EMBA Managerial Economics & Business Ethics – Cotrugli

aje on March 16, 2024

Background readings:

The textbook is Economics: A Complete Guide for Business by Anthony J. Evans (2020). I wrote it specifically for this course and all students are advised to read it in conjunction with the lectures. 
 
There are plenty of other good textbooks on the market. I also recommend Managerial Economics by Luke M. Froeb, Brian T. McCann, Michael R. Ward and Mikhael Shor (Thomson Southwestern 3rd edition, 2013) and A Concise Guide to Macroeconomics by David Moss (Harvard Business School Press, 2007). 

Course handouts: Managerial Economics and Business Ethics

Day 1

1. Incentives matter* +

Textbook reading: Chapter 1

2. Understanding cost* +

Textbook reading: Chapter 2

3. Auctions +

Hild, M., Dwidevy, A., and Raj, A., “The Biggest Auction Ever: 3G Licensing in Western Europe”, Darden Business Publishing, 2004 (£)

Discussion question: What are the alternatives to auctions?

Extra activity: The Dutch flower auction

Textbook reading: Chapter 3

4. Prediction markets +

Coles, Peter, Lakhani, Karim and McAfee, Andrew, “Prediction Markets at Google” Harvard Business School 9-607-088, August 20th 2007 (£)

Prediction Markets, February 2016

Textbook reading: Chapter 4

Day 2

Before the Macroeconomics class you should watch this video:  and complete this quiz.

6 & 7. Monetary policy* +

“The Euro in Crisis: Decision Time at the European Central Bank” Harvard Business School case no. 9-711-049

The ECB During the Crisis, July 2021

Textbook reading: Chapter 7 and Chapter 8

8 & 9. Fiscal policy* +

Textbook reading: Chapter 9

10. Macro Policy Workshop +

Extra activity: NGDP masterclass

After the Macroeconomics class you should watch this video and complete this quiz.

Day 3 

  1. Managerial Insights*
  2. Macro Risk*
  3. Markets: The First AI* +
    • For this session there are 4 readings. You may find some of them tough going. But you’ll have some time in class as well. Please try to read them. 
    • “On the Origin of Money” (Carl Menger, 1892, Economic Journal, (2):239-55)
    • “The Use of Knowledge in Society” (Friedrich Hayek, 1945, American Economic Review, 35(4):519- 530)
    • “I, Pencil” (Leonard Read, 1958, Foundation for Economic Education)
    • “What is Seen and What is Not Seen” (Frederic Bastiat, 1850, Paris: Guillaumin. This version taken from The Bastiat Collection, 2nd Ed., Mises Institute, 2007, pp. 1-11 only)

    Here is a PDF copy of the reading pack which should be read:

    Download the reading pack here.

  4. Group preparation
  5. Group presentations

Day 4 See Business Ethics.

Before the Business Ethics class you should read about these mini cases: and complete this form.

 

Note: Sessions marked with an asterix (*) have a lecture handout available in advance, which can be downloaded. Cases marked with a pound sign (£) are available through the Programme Office. Follow the + links for additional resources.

Tip jar

aje on March 15, 2024

☕️ If you have enjoyed any of these resources, feel free to buy me a coffee.

 

Social, political, and ethical dimensions of digital transformation – 2023/24

aje on March 11, 2024

Course introduction

There are widespread concerns that social and political divisions are being exacerbated by information technology, and that this is having a profound impact on the capabilities and quality of both global and local institutions. In a similar way to how the advent of the printing press prompted the rise of democracy and the nation state, perhaps digital transformation is contributing to a similar disruption in governance.

Such trends are particularly relevant in regimes where statehood was not an internal process, and was adopted either through colonial or international activity. Rising populism and authoritarianism provides the social and political backdrop to our analysis of the broad impact of technology, and we will consider whether pluralist approaches may help to combat some of the emerging threats to liberal democracy.

This course investigates how digital transformation relates to democracy and governance in an increasingly connected yet potentially polarised world.

