When I was in college, I never had any trouble understanding microeconomics, describing individual transactions. Yet macroeconomics - aimed at providing the "big picture" of how the economy works - always gave me a big headache. I was able to mathematically follow the models, but I could never get the underlying concepts into my head, they just did not relate to the realities I was aware of. After I had graduated, I was quite glad to never go back to this part of my education, and my unease faded with the negligible relevance of "macro" for my day-to-day work as a senior manager and management consultant.
Until a few years ago, I only had a limited amount of time at hand to be puzzled about the world we live in. Yet I remember a number of times when I - for example - sat in a car driving, thinking: "Wow, here are 1.5 tons of steel, rubber and electronics, just to move my 90 kg! And it seems to make sense!" Similarly strange reverberations came up when I looked at stock markets, where I felt that share prices had long lost any connection with real underlying values. In early spring 2000, the NASDAQ was just approaching 5000 points due to what was later called the "New Economy Bubble". I was working as a technology consultant in the United States and in Mexico. During this period, I bet with a good friend who was working on a project with me that the index would soon fall below 1500 points. I remember him looking at me as if I had just landed from outer space. And despite my - what I thought - good arguments questioning the true value of most Internet businesses traded at sky-high prices, I was unable to convince him and many others of the now apparent folly. In October 2002, the NASDAQ had come down to almost 1100 points. His confirmation email was just a dry note stating that I had won, and that he had seen most of his savings disappear within less than two years.
Those conclusions back then weren't really based on any solid research, but more on intuition and connecting the dots from reading the news. I was way too time-constrained to dive deeper into the subject of economics, but my feelings that something might not exactly be right about how the world was going never subsided.
In 2007, I began to put more effort into economic research, devoting 1-2 hours a day to studying the world economy, but soon discovered that even getting to a basic understanding would be impossible for one person alone. Hence, I hired a first research associate in early 2008 who helped dig through the immense amounts of data to form a first integrated picture of the global economy. While we were doing so, we left behind most traditional views of macroeconomics and identified a few mechanisms related to debt and money supply that left us worried for the entire financial system, a view that was - even more quickly and more shockingly than we had anticipated - confirmed in September 2008 by the events after the Lehman Brothers bankruptcy. That was when I decided to formally establish what now is called the IIER - the Institute for Integrated Economic Research.
From that point onwards, my decision to put a substantial amount of my time and resources into the understanding of the economy firmed up, and by now, all effort is devoted to IIER. After developing an initial understanding of monetary systems and credit markets, we soon shifted our research towards the underestimated relevance of resources and there, first and foremost, energy. Never before had I been more excited about my job, not least because I finally found out why it makes economic sense to drive a car to move just one person's weight.
Today, IIER is working on a number of - what we consider - relevant subjects and receives increasing recognition from many people in business, policy-making and academia, which gives us confidence that we are on the right track. Ultimately, our objective is a simple one - to establish thorough views of economic systems which help plan and manage the future of mankind in a better way. I am afraid that this won't be an easy task.
Hannes Kunz, President