price mechanism

Derivatives Markets
by David Goldenberg
Published 2 Mar 2016

Without this guarantee, our efforts to find a unique replicating portfolio may indeed fail because we will not be able to distinguish between the multiple, no-arbitrage pricing mechanisms available in a simply no-arbitrage market. Note that once we have a unique pricing mechanism, which is guaranteed by market completeness, then we get no-arbitrage by the First Fundamental Theorem of Asset Pricing. The only case in which this is not true is when there does not exist a linear, positive pricing mechanism. In that case, there would also be arbitrage opportunities, in which case linear, positive pricing wouldn’t even make sense. Furthermore, why would anyone want to replicate derivative securities if not for the fact that the pricing mechanism emerges from that exercise, as we will shortly see in the single period BOPM?

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All we really need is market completeness, where the definition does not preclude the existence of one linear, positive pricing mechanism. This is an absurd case. It doesn’t make a lot of economic sense to say that market completeness means that the pricing mechanism is unique if it exists. That constitutes an artificial separation of no-arbitrage from market completeness. Market completeness includes no-arbitrage when it is simply described as ‘a linear, positive pricing mechanism exists (no-arbitrage) and is unique (market completeness)’. Once we have a linear, positive pricing mechanism, then no-arbitrage follows from the First Fundamental Theorem of Asset Pricing (FTAP1).

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Therefore all pricing methods, when the underlying model is complete, must lead to the same result given by replication. Without no-arbitrage, either built into the definition of complete markets or assumed, there is no viable pricing mechanism at all. Even with no-arbitrage, there are multiple viable pricing mechanisms. Complete markets filter them down to one by implying a unique pricing mechanism, the one generated by the replicating portfolio. The BOPM is known to be a complete model, so once we get a linear, positive pricing mechanism we know that it is the correct and only one. The quick way to see completeness of the BOPM (N=1) is to use our rule of thumb. All of the uncertainty in the model is embodied in the stock price movement up or down.

The Price Is Wrong: Why Capitalism Won't Save the Planet
by Brett Christophers
Published 12 Mar 2024

Rather, all electricity traded for a particular settlement period is priced equally, and this uniform price – variously referred to as the wholesale price, spot price or merchant price – represents the bid offered by the highest-bid generator among those dispatched, which is to say the most expensive producer in the merit order. This pricing mechanism is called the ‘single-clearing price’ mechanism.2 Why does the most expensive generator set the price received by all? It is a good question, eliciting much head-scratching at the time of drafting of this chapter in late 2022, as electricity prices in Europe (including the UK) hit all-time highs – and it is a question to which we shall return.

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We are living at a time when governments around the world are widely endeavouring to withdraw economic support for renewables, and, correspondingly, are moving towards increasingly marketized systems for electricity generation and delivery – and when they are doing both of these things, moreover, explicitly because they believe that the relative-prices thesis is right. In such a context, it is positively dangerous to assume – wrongly – that capital and the price mechanism will save the day. This brings us then to the potential implications of the book’s arguments specifically for the political economy of the energy transition. If the argument that cheapness wins out is erroneous, it is also, perforce, misleading in terms of informing people’s views about what, politically and institutionally, needs to be done.

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From the outset, government ‘interference’ (as neoliberals would see it) in markets and pricing has been stitched into the fabric of the solar and wind power economy. It remains so today. In fact, the book’s argument is that it has to be: markets cannot, and will not, do the job by themselves, that job of course being rapid and comprehensive electricity decarbonization. Markets, and the vaunted price mechanism, are failing. We will not be saying much more specifically about renewables in the next few paragraphs, but the book’s thesis should nonetheless be borne in mind by the reader: precisely in the marketization processes that we now discuss lie the seeds of the main economic obstacles to decarbonization.

Postcapitalism: A Guide to Our Future
by Paul Mason
Published 29 Jul 2015

Meanwhile, the information content of other physical goods is rising, exposing more commodities to the possibility that their production costs begin to plummet too. All this is eroding the very price mechanism that marginalism describes so perfectly. The economy at present, consists both of scarce and abundant goods; our behaviour is a mixture of the old pleasure-vs-pain choices, made in our own self-interest, alongside sharing and cooperation, which seem to the marginalists like sabotage. But in a full information economy – where much of the utility was provided through information and physical goods were relatively abundant – the price mechanism as described by marginalism would fall apart. Because marginalism was a theory of prices and prices only, it cannot comprehend a world of zero-priced goods, shared economic space, non-market organizations and non-ownable products.

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Romer showed that, once the economy is composed of shareable information goods, imperfect competition becomes the norm. The equilibrium state of an info-tech economy is one where monopolies dominate and people have unequal access to the information they need to make rational buying decisions. Info-tech, in short, destroys the normal price mechanism, whereby competition drives prices down towards the cost of production. A track on iTunes costs next to zero to store on Apple’s server, and next to zero to transmit to my computer. Whatever it cost the record company to produce (in terms of artist fees and marketing costs) it costs me 99p simply because it’s unlawful to copy it for free.

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For Romer’s research had shown that, once you move to an information economy, the market mechanism for setting prices will drive the marginal cost of certain goods, over time, towards zero – eroding profits in the process. In short, information technology is corroding the normal operation of the price mechanism. This has revolutionary implications for everything, as the rest of this book explores. If they’d understood capitalism as a finite system, Romer and his supporters might have explored the massive implications of this extraordinary statement – but they did not. They assumed the economy was, as in the textbooks, composed of price makers and price takers: rational individuals trying to pursue their self-interest through the market.

Fully Automated Luxury Communism
by Aaron Bastani
Published 10 Jun 2019

If information goods are to be distributed at their marginal cost of production – zero – they cannot be created and produced by entrepreneurial firms that use revenues obtained from sales to consumers to cover their costs. If information goods are to be created and produced … (companies) must be able to anticipate selling their products at a profit to someone. Remarkably, two of the most esteemed economists in the world were conceding a quite remarkable truth: the price mechanism had broken down for what should be the most valuable part of the commodity – its instructions. Economics, for so long obsessed with the issue of dealing with scarcity, began to see glimpses of something beyond it – the only problem being this broke down the system of incentives by which people are meant to create things under capitalism, namely profit.

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Abundance beyond Value There is one final issue, however, that many in the industry appear unwilling to face. It is a problem born of success, much as the Horse Manure Crisis of 1894 placed the limits of the First Disruption against the abundance of the Second. It is also a problem born of extreme supply, which, as we’ve already seen, is difficult to reconcile with the price mechanism. You see, there is so much mineral wealth beyond our planet, on other planets, moons and asteroids, that the moment off-world mining becomes a viable industry, the price of the very commodities investors had previously found so precious will collapse. The most instructive example here is the asteroid 16 Psyche, located in the belt between Mars and Jupiter.

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The mode of production of material life conditions the general process of social, political and intellectual life. It is not the consciousness of men that determines their existence, but their social existence that determines their consciousness. Marx proceeded to say something of supreme importance, especially given what is happening to the price mechanism for information goods, even according to the likes of Paul Romer and Larry Summers: At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production or – this merely expresses the same thing in legal terms – with the property relations within the framework of which they have operated hitherto.

The Bitcoin Standard: The Decentralized Alternative to Central Banking
by Saifedean Ammous
Published 23 Mar 2018

Neither the suspension of the gold standard nor the wartime spending did anything to alleviate the Great Depression. As the major economies of the world went off the gold standard, global trade was soon to be shipwrecked on the shores of oscillating fiat money. With no standard of value to allow an international price mechanism to exist, and with governments increasingly captured by statist and isolationist impulses, currency manipulation emerged as a tool of trade policy, with countries seeking to devalue their currencies in order to give their exporters an advantage. More trade barriers were erected, and economic nationalism became the ethos of that era, with predictably disastrous consequences.

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There must be more to socialist failure than just incentives, and Mises was the first to precisely explicate why socialism would fail even if it were to successfully overcome the incentive problem by creating “the new socialist man.” The fatal flaw of socialism that Mises exposed was that without a price mechanism emerging on a free market, socialism would fail at economic calculation, most crucially in the allocation of capital goods3. As discussed earlier, capital production involves progressively sophisticated methods of production, longer time horizons, and a larger number of intermediate goods not consumed for their own sake, but only produced so as to take part in the production of final consumer goods in the future.

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As discussed earlier, capital production involves progressively sophisticated methods of production, longer time horizons, and a larger number of intermediate goods not consumed for their own sake, but only produced so as to take part in the production of final consumer goods in the future. Sophisticated structures of production only emerge from an intricate web of individual calculations by producers of each capital and consumer good buying and selling inputs and outputs to one another4. The most productive allocation is determined only through the price mechanism allowing the most productive users of capital goods to bid highest for them. The supply and demand of capital goods emerges from the interaction of the producers and consumers and their iterative decisions. In a socialist system, government owns and controls the means of production, making it at once the sole buyer and seller of all capital goods in the economy.

Keynes Hayek: The Clash That Defined Modern Economics
by Nicholas Wapshott
Published 10 Oct 2011

“There is little ground for believing that a system with the modern complex credit structure will ever work smoothly without some deliberate control of the monetary mechanism,” Hayek wrote, “since money by its very nature constitutes a kind of loose joint in the self-equilibrating apparatus of the price mechanism which is bound to impede its working. The aim of any successful monetary policy must be to reduce as far as possible this slack in the self-correcting forces of the price mechanism, and to make adaptation more prompt so as to reduce the necessity for a later, more violent, reaction.”42 But, in a warning to those like Friedman who would come to resort to quantitative monetary theory as a cure-all, Hayek suggested there were strict limits to this means of managing the economy.

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As Hayek put it, “Socialism promised to fulfill our hopes for a more rational, more just world. And then came [Mises’s Socialism]. Our hopes were dashed. Socialism told us that we had been looking for improvement in the wrong direction.”1 Mises’s principal objection to a communist or socialist society was that it ignored the price mechanism he believed essential for any economy to operate efficiently. He argued in Economic Calculation that because in a socialist society the government owned the main industries—“the means of production”—and therefore set the prices of goods, the key purpose of prices, to distribute scarce resources, was made redundant.

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The nub of the issue, according to Hayek, was that by reducing interest rates, the central bank interfered in the relationship between savings and investment. He and the Austrian School believed that all markets over time, including the market in money, would reach a state of equilibrium where the supply of goods from manufacturers and demand came to be matched. Hayek suggested that the price mechanism reflected the tendency toward equilibrium and that any attempt to artificially alter prices would have dire consequences. In his view, to tamper with prices was merely to tinker with the symptoms of the shift toward equilibrium. To artificially reduce interest rates, or the price of borrowing money, merely led to price inflation, while raising interest rates artificially meant encouraging a contraction of business activity (a slump).

Sabotage: The Financial System's Nasty Business
by Anastasia Nesvetailova and Ronen Palan
Published 28 Jan 2020

Since the implication of the theory is that those businesses who play by the rules will only be delaying and deferring the inevitable – loss of profit and collapse – while running at very low profitability in the meantime, the question arises whether those businesses may not seek a more permanent solution to their problem, a more permanent ‘disequilibrium’ in the markets, to ensure that the discipline of the price mechanism may apply to others, but less so to them. Perhaps, and this is our core contention, the business of finance is not that different to other businesses. There is a long tradition of thought and research that shows how successful industrial or services businesses seek ways of interfering with the market, by influencing it, changing it in such a way that competition rules do not apply to them – and, ideally, exclusively not to them.

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We demonstrate that in each of the selected cases we study profitable transactions or ‘deals’ did not arise from a competitive edge in skills, capacity, expertise, hard work or superior knowledge (known as theory of asymmetrical information). Instead, they involved elements or attempts at controlling markets; that is, sabotaging the price mechanism, through either internal misrepresentation of information or facts, or predatory practices that are presently or potentially damaging to clients, competitors or the government, or a combination of all three. Specifically, what is often presented as isolated scandals in the financial system falls into one of the three categories of sabotage: sabotaging the clients, sabotaging competitors or sabotaging governments (or simultaneously all three).

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To resolve Volcker’s paradox, and to understand Veblen’s theory of sabotage, we need to turn to the dilemma of profitability. THE DILEMMA OF PROFITABILITY There is no better way to start than with an idea that is taught to every student of economics around their third, or perhaps fourth, week of Economics 101. After learning about the workings of the price mechanism in competitive markets and the behaviour of (rather selfish) utility-maximizing consumers, students are usually directed to a chapter called ‘Market Equilibrium under Perfect Competition’. There they discover, alas, that it is next to impossible for firms to make profits in perfectly competitive markets.

Cogs and Monsters: What Economics Is, and What It Should Be
by Diane Coyle
Published 11 Oct 2021

As history—and Red Plenty—reveal, the market version proves superior in practice because the price mechanism summarises, albeit imperfectly, the information about supply and demand conditions that brings about the allocation of resources to production of all the goods and services in the economy. This is the point made by Hayek in his classic article, ‘The Use of Knowledge in Society’ (1945). He argued that the information a central planner would need in order to achieve efficient economy-wide production can never be known by one person or organisation. The vast amount of necessary information is decentralised, and the price mechanism can co-ordinate it better than the planner can extract it.

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However, Sandel is surely correct to argue that some values cannot be meaningfully expressed in terms of money, and that to do so can seem to demean other important (non-monetary) values. We economists would do better to accept that many people find it genuinely unethical to put a price on biodiversity or the climate, even as we argue that price mechanisms—market processes—can help protect species or reduce CO2 emissions. It would make for a more fruitful conversation with our critics. What markets do brilliantly, nevertheless, is co-ordinate the use of resources in a process of discovery and challenge. The information signalled by the price set by demand and supply is a wonderful co-ordinating device.

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Transport economics has had many policy applications. Daniel McFadden was co-recipient of the 2000 Nobel memorial prize for his development of econometric methods for predicting passenger demand, as applied in a now-classic example to San Francisco’s BART authority (McFadden 1974). Economists have developed road pricing mechanisms and congestion charges. In many places, before the days of ride-sharing services, there were shortages of taxis, sustained by barriers to entry in the form of licences. A taxi licence or medallion was a valuable piece of property, and incumbents ardently resisted the issue of new ones no matter how acute the taxi shortage.

Hacking Capitalism
by Söderberg, Johan; Söderberg, Johan;

This highly distributed labour process stretches the organisational limits of the firm. Too many people have to be involved in setting a standard for them all to fit on a payroll. Corporations enlarge the labour pool beyond the in-house staff by involving their customers in the development process. But the price mechanism acts yet again as a limitation on the productivity of labour. Elementary economic theory tells us that a positive price on information reduces the number of buyers. That becomes a real constraint when the same people are the main developers of the service. It is for this reason that companies are experimenting with alternative business models that circumvent the direct point of sale.

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A major drawback with all of these options is that the company gives up control over the consumer market when it suspends its right to exclude non-paying users. There is a way for corporations to have it both ways, i.e. to stay in control while expanding the pool of developers beyond the limits of the price mechanism. Corporations can take advantage of non-paying, illicit uses of their service. This helps to explain how the software-, music- and film-industries sometimes benefit from pirate sharing.14 The economist Oz Shy comes up with some interesting results from his study of the software sector. His point of departure is that illicit, non-paying software users, or so-called ‘freeriders’, expand the total pool of users of a particular software, with the outcome that the utility of the program is enhanced for paying software users.

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In his view the network is distinct from both the market and firm. Benkler’s argument builds on the theories of the economist Ronald Coase. In 1937, Coase put his finger on the fact that the agents operating on the free market were firms. The existence of firms contradicts the market principle since the firm has internally dissolved the price mechanism. It runs counter to the assumption in economic theory that markets are prevalent because they are the most efficient method to organise economic interactions. Coase’s response was that firms emerge when the transaction cost from coordinating buyers and seller are higher than the cost of a hierarchic organisation.6 Benkler adds to Coase’s reasoning by saying that falling costs of communication technology have given rise to networks of volunteer developers.

Marxian Economic Theory
by Meghnad Desai
Published 20 May 2013

The link between profits and surplus value becomes complex and in fighting against exploitation workers cannot fight against their own industry's owners in isolation; they have to fight the whole system. The price mechanism thus divides up total surplus value into profits of different industries such that rates of profit are equal. (There is a further division of profits into interest, ground rent, etc., which Marx discusses in Vol. Ill). The condition that total surplus value equals total profits is not just another equation but a way in which, for Marx, the price and value systems are linked up. For Bortkiewicz, the price mechanism has the role of allocating total value produced into different incomes (wages, profits, etc.) and different total revenue after sale for each Department in such a way that the rate of profit is equal.

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It is not a 'behavioural' rule, nor is it a necessary part of Mar:'s value theory.3 It is a way of reducing the number of unknowns in the transfonnation problem from six (three gi and three ri) to four, since the four equations in the price domain can only solve for four unknowns. If the rates of exploitation diffc:"ed ss from one industry to another and the organic composition did as well but the rate of profit was equal across industries, then the'explanation of 'dissolving' of value relations becomes very complex. Why is this so? The role of price mechanism and exchange in Marx' s theory is to mask surplus value and make it appear legitimate as profit. The profit of anyone particular firm, industry or Department does not equal the surplus value produced by it. The equalisation of the rate of profit across industries in price terms means that price movements and 'behavioural' decisions of capitalists regarding choice of techniques etc. can be seen as equalising profit rates.

Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown
by Detlev S. Schlichter
Published 21 Sep 2011

Such a crisis theory was first developed by the British Currency School in the nineteenth century but had found a full and satisfactory elaboration only through the Austrian School in the early twentieth century, not least by Mises himself.17 But underconsumption theories were not dead. They once again rose to prominence in the form of Keynesianism in the 1930s, which has constituted the most influential underconsumption theory to this day. All underconsumption theories suffer from an irrational fear of savings and a lack of appreciation of the pricing mechanism. Saving, consumption and investing are interconnected and coordinated via market prices, including interest rates. Saving is the basis for prosperity. No society has ever risen, nor could any society conceivably ever rise, out of poverty and into prosperity via consumption. It is saving and production that generate wealth.

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And those who take his savings in the meantime and use it to build productive capital sell their produce practically to the same saver at the point when he finally wants to consume. Saving means postponing consumption, not nonconsumption. To explain the origin of a recession it is not sufficient to point to the level of savings, which by itself can never constitute a problem. One needs to explain why the pricing mechanism that coordinates the various activities in the economy fails, and for this, money is the prime candidate. The so-called savings glut theory became popular before the recent financial crisis, not least because it was embraced by Ben Bernanke in a speech in 2005 before he became chairman of the Federal Reserve.18 In this speech, Bernanke did not deal with the financial crisis, which at that time had not commenced, but with a set of perceived or real imbalances, which were widely debated at the time, in particular the large and widening U.S. current account deficit.

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The problem seems to be that savings are too high relative to present investment activity in the countries where people save. The surplus savings thus washes up on U.S. shores, where it causes imbalances in the domestic economy. As in previous excess savings theories, it is difficult to see a problem in this for as long as the pricing mechanism works. The amount of saving and the amount of investment are not two uncorrelated magnitudes that we must hope will somehow match. An uninhibited market and nondistorted interest rates coordinate the two. True savings mean that real resources have been freed up from meeting present consumption needs and have become available for investment purposes.

Mastering Private Equity
by Zeisberger, Claudia,Prahl, Michael,White, Bowen , Michael Prahl and Bowen White
Published 15 Jun 2017

Closing Mechanisms The closing mechanism set out in a transaction’s SPA defines the manner in which net debt and target working capital will be measured. The two main mechanisms used in a buyout are the locked-box mechanism and the completion accounts mechanism. LOCKED-BOX MECHANISM: A locked-box mechanism is a fixed-price mechanism that sets the value of net debt and working capital at a specific date (known as the locked-box date) before the signing of the SPA. This date is usually a relatively recent one, between the last annual balance sheet date and the date of SPA signing. When this mechanism is employed, the economic risk of the target is transferred to the buyer as of the locked-box date, and the buyer receives all cash profits generated by the target from that date onward.

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In a final check of the transaction, an investment bank or accounting firm will render a fairness opinion that states whether or not a transaction is fair, with a focus on price. Closing This chapter offered insights into some of the tangible and intangible elements in the PE deal process, bidding strategies, pricing adjustments and closing mechanisms, respectively. While a thorough understanding of the deal pricing mechanics in LBOs is crucial, this is a rather ambiguous part of the investment process that is heavily influenced by experience. It requires the ability to relate to and negotiate with various parties, to recognize and adjust to changing circumstances and in particular lever one’s network of professional relationships.

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Sautter, Christina M. (2013) Auction Theory and Standstills: Dealing with Friends and Foes in a Sale of Corporate Control, Case Western Reserve Law Review, 64(2), https://ssrn.com/abstract=2207693 or http://dx.doi.org/10.2139/ssrn.2207693. Tattersall, C., Roth, P. and Pütz, V. (2012) Share Purchase Agreements: Purchase Price Mechanisms and Current Trends in Practice, Ernst & Young, http://www.ey.com/Publication/vwLUAssets/EY_TAS_-_Share_Purchase_Agreements_spring_2012/$FILE/EY-SPA%20brochure-spring-2012_eng.pdf. Notes 1 The dynamics in venture investments is different and is addressed in detail in Chapter 2 Venture Capital and Chapter 7 Target Valuation. 2 EBITDA is often used as a proxy for cash flow.

Imagining India
by Nandan Nilekani
Published 25 Nov 2008

Praful says, “Farmers in Kashmir tell me that if they could send their flower harvests into Indian markets by air, it would massively cut their losses from decay, and expand their reach across India.” Telecom and road networks also mean the chance for farmers and fishermen to negotiate prices in markets directly and discover market trends as opposed to depending on support price mechanisms and middlemen networks. Better irrigation networks mean not having to rely on a fickle-minded monsoon or free electricity for pumps—and this has a big effect. Sixty-nine percent of people in nonirrigated areas are poor, while in irrigated areas this figure falls to 2 percent. Similarly, a million rupees on roads lifts an estimated 123 people out of poverty.

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Such pricing consequently incorporates the impact of direct carbon sources such as coal plants, as well as indirect sources such as the destruction of carbon “sinks” like forests and water bodies. Such carbon pricing can only be effective if we have the governance to manage it; else it will go the way of our other environmental regulations. An effective, enforceable pricing mechanism would require an independent, institutional carbon regulator. “A carbon regulator like SEBI,” Vinod Khosla says, “would bring in both auditing and transparency, and could form a regional exchange in Asia for carbon trading.” In addition, decentralized governance—empowering towns, cities and villages—would be critical in monitoring carbon projects more effectively.

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Such decentralization of power would be especially important to enable cities and villages to immediately respond to natural crises, such as the seasonal droughts, floods and storms that are becoming commonplace. Additionally, embracing clear, ambitious environmental goals that include pollution caps would allow India to influence the terms of the global climate change debate more clearly in its favor. By accepting carbon pricing mechanisms, for instance, India gains the bargaining power to negotiate for transfers of technology and funding for emission cuts. Such negotiations are reasonable on the grounds that the rich nations with their emissions have used up a large part of the emissions “reservoir” since 1850, leading to the potentially massive climate adaptation costs for India.

Globalists: The End of Empire and the Birth of Neoliberalism
by Quinn Slobodian
Published 16 Mar 2018

For prices to serve their function, however, they must not encounter re­sis­tance. He gave the specific example of l­abor: “­Here the price mechanism is partially switched off, and real frictional losses can occur in the form of strikes and unemployment.” Luckily, he pointed out, “­labor was the most mobile and diverse of all the ­factors of production.”98 Even if unemployment figures remained constant, the ­actual mass of unemployed usually rotated in and out as ­people moved from position to position. In the demand for the “faultless functioning of the price mechanism,” Haberler conjured an image reminiscent of an enormous clockwork or factory apparatus, shuttling components from one location to the other.

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Scholars have observed that in the course of that war, all belligerent powers “moved in the direction of or­ ga­nized capitalism and war collectivism.”6 Foreign-­owned property was seized, command economies replaced market supply and demand, centralized regimes of rationing and resource allocation displaced the price mechanism, and national governments and planning boards demolished the walls of corporate secrecy, intruded into private accounts and affairs of business to gather data about production and distribution, and created what some called “war socialism” and what the German A W o r l d of W alls 29 statesman and entrepreneur Walther Rathenau called the Großwirtschaft, or “­great economy.”7 In the course of the war, the sacred nature of private property across borders was ­violated; the space of the private cap­i­tal­ist was desecrated.

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Even as the MPS met in Hong Kong, the Chinese Communist Party was planning its own institutional fix for the P ­ eople’s Republic of China. At the time, mainland China as a ­whole exported no more than the tiny colony of Hong Kong. Deng Xiaoping’s reforms started a pro­cess ­toward China’s own form of nonmajoritarian capitalism, slowly introducing market freedoms without expanding po­liti­cal repre­sen­ta­tion. The price mechanism was permitted without the mechanism of popu­lar sovereignty—­t he multiparty election. In 1979, China opened the country’s first export pro­cessing zones in the Pearl River Delta, a region of exception outside of the national tax structure that would become a defining form of neoliberal-­style development by the 1990s.100 This ­future was distant in the 1970s, however, and in the de­cade of the NIEO, the situation still looked dire to neoliberals.

Losing Control: The Emerging Threats to Western Prosperity
by Stephen D. King
Published 14 Jun 2010

While we don’t pop down to the local supermarket and studiously calculate the opportunity costs of each of our purchases, opportunity cost is still involved. Our budgets reflect scarce resources. And the way we allocate those resources depends on price. The price mechanism, in turn, is a remarkably efficient way of allowing us to make informed choices about scarcity. If something is expensive, its opportunity cost may be high. If something is cheap, its opportunity cost might be correspondingly low. Adam Smith (1723–1790), one of the economic greats and now deservedly immortalized on the Bank of England £20 note, called the price mechanism the ‘invisible hand’.8 Many people have been seduced by Smith’s ideas, sufficiently so as to claim that free markets are the sole reason behind the West’s ongoing prosperity.

