The ‘laws of economics’ don’t exist

By Zachary Karabell – This is just a smattering of examples over the past few weeks. Increasingly, our debates about – and our solutions to – pressing issues such as immigration, budgets and debt are framed in the context of all-powerful economic laws that dictate what is and is not possible. There’s just one slight problem:

There are no laws of economics.

For sure, many economists and large parts of society believe there are. The high levels of anxiety about deficits and government debt, not just in the United States but throughout the euro zone and much of the world, stem from the belief that if central banks create too much money, it will inevitably lead to inflation. Why? Because the “laws of economics” say the supply of money will cause inflation if overall output stays the same. more> http://tinyurl.com/ckx2xkp

Saving The World From The Economists: Ronald Coase & Paul Krugman

By Steve Denning – Economics, writes Nobel Prize winner Ronald Coase, as currently presented in textbooks and taught in the classroom does not have much to do with business management, and still less with entrepreneurship.

If the only problem of economists was one of irrelevance, then we could view the exchanging of econometric models of largely irrelevant issues by academics in ivory towers with the same nonchalance that we view medieval theologians arguing about how many angels can dance on the head of a pin.

The sad reality is that the people do pay attention to economists and their models. more> http://tinyurl.com/cfx3tbt

Related articles

• Saving Economics from the Economists | Ronald Coase | Harvard Business Review (entrepreneurshipmatters.com)
• Coase on Mainstream Economics (businessinsider.com)
• Economics as a Tool for the State, Rather than a Window to Enlightenment (coordinationproblem.org)
• Isolated from the Ordinary Business of Life (feldsmarch.com)

The perils of cliff-diving

By Douglas Holtz-Eakin – The fiscal cliff is a danger to the economy.  Some have argued that cliff diving is benign either because the cliff itself is an illusion – it is really a gentle slope.

Both arguments miss the key role that would be played by financial markets.  Cliff diving would have a significant impact on financial markets, impairing asset values, exacerbating credit stringency and amplifying the direct effects on the Main Street economy. These effects cannot be “unwound” by retroactively legislating away the fiscal cliff.

Unlike budgetary moves that can be reversed, these kinds of negative effects on market confidence in the outlook are durable. Many analysts, for example, attribute at least part of the slowing in the 2nd half of 2011 to a decline in consumer confidence because of the political battle over raising the debt limit. more> http://tinyurl.com/a7o6mtr

Related articles

• The perils of cliff-diving (blogs.reuters.com)
• Fiscal Cliff Diving, or Abortion Economics of a failed Economy (lynleahz.com)
• Cliff diving (politico.com)
• Cliff Diving (chiefwritingwolf.com)
• Is Cliff Diving The Least-Bad Option? (pinkbananaworld.com)

Global Drucker Forum Foments A Revolution In Capitalism

By Steve Denning – Among many other speakers, Roger Martin, Dean of the Rotman School of Management, will discuss the shift from maximizing shareholder value to customer capitalism. He will talk about: what went wrong with capitalism? Can it be reformed? What are the main axes to pursue?

My own contribution comes in an article on the Global Drucker Forum this morning, “The Revolutionary Tenets of Management 2.0”. more> http://tinyurl.com/8ejc7cd

Related articles

• Is The Tyranny Of Shareholder Value Finally Ending? (customervaluefoundation.wordpress.com)
• Maximizing Shareholder Value’ is ill-Conceived Concept (customervaluefoundation.wordpress.com)
• Capital vs. talent (arunwithaview.wordpress.com)
• Is Shareholder Capitalism Dead And Can We Have A “Stakeholder Capitalism” That Works? (forbes.com)
• Why saving the planet is no longer the work of political leaders (guardian.co.uk)
• What Facebook Has to Teach Us About How to Teach (forbes.com)

In Praise Of Stretch Goals

BOOK REVIEW

Betterness: Economics for Humans (Kindle Single), Author: Umair Haque.

By Steve Denning – In an article  entitled The Folly of Stretch Goals, Daniel Markovitz writes, “Let’s dispense, once and for all, with the managerial absurdity known as ‘stretch goals.’”

Well, no! Instead, let’s celebrate stretch goals.

Markovitz’s article shies away from stretch goals for several reasons:

• “Stretch goals can be terribly demotivating, overwhelming and unattainable”
• “Stretch goals foster unethical behavior”
• “Stretch goals can also — tragically — lead to excessive risk taking.”

Stretch goals need to be about human excellence, not about financial targets. Financial goals bring out the selfish gene that lurks in all of us. Instead, stretch goals need to appeal to what is best in us. more> http://is.gd/lMczMu

Related articles

• The Folly of Stretch Goals (blogs.hbr.org)