EconAir

Baldwin Locomotive Baldwin, the largest producer of steam locomotives in the                 nineteenth century, faced problems typical of a dominant company in a bilateral oligopolistic industry.   Almost everything that               happened at Baldwin was conditioned by a highly cyclical, almost   unpredictable competitive environment.   A high level of business       risk followed from sudden, large fluctuations in demand. This         meant that Baldwin often had excess capacity with substantial         fixed investment, leading to a strategy based on economies of scope and not economies of scale.   Baldwin also depended on a skilled       labor force with firm-specific knowledge and experience that was    exposed to sudden and massive layoffs followed by the company’s   attempts to rehire the same workers.   It is hard to imagine a more    challenging competitive environment.                                                      Baldwin was a large and dominant firm, a

I reread Alice in Wonderland last year. I’ve been reading a lot of weird books in the last two years but Alice in Wonderland is the weirdest. It’s like a children’s story written by Franz Kafka. The book and its images continue to resonate. I’ll skip the cheap shot of recalling the Mad Hatter’s Tea Party because a lot of recent commentators have already used it. Also, there’s a serious idea in game theory called the Red Queen Effect, even a whole book about it by Matt Ridley. (Any book by Matt Ridley is recommended.) But the time Alice in Wonderland really resonated was the 1960s. The following are the lyrics from the group and the song that was virtually the anthem of the Berkeley/San Francisco counterculture. It was written by the group’s lead singer, Gracie Slick. "White Rabbit" by Jefferson Airplane One pill makes you larger And one pill makes you small And the ones that mother gives you Don't do anything at all Go ask Alice When she's ten

Thucydides A friend of mine recently said that the most “useless” course he took in college was history. Let’s start with Thucydides, The History of the Peloponnesian War . This was a war that took place over 2,400 years ago. What possible relevance could it have? In this war, Athens and Sparta, the two “superpowers” of Greece, were locked into a long war for the dominance of Greece. The climax to the story in Thucydides was that Athens decided to send its formidable fleet and much of its army to attack Syracuse, an ally of Sparta far away across the Mediterranean Sea in Sicily (still there). The campaign was a disaster, leading to political instability at home and weakening Athens’ military position in Greece. Sound familiar? Remind you of our involvement in Vietnam? This is not a direct analogy but suggestive of some of the consequences of the Vietnam War. These potential consequences were not factored into the decision to make a major commitment in Vietnam. Fort