Assessment
  • 40% Group report [download here]
  • 60% Final exam (MCQ) – this relates to all lecture content and the readings from the content section

For a good example of a subject matter for the group report I highly recommend reading The Story of VaccineCA. In particular, consider how the following elements coincide: the type of organisation chosen to pursue this objective (initially volunteers but then a Delaware corporation;  the institutional context (i.e. liberal market democracy where sharing such information wasn’t illegal); and the cultural attitude toward problem solving and tech optimism. For a great interview with Patrick McKenzie about his background and advice listen to his Conversation with Tyler.

Prerequisite

Students should have already taken my 6 hour component of the Business Frontier Technologies course. This includes some of the following content:

Mandatory pre-course readings

For a 50 point quiz to test your knowledge of the pre-readings see here.

Contents
  1. Addiction [lecture handouts]
  2. Democracy [lecture handouts]
  3. Ethics [lecture handouts]
  4. Humans [lecture handouts]
  5. Governance [lecture handouts]
Optional background preparation

To understand some of the context for my construction of this course I recommend:

  • Matthew Perry on BBC Newsnight, (yes, one can make the contrarian and pedantic point that humans exercise “choice” in every decision we make, but this interview demonstrates the importance of acknowledging the human cost of not being in full/partial/any control of things that are harmful to your well being. Particularly poignant given Perry’s death in 2023).
  • 12. Conspiracy Theories, The Rest is History, Jan 4th 2021 (a short overview of the history of conspiracy theories, with emphasis on how they tend to satisfy a need for us to try to make sense of shocking events).
  • Beware the Jabberwock, This American Life, March 15th 2019 (a single episode that provides a detailed look at the origins of the Sandy Hook conspiracy theory and one parents attempt to fight misinformation. The second half of this episode is an interesting, but less relevant profile and interview with Alex Jones).
  • Four Hours at the Capitol, BBC (a documentary about the storming of the US Capitol building on January 6th 2021)
  • The Coming Storm, BBC Sounds (7 part podcast documentary on the rise of QAnon)
  • Death by Conspiracy, BBC Sounds (an 11 part podcast documentary on Gary Matthews, who died from covid in January 2021 having been drawn to social media claims that it was a hoax. I listened to this as a parallel to The Coming Storm but it strayed too far into covid, media ethics, and psychology for me to incorporate it more fully in this course, which attempts to avoid those areas. I didn’t learn much about conspiracy theories aside from episode 9 which provided a good attempt to understand why our common conception is often misplaced. Ultimately I just found this sad.)
  • Things Fell Apart, BBC Sounds (a documentary that looks at the different origins of the culture wars, which are defined as “the battle for dominance over conflicting values”, or the things we shout about on social media)
  • Command and Control, PBS (a documentary looking at how close we came to a major nuclear accident)
  • The Last Podcast on the Left (Episodes 400-405) – this series was recommended as a deep dive into the original and most important conspiracy theory of all time, but I found it so irritating and juvenile in presentation that I didn’t get past the first episode. I did like the claim that conspiracy theories require a conspiracy vacuum, however.
Recommended video

Famous documentaries about Facebook include:

Here is the Brexit movie mentioned in class:

Here are US political strategists talking about micro targeting:

Here is David Rand’s talk on misinformation:

This documentary looks at the Arab spring:

Here is Coltan Scrivner’s explaining the evolutionary purpose of paying attention to true crime:

Here is Patri Friedman arguing that we should be able to start new countries as easily as starting a new country:

Recommended audio
Recommended movie night

This is not massively related to this course, but I really enjoyed watching Top Gun: Maverick (you may need to watch the original Top Gun first to get the full benefit). It reminded me of how Rocky IV contrasted American individualism, authenticity, and heart against superior Soviet technology. I saw Maverick as a rumination on automation, and the continued role for human emotion, and decision making that is instinctive, impulsive, and emotive, and how that gets managed. The subtext is that unmanned drones and algorithms are the future. In the film, US technology is deemed inferior but it is all about who is in the plane and not the plane itself. Traditional pilots needs to eat, sleep and piss but remain the driving force of future success, and whatever is is that ensures a future is worth achieving.

