Economy

Mohammad Anas Wahaj | 13 may 2015

Adam Smith believed in laissez-faire world and his theory of 'invisible hand' of free markets has been a defining element of the capitalist economies. It explains that when markets are left alone, they allocate resources better and efficiently. This evolved into an economic school of thought that unregulated markets are inherently stable. According to Friedrich von Hayek, a free-market economist, the best way for an economy to recover after a slump was for it to be left alone. Deregulation was the main mantra in the global economy throughout the 1980s and 1990s. Alan Greenspan, chairman of the US Federal Reserve (1987-2006), has been instrumental in this shift. Subitha Subramanian, chief economist at Sarasin & Partners, explains the reshaping of the free markets and the rise of the 'visible hand' in global economy in recent years. According to her, 'In 2007, the sharp collapse in asset prices and economic growth prompted a sea change in the attitude towards laissez-faire economics. Only expensive government interventions seemed capable of arresting the economy's plunge.' Works of economist John Meynard Keynes on the Great Depression is finding new relevance to understand volatility of markets. She further explains, 'The biggest distortion facing financial markets today comes from the repression of interest rates by the world's central bankers...Currency markets, too, are being subjected to large distortions owing to central banks introducing activist policies at different paces. In a laissez-faire world, wealth creation is a reward for risk taking and innovation. In a world of financial repression, it is linked to central bank policies pushing up asset prices, which disproportionately benefits the older and wealthier segments of society.' Rising inequality, shifting of tax systems away from economic activity towards wealth and assets, instability of credit-based financial system, shifting of geopolitical landscape away from US leadership and governance, and rise of regionalization and localizaiton, are all contributing to the reshaping of global economy by deliberate interference of policy makers who are seeking growth and stability. Read on...

The Financial Times: The rise of the visible hand in economic policy
Author: Subitha Subramaniam

Mohammad Anas Wahaj | 19 nov 2014

The concept of 'collaborative economy', people sharing products and services with each other, is facilitated by technologies and disrupting businesses with services like Uber, Kickstarter, Airbnb etc getting substantial public and media attention. Jeremiah Owyang, founder of Crowd Companies, talks about 'Honeycomb', which shows how this economy is forming - resilient structures that efficiently enable many individuals to access, share, and grow resources among a common group. He mentions 3 things that drive the collaborative economy: societal drivers, economic drivers, and technology enablers. Collaborative economy is growing and the participation has nearly doubled between 2013 and 2014. Crowd funding businesses ensures loyal community involvement in the venture. Mr. Owyang makes three predictions on the future of collaborative economy - (1) New membership-based business models. A business model will emerge where people don't actually own goods, they just need access to them (2) Branded marketplaces will compete with startups (3) Brands will pull the makers closer to them, and co-innovation will blur lines between customers and employees. Read on...

Salesforce Blog: 3 Predictions for the Future of the Collaborative Economy
Author: Jeremiah Owyang

Mohammad Anas Wahaj | 10 nov 2014

Number of start-ups are often considered to have a positive correlation with the health of the economy. But Professor Daniel Isenberg of Babson College, and Fernando Fabre, president of Endeavor Global, argue that 'Scale-ups', growing businesses that promote long-term entrepreneurship, have more impact on the economy as they lead to more innovation and create more jobs as compared to a high-number of quickly failed start-ups. They negate the Brookings Institution report that blames the decline of entrepreneurship in US on established companies and point out that the report doesn't classify company as entrepreneurial if it has lasted for more than 16 years, implying that fewer start-ups reflect an economy that can't support new business. On the contrary, companies that exist for longer period continue to grow and innovate and contribute substantially to the economy. Prof. Isenberg and Mr. Faber have created a 'Scale-up Declaration' that explains the benefits of scale-ups: 'Entrepreneurs create value and are necessary in all sectors of society. What makes great entrepreneurs are people who scale up their operation and then reinvest their knowledge or financial gains to help the next generation of entrepreneurs.' An example of successful scale-up entrepreneur cited by Mr. Faber is Fadi Ghandour, founder of Aramex, who reinvested in Jordanian entrepreneurs and helped create an entrepreneurial ecosystem there alongwith other successful entrepreneurs. Scale-up entrepreneurs have the power to recycle life and energy into the economy by reinvesting in innovation. Read on...