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The interaction between the Western world and the emerging nations brings the politics back into economics (and, for that matter, takes the mathematics out). FAITH IN THE MARKET Market forces alone cannot deal with political economy. Nevertheless, for many years, policymakers were happy to leave difficulties over scarcity to the market and, in particular, to the price mechanism. It is easy to see why. Since the end of the First World War, the political and economic debate both among and within the major powers has focused on the relative merits of market and state as providers of our economic well-being. Early in the twentieth century, the debate became increasingly polarized through the impact of the Russian Revolution in 1917, the strengthening of the trade-union movement in the UK in the 1920s and the US Great Depression of the 1930s.

Unconventional Success: A Fundamental Approach to Personal Investment
by David F. Swensen
Published 8 Aug 2005

The distributor marketed Dividend Shares at the previous day’s liquidating value “plus a premium of 8-2/3 percent of the offering price” (i.e., slightly less than 9-1/2 percent of liquidating value).19 The offering price remained good until noon on the offering day. In essence, for the entire morning of any given trading day distributors offered Dividend Shares at the previous day’s price. Even though the stale-pricing mechanism theoretically allowed individual investors to make profits by trading at yesterday’s prices, the nearly 9.5 percent load effectively eliminated the possibility of individual investors exploiting profitable arbitrage opportunities. Dealers, however, faced no such hurdle, as load-free trading allowed them to take advantage of the system.

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Finally, the Investment Company Act of 1940 eliminated the two-price system, forcing fund management companies to find new methods of fleecing mutual-fund investors. SEC-Mandated Stale Prices To the continued disadvantage of individual investors and in spite of the Investment Company Act of 1940’s proscriptions, large investors found ways to exploit the newly revised mutual-fund pricing mechanisms. Even though the SEC Report on Investment Trusts and Investment Companies recognized that “if both the sales and redemption prices were based on the closing asset value on the day of the receipt of the order, many abusive trading practices of distributors and dealers which existed or were possible under the two-price system could be eliminated,” the 1940 Act failed to institute such a system.

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Pilgrim Baxter & Associates agreed to a $100 million settlement, while neither admitting nor denying guilt.38 Stale pricing of mutual-fund shares provided market-timing opportunities for bad actors during the entire history of the mutual-fund industry. In the 1920s and 1930s, stale pricing underlay the investor-unfriendly two-price system. In the 1940s, 1950s, and 1960s, stale pricing resulted from backward-looking pricing mechanisms that allowed investors to trade today at yesterday’s prices. In the 1970s, 1980s, 1990s, and 2000s, stale pricing occurred in mutual funds holding securities that traded in different time zones or that traded infrequently, or both. Over the decades, opportunities for profit from stale pricing persisted, even as the targets for ill-gotten gains changed.

The Limits of the Market: The Pendulum Between Government and Market
by Paul de Grauwe and Anna Asbury
Published 12 Mar 2017

I argued earlier that every government action which attempts to defend collective interests will harm private interests. Such policies are also coercive in character. To start with, taxes must be levied, and they are imposed on individuals against their will. Furthermore, the entirety of the collective action is aimed at changing the behaviour of individuals. That can be achieved gently through the price mechanism. For example a tax on products which pollute the environment will raise their price. Consumers remain free to buy the product, but because it has become more expensive, many consumers will buy less of it. Coercion is unavoidable, even with this soft approach, because it involves levying a tax.

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This protective mechanism could also take other forms such as import protection or protection against the entry of newcomers into a market. It was the conviction of Polanyi that these protective mechanisms will destroy the market system, as they eliminate its flexibility. In particular it makes the price mechanism that should guide the system towards an equilibrium unreliable. As a result, the market system will stop producing the best possible outcome for everybody. It cannot be relied upon to produce growth and innovation. This will in the end lead to its demise as it is widely perceived to be inefficient and corrupt.

Automation and the Future of Work
by Aaron Benanav
Published 3 Nov 2020

It is whether these technologies—advanced robotics, artificial intelligence, and machine learning—have so accelerated the rate of job destruction and so diminished the rate of new job creation that increasing numbers of people are already finding themselves permanently unemployed. If so, that would completely upend the normal functioning of capitalist economies. This insight, on which the automation theory is based, was stated most succinctly by Nobel Prize–winning economist Wassily Leontief in 1983. The “effective operation of the automatic price mechanism,” he explained, “depends critically” on a peculiar feature of modern technology, namely that in spite of bringing about “an unprecedented rise in total output,” it nevertheless “strengthened the dominant role of human labour in most kinds of productive processes.”19 In other words, technology has made workers more productive without making work itself unnecessary.

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Both Friedrich Hayek and Milton Friedman advocated for UBI, in the form of a negative income tax, as a replacement for welfare programs: instead of funding public projects aimed at reducing poverty, people should be given enough money to raise them above the poverty line.29 This proposal was of a piece with Friedman’s larger neoliberal worldview.30 Instead of trying to resolve market failures by supplementing private activity with public activity—public education, healthcare, housing, regulations on pollution, and so forth—Friedman argued that states should bring more aspects of life within the purview of the price mechanism. He saw the market as the very foundation of freedom, responsibility, and self-respect. On this view, the poor did not need public assistance; they needed money, so that they could reimmerse themselves in markets. Today, the most fulsome right-wing arguments for UBI are to be found in the writings of the infamous racist social critic Charles Murray, who has taken up Friedman’s baton.

Vulture Capitalism: Corporate Crimes, Backdoor Bailouts, and the Death of Freedom
by Grace Blakeley
Published 11 Mar 2024

Yet the designation of the corporation as an “economic” institution disguises the forms of “private government” that obtain within the firm.31 And the understanding of the state as a political institution insulated from “the economy” obscures how the exercise of state power is shaped by a process of social struggle in which capital dominates.32 The fusion of political and economic power in capitalist societies means, Meiksins Wood argues, that democracy “has become synonymous with socialism.”33 To understand socialism in this way, we must accept that the divide between capitalism and socialism is not defined by technical questions like the operation of the price mechanism, the extent of planning or markets, or even the balance between the public and private sector. These factors are all important in shaping the way socialist and capitalist societies function, but the difference between the two is far simpler. A capitalist society is a class-divided society in which power is monopolized by capitalists and their allies.

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Naturally, these choices tended to consolidate the status quo and benefit the powerful. The significant uptick in inflation seen around the world in the wake of the pandemic has been presented by many as a “natural” result of the decision to lock down and then reopen the global economy. Governments upset the operation of the price mechanism, and now they are paying the price. But the inflationary crisis we’re seeing today is not natural; it is political. Some economic actors—those with the most power—have made huge amounts of money from the crisis, while others have been plunged into poverty. The relentless pursuit of profit among a few powerful actors in the global economy is creating the inflationary pressure that everyone else is being forced to pay for.

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A firm that developed a powerful production technique should be able to charge higher prices than its competitors for a while to make sure the entrepreneur was fairly compensated for the investment undertaken in developing the innovation. If that meant that the most innovative firms sometimes became monopolies, so be it. Entrepreneurs needed to be rewarded for their brilliance, or they wouldn’t innovate and capitalism would stagnate. In place of Adam Smith’s invisible hand regulating supply and demand through the price mechanism, we find the grasping fist of the entrepreneur, pulling everyone else forward by their bootstraps. But Schumpeter did believe that the rewards of monopoly power would—or, more accurately, should—always be temporary. If a firm did not continue to innovate once it had reached a market-dominating position, then it would eventually be outcompeted by other firms.

When the Money Runs Out: The End of Western Affluence
by Stephen D. King
Published 17 Jun 2013

This was a reaction to the excess inflation of the 1970s, a period during which central banks were too often required to do the bidding of their political masters. For a while, inflation was endemic, leading to losses for those on fixed monetary incomes – most obviously pensioners – and huge distortions to the price mechanism – Adam Smith's ‘invisible hand’. By making central banks independent, and thus no longer subject to the temptations of the electoral cycle, the hope was that inflation would eventually be brought back under control, leaving the world a much happier place. The financial crisis has destroyed this separation of monetary church from state.

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Whether thanks to Adam Smith with his invisible hand or to Friedrich Hayek with his hatred of central planning,1 proponents of free markets had won the argument. They knew that a happy and prosperous society depended on the decisions of millions of individuals whose actions were ‘coordinated’ through the miracle that is the price mechanism. Rapid global growth was a direct result of the spread of market forces around the world. Those who resisted this process would ultimately lose out. Deregulation and privatization spread like wildfire, such was our collective faith in the wisdom of markets. The Soviet model had failed. The Asian model, so it seemed, was also in the process of failing.

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Central banks can attempt to get around this by buying an ever wider range of assets to encourage a flow of credit to the private sector too – in September 2012, for example, the Federal Reserve announced ongoing purchases of mortgage-backed securities – but this, surely, compounds the problem: if interest rates on an ever increasing amount of debt are determined by the central bank, capital markets become totally redundant. They may not have always worked well in the past but their complete removal surely opens the way for a huge misallocation of capital: absent a functioning price mechanism, it's difficult to see how investment decisions can be made on an informed basis, leading, in turn, to a much lower growth rate of GDP in the future. So there can be no doubt that high levels of government debt have to be tackled, even in a world where central banks are free to print money. The costs may not be so immediate – in contrast to the Greek and Spanish experience – but high and growing levels of government debt eat away at the fabric of economic progress: one way or the other, they squeeze out the market.

Reinventing the Bazaar: A Natural History of Markets
by John McMillan
Published 1 Jan 2002

The business press proclaimed eBay’s reinvention of markets. BusinessWeek said that, with its online auctions, “eBay has single-handedly created a new market.” According to the Economist, “Internet auctioneers such as eBay may be the instigators of a revolutionary leap forward in the efficiency of the price mechanism.”5 The eBay web site is a high-tech flea market. It has over 42 million registered users; the typical user spends twenty minutes a day on the site. Around five million auctions are running on any given day, selling everything from cast-offs to fine art. As I write this, for example, there are nearly fifteen hundred items listed under the heading “Victorian tradecards”—which, it turns out, are a nineteenth-century version of junk mail. eBay has created a global market for goods that previously had a purely local market.

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The open IPO, Hambrecht says, “delivers a price that is a lot closer to the real market demand than an artificially negotiated price.” While “the original business model was to see if we could put together the breadth and power of the web with an auction process,” the difficult part of it was getting “a different pricing mechanism in a market that was used to negotiated pricing.” The open IPO is “inherently a more efficient and cheaper process.” An early sign of the potential of IPO auctions was the enraged reaction from those doing business in the entrenched way. An industry observer remarked of Hambrecht, “Other investment banks act as though he’s the anti-Christ.”11 While entering the IPO business and dissuading issuing firms from using the big-name investment banks was an arduous process, the new way of running IPOs won a few early converts, as firms like the online magazine Salon.com in 1999 and Peet’s Coffee & Tea in 2001 chose to go public via open IPOs.

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One wine auction site, for example, packages bottles into sets (usually different vintages from a particular vineyard). It then accepts not only bids on the individual bottles but also all-or-nothing bids on the package. If a bid for the package exceeds the total of the high bids for the individual bottles, the package bidder wins. Hybrid pricing mechanisms—setting prices while allowing some auction-like elements of information generation—are used by online sellers of tickets for air travel and sporting events. Before the internet, fixing ticket prices in advance meant that when demand was unexpectedly low, seats went unfilled on planes and in stadiums.

Global Spin: The Corporate Assault on Environmentalism
by Sharon Beder
Published 1 Jan 1997

Other environmental resources such as clean air are not given a price at all, and are therefore viewed by economists as free. These economists argue that environmental assets tend to be overused or abused because they are too cheap. Their solution is to create a pricing mechanism so that environmental values are internalized by businesses that harm the environment: the extra costs involved in price-based economic instruments such as charges, taxes and subsidies are supposed to provide an incentive to change environmentally damaging behaviour. Such pricing mechanisms are also supposed to prevent the depletion of natural resources. John Hood, a visiting fellow at the Heritage Foundation and Vice-President of the John Locke Foundation, maintains: For natural resources over which property rights are relatively easy to establish, such as oil, minerals, or timber, prices serve as an early warning signal to companies about scarcity.

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In the US they have attempted to hamstring the regulatory process by advocating legislation which would ensure that regulatory efforts become too expensive and difficult to implement, by insisting on cost benefit analyses and risk assessments of proposed legislation and compensation to state governments and property owners for the costs of complying with the legislation. Throughout the Western world, these think-tanks have promoted free-market techniques such as tradeable property and pollution rights, pricing mechanisms, tax incentives, and voluntary agreements for dealing with environmental degradation. These have been taken seriously by governments and in some cases accepted by environmentalists as a valid alternative to tougher legislation (see Chapter Six). Corporations have also turned their attention to the next generation, through the development and distribution of ‘educational’ material to schools.

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47 Some think-tank economists also argue that there is little incentive to protect environmental resources that are not privately owned; their solution is to create property rights over parts of the environment that are currently free. Rights-based economic instruments such as tradeable pollution rights, for example, “create rights to use environmental resources, or to pollute the environment, up to a predetermined limit” and allow these rights to be traded.48 Rights-based measures are also a way of providing a pricing mechanism for environmental resources. A ‘proper’ price places environmental resources beyond the reach of those who wish to exploit them, or, at the very least, ensures that the social benefits of exploitation exceed the social costs, however these benefits and costs are measured. Accordingly the solution to environmental problems becomes one of ‘marketizing’ the environment through the creation of markets in pollution rights, imposing taxes or subsidies so that prices reflect social costs and awarding quotas of right to pollute.49 Both price- and rights-based measures are market-based.

The Great Economists Ten Economists whose thinking changed the way we live-FT Publishing International (2014)
by Phil Thornton
Published 7 May 2014

The way that the economy developed was therefore as dependent on a division of knowledge as on the division of labour that Adam Smith set out. It is a complex system in which millions of consumers and producers armed with types and quality of information carry out 132 The Great Economists transactions with others that in turn send new signals and add to people’s knowledge. In Hayek’s view, the price mechanism of the free market is a powerful tool to enable people to overcome the fact that they do not have perfect knowledge. Each change in price gives people new information to incorporate as they seek to make the optimal decision for themselves. The key dictation is that the market equilibrium is a process not a state.

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In other words, public goods are those whose consumption by one person does not mean less consumption by anyone else. The features of public goods stand in direct contrast to those of ordinary goods, such as bread. A loaf eaten by one consumer is not available to anyone else. As a result, Samuelson said, there was no ‘decentralised’ pricing mechanism that would lead the private sector to provide those goods. The private sector generally does not guarantee efficient production of public goods because it cannot capture the wider benefits of the GPS system or, say, a cure for malaria. For this reason private companies are unlikely to produce that good or service, knowing they will not get rewarded for it.

Trust: The Social Virtue and the Creation of Prosperity
by Francis Fukuyama
Published 1 Jan 1995

This apparent contradiction between the competitive free market and the cooperative yet authoritarian firm was the starting point of a seminal article written in the 1930s by the economist Ronald Coase.11 Coase noted that the essence of the market was the price mechanism, which brought supply and demand into equilibrium, but that within the firm, the price mechanism was suppressed and goods were allocated by command. If the price mechanism was deemed so efficient, the question arose: Why did firms exist at all? It is conceivable, for example, that cars could be manufactured entirely without car companies in a decentralized market. One firm would sell a car design to a final assembler, which would purchase the major components from subcontractors, which would in turn purchase the parts for subassemblies from other independent parts suppliers; the assembled car could then be sold to an independent marketing organization, which would sell it to a dealer and thence to the final consumer.

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Boone, 204 Piore, Michael, 103, 229 Pitney-Bowes, 65, 79, 275 Pitts, Jesse, 116 Poland, 356, 361 Political Confucianism, 84, 85, 92, 350 Political economy, 18 Polygamy, 291 Porcelain manufacturing, 81 Pornography, 316 Portugal, 41 Poverty, 38, 62, 303, 353 Preindustrial societies, 45-46, 63, 132, 313 Presbyterians, 289 Presidents’ Council (Japan), 130, 197 Prestowitz, Clyde, 14 Price mechanism, 200 Pride, 358 Primogeniture, 88, 116, 130, 173-174 Principles of Scientific Management, The (Taylor), 225, 231 Privacy, right to, 316 Professional associations, 157, 309 Property rights, 63-65, 87, 150, 223, 275, 336, 350 Protestant Ethic and the Spirit of Capitalism, The (Weber), 37, 40, 43-46 Protestantism, 44-47, 142, 156, 279, 283, 286-294, 336 Protestant Reformation, 40, 44, 154, 286 “Protestant Sects and the Spirit of Capitalism” (Weber), 46 Public goods, 155 Puritanism, 36, 44, 183, 279, 289, 290, 292 Purposive contracts, 222-223 Putnam, Robert, 56, 100, 104, 105, 108, 109, 309 Qing China, 81 Quakers, 46, 289 Quality circles, 262, 317 Quayle, Dan, 61, 67 Railroads, 47-48, 273-274 Rathenau, Emil, 212, 213 Rational choice theory, 17 Rational desire, 358 Rational utility maximization, 18-21, 33-35, 37, 38, 41, 46, 351, 358, 360 Reciprocal obligation, 186, 188-193, 195, 197, 202, 205-207, 260-262 Recognition, desire for, 6-7, 358-360 Redding, Gordon, 75 Reformation, 40, 44, 154 Regionalism, in South Korea, 140, 141 Reliability, 43, 46 Religion, 28, 54, 131, 141-142, 154-155, 177-180, 182-183, 279-280, 283-294, 319; see also specific religions Religion of China, The (Weber), 65 Renaissance, 108 Renault, 114, 117, 123 Republic of Korea: see South Korea Restructuring, 48, 185 Revealed preference, 19 Reverse racism, 295 Riemon, Soga, 169 Rieppel, Paul, 232 Riesman, David, 277 Rights, 10, 314-317 Riots, 298 Risk, attitudes toward, 36-37, 46 Rockefeller, Jay, 78 Rockefeller, John D., 276 Rockefeller, Nelson, 78 Roosevelt, Theodore, 215, 276 Rosenberg, Nathan, 154 Rotating credit associations, 300-302 Rousseau, Jean-Jacques, 285 Royal Dutch/Shell, 212 Rules, proliferation of, 222-224 Russia, 28, 356, 357 Sabel, Charles, 103, 229, 242 Samsung Electric Company, 71, 73, 128, 134, 136, 140, 144 Samuel, Marcus, 250 Samurai class, 136, 173, 175, 350, 360 Sanyo, 79 Sardinia, 100 Sato, Eisaku, 173 Scargill, Arthur, 239 Schumpeter, Joseph, 159, 311 Scientific management, 225-230 Scientific method, 350 Sears, Roebuck, 65, 79, 275 Second Treatise on Government (Locke), 285 Self-interest, 18-19, 21, 26, 149, 156 Semiconductor industry, 143, 170 Seniority-based compensation system, 172, 188 Seven Samurai, The (film), 183 Shame, 358 Sharecropping, 107 Sharpton, Al, 295 Shell Oil, 250 Sheng Hsuan-huai, 79 Sherman Anti-Trust Act, 204, 214, 215, 276 Shimomura family, 169 Shipbuilding industry, 16, 139, 144 Shiseido, 79 Shotoku, Prince Taishi, 177 Sicily, 100, 107 Siemens, 31, 212, 213 Silicon Graphics, 165 Silla dynasty, 132 Simint, 103 Singapore, 70, 85, 92, 93, 179, 329, 337, 338 Single-parent families, 51, 61-62, 67, 309, 353 Slavery, 296, 302-303 Small-scale industrialization, in Italy, 97, 102-105, 108-111, 229 Smith, Adam, 7, 13, 17-18, 224, 229, 259, 326, 359, 360 Smith, Joseph, 290, 291 Smith, Roger, 262 Snecma, 123 Social capital, 10, 11, 16, 97, 101, 102, 150, 321, 325, 336, 355, 356, 358, 362 acquisition of, 26-27 defined, 26 distribution among societies, 28 economic consequences of, 27, 29 spontaneous sociability as subset of, 27 Social class in France, 120-121 in Great Britain, 158-159, 249-251 in South Korea, 132, 136 Social virtues, 43, 46, 48 Soft authoritarianism, 85 Sony America, 181 Southern Christian Leadership Conference, 304 South Korea, 16, 20, 127-145 adoption in, 132 auto industry in, 265 chaebol system in, 73, 128-130, 133-138, 142, 144, 145, 333 concentration of industry in, 128-129 familism in, 63, 128, 131, 133, 134, 137, 145, 331-332 family structure in, 130-132, 336 firm size in, 29, 71, 163, 327, 329, 332, 333 industrial policy and structure in, 127-128, 132-137 inheritance in, 130-132, 134 Japanese influence on, 128-130 labor relations in, 136-137, 264 lineage in, 132-133, 140 management style in, 128, 134-135 military service in, 140-141 nationalism in, 141 network organizations in, 73, 128-130 regionalism in, 140, 141 religion in, 131 social class in, 132, 136 state, role of, 52, 128, 137-140, 338, 344 wealth concentration in, 144-145 Soviet Jewish emigrés, 55 Soviet Union, 24, 40, 52, 54-55, 225 Sozialmarktwirtschaft, 217, 218, 232, 242 Spain, 41, 50, 55, 56 Spanish Civil War, 40 Spontaneous sociability, 10, 25, 27-29, 31, 47, 48, 50, 98, 104, 107, 149-151, 158, 159, 161, 171, 206, 207, 273, 281, 304-306, 318, 333, 338, 339, 342, 355, 357, 358 Ssangyong, 133 Stalin, Joseph, 55, 225 Standard Oil trust, 215, 274, 276 Stark, Rodney, 289 State, role of, 15-17, 27, 30, 52-54, 57, 72, 81-82, 101-102, 122-125, 128, 137-140, 279, 338, 339, 344 Status contracts, 222 Steel industry, 16, 124, 143, 211, 219, 226, 256, 341 Stein-Hardenberg reforms (1807-1812), 246-247 Steuart, James, 360 Stigler, George, 13 Stollwercks, 213 Strikes, 136-137, 216 Sumitomo, 7, 9, 73, 162, 166, 169, 198, 199, 205 Sung dynasty, 179 Sun Microsystems, 24, 165 Sunrise and sunset industries, 15-16 Sun Yat-sen, 138 Suzuki, Shosan, 182-183 Sweden, 29, 162, 163, 212, 288, 328 Switzerland, 29, 162, 163, 212 Syngman Rhee, 139, 142, 143 Taehan Textile and Tachan Electric, 134 Taika period, 131, 182 Taiwan, 16, 29, 50, 70, 81, 92, 93 cottage industries in, 87 familism in, 67, 74, 86-87, 329, 331 firm size in, 29, 30, 71, 326, 327, 329, 332, 333 network organizations in, 73, 197, 198 state, role of, 52, 57, 72, 82, 138, 338 Taoism, 84 Tariffs, 14 Taylor, Frederick W., 225-227, 231, 232, 255 Taylorism, 225-234, 255-260, 266, 313, 317 Technological innovations, 23-26, 30, 125, 316-317, 340-341, 353, 354 Terza Italia, 100-108 Textile industry, 16, 225 Thailand, 71, 338 Thatcher, Margaret, 251 Theory of Moral Sentiments, The (Smith), 18, 359 Thick description, 34 Thomas, Robert, 47, 63, 122 Thomson-CSF, 123 Thrift, 37 Thurow, Lester, 28 Time-and-motion studies, 225 Tocqueville, Alexis de, 39, 50, 55-56, 118, 120, 122-124, 235, 272-273, 290 Toffler, Alvin, 23 Toffler, Heidi, 23 Tokugawa period, 132, 179, 182, 183, 191 Tönnies, Ferdinand, 273 Toshiba, 165 Toyo Kogyo, 199 Toyota Motor Company, 8, 48, 163, 197, 201, 257-258, 263 Tracking system, 239-240 Trade associations, 117, 204, 216, 309 Transaction costs, 27-28, 151, 153, 200-202, 204, 342, 352 Trinidadians, 303 Trusts, 204, 214, 276 Tu Wei-ming, 84, 85 Tyson, Laura, 14 Ukraine, 356, 357 United Auto Workers (UAW), 226, 262, 263 U.S.

Future Politics: Living Together in a World Transformed by Tech
by Jamie Susskind
Published 3 Sep 2018

The results OUP CORRECTED PROOF – FINAL, 28/05/18, SPi РЕЛИЗ ПОДГОТОВИЛА ГРУППА "What's News" VK.COM/WSNWS Algorithms of Distribution 269 they are shown directly delimit the set of options from which they choose in making their purchases.29 Often algorithms will apply class distinctions: online shopping platforms routinely display advertisements for payday loans to less well-off groups.30 Every algorithm of this kind will benefit some groups more than others. The question is, whose interests should they prioritize? The seller or the buyer? Rich or poor? These are quintessential questions of distributive justice. Algorithms and Price Finally, algorithms increasingly intervene in the most fundamental machinery of the market economy: the price mechanism. Cus­ tomers may be charged more or less depending on where they live (outlets like Staples charge differentially for the same product depending on the postcode of the buyer),31 the time of day (gas stations charge more in hours of peak demand),32 and the weather outside (vending machines can use algorithms to vary prices according to the heat).33 These are simple examples but the possibilities are much more radical.

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Not so in the digital lifeworld.When I buy my groceries using a digital application it might be hard to know if the price displayed has been tailormade for me, based on my past spending habits and whatever else the vendor has learned about me. OUP CORRECTED PROOF – FINAL, 28/05/18, SPi РЕЛИЗ ПОДГОТОВИЛА ГРУППА "What's News" VK.COM/WSNWS 270 FUTURE POLITICS Algorithmic interference with the price mechanism raises ­profound questions of distributive justice. Is it just for people to pay different prices for the same thing? The market already fails to guarantee that the least well-off will get enough or receive ­priority in the allocation of scarce social goods. Nor does it ensure equality of opportunity, or that people get what they deserve.

