Five Economic Eras


Economic era is a historic period of time in which the commerce of the time is dominated by, but not exclusively limited to, one particular activity, whether that be hunting and gathering, farming, manufacturing or information processing. We have waded through five economic eras:

  1. Hunting and gathering: primeval, from the dawn of human history
  2. Agricultural: approximately 8,000 BC
  3. Industrial: 1776—the year  the Watt steam engine was invented and Adam Smith’s ideas first appeared
  4. Information: 1946—the year of the first electronic computer, the ENIC
  5. Knowledge: 1994—the year of the release of Netscape.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, and my Lectures.

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Managing a Shortage


In the real world, equilibrium prices are always changing. A flood in Brazil may cause the price of coffee to rise; good farming weather in the Midwest will lead to a fall in the price of wheat; advancing technology steadily lowers the price of computers. If enough people are drastically affected by the price change the government may decide to do something about it—whether wisely or unwisely. Rising apartment rents will lead to pressure for rent control, falling wheat prices will lead to pressure for agricultural price supports, and so forth.

When the government controls the price of a good below the market-clearing level, there will be a “shortage.” A shortage is not the same as scarcity. Scarcity simply means that not all desires can be satisfied, and so scarcity is always present. Diamonds are scarce, but there is no shortage—anyone who can pay the price of a diamond can buy one. A shortage exists when goods are not just expensive but unavailable to some people—except perhaps by unlawful means. In a city with rent controls, newcomers may be unable to rent an apartment at all, regardless of their willingness to pay. Thus, faced with a supply shift or demand shift dictating a higher equilibrium price, consumers are bound to lose out one way or the other—either from the higher price if the market adjustment proceeds unimpeded, or from the “shortages” that follow when government interventions keep the price low.

Using the concepts of short-run and long-run supply, let us trace out the consequences of coping with upward pressures on price by imposing a “ceiling.” There are some less visible consequences of price ceiling. Unable to raise price openly, firms may use subtler strategies. They may eliminate discounts or seasonal sales, reduce quality or variety or convenience of their offerings, or concentrate production in product lines that happen to have received a better break from the price-control authorities. Supplies may be sold abroad, leaving even less available for domestic consumers. And of course black markets may arise, providing a wider scope for people specializing in illegal activity. In extreme cases, there may be a breakdown of legitimate trade. In this connection, we can learn much from a previous great inflationary episode associate with World War 11 and its aftermath.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight

The Era of Fragmentation


Driven by a combination of capital-intensive new technologies, newly emerged mass markets, and global trade based on national competitive advantage, in industrial era production was organized around the idea of division of labor instead of craft specialization. The work formerly done by one artisan was broken down into its component parts, which in turn were mechanized where possible, and semi-skilled workers were hired to do part of the job or to tend the machines. New roles, those of supervisor, middle manager, and production planner, were created to provide the oversight and coordination that were formerly the responsibility of individual journeymen or masters. In brief, authority over the content of jobs was given to people who, themselves, were not actually doing this work. The newly created managerial authority took “from workers the right to define their own job, their own skill level, and their own standards of quality.”

The division of labor, originally intended to create a rapid growth economy based on a low-skill work force, did help assimilate nineteenth century agricultural workers into industry. But once there, it imprisoned them.

Division of labor is an addictive practice. Work breakdown—promoted by those whose authority and careers tend to benefit from it—tends to beget more work breakdown, taking the pressure off the employer or the educational system to continually upgrade employee skills. Once started, the practice tends to be self-reinforcing, producing a de-skilled work force.

By the mid-twentieth century, most corporate organizations were based on the concept of functional specialization. Work that was once whole had become fragmented. The focused skill of an individual was diffused into the skill of an entire factory. The common view was that mechanics check their brains at the gate when they come to work.

My Consultancy–Asif J. Mir – Management Consultant–transforms organizations where people have the freedom to be creative, a place that brings out the best in everybody–an open, fair place where people have a sense that what they do matters. For details please visit www.asifjmir.com, Line of Sight