EconAir

EconAir is an economics and political blog containing about 200 essays and posts written mostly by Bennett Greenberg, a retired professor of economics with experience teaching across the full undergraduate economics curriculum as well as related disciplines such as economic history, business strategy, finance, and political economy. Experience includes economist and corporate planning manager for three S&P500 companies, consultant to small businesses, brokering a large acquisition, managing director of a small company, and board member of five nonprofits. Since retirement, also interested in political and economic lessons from historical examples. The central theme of this blog is that innovation and information are the driving forces of economic development, economic growth, competition, and market structure. Modern capitalism is best understood as a dynamic process, not a static system of markets tending toward equilibrium. The Industrial and Digital Revolution...

Adam Smith - Our Founding Father INTRODUCTION   This essay on Adam Smith and his famous example of a pin factory also serves as an introduction to some of the themes in the over 100 essays in this blog.   Adam Smith wrote the  Wealth of Nations  during the beginning of the Industrial Revolution. It was published in 1776. The dynamics of the Industrial Revolution continue to be a disruptive force; because of AI, it might be even more disruptive in the future.   ADAM SMITH’S PIN FACTORY   Adam Smith’s description of a pin factory is on the first page of  The Wealth of Nations .  (Chapter 1 – “Of the Division of Labour”)  Drawings of pin factories of this period show workers using hand tools. Smith says the process can be broken down into 18 distinct steps, including packaging the pins. Smith mentions that pin factory workers were poorly paid, despite their high productivity.    Adam Smith says he visited a pin factory empl...

  INFORMATION AND ECONOMIC THEORY A key strategy for corporate growth and development is innovation.    Innovation generates proprietary information, company-specific knowledge, and new technology.    A company’s products and services embody past innovation and the sum of proprietary information.    One of the assumptions of the perfect competition model is complete information.    All participants in a market know all relevant information.    As discussed in an earlier tutorial,  Introduction to Information and Economic Structure , this assumption is unrealistic in an imperfectly competitive economy dominated by large corporations. Proprietary information that cannot be duplicated by other companies allows a company to differentiate its products and services from those of other companies. Differentiated products and services reduce competition from other companies and limit the ability of a supplier or customer to play off one...