business cycle most necessary for ordinary citizens?

Features of effective fiscal policy

The golden rule of an enterprise's economy should serve as a guideline for the development of not only the strategy of an individual organization. This principle is important in the fiscal policy of any state. He says that loans should be used by the government solely for investment, and not for financing current consumption. Therefore, the golden rule is the basis of a balanced budget. The stability of the state depends on the ratio of the size of the public sector to the national income. The explanation of the golden rule of fiscal policy is contained in the macroeconomic theory. The increase in government borrowing leads to an increase in the real interest rate, which reduces the amount of investment in the economy.

The ideal savings rate

The basis of the economy is gradual development. The golden rule says that the right level of savings is the one that maximizes a constant level of consumption or ensures the growth of the latter. For example, it is used in the Solow model. The concept can also be found in the works of John von Neumann and Alla Maurice. However, for the first time the term "the golden rule of the savings level" was used by Edmund Phelps in 1961.

Applying the rule in different countries

In 1997, the then Chancellor of the Exchequer of the United Kingdom, Gordon Brown, proclaimed the basis for a new budget. So the "golden rule" with the light hand of the Labor Party for a long time came into use by British politicians. In 2009, the golden rule in Britain was replaced by the principle of sustainable investment. State borrowings in each individual year should not exceed 40% of the gross domestic product earned in it.

In Germany, in 2009, on the contrary, they introduced an amendment to the constitution that balances the budget. It is designed to "slow down" the growth of debt. The reform should begin as early as 2016. In France, for lowering the budget in 2011, the lower house of parliament voted. However, it has not yet entered into force, since the procedure for amending the constitution has not been completed. The Spanish Senate voted to determine the limitations of the structural deficit. This amendment to the Constitution will come into force in 2020. In Italy, the commitment to a balanced budget has been in force since 2014.

Thus, we can say with confidence that the golden rule of the economy is not just a theoretical concept, but also a quite successful practical principle, which is now being introduced in many developed countries.