Here’s an absorbing and fascinating explanation of how the Mach 10 scene resembles a perfect pop song:

The best 3 movies related to AI and our conception of reality (in my opinion) are:

 

Recommended activity
Recommended case studies on digital transformation

Perhaps the best case study of the importance of an effective digital transformation is the UK Post Office Horizon scandal (Wikipedia). There is an excellent podcast about it produced by BBC Sounds and in January 2024 ITV aired a documentary.

Further academic reading
Student reflections

Priyanka Dalotra (LinkedIn)

On design
Resources for the public sector

If you wish to work in the public sector I recommend the following resources:

Recommended books

The MIT Press Essential Knowledge series contains a number of titles that are relevant for this course. I particularly recommend:

Other

The Ostrom Workshop has some good resources on Polycentric Governance.

And finally

If you detect an attempt to link together the claims that “an important solution to social media addiction is good parenting” and “we have to learn how to raise AI” then this is deliberate. Indeed Stuart Ritchie (who works at Anthropic) captures it perfectly:

And it’s apt that I teach this course at ESCP. As Martin Luther said, Paris is “the parent of learning”.

The Bank of England Museum

aje on February 23, 2024

I have been to the Bank of England Museum several times and highly recommend it. It provides a good overview of the Bank’s history, contains interactive content, and has special exhibitions. Situated in the basement of the Bank (and therefore very close to the eponymous underground station) it’s open on every weekday and even opens late every third Thursday. The best part: it is totally free!

My most recent visit was in June 2024.

I started by looking at early examples of currency. Gold coins originate from c7th bc in Lydia (now in modern Turkey) and here is my photo of one of the first:

The museum has a section on the historic non monetary uses of gold. Here is a photo of a gold-plated visor from a metal workers helmet:

The bank’s notes originate from 1743 and the most popular types served as a type of payable receipt, that would enable the holder to redeem coin deposits. Here are some examples of early bank notes:

Notice how some are torn in the bottom corner. As this page explains, this shows that the balance has been paid.

I was very pleased to see a section marking the history of women at the bank. The first female employees started in 1894, and the bank was one of the first institutions in the City to employ them.

My favourite part of the museum is the attempt to explain how monetary policy works. This machine gives visitors the chance to play the role of the Monetary Policy Committee (MPC) and move interest rates up or down depending on how close inflation is to the target.

As you can see, I wasn’t very good!

But I did get it in the end!

While I was visiting there was a special exhibit on slavery and the bank. Over a 300 year period the global slave trade took over 12 million Africans from their homes, and this map reveals the scale.

I didn’t learn much about the banks role, but I was encouraged to reflect:

I hope you enjoyed my tour as much as I did. Please consider visiting the museum for yourself!

You can take a short quiz to test your knowledge here:

The Museum of Neoliberalism

aje on February 23, 2024

I was saddened to learn that The Museum of Neoliberalism is closing (see here). It is located near Lewisham and I visited in November 2023.

In this article I wanted to share 5 points that came to mind as I looked around.

(1) There is a tendency for critics of neoliberalism to present a conspiracy theory view of the movement. The museum presents this in the following way:

I mean, they even used red thread!

The serious point is that these outside accounts don’t match my inside knowledge, and I don’t believe that’s due to naivety on my part. I’m a senior fellow of the Adam Smith Institute and disagree that they constitute a “total perversion of Smith’s ideas”, but welcome an intellectual conversation about that claim. Back in 2016 Sam Bowman (then Executive Director at the ASI) wrote an article called “I’m a neoliberal. Maybe you are too” and yet I’ve not seen an honest engagement with them.

Ultimately, I think that the truth is less exciting than the museum depicts – these think tanks are transparent with their objectives and activities, punch above their weight in terms of resources, but have little direct power or influence. It’s an error to present them as something they are not.

(2) There is lots to be said about what has happened to economic inequality (and why) over the course of the twentieth century (my teaching materials are here). But the idea that governments responded to falling inequality by increasing prices is simply wrong.

Milton Friedman’s monetarist prescriptions were a response to the prevalent inflation, and succeeded in controlling it. That inflation was a result of excessive money creation, in part due to the fiscal profligacy of government spending. The chronology is clear – neoliberalism gained dominance within the context of high inflation, and sought to combat it. It did not generate inflation as a means to reverse declining inequality.