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32 OUP CORRECTED PROOF – FINAL, 28/05/18, SPi РЕЛИЗ ПОДГОТОВИЛА ГРУППА "What's News" VK.COM/WSNWS Index Jie, Ke 32 job applicants 266–7, 268 Jobs, Steve 314 Johnson, Bobby 399 Johnson, Steve 427 Jones, Steve 388 Jøsang, Audun 423 Jouppi, Norm 375 judicial system 102 Jury Theorem 224 justice algorithmic injustice 279–94 civil 259 concept 74–5, 76 conceptual analysis 81 criminal 259 as desert 260–1 as dessert 261, 262 distributive 257–70, 274, 278 and equality, difference between 259 fairness principle 353 property 313–41 in recognition 260, 271–8 social see social justice technological unemployment 295–312 Justinian, Emperor 202 Kahane, Guy 434 Kant, Immanuel 186, 272, 406 Karrahalios, Karrie 433 Kasparov, Garry 31, 36, 373 Kassarnig,Valentin 372 Keen, Andrew 376 Kelion, Leo 413 Kellmereit, Daniel 380 Kelly, Kevin 20, 21, 370, 373, 374, 375, 430 Kelly, Rick 384, 385 Kelly III, John E. 386, 388 Kelsen, Hans 103, 392 Kennedy, John F. 164, 188, 347 Kennedy, Robert F. 256 Keurig 116 Khatchadourian, Raffi 52, 382 503 Khomami, Nadia 397 Al-Khw­ār izmī, Abd’Abdallah Muhammad ibn Mūsā 94 Kim, Mark 376 King, Martin Luther 6, 180, 257, 360, 404 Kirchner, Lauren 403 Kirobo Mini 55 Kitchin, Rob 376, 377, 380, 381, 387, 388, 391, 404 Klaas, Brian 408 Kleinman, Zoe 383 Knockel, Jeffrey 399 Koch brothers 230 Kolhatkar, Sheelah 367, 423 Kollanyi, Bence 413 Korea 20 Kotler, Steven 374, 435 Krasodomski-Jones, Alex 412 Kurzweil, Ray 38, 366, 374, 436 Kymlicka, Will 418 labour market 303 Lai, Richard 386 Lampos,Vasileios 393 Landemore, Hélène 408, 411, 416 Laney, Doug 431 Langbort, Cedric 433 language importance to politics 16–17, 19 limits of 10–11 political concepts 76–80 public and private power 157 Lanier, Jaron 367, 374, 384, 400, 416, 419, 428, 431, 435 Data Deal 338 human enhancement 363 network effect 321 Silicon Valley startups 6–7 Wiki Democracy 246 Lant, Karla 376 Laouris,Yiannis 435 Large Hadron Collider 65 Larkin,Yelena 427 Larson, Jeff 403, 422 Larson, Selena 370, 421 OUP CORRECTED PROOF – FINAL, 28/05/18, SPi РЕЛИЗ ПОДГОТОВИЛА ГРУППА "What's News" VK.COM/WSNWS 504 Index law adaptive 107–10 AI Democracy 253 AI systems 31 code-ified 110–12, 245 digital 100–14 dissent 179–80 enforcement 101–7 intellectual property 332 justice in recognition 274–5 oral cultures 111–12 rule of 115 self-enforcing 101–3 supercharged state 171–2 wise restraints 185–6 written 111, 112 Lawrence, Neil 374, 388, 427 Leftwich, Adrian 389 Lenin,Vladimir Ilyich 21, 153, 370 Leonardo Da Vinci 28 Lessig, Lawrence 391, 392, 394, 420, 433 code as law 96 cyberspace as a place 97 free software 359 law enforcement through force 104, 105 privatization of force 100, 117 Leta Jones, Meg 138, 397, 432 Levellers 215–16 Levy, Steven 404 Lewis, Michael 428 liberal democracy 216–17, 246, 254 liberal-democratic principle of legitimacy 350 liberalism 77, 350 liberty 3, 10, 23, 346 concept 74–5, 76 conceptual analysis 81 contextual analysis 84 Deliberative Democracy 234 and democracy 207–8, 222, 225, 249 digital 205–7 digital dissent 179–84 digital liberation 168–71 harm principle 195–205 human enhancement 363 nature of politics 74 price mechanism 270 and private power 189–94 supercharged state 171–9 and the tech firm 188–208 transparency regulation 355 types 164–8 wise restraints 184–6 see also freedom Library of Congress 56 life-logs 63 Lincoln, Abraham 89, 210, 231, 323 Linn, Allison 398 Linux 243–4, 245, 333 Lipińska,Veronika 435 lip-reading 30 liquid democracy 242 Lively, J. 409 Livingston, James 425 Livy 216 loans, and distributive justice 267, 268 Locke, John 216, 246, 301, 323, 429 loomio.org 234 Lopatto, Elizabeth 434 lottery, work distribution via 304 Loveluck, Benjamin 378 Luca, Michael 423 luck egalitarianism 262, 307 Luddites 13 Lukes, Steven 390–1, 395, 398 Luxemburg, Rosa 348, 432 Lynch, Jack 384 Machiavelli, Niccolò 188, 217, 406, 409 machine learning 34–7, 266 algorithmic injustice 293 commons 332 data-based injustice 282 Data Democracy 248 data’s economic importance 317 distributive justice 267 future of code 98 group membership fallacy 284 OUP CORRECTED PROOF – FINAL, 28/05/18, SPi РЕЛИЗ ПОДГОТОВИЛА ГРУППА "What's News" VK.COM/WSNWS Index increasingly quantified society 61 liberty and private power 191 political campaigning 220 predictions 139, 173, 175 productive technologies 316 rule-based injustice 284 MacKinnon, Rebecca 396 Madison, James 216, 241, 369, 415 MagicLeap 59 Maistre, Joseph de 101 make-work 304 manipulation 93, 122 code 96, 97 digital liberation 170–1 harm principle 200 Mannheim, Karl 78, 390 Manyika, James 424 Mao, Huina 416 Marconi, Guglielmo 21 marginalization 273 Margretts, Helen 410 market system, and distributive justice 264–5 Markoff, John 400, 413 Martinez, Peter 413 Marx, Karl 367, 390, 398, 415, 417, 424, 425, 429, 434, 436 Communist Manifesto 326–7, 362 Direct Democracy 240–1 future of political ideas 86 justice 258 perception-control 144 on philosophers 7 political concepts 78 property 324, 326–7 sorcerer 366 workers 295, 298, 301, 307 Mason, Paul 374 Massachusetts Institute of Technology see MIT Mattu, Surya 403 Maxim, Hiram 20 Mayer-Schönberger,Viktor 387, 388, 395, 397, 427, 433 data 62, 65 forgetting versus remembering 137 505 Mayr, Otto 14, 368 McAfee, Andrew 374, 382, 390, 393, 427, 431 capital 315, 316, 334 McChesney, Robert W. 400, 427 McDermott, Daniel 390 McGinnis, John O. 416 McKinsey 295, 299 Mearian, Lucas 386 MedEthEx 108 medicine 3D printing 56–7 AI systems 31, 32, 108–9, 113 digital law 112–13 increasingly integrated technology 51, 54, 56–7 ransomware 182 robotics 54 technological unemployment 300 Medium 183 memory 136–8 Merchant, Brian 430 merit, and distributive justice 261 Mesthene, Emmanuel G. 368 metadata 63 Metcalfe’s Law 320 Metz, Cade 372, 373, 374, 375, 380 Metz, Rachel 407 Michaely, Roni 427 Microsoft acquisitions 318 chips 40 commons 332 concentration of tech industry 318, 320 Global Internet Forum to Counter Terrorism 191 HoloLens 59 patents 315 speech-recognition AI system 30 Tay 37, 346 might is right 349 military AI systems 31 brain–computer interfaces 48 sensors 50 OUP CORRECTED PROOF – FINAL, 28/05/18, SPi РЕЛИЗ ПОДГОТОВИЛА ГРУППА "What's News" VK.COM/WSNWS 506 Index Mill, James 195 Mill, John Stuart 367, 403, 406–7, 411, 414, 415 change, need for 3 Deliberative Democracy 234 democracy 223 freedom of speech, constraints on 237 harm principle 196, 198, 199, 203 liberty 195–6, 201, 203 liquid democracy 242 normative analysis 83 predictions 173 upbringing 195 Miller, David 435 Mills, Laurence 418 Milton, John 124, 167, 395 minstrel accounts 232 Mirani, Leo 396 Miremadi, Mehdi 424 Misra, Tanvi 377 MIT affective computing 53 bomb-detecting spinach 50–1 Senseable City Lab 50 Technology Review Custom 427 temporary tattoos for smartphone control 51 Mitchell, Margaret 403 Mitchell, William J. 183, 376, 405 Mizokami, Kyle 379 Moley 407 Momentum Machines 299 Montesquieu, Charles de Secondat, Baron de 358, 433 Moore, Gordon 39, 374 Moore’s Law 39–40, 41 morality AI Democracy 253 automation of 176–7 Data Democracy 249–50 Direct Democracy 240 fragmented 204, 231 harm principle 200–5 justice in distribution 261 see also ethics Moravec’s paradox 54, 382 More, Max 402, 434 Morgan, J.

Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist
by Kate Raworth
Published 22 Mar 2017

From this vantage point – counter-intuitive though it may sound – equilibrium economics actually turns out to be a form of systems analysis, just an extremely limited one. It get the results it seeks by imposing severely restrictive assumptions about how market systems behave – assumptions including perfect competition, diminishing returns, full information, and rational actors – so that no errant effects get in the way of the price mechanism’s ability to act as the balancing feedback loop that restores market equilibrium. Think of it in terms of starlings: what restrictions would you have to impose on a large flock of these birds if you wanted to make sure that they all stayed still? You could place each bird in its own narrow little coop and shut them all away in a dark, quiet room: that should encourage them to stay put.

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When launched, their analysis simultaneously raised the alarm about the state of the world, introduced systems thinking widely into policy debates, and caused an uproar amongst those committed to the goal of growth.44 Mainstream economists were quick to deride the model’s design on the basis that it underplayed the balancing feedback of the price mechanism in markets. If non-renewable resources became scarce, they argued, their prices would rise, triggering greater efficiency in their use, the wider use of substitutes, and exploration for new sources. But in dismissing World 3 and its implied limits to growth, they too quickly dismissed the role and effects of what the 1970s model simply called ‘pollution’, which – unlike metals, minerals and fossil fuels – typically carries no price and so generates no direct market feedback.

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In economic terms, healthy hierarchy means, for example, ensuring that the financial sector is in service to the productive economy, which in turn is in service to life.50 Second, self-organisation is born out of a system’s capacity to make its own structures more complex, like a dividing cell, a growing social movement, or an expanding city. In the economy much self-organising goes on in the marketplace through the price mechanism – that was Adam Smith’s insight – but it also takes place in the commons and in the household too – the insight of Elinor Ostrom and generations of feminist economists. All three of these realms of provisioning can self-organise effectively to meet people’s wants and needs, and the state should support all three in doing so.

What Would the Great Economists Do?: How Twelve Brilliant Minds Would Solve Today's Biggest Problems
by Linda Yueh
Published 4 Jun 2018

So, should Britain continue its efforts to rebalance its economy? What would Adam Smith do? Adam Smith on rebalancing the economy Adam Smith’s economic system is formulated around three pillars: the division of labour, the price mechanism and the medium of exchange (money). Both the price of goods or services and the wages of those who produce them are dictated by the price mechanism (dubbed by Smith as the ‘invisible hand’). Money has a role set by the market to pay for goods/services, and its supply should not be distorted by the state, for example via mercantilist policies where the aim of trade is to run a surplus of exports over imports and to increase a country’s store of gold and silver.

…

He had not forgotten his background in the Austrian School, which was firmly at odds with social planning and excessive government intervention in the economy. His contemporary von Mises had questioned how it would be possible for any economic system, by which he meant communism, to exist without a price mechanism to allocate and incentivize economic activity. He believed that critics of capitalism, and, at the time of the inter-war years, there were many, failed to point out how a socialist system could be properly organized. Without prices, there would be no way for the baker to know how much to sell his bread for.

The Great Economists: How Their Ideas Can Help Us Today
by Linda Yueh
Published 15 Mar 2018

So, should Britain continue its efforts to rebalance its economy? What would Adam Smith do? Adam Smith on rebalancing the economy Adam Smith’s economic system is formulated around three pillars: the division of labour, the price mechanism and the medium of exchange (money). Both the price of goods or services and the wages of those who produce them are dictated by the price mechanism (dubbed by Smith as the ‘invisible hand’). Money has a role set by the market to pay for goods/services, and its supply should not be distorted by the state, for example via mercantilist policies where the aim of trade is to run a surplus of exports over imports and to increase a country’s store of gold and silver.

…

He had not forgotten his background in the Austrian School, which was firmly at odds with social planning and excessive government intervention in the economy. His contemporary von Mises had questioned how it would be possible for any economic system, by which he meant communism, to exist without a price mechanism to allocate and incentivize economic activity. He believed that critics of capitalism, and, at the time of the inter-war years, there were many, failed to point out how a socialist system could be properly organized. Without prices, there would be no way for the baker to know how much to sell his bread for.

Why Information Grows: The Evolution of Order, From Atoms to Economies
by Cesar Hidalgo
Published 1 Jun 2015

Coase noted that economic transactions were not easy, and that the economy was not as fluid as many of his colleagues liked to assume. In Coase’s view, the economy was not a collection of fluid and frictionless market transactions but a set of islands of conscious power, shielded from each other and from the dynamics of the price mechanisms. Firms are hierarchical, Coase emphasized, and the interactions between a firm’s workers are often political. So in Coase’s view, hiring a worker was a form of contract in which a person was hired to do a task that had not yet been specified, since what a worker will be asked to do a few months down the road is rarely known when she is hired.

…

Coase dedicated much of his academic career to explaining the existence and boundaries of these islands of power. His answers become known as the transaction cost theory of the firm. Coase’s explanation of the boundaries of a firm was brilliant and simple. It was based on the idea that economic transactions are costly and not as fluid as the cheerleaders of the price mechanism religiously believed. Often, market transactions require negotiations, drafting of contracts, setting up inspections, settling disputes, and so on. These transaction costs can help us understand the boundary of the firm, since according to Coase, a parsimonious way of understanding the islands of central planning that we know as firms is to search for the point at which the cost of transactions taking place internally within the firm equals the cost of market transactions.

Other People's Money: Masters of the Universe or Servants of the People?
by John Kay
Published 2 Sep 2015

When there is a sudden surge in demand for milk, the same happens: there is a queue and those who are late to join the queue get no milk. If the surge is more sustained, dairies probably raise the price and the available supply is allocated differently. The queue rations by rejecting some demands, the market uses the price mechanism to ration by discouraging some people from buying or selling. Most securities markets – in contrast to deposit-taking institutions – ration by price. If too many people want to realise their investment in a company, the price of that company’s shares falls. The ability of savers to buy and sell shares enables companies to raise permanent capital without locking shareholders into holding their investments indefinitely.

…

This intellectual misconception behind the thought that prosperity might be enhanced by trade in baseball cards has been associated with an economic model that misunderstands the (important) role that markets play in enabling complex modern economies to manage information. Prices act as signals, and the price mechanism is an important guide to resource allocation: that does not mean that the constantly changing price on the Bloomberg screen is a complete and comprehensive distillation of the wisdom of the ages. There are many guides to value other than price, whether we are talking about a Shakespeare play or a business organisation.

…

.: Hyperion 220 Loomis, Carol 108 lotteries 65, 66, 68, 72 Lucas, Robert 40 Lynch, Dennios 108 Lynch, Peter 108, 109 M M-Pesa 186 Maastricht Treaty (1993) 243, 250 McCardie, Sir Henry 83, 84, 282, 284 McGowan, Harry 45 Machiavelli, Niccolò 224 McKinley, William 44 McKinsey 115, 126 Macy’s department store 46 Madoff, Bernard 29, 118, 131, 132, 177, 232, 293 Madoff Securities 177 Magnus, King of Sweden 196 Manhattan Island, New York: and Native American sellers 59, 63 Manne, Henry 46 manufacturing companies, rise of 45 Marconi 48 marine insurance 62, 63 mark-to-market accounting 126, 128–9, 320n22 mark-to-model approach 128–9, 320n21 Market Abuse Directive (MAD) 226 market economy 4, 281, 302, 308 ‘market for corporate control, the’ 46 market risk 97, 98, 177, 192 market-makers 25, 28, 30, 31 market-making 49, 109, 118, 136 Markets in Financial Instruments Directive (MIFID) 226 Markkula, Mike 162, 166, 167 Markopolos, Harry 232 Markowitz, Harry 69 Markowitz model of portfolio allocation 68–9 Martin, Felix 323n5 martingale 130, 131, 136, 139, 190 Marx, Groucho 252 Marx, Karl 144, 145 Capital 143 Mary Poppins (film) 11, 12 MasterCard 186 Masters, Brooke 120 maturity transformation 88, 92 Maxwell, Robert 197, 201 Mayan civilisation 277 Meade, James 263 Means, Gardiner 51 Meeker, Mary 40, 167 Melamed, Leo 19 Mercedes 170 merchant banks 25, 30, 33 Meriwether, John 110, 134 Merkel, Angela 231 Merrill Lynch 135, 199, 293, 300 Merton, Robert 110 Metronet 159 Meyer, André 205 MGM 33 Microsoft 29, 167 middleman, role of the 80–87 agency and trading 82–3 analysts 86 bad intermediaries 81–2 from agency to trading 84–5 identifying goods and services required 80, 81 logistics 80, 81 services from financial intermediaries 80–81 supply chain 80, 81 transparency 84 ‘wisdom of crowds’ 86–7 Midland Bank 24 Milken, Michael 46, 292 ‘millennium bug’ 40 Miller, Bill 108, 109 Minuit, Peter 59, 63 Mises, Ludwig von 225 Mittelstand (medium-size business sector) 52, 168, 169, 170, 171, 172 mobile banking apps 181 mobile phone payment transfers 186–7 Modigliani-Miller theorem 318n9 monetarism 241 monetary economics 5 monetary policy 241, 243, 245, 246 money creation 88 money market fund 120–21 Moneyball phenomenon 165 monopolies 45 Monte Carlo casino 123 Monte dei Paschi Bank of Siena 24 Montgomery Securities 167 Moody’s rating agency 21, 248, 249, 313n6 moral hazard 74, 75, 76, 92, 95, 256, 258 Morgan, J.P. 44, 166, 291 Morgan Stanley 25, 40, 130, 135, 167, 268 Morgenthau, District Attorney Robert 232–3 mortality tables 256 mortgage banks 27 mortgage market fluctuation in mortgage costs 148 mechanised assessment 84–5 mortgage-backed securities 20, 21, 40, 85, 90, 100, 128, 130, 150, 151, 152, 168, 176–7, 284 synthetic 152 Mozilo, Angelo 150, 152, 154, 293 MSCI World Bank Index 135 muckraking 44, 54–5, 79 ‘mugus’ 118, 260 multinational companies, and diversification 96–7 Munger, Charlie 127 Munich, Germany 62 Munich Re 62 Musk, Elon 168 mutual funds 27, 108, 202, 206 mutual societies 30 mutualisation 79 mutuality 124, 213 ‘My Way’ (song) 72 N Napoleon Bonaparte 26 Napster 185 NASA 276 NASDAQ 29, 108, 161 National Economic Council (US) 5, 58 National Employment Savings Trust (NEST) 255 National Institutes of Health 167 National Insurance Fund (UK) 254 National Provincial Bank 24 National Science Foundation 167 National Westminster Bank 24, 34 Nationwide 151 Native Americans 59, 63 Nazis 219, 221 neo-liberal economic policies 39, 301 Netjets 107 Netscape 40 Neue Markt 170 New Deal 225 ‘new economy’ bubble (1999) 23, 34, 40, 42, 98, 132, 167, 199, 232, 280 new issue market 112–13 New Orleans, Louisiana: Hurricane Katrina disaster (2005) 79 New Testament 76 New York Stock Exchange 26–7, 28, 29, 31, 49, 292 New York Times 283 News of the World 292, 295 Newton, Isaac 35, 132, 313n18 Niederhoffer, Victor 109 NINJAs (no income, no job, no assets) 222 Nixon, Richard 36 ‘no arbitrage’ condition 69 non-price competition 112, 219 Norman, Montagu 253 Northern Rock 89, 90–91, 92, 150, 152 Norwegian sovereign wealth fund 161, 253 Nostradamus 274 O Obama, Barack 5, 58, 77, 194, 271, 301 ‘Obamacare’ 77 Occidental Petroleum 63 Occupy movement 52, 54, 312n2 ‘Occupy Wall Street’ slogan 305 off-balance-sheet financing 153, 158, 160, 210, 250 Office of Thrift Supervision 152–3 oil shock (1973–4) 14, 36–7, 89 Old Testament 75–6 oligarchy 269, 302–3, 305 oligopoly 118, 188 Olney, Richard 233, 237, 270 open market operations 244 options 19, 22 Organisation for Economic Co-operation and Development (OECD) 263 Osborne, George 328n19 ‘out of the money option’ 102, 103 Overend, Gurney & Co. 31 overseas assets and liabilities 179–80, 179 owner-managed businesses 30 ox parable xi-xii Oxford University 12 P Pacific Gas and Electric 246 Pan Am 238 Paris financial centre 26 Parliamentary Commission on Banking Standards 295 partnerships 30, 49, 50, 234 limited liability 313n14 Partnoy, Frank 268 passive funds 99, 212 passive management 207, 209, 212 Patek Philippe 195, 196 Paulson, Hank 300 Paulson, John 64, 109, 115, 152, 191, 284 ‘payment in kind’ securities 131 payment protection policies 198 payments system 6, 7, 25, 180, 181–8, 247, 259–60, 281, 297, 306 PayPal 167, 168, 187 Pecora, Ferdinand 25 Pecora hearings (1932–34) 218 peer-to-peer lending 81 pension funds 29, 98, 175, 177, 197, 199, 200, 201, 208, 213, 254, 282, 284 pension provision 78, 253–6 pension rights 53, 178 Perkins, Charles 233 perpetual inventory method 321n4 Perrow, Charles 278, 279 personal financial management 6, 7 personal liability 296 ‘petrodollars’ 14, 37 Pfizer 96 Pierpoint Morgan, J. 165 Piper Alpha oil rig disaster (1987) 63 Ponzi, Charles 131, 132 Ponzi schemes 131, 132, 136, 201 pooled investment funds 197 portfolio insurance 38 Potts, Robin, QC 61, 63, 72, 119, 193 PPI, mis-selling of 296 Prebble, Lucy: ENRON 126 price competition 112, 219 price discovery 226 price mechanism 92 Prince, Chuck 34 private equity 27, 98, 166, 210 managers 210, 289 private insurance 76, 77 private sector 78 privatisation 39, 78, 157, 158, 258, 307 probabilistic thinking 67, 71, 79 Procter & Gamble 69, 108 product innovation 13 property and infrastructure 154–60 protectionism 13 Prudential 200 public companies, conversion to 18, 31–2, 49 public debt 252 public sector 78 Q Quandt, Herbert 170 Quandt Foundation 170 quantitative easing 245, 251 quantitative style 110–11 quants 22, 107, 110 Quattrone, Frank 167, 292–3 queuing 92 Quinn, Sean 156 R railroad regulation 237 railway mania (1840s) 35 Raines, Franklin 152 Rajan, Raghuram 56, 58, 79, 102 Rakoff, Judge Jed 233, 294, 295 Ramsey, Frank 67, 68 Rand, Ayn 79, 240 ‘random walk’ 69 Ranieri, Lew 20, 22, 106–7, 134, 152 rating agencies 21, 41, 84–5, 97, 151, 152, 153, 159, 249–50 rationality 66–7, 68 RBS see Royal Bank of Scotland re-insurance 62–3 Reagan, Ronald 18, 23, 54, 59, 240 real economy 7, 18, 57, 143, 172, 190, 213, 226, 239, 271, 280, 288, 292, 298 redundancy 73, 279 Reed, John 33–4, 48, 49, 50, 51, 242, 293, 314n40 reform 270–96 other people’s money 282–5 personal responsibility 292–6 principles of 270–75 the reform of structure 285–92 robust systems and complex structures 276–81 regulation 215, 217–39 the Basel agreements 220–25 and competition 113 the origins of financial regulation 217–19 ‘principle-based’ 224 the regulation industry 229–33 ‘rule-based’ 224 securities regulation 225–9 what went wrong 233–9 ‘Regulation Q’ (US) 13, 14, 20, 28, 120, 121 regulatory agencies 229, 230, 231, 235, 238, 274, 295, 305 regulatory arbitrage 119–24, 164, 223, 250 regulatory capture 237, 248, 262 Reich, Robert 265, 266 Reinhart, C.M. 251 relationship breakdown 74, 79 Rembrandts, genuine/fake 103, 127 Renaissance Technologies 110, 111, 191 ‘repo 105’ arbitrage 122 repo agreement 121–2 repo market 121 Reserve Bank of India 58 Reserve Primary Fund 121 Resolution Trust Corporation 150 retirement pension 78 return on equity (RoE) 136–7, 191 Revelstoke, first Lord 31 risk 6, 7, 55, 56–79 adverse selection and moral hazard 72–9 analysis by ‘ketchup economists’ 64 chasing the dream 65–72 Geithner on 57–8 investment 256 Jackson Hole symposium 56–7 Kohn on 56 laying bets on the interpretation of incomplete information 61 and Lloyd’s 62–3 the LMX spiral 62–3, 64 longevity 256 market 97, 98 mitigation 297 randomness 76 socialisation of individual risks 61 specific 97–8 risk management 67–8, 72, 79, 137, 191, 229, 233, 234, 256 risk premium 208 risk thermostat 74–5 risk weighting 222, 224 risk-pooling 258 RJR Nabisco 46, 204 ‘robber barons’ 44, 45, 51–2 Robertson, Julian 98, 109, 132 Robertson Stephens 167 Rockefeller, John D. 44, 52, 196 Rocket Internet 170 Rogers, Richard 62 Rogoff, K.S. 251 rogue traders 130, 300 Rohatyn, Felix 205 Rolls-Royce 90 Roman empire 277, 278 Rome, Treaty of (1964) 170 Rooney, Wayne 268 Roosevelt, Franklin D. v, 25, 235 Roosevelt, Theodore 43–4, 235, 323n1 Rothschild family 217 Royal Bank of Scotland 11, 12, 14, 24, 26, 34, 78, 91, 103, 124, 129, 135, 138, 139, 211, 231, 293 Rubin, Robert 57 In an Uncertain World 67 Ruskin, John 60, 63 Unto this Last 56 Russia defaults on debts 39 oligarchies 303 Russian Revolution (1917) 3 S Saes 168 St Paul’s Churchyard, City of London 305 Salomon Bros. 20, 22, 27, 34, 110, 133–4 ‘Salomon North’ 110 Salz Review: An Independent Review of Barclays’ Business Practices 217 Samuelson, Paul 208 Samwer, Oliver 170 Sarkozy, Nicolas 248, 249 Savage, L.J. 67 Scholes, Myron 19, 69, 110 Schrödinger’s cat 129 Scottish Parliament 158 Scottish Widows 26, 27, 30 Scottish Widows Fund 26, 197, 201, 212, 256 search 195, 209, 213 defined 144 and the investment bank 197 Second World War 36, 221 secondary markets 85, 170, 210 Securities and Exchange Commission (SEC) 20, 64, 126, 152, 197, 225, 226, 228, 230, 232, 247, 292, 293, 294, 313n6 securities regulation 225–9 securitisation 20–21, 54, 100, 151, 153, 164, 169, 171, 222–3 securitisation boom (1980s) 200 securitised loans 98 See’s Candies 107 Segarra, Carmen 232 self-financing companies 45, 179, 195–6 sell-side analysts 199 Sequoia Capital 166 Shad, John S.R. 225, 228–9 shareholder value 4, 45, 46, 50, 211 Sharpe, William 69, 70 Shell 96 Sherman Act (1891) 44 Shiller, Robert 85 Siemens 196 Siemens, Werner von 196 Silicon Valley, California 166, 167, 168, 171, 172 Simon, Hermann 168 Simons, Jim 23, 27, 110, 111–12, 124 Sinatra, Frank 72 Sinclair, Upton 54, 79, 104, 132–3 The Jungle 44 Sing Sing maximum-security gaol, New York 292 Skilling, Jeff 126, 127, 128, 149, 197, 259 Slim, Carlos 52 Sloan, Alfred 45, 49 Sloan Foundation 49 small and medium-size enterprises (SMEs), financing 165–72, 291 Smith, Adam 31, 51, 60 The Wealth of Nations v, 56, 106 Smith, Greg 283 Smith Barney 34 social security 52, 79, 255 Social Security Trust Fund (US) 254, 255 socialism 4, 225, 301 Société Générale 130 ‘soft commission’ 29 ‘soft’ commodities 17 Soros, George 23, 27, 98, 109, 111–12, 124, 132 South Sea Bubble (18th century) 35, 132, 292 sovereign wealth funds 161, 253 Soviet empire 36 Soviet Union 225 collapse of 23 lack of confidence in supplies 89–90 Spain: property bubble 42 Sparks, D.L. 114, 283, 284 specific risk 97–8 speculation 93 Spitzer, Eliot 232, 292 spread 28, 94 Spread Networks 2 Square 187 Stamp Duty 274 Standard & Poor’s rating agency 21, 99, 248, 249, 313n6 Standard Life 26, 27, 30 standard of living 77 Standard Oil 44, 196, 323n1 Standard Oil of New Jersey (later Exxon) 323n1 Stanford University 167 Stanhope 158 State Street 200, 207 sterling devaluation (1967) 18 stewardship 144, 163, 195–203, 203, 208, 209, 210, 211, 213 Stewart, Jimmy 12 Stigler, George 237 stock exchanges 17 see also individual stock exchanges stock markets change in organisation of 28 as a means of taking money out of companies 162 rise of 38 stock-picking 108 stockbrokers 16, 25, 30, 197, 198 Stoll, Clifford 227–8 stone fei (in Micronesia) 323n5 Stone, Richard 263 Stora Enso 196 strict liability 295–6 Strine, Chancellor Leo 117 structured investment vehicles (SIVs) 158, 223 sub-prime lending 34–5, 75 sub-prime mortgages 63, 75, 109, 149, 150, 169, 244 Summers, Larry 22, 55, 73, 119, 154, 299 criticism of Rajan’s views 57 ‘ketchup economics’ 5, 57, 69 support for financialisation 57 on transformation of investment banking 15 Sunday Times 143 ‘Rich List’ 156 supermarkets: financial services 27 supply chain 80, 81, 83, 89, 92 Surowiecki, James: The Wisdom of Crowds xi swap markets 21 SWIFT clearing system 184 Swiss Re 62 syndication 62 Syriza 306 T Taibbi, Matt 55 tailgating 102, 103, 104, 128, 129, 130, 136, 138, 140, 152, 155, 190–91, 200 Tainter, Joseph 277 Taleb, Nassim Nicholas 125, 183 Fooled by Randomness 133 Tarbell, Ida 44, 54 TARGET2 system 184, 244 TARP programme 138 tax havens 123 Taylor, Martin 185 Taylor Bean and Whitaker 293 Tea Party 306 technological innovation 13, 185, 187 Tel Aviv, Israel 171 telecommunications network 181, 182 Tesla Motors 168 Tetra 168 TfL 159 Thai exchange rate, collapse of (1997) 39 Thain, John 300 Thatcher, Margaret 18, 23, 54, 59, 148, 151, 157 Thiel, Peter 167 Third World debt problem 37, 131 thrifts 25, 149, 150, 151, 154, 174, 290, 292 ticket touts 94–5 Tobin, James 273 Tobin tax 273–4 Tolstoy, Count Leo 97 Tonnies, Ferdinand 17 ‘too big to fail’ 75, 140, 276, 277 Tourre, Fabrice ‘Fabulous Fab’ 63–4, 115, 118, 232, 293, 294 trader model 82, 83 trader, rise of the 16–24 elements of the new trading culture 21–2 factors contributing to the change 17–18 foreign exchange 18–19 from personal relationships to anonymous markets 17 hedge fund managers 23 independent traders 22–3 information technology 19–20 regulation 20 securitisation 20–21 shift from agency to trading 16 trading as a principal source of revenue and remuneration 17 trader model 82, 83 ‘trading book’ 320n20 transparency 29, 84, 205, 210, 212, 226, 260 Travelers Group 33, 34, 48 ‘treasure islands’ 122–3 Treasuries 75 Treasury (UK) 135, 158 troubled assets relief program 135 Truman, Harry S. 230, 325n13 trust 83–4, 85, 182, 213, 218, 260–61 Tuckett, David 43, 71, 79 tulip mania (1630s) 35 Turner, Adair 303 TWA 238 Twain, Mark: Pudd’nhead Wilson’s Calendar 95–6 Twitter 185 U UBS 33, 134 UK Independence Party 306 unemployment 73, 74, 79 unit trusts 202 United States global dominance of the finance industry 218 house prices 41, 43, 149, 174 stock bubble (1929) 201 universal banks 26–7, 33 University of Chicago 19, 69 ‘unknown unknowns’ 67 UPS delivery system 279–80 US Defense Department 167 US Steel 44 US Supreme Court 228, 229, 304 US Treasury 36, 38, 135 utility networks 181–2 V value discovery 226–7 value horizon 109 Van Agtmael, Antoine 39 Vanderbilt, Cornelius 44 Vanguard 200, 207, 213 venture capital 166 firms 27, 168 venture capitalists 171, 172 Vickers Commission 194 Viniar, David 204–5, 233, 282, 283, 284 VISA 186 volatility 85, 93, 98, 103, 131, 255 Volcker, Paul 150, 181 Volcker Rule 194 voluntary agencies 258 W wagers and credit default swaps 119 defined 61 at Lloyd’s coffee house 71–2 lottery tickets 65 Wall Street, New York 1, 16, 312n2 careers in 15 rivalry with London 13 staffing of 217 Wall Street Crash (1929) 20, 25, 27, 36, 127, 201 Wall Street Journal 294 Wallenberg family 108 Walmart 81, 83 Warburg 134 Warren, Elizabeth 237 Washington consensus 39 Washington Mutual 135, 149 Wasserstein, Bruce 204, 205 Watergate affair 240 ‘We are the 99 per cent’ slogan 52, 305 ‘We are Wall Street’ 16, 55, 267–8, 271, 300, 301 Weber, Max 17 Weill, Sandy 33–4, 35, 48–51, 55, 91, 149, 293, 314n40 Weinstock, Arnold 48 Welch, Jack 45–6, 48, 50, 52, 126, 314n40 WestLB 169 Westminster Bank 24 Whitney, Richard 292 Wilson, Harold 18 windfall payments 14, 32, 127, 153, 290 winner’s curse 103, 104, 156, 318n11 Winslow Jones, Alfred 23 Winton Capital 111 Wolfe, Humbert 7 The Uncelestial City 1 Wolfe, Tom 268 The Bonfire of the Vanities 16, 22 women traders 22 Woodford, Neil 108 Woodward, Bob: Maestro 240 World Bank 14, 220 World.Com bonds 197 Wozniak, Steve 162 Wriston, Walter 37 Y Yellen, Janet 230–31 Yom Kippur War (1973) 36 YouTube 185 Z Zurich, Switzerland 62

