A Country Is Not a Company (1996) | Hacker News Reader

A Country Is Not a Company (1996)

hbr.org

The author's argument could more accurately be summarized as "making good business decisions requires a different skill-set than making good economic policy decisions."

The article is not very tightly written, but the reasoning boils down to: economic policy requires reasoning about an immensely complicated closed system in which the gains of any individual actor are uninteresting. In contrast, business strategy requires reasoning about a relatively simple system in which the gains of an individual actor are all that matter. Economics requires system-level thinking, business requires individual-actor level thinking.

By analogy: think of a poker table in a casino. Being a good business person is making good poker decisions as a player from hand to hand. Being a good economist is creating the conditions for a healthy poker game with many winners and losers.

I think the author is right to a certain extent, but they could have written a much shorter article if they'd started from the observation that good business decisions and good economic decisions optimize very different objective functions.

For some reason the article starts with some kind of limp examples of hypothetical things business people might say when confronted with economic policy questions and kind of dithers around about why business leaders don't write great business strategy books. We don't need to put words in anyone's mouth or operate at such a flimsy biographical level to observe that business and economic decision making are fundamentally different in kind.

Note that the author is not saying anything about whether or not good business people make good politicians, which is a fundamentally different question (I can want to vote a successful local business person into a house seat because I think they will be an effective political leader without thinking that they should work in the Fed.)

I assume this was written in response to the widespread assumption that Ross Perot's business success was a qualification for the presidency.

Hm,isn't that also basically the argument for trump?

Some of the confidence of this article (which one could describe as a remarkably, um, self-confident explanation of basic accounting identities in international trade) seems a little misplaced 20 years later. Especially if you've spent much time in the burned-out areas of America.

As an economic doctrine, running a country as if it were a company (in economic terms) has a name. It's called "mercantilism." Adam Smith coined this term to describe, essentially, normal economic policy before Adam Smith.

You don't need a time machine to investigate the effects of mercantilist economics, since the entire modern Far East is run on basically mercantilist principles. Just visit Harvard, ride the Amtrak to DC (looking out the windows), then fly to Shanghai. Cost, about $2K. This should give you a good gut feeling for whose econ professors are on the money.

On the other hand, Adam Smith sure could turn out a sentence. And so can this guy. Not clear that this is the best way to judge economics professors, however. For a classic text in mercantilist economics, try Friedrich List, _National System of Political Economy_ (1844):

https://books.google.com/books?id=4uuc7tdk0Z8C

I think you could more directly make your point.

> Just visit Harvard, ride the Amtrak to DC (looking out the windows), then fly to Shanghai. Cost, about $2K. This should give you a good gut feeling for whose econ professors are on the money.

Are you suggesting the USA has more poverty than China?

I've ridden the Amtrak from Boston to NYC and NYC to Philly, and I've been to the Far East three times (including Shanghai). I still have no idea what point you're making.

Regardless of what side you're supporting, keep in mind that only a small minority of Chinese people live in Shanghai, and only a small minority of Americans live in the Acela corridor, so we probably can't draw broad conclusions from either.

Your argument is that mercantilism works better because East Asian nations have better public transportation and railway networks than the US? Last time I checked, GDP per capita and labor productivity in the US greatly exceeds that of China, Taiwan, Japan, SK, or Singapore.

The mercantilism vs. capitalism debate Adam Smith was entering into wasn't really about internal economic organization anyway, it was about international trade and economic competition. The old mercantilist idea was that economic competition was a zero sum game, and that above all else the government should try to maintain a favorable balance of trade (export more than you import). Adam Smith's basic argument was that both sides benefit from trade. By following their comparative advantage and then conducting trade with each other, two parties could consume more than they could produce alone.

Reading about Friedrich List, some of his ideas do have merit. Protectionism to foster nascent industries has worked well as a development tool. The US used it in the 19th and early 20th centuries and the East Asian nations (except Singapore) used it in the later 20th century. But for that to work, there had to be certain conditions: a weaker currency and lower standard of living. So it works well for countries that have not yet developed, but not so well for countries which have already developed. It also doesn't explain countries like Singapore, which did not develop based on low-grade manufacturing, but instead by embracing its important position on key trade routes and developing its service sector (esp. financial services).

"The mercantilism vs. capitalism debate Adam Smith was entering into wasn't really about internal economic organization anyway, it was about international trade and economic competition. The old mercantilist idea was that economic competition was a zero sum game, and that above all else the government should try to maintain a favorable balance of trade (export more than you import). Adam Smith's basic argument was that both sides benefit from trade."