(3) There is this a long list of notable moments of privatisation in the UK. I suspect the assumption is that because people typically don’t like privatisation, this is persuasive. However, the paradox of privatization is that although most people believe that the process by which assets are returned to private ownership is often flawed, they typically do not want the state to control those industries. (Note that the solution, therefore, is to avoid nationalisation in the first place.)

But when you actually look at these companies – Lunn Poly, Thomas Cook – does anyone really want state ownership of travel agents? Is Rolls Royce really a company that the UK government has to manage and run? Really?

(4) The section on “bullshit jobs” exposes poor working practices and elicits sympathy for workers who lack certain employment rights.

In my view, though, the last thing you should do in such situations is to take away options. And yet this is what higher labour standards, by imposing costs on employers, tend to do. Ultimately I find these sorts of judgments elitist and snobbish. There’s a million jobs I’d hate to do, but any job that someone voluntarily agrees to, because they view it as an improvement over their next best alternative, is ok by me. Generally speaking, the gig economy has been a liberation within the context of excessive restrictions on labour.

(5) And what’s the conclusion? Well this final panel, called “there is an alternative” sums things up nicely.

Apparently

“the current crisis is an open moment of possibility in which the world will step beyond it into something else. What that ‘something else’ looks like is up to you.”

Forgive me, but I do not see an articulation of an alternative. This does nothing to dispense the fear that the alternative to a free market system of private property rights is a utopian nonsense.

I love the concept of a Museum of Neoliberalism and am sorry that it is closing. I found it provocative and hope you enjoyed my reflections.

In search of Zagreb’s uniqueness

aje on February 23, 2024

I’ve been regularly visiting Zagreb for over a decade, and have noticed that it is unique for three main reasons:

(1) The old town – all nice European cities have an old town, but five things make Zagreb’s particularly memorable.

The Funicular is the shortest in the world and Zagreb’s first form of public transit.

©Vladographer/Getty Images Plus

The Gric cannon fires at 12:00pm every day, and has done for for over a century. Kaboom!

The Stone Gate is in the upper town and displays an icon that supposedly survived a fire in 1731 (see here). Here is a photo of the stone gate from the 1940s:

The Gric tunnels are handy ways to pass through parts of the centre. I first heard about them from an episode of one of my favourite YouTube series, Cockpit Casual.

Croatia (as in “cravat”) invented the tie. See more here.

(2) Weird museums – Zagreb is home to several bizarre sounding museums, all in the centre of town. I’ve been to most, but am not sure what order to list them here. The perfect night out?

(3) Festival of light – held in March each year, the festival marks the arrival of Spring and includes installations throughout the city. The use of light in public spaces is a theme in Zagreb, as you can see from the display on the Hendrix bridge:

Finally, here are some ad hoc recommendations:

 Music

Movies

Food

  • Zagrebačke kremšnite (from Vincek)

And here’s my favourite photo from Zagreb:

Sustainability

aje on December 7, 2023

Lecture handout: Sustainability

⭐ Required readings:

Here’s how to visit the grave of J.B. Say. Here is a photo from a book written by Richard Cantillon, published in 1755, which uses the word “entrepreneur”.

Here is a video on poverty being a lack of cash, not a character trait:

Here is the Bushradical video about building a log cabin in the woods:

Here is the Outdoor Boys video about building a snow shelter:

 

Here’s a nice visual showing different carbon pricing initiatives:

Here is more on the doughnut model:

Some spinning donuts (you see! it is meant to be measured after all!):

Here is a savage review:

  • Andrew Lilico: ‘Doughnut Economics’ by Kate Raworth, June 24th 2024 – including this zinger: “I can safely say I have never hated a book more than this one… It makes assertion after assertion about economics that is simply false, and even if the initial assertion were true, what is done with that assertion would still be wrong… We don’t need to reinvent economics. We just need to understand it properly and apply it correctly and with imagination. Unfortunately, reading this book will not help you to achieve any of that.”
Depopulation