The Innovation Illusion: How So Little Is Created by So Many Working So Hard
by Fredrik Erixon and Bjorn Weigel
Published 3 Oct 2016

Tech thinker Kevin Kelly has prophesied the rise of a new form of socialism as a consequence of unobstructed source technology and community-generated content.20 Capitalism is a highly adaptive creature, argues the contrarian economic reporter Paul Mason, but it is not going to survive the current revolution in information technology.21 Information, he argues, will destroy the price mechanism and new forms of collaborative production will do away with what is left of market capitalism. The passion for technological determinism also thrives on the other side of the ideological fence. “The Goliath of totalitarianism will be brought down by the David of the microchip,” mused conservative icon Ronald Reagan,22 who drew heavily from technology enthusiasts like George Gilder, an economist who later identified the billion-transistor chip as the cure to root out all economic evil.23 A British libertarian politician has predicted that the new digital age will be the end of politics.24 Neoconservatives similarly were quick to embrace the revolutionary promise of technology.

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Coase challenged the prevailing ignorance with an idea of the firm and its boundaries.16 He argued that firms and their boundaries (their size, functions and, to use a modern definition, “demarcation between the organization and its environment”17) are defined by transaction costs. Or, to translate it into the language of economics: the marginal costs and benefits of contracting out production through the market’s price mechanism versus combining necessary parts of the production “in-house” through the firm. You can also call it the make-or-buy question: should companies produce themselves or buy from others? It is a basic question, yet one that many economists and business observers ignore. Companies have different origins and thrive for a variety of reasons, but they all have one thing in common, Coase argued: if capital and labor miraculously found each other spontaneously, firms would become pointless.

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Firms, if you want to be provocative, exist because markets fail, at least in a theoretical way. And the greater the failure, the more space there is for an upward valuation of companies. Coase put it slightly more dryly: “The main reason why it is profitable to establish a firm would seem to be that there is a cost of using the price mechanism.”18 A successful firm can bank on the value of its unique combination of ideas, management, capital, and labor – or of what it has that cannot easily be reproduced by the market, or copied by another firm. Companies exist because they reduce market transaction costs. Yet if this is the case, why has the process of capitalist competition not coalesced all firms into a single gigantic unit?

Samuelson Friedman: The Battle Over the Free Market
by Nicholas Wapshott
Published 2 Aug 2021

He thought no one knew enough about the workings of the economy for government involvement to be anything but reckless interference. Friedman, and much of the Chicago School, promoted the virtues of free-market forces but concentrated their energies on determining how an economy works most efficiently, for instance through study of the price mechanism and incentives for growth. To Hayek’s embarrassment, the Chicago economics faculty rebuffed his overtures and he was obliged instead to accept a post in a minor department, the Committee on Social Thought. The Chicago School “didn’t want him,” recalled Friedman. “They didn’t agree with his economics. … If they had been looking around the world for an economist to add to their staff, their prescription would not have been [Hayek,] the author of Prices and Production.”46 Friedman soon came to experience at firsthand the lingering bitterness between Keynesians and the conservative holdouts who attended Mont Pèlerin meetings.

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And it was his intimate knowledge of the Chicago School that gave him the confidence to tweak Friedman’s nose in argument by calling in evidence Friedman’s home team. Samuelson gave full credit to the Chicago School for keeping market forces at the center of economics, even though during the Great Depression free-market forces had failed to prevent—indeed, had contributed to—a worldwide humanitarian disaster. “From 1932–1945, faith in the market-pricing mechanism as the organizer of the economy sold at a discount,” Samuelson wrote. “It was the priceless contribution of Frank Knight and the Chicago School to remind us of the market’s merits.”49 Samuelson was friends with the big personalities at Chicago and knew that they often disagreed with each other.

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“Under cover of the price controls, inflationary pressures will accumulate, the controls will collapse, inflation will burst out anew, perhaps sometime in 1973, and the reaction to the inflation will produce a severe recession,” he wrote. If there was a resulting stampede for higher wages and prices, to catch up for the loss of increases during the freeze, hyperinflation was likely to take root, Friedman argued. Friedman was offended by Nixon interfering with the free working of the price mechanism, in which the “natural” price was arrived at and supply and demand were matched as the market “cleared.” He had warned fifteen years before that “even open hyperinflations [periods of high inflation] are less damaging to output than suppressed inflations in which a wide range of prices are held well below the levels that would clear the market.”

Where Does Money Come From?: A Guide to the UK Monetary & Banking System
by Josh Ryan-Collins , Tony Greenham , Richard Werner and Andrew Jackson
Published 14 Apr 2012

As Davies suggests, the Competition and Control reforms saw a fundamental shift in emphasis from the central bank which: ....changed from rationing bank credit through quantitative ceilings on bank advances and qualitative or selective guidance... to rely on the more generally pervasive influence of the price mechanism, with variation in the rate of interest becoming the main weapon.105 The Bank abandoned its age-old Bank Rate and replaced it with a Minimum Lending Rate (MLR), now described as the Policy Rate or short-term interest rate, which determined the rate at which banks and other financial institutions could access cash and Bank of England reserves.106 These organisations could then lend reserves to other banks at whatever rate they wanted.

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This raises demand for bonds from the level they would have been at without a secondary market, and allows investors to hold liquid assets, whilst they still receive the benefits of having a fixed repayment date. Furthermore, the price of gilts in secondary markets is determined by genuine supply and demand rather than the primary market where GEMMS are required to both buy and sell gilts on demand at any time.14 This price mechanism conveys important information to investors that will also affect the primary market. As we have seen, government spending, via the Consolidated Fund, is usually financed by taxation and borrowing. In terms of intrabank payment, the process is no different from ordinary transfers, as described in Section 4.3.

Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor
by John Kay
Published 24 May 2004

These implicit prices, central to both personal and commercial lives, are called opportunity costs: the price of doing A is that it becomes more difficult to do B. Among small groups of people who deal with each other frequently and know each other well-friends, families, close colleagues, the inhabitants of Sicelo's village-resource allocation occurs through these implicit price mechanisms. Market exchanges are needed when people deal outside these closed circles. Incentive compatibility is immediately more serious. We understand the real needs of our friends and family better than the needs of people we hardly know. Market exchanges allow longer chains of wants. If I had to find a plumber who needed lessons in economics, my tap might drip for a long time.

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See central planning Plowden, Edward, 111-12, 114, 120-21, 127 pluralism, 87, 88, 115-24, 190, 200 American business model, 21, 79,87 and economic development, 55-56, 62-63 monopolies vs., 295 research support, 269-70 See also disciplined pluralism political economy, 201-3,314-15 politics, 55, 62, 69 adaptive behavior, 252 of economics, 333-35 public choice theory, 343 risk assessment, 156-57 self-interest, 12, 250-51, 317 strategic behavior, 100-101 pollution, 263-65 poor states, 16-17,53,64-65,67,211, 277-88 coordination failures, 127 dependencytheor~60,284-86 economic policy, 335-37 future of, 354-55 inequality in, 51-52 reasons for, 47,319,355-56 and rent seeking, 295 Porter, Michael, 334 { 417} portfolio theory, 160 Portrait ofDr. Gachet (van Gogh), 92-96, 102-4,137,191,228 Posner, Richard, 189, 199 postmodernism, 312,329,333 Prebisch, Raoul, 60, 285 Prebisch-Singer thesis, 285 price mechanism, 98-99, 128 airline seats, 151-52 flower market, 146-48 "going rate," 231, 232 and imperfect information, 223-24, 227-28,229-31 market rigging, 150-51 oil markets, 143-45 supply and demand, 139, 140-41, 164, 230-33 Prisoner's Dilemma, 205, 252-55, 256, 330, 331 privatization, 11,312 probability theory, 234 production and exchange, 83-92, 93, 146 access regulation, 296 assignment of goods, 93-104 costs, 140, 151 and economic rent, 145,294-95, 300 as economics definition, 83 efficiency in, 193-94,201-2 productivity theories, 289-300 See also coordination; supply and demand productivity, 8, 9, 86 factors in, 28-29,51, 178,279,354 GDP per worker, 43-44 and income distribution, 289-90, 300, 321,353 and material living standards, 45-49 range in 1820, 67 profits, 343 property, 57,230-31 property rights, 11, 52, 54, 59, 62, 75, 81, 206 definition problems, 189-90,351-52 and market truths, 318-19 rules as, 82 and welfare economics, 202 See also intellectual property Protestantism, 52, 55-57 public choice theory, 251-52,343 public goods, 248-52,253,257-58,341-42 purchasing power parity, 46, 47, 162,289 Putnam, Richard, 172 put option, 160,237,241 queue theory, 127, 128-29, 130, 147, 171, 198 QWERTY layout, 131,260 Rand, Ayn, 315 "random walk" process, 159 rational-choice models, 324, 328,329, 337, 339 rationality, 199-201,210-21,229,231,234, 244-46,311,329,347-48 meaning to economists, 210-11,219-20 { 418} Index Rawls,John, 201-3,314-15 Reagan, Ronald, 194, 335 redistribution, 321,335,353 Rawls on, 202,203,314-15 regulation, 14-16,20,87-88,200,314,344, 352 arguments against, 11, 349 reinsurance, 154 religion, 52, 55-57, 125-26 rent.

…

See queue theory supply and demand, 230-33 capital, 163-67 commodity products, 138-46 coordination of, 127-28, 137, 141-43 demand timing, 142 equilibrium of. See general equilibrium incentive compatibility, 98-100, 104, 151 and information asymmetry, 206, 207, 222-33,319 See also competitive markets; price mechanisms Sweden, 24, 26, 27,43-45,67,260,289, 304-5 Switzerland, 15-16,31,43,56,67 cost ofliving, 48, 49 economic lives, 23, 43, 44, 187-89,209, 289,301,302-4 economic organization, 305 specialization, 91-92 Tagamet, 273 Taiwan, 63, 64 Tanzania, 280,281 Tawney, R. H., 56 taxation in free market, 11, 15-16,313,314,315,344 for public goods, 250 and rent seeking, 296 tax curs, 33 7 teams, 20,252-53, 300-310,320 income distribution within, 290-93, 300-301 technology colonial transfer of, 59 and coordination, 207 and living standards, 26-27, 28 See also innovation technology stocks, 124 telecom stocks, 229, 244 telephone system, 262-63, 271 terrorist incidents market, 157 Thurow, Lester, 315,316 tin market, 150 tipping, 75 "tit for tat" strategy, 254-55 Titmuss, Richard, 258 Tobin,James, 356, 360 Tocqueville, Alexis de, 57, 172,322 tolerance, 52 Toyota,64,89,296 trade, 177, 198 specialization, 86-92 See also production and exchange trademarks, 74,224,272,352 transactions, 73-82 costs, 205-6, 219 and information asymmetry, 222-33,319 transistor, 268 { 420} Index Trump, Donald, 317 trust, 20, 51,225,256,319 Tucker, Albert, 254, 330 Turing, Alan, 267,269,272-73,274 Turnbull, Colin, 286, 322 Tversky, Amos, 220, 235 uncertainty, 234, 241-42.

Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World
by Don Tapscott and Alex Tapscott
Published 9 May 2016

Against traditional economists who argued that there were internal markets within firms, Coase said that when “a workman moves from department Y to department X, he does not go because of a change in relative prices, but because he is ordered to do so.”25 In other words, markets allocate resources via the price mechanism, but firms allocate resources via authoritative direction. Williamson went on to explain that there are two significant coordinating systems. First is the price system for decentralized resource allocation needs and opportunities (the market). But second, (traditional) “firms employ a different organizing principle—that of hierarchy—whereupon authority is used to affect resource allocation.”

…

Artists also need automated subsidiary rights management, wherever possible or desired, where prospective licensees either accept or reject the artist’s terms of use and payment. The contract itself enforces each deal and can notify the artist of any breaches and terminations. Auction/Dynamic Pricing Mechanisms to experiment with promotions and versioning of content, even peg subsidiary rights royalty percentages to the demand of a song. For example, if consumer downloads of a song spike, then an advertiser who licensed that song for a commercial automatically has to pay more when the commercial runs.

…

Abra, 20, 186–88, 325n Academic institutions as players in blockchain ecosystem, 286 role in culture, 246–49 Accenture, 69, 70 Accessibility, 256–57 Accountability, 10, 30, 108–9, 303 in foreign aid, 20–21, 190–91 in government, 23, 199, 202, 207–9, 309 in microfinance, 192 Accounting, 63, 64, 73–79 double-entry, 7, 74, 75, 310 triple-entry, 77, 78–79, 180 World Wide Ledger, 6–8, 75–77, 142 Accounting fraud, 74, 76 AccountingWEB, 74 Adams, Scott, 106 Advocacy networks, 302–3 Agency costs, 107 Agency risk, 60 Agenda, for next digital age, 307–9 Aggregating economy, 17–18, 134–35, 164–65 Agora Voting, 218–19 Agriculture, 138–39, 157–58 Airbnb, 17, 18, 115–17, 134, 135, 270 Allaire, Jeremy, 71–72, 75–76 Allianz, 156 Allied Control, 261 Altcoins, 60, 257 Amazon, 13, 72–73, 118, 122, 123 American Association of Independent Music, 230 American Society of Composers, Authors and Publishers (ASCAP), 229 Andreessen, Marc, 5, 9, 80, 311 Andreessen Horowitz, 178–79, 284 Andresen, Gavin, 51, 104, 285, 305 implementation challenges, 257, 260, 262, 271–72 Angaritis, Dino Mark, 31–32, 115, 131, 153 Animating objects, 22, 155, 156–61 Anti–money laundering/know your customer (AML/KYC), 42, 44, 302 Antonopoulos, Andreas, 70, 125, 128, 225, 233, 255 design principles, 40, 47–48 digital identity, 15, 264–65 re-architecting the firm, 86, 96, 97, 98, 102 AOL, 255 Apple, 13, 118, 150, 161, 229, 235 Application specific integrated circuits (ASICs), 261 Arab Spring, 200 Ariely, Dan, 279 Art (artists), 21, 239–43 buying through bitcoin blockchain, 240–42 ownership rights, 45–49, 132–33 profile of next-gen patron, 242–43 Artificial intelligence (AI), 91, 123, 265, 274 Artist-centric music model, 231–35 Artists and repertoire (A&R), 238–39 Artlery, 239–43 Ascribe, 132–33, 243 Asset ownership, 19–20, 193–95 Asymmetric cryptography, 39–40 Athey, Susan, 111 Attention markets, 140–41 Attestation, in financial services, 56, 57, 58 Auction/dynamic pricing mechanisms, 234 Audits, 6–7, 63, 75–77, 78 Augur, 82, 83, 84–85, 181, 220, 224 Australian outback, power poles, 145, 146–47 Authenticating identity and value, in financial services, 61, 64 Automated Clearing House (ACH), 59, 293 Automated subsidiary rights management, 234 Autonomous agents, 22, 120, 121, 122–25, 126, 321–22n Autonomous vehicles, 156–57, 165–67 Back, Adam, 34, 41 “Backdoor access,” 244 Background checks, 176 bAirbnb, 115–17 Balanc3, 76, 178 Bandcamp, 235 Bank of Canada, 9, 294, 296 Bank of England, 9, 294 Bankruptcy laws, 174 Banks.

Austerity Britain: 1945-51
by David Kynaston
Published 12 May 2008

Relatively early in the war, the great economist John Maynard Keynes had more or less won the battle within the Treasury to persuade that deeply conservative institution to accept at least a substantial measure of demand management as the principal way of regulating the economy in order to keep the level of unemployment down. Thereafter, the real intellectual conflict among radically minded ‘activators’ was between Keynesians and those whose ideal was wartime-style (and Soviet-style) direct physical planning. For the former, there was still a significant role – at least in theory – to be played by the price mechanism of the market; for the latter, that role was fairly surplus to requirements. By the end of the war, it seemed that the force was with the out-and-out planners, with their emphasis on investment planning and, through direct controls over labour, manpower planning. Indeed, such was the temper of the times that even most Keynesians had, in a visceral sense, little real faith in, or any great intellectual curiosity about, the possible economic merits of the market or of supply-side reforms.

