4 posts tagged economics
The more we hate it, the more it agrees with us. How advertising turned anti-consumerism into a secret weapon
In 1796, the English physician Edward Jenner injected an eight-year-old boy in Gloucestershire with cowpox. Reasoning that absorbing a small amount of the virus would protect the child from a full-strength attack of smallpox in the future, Jenner’s bold experiment founded the practice of vaccination. Two hundred years later, the marketing industry has cottoned on to Jenner’s insight: a little bit of a disease can be a very useful thing. If you’re one of the more than 7 million people who have watched the global fast-food chain Chipotle’s latest advertisement, you’ll have experienced this sleight of hand for yourself. The animated short film — accompanied by a smartphone game — depicts a haunting parody of corporate agribusiness: cartoon chickens inflated by robotic antibiotic arms, scarecrow workers displaced by ruthless automata. Chipotle’s logo appears only at the very end of the three-minute trailer; it is otherwise branding-free. The motivation for this big-budget exposé? ‘We’re trying to educate people about where their food comes from,’ Mark Crumpacker, chief marketing officer at Chipotle, told USA Today, but ‘millennials are sceptical of brands that perpetuate themselves’. (via Advertising turned anti-consumerism into a weapon – Adam Corner – Aeon)
A good social Darwinism
Evolution has transformed all we know about how humans behave, compete and co-operate. When will economics catch up?
In 2008, as it was becoming clear that a once-in-a-generation financial crisis was upon us, a friend of mine who is a senior corporate executive asked me a peculiar question. Might evolutionary theory have something to say about what caused the crisis? Those of us who labour away in the biological sciences are unaccustomed to fielding questions from corporate executives, but I had founded a think tank called the Evolution Institute and my friend was an early supporter. These were desperate times; the financial crisis had exposed grave weaknesses in our basic understanding of economic systems. The reigning theoretical paradigms in economics had run out of credibility, having, at best, failed to predict the crisis and, at worst, helped to exacerbate it. Could evolutionary theory do better?
Of course, economics has been crying out for interdisciplinary intervention since its inception. The field is caught in a tug-of-war between two ideas: the idea that we need market processes to proceed unhindered and the idea that a healthy economy requires regulation. The 18th-century pioneer of political economy Adam Smith observed that economies have a way of running themselves when left to their own devices. Without the meddling of overseers, Smith argued, a benevolent ‘invisible hand’ would emerge from the workings of the market itself. Yet Smith also knew that naked self-interest is often very bad for society as a whole. The industrial revolution and the great depression would demonstrate this danger best. Communism demonstrated the opposite danger, that too much regulation dooms an economy to stagnation. What the economic landscape lacks is an adequate theory to navigate the enormous middle ground between these two insights. Instead, policy is drawn from a hodge-podge of perspectives pulled from philosophy, the social sciences, and practical experience.
It’s not every day that someone writes down an equation that ends up changing the world. But it does happen sometimes, and the world doesn’t always change for the better. It has been argued that one formula known as Black-Scholes, along with its descendants, helped to blow up the financial world. Black-Scholes was first written down in the early 1970s but its story starts earlier than that, in the Dojima Rice Exchange in 17th Century Japan where futures contracts were written for rice traders. A simple futures contract says that I will agree to buy rice from you in one year’s time, at a price that we agree right now. (via BBC News - Black-Scholes: The maths formula linked to the financial crash)
Many of the bestselling business books of the past decade, such as “Freakonomics” and “The Undercover Economist”, started with an implicit, fundamental premise: “If it can’t be quantified or calculated, it can’t be true.” These books often reduced baffling and complex scenarios — everything from global warming to why there are so many Starbucks stores in your neighborhood — to simple explanations supported by basic economic thinking. Sometimes these explanations contained charts, graphs and little diagrams that made the world appear neat, tidy and orderly. A decade ago, in fact, Google made news when they hired UC Berkeley economics professor Hal Varian as their first in-house economist. Varian was charged with modeling consumer behaviors and consulting on corporate strategy. The announcement further projected the belief that, in short, economics was the key to market success. Today, Google should be looking for a prize-winning neuroscientist. (via Is neuroscience the new ‘Freakonomics’? - Ideas@Innovations - The Washington Post)