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There are three issues I have with this: 1. "Quality" for management decisions are notoriously ill defined for the same reason that we never know if we did the

There are three issues I have with this: 1. "Quality" for management decisions are notoriously ill defined for the same reason that we never know if we did the right thing with the economy: the experiments can never be repeated. 2. The example serves to explain what a decision is and what a good decision would be, but that is not the concept that needs explanation! 3. "some seeming inefficiency can’t actually be inefficient because the market is efficient and inefficiencies will quickly be eliminated." is not the right statement of efficient markets. Rather, the act of trying to make it more efficient is exactly what makes it efficient. So if you see an opportunity, someone exploits it and thus makes it more efficient.

philipov 9y ago
4. Markets aren't actually efficient because they are stacked in favor of incumbents through their ability to lobby for anti-competitive legislation, as can be seen with the perversion of the copyright and patent systems.
- mulmen 9y ago
  The mistake you made in this example is attributing an action in the legislative system as a failure in the market.
  - philipov 9y ago
    I am saying the opposite: the market becomes less efficient as a result of legislative capture. But it is a feedback loop, so attributing the dynamics to simple cause and effect is not appropriate.
- Spooky23 9y ago
  Markets aren’t going to deliver best value to anyone without being forced to. Eventually, every company wants to own the market, and convincing government to do so is a key part of that strategy. The invisible hand sometimes is holding a visible club.
lucas_membrane 9y ago
> what a good decision would be, but that is not the concept that needs explanation It is subsumed in this work that good for baseball is winning games, and if you look at some of the references, it is taken for granted that there are ways to rank the possible results on some scale of efficiency or effectiveness. I would certainly question this. Some of the references study the huge money-eating monster: healthcare. Here is a simple non-controversial problem -- look at all the healthcare systems in the world and rank the 10 best in order from best to worst by efficiency, effectiveness or ??? Even in baseball, there is no way to rank results. Some years, some teams have had very low winning percentages but much higher profitability than in other years. When I studied economics, some very good economists like Vernon Smith and Roger Noll took an interest in sports and particularly baseball. A standard assumption then was that there was an optimum winning percentage at which game attendance would be maximized, around 60% to 70%. Baseball is a good example of the difference between short-term and long-term objectives, too. The winning vs losing equation is viciously zero-sum, and almost any innovation will be copied if it succeeds in the short-run. This leaves about zero long-term incentive to innovate. The real questions are: What kind of game do you want to play? What kind of game do people want to watch? What kind of job do you want to have? What kind of relationships do managers want to have with their unwashed workers? Which stakeholders will the firm respect?

philipov 9y ago

4. Markets aren't actually efficient because they are stacked in favor of incumbents through their ability to lobby for anti-competitive legislation, as can be seen with the perversion of the copyright and patent systems.

mulmen 9y ago
The mistake you made in this example is attributing an action in the legislative system as a failure in the market.
- philipov 9y ago
  I am saying the opposite: the market becomes less efficient as a result of legislative capture. But it is a feedback loop, so attributing the dynamics to simple cause and effect is not appropriate.
Spooky23 9y ago
Markets aren’t going to deliver best value to anyone without being forced to. Eventually, every company wants to own the market, and convincing government to do so is a key part of that strategy. The invisible hand sometimes is holding a visible club.

lucas_membrane 9y ago

> what a good decision would be, but that is not the concept that needs explanation It is subsumed in this work that good for baseball is winning games, and if you look at some of the references, it is taken for granted that there are ways to rank the possible results on some scale of efficiency or effectiveness. I would certainly question this. Some of the references study the huge money-eating monster: healthcare. Here is a simple non-controversial problem -- look at all the healthcare systems in the world and rank the 10 best in order from best to worst by efficiency, effectiveness or ??? Even in baseball, there is no way to rank results. Some years, some teams have had very low winning percentages but much higher profitability than in other years. When I studied economics, some very good economists like Vernon Smith and Roger Noll took an interest in sports and particularly baseball. A standard assumption then was that there was an optimum winning percentage at which game attendance would be maximized, around 60% to 70%. Baseball is a good example of the difference between short-term and long-term objectives, too. The winning vs losing equation is viciously zero-sum, and almost any innovation will be copied if it succeeds in the short-run. This leaves about zero long-term incentive to innovate. The real questions are: What kind of game do you want to play? What kind of game do people want to watch? What kind of job do you want to have? What kind of relationships do managers want to have with their unwashed workers? Which stakeholders will the firm respect?