…

H. Lawrence of ‘shallow abstractions’ in relation to ‘freedom in sexual relations’; politically, he defined himself as a ‘militant Moderate’; and, as a trained economist who had lectured through the 1930s at the LSE, he combined a strong belief in economic planning with the conviction that the price mechanism was indispensable if the liberty of consumers in a modern democracy was to be ensured. During the 1930s, Durbin became close to the young psychiatrist John Bowlby, and the influence of Bowlby ran through much of his major work, The Politics of Democratic Socialism, published in 1940. As for economics itself, Durbin made a brave gesture towards the ‘sound money’ school – its citadel the City of London – that had wrecked Ramsay MacDonald’s 1931 Labour government, by declaring that ‘it is not wise in the long run to expect to live upon golden eggs and slowly to strangle the goose that lays them’.

…

For a whole hour it went on with hardly a pause, hardly a word from me, and then abruptly he stood up, pleaded pressure of many things and escorted me to the door.’10 Anthony Wedgwood Benn – son of a Liberal-turned-Labour peer, in his early 20s, about to come down from Oxford after being a fighter pilot in the war – did not yet have executive responsibilities but in early 1948 he composed his private ‘Thoughts on Socialism’. Arguing that pre-war ‘poverty and squalor and undernourishment’ had made ‘a mockery of the price mechanism as a means of translating needs into economic demand’, he nevertheless accepted that ‘economic efficiency demands a degree of inequality because of the need for incentives’. Even so: ‘A certain standard of health, nourishment and housing must be maintained for all. No one else can do it but the state and in Britain a new paternalism is state paternalism: looking after those who cannot look after themselves.

Nine Crises: Fifty Years of Covering the British Economy From Devaluation to Brexit
by William Keegan
Published 24 Jan 2019

As president of the Board of Trade, Wilson had presided over what he referred to as ‘a bonfire of controls’, left over from the recent war. Unlike most economists, he was more tuned intellectually to physical, supply-side measures such as import controls to cure a trade deficit rather than to use of the price mechanism for a currency adjustment. Moreover, the devaluation of August 1931, when Britain came off the gold standard, may have taken place under the National Government, but the Prime Minister and Chancellor in that government were the Labour politicians Ramsay MacDonald and Philip Snowden. The memory contributed to the criticism that Labour was the party of devaluation.

…

Moreover, it would take time for the hoped-for beneficent effects of devaluation to work through the system. The higher price of imports and cheaper exports would inevitably make the trade and balance of payments deficits worse before they got better, when, it was hoped, via the workings of the price mechanism and the impact on profitability, the volume of exports would rise and the import bill would be lower than it might otherwise be. There were many nervous moments. The essence of the policy was to move resources into exports (or ‘import saving’). In an economy close to full employment, this required restraint on domestic spending – both public and private.

The Corona Crash: How the Pandemic Will Change Capitalism
by Grace Blakeley
Published 14 Oct 2020

With massive state intervention now the only thing standing between economies battered by the coronavirus pandemic and global economic meltdown, few politicians or economists are calling on governments to step back, let businesses fail, banks go bust and homeowners default on their mortgages – even if some countries have attempted to extricate themselves from lockdown and return to ‘business as usual’ before getting the virus under control.1 In normal times, neoliberals have a knee-jerk reaction against any interference in the operation of supposedly free, competitive markets. Too much public investment distorts the natural operation of the price mechanism, which facilitates the efficient allocation of society’s resources by maintaining an equilibrium between supply and demand, they argue. To counter this problem, states would have to know exactly how many resources were available and have a concrete plan for how they would be used. The economy is too complex a system to be subject to successful central planning.

Net Zero: How We Stop Causing Climate Change
by Dieter Helm
Published 2 Sep 2020

The more powerful they are, the greater the distortions away from the public interest to the private interests of their members. Regulation plus lobbyists equals more expensive decarbonisation. Regulation of consumption is particularly difficult. People do not like to be told what they cannot buy, and they hate rationing. Rationing might work in a war, in the context of a completely planned economy where the price mechanism has been all but eliminated. While there is a lot of food safety and health and safety regulation, top-down instructions tend to backfire. We have not managed to ban cigarettes, and indeed when it comes to recreational drugs, regulation has not worked well. The Americans tried prohibition, with limited success.

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Unlike carbon taxes, regulation is easy to capture, and it usually is captured.[14] Urban regulation and planning The other pollutants from transport are mainly local in their impacts. Nowhere is this more obvious than in towns and cities. Emissions from cars and lorries damage people’s lungs and shorten lives. Pricing mechanisms can make some difference, and urban congestion charges have a part to play. They ration the supply of road space and can reduce traffic. By calibrating these charges according to engine size and vintage (and hence pollution), the more polluting ones can be priced off the road. Congestion charges will, however, never be sufficient, and the regulatory and planning options have to come into play.

Magic Internet Money: A Book About Bitcoin
by Jesse Berger
Published 14 Sep 2020

Fundamentally sound money allows for fair and fluid trading by accurately measuring prices, creating conditions for productivity to improve, and generating economic growth, like a rising tide lifting all boats. If defective, however, money can have the opposite effect, confusing trade markets by distorting the pricing mechanism, causing valuable resources to be misallocated, thereby weakening an economy’s efficacy. Some economists with a preference for free-market ideology, most notably those from the Austrian school of thought,4 have long questioned the ability of the legacy monetary system to beneficially allocate resources and stimulate growth.

Order Without Design: How Markets Shape Cities
by Alain Bertaud
Published 9 Nov 2018

Administrative allocation of street space to a specific mode of transport may result in some positive outcomes in some circumstances, but it also introduces a rigidity when demand fluctuates at different hours of the day or over time. The rigidity introduced by an administrative allocation of street area to a preferred mode of transport may result in a loss of mobility. In market economies, supply and demand is matched through pricing mechanisms. Would it be possible to have a pricing system that determines the optimum mix of different modes of transport through a pricing mechanism without relying on administrative allocation of street space to an exclusive mode of transport? As I have suggested earlier, we should approach urban transport as a real estate problem. A municipality is the owner of the streets.

…

Beginning in 2004, all new passenger vehicles—including SUVs, minivans, vans and pick-up trucks—must meet more stringent tailpipe emission standards.27 Figure 5.20 shows the changes in pollution in Germany from new gasoline nondiesel cars over several decades. The changes show that government mandates, while imperfect tools, are still effective at triggering the technological changes necessary to reduce pollution that markets, in the absence of pricing mechanisms, have been unable to provide. Figure 5.20 Changes in gasoline-car pollutant emissions in Germany, 1990–2013. Sources: Table 2: Fuel-specific IEF for passenger cars, in Fkg/TJ, Ministry of the Environment, Federal Environment Agency (Umweltbundesamt, UBA), Dessau-Roßlau, Germany. The decrease in pollution emissions shown in figure 5.20 is due to a combination of technological change allowing a decrease in gasoline used per kilometer and changes in engine and exhaust treatment that reduce tailpipe pollutants.

Last Trains: Dr Beeching and the Death of Rural England
by Charles Loft
Published 27 Mar 2013

Buchanan’s report would come out as part of the operation.183 This was Marples speaking, not his officials, and he hoped to be placed in charge of the project, but nothing came of it as Macmillan’s modernisation project focused on short-term goals. Buchanan’s appointment and report helped fuel a conflict in transport policy advice between physical planners and economists which was to fester over the following decade. In hindsight, this diverted attention from the need to develop an effective pricing mechanism for road use by raising the false prospect that the car could be physically accommodated. It might appear that this was the real legacy of Marples’s predilection for road building, but the Treasury’s interest in road pricing had not even begun to address the practical and political difficulties of such a measure in 1959 and the idea received no more encouragement from Barbara Castle than it had from Marples.

…

Nevertheless, rail policy in the late 1950s and early 1960s represented a significant advance on 1951–6, because genuine attempts to understand and tackle the problem were made. The most obvious omission in the development of transport policy during this period was the absence of an effective pricing mechanism for road use. One problem with the car is that its costs are not sufficiently related to its use and in particular to the kind of use one makes of it; but if this was a flaw in the Treasury’s response to the transport revolution, it was one determined by political realities. In an ideal railway world the taxpayer would pay the rail operator a fee for the benefit provided by every rail service (not just those that lose money) to those who do not pay directly in fares and freight charges.

The Devil's Derivatives: The Untold Story of the Slick Traders and Hapless Regulators Who Almost Blew Up Wall Street . . . And Are Ready to Do It Again
by Nicholas Dunbar
Published 11 Jul 2011

The derivative-dealing banks set themselves up as secretive mini-exchanges. They would seek out customers with opposing views and line them up without the other’s knowledge. The bank sitting between them would not be exposed to the market’s going up or down and could simply skim off a percentage from both sides, dominating the all-important pricing mechanism that was the derivatives market’s big selling point. There was so much to be skimmed in this way, and so many ways to do it. But perhaps the most lucrative way of all was to invent new derivatives. In Singapore on the night after the conference, I joined a group of conference delegates on a tour of some of the city’s famed nightspots.

…

The Snake Is Eating Its Tail In light of the global meltdown set off by AIG’s plunge, an obvious question repeatedly asked is, Why couldn’t Wall Street and the European banks forgo the additional collateral that a downgraded AIG was obliged to pay them? The answer is that they could have done that, but at the price of triggering an AIG default. Goldman, sitting at the heart of the super-senior swap deals and CDO pricing mechanism, like a spider at the center of its web, had hedged against that outcome, using default swaps written on AIG itself. On planet Derivative, Goldman had its bases covered. There was only one scenario that scared Goldman—if AIG was prevented from defaulting by the government and was also prevented from making default swap collateral payments.

Free Market Missionaries: The Corporate Manipulation of Community Values
by Sharon Beder
Published 30 Sep 2006

But the study of his own advantage naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society.26 The free market gospel claims that the Market is able to perfectly match production to consumer demand without the need for centralized planning, while keeping prices close to the cost of the most efficient production, and while encouraging innovation to extend the choice for buyers. It achieves this through competition. Free market missionaries declare that the Market is democratic because it is driven by individual choices; it is efficient because of competition between sellers; and it is non-discriminatory because the price mechanism is impartial when it comes to colour, gender and race. Choice, competition and efficiency ensure everyone is better off because the economy produces all the goods that people want at the lowest possible price and available resources are supposedly fully and efficiently utilized.27 The ultimate test of general welfare within this view is of course wealth, where wealth refers to the bountiful ‘production and sale of marketed goods and services’.

…

Greg Lindsay is, in fact, a vice president of the Mont Pèlerin Society; in the 1980s CIS organized the Pacific Regional Meeting of the Mont Pèlerin Society. CIS is committed to ‘an economy based on free and competitive markets’ and ‘individual liberty and choice’, including ‘the right to property’. It claims government decision-making should be turned over to the market and that the market and its automatic pricing mechanism should be used to allocate resources. It has strong links with the Washington-based Cato Institute (see Chapter 8).18 CIS deals with ‘practical public policy issues’ as well as ‘more intellectual issues focusing on the way societies work and the importance of liberty in securing prosperity both economically and socially’.

Rise of the Robots: Technology and the Threat of a Jobless Future
by Martin Ford
Published 4 May 2015

The problem is that health care is a broken market and no amount of technology is likely to bring down costs unless the structural problems in the industry are resolved. There is also, I think, a great deal of confusion about the nature of the health care market and exactly where an effective market pricing mechanism should come into play. Many people would like to believe that health care is a normal consumer market: if only we could get insurance companies, and especially the government, out of the way and instead push decisions and costs onto the consumer (or patient), then we’d get innovations and outcomes similar to what we’ve seen in other industries (Steve Jobs might be mentioned again here).

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Every time our doctor presses her touch screen, she essentially mints money. While this example is, at the moment, imaginary, there is an abundance of evidence demonstrating that new health care technologies very often lead to more spending rather than improved productivity. The primary reason is that there is no effective market pricing mechanism to drive increased efficiency. In the absence of market pressure, providers often invest in technologies designed to increase revenue rather than efficiency, or where they do achieve increased productivity they simply retain the profits rather than lowering prices. The poster child for technology investment as a driver of health care inflation may well be the “proton beam” facilities that are being built to treat prostate cancer.

Four Futures: Life After Capitalism
by Peter Frase
Published 10 Mar 2015

But if we posit a world in which everyone is allocated the same basic income and nobody has control over vast pools of wealth, this objection disappears. Think of the basic income as the ration card that gives you access to your share of all that is scarce in the world. Rather than allocate specific amounts of each scarce resource, the pricing mechanism of the market is used to protect against overuse. To illustrate what this means, consider a mundane example: parking. In American cities, street parking has traditionally been free in most areas or available at a small fixed price. This is a dramatic underpricing, in the sense that it leads people to overconsume the limited resource of parking spaces, leading to a shortage of free spaces and many cars cruising around looking for spaces.

Nomad Citizenship: Free-Market Communism and the Slow-Motion General Strike
by Eugene W. Holland
Published 1 Jan 2009

A now-classic analysis of capitalist production spearheaded by Ronald Coase in the 1930s and developed subsequently by Oliver Williamson and others examined the relative transaction costs to a business firm of buying goods and services on the open market compared to hiring people to produce those same goods and services within the firm.95 Where transaction costs of buying on the open market are high, production is integrated into the firm and triggered by managerial command; where they are low, production is out­ sourced and triggered by market pricing mechanisms. Commons-based peer production breaks completely free of this paradigm: participating programmers are not paid for their contributions, nor are they told what to do by some supervising manager. Instead, they engage and contribute on their own free initiative. It is worth being clear in this regard about the role of Linus Torvald in the peer-production process, for he is nothing like an orchestra conductor: programmers are not obeying his commands to write or patch a certain piece of software; this is taken care of immanently and voluntarily through the mediation of Web sites like SourceForge and Savannah.

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There may be a family resem­ blance (in the strong, W ittgensteinian sense) between von H ayek’s rejection of so­ cialist planning and fellow-Viennese W ittgenstein’s rejection of logical positivism; von Hayek says, “I fear th a t our theoretical habits of approaching the problem w ith the assum ption of more or less perfect knowledge on the p art of almost ev­ eryone has made us som ewhat blind to the true function of the price mechanism and led us to apply rather misleading standards in judging its efficiency” (527). 40. Ibid., 521. 41. Ibid. 42. Ibid., 526. 43. Ibid., 524. 44. T he end of Asimov’s I, Robot poses exactly this question, b u t the issue also arises in Plato’s Republic and Z am y atin ’s We. 45. Von Hayek, “Use of Knowledge in Society,” 5 2 5 -2 7 . 46.

The Code of Capital: How the Law Creates Wealth and Inequality
by Katharina Pistor
Published 27 May 2019

One option is to do away with the legal privileges of capital and turn our economic and political system into “radical markets.”45 According to Posner and Weyl, radical markets are meant to dismantle the last vestiges of politics by subordinating all decisions and, one might add, all values, to the price mechanism. The two authors claim that the efficient allocation of resources based on a fully competitive market is the path to a “just society.”46 It follows that property rights shall be replaced with contingent use rights. Rather than hoarding wealth over time and protecting it against competing challenges, in this new world, the law protects only temporal use rights.

…

Which of these alternatives one prefers will depend largely on one’s view of humans as either self-interested, profit-maximizing individuals, or as social beings capable of self-reflection and collective self-governance. It also depends on one’s idea of freedom—economic freedom devoted to a sole cause, that of efficient resource allocation with the help of the pricing mechanism, or only as a means to an end, the end being individual freedom within a just society.49 These big philosophical debates cannot be resolved here. But contrasting these two models helps illuminate two core messages of this book. First, law is central for the organization of modern society, including for the organization of markets and the assets that are created for and traded on them.

Pivotal Decade: How the United States Traded Factories for Finance in the Seventies
by Judith Stein
Published 30 Apr 2010

As it did in the past, the United States produced a trade remedy. Undersecretary of the Treasury Anthony Solomon set up minimum prices for imports. The price was based on the costs of the most efficient foreign producer, Japan. Actually, the Japanese were prepared for quotas and were amazed that Carter demanded only minimum prices. Under the trigger price mechanism (TPM), prices lower than the minimum price would activate a fast track investigation to determine whether dumping occurred. But the price allowed the Europeans and many developing countries to dump with impunity because they could sell at the Japanese price, which was below their own cost of production.108 Initially, Solomon believed that the TPM would be enough to return the industry to profitability, so it could modernize and invest in pollution control.109 But by 1979 Solomon wondered, “Should we fight ’em or join ’em?”

…

Textile Workers Union of America Theobald, Robert Thieu, Nguyen Van Third World exporters, politics of Tho, Le Duc Thompson, Dudley Thompson, Frank Thurmond, Strom Thurow, Lester Tobin, James Tokyo Round Townsend, Lynn Townsend, William Toyota trade, U.S., deficits Trade Act Trade Agreements Act Trade Expansion Act Trezise, Philip trigger price mechanism (TPM) Trilateral Commission Tsongas, Paul Tugwell, Rexford Ture, Norman B. Turner, Tom Udall, Morris K. Udall, Stuart Ullman, Al unemployment, U.S. among African Americans and business interests and the Federal Reserve and foreign trade government interventions to reduce and inflation linked to economic growth as political issue rates of United Automobile Workers (UAW) United Kingdom United Nations United Steelworkers of America Uruguay Round U.S.

The Great Transformation: The Political and Economic Origins of Our Time
by Karl Polanyi
Published 27 Mar 2001

Perhaps his most famous contribution to social thought, this concept has also been a source of enormous confusion. Polanyi starts by emphasizing that the entire tradition of modern economic thought, continuing up to the present moment, rests on the concept of the economy as an interlocking system of markets that automatically adjusts supply and demand through the price mechanism. Even when economists acknowledge that the market system sometimes need help from government to overcome market failure, they still rely on this concept of the economy as an equilibrating system of integrated markets. Polanyi’s intent is to show how sharply this concept differs from the reality of human societies throughout recorded human history.

…

Implicit in Polanyi’s argument is a more specific critique of the market as a self-regulating mechanism. In the case of manufactured commodities, a falling price for an abundant commodity restores equilibrium by both encouraging increased consumption and by discouraging new production. In the case of fictitious commodities, the effectiveness of the price mechanism is reduced because automatic increases or decreases in supply cannot be assumed. 14. For many other commodities as well, government involvement is a precondition for market competition. See the aptly titled book by Steven Vogel, Freer Markets, More Rules: Regulatory Reform in Advanced Industrial Countries (Ithaca, N.Y.: Cornell University Press, 1996). 15.

Adam Smith: Father of Economics
by Jesse Norman
Published 30 Jun 2018

The buyers generally have a fixed or natural end-use for the goods—the trips get made, the meals get eaten, the holidays get taken—and so they do not generally switch roles to become sellers depending on price. The selling mechanism is generally a single sale price as in supermarkets, not the bid–offer spreads seen on foreign exchange kiosks at airports, or one of a large range of other possible price mechanisms. On the whole, these markets work in the way canonically attributed to Smith on the model of the so-called ‘invisible hand’, with supply and demand tending towards competitive equilibrium, and they work extremely well. Another way of thinking of these markets is that they exhibit what has become known as the ‘wisdom of crowds’, and they do so because they satisfy four conditions: those involved are diverse in their access to information and in their opinions; they are independent, each person exercising his or her own view and not deferring to others; they are decentralized, so that they can specialize or draw on local knowledge; and there is a means—a market mechanism—to aggregate or gather their private judgements or choices together into a collective decision.

…

THE ECONOMIC CONSEQUENCES OF FORGETTING SMITH This brief and inevitably schematic account of a highly complex set of events illustrates all of our key themes. First of all, it underlines the deep difference between markets for products, many of which can readily be understood in terms of a tendency to equilibrium and the so-called invisible hand, and asset markets, which have a different price mechanism, a different internal logic and an embedded tendency to boom and bust. The 2008 recession vividly highlighted the contrast between the different kinds of markets: US consumption of non-durable goods and services had a maximum decline of 1.7 per cent; but that of housing fell by nearly 60 per cent.

The Marginal Revolutionaries: How Austrian Economists Fought the War of Ideas
by Janek Wasserman
Published 23 Sep 2019

If the Keynesians and Chicagoans challenged the Austrians to reconsider some of their methodological and policy assumptions, socialism posed an existential threat to their entire worldview. In the shadow of the Great Depression, Austrians faced a resurgent Marxism, which confronted the Austrians on their former battlefield: the issue of socialist calculation. When we left the socialist calculation debate in the 1920s, Mises’s argument about the unfeasibility of a functioning price mechanism in a state-directed economy carried the day. The worldwide depression prompted a reevaluation. As Western economies stagnated and shrank, the Soviet Union, in the midst of its first Five-Year Plan, appeared to be flourishing. In the United Kingdom, France, and Spain, communist, socialist, and social democratic parties gained in popularity at the expense of liberal parties.

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Setting aside that this interpretation of Capitalism, Socialism, and Democracy missed Schumpeter’s ironical attitude toward “successful” socialism and “failing” capitalism, Heilbroner built his Schumpeterian argument on Mises’s and Hayek’s work on socialist calculation. They had pinpointed the fundamental problems that planned economies had not (and could not) overcome. These were not just economic issues with price mechanisms or coordination problems with information either; they were also cultural ones. Channeling his inner Austrian, he wrote, “capitalism is a social order built upon a deeply embedded and widely believed principle expressed in the actions and beliefs of its most important representatives.” Or, as he put it succinctly elsewhere, “It turns out, of course, that Mises was right.”4 Heilbroner’s searching essays provoked many people on the left and cheered people on the right.

The Tyranny of Nostalgia: Half a Century of British Economic Decline
by Russell Jones
Published 15 Jan 2023

— Sir Alec Cairncross, 19881 the classics and mr keynes The birth of modern economics is usually associated with the publication of Adam Smith’s An Enquiry into the Nature and Causes of the Wealth of Nations in 1776.2 Economic theory burgeoned over the next 160 years, but the core message remained that, if left to its own devices, capitalism was a near-­perfect system. Shocks of one sort or another might come and go, but rational self-interest, coupled with the unfettered operation of the price mechanism, would encourage economies to smoothly gravitate back to a position of optimal equilibrium. It was therefore important to trust free markets to work their allocative magic. Market failures – where the freely functioning forces of supply and demand failed to distribute scarce resources in a way that optimized social welfare – were believed to be few and far between.

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Over the course of three decades it had curdled into a sour quagmire of chronic macro instability, overbearing government interference, industrial strife and political dyspepsia, where the abnormal came to seem all too normal. Full employment had become harder and harder to secure. Inflation had surged to unprecedented peacetime levels and become hard-wired into the superstructure of the economy. The budget and the current account were both prone to significant deficit. The price mechanism had, in important respects, been bent out of shape. Major downturns, involving substantial output falls, seemed to once again be a fact of life. The underlying trend of economic growth appeared to have slowed. In the eyes of many, the trade unions had become a law unto themselves, or even a threat to the entire democratic process.

The Dhandho Investor: The Low-Risk Value Method to High Returns
by Mohnish Pabrai
Published 17 May 2009

About EMTs, Buffett commented: Observing correctly that the market was frequently efficient, [academics and Wall Street pros] went on to conclude incorrectly that it was always efficient. The difference between these propositions is night and day.6 —Warren Buffett Markets aren’t fully efficient because humans control its auction-driven pricing mechanism. Humans are subject to vacillating between extreme fear and extreme greed. When humans, as a group, are extremely fearful, the pricing of the underlying assets are likely to fall below intrinsic value; extreme greed is likely to lead to exuberant pricing. If a business owner is extremely pessimistic and fearful about the future of his business and decides to sell it, it is likely to take him several months to get a sale consummated.

End the Fed
by Ron Paul
Published 5 Feb 2011

This was probably my first real-life experience in the free market solving problems generated by government mischief. Sadly, we haven’t learned a whole lot. Even today, as we’re struggling to get out of a gigantic economic crisis, the principle of government meddling in pricing goods and services persists. The worse the crisis gets, the more government interferes in the pricing mechanism. Today the black market in labor and goods is huge. Our disastrous tax code has contributed substantially to the need for the underground economy. This need will surely grow as the economy further deteriorates. In economic terms, all this activity is beneficial in the underground, despite politicians’ cries that the government is being cheated out of hundreds of billions of dollars in tax revenue.

The Tyranny of Metrics
by Jerry Z. Muller
Published 23 Jan 2018

The principals were in the first instance those who paid for agencies and nonprofit organizations: in the case of government, the taxpayers. The organizations’ students, patients, or clients were now to be regarded as their customers. One difficulty, for those who sought to make such organizations more like a business, was that there was no price mechanism by which to determine whether those who supplied the funds were getting good value for their money. In a competitive market, consumers can compare the price of goods and services with the quality of the products on offer, and can make informed decisions about what to buy. Prices convey a lot of information in a concise, transparent form.

Wall Street: How It Works And for Whom
by Doug Henwood
Published 30 Aug 1998

Markowitz apparently overlooked Lewis' descriptions of how Salomon's traders bought mortgages from failing savings and loans, repackaged them into bonds, and sold them back to the thrifts at enormous profit to themselves and huge losses to the S&Ls — and eventually, U.S. taxpayers.^^ Deregulated and doomed, they were eager to play games on Wall Street. Here is Lewis' (1989a, p. 105) description of the miraculous Smithian pricing mechanism at work: Trader Tom DiNapoli fondly remembers a call from one thrift president. "He wanted to sell a hundred million dollars' worth of his thirty-year loans ...and buy a hundred million dollars of some other loans with the cash from the sale. I told him I'd bid [buy] his loans at seventy-five [cents on the dollar] and offer him the others at eighty-five."

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Further, contracts cannot be written to cover every eventuality; every spill can't be anticipated, so it pays to have a janitor on hand to deploy whenever an unexpected disaster presents itself. In such cases, the price system hardly enters the picture. Or, in Coase's concise definition, "the distinguishing mark of the firm is the supersession of the price mechanism." But under capitalism, the scope of conscious planning rarely extends beyond a firm's boundaries; the price system is the normal governor of relations among firms and between firms and final consumers. Conventional economics still treats the market as essentially self-regulating: the system, outside the firm, still works itself.

