June 16, 2010 at 5:37 pm · Filed under Economic Policies, Great Minds
Adam Smith was a Scottish philosopher, back in the 1700s. He wrote a couple of well known books, you might’ve heard of them. They were called “The Theory of Moral Sentiments” and “An Inquiry into the Nature and Causes of the Wealth of Nations”, better known as “The Wealth of Nations
”. I recently read a summary of and commentary on The Wealth of Nations. I couldn’t bring myself to read the original in its entirety, it’s a doorstopper of a book, in language that’s too archaic for me to make much progress. The summary was plenty interesting though. As he was the first to popularly articulate these ideas, I believe we have Smith to thank for free markets as well as many social freedoms.
One of the things I took away from the book was Smith’s very pragmatic assessment of how Europe moved from serfdom / slavery / feudalism to a comparatively free society (which we beneficiaries of Western economic progress get to enjoy). It’s a powerful idea. I’m going to try and sum it up.
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March 11, 2010 at 4:24 pm · Filed under Economic Policies
I don’t remember where I heard this story. But it goes like this:
Once upon a time, lets say in the 1980s, an American economist visited China. He was graciously welcomed by his hosts, the Chinese government, given an official minder, and shown around. He was shown many things the Chinese were proud of: the factories they were building, the Great Wall etc. Then he was taken to the construction site of a giant dam, where thousands of workers were industriously toiling away with shovels, building a barricade.
He asked his minders: “How come all these people are using shovels? You could get a couple of bulldozers and have a few people finish the job much quicker and more efficiently.”
His minder replied: “Yes, but we wouldn’t be able to keep all these people employed then.”
To which the economist replied: “Ah, so it’s employment you want, not productivity. Well in that case you should take away the shovels and give all these people spoons.”
It’s a story most decision makers would do well to keep in mind. Too often, means become an end in themselves. And a by-product of the ultimate goal becomes the goal. At the expense of all else. I’m sure there’s a management term for it. Michael Porter or Drucker or one of those gurus probably came up with something. Goal-derivative scope creep or something like that.
For more on the difference between Production vs. Employment and why Production is a more desirable goal, I suggest reading this post about it that goes into much more detail:
For my money, I would go for a system that is hell bent upon production and having produced, hell bent upon an equitable distribution. Given scarce resources, the most efficient production method is most desirable. If that means more computers in banks, so be it. So you have to lay off bank clerks. But if you look around, humans are somewhat inventive and entrepreneurial. The system adjusts — not smoothly or costlessly — but eventually. And if done with sufficient forethought, without too much pain.
by Gaddis
by Harris
by Sachs