Chronicle-Independent: A broader definition of entrepreneurs
Author: John Hoffmire, Krystal Bailey

Mohammad Anas Wahaj | 31 oct 2014

According to 2014 KPMG Global Technology survey of 768 global technology business leaders, the three disruptive technologies - 3D Printing, Internet of Things (IoT) and Biotech/Healthcare IT - have the potential to shape the next three years. While commenting on prospects of these technologies in Ireland, Anna Scally, partner at KPMG Ireland, said 'The good news is that Ireland has big strengths and further potential in these areas.' Survey respondents consider the following as the top barriers to commercialize technology innovation - security (27%), technology complexity (22%) and customer adoption (21%). In the study, technology business leaders globally believed that retail/intelligent shopping (20%) has the greatest potential to generate revenue as a result of adoption of IoT. Moreover it also cited digital currencies like Bitcoin & Blockchain as emerging technologies that might impact specific sectors or industry in particular regions depending upon their adoption. According to Gary Matuszak, global chair of KPMG's Technology, Media and Telecommunications practice, 'The interplay of these emerging technologies is enabling new business models and fuelling innovation in many industries.' Read on...

Silicon Republic: Three disruptive technologies that will shape the next three years
Author: John Kennedy

Mohammad Anas Wahaj | 29 oct 2014

The evolution of global society and growth of interdependent world has facilitated 'networked' approaches to public value and new models of global problem solving. Moreover digitization of society has transformed its capability to organize for innovation, creation of wealth and public value. In an interview, Don Tapscott, an innovation and technology thought leader, suggests four pillars of the society that rely on each other for success and survival - (1) Critical role of 'governments' in achieving security and prosperity, and achieving harmonization, fairness and justice (2) Most countries in the world have chosen the 'private sector and corporations' as the dominant institution for the creation of wealth (3) The 'civil society' has emerged as a new and critical pillar with not-for-profit sector becoming a massive part of the economy and providing employment to substantial population (4) Internet has empowered 'individual citizens' from every walk of life to have an extraordinary effect on achieving social change. Read on...

DonTapscott.com: The New Interdependence: Four Pillars of Society
Author: Don Tapscott

Mohammad Anas Wahaj | 14 oct 2014

Although economists were critized for not been able to predict the financial crisis of 2008, but macroeconomic forecasting is just one aspect of their work. In a recently published book 'Trillion Dollar Economists', author & economist Robert Litan, argues that while macroeconomic forecasters are more publicly renowned due to press coverage but there are other economists who worked for the private sector and contributed substantially to transform businesses in America. Following are seven economists mentioned - (1) Julian Simon: Helped revolutionize the airline industry by popularizing the idea that carriers should stop randomly removing passengers from overbooked flights and instead auction off the right to be bumped by offering vouchers that go up in value until all the necessary seats have been reassigned. (2) Hal Varian: As economist for Google, he fine tuned 'Dutch Auction' first designed by William Vickrey, that Google utilized for its 2004 IPO. He further helped develop the Google Trends tool and the use of A/B testing to improve the launch of other new services. (3) Vernon Smith: won the Nobel Prize in economics in 2002 for his contributions in helping economics become a more experimental science that relied on laboratory testing to understand human behavior. His experiments proved that through careful deregulation of energy markets, electricity companies could become more efficient and still sell energy at fair prices. (4) Frank Ramsey: In 1920s formally proved that rather than charging one price, firms ought to discriminate against customers based on where they fall on the 'Demand Curve'. In other words, companies should charge the most any particular customer is willing to pay, rather than one price for all. His concepts are utilized in airline and hospitality industries. (5/6) Lloyd Shapley and Alvin Roth: Nobel Prize winners of 2012, their work in 'Market Design' has helped revolutionize the way buyers and sellers are matched in many different markets. They worked on how to design markets to attract enough buyers and sellers, to give those participants enough time and information to make rational choices, and to do it in a way that prevents fraud or the leaking of confidential information (7) Burton Malkiel: He helped popularize the concept that investors do better when they diversify through his book 'A Random Walk Down the Street' and inspired entrepreneur Jack Bogle to work on 'Index Funds' as they would be a cheap way for the average investor to diversify. Read on...

FORTUNE: 7 economists worth their weight in gold
Author: Chris Matthews

Mohammad Anas Wahaj | 30 aug 2014

International Monetary Fund (IMF), with inputs from readers, select global economists and journal editors, recently compiled a list of 25 'Generation Next' economists, below the age of 45, who are influencing and shaping the way one understands global economy. In this list there are four Indian-origin economists - (1) Raj Chetty of Harvard University (Research: Combines empirical evidence & economic theory to help design more effective government policies; Equality of opportunity); (2) Gita Gopinath of Harvard University (Research: International finance & macroeconomics with focus on issues related to international price setting, currency choice & exchange rate pass-through, business cycles & crisis); (3) Parag Pathak of Massachusetts Institute of Technology (Research: Market & mechanism design; Labor economics; Education economics & reform); (4) Amit Seru of University of Chicago (Research: Financial intermediation & regulation; Resource allocation & internal organization of firms; Performance evaluation & incentives). Read on...