The Sovereign Individual: How to Survive and Thrive During the Collapse of the Welfare State
by James Dale Davidson and William Rees-Mogg
Published 3 Feb 1997

As a result, firms will tend to dissolve as information technology makes it more rewarding to rely upon the price mechanism and the auction market to undertake tasks that need doing rather than having them internalized within a formal organization. As information technology increasingly automates the production process, it will take away part of the raison d 'etre of the firm, the need to employ and motivate managers to monitor individual workers. "Why Are There Firms?" Remember, the question "Why are there firms?" is not as trivial as it may seem on casual observation. Microeconomics generally assumes that the price mechanism is the most effective means of coordinating resources for their most valued uses.

Seriously Curious: The Facts and Figures That Turn Our World Upside Down
by Tom Standage
Published 27 Nov 2018

Pavements, street signs and pedestrian signals, for example, are often designed for the young and able-bodied. Richer countries have more money to spend on making them better suited to older age groups. That may not extend lifespans, but it can help people make the most of their remaining years. Why do companies exist? The idea of the price mechanism is central to the study of economics. Market prices convey information about what people want to buy and what others want to sell. Adam Smith used the metaphor of the “invisible hand” to describe how the economy is governed by price signals. In 1937 a paper published by Ronald Coase, a British economist, pointed out a flaw in this view: it did not explain what goes on within firms.

Wild Ride: Inside Uber's Quest for World Domination
by Adam Lashinsky
Published 31 Mar 2017

Gurley concluded: “Uber has no intention of abandoning dynamic pricing precisely because it is in the consumer’s best interest, especially when one understands the true alternatives.” Surge pricing would remain controversial as well as a source of academic fascination for years. In 2015, a group of scholars commissioned by the U.S. Federal Trade Commission published a long analysis of Uber’s pricing mechanism, concluding that the company’s “black box” algorithm raised “important questions of fairness and transparency.” The acrimony over a topic that was simultaneously wonky and relatable to any passenger also helped introduce the public to a new global commercial character: Travis Kalanick, the “asshole.”

Why Liberalism Failed
by Patrick J. Deneen
Published 9 Jan 2018

According to Polanyi, the replacement of this economy required a deliberate and often violent reshaping of local economies, most often by elite economic and state actors disrupting and displacing traditional communities and practices. The “individuation” of people required not only the separation of markets from social and religious contexts but people’s acceptance that their labor and its products were nothing more than commodities subject to price mechanisms, a transformative way of considering people and nature alike in newly utilitarian and individualistic terms. Yet market liberalism required treating both people and natural resources as these “fictitious commodities”—as material for use in industrial processes—in order to disassociate markets from morals and “re-train” people to think of themselves as individuals separate from nature and one another.

Mobility: A New Urban Design and Transport Planning Philosophy for a Sustainable Future
by John Whitelegg
Published 1 Sep 2015

Enhanced traffic circulation (by infrastructure changes and electronic methods).” The same conclusion was reached in a European Conference of Ministers of Transport study published in 1995 (OECD, 1995). This study listed 29 measures grouped under 4 headings: Land use management. Road traffic management. Environmental protection. Pricing mechanisms. As in the TNO (1992) study the authors argued: “All the policy instruments listed are potentially helpful but no single one of them has the power to achieve the objectives of sustainable development: to do this governments need to introduce packages of policies that are mutually reinforcing.”

How We Got Here: A Slightly Irreverent History of Technology and Markets
by Andy Kessler
Published 13 Jun 2005

If everyone sells Intel on the same day, its price would go to zero, there are not enough buyers or capital to handle a run on the stock. But it doesn’t go to zero. At a low enough price, some investors see the value of Intel’s future earnings and start buying it. So stock markets are built on Trust with a capital T as well, but there is a price mechanism to hold off runs and panics. Not so with banks. *** More trade meant even more gold flowed into England, but unfortunately, there was no outlet for it. The Brits could have bought more foreign goods, which would have reduced their trade surplus and incoming gold, but there was not much to buy, and the echo of mercantilism of times past still encouraged exports and hording gold.

The Inner Lives of Markets: How People Shape Them—And They Shape Us
by Tim Sullivan
Published 6 Jun 2016

In the past, economists might have ignored this kind of problem, since it fell well outside the scope of the discipline (although nearly all economists experienced the existential angst of some version of this dance, usually in the role of Albert). For much of the economics profession’s existence, when economists thought about allocating resources, they focused on two polar options: market prices or a bossy manager or bureaucrat. Problems like matching middle-school dancers didn’t lend itself to the price mechanism, which would have had dancers paying for one another’s attention (we’re sure you can immediately see the problems with a pay-to-date system). And a Soviet-style central planning committee (made up of who? the popular kids? the principal? concerned parents?) won’t go very far in solving the problem either.

Private Island: Why Britain Now Belongs to Someone Else
by James Meek
Published 18 Aug 2014

The civil servants who might have told him otherwise don’t seem to have made a fuss about it; the DTI’s permanent secretary at the time, Michael Scholar, told me in an email that the EDF takeover ‘was not in the department a cause célèbre’. Battle now regrets not challenging Littlechild and the other regulators. ‘The regulator was completely fixed on price mechanism as the be all and end all, and opening up to new entrants. On paper it sounded fine. But in the real global economy, we couldn’t buy a French power station, and they could buy ours. We didn’t get a grip on the regulators. We left the framework to them. We should have changed the remit. We were too cautious and nervous about questioning the market.

The Fair Trade Scandal: Marketing Poverty to Benefit the Rich
by Ndongo Sylla
Published 21 Jan 2014

According to this foundation, however, buyers are always prepared to agree a price increase which would reflect the value added provided by the label. The price of certification is also determined through a negotiation process between sellers and buyers. UTZ Certified does not interfere with the pricing mechanism. It simply levies administrative costs. However, it is criticised for having relatively loose standards on the environment and the rights of workers. Founded in 1991 and based in Washington, the mission of the Smithsonian Migratory Bird Center is to study, popularise and protect migrating birds.

Global Governance and Financial Crises
by Meghnad Desai and Yahia Said
Published 12 Nov 2003

Baker was convinced in 1985 that growth should resume via structural reforms and that the international institutions should back up structural adjustments in granting longer credits under conditions which became more intrusive. Macroeconomic stabilization was no longer held as the single device to recover an already ploughed growth track. Microeconomic conditions for growth had to be created in privatizing public sectors, in deregulating price mechanisms, in opening markets to foreign competition. On the financial side, liberalization had to be undertaken to reduce the amount of foreign debt via securitization (Brady Plan in 1989) and to attract new funds from non-bank private creditors. Without endorsing debt reduction schemes publicly, the IMF actively encouraged commercial banks that had provisioned their losses to sell their loans at a discount.

Reinventing Capitalism in the Age of Big Data
by Viktor Mayer-Schönberger and Thomas Ramge
Published 27 Feb 2018

From Internet travel site Kayak to online investment company SigFig, to digital labor platform Upwork, more and more markets that use data to help participants find better matches are gaining traction and attracting attention. In this book, we connect the dots between the difficulties faced by traditional online markets; the error of the stock market’s trusted pricing mechanism; and the rise of markets rich with data. We argue that a reboot of the market fueled by data will lead to a fundamental reconfiguration of our economy, one that will be arguably as momentous as the Industrial Revolution, reinventing capitalism as we know it. The market is a tremendously successful social innovation.

China's Superbank
by Henry Sanderson and Michael Forsythe
Published 26 Sep 2012

While economists in the West before the financial crisis believed that the best way to prosperity is to reduce government involvement in the economy and let the private sector do the work, CDB and its chairman grew up in a different world, where there were no markets, no stocks or bonds, and an almost nonexistent private sector. There were shortages of goods and inadequate pricing mechanisms. CDB later went on to create markets and funds where there were none. At the same time as CDB has grown to be the world’s largest policy bank, the Chinese state has not only kept full ownership but also continues to set the lending rates banks have to base their loans on. It is no different in the oil, power, or commercial banking sector, where the state has kept a controlling share of China’s largest firms in an effort to build over 100 so-called national champions.

Tomorrow's Capitalist: My Search for the Soul of Business
by Alan Murray
Published 15 Dec 2022

The appeal was formulated by the Alliance of CEO Climate Leaders, a group of eighty-three CEOs who had organized in 2014 to support the Paris Agreement with bold corporate climate action. The Net-Zero Challenge sparked many initiatives, such as the Race to Zero campaign, which has engaged hundreds of companies and includes efforts to encourage governments to create incentives for companies to commit to net zero in reasonable time frames, institute carbon pricing mechanisms that make low-carbon options more cost effective, and make investments in green technology. A year later, in January 2021, the World Economic Forum urged CEOs to do even more, beyond their own footprints into an expanded supply chain. Rich Lesser, then CEO of Boston Consulting Group and a cochair of the Alliance of CEO Climate Leaders, unveiled a study by BCG showing that eight supply chains account for more than 50 percent of global emissions, including construction, fashion, fast-moving consumer goods, electronics, automotive, professional services, and freight.

Patriot Games
by Tom Clancy
Published 2 Jan 1987

She kissed him on the forehead. "Screwdriver." He handed it to her. Cathy took a quick look at the plans. "No wonder, you dummy. You're using a short screw when you're supposed to use a long one." "I keep forgetting that I'm married to a high-priced mechanic." "That's real Christmas spirit. Jack." She grinned as she turned the screw into place. "A very pretty, smart, and extremely lovable high-priced mechanic." He ran a finger down the back of her neck. "That's a little better." "Who's better with tools than I am, one-handed." Her head turned to reveal the sort of smile a wife saves only for the husband she loves. "Give me another screw.

Suburban Nation
by Andres Duany , Elizabeth Plater-Zyberk and Jeff Speck
Published 14 Sep 2010

About half of U.S. air pollution emissions come from motor vehicles (MacKenzie, Dower, and Chen, 14). bf “Cheap gasoline forever, whatever,” is how The Economist describes the American approach to transportation planning, adding: “Hence the paradox that the freest market in the world eschews the price mechanism and applies command-and-control regulation to a central portion of its economy” (“Living with the Car,” 7). bg As The Boston Globe’s David Nyhan notes, “If that result were an election, we’d call it a landslide … Conclusion: the people are way out in front of the politicians again” (Nyhan, “For the Planet’s Sake, Hike the Gas Tax,” A27).

Bureaucracy
by David Graeber
Published 3 Feb 2015

There followed stage two of the argument, which was, in its essence, that bureaucracy represents an inherent flaw in the democratic project.9 Its greatest exponent was Ludwig von Mises, an exiled Austrian aristocrat, whose 1944 book Bureaucracy argued that by definition, systems of government administration could never organize information with anything like the efficiency of impersonal market pricing mechanisms. However, extending the vote to the losers of the economic game would inevitably lead to calls for government intervention, framed as high-minded schemes for trying to solve social problems through administrative means. Von Mises was willing to admit that many of those who embraced such solutions were entirely well-meaning; however, their efforts could only make matters worse.

A Brief History of Neoliberalism
by David Harvey
Published 2 Jan 1995

The weak legal protections for capitalist enterprises put a premium on informal local relations and trust networks that the overseas Chinese were in a privileged position to exploit.15 Subsequently the Chinese government designated several ‘open coastal cities’ as well as ‘open economic regions’ for foreign investment (Figure 5.1). After 1995 it virtually opened the whole country up to foreign direct investment of any type. The wave of bankruptcies that hit some of the TVEs in the manufacturing sector in 1997–8, spilling over into many of the SOEs in the main urban centres, proved a turning-point. Competitive pricing mechanisms then took over from the devolution of power from the central state to the localities as the core process impelling the restructuring of the economy. The effect was to severely damage, if not destroy, many of the SOEs and create a vast wave of unemployment. Reports of considerable labour unrest abounded (see below) and the Chinese government was faced with the problem of absorbing vast labour surpluses if it was to survive.16 It could not solely rely on an ever-expanding inflow of foreign direct investment to solve the problem, important though this might be.

The Trouble With Billionaires
by Linda McQuaig
Published 1 May 2013

He recognized that capitalism could only survive in a democracy if the general public benefited from it, and this involved redistributing its bounty, which otherwise ends up concentrated in the hands of the few. Simons argued that progressive taxation was the best way to achieve the necessary redistribution – since it involved the least amount of government intrusion in the market. Taxes, after all, don’t interfere with the market’s ability to determine prices and to allocate resources through the price mechanism – key features of the market economy. They don’t involve a government bureaucrat imposing measures that interfere with the basic elements of supply and demand. ‘No fundamental disturbance of the whole system is involved,’ noted Simons in his classic ‌1938 text Personal Income Taxation.6 He elaborated on this theme later, in Economic Policy for a Free Society, emphasizing how progressive taxation achieves redistribution without impinging on freedom: ‘What is important for libertarians is that we preserve the basic processes of free exchange and that egalitarian measures be superimposed on those processes, effecting redistribution afterward and not in the immediate course ‌of production and commercial transactions.’7 It could be added here that taxation – and even heavy taxation of the rich – was supported by no less a conservative heavyweight than Adam Smith.

Stolen: How to Save the World From Financialisation
by Grace Blakeley
Published 9 Sep 2019

In the inter-war period, Keynes had mounted a challenge to the economics profession by developing a theory of economic demand that challenged the central tenet of classical economics — Say’s law, the idea that supply creates its own demand.8 According to Jean-Baptiste Say — a Napoleonic-era French economist — prices in a free market will rise and fall to ensure that the market “clears”, leaving no goods or services left once everyone has had the chance to bid. If the market fails to clear — i.e. if businesses have products to sell but no one wants to buy them — it is because something is getting in the way of the price mechanism, like taxes or regulation. The law applied to workers as well as commodities, which reinforced the idea that there could be such a thing as involuntary unemployment. If a worker was unable to find a job, it was because he was setting his wage expec- tations too high. This ideology was, of course, at odds with the experiences of those who had lived through the Great Depression.

Skin in the Game: Hidden Asymmetries in Daily Life
by Nassim Nicholas Taleb
Published 20 Feb 2018

Meanwhile, by contrast, the person who related the story went bankrupt while knowing every intimate detail about the green lumber. The fallacy is that what one may need to know in the real world does not necessarily match what one can perceive through intellect: it doesn’t mean that details are not relevant, only that those we tend (IYI-style) to believe are important can distract us from more central attributes of the price mechanism. In any activity, hidden details are only revealed via Lindy. Another aspect: What can be phrased and expressed in a clear narrative that convinces suckers will be a sucker trap. My friend Terry B., who taught an investment class, invited two speakers. One looked the part of the investment manager, down to a tee: tailored clothes, expensive watch, shiny shoes, and clarity of exposition.

Road to Nowhere: What Silicon Valley Gets Wrong About the Future of Transportation
by Paris Marx
Published 4 Jul 2022

But we should also go beyond that to imagine a way of organizing a transportation system that is coordinated on multiple levels and planned with democratic input for equity, accessibility, and sustainability. On the city level, the marketization and commodification of transportation needs to be halted, including the implementation of congestion pricing mechanisms. Instead, the focus should be on altering the physical environment and providing the necessary services to encourage residents to shift from driving their personal vehicles to using public transit, cycling, or walking to their destinations. Facilitating that transition requires a significant improvement to transit services, effectively shifting the massive subsidies currently dedicated to automobiles and their infrastructure to bolster collective mobility and build dense communities around it.

Narconomics: How to Run a Drug Cartel
by Tom Wainwright
Published 23 Feb 2016

The buyers have a look at what’s on offer. If an apple seller sets too high a price, the buyers will go elsewhere. If a buyer bids too little, the seller will offer the apples to someone else instead. A price is agreed when both buyer and seller are satisfied that they are getting the best deal they can. This is the basis of the price mechanism that magically matches supply and demand in market economies around the world. Now imagine the market for an illegal product, such as a banned narcotic. The product’s illegality means that deals have to take place in secret. So unless law and order has really broken down, there is no open market where buyers can compare prices and sellers can hawk their wares.

Emergence
by Steven Johnson

Posts start out life at 0 or 1 (depending on whether their authors are registered users of the system.) Moderators can then “spend” a moderation point rating a post either up or down. A post that starts life at 1, and receives three positive points and one negative point would be at Level 3, because 1 plus 3 minus 1 equals 3. “He was far”: Jacobs, 2000, 154. A related idea is the pricing mechanism of market economies as an information-processing system, as described by the libertarian demigod Friedrich von Hayek. “Long before the fall of communism, Hayek identified its oft-overlooked weakness: not only did it fail to offer an incentive to work hard; it forced signals connecting supply and demand to travel a tortuous path that invited distortion.”

The Financial Crisis and the Free Market Cure: Why Pure Capitalism Is the World Economy's Only Hope
by John A. Allison
Published 20 Sep 2012

Imagine if you had food insurance: every time you went to the grocery store, you would file a claim for your food purchases, and your insurance company would negotiate with the grocery store over the prices and maybe ask you to take back something that it did not think was good for you. One of the fundamental laws of economics is that if a good or service is priced at less than it is worth, it will be overused—that is, wasted—because the pricing mechanism has been destroyed. The typical consumer of health services in today’s government-enforced hybrid system never negotiates with his doctor over price. In addition, the doctor has a major incentive to overprescribe because the more she does, the more she gets paid and the more she reduces the risk of being sued.

Here Comes Everybody: The Power of Organizing Without Organizations
by Clay Shirky
Published 28 Feb 2008

As a result, such groups are better able to produce what James Surowiecki has called “the wisdom of crowds.” In his book of that name he identified the ways distributed groups whose members aren’t connected can often generate better answers, by pooling their knowledge or intuition without having to come to an agreement. We have many ways of achieving this kind of aggregation, from market pricing mechanisms to voting to the prediction markets Surowiecki champions, but these methods all have two common characteristics: they work better in large groups, and they don’t require direct communication as the norm among members. (Indeed, in the case of markets, such communication is often forbidden, on the grounds that small clusters of collaborators can actually pervert the workings of the large system.)

Broken Markets: How High Frequency Trading and Predatory Practices on Wall Street Are Destroying Investor Confidence and Your Portfolio
by Sal Arnuk and Joseph Saluzzi
Published 21 May 2012

With their electronic savvy and prowess, they optimize their automated trading programs to maximize the money they earn from trading as well as from rebates paid to them by NYSE. DMMs make money not only from buying stocks and selling them higher, but also from the exchanges, which reward them with rebates for “adding liquidity.” The exchanges have adopted complex pricing mechanisms that reward the adding of liquidity with a small rebate, while charging a small fee for the taking of liquidity. Due to these exchange rebates, DMMs can make money even when they buy and sell at the same price. A critical factor in doing this is speed. Key for the DMMs’ success, therefore, is being as close as possible to the exchange.

The Wealth of Humans: Work, Power, and Status in the Twenty-First Century
by Ryan Avent
Published 20 Sep 2016

If housing supply is free to respond to demand, then when the willingness to pay to live in a city rises above construction costs builders build more in order to pocket the spread as profit. If supply can’t easily respond, however, then the existing stock of housing must be rationed, using the price mechanism. The cost of housing must rise until enough would-be residents decide the cost of living in the city is no longer worth the benefit. Across the US economy as a whole, housing is about 38 per cent more expensive than it would be if housing supply could easily adjust to demand, according to one recent estimate.7 In the tightest markets, such as Manhattan and San Francisco, the effect on prices is considerably larger: most of the cost of housing is attributable to the difficulty of building more.

No Such Thing as a Free Gift: The Gates Foundation and the Price of Philanthropy
by Linsey McGoey
Published 14 Apr 2015

The reason why economics is not like the natural sciences, Hayek believed, is because economic transactions are rooted in human motivations, and human motivations are too ephemeral to ever be understood through the same tools used to understand physical laws of nature. Hayek’s understanding of the limits of economic knowledge was essential to his criticism of state planning. In place of a central planner, he argued, what are needed are autonomous market actors – those capable of responding swiftly, through pricing mechanisms, to the fleeting decisions of countless individuals separated by space and time. In Hayek’s words, ‘the most significant fact about this system is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action’.2 Hayek’s Serfdom helped to inspire populist reactions against the evils of ‘big government’ even as, quite ironically, he embarked on a spirited campaign of ‘re-education’ through invitation-only meetings launched at the resort of Mont Pelerin sur Vevey in 1947, high in the Swiss Alps, with funding from the Volker Fund, an American philanthropic organization.

Squeezed: Why Our Families Can't Afford America
by Alissa Quart
Published 25 Jun 2018

She liked being over a shoulder, spying on an apartment because an apartment was the whole world to her. This “reading” of a nonverbal creature was all-consuming and exhausting labor. Caring for her was as full-time as it could get. And yet I needed to actually work too. Ironically, I even depended on (low-level) automation to help me so that I could edit while my daughter relaxed: her Fisher-Price mechanical swing rocked her back and forth so many times faster and for so much longer than I could. (Plus, it was fluffy and adorable, built to resemble a sheep.) As an infant, she often fell asleep this way, in a vibrating robot sheep’s mechanical embrace. I knew I was supposed to be rocking her in my orange nursing chair, swaddled in a white cotton blanket with ducks printed on it, to satisfy her desire for repetitive movement, but the auto-rocker seemed to be doing it better.

Randomistas: How Radical Researchers Changed Our World
by Andrew Leigh
Published 14 Sep 2018

Hoch, 1998, ‘An anchoring and adjustment model of purchase quantity decisions’, Journal of Marketing Research, vol. 35, no. 1, pp. 71–81 35Kusum L. Ailawadi, Bari A. Harlam, Jacques César & David Trounce, ‘Quantifying and improving promotion effectiveness at CVS’, Marketing Science, vol. 26, no. 4, 2007, pp. 566–75. 36Ju-Young Kim, Martin Natter & Martni Spann, ‘Pay what you want: A new participative pricing mechanism’, Journal of Marketing, vol. 73, 2009, pp. 44–58. 37Greer K. Gosnell, John A. List & Robert Metcalfe, ‘A new approach to an age-old problem: Solving externalities by incenting workers directly’, NBER Working Paper No. 22316, Cambridge, MA: NBER, 2016. 38Bruce S. Shearer, ‘Piece rates, fixed wages and incentives: Evidence from a field experiment’, Review of Economic Studies, vol. 71, no. 2, 2004, pp. 513–34. 39Lan Shi, ‘Incentive effect of piece-rate contracts: Evidence from two small field experiments’, B.E.

Lying for Money: How Fraud Makes the World Go Round
by Daniel Davies
Published 14 Jul 2018

A large cluster of these long-term contracts is what we call a firm, and Ronald Coase’s contribution to this strand of intellectual history was to set out the circumstances under which firms would form, and how the economy would tend not to the frictionless ideal, but to be made up of islands of central planning* linked by bridges of price signals. Of course, bringing the theory of the firm back into the model brings back a lot of the information problems associated with the socialist planning debate. The price mechanism and decentralised markets work to use private information at the firm level, but within the firms, managers are as blind as Soviet central planners ever were. The problem of trying to make sure your desired outcome happens when you can’t directly monitor the person responsible for doing it is, in the most general terms possible, known as the principal/agent problem, and something like three or four Nobel Prizes in economics (Mirlees, Tirole and at least half each of Meade and Hanson) have been given out for progress in tackling various versions of it.

The Age of Turbulence: Adventures in a New World (Hardback) - Common
by Alan Greenspan
Published 14 Jun 2007

One might think that smart planning authorities should have been able to adjust to their models' shortcomings. People like Sitaryan are smart, and they tried. But they took too much on themselves. Without the immediate signals of price changes that make capitalist markets work, how was anyone to know how much of each product to manufacture? Without the help of a market pricing mechanism, Soviet economic planning had no effective feedback to guide it. Just as important, the planners did not have the signals of finance to adjust the allocation of savings to real productive investments that accommodated the population's shifting needs and tastes. Years before becoming Fed chairman, I'd actually tried picturing myself in the central planner's job.

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Accordingly, were we to allow open migration of skilled workers to this country, there would soon be a lower wage premium of skilled over lesser skilled and an end to our shortages of skilled workers.* The shortages occur because we are inhibiting world competitive labor markets from functioning. Administrative exclusionary rules have been substituted for the pricing mechanism. In the process, we have created in this country a privileged, native-born elite of skilled workers whose incomes are being supported at noncompetitively high levels by immigration quotas on skilled professionals. Eliminating such restrictions would, at the stroke of a pen, reduce much income inequality and address the problem of a potentially noncompetitive capital stock.

Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State
by Paul Tucker
Published 21 Apr 2018

Over the middle decades of the last century, economists pinned down the circumstances under which Adam Smith’s invisible hand can bring about efficiency in this sense. In their famous “welfare theorems,” Kenneth Arrow, Gerard Debreu, and Lionel McKenzie uncovered the ideal or abstract conditions under which a market economy (the price mechanism) would deliver an efficient allocation of resources, with no gains from trade—no potential Pareto improvements—left unexploited and, therefore, with everyone left with their well-being as high as possible given the original distribution of resources. If those initial endowments were redistributed, perfect markets would generate a new Pareto-efficient state of affairs.

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Indeed, rather amazingly, some of the strongest political support for the 1930s Chicago Plan came from advocates of government deciding how to allocate credit in the economy. As Senator Bronson Cutting put it at the time, “private financiers are not entitled to any profit on credit.”14 A project that academics saw as immunizing money from credit was, in some political eyes, a means of getting the price mechanism out of credit allocation, converting the central bank from a monetary institution into a state-credit bank. It is something to ponder: credit creation in the hands of politicians—pandering to popularity, doing favors for friends, or approximating a planned economy. Arguments aside, the narrow banking question is for elected politicians.

Understanding Asset Allocation: An Intuitive Approach to Maximizing Your Portfolio
by Victor A. Canto
Published 2 Jan 2005

ETFs and the low cost-managed index funds are diversified baskets of securities designed to track the performance of well-known indices, proprietary indices or basket of securities. The major differences between the two is that the ETF are traded as individual stocks on major exchanges while the passive funds are subject to the traditional mutual funds-pricing mechanism (that is, at the close of market). They offer diversification or exposure to an entire market index or sector with one security at very low costs (that is, management fees). Each asset class was available at some point over the last three decades. Looking forward, it is readily apparent that—with ETFs’ proliferation—investors can now easily expand their choices and further disaggregate the international allocation, the fixed-income allocation, and even the domestic allocation (see Figure 6.4).

