The Filter^

Emma Maersk

awesome

ABC Reviving in Switzerland

Here's something to add to the list:

Austrian economics, however, has enjoyed a minor revival in the last decade, most prominently at the Basel, Switzerland-based BIS
Wall St Journal Blog (via Tyler)

Tesco's great experiment

I'm currently flicking through "Tescopoly", a book typical of the non economics foundation (an intriguing organisation fighting imaginary ghosts: the failures of neoclassical economics shouldn't mean we abandon the science of economics). Apparantly "it would be hard to design an environment more capable of inducing alienation", yet people are "appalled at the prospect of a commercial invasion of a personal emotional sphere". Tesco is charged with simultaneously destroying society, and seeking to create it - the vision might not be to everyone's tastes, but any attack should be at least consistent. It should also be aware of an alternative economic paradigm (Austrian) that tackles this issue:

Though often mathematically modelled in dry terms, markets can be looked at instead as meaningful domains of human activity. To economists, markets have been seen as nothing but objective 'forces' or allocation 'mechanisms'. This book, however, argues that they can be seen as involving the human spirit, personal expression and moral commitments. It presents the view that markets are not so much things that need to be measured as meanings that need to be narrated and interpreted.

Lavoie and Chamlee-Wright 2001

So it's refreshing to read an excellent summary of Tesco's current strategic entry into the US from The Economist. Rather than re-defining the English language to engineer Tesco as having monopolistic control of retailing and an automatic assurance of future growth, we see a company at the whim of fickle consumers, utterly dependent on their ability to continually innovate and satisfy the most pressing needs of those who choose to use it. For a "new" (i.e. "non") economist concentration of capital means the big get bigger. Thesre's no scope for strategy. No threat of failure. No risk. Dasani didn't fail. Wal Mart are the biggest UK retailer.

For those of us in the real world, it's actually quite interesting to see how Tesco get on. One of their biggest challenges is timing their market entry:

If Tesco gambles small and wins, competitors will have time to copy it before it reaches critical mass. Placing a big bet is more dangerous, but it may be the best way to exploit a model that can be scaled up rapidly into thousands of stores

At the heart of the model, Tesco seek to introduce two major innovations to the US market. Firstly, to provide "convenience and quality together", to position themselves between "Whole Foods Market (luxury) and Wal-Mart (cheap). Secondly, to offer "ready meals", in contrast to "that which lasts long because it has been dried, canned, frozen or otherwise preserved, and that which is prepared from raw ingredients on site". Their success will partly depends on their ability to roll out (and improve upon) their supply-chain management and Clubcard capabilities.

Ultimately the story of Tesco has two competing narratives. On the one hand is the determinisitic, inevitable growth of an increasingly powerful retailer. In essence this is a conspiracy story, simultaneously rejecting the logic of economic reasoning, whilst relying on an interest-led explanation. Alternatively we see Tesco as the product of a competitive market, expanding along some margins, losing ground on others, depending on their abilitiy to renew themselves, and outcompete their rivals. Their future is uncertain, frought with risk.

My post on the smoking ban lamented people who have a direct line from personal preferences to policy prescription. Once more we see people with an aesthetic dislike for something seeking to curtail it through legislation. But, as ever, we see the hitherto unknown market outcomes being the most effective and telling mechanism of judgement. Whilst the courts pander to vested interests, ignorance and snobbery, a $68.3bn company stands before the American people and cautiously asks: Do I add value?

the Entrepreneur

When I lecture on entrepreneurship I start with a photo of legendary wrestler "The Undertaker". The term "entreprendre" literally means "to undertake", and this fits with the classical definition (stemming largely from Cantillon) that an entrepreneur buys inputs as a known price, sells outputs at an unknown price, and is therefore characterised by their exposure to risk. Frank Knight clarified this concept of risk (and it's contrast with uncertainty), and then Joseph Schumpeter's attention to new combinations and innovation cemented our concept of "the entrepreneur"

def. entrepreneur: The undertaker of business ventures

However the biggest challenge of teaching entrepreneurship is to make the distinction between "the entrepreneur", and the social function of entrepreneurship.  After all, David Beckham isn't "a footballer", he's a father, husband, Englishman, model, etc. When we talk about "entrepreneurs", we're talking about ideal types and it's important to avoid a slippery slope into typical policy reform that associates entrepreneurship with Small and Medium-sized Enterprises (SMEs)

"Economics, in speaking of entrepreneurs, has in view not men, but a definite function" Mises 1966:246

