1、Economics at the CrossroadsI would like to see economics become more of a science,and more of a science means that it concerns itself more with realityWere facing a danger that economics is rigorous deduction based upon faulty assumptions.Professor W.Brain ArthurSanta Fe InstituteThe changing nature
2、 of the business profile “”mergers acquisitions re-engineer Enter the“global economy”global company multi-national company:MNC MNC global corporation global company R&D Identities loyalties “borderless organizations”sub-Saharan Africa (efficiency)doing the right thing (effectiveness)doing the right
3、thing right (relative scarcity)Economic concepts and models Questioning four tenets of economics 1.The law of diminishing returns2.Increasing returns3.The production possibility frontier4.The division of laborThe law of diminishing returns relative scarcity opportunity cost Thomas Malthus 1798 disma
4、l science global sourcing Philip Kotler guru Lewis&Harris global sourcing source global sourcing/production increasing returnsFrom diminishing returns to increasing returns ()()increasing returns increasing returns to scale The theory that made Microsoft diminishing returns QWERTY VHS diminishing re
5、turns increasing returns,Bill Gates positive feedback W.Brian Arthur increasing returns is essentially the tendency for something that gets ahead to get further ahead.QWERTY Remington lock-in switching cost increasing returns Microsoft upfront cost R&D Microsoft Windows copy copies Windows run Windo
6、ws Windows increasing returns Brian Arthur cognitive industry ideas diminishing returns Brian Arthur increasing returns “increasing returns ”diminishing returns increasing returns positive feedback increasing returns to scale scale Increasing returns whoever gets advantage,gets further advantage.Who
7、ever loses advantage,will lose further advantage.1.Cost advantage upfront R&D cost 2.Network effects 3.Groove-in effects increasing returnsThe production possibility frontier (PPC)PPC law of diminishing returns PPC PPC PPC PPC 1990 biotechnology outsourcing PPC hard soft technology PPC The division
8、of labor PPC PPC 1776 Adam Smith 1.(dexterity)2.3.Henry Ford Alfred Sloan Ford Sloan outsourcing global sourcing cross-functional teamsThe horizontal organization the death of hierarchies re-engineering Specialization versus cross-functional teams Goodbye pyramid welcome spaghetti structure (lean)1980
