The Insights of a Columbia Professor

I am a regular Listener of Econtalk, where an Economics scholar (Russell Roberts) talks with luminaries of the field about various aspects of political economy. This week I listened with interest to Prof Amar Bhide of Columbia business school talk about outsourcing and venturesome economy. I was hooked early on when he talked about the fears of Americans regarding innovation in other countries, and the supposed lack of basic science research at home (link to the episode page).

He said that there are multiple levels of innovation, but they may be divided into three basic ones. Taking the example of shipping, the Archimedes' Principle regarding buoyancy is critical, but not sufficient to build a ship. You need technical expertise of various kinds for that. And then you need to run the shipyard, and that requires a different set of skills altogether. His point was that basic research is all well and good, but the knowledge, once created, is there for all to use. What is much more critical for prosperity is the application of that knowledge, and that requires skills that are much more local. Leading a team of workers to either build, or manage requires much more local knowledge, and contributes much more to the profits than basic research. We may agree or not with him, (I do, with the caveat of health care) but the idea leads to interesting paths.

I think its obvious from his exposition that the three basic tiers of wealth creation are basic sciences, technical sciences (like medicine and engineering), and management sciences. And it is interesting to see that almost all of my classmates are moving from technical sciences to management, implicitly agreeing with his theory that this will lead to them contributing more than they do now (and presumably receiving more too :-) )

And now, look at this EPGP course. One of the major explicit differentiators for the course is the focus on India and emerging economies. This ties in well with Prof Bhide's thoughts that the management needs to be much more focused on the local factors that any other branch. There is going to be a local focus throughout the course while teaching us general principles. Sure, there are differences between different emerging economies, and that's why we will have full-time immersion into these counties for several weeks, giving us a first hand experience of how business is done there. This fantastic aproach is one of the reasons I'm excited to pursue this course.

Economics is a Rap Song

Demand, Supply - Rhythm, Rhyme, Results

The top ten Principles of economics, courtesy Greg Minkew's blog

Here are lyrics:

Verse I
Tradin’ this for that, call it tit for tat
We all face tradeoffs and that’s a fact because
Everything is in finite supply
That’s the reason why we all sell and buy

Next up is rule deuce, the next best use
Of money or time defines its true value
It’s more convoluted than just the simple cost
What else could you do? What opportunities are lost?

Decisions at the margin, yeah that’s the key
To understanding principle #3
Take your present situation and assume that it’s the best
If a change is worth more than it costs, then that’s your test

Lesson #4: it’s like the carrot and the stick
We break it down so you can see what makes the world tick
So why do we do the things that we do?
It’s a system of incentives that we all respond to

Chorus
Demand, supply
Listen up, learn this, and you’ll know why
We work, we buy
The price is right when the competition’s alive
(x2)

Verse II
Everyone in society can benefit from trade
#5 is a reminder that we shouldn’t let hope fade
Just use what you’ve got to produce your best
The money that you make will buy the rest

Lesson 6 is a trick, the invisible hand
Buyers and sellers clear markets without the man
The market system almost always prevails
But recognize, too, that markets can fail

Because of monopolies and the troubles they create
Uncle Sam comes along and he’s gotta regulate
That’s lesson #7: when government’s there
They oversee to guarantee that competition is fair

#8 says the future of a national State
Relies on services and products people create
If we sell and excel and we keep doing well
Then the money keeps going ’round just like a carousel

Chorus

Verse III
#9: keep an eye on that money supply
Printing too much paper sends prices sky high
A dollar means nothing, it’s just a nice name
If what it represents doesn’t stay the same

Number 10: there’s a tradeoff in the short run
Between unemployment and inflation
I really can’t explain the whole situation
You want the full story? Step up your education!

Shared by joyce santos at imeem

Whither Jobs?

Fan though I am, this is not about the eerie absence of Steve Jobs from the helm of Apple. With or without him, I don't foresee an 80's style collapse of Apple. There is, however, another threat to Apple, and to me. The Economy.

First, the disclaimer. I am not an economist, you know. Although i read this essay by Daron Acemoglu, an MIT economist, and he details where economists too went wrong. This article by Arnold Kling is very accessible.

To quote Acemoglu, economists started believing that

the era of aggregate volatility had come to an end. We believed that through astute policy or new technologies, including better methods of communication and inventory control, the business cycles were conquered. Our belief in a more benign economy made us more optimistic about the stock market and the housing market. If any contraction must be soft and short lived, then it becomes easier to believe that financial intermediaries, firms and consumers should not worry about large drops in asset values.

I'm no one to judge an economist, much less an economist's assessment of economists, but I must say that till early 2008, I heard many economic writers I admire say that this problem was all "much ado about nothing".

Anywho, here we are, no one seems willing to give any good news. Wall Street Journal had this article, saying recruitment in Business Schools were at a lower level than even one expected in October. One quote by a student caught my eye. She said about the placement system in the college,

The system they have in place now seems to be one that works very well when the economy is good, but now that there are no employers coming -- no one knows what to do

This may be true, and therefore we will need a plan. This is the moment for aggressively reaching out, and I'm happy to say our batch is already thinking on those lines. I never would have thought that there will be dozens of mails everyday in our mailing list. Some are about mundane issues like what laptops to buy, but several talk about projecting ourselves to the world. This being the first batch, and the institute is flexible, so a lot of ideas are being discussed, and nothing is off limits.

This may sound like an ad for the batch, but it didn't start that way. I wanted to discuss the problems, ended us talking about the solutions we are working on. So.... does anyone have any idea? Where do we look for jobs next?