I have done more work, modeling the three economic sectors of growth, maturity, and decline. Up until now, I have thought that I would reserve it for publication in the economics community. Given developments, political and economic, in past weeks, I am inclined to publish it here. For one thing, given the long time frame in academia, the material, if approved through the long (socially constructed) peer review process, wouldn't come to light for a year or so.
The fact is, though, getting the material published in a significant journal, given my status of as a newly-minted academic at my age (which rounds up to 60 years old now) is slim. I have not grown up in the socially constructed worlds of economics or management and though I find value in their literatures, in my experience, they have often taken the wrong path where they diverged in the past. This is a widespread problem in academic fields of study, which have lost the groundings that seemed to have peaked in the 1960s and fallen back thereafter into what Paul Adler calls "problem-oriented research". Instead of dealing with the big issues, there is a tendency to look for low-lying fruit in a small problem area that seems to lend itself to statistical analysis. A researcher or team will tighten up numbers in that area and get published based on their statistical flair and then brand themselves for their careers on that issue. Actually, the plan is benefited by some level of irrelevance. If the issue is plausibly important, but not so critical as to raise anyone's real interest, researchers get "off the hook". This is to say that they get left alone.
I am a member of the Academy of Management for three years now. You would not know that we have an economic crisis given the content of recent issues of their journals. Why is this the case? Largely due to the long-term nature of their publication process. Still, some mention would be warranted, particularly given the nature of organization crisis we find ourselves in. Finance and the automotive industry are in need of help -- though it is too late in the case of many venerable organizations.
I just spoke to a friend in another city. He indicated that everyone he knows is absolutely frozen in fear of the worst. I just finished an article in the current issue of the Economist. It recounted the details of the current crisis in the context of previous ones. The take home message? "Business cycle failure is brought on by stupidity and greed. Get used to it."
That is pretty much the message of the world's economic and political leaders to the rest of us. Of course, we must ask ourselves, whose stupidity and greed are to account for the crisis? Those who took the credit card debts that they were not going to be able to pay or those who offered it to them, knowing based standards developed over the ages that they would not be paid back? The same with sub-prime mortgages.
The wordsmithing in all of this is interesting. Sub-prime? Prime would signify the best of something, would it not? Sub-prime? Wouldn't that be normal? When they are referring to "sub-prime" assets, are they really saying "non-credit-worthy" assets? Similar to this is the reference to "toxic assets". Such assets aren't toxic, they are worthless (as in railroad stocks in past eras that did not pan out -- and for that matter, gold that did not pan out. By labeling them "toxic", we are dodging reality.
From a model economics perspective, we can say that from the early 1980s on, banks have attempted to continue their growth patterns in the absence of a federal plan for them to be profitable in their main lines of business -- so they used methods, both highbrow (by hiring the physicists and quants) and lowbrow (by giving away money to people that would not pay it back). Since they didn't have a hard monetary constraint (given that they could create money on their own with such plans) they were able to evade the natural limits of the market.
We forget the "eco" in economics. Being biologic beings, what we create to support our livings are as biological and ecological as beaver dams and bird nests, yet we do not acknowledge our roots. This is of particular criticality in the failure of our organizations. This is fundamental to our current status. Within organizations, particularly decaying ones, the people that are knowledgeable, that should be in position to organize and deploy people and resources, tend to not have the power to do so. In many cases, this means that the politicians and the number-crunchers take over, limiting the capacity to do by the subject matter experts and people with marketing ideas, which are viewed as being risky. The organizations assumes the greatest risk of all by failing to innovate. As a side note, doesn't it seem odd that we are absolutely freaked out about not educating our children in math and science and then allow our organizations to be so corrupt and "Dilbert-like" that they can't apply their knowledge in these organizations once they get their jobs?
Back the to automobile crisis. When was the last great transportation entrepreneur? In the automotive world, wouldn't you say it had to be Walter Chrysler -- dating to the 1930 (Iacocca? -- great, great turnaround guy, but no entrepreneur). There are many, many, many, many ideas in that world that have been killed and their authors marginalized (or worse). Could there be a better example to us of necronomy and its effects than that? The success of foreign auto companies is an important testament to the weakness of our entrepreneurial sector in transportation. If competition, real competition had existed in the United States in the postwar period, there would have been no opening for foreign producers to succeed, and yet, they have thrived. Organizational failure and poor policy both conspired to bring the automobile industry to its current desperate state.
We don't need total conquest by entrepreneurs, but they need to be supported and allowed to take market risks. We need balance. I have run some numbers on this and I plan to post them soon.
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