894 Posts Found

Two scholars measure the economic impact of VC-funded companies.

Content: Article | Authors: Ilya A. Strebulaev, Will Gornall | Source: Stanford University | Subjects: Economics, Entrepreneurship, Venture Capital

We have an assumption in our society about how markets automatically distribute things optimally. But Adam Smith himself said that it’s the social interactions interacting with the market that cause equitable distribution. In his view, the invisible hand suggests that the exchanges between people establish the norms that divide market opportunity. So it is the social exchanges that are the main actor, not the market.

In … [ Read more ]

Content: Quotation | Author: Sandy Pentland | Source: Deloitte Review | Subjects: Capitalism, Economics

I think capitalism, as I see it, is a concept that to date has been very useful and very good at delivering answers to many human needs that have plagued human beings for most of their history. You know, we are now very good at delivering food, construction material, certain kinds of information, transport, logistics, legal knowledge, financial knowledge, medical knowledge and assistance. These things … [ Read more ]

Content: Quotation | Author: Alain de Botton | Source: Deloitte Review | Subjects: Capitalism, Economics

In 1970, in “Efficient Capital Markets: a Review of Theory and Empirical Work,” Gene Fama defined a market to be “informationally efficient” if prices at each moment incorporate all available information about future values. Informational efficiency is a natural consequence of competition, relatively free entry, and low costs of information. If there is a signal, not incorporated in market prices, that future values will be … [ Read more ]

Content: Quotation | Author: John H. Cochrane | Source: Capital Ideas | Subjects: Economics, Finance

The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would be nowhere so dangerous as in the hands of a man who … [ Read more ]

Content: Quotation | Author: Adam Smith | Source: Capital Ideas | Subjects: Capitalism, Economics

The uniform, constant, and uninterrupted effort of every man to better his condition, the principle from which public and national, as well as private opulence is originally derived, is frequently powerful enough to maintain the natural progress of things towards improvement, in spite both of the extravagance of government, and of the greatest errors of administration.

Content: Quotation | Author: Adam Smith | Source: Capital Ideas | Subjects: Capitalism, Economics, Government

We live in uncertain environments. Uncertainty derives in good measure from the limited cognition (dispersed and specific capabilities) of different economic actors. Consequently, knowledge differences lead to division of labor and to specialization throughout the economy. A firm is that entrepreneurial organ that utilizes such division of labor and specialization to achieve some more or less well-defined ends. As such, it is akin to a … [ Read more ]

Content: Quotation | Author: Giampaolo Garzarelli | Subjects: Economics, Knowledge, Miscellaneous

Markets tend to specialize in the coordination of knowledge that is intelligible to all (data about prices and quantities), while firms tend to specialize in the coordination of knowledge that is instead specific (capabilities of production) in order to achieve some ends.

Content: Quotation | Author: Giampaolo Garzarelli | Subject: Economics

Transaction costs should be seen … as costs that arise primarily from imperfections in knowledge. …We may think of these dynamic transaction costs as the costs of bargaining with, coordinating with, informing, learning from, organizing, teaching, and persuading others: they are costs incurred for the search, organization and employment of the required capabilities when these are lacking. In light of this, it is not possible … [ Read more ]

Content: Quotation | Author: Giampaolo Garzarelli | Subject: Economics

Economic organization particularly matters ‘when different things are being done, in the furtherance of a common end, and in definite relations to each other, i.e., in coordination.’ Because there exist ‘some innate individual differences in human capacities and aptitudes’—i.e., differences in capabilities—‘the first in the list of gains from organization results from taking advantage of [these differences]. One … problem is to discover such differences … [ Read more ]

Content: Quotation | Author: Giampaolo Garzarelli | Subject: Economics

A healthy firm … constantly strives to place capability and rights to act on that capability in the same hands—a co-location problem. Jensen & Meckling specify that there are generally two ways we might solve this problem of co-location. We could let knowledge move to those who have the rights to act; or we could let the rights to act move to those with knowledge. … [ Read more ]

Content: Quotation | Author: Giampaolo Garzarelli | Subject: Economics

It is … from indivisibilities that the division of labor takes its start, and the basic indivisibility is that of the individual. […] For our purpose we may regard an individual as a coordinated complex of activities. The indivisibility of the individual consists in the fact that, although it may be capable of a great many different activities, it can perform only few activities simultaneously … [ Read more ]

Content: Quotation | Subject: Economics

If demography is destiny, global growth is headed for a slowdown. History, however, suggests that productivity could ride to the rescue.

Editor’s Note: an obvously topical article, but one which contains some interesting generalized observations and concepts, so definitely worth a read.

Content: Article | Authors: Jaana K. Remes, James Manyika, Jonathan R. Woetzel | Source: McKinsey Quarterly | Subject: Economics

Despite its ability to generate prosperity, capitalism is under attack. By shaking up our long-held assumptions about how and why the system works, we can improve it.

Content: Article | Authors: Eric Beinhocker, Nick Hanauer | Source: McKinsey Quarterly | Subject: Economics

Professor Shane Greenstein is annoyed by “Internet exceptionalism,” the prevalent idea that the Internet defies economic logic, that there’s never been anything like it in business history, and that its impact supersedes everything. In his new book, Greenstein argues that the Internet actually follows classic patterns of economic behavior, detailing the commercial forces that guided the Internet’s path from cool invention to successful innovation. … [ Read more ]

Content: Article | Authors: Carmen Nobel, Shane Greenstein | Source: Harvard Business School (HBS) Working Knowledge | Subject: Economics

When the rate of return of capital [R] exceeds the rate of growth of output and income [G], as it did in the nineteenth century and seems quite likely to do again in the twenty-first, capitalism automatically generates arbitrary and unsustainable inequalities that radically undermine the meritocratic values on which democratic societies are based.

Content: Quotation | Author: Thomas Piketty | Source: strategy+business | Subjects: Capitalism, Economics

Rampant speculation. Record trading volumes. Assets bought not because of their value but because the buyer believes he can sell them for more in a day or two, or an hour or two. Welcome to the late 1920s. There are obvious and absolute parallels to the great bull market of the late 1990s, writes Galbraith in a new introduction dated 1997. Of course, Galbraith notes, … [ Read more ]

Content: Book | Author: John Kenneth Galbraith | Subjects: Economics, History

One oft-cited source of productivity is learning by doing, which is the ability of workers to raise productivity through experience. In fact, economists have credited the Horndal effect to learning by doing. The longer workers do the same type of job the better they get. The result is higher production without having to put in new machines or hire more workers.

Several studies have looked into … [ Read more ]

Content: Article | Source: Capital Ideas | Subjects: Economics, Operations

When a company undergoes a technological change — such as introducing robots or reorganizing the workflow in manufacturing — does it mainly make individual workers more productive because they will be able to churn out more widgets per hour? Or does it make all factors of production equally more productive — workers can produce more widgets, state-of-the-art equipment can accomplish tasks faster, materials that can … [ Read more ]

Content: Article | Authors: Jordi Jaumandreu, Ulrich Doraszelski | Source: Knowledge@Wharton | Subject: Economics

We have become much more productive—output per hour worked increased more than fourfold between 1950 and 2012, according to the Bureau of Labor Statistics. But the amount we work hasn’t fallen anywhere near as fast. In the United States, the average working year went from 1,963 hours in 1950 to 1,790 hours last year, a drop of less than 10%.

This has prompted some people to … [ Read more ]

Content: Article | Author: Dave Nussbaum | Source: Capital Ideas | Subjects: Economics, Organizational Behavior