IBN Live: Four gen-next Indian-origin economists in IMF list of 25
Author: NA

Mohammad Anas Wahaj | 01 may 2014

For ethical decision making both quantitative and qualitative approaches have to be considered for better results. Research by Dr. Chen-Bo Zhong of Rotman School of Management advocates a decision strategy that gives importance to both reason and intuition. He suggests that organizations can improve their decision making strategies as they plan and develop incentive structures by balancing economy with psychology and they should emphasize the value of people's intuition and emotions. In today's socially networked and interconnected world consequences of people's actions are more significant and impact wider society. So it becomes important to study unethical behavior and understand why it happens and how we can counteract it. Most current theories in ethical decision making are based on Lawrence Kohlberg's model of moral development that holds that moral reasoning, the basis for ethical behavior, has six identifiable development stages - two stages within three levels. (1) Pre-conventional level - judging the morality of an action by its direct consequences. (2) Conventional level - judging the morality of actions by comparing them to society's views and expectations. (3) Post-conventional level - is marked by a growing realization that individuals are separate entities from society and individual's own perspective may take precedence over society's view. The ethical decision-making research that follows in the Kohlberg tradition considers decision-making as very linear and cognitive, with it broken into discrete steps: recognize the moral dilemma -> reason based on your moral principles -> make a moral judgment -> act on that judgment. But Dr. Chen-Bo Zhong's research challenges the idea that moral reasoning is so much systematic and linear. It builds on NYU Psychologist Jonathan Haidt's findings, that first questioned the rationality-based moral judgment. Dr. Haidt's Moral Foundations Theory considers the way morality varies between cultures and identifies six foundations that underlie morality in all societies and individuals. He names them using pairs of opposites to indicate that they provide continua along which judgments can be measured: care/harm; fairness/cheating; loyalty/betrayal; respect for authority/subversion; sanctity/degradation and liberty/oppression. Haidt showed that oftentimes, moral judgement follows not from the analysis of harm, but from a very instinctive and intuitive reaction of disgust, and as a result, moral judgment is often based on intuition. Based on this line of research, moral judgment and decision-making is not just a systematic process: peoples' affect, or emotion, plays an important role in these judgments. Dr. Zhong's research shows that there are two distinct processes involved in moral decision-making: one is very reasoned and systematic, while the other is more intuitive and affective. He believes that our affective reactions actually play a role in regulating our ethical behaviour. This is in line with University of Southern California Professor Antonio Damasio's work on 'somatic markers'. Prof. Domasio has shown that reactions such as guilt, disgust and happiness play an important role in regulating behaviour. Dr. Zhong further explains that as economics is substantially based on rationality, reason and incentives, its education influences people towards numbers and calculations i.e. to quantify things. Economics tends to under-emphasize things that are less tangible, less quantifiable, and that can have impacts on multiple domains. Research shows that when people are asked to use a numeric metric to evaluate a product it actually dampens people's enjoyment of the product. This is even recognized by economists. Robert Frank showed that students trained in economics tend to be more competitive and often make more selfish choices. It is possible that being reminded of money, a standard quantitative measure of value, automatically activates a calculative mindset that suppresses emotional influence and disinhibits unethical behaviours. Dr. Zhong's hypothesis is that over emphasis on reason and excessive deliberation might actually have negative ethical consequences. Read on...

Forbes: The Downsides of Deliberative Decision Making
Author: Chen-Bo Zhong

Mohammad Anas Wahaj | 16 jan 2014

'Corporatization of governance' - trying to run government like a business might be a popular thought seeking acceptance in political circles but it is important to understand the implications and outcomes of its application. Another important thing would be to understand what models of business are to be considered in this regard. According to the author this type of agenda might include free trade, privatization, weakening labour rights, deregulation, slashing government services and taxes on large corporations, and the advent of the surveillance state. The basic difference between the government and business is regarding the interests they serve - public or private. Article provides perspectives and views on various aspects of this model of governance by sharing specific instances from the Canadian politics. Read on...

The Rossland Telegraph: The problem with running government like a business
Author: Murray Dobbin

Mohammad Anas Wahaj | 09 jan 2014

Globalization as an economic and business phenomenon has consistently been a norm and countries have been encouraging and developing collaborations and partnerships with each other. Globalization impacts life of every consumer. For thirty years there has been a consistent trend where global trade grew at about twice the rate of global economy. According to WTO (World Trade Organization), global trade grew at an average 6.2% annually and global GDP at 3.7% during 1988-2007. But a new thing that emerged in the last two years is drop in global trade even below the global GDP growth. Although developments like internet, opening up of Chinese economy, rise of emerging markets, better travel connectivity etc point towards faster globalization. But the rise of protectionism and localism are the probable reasons for the decline. Nature of global politics will play an important role in shaping the future of globalization. Moreover the growing possibilities of large scale use of technologies like 3D printing may shift the global manufacturing patterns by giving rise to self-manufacturing of certain goods that are currently being outsourced, thus encouraging localization. Read on...

CNN: Have we reached the end of globalization?
Author: NA

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