Currency Wars: The Making of the Next Gobal Crisis
by James Rickards
Published 10 Nov 2011

,” the IMF presented a blueprint for the creation of a liquid SDR bond market, the antecedent to replacing the dollar as the global reserve currency with SDRs. The IMF’s paper identifies both potential issuers of SDR bonds, including the World Bank and regional development banks, and potential buyers, including sovereign wealth funds and global corporations. The study contains recommended maturity structures and pricing mechanisms, as well as detailed diagrams for the clearance, settlement and financing of such bonds. Suggestions are made to change the SDR basket over time so as to enhance the weight of the Chinese yuan and to diminish the weight of the dollar. The IMF study is optimistic about the speed and stealth with which this could be accomplished.

The Misbehavior of Markets: A Fractal View of Financial Turbulence
by Benoit Mandelbrot and Richard L. Hudson
Published 7 Mar 2006

But the fundamental process by which prices react to news does not change. A mathematician would say market processes are “stationary.” This contradicts some would-be reformers of the random-walk model who explain the way volatility clusters by asserting that the market is in some way changing, that volatility varies because the pricing mechanism varies. Wrong. A striking example: My analysis of cotton prices over the past century shows the same broad pattern of price variability at the turn of the last century when prices were unregulated, as there was in the 1930s when prices were regulated as part of the New Deal. Rule IV. Markets mislead.

Servant Economy: Where America's Elite Is Sending the Middle Class
by Jeff Faux
Published 16 May 2012

That U.S. consumers, representing less than 5 percent of the world’s current population, can continue to use 25 percent of the world’s fossil-fuel resources is not credible. Moreover, although we don’t know how long it will take for the full force of climate change to arrive, we can see it coming. In the wake of our recent financial disasters, to imagine that these resource and environmental pressures can in any way be resolved by the price mechanisms of unregulated markets is preposterous. Yet, no serious observer believes that our current political institutions are capable of dealing with that reality. A governing class that will not bring itself to rescue the sinking incomes of the majority of its voters in the next election is hardly going to lead the world to stop a projected rise in the sea level decades in the future.

Present Shock: When Everything Happens Now
by Douglas Rushkoff
Published 21 Mar 2013

In his view, pricing is established collectively by thousands or even millions of individual actors, each acting on his own little bit of knowledge. The marketplace serves to resolve all these little pieces of data in a process Hayek called “catallaxy”—a self-organizing system of voluntary cooperation. Feedback and iteration. Price mechanisms were not human inventions so much as the result of collective activity on a lower order. Humans were part of a bigger system that could achieve “spontaneous order.” Between chaos theory, cybernetic systems, and computing brawn, economists finally had the tools to approach the marketplace as a working catallaxy—as a product of nature as complex and stable as human life itself.

Value Investing: From Graham to Buffett and Beyond
by Bruce C. N. Greenwald , Judd Kahn , Paul D. Sonkin and Michael van Biema
Published 26 Jan 2004

Therefore, our overall unrealized and realized pre-tax gains in equities for the three year period came to approximately $112 million. During this same interval the Dow-Jones Industrial Average declined from 852 to 805. It was a marvelous period for the valueoriented equity buyer. We continue to find for our insurance portfolios small portions of really outstanding businesses that are available, through the auction pricing mechanism of security markets, at prices dramatically cheaper than the valuations inferior businesses command on negotiated sales. This program of acquisition of small fractions of businesses (common stocks) at bargain prices, for which little enthusiasm exists, contrasts sharply with general corporate acquisition activity, for which much enthusiasm exists.

The Truth Machine: The Blockchain and the Future of Everything
by Paul Vigna and Michael J. Casey
Published 27 Feb 2018

Also, if you want to do this properly, you need all those payments and receipts to be settled in a special, internally traded currency, a token whose floating value is pegged to kilowatt hours and that the user can convert into dollars, to help optimize local grid management. That way, you will have a market pricing mechanism to carry out similar load-management strategies as those used by traditional grid managers in much wider energy regions. A floating KwH token represents a local price for power, and like all market prices it functions as a signal to users within the microgrid. But because it’s a digital signal, people can finely tune their devices’ response to it.

Rebooting India: Realizing a Billion Aspirations
by Nandan Nilekani
Published 4 Feb 2016

In the technical design of a smart grid, IT can help monitor and control electricity real-time with fine granularity, construct a robust, self-healing grid—detect outages, load, congestion and shortfall, and establish two-way power exchange with a large number of renewable generators, storage devices and devices such as plug-in hybrid vehicles. In terms of commercial and behavioural issues, IT can help identify theft and losses, provide choice to customers, allow for new pricing mechanisms such as Time-of-Day (ToD) or real-time, enable much improved transparency and conservation, and provide the structure for sophisticated billing, collection and information management. So, what are technology’s limitations in this sphere? The report states: We must remember that IT by itself cannot change practices and fundamentals directly.

Red Flags: Why Xi's China Is in Jeopardy
by George Magnus
Published 10 Sep 2018

They were publicly owned but this was overshadowed by the fact that they partnered with private entrepreneurs in a ‘de facto’ property rights arrangement in which the threat of expropriation was deemed less likely by virtue of the partnership.13 Throughout the last twenty-five years or so, China’s bureaucracy has continued to adapt, and experiment with, and test aspects of, the ‘capitalist mode of production’ on a trial-and-error basis. It introduced a vast body of law, even though it is subservient to the Party and the state. It established and pursued a number of market pricing mechanisms and liberalisation initiatives while phasing out many quantitative economic controls and targets. It privatised many SOEs, while retaining and rebooting others at the heart of the economic system. It modernised and liberalised the financial system at home and its interaction with foreign finance systems up to a point, even if the last few years have seen some back-pedalling as the implications of liberalisation became difficult to absorb and accept.

MegaThreats: Ten Dangerous Trends That Imperil Our Future, and How to Survive Them
by Nouriel Roubini
Published 17 Oct 2022

“Human beings have been physically removed from this assembly line, replaced by robots and digital-savvy technicians and engineers operating at a distance.” Once machines get the hang of decisions that remaining people make, those jobs will vanish too. Efficient competition can bend rules in unsavory ways. “As pricing mechanisms shift to computer pricing algorithms, so too will the types of collusion,” authors Ariel Ezrachi and Maurice Stucke contend in the University of Illinois Law Review. “We are shifting from the world where executives expressly collude in smoke-filled hotel rooms to a world where pricing algorithms continually monitor and adjust to each other’s prices and market data.”37 Surrender scruples or face unpleasant consequences.

Living in a Material World: The Commodity Connection
by Kevin Morrison
Published 15 Jul 2008

For much of the early period the British pound was the currency of international trade, so the LME’s contracts, together with the imposition of tariffs were more suitable for global trading and London was therefore able to remain the centre of global copper trading. Copper trade on the LME really took off after the nationalization of Codelco, which preferred to sell its copper at a price set by the market rather than a producer price mechanism. The other main competitor to the LME is the Shanghai Futures Exchange. 214 | LIVING IN A MATERIAL WORLD Copper Rush Even the US is having a new copper rush, just as it did in the late 19th century. In some ways things have not changed; there was an 80% increase in the number of active mining claims on public lands to more than 370 000 in the four and a half years to July 2007, mainly in the western US states, though some are near iconic American sites like the Grand Canyon and Yosemite National Park.

Rewriting the Rules of the European Economy: An Agenda for Growth and Shared Prosperity
by Joseph E. Stiglitz
Published 28 Jan 2020

# For instance, the best singers or athletes are enormously well paid but others receive low incomes. ** Shifting old-age retirement programs from pay-as-you-go pensions to fully funded retirement accounts breaks intergenerational solidarity and leaves individuals to save for their own retirement, undermining economic stability. †† Zoning is used because designing a price mechanism is essentially far too complex. ‡‡ Again, the ECB, national central banks, and European governments can use both carrots and sticks. The ECB, for instance, could restrict access to refinancing to banks that satisfied these targets. Alternatively, governments could make available the information described earlier (for issuing public option mortgages) at no cost to private lenders.

Superminds: The Surprising Power of People and Computers Thinking Together
by Thomas W. Malone
Published 14 May 2018

This is the best explanation we have for why hierarchically managed companies exist in our economy instead of every worker being an independent contractor who negotiates with others every day to do the work that needs to be done. Comparing Markets to Communities Like hierarchies, markets can have either higher or lower decision-making costs than communities. The same price mechanism that often makes markets cheaper than hierarchies also makes them cheaper than communities when coordinating large numbers of people and decisions. On the other hand, communities, like hierarchies, are often better than markets at dealing with transaction costs arising from things like contract negotiations and hold-up problems.

The Bond King: How One Man Made a Market, Built an Empire, and Lost It All
by Mary Childs
Published 15 Mar 2022

Kirsten Grind, Gregory Zuckerman, and Jean Eaglesham published a story saying the regulatory body was looking into whether Pimco had artificially boosted returns of its Bond ETF; that the ETF’s “huge early gains” had probably helped attract investors; that the SEC’s probe had intensified in recent weeks; that Gross himself had met with the investigators. The article wasn’t heavy on details, but the SEC had caught on to the odd-lot pricing mechanism Pimco had exploited that gave the Total Return ETF a killer head start, trouncing its own mutual fund counterpart—just as alleged in Jason Williams’s lawsuit. Pimco had kept the investigation under wraps for so long, only for it to break now, at the worst possible moment, as everything was coming to a head.

The Devil's Playground: A Century of Pleasure and Profit in Times Square
by James Traub
Published 1 Jan 2004

Law & Order wanted to shoot a murder scene on the premises; Sex and the City wanted a sex scene. Marc wasn’t interested. “No sex, no murder, nothing negative.” But where was the positive going to come from? Marc admitted that he was hurting; the promoters he booked in weren’t making the bar minimums he charged, and he was being forced to shift to a different pricing mechanism. The economy was killing everyone. Maybe this bid for respectability would crash, and Show World would end with racks full of kung fu videos like everyone else. But I was rooting for Marc. It was obvious, in retrospect, that Todo Con Nada at Show World had been foredoomed. Richie Basciano did not aspire to be alternative anything; neither, for that matter, did Times Square.

Understanding Sponsored Search: Core Elements of Keyword Advertising
by Jim Jansen
Published 25 Jul 2011

, which had purchased Overture in 2003, introduced a revamped sponsored-search auction in 2007. Baidu modeled both the Google auction and presentation in 2009. The auction process or platform, typically called a market, takes some set of resources and allocates these resources to those participating in the auction based on a pricing mechanism known as a bid. Therefore, an auction is simply a market with an explicit set of rules to determine resource allocation. The prices of these resources are based on bids from the participants in that market [4]. For sponsored search, the search engines are the market as the keyphrase bidding platform where advertisers (virtually) gather.

Exceptional People: How Migration Shaped Our World and Will Define Our Future
by Ian Goldin , Geoffrey Cameron and Meera Balarajan
Published 20 Dec 2010

One such practice was collective price bargaining, where a ship's captain would bargain on behalf of all of the merchants on board. The accelerating pace of cross-cultural trade also attuned more general patterns of behavior in the region toward trade, augmenting “the everyday routines of life” through the growth of specialization and the spread of the price mechanism. While Europeans would be the first to open up the Atlantic route to the Americas, in the early fifteenth century, the Chinese first established contact over the Indian and Pacific Oceans. Between 1403 and 1433, Admiral Zheng He, under the patronage of the Ming Emperor Zhu Di, undertook a series of explorations with fleets that at times numbered up to 300 ships, carrying 20,000 men.

Arrival City
by Doug Saunders
Published 22 Mar 2011

Much of the suburban settlement has to do with family and village networks, which establish chain-migration footholds in an affordable suburb, rapidly turning a small group of workers into a large and concentrated influx; one Washington-area official calls this “the cousin syndrome.” Economists have also observed an immigration-driven pricing mechanism with a suburbanizing effect, in which first-wave migrants arrive in the urban core in such great numbers that they drive up arrival-city rents and drive down immigrant wages, making the inner-ring suburbs appear more appealing, in wages and rent, to the next wave of villagers to arrive.22 This pattern is even more sharply defined in the largest cities of Canada.

Platform Revolution: How Networked Markets Are Transforming the Economy--And How to Make Them Work for You
by Sangeet Paul Choudary , Marshall W. van Alstyne and Geoffrey G. Parker
Published 27 Mar 2016

As Heiferman explained in an interview five years later, “The big headline, by the way, in going from free to fee for us is: Yeah, we lost 95% of our activity but now we have much, much, more going on than we ever did before and half the Meetups are successful, as opposed to 1–2% being successful.”5 As we’ve discussed, a platform’s goal is not simply to pump up the numbers of participants and interactions. It must also take steps to encourage desirable interactions and discourage undesirable ones. Meetup’s monetization model helped it achieve exactly that. By discouraging organizers who weren’t serious about their objectives, the pricing mechanism created a culture of quality on the platform. It’s a mistake to assume that network effects can always be optimized by simply refraining from charging users. A better approach to analyzing the monetization challenge is to ask these questions: How can we generate revenues without reducing our positive network effects?

The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being in Charge Isn’t What It Used to Be
by Moises Naim
Published 5 Mar 2013

Consider the threat of climate change: even as the rise from poverty of China and India has lifted the lives of billions, it has also accelerated their greenhouse gas emissions dramatically. China overtook the United States as the single largest emitter of greenhouse gases in 2006, and India that year was ranked fourth. Any effort to reduce carbon emissions in one country must take into account the actions of the other—not least because as environmental policies and carbon pricing mechanisms in developed countries take hold, companies have responded by shifting their carbon-intensive production offshore. From arms exports and Internet-domain conventions to fisheries and agricultural trade, just about every subject for international negotiation now involves more demands from a growing number of stakeholders.

The Blockchain Alternative: Rethinking Macroeconomic Policy and Economic Theory
by Kariappa Bheemaiah
Published 26 Feb 2017

In his seminal paper, ‘The Nature of the Firm’, Coase noted that while economies involve plenty of planning, a large part of this planning is not coordinated by the price system and takes place within the boundaries of the firm (Hidalgo, 2015). As firms have hierarchies, most interactions within a firm are political. This creates boundaries of power that influence transactions and interactions causing them to deviate from the clear-cut dynamics of market price mechanisms. This is seen in the form of contracts, inspections, disputes, negotiations, etc. These boundaries in turn rack up costs and the greater the cost associated with a transaction, the more friction associated with making the transaction. But trust is an essential element in any network as it allows for the transfer of information, knowledge and knowhow.

The Evolution of Everything: How New Ideas Emerge
by Matt Ridley

The more open and free the market, the less opportunity there is for exploitation and predation, because the easier it is for consumers to boycott the predators and for competitors to whittle away their excess profits. In its ideal form, therefore, the free market is a device for creating networks of collaboration among people to raise each other’s living standards, a device for coordinating production and a device for communicating information about needs through the price mechanism. Also a device for encouraging innovation. It is the very opposite of the rampant and selfish individualism that so many churchmen and others seem to think it is. The market is a system of mass cooperation. You compete with rival producers, sure, but you cooperate with your customers, your suppliers and your colleagues.

Trading Risk: Enhanced Profitability Through Risk Control
by Kenneth L. Grant
Published 1 Sep 2004

In order to analyze transactions-level performance for this portfolio, it would be useful to know something about the volume of these securities, not to mention their volatilities, betas, sectors, and other market characteristics. However, it would be neither necessary nor indeed efficient to record these statistics every time the portfolio manager executed a trade in one of these names. Rather, this information is best obtained from other sources, including electronic-pricing mechanisms such as Reuters and Bloomberg, as well as financial print publications, such as Barron’s. Defining a Transaction As a final consideration in setting up your trade-level analysis tool kit, you must decide what among your transactions activity specifically constitutes a “trade.” This is particularly important for active traders (including professionals) who very often maintain a core position in a given security while scaling up and down the exact quantities they are holding at any time on the basis of market conditions.

Transaction Man: The Rise of the Deal and the Decline of the American Dream
by Nicholas Lemann
Published 9 Sep 2019

He called The Modern Corporation and Private Property “folklore,” adding that Berle’s more recent writings were no better: in endorsing the idea of corporate executives as statesmen who served a public purpose, Berle was running the risk of “losing the only objective standard available for judging quality among corporate managers,” which was their economic performance. All attempts to consider the corporation as a social institution “represent disguised efforts to find an alternative to the price mechanism in economic matters.” In a second article, Manne proposed a solution to the problems created by decades of muddy thinking about the corporation: the establishment of a “market for corporate control,” in which a newly empowered breed of shareholders would, if management failed to perform well economically, arrange for the corporation to be acquired by a new owner who would better serve their interests.

Digital Disconnect: How Capitalism Is Turning the Internet Against Democracy
by Robert W. McChesney
Published 5 Mar 2013

For Buffett it is all about monopoly power, not management. “If you own the only newspaper in town, up until the last five years or so, you had pricing power and you didn’t have to go to the office” and worry about management issues.44 The consequences for mainstream economics are disastrous if the price mechanism and market competition are removed as the main regulatory mechanisms. The economy will be inefficient and unfair. In general, economists have punted on this issue rather than face up to the reality of Buffett’s world and the implications of Hayek’s concern.45 As important and revealing as concentration ratios for industries are, they are of more limited value today than in the past in getting at the full range of monopoly power of the giant corporation.

The End of Alchemy: Money, Banking and the Future of the Global Economy
by Mervyn King
Published 3 Mar 2016

The way in which each country will choose to rebalance is a matter for itself, but it is in the interests of all countries to find a common timetable for that rebalancing. The natural broker for an agreement is the IMF. Our best chance of solving the prisoner’s dilemma, while retaining national sovereignty, is to use the price mechanism, not suppress it. Arrangements to fix or limit movements of exchange rates tend to backfire as unexpected events require changes in rates to avoid economic suffering. At the heart of the problem is the question that so troubled the negotiators at Bretton Woods. How can one create symmetric obligations on countries with trade surpluses and trade deficits?

No One Would Listen: A True Financial Thriller
by Harry Markopolos
Published 1 Mar 2010

You can’t regulate common sense, but some sort of guidelines should be available to investors on the SEC’s web site, pointing out that if you don’t know how to model an OTC derivative yourself, then you, your company, or your municipality shouldn’t be trading them. The SEC should closely investigate all disclosures in the OTC municipal derivatives market, because this sector of the marketplace is just rife with fraud. In many instances it is still a pay-to-play market with opaque disclosure documents and even more opaque pricing mechanisms, which only serve to defraud government entities. I have seen the state of Massachusetts lose $450 million because no one in state government knew how to price interest rate swaptions. The Massachusetts Turnpike Authority was picked off by several Wall Street firms because they were lured into OTC transactions in which they didn’t understand the pricing or the risks.

Life Inc.: How the World Became a Corporation and How to Take It Back
by Douglas Rushkoff
Published 1 Jun 2009

Since the information required to make production decisions is inherently decentralized, it should be gathered and reconciled through decentralized means. Adam Smith had already argued that if everyone goes after his own interests, the interests of the greater society will be served. Hayek extended this logic, contending that the price mechanisms of a freely functioning market will naturally synchronize the demands of people with the market’s supply. In Hayek’s view, this mechanism is not of human design, but a spontaneous “catallaxy”: a self-organizing system of voluntary cooperation. As millions of people both rationally and irrationally pursued their goals, a working market would order itself around them.

The Future of Ideas: The Fate of the Commons in a Connected World
by Lawrence Lessig
Published 14 Jul 2001

Land, labor and capital are all scarce, but this, of itself, does not call for government regulation. It is true that some mechanism has to be employed to decide who, out of the many claimants, should be allowed to use the scarce resource. But the way this is usually done in the American economic system is to employ the price mechanism, and this allocates resources to users without the need for government regulation.” R. H. Coase, “The Federal Communications Commission,” Journal of Law & Economics 2 (1959): 1, 14. 16 Hazlett has been prolific in advancing this argument. See, e.g., Hazlett and Sosa, “Chilling the Internet?

Money for Nothing
by Thomas Levenson
Published 18 Aug 2020

His thinking matured in 1705, when his next treatise, titled Money and Trade Reconsidered: with a Proposal for Supplying the Nation with Money, set out what the economist and central banker François Velde has called “the first…theoretical framework” for much of the modern conception of money. There, Law argued that money was, like any commodity, subject to supply and demand; that the amount of money available within a society determined prices within a market; and that this price mechanism shaped a nation’s trade, its employment, and the productive capacity of its economy. This was not wholly new thinking—recall that Isaac Newton answering Pollexfen had offered some similar notions, and that others were working on related ideas. But there was more to come: Law’s book offered only the first steps in an argument he would work out over the next decade.

The New Enclosure: The Appropriation of Public Land in Neoliberal Britain
by Brett Christophers
Published 6 Nov 2018

But despite the claims of political-economic libertarians such as the late Murray Rothbard, few significant theorists of capitalism would suggest that all services can be effectively provided, or should therefore be provided, by the private sector. ‘The market’, understood here as an aggregation of private-sector actors whose relations are mediated purely through the price mechanism, sometimes ‘fails’. It is ill-adapted to providing some types of services, failing to do so adequately when given the task. Those services, theorists suggest, should be provided by the state, as they often have been in the past. Adam Smith’s thinking has long been a touchstone in this regard.

Networks, Crowds, and Markets: Reasoning About a Highly Connected World
by David Easley and Jon Kleinberg
Published 15 Nov 2010

This consideration will come up as a central issue at various points later in the chapter. 9.4 Second-Price Auctions The sealed-bid second-price auction is particularly interesting, and there are a number of examples of it in widespread use. The auction form used on eBay is essentially a second-price auction. The pricing mechanism that search engines use to sell keyword-based advertising is a generalization of the second-price auction, as we will see in Chapter 15. One of the most important results in auction theory is the fact we mentioned toward the end of the previous section: with independent, private values, bidding your true value is a dominant strategy in a second price sealed-bid auction.

…

We will refer to this as the Vickrey-Clarke-Groves (VCG) principle, after the work of Clarke and Groves, who generalized the central idea behind Vickrey’s second-price auction for single items [111, 198, 393]. For matching markets, we will describe an application of this principle due to Herman Leonard [266] and 454 CHAPTER 15. SPONSORED SEARCH MARKETS Gabrielle Demange [127]; it develops a pricing mechanism in this context that causes buyers to reveal their valuations truthfully. Applying the VCG Principle to Matching Markets. In a matching market, we have a set of buyers and a set of sellers — with equal numbers of each — and buyer j has a valuation of vij for the item being sold by seller i.2 We are assuming here that each buyer knows her own valuations, but that these valuations are not known to the other buyers or to the sellers.

On the Brink: Inside the Race to Stop the Collapse of the Global Financial System
by Henry M. Paulson
Published 15 Sep 2010

This meant, for example, that rather than just eliminating golden parachutes in the new contracts of certain executive officers, the top officers of banks accepting capital would have to forgo any such payments in existing contracts as well; they would also have to provide for clawbacks of pay if financial statements were found to be materially inaccurate. There were a few outstanding issues. We needed to get bank regulators to sign off on the treatment of the capital for regulatory purposes, and I also wanted to nail down a pricing mechanism that would ensure widespread participation while keeping the program voluntary. But overall I felt confident we finally had the framework for a workable approach. In any case, we needed to get a capital program together immediately to help the financial system. The short sellers had wasted little time justifying John Mack’s worries, returning to the market on Thursday to drive shares of both Morgan Stanley and Merrill Lynch down 26 percent.

An Empire of Wealth: Rise of American Economy Power 1607-2000
by John Steele Gordon
Published 12 Oct 2009

The ice man and the ice wagon entered into American folklore and legend, and the American love affair with both iced drinks and frozen desserts (still a notable American peculiarity to most Europeans, especially the British) was already in full swing. By 1880 the extent of the ice trade was estimated at eight million tons annually, and mild winters invariably brought newspaper warnings of an impending “ice famine” the following summer and swiftly rising prices. Mechanical refrigeration ended the trade with the more distant foreign cities in the 1880s, when it could no longer compete with locally made ice. But the domestic trade continued to expand until well into the twentieth century, when the household refrigerator began replacing the ice man. THE DEEP DEPRESSION that had started in 1837 began to lift in the mid-1840s.

Superclass: The Global Power Elite and the World They Are Making
by David Rothkopf
Published 18 Mar 2008

It is also a network in turmoil today, thanks both to geopolitical upheaval and to the recognition that the global energy paradigm is changing as a consequence of global warming, innovations in alternative technologies, and persistent national security concerns about the current system—notably its pricing mechanisms and the unintended consequences of whom it empowers. One set of the principal actors in this hybrid power network are the senior executives of the world’s leading nationally owned energy companies (national oil companies/NOCs), or the government officials to whom they ultimately report. On the other side are independent oil companies (IOCs) working with them, often possessing more advanced technology and key resources.

India's Long Road
by Vijay Joshi
Published 21 Feb 2017

Low productivity in turn was the product of three features of economic policy: inappropriate and excessive state intervention in markets; the dominant role of the public sector; and neglect of critical social sectors. The origins of the first two features lay in statist doctrines, characterised by antipathy towards business, contempt for the price mechanism, and hostility to international trade that had a special resonance in many post-​colonial societies. In India, a further twist was given to this kind of thinking by a ‘heavy industry’ strategy (based loosely on Soviet planning models), which was adopted in the Second Five Year Plan and used to justify the physical allocation of investment.5 It was taken for granted that extensive government intervention and controls were necessary to subdue or supplant the market, and make the private sector’s activities consonant with the planned trajectory of output.6 Once the controls were established, the dynamic of rent-​seeking took over and they proliferated to the point where no economic activity, unless of very small scale, could be legally pursued without obtaining dozens of permits and licences from different departments of government.