Paul Erlich’s ‘The Population Bomb’ warned that we would be unable to feed a growing global population and that the solution was to reduce birthrates. He said “we can no longer afford merely to treat the symptoms of the cancer of population growth; the cancer itself must be cut out”. Suggested methods included adding sterlients to the food supply (see Ritchie 2024, p.155). That didn’t happen, but fears about overpopulation were so influential it led to the sterilisation of 8 million Indian men. And yet as of January 2023 Paul Erlich is still receiving media coverage when warning about unsustainable growth. Note:

As the lecture argues, we are more than capable of providing good living standards for the population. And if you are worried about an exponential population growth then don’t be. Population growth has fallen from over 2% in the 1960s to 0.8% by 2022. We have now passed “peak child”, with the highest number of children peaking in 2017. The global population is expected to stabilise at 11bn. It turns out that when you are successful at reducing poverty people tend to have fewer children. We have sufficient natural resources as well as the socio-economic system necessary to support a thriving global population. Like John Lennon, we do not need to be concerned about over population:

Lecture handout: Sustainability Survey
Degrowth

Recently there has been increased attention to the concept of “degrowth”. I think it’s important to recognise that we simply don’t have sufficient wealth for everyone to have a reasonable standard of living. Even if you somehow confiscated the entire global GDP and shared it equally everyone would only get $15 per day. ($84 trillion between 8 billion people is $10,695 which is $30 per day. This is a reasonable income for many parts of the world, but would lock us in to present consumption power. Would you have wanted your parents to have made a similar trade back in 1985, which would be $12 trillion between 5 billion = $2,400, i.e. less than $7 per day? I’ve used income, rather than wealth, because the data is better. These figures should also be adjusted for purchasing power, but it’s only meant as a back of the envelope exercise).

In addition to this, growth is one of the biggest parts of the solution to our environmental problems. This is because:

  1. We have successfully decoupled a lot of the negative impact of growth. Therefore there’s no fixed trade off between material betterment and environmental protection.
  2. The best way to fix our environmental problems is through technology, and as Hannah Ritchie has argued recent breakthroughs in the batteries required for electric vehicles, or low cost solar panels, are a result of economic growth (Ritchie 2024, p.35).

An academic article published in 2024 provides a comprehensive survey of 561 articles from the degrowth literature. It found that: “the large majority (almost 90%) of studies are opinions rather than analysis; few studies use… data… most studies offer ad hoc and subjective policy advice… various studies represent a “reverse causality” confusion, i.e. use the term degrowth not for a deliberate strategy but to denote economic decline (in GDP terms) resulting from exogenous factors or public policies; [and] few studies adopt a system-wide perspective – instead most focus on small, local cases without a clear implication for the economy as a whole.”

See: Ivan Savin, Jeroen van den Bergh, 2024, “Reviewing studies of degrowth: Are claims matched by data, methods and policy analysis?“, Ecological Economics, Volume 226

I also recommend the following:

Recommended books:

  • Ridley, M., 2011, The Rational Optimist, Fourth Estate
  • Munger, M., 2019, Is Capitalism sustainable?, American Institute for Economic Research
  • Rosling, H., 2018, Factfulness, Sceptre
  • Tupy, M.L., and Pooley, G.L., 2023, Superabundance, Cato Institute
  • Ritchie, H., 2024, Not the end of the world, Chatto & Windus

Recommended podcasts:

Learning Objectives: This session considers whether infinite growth is possible on a planet with finite natural resources.

Spotlight on sustainability: Doh!

Business Economics (BIM) 2024

aje on December 4, 2023

This course will develop students capacity for economic analysis and awareness of the most important insights for management.

 Assessment
Textbook

Evans, Anthony J., 2020 “Economics: A complete guide for business“, London Publishing Partnership

Digital copies of the relevant section are available in the links below.

️ Content
Session Before During After
1. Incentives Matter Nothing Lecture handouts
2. Markets: Beyond AI Watch the full movie Arrival (2016), Denis Villeneuve

You can download all of the above in a single PDF file here.

