Coase: “Firms Never Calculate Marginal Costs”

Source of YouTube video:
http://www.youtube.com/watch?feature=player_embedded&v=ZAq06n79QIs#!

(p. 257) You can watch a 99 year-old Ronald Coase speaking in December 2009 for 25 minutes on the subjects of “Markets, Firms and Property Rights.” “One of the things that people don’t understand is that markets are creations. . . . In fact, it’s very difficult to imagine that firms act in the way that is described in the textbooks, where you maximize profits by equating marginal costs and marginal revenues. One of the reasons one can feel doubtful about this particular way of looking at things is that firms never calculate marginal costs . . . I think we ought to study directly how firms operate and develop our theory accordingly.” From the conference “Markets, Firms and Property Rights: A Celebration of the Research of Ronald Coase,” held at the University of Chicago Law School by the Information Economy Project at George Mason University School of Law. The webpage also includes video of seven panels of prominent speakers, along with PDF files of a dozen or so papers given at the conference. Available at 〈http://iep.gmu.edu/CoaseConference.php〉.

Source:
Taylor, Timothy. “Recommendations for Further Reading.” Journal of Economic Perspectives 24, no. 3 (Summer 2010): 251-58.
(Note: ellipses in original.)

Chamber Blitz Clip for Tort Reform

BlitzGasolineCans2012-10-11.jpg “Blitz gasoline cans, at Ace Hardware in Miami, Okla., will soon disappear from stores. The company closed because of the costs of lawsuits contending that the cans were unsafe.” Source of caption and photo: online version of the NYT article quoted and cited below.

The “Mr. Flick” quoted below is Rocky Flick, the former CEO of Blitz.

(p. B1) Crusading against what it considers frivolous lawsuits, the United States Chamber of Commerce has had no shortage of cases to highlight, like the man suing a cruise line after burning his feet on a sunny deck or the mother claiming hearing loss from the screaming at a Justin Bieber concert.

Now, the lobbying group’s Institute for Legal Reform is showing a 30-second commercial that uses Blitz USA, a bankrupt Oklahoma gasoline can manufacturer, to illustrate the consequences of abusive lawsuits. The ad shows tearful workers losing their jobs and the lights going out at the 46-year-old company as a result of steep legal costs from lawsuits targeting the red plastic containers, according to the company and the institute.
The closing of the 117-employee operation this summer became a rallying point for proponents of tort reform. . . .
. . .
(p. B2) Blitz executives note that the company, which was the nation’s leading gas can producer, sold more than 14 million cans a year over the last decade, with fewer than two reported incidents per million cans sold. The company said the most serious incidents usually involved obvious misuse of the cans, like pouring gasoline on an open fire.
. . .
A decade ago, Mr. Flick said, the company would face one or two lawsuits a year. The number grew to six or seven a year, and finally to 25 or so last year when Blitz filed for bankruptcy.

For the full story, see:
CLIFFORD KRAUSS. “Two Sides of Product Liability: A Factory’s Closing Focuses Attention on Tort Reform.” The New York Times (Fri., October 4, 2012): B1.
(Note: ellipses added.)
(Note: the online version of the article is dated October 5, 2012 and has the shorter title “A Factory’s Closing Focuses Attention on Tort Reform.”)

View the Chamber video clip on the Blitz example:

FlickRockyFormerBlitzCEO2012-10-11.jpg

“Rocky Flick, Blitz’s former chief executive.” Source of caption and photo: online version of the NYT article quoted and cited above.

Vivid Examples of Government Obstacles to Entrepreneurship

EconomicFreedom.org/Stories is posting video clips of free agent entrepreneurs and the obstacles that government policies put in the path to their achievements. The videos give concrete examples and make the costs of regulations more real by connecting the costs to the faces of actual people.

Diamond to Teach Creative Destruction Colloquium in Fall 2012

CreativeDestructionColloquiumPoster2012PortraitTopHalfCropped.jpg

Colloquium Rationale:
Creative destruction is the process through which innovative new products are created, and older obsolete products are destroyed. In transportation, for example, cars creatively destroyed the horse and buggy, trains creatively destroyed horse-drawn wagons. Such innovations contribute to longer and richer lives, but may come at the cost of greater uncertainty in the labor market. Schumpeter claimed that the process of creative destruction is the essential fact about capitalism. Although Nobel-prize-winner George Stigler has described creative destruction as “heresy,” a growing number of economists and non-economists have found the concept useful in understanding the world. While most of the emphasis will be on the implications of creative destruction for business and the economy, the discussion will sometimes involve issues related to information science, sociology, medicine, law, engineering, psychology, literature, political science, architecture, and history.

You can hear me talking about last year’s version of the Creative Destruction Colloquium (which was offered last year under a different course number and a slightly different title) in the following YouTube video:

Entrepreneur Jobs Was an Exemplar of Creative Destruction

The clip embedded above from the CNBC web site, was broadcast on CNBC on Weds., Oct. 5, 2011.

I watched several commentaries on Steve Jobs after his death was announced today (Weds., Oct. 5). I think the one above, from CNBC, was one of the best.
It highlights many important aspects of Jobs’ life. That he came back from failure, that he brought us products we didn’t know we needed until he showed us what they could do, that his products disrupted the status quo of whole industries, that at his death he owned more shares of Disney than anyone else. (Steve Jobs and Walt Disney were two of the greatest “project entrepreneurs” of all time.)

Art Diamond Describes Honors Colloquium on Creative Destruction

The clip above is embedded from You Tube. It was recorded on July 6, 2011 in Mammel Hall, the location of the College of Business at the University of Nebraska at Omaha (UNO). I am grateful to Charley Reed of UNO University Relations for doing a great job of shooting and editing the clip.

Jon Stewart Skewers Media Bias Against Libertarian Ron Paul

The hilarious (but also seriously sad) clip above is embedded from the Mon., August 15, 2011 “The Daily Show with Jon Stewart.”
(Note: I thank Deirdre McCloskey for letting me know about the clip.)