These issues have been on my mind since attending the UK premier of a new film, The Call of the Entrepreneur (at Cass Business School, watch the trailer here), which makes an important point:

how we view entrepreneurs—as greedy or altruistic, as virtuous or vicious—shapes the destinies of individuals and nations

The film follows three case studies, but did an excellent job showing the effects of entrepreneurship on wider society. My quibbles are that it failed to adequately distinguish between entrepreneurs, capitalists, and managers (and I think claiming that entrepreneurs are the "conductors" of a market economy is the wrong metaphor); and by grounding the film in ethics would alienate a secular audience. Finally, Tony Woodlief:

Entrepreneur: Someone who sees an unmet need, often before customers themselves see it. The entrepreneur discovers a way to profitably meet that need, and organizes the resources and people to deliver the resulting value to customers.

Koch interview

I recently spoke about Charles Koch's book "The Science of Success", and encourage you to take a look at this interview with him:

the best way to be successful over time is to focus on creating real value, not the illusion of value. Contribute to prosperity and make people's lives better. Be more efficient at using resources to create goods and services that are more highly valued than those of your competitors. Go in the direction of your ability and competency.

He makes some interesting points on business education, underlining that the most important challenge for educators is to create a culture of humility rather than arrogance.

Political correctness and freedom to joke

What's black and doesn't work?
Bernard Manning's kidneys

Legendary comic Bernard Manning has died, offering an opportunity to question the role of offensive humour. One of the main cultural differences between living in America versus the UK, is that over here people tend not to make a distinction between personal preferences and preferred policy. For example the current ban on smoking has demonstrated that people's tastes clearly influence their policy prescription. This undermining of a liberal order of tolerance and freedom is a shame, so it's nice to hear people that geniunely respect the rights of their foes.

On a 5 Live phone in discussing Bernard Manning, a caller made an erudite attack on his brand of humour, but it's majestic to hear her horror when the presenter assumes that this attack suggests she'd want to ban him or curtail his freedom to tell jokes. In fact, not only does she defend his right to offend, but points out that he's been the victim of this decision to offend. Not only is a liberal order morally just, but it delivers effective results! (click here for the audio, it's on 16mins 30sec)

Those who celebrate Manning's anti-PC stance simply don't understand what PC means. The fact that we laugh at The Office (and to a lesser extend, Little Britain), and shudder at Manning, is because of how they present themselves. Humour based on minority groups is dangerous ground, and can be mined for cheap gags, or approached with caution. Stewart Lee has it spot on in this Guardian article:

I am a great fan of political correctness, even though, as one of the writers of Jerry Springer the Opera, I was routinely praised for apparently attacking it, and feel that any indignities we suffer from PC's overzealous policing are a small price to pay for all that it has achieved.

Brain Injury, Drinking, and Seatbelts

Although driving whilst intoxicated significantly increases the chances of an accident (and the seriousness of an accident) researchers from the University of Toronto have found that having low levels of alcohol in your system can reduce the effects of a head injury (BBC News). If we use the same logic that makes seatbelts compulsory, therefore, it should be a legal requirement to drive under the influence of alcohol.

Perhaps a new road safety campaign: Belt up, Drink up

Liechtenstein

The Prince of Liechtenstein is among the world's wealthiest heads-of-state with an estimated wealth of some 2 billion dollars. The country's population enjoys one of the world's highest standards-of-living.

source: Wikipedia.

No idea why this is sitting in the "drafts" section, but as part of a routine clean up let's make it public. I can't remember what point I wanted to make about this information, but to see the extent of my predictability, does anyone have a better idea than I do about why my previous self thought it worth writing a blog post about?

Blogging about

• The Times: Best business blogs
• The Mason Gazette: GMU Econ bloggers

Cultural Approaches to Nanotechnology

It's nice to see the enduring Douglas/Wildavsky influence at the Yale Law School, with a new paper applying Cultural Theory to public opinions regarding nanotechnology. From Ron Bailey:

"Egalitarians and communitarians, for example, tend to be sensitive to claims of environmental and technological risks because ameliorating such risks justifies regulating commercial activities that generate inequality and legitimize unconstrained pursuit of self-interest," claim the researchers. "Individualists, in contrast, tend to be skeptical about such risks, in line with their concern to ward off contraction of the sphere of individual initiative. So do hierarchists, who tend to see assertions of environmental technological risks as challenging the competence of governmental and social elites."

Here's the Cultural Cognition Blog.