Mesoeconomics – what is it and why is it important?

We know about microeconomics and macroeconomics but there has been little attention given towards mesoeconomics. Meso means ‘middle’ and fits between micro and macro and refers to the supply chains in the industrial policy of a country. It has been assumed that supply chains don’t require intervention as markets can be trusted to deliver the most efficient solution. However geopolitical, environmental, social and political shocks have meant governments can’t ignore the need to understand the economy as a complex set of production networks that evolve dynamically in response to specific demands and supply-side shocks. Mesoeconomics hopes to identifying and evaluate potential points of failure and channels of promotion, calling attention to where investment in resilience are most needed. South Korea and China used tools of mesoeconomics to their advantage as specific industries with strong and diverse forward links were subsidised by the government. They delivered substantial benefits across the economy’s production networks and increased the resilience of the supply side and enabled effective responses to legitimate extra-market demands.

Gillian Tett wrote in the FT about how this is a positive move in the understanding of an economy. She states that economists used to act like medieval doctors – looking at the interaction of body parts. However with mesoeconomics they are more like physicians with a microscope looking at the blood flow – i.e. networks. She sees this shift being positive in three ways:

• Policymakers will get a better understanding of how an economy works and inflation develops

• It may widen the scope of the economics profession with more imagination

• Network analysis is crucial in the political economy and has long been overlooked.

Supply chain problemsduring COVID The maritime supply chain has been stretched to the limit over the last year and there have been a number of reasons for that. From a lack of containers to surges in global economy activity as consumers shifting from buying services to buying goods, the freight time and cost has increased significantly. Below is a mindmap that also looks at the major problems faced by the maritime supply chain last year.

Sources:

• Forget macro and micro, it’s mesoeconomics that matters. Gillian Tett. FT 24-5-24

• The Rise of Mesoeconomics – William H. Janeway. May 17, 2024

Sign up to elearneconomics for comprehensive key notes with coloured illustrations, flash cards, written answers and multiple-choice tests on inflation and supply that provides for users with different learning styles working at their own pace (anywhere at any time).