+1 to this, this is a better description of 'Mercantilism'.

Haven't things changed since 1996 though? Many countries today seem to be "selling themselves" to companies and capital, trying to attract investment.

Serious question: does the conclusion change in the absence of the Fed? The author's examples of a business leader's choices being countered by the Fed, rendering those results fruitless, makes it seem like the Fed is getting in the way of the natural consequences of these decisions.

Most of Trumps demographic doesn't read outlets like HBR unfortunately (or won't read at all).

His entire base reminds me of the quote, "if you think education is expensive, try ignorance"

Entire base? Even Peter Thiel?

I have a Masters degree in physics and I support Trump.

The article isn't about whether good business people make good political leaders. The article is about whether or not good business people make good economists, and does not touch on the business of being an statesperson. Let's not cheapen the conversation by dragging the gibbering masses into it.

Third party voter here, so no real skin in the game between Hillary and Trump. I was talking to a friend of mine about the election and it suddenly occurred to me. Virtually every problem I have about trump could be summed up with a single sentence about that problem and you'd know exactly what I meant. With Hillary, on the other hand, virtually every problem I have with her requires a ton of contextual knowledge. Like if I said to you Hillary becoming president results in a greater chance of WWIII against Russia and millions of deaths than Trump, you really have to know a lot about the Arab Spring, what we did in Syria which was really a proxy war with Iran to depose an Iranian ally but wound up creating ISIS, that Syria, Iran, and Russia are allies, and tons of other stuff that most voters simply aren't aware of. It's so much easier to say, "This guy probably raped some people so I'm not gonna vote for him."

When threats are well understood, there is a greater chance of those threats being constrained by a distributed system of checks and balances.

Regardless of political affiliation, it baffles me a person like Trump can get even close to being president. Disclosure: I'm European and not allowed to vote in the US (yet)

Stop thinking of him as a potential leader of the free world and instead of as a living, breathing "Fuck you!" to mainstream politics and the wealthy elite. Donald Trump went to a big Detroit auto show, looked straight at the execs of the American auto industry and told them if they closed their American factories and opened them up in Mexico he'd slap them with a 35% tariff. That kind of shit resonates with a populace who has seen both parties sell off the middle class to enrich themselves and the wealthy elite. I don't support him and don't suggest anyone votes for either him or Hillary, but it's very easy for me to understand why people like him so much.

But isn't he part of the problem then? He has a big mouth but just as entitled and 'elite' as everyone else, except he lacks all the good traits of a leader. Whenever something doesn't go his way he resorts to acting like a 5 yr old. He is a joker of a businessman let alone let him run a country?!

Yep, he's an asshole. But, perhaps ironically, he talks to the electorate like an adult in a way that most politicians won't. He outsourced his manufacturing to Mexico, he's openly stated why, and what he's going to do about it so that it's likely that some of those jobs can come back to the US. He's talked directly about the tax breaks he and the wealthy elite take, why they're unfair, and what he's going to do about it to bring sanity back to the tax code. These are things you'll never hear from a Clinton or a Cruz. Yes, he has a big mouth and is kind of openly an asshole. I fail to see how his elite status or "good traits of a leader" is really different than Clinton. I mean she destroyed evidence in her criminal investigation and literally created ISIS by training, arming, and intentionally radicalizing Syrians during the Arab uprising. How could you possibly think she's got good traits of a leader? Because she doesn't cuss on Twitter?

This is exactly the kind of condescension by the coastal elite that is fueling the Trump momentum. Maybe just maybe, not everyone who supports capitalism and opposes a humongous federal government is not an ignorant racist. Too radical to contemplate for you, I guess?

"What people learn from running a business won’t help them formulate economic policy. "

This is very, very false.

Yes - a nation is not a 'company' - but most people do work for companies, and arguably the most important metric in the nation is 'employment'. People who are employed are happier, fruitful, they pay taxes, they don't consume as many free government services etc..

It's definitely fair thing to say the country 'should not be run like a business' - but as we have seen with Obamacare - and the US' messed up overseas taxation scenarios - I think it does help to have a good understanding of the reality of business etc..

Also - one could argue that 'Economics' is not really even a science in the classical sense. Economists can't predict much, they never agree with one another even on the most fundamental issues.

Reply on news.ycombinator.com