War and Gold: A Five-Hundred-Year History of Empires, Adventures, and Debt
by Kwasi Kwarteng
Published 12 May 2014

For these nations, argued Keynes, ‘the competitive disadvantage will be concentrated’. They had ‘already taken nearly all the available surplus gold in the whole world’.17 In France, according to one recent observer, ‘until early 1935 the policy-making establishment was convinced that a liberal economy needed a fixed anchor, namely the gold franc, to allow the price mechanism to operate’. Needless to say, the ‘budget had to be balanced’.18 The election as President of Franklin Delano Roosevelt in 1932 shifted the mood on the commitment to dollar–gold convertibility. It removed what Keynes had memorably called ‘the magic spell of immobility which [had] been cast over the White House’ in Herbert Hoover’s time.19 Once Roosevelt was inaugurated in March 1933, he declared a national bank holiday, and immediately suspended gold convertibility and foreign exchange dealings.

After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead
by Alan S. Blinder
Published 24 Jan 2013

“sensitive to the public outrage”: Paulson, On the Brink, 261. “We can’t say that now”: Wessel, In Fed We Trust, 227. was no easy task: Though the technical problems required thought, they were not insoluble. Swagel reports that “we had reverse auctions to buy MBSs essentially ready to go by late October 2008—including a pricing mechanism.” Swagel, “The Financial Crisis: An Inside View,” Brookings Papers on Economic Activity, 55. drew huzzahs from many experts: One example: Krugman, “Gordon Does Good,” New York Times. I was one of four people on earth: Little did I know that Warren Buffett, the Sage of Omaha, was another. Sorkin, Too Big to Fail, 510–12.

The Default Line: The Inside Story of People, Banks and Entire Nations on the Edge
by Faisal Islam
Published 28 Aug 2013

Good for some, but not for all. I saw for myself how, even in 2010, estate agents would market £100,000 houses in Greater Manchester to well-heeled investors at the National Landlord Show in Kensington on the basis of rental yield. In BTL, multiples of rental yield replace multiples of salary as the pricing mechanism for our homes. Young first-time buyers such as Naomi Jacobs in Newcastle finds herself more in a property nightmare than a property dream. ‘I’d love to buy a little house now,’ she told me. She wants to have a family, and as the family gets bigger so she’d want a bigger house. That is the dream.

Investment: A History
by Norton Reamer and Jesse Downing
Published 19 Feb 2016

All this leads to a central question: how does one make sense of the movements of the market? How does one sift through all the noise and reach meaning? That is the task of the investor, accomplished by deploying methods of valuation. Valuation is the process of finding logic amid this noise, hoping to uncover areas of the market where the price mechanism has failed—areas that are the exploitable opportunities and the bread and butter of the successful investor. Investing and the companion enterprise of valuation have always been more of an art than a science. However, in the last century, there has been a burgeoning field of investment science that has profoundly The Emergence of Investment Theory 229 shaped and guided the way practitioners approach their art.

The Finance Curse: How Global Finance Is Making Us All Poorer
by Nicholas Shaxson
Published 10 Oct 2018

That particular night Director hosted twenty dinner guests, largely conservative thinkers, including not just Friedman but George Stigler, who would go on to make a name for himself attacking government regulation, the British economist Ronald Coase and a fire-breathing conservative lawyer called Robert Bork.1 The University of Chicago in those days was a bear pit, an arena of intense macho intellectual combat where academics were constantly struggling to outdo each other with clever theories about efficient markets – theories that often perched on toe-curling assumptions – to adopt unconventional, even anti-social positions usually supporting big business and attacking big government. Mathematical and logical elegance trumped the messy reality of life and the world. Director himself was one of the truest of true believers in neoliberalism: that pretty much anything worthwhile could and should be shoehorned into the price mechanism in the interests of ‘efficiency’. His messianic zeal mesmerised many of his students. One was Bork, who commented, ‘Aaron gradually destroyed my dreams of socialism with price theory,’ adding that many of his colleagues ‘underwent what can only be called a religious conversion’.2 The guests that evening were there to listen to Ronald Coase present a draft paper, The Problem of Social Cost.

The New Map: Energy, Climate, and the Clash of Nations
by Daniel Yergin
Published 14 Sep 2020

So significant has this personal dimension become that one of the major U.S. television networks invites “those who care deeply about the planet’s future” to go to its “confessions” page on its website to share how personally “you have fallen short in preventing climate change.”13 Chapter 42 GREEN DEALS C limate has risen to the top rung of policy in a number of nations. Of the G20 countries, fourteen deploy or have announced plans to deploy carbon pricing mechanisms or some kind of carbon tax. The United Kingdom announced that it will legally commit to zero carbon emissions by 2050. Two dozen other countries are promising the same, though the path for most is far from clear. Europe, more than anywhere else on the planet, is seeking to build an “After Paris” world.

How to Be a Liberal: The Story of Liberalism and the Fight for Its Life
by Ian Dunt
Published 15 Oct 2020

Other producers would see that there was a lot of profit to be made and start making it themselves. Eventually there would be more supply and the price would fall. But if few customers wanted a product, the price would fall. People would stop producing it, because it didn’t make much profit, until there was a reduction in supply and the price would eventually rise. This price mechanism gave people all sorts of vital data about scarcity and desire. And it meant that production suddenly became efficient. The profit motive encouraged cheaper production, driving down costs and maximising national output. Importantly, this was not achieved by planning. It flowed naturally from people’s self-interest.

The Asian Financial Crisis 1995–98: Birth of the Age of Debt
by Russell Napier
Published 19 Jul 2021

Having intervened in the price of domestic commodities for many years in Malaysia, the authorities have now decided to intervene in the free market for capital. Last Friday, the domestic cost of money was deemed too high in Malaysia, so there was a unilateral declaration that it would rise no further (the base lending rate pricing mechanism was rescinded for the month of July). On Monday, the authorities decided that short-term capital outflows were injurious to the economy, so they have acted to prevent them. While intervening with the price of chickens was serious enough, to intervene with the price of money and the freedom of movement of capital is even more dangerous.

Radical Uncertainty: Decision-Making for an Unknowable Future
by Mervyn King and John Kay
Published 5 Mar 2020

In the nineteenth century, Leon Walras, a French economist working at the University of Lausanne, attempted to express in a system of equations the idea that the uncoordinated decisions of millions of people might produce aggregate outcomes that were not only coherent but efficient. 10 But Walrasian analysis only reached fruition when, as described in chapter 14 , new and powerful mathematical tools were applied to economics by Kenneth Arrow and Gerard Debreu. 11 For some devotees of laissez faire, this was the analysis they had been waiting for – a rigorous mathematical demonstration of the maxim that ‘you can’t buck the market’. Building on Walras, Arrow and Debreu envisaged a ‘grand auction’, to which consumers brought their demand curves, workers and resource owners their supply curves, and producers their technical capabilities. In this ‘grand auction’ the price mechanism secured an equilibrium which reconciled all these demands and supplies and in which no one could be better off without making someone else worse off – all possible mutually advantageous trades had been realised. But in a radically uncertain world, markets are necessarily incomplete. There is no market in oil for delivery in 2075, for example, because there are so many uncertainties that no one is willing to trade.

Oil: Money, Politics, and Power in the 21st Century
by Tom Bower
Published 1 Jan 2009

He was fired, and Metallgesellschaft was ruined. Speculating about oil prices, insiders acknowledged, was not suited to amateurs. The involvement of bankers and big traders complicated the pricing of Saudi oil for Laney Littlejohn. Regularly, Littlejohn was told by Jorge Montepeque that his pricing mechanism was being manipulated. “We’re watching Japanese traders squeeze the market in Dubai,” Montepeque declared. “Everyone’s manipulating in Dubai. It’s full of daisy chains.” Aramco or Shell could have terminated the squeezes by releasing more oil in the region, but refused. Montepeque suspected their motives.

The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order
by Benn Steil
Published 14 May 2013

High unemployment could persist indefinitely if governments did not intervene forcefully to boost consumption demand. Cheap money provided by the central bank was not enough. This was wholly contrary to classical economics, which held that protracted involuntary unemployment was a result of some interference in the workings of the price mechanism. Classical economics showed that full employment required flexible wages; Keynes showed why, with different assumptions, falling wages could actually worsen unemployment. These different assumptions were related to the nature of money, human psychology, and conventions of contemporary society.

The Asylum: The Renegades Who Hijacked the World's Oil Market
by Leah McGrath Goodman
Published 15 Feb 2011

Energy analysts, observing Wall Street’s apparent interest in stowing away ever-greater amounts of oil in Cushing, fretted that the town was having an outsize and unreasonable effect on energy prices. They believed Cushing should no longer be the epicenter of the oil universe and that Texas crude had become a red herring. “The dynamics of the U.S. crude oil market have become increasingly bizarre in recent weeks and have now reached the point where the oil price mechanism itself has gotten stuck in a fairly vicious loop,” wrote Paul Horsnell, head of commodities research at Barclay’s Bank. “In terms of being a reflection of general market conditions, West Texas Intermediate has become about as useful as a chocolate oven glove.” But Schaeffer could breathe easy.

Rentier Capitalism: Who Owns the Economy, and Who Pays for It?
by Brett Christophers
Published 17 Nov 2020

Boué, ‘The United Kingdom: Public Debate and Management of Petroleum Resources’, in I. Overland, ed., Public Brain Power: Civil Society and Natural Resource Management (Basingstoke: Palgrave Macmillan, 2017), pp. 329–46, at p. 335. 46. Boué, ‘1973 Oil Shock’, pp. 244, 246. 47. Energy Charter Secretariat, ‘Taxation Along the Oil and Gas Supply Chain: International Pricing Mechanisms for Oil and Gas’, 2008, p. 67 – pdf available at energycharter.org. 48. Mommer, ‘Fiscal Regimes and Oil Revenues’, p. 26. 49. Wright and Boué, ‘United Kingdom’, p. 336. 50. G. Muttitt, A. Markova and M. Crighton, ‘Sea Change: Climate Emergency, Jobs and Managing the Phase-Out of UK Oil and Gas Extraction’, May 2019, p. 35 – pdf available at priceofoil.org. 51.

Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed
by James C. Scott
Published 8 Feb 1999

And yet, as I make clear in examining scientific farming, industrial agriculture, and capitalist markets in general, large-scale capitalism is just as much an agency of homogenization, uniformity, grids, and heroic simplification as the state is, with the difference being that, for capitalists, simplification must pay. A market necessarily reduces quality to quantity via the price mechanism and promotes standardization; in markets, money talks, not people. Today, global capitalism is perhaps the most powerful force for homogenization, whereas the state may in some instances be the defender of local difference and variety. (In Enlightenment's Wake, John Gray makes a similar case for liberalism, which he regards as self-limiting because it rests on cultural and institutional capital that it is bound to undermine.)

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown
by Philip Mirowski
Published 24 Jun 2013

Both the Fed and the profession can accept that the EMH, properly understood, and bubbles are entirely compatible—you just won’t know you are in one till it bursts. And paraphrasing Bill Clinton, it all depends what you mean by “bubble.” Yet Stiglitz never really repudiates the neoliberal doctrine of the Marketplace of Ideas. “The price mechanism is at the core of the market process of gathering, processing and transmitting information.” There is nothing autodestructive about the Marketplace of Ideas. But then, who in the elite of the orthodox economics profession ever thought otherwise?81 The endless quest to delete the EMH from the Ten Commandments of Neoclassicism almost constitutes the definition of “empty gesture” within orthodox economics. 3) Abandon the DSGE Model A third reaction to the crisis is to refrain from indictment of the global orthodoxy, and instead suggest that since the crisis was eminently a “macroeconomic” event, the onus for failure must be narrowly restricted to that subset of the profession tasked with study of the macroeconomy; and furthermore, the correct response is to simply jettison the paradigmatic model found in contemporary macroeconomic textbooks, the so-called Dynamic Stochastic General Equilibrium (DSGE) model.

Basic Income: A Radical Proposal for a Free Society and a Sane Economy
by Philippe van Parijs and Yannick Vanderborght
Published 20 Mar 2017

In Â�Meade, The Collected Papers of James Â�Meade, ed. Susan Howsen, vol. 1: Employment and Inflation, ch. 4. London: Unwin Hyman. —Â�—Â�—. 1937. An Introduction to Economic AnalyÂ�sis and Policy. Oxford: Oxford University Press. —Â�—Â�—. 1938. Consumers’ Credits and Unemployment. Oxford: Oxford University Press. —Â�—Â�—. 1948. Planning and the Price Mechanism: The Liberal-Â�Socialist Solution. London: Allen and Unwin. —Â�—Â�—. 1957. “The Balance of Payments ProbÂ�lems of a Â�Free Trade Area.” Economic Journal 67(3): 379–396. —Â�—Â�—. 1971. The Intelligent Radical’s Guide to Economic Policy. London: Allen and Unwin. —Â�—Â�—. 1989. Agathotopia: The Economics of Partnership.

The Price of Time: The Real Story of Interest
by Edward Chancellor
Published 15 Aug 2022

Central planning doesn’t work, in Hayek’s view, because public officials can never gather all the information needed to make it work. On the other hand, capitalism works because it is a system in which decision-making is decentralized: prices set under competitive conditions contain all the information about people’s infinitely varied preferences. Hayek refers to ‘regulation by the price mechanism’. If resources aren’t allocated by the market then the authorities must step in. He was concerned that ‘once the free working of the market is impeded beyond a certain degree, the planner will be forced to extend his controls until they become all-comprehensive.’32 In The Road to Serfdom, Hayek warns against official attempts to achieve full employment through monetary policy, which he believed would damage growth prospects.

Ellul, Jacques-The Technological Society-Vintage Books (1964)
by Unknown
Published 7 Jun 2012

It is to Fourastie’s credit that he pointed out that technical development controls all contemporary economic evolution, from production operations to demography. (There is no doubt that world population growth is related to the increase in consumption.) Even more abstract spheres are shown by Fourastie to be dominated by technical progress; for example, the price mechanism, capital evolution, foreign trade, population displace­ ment, unemployment, and so on. This invasion of all economic activity by technique seems today indisputable. O f course the problem had been raised by economists before Fourastie, if not in full, at least to a certain degree. In an ef­ fort to explain crises, Gottfried Haberler, in Prosperity and De­ pression, ascribed their existence to inequality of technical develop­ ment in different branches of economic activity.

After Tamerlane: The Global History of Empire Since 1405
by John Darwin
Published 5 Feb 2008

After 1970, the rapid growth of previous decades could not be sustained. The extra production to improve living standards and fund the apparatus of military power eluded the Soviet planners. Without the sanction of terror, the command economy that Stalin had fashioned lost its grip on the workforce.92 The lack of a price mechanism to direct investment and select innovation became more and more costly. To make matters worse, the setbacks affecting the market economies in the 1970s proved very short-lived. In the G- 7 countries (Germany, Italy, France, Britain, Canada, Japan and the United States) that made up the core of the capitalist world, the 1980s sawextremely rapid movement towards the characteristic forms of commercial globalization: ever-greater dependence upon exports and trade; bank activity across national borders; the flowof capital into foreign investment; the large-scale buying and selling of currencies.93 America’s corporate economy staged a major recovery in the 1980s.94 The spectacular growth of so-called ‘newly industrialized countries’, like Singapore, Malaysia, Thailand, Taiwan and, above all, South Korea (the world’s tenth largest producer of steel by 1989), most of which had sheltered under American strategic protection, erased the fear that they would be hollowed out by Marxist liberation movements.

The Social Life of Money
by Nigel Dodd
Published 14 May 2014

The principle would be that economies can expand only to the extent that they become more energy efficient: using up too much of a country’s energy quota would be like running up too much debt, with domestic “inflation” eventually forcing it to contract. Douthwaite’s proposals represent a utopian pricing system, which uses a chosen scarce resource—energy, as opposed to labor or time, for example—to underpin the value of money. In such a system, the price mechanism is meant to achieve a more equitable distribution of the resource in question. In all such instances—gold, labor money, time dollars, and energy units—the logic is that by holding money’s value to a commodity that is in finite supply, prices have to stabilize over time. With gold, the aim is to hold prices steady.

The Power Law: Venture Capital and the Making of the New Future
by Sebastian Mallaby
Published 1 Feb 2022

Much of the attention focused on the mechanism used to allocate the shares: in another of their revolts against the financial establishment, the Googlers had refused to pay investment bankers their traditional fee for placing stock, preferring instead to sell shares via an auction. But whereas Google’s experimental pricing mechanism did not become the model for later Valley IPOs, the dual-class, ten-votes-versus-one share structure was copied by companies such as Facebook.[63] Google’s extraordinary growth after its flotation—over the next three years, the stock price quintupled—made the VCs’ objections to the dual-class structure look irrelevant.

Darwin's Dangerous Idea: Evolution and the Meanings of Life
by Daniel C. Dennett
Published 15 Jan 1995

And the creatures that don't have eyes at all are neither better nor worse on any absolute scale of design; their lineage has just never been given this problem to solve. It is this same variability in luck in the various lineages that makes it impossible to define a single Archimedean point from which global progress could be measured. Is it progress when you have to work an extra job to pay for the high-priced mechanic you have to hire to fix your car when it breaks because it is too complex for you to fix in the way you used to fix your old clunker? Who is to say? Some lineages get trapped in (or are lucky enough to wander into — take your pick) a path in Design Space in which complexity begets complexity, in an arms race of competitive design.

Iron Curtain: The Crushing of Eastern Europe, 1945-1956
by Anne Applebaum
Published 30 Oct 2012

Hungary launched its Three-Year Plan in August 1947, and would announce a Five-Year Plan in 1950. Poland also launched a Three-Year Plan in 1947, and a Six-Year Plan in 1950. Germany launched a Two-Year Plan in January 1949 and then a Five-Year Plan for the years 1951–55. The targets set in these first plans were often pulled from the air, and the understanding of pricing mechanisms was unsophisticated, to say the least. One of Poland’s first economic bureaucrats tried to keep track of the fluctuating prices of coal and bread in the months before the first plan went into effect, imagining that would eventually help him set the “correct” prices for all goods—prices which, of course, would never need to be changed again, he thought, since there would be no inflation in a communist economy.

Private Empire: ExxonMobil and American Power
by Steve Coll
Published 30 Apr 2012

Kreindler knew all about ExxonMobil’s support for a carbon tax, and in his circles, “there are two explanations—one is paranoid—that they were reading the tea leaves and proposed a poison pill they knew would never pass. The other explanation, which I’m inclined to believe, is that Exxon believed some [carbon pricing] mechanism was inevitable, and they took a very hard look at their business model and decided they could simply out-compete everyone else if the policy were a carbon tax.” Kreindler and Stuewer talked in detail about changes to the Waxman-Markey formulas that might bring it closer to something ExxonMobil could accept, by structuring the cap-and-trade regime so that it looked and worked more like a straight-up carbon tax.

The Atlantic and Its Enemies: A History of the Cold War
by Norman Stone
Published 15 Feb 2010

The direct costs ran into thousands of millions, and there were tales of extraordinary waste and maladministration. The regulation was meant to ensure fair shares, and to bring back refineries that had been kept out of service. It seems only to have profited lawyers. Administrations lurched, unwilling to accept that the price mechanism was in the end valuable. President Gerald Ford, in January 1975, talked nuclear power and coal; ecologists went to town. However, two things were at last put through. The Alaskan Pipeline, set to cost $10bn, was allowed; and in 1975 American automobiles had to have fuel efficiency standards. In 1977 Carter took over, appointing a multipurpose warhorse, James Schlesinger, as his maker of energy policy, in effect hoping for rationing because a CIA report of 1976 had predicted another oil shortage.

The Age of Surveillance Capitalism
by Shoshana Zuboff
Published 15 Jan 2019

Industrial capitalism transformed nature’s raw materials into commodities, and surveillance capitalism lays its claims to the stuff of human nature for a new commodity invention. Now it is human nature that is scraped, torn, and taken for another century’s market project. It is obscene to suppose that this harm can be reduced to the obvious fact that users receive no fee for the raw material they supply. That critique is a feat of misdirection that would use a pricing mechanism to institutionalize and therefore legitimate the extraction of human behavior for manufacturing and sale. It ignores the key point that the essence of the exploitation here is the rendering of our lives as behavioral data for the sake of others’ improved control of us. The remarkable questions here concern the facts that our lives are rendered as behavioral data in the first place; that ignorance is a condition of this ubiquitous rendition; that decision rights vanish before one even knows that there is a decision to make; that there are consequences to this diminishment of rights that we can neither see nor foretell; that there is no exit, no voice, and no loyalty, only helplessness, resignation, and psychic numbing; and that encryption is the only positive action left to discuss when we sit around the dinner table and casually ponder how to hide from the forces that hide from us. 2.

The Quest: Energy, Security, and the Remaking of the Modern World
by Daniel Yergin
Published 14 May 2011

The “Top 1000 Program” aims to cut energy consumption among China’s largest energy-using enterprises, which by themselves represent a third of the country’s entire energy consumption. Today China’s fuel-efficiency standards for vehicles are stiffer than those of the United States.9 But Beijing has been cautious about using the price mechanism to reduce demand. One senior official was asked why China still controls retail petroleum prices, partly shielding consumers from world prices. He summed up the reasons simply: “Farmers, the army, and taxi cab drivers.” In other words, Beijing wants to mitigate the price burdens for rural Chinese, many of them struggling at the lower end of the income table, and avoid stimulating outbreaks of discontent and violence in the countryside.

The Rise and Fall of the Great Powers: Economic Change and Military Conflict From 1500 to 2000
by Paul Kennedy
Published 15 Jan 1989

More capital might be poured into industry and technology, but only at the cost of diverting resources either from defense—which has remained the number-one priority of the USSR, despite all the changes of leadership—or from consumer goods—slighting of which was seen to be highly unpopular (especially in eastern Europe) at a time when improved communications were making the West’s relative prosperity even more obvious. Finally, Russia and its fellow Communist regimes could contemplate a series of reforms, not merely of the regular rooting-out-corruption and shaking-up-the-bureaucracy sort, but of the system itself, providing personal incentives, introducing a more realistic price mechanism, allowing increases in private farming, encouraging open discussion and entrepreneurship in dealing with the newer technologies, etc.; in other words, going for “creeping capitalism,” such as the Hungarians were adroitly practicing in the 1970s. The difficulty of that strategy, as the Czech experiences of 1968 showed, was that “liberalization” measures threw into question the dirigiste Communist regime itself—and were therefore frowned upon by party ideologues and the military throughout the cautious Brezhnev era.246 Reversing relative economic decline therefore had to be done carefully, which in turn made a striking success unlikely.

The Coming Plague: Newly Emerging Diseases in a World Out of Balance
by Laurie Garrett
Published 31 Oct 1994

Bibile, “The Political Economy of Controlling Transnationals: The Pharmaceutical Industry in Sri Lanka, 1972–1976,” International Journal of Health Services 8 (1978): 299–328: T. Heller, Poor Health, Rich Profits: Multinational Drug Companies and the Third World (London: Spokesman Books, 1977); UNCTAD Secretariat, “Dominant Positions of Market Power of Transnational Corporations: Use of the Transfer Pricing Mechanism,” Geneva, November 30, 1977; J. M. Starrels, “The World Health Organization, Resisting Third World Ideological Pressures” (Washington, D.C.: Heritage Foundation, 1985); R. Deitch, “Commentary from Westminster: More Pressure on the Profits of the Pharmaceutical Industry,” Lancet I (1984): 521; and International Federation of Pharmaceutical Manufacturers Associations (IFPMA), “Medicines and the Developing World,” Geneva, 1984. 136 S.

Nixonland: The Rise of a President and the Fracturing of America
by Rick Perlstein
Published 1 Jan 2008

To those who claimed it unconstitutional for the federal government to interfere with the private housing market, the bill’s supporters pointed out how deeply the federal government subsidized the private housing market. To those who said integration brought neighborhood breakdown, they introduced social science into the Congressional Record (“Old concepts about neighborhood homogeneity, the relationship of changes in value to housing supply, the price mechanism as a controlling factor in family mobility, the significance of panic-selling and block-busting techniques, and property maintenance habits of nonwhite families are being revised and are no longer supported by responsible literature in the field”) and the conclusions of President Eisenhower’s Civil Rights Commission that integration brought lower “rates of disease, juvenile delinquency, crime, and social demoralization.”

Stigum's Money Market, 4E
by Marcia Stigum and Anthony Crescenzi
Published 9 Feb 2007

It’s a misconception that banks began making advances in the domestic market solely to compete with the commercial paper market. Another motive was to keep business that they would have lost had they insisted that borrowers pay prime at a time when borrowers felt that prime was unrealistically high. Big banks felt compelled to devise some pricing mechanism that would give the borrower a rate she’d view as realistic; that is what pushed banks into making loans at subprime rates.14 Eventually, the enthusiasm of banks for extending advances at sub-prime rates faded for a time because they found that doing so was unprofitable. “The good borrowers,” noted one banker, “are doing commercial paper, so we have here the small guy who does not want to take any interest-rate risk.

Artificial Intelligence: A Modern Approach
by Stuart Russell and Peter Norvig
Published 14 Jul 2019

In Kaggle data science competitions they were the most popular approach of winning teams from 2011 through 2014, and remain a common approach to this day (although deep learning and gradient boosting have become even more common among recent winners). The randomForest package in R has been a particular favorite. In finance, random forests have been used for credit card default prediction, household income prediction, and option pricing. Mechanical applications include machine fault diagnosis and remote sensing. Bioin-formatic and medical applications include diabetic retinopathy, microarray gene expression, mass spectrum protein expression analysis, biomarker discovery, and protein-protein interaction prediction. 19.8.3Stacking Whereas bagging combines multiple base models of the same model class trained on different data, the technique of stacked generalization (or stacking for short) combines multiple base models from different model classes trained on the same data.