 Lecture handouts
3. Market Applications Lecture handouts
4. Competition and the Market Process Lecture handouts
5. Global Prosperity Activity: Global conditions quiz Lecture handouts
6. Growth Watch “Growth is like an iPhone”

 Lecture handouts
7. Sustainability Lecture handouts
8. Inequality Activity: Thinking about wealth

Watch: “$456,000 Squid Game In Real Life!” Mr Beast

Watch the full movie Parasite (2019), Bong Joon Ho

 Lecture handouts

Long reads

aje on October 4, 2023

Here are a collection of slightly longer newspaper articles that I’ve found absorbing and well worth reading:

️️️ Events

⚖️ True crime

Music

For more, see Best of 2023: Personal Essays

Generative AI

aje on September 3, 2023

My policy on Generative AI (such as ChatGPT, Claude, or other other Large Language Models (LLM)) is a simple one:

  • Treat Generative AI as a helpful person (such as a parent or a friend).

What does this mean for class attendance?

✅ You are allowed to ask it questions for revision purposes.

❌ You are not allowed to upload course materials.

❌ You are not allowed to ask it to attend class and take notes for you.

I can understand that having a parent or friend attend class with you to take notes might help your learning, but there are already policies in place for students that face difficulties with meeting basic expectations. Such requests should be made in advance and solutions found that take into consideration students that are capable of doing their own note taking. There is also a proprietary issue whereby class materials are not supposed to be made public or used for AI training purposes. In the same way that we don’t record live sessions, we don’t invite outsiders unless there’s a specific pedagogical reason.

 

What does this mean for written work?

✅ You are allowed to ask it questions.

✅ You are allowed to get advice on writing.

❌ You are not allowed to submit any text that it generates as your own work.

❌ You are not allowed to submit any text into another piece of software that rewrites it.

The issue is accountability. An attribution of authorship carries with it accountability for the work, which cannot be effectively applied to Generative AI. When you submit a piece of assessment the aim is to establish your unique understanding, as opposed to the understanding of someone else. This means that while you can use a wide variety of inputs to provide help, any output needs to be generated, and “owned” by yourself.

If you have found a way to automate your work, such that anyone (or anything) else can follow the steps that you take and create the same output, you have succeeded in finding efficiencies. You have possibly even generated important knowledge. But you have failed to complete the assignment you were set. Your formal assessment is intended to establish your ability, as a human, to complete the task. Formal assessment is not intended to establish your capability to use technology to meet an objective. That is why submitting other people’s work (whether it’s your parents, your friends, or from Generative AI) is fraud.

An inaccurate analogy would be to treat Generative AI like software, such as Microsoft Word. It is obviously not cheating to type answers in a word processor, or use spelling or formatting advice to improve your work. Unlike Word, however, Generative AI goes beyond helping your writing to actually help with content. It is more of an oracle than a piece of software. Therefore I think it’s better to imagine it as a helpful person. Or, as Cowen and Tabarrok (2023) say in this very useful article about how to use ChatGPT,

“It resembles collaborating with a bright and knowledgeable research assistant, albeit one from a different culture.”

Their advice includes:

  • Be specific with your prompts.
  • Ask for comparisons and contrasts.
  • Ask for lists.
  • Ask follow up questions.

I recommend this article:

I also recommend developing some custom instructions. Here are Eli Dourado’s.

And I like this graphic:

Relevance for your thesis

If you decide to use Generative AI in your thesis you should be honest and open about it, and provide an appropriate discussion in the Methods section (or, if a Methods section is not used, a suitable alternative part) of the manuscript. That will allow your advisor and committee to establish whether your use is appropriate. If you decide to use Generative AI but don’t explain how, this is fraud. In some cases, it may be that use of Generative AI is so heavy it warrants being a co author. This is fine if you list Generative AI as a co author, and you can do this for other types of work, but a thesis or other formal assessment must be single authorship.

Finally, ethical behaviour is important. Therefore:

  • Just because other people are doing something wrong, this doesn’t mean that you should.
  • A thesis isn’t just about producing the best piece of work, it’s about demonstrating your knowledge of research methods (which includes ethical design and execution) and your ethical decision making.
  • If you’re not sure, ask for help.

Don’t forget that the original excitement about AI was how it quickly and easily helped mediocre students imitate good students. If this is your situation then I can understand why it is an exciting tool. But I am more interested in your personal development than your ability to mimic others. Therefore I resist pressure towards conformity and advocate authentic work that is accountable. I prefer Human Authenticity over Artificial Intelligence.

Updated October 2024