Dynamic Economic Decision Making

2011-8-22 John Mauldin Dynamic Economic Decision Making

Decision-traps limit the leader’s ability to deal with cyclical but especially longerterm changes. Decision-makers tend to anchor their expectations about the future
in the past and to think in terms of their historical investments in their career and
in their firm. Their career is their memory of events and decisions tend to be
framed in terms of our experience. Decisions about the future of the firm tend to
reflect the firm’s existing structure. Seldom do firms break out of character and set
a new course. This causes them not to examine the marginal costs and benefits of
moving to a new future. In addition, public policy makers are slow to recognize
the changing character of competitiveness in industries (autos, textiles, and
consumer electronics) and thereby subsidize such industries for far too long. This
is not only a U.S. tendency but very much the general case as evidenced by the
United Kingdom in the post-World War II period until Prime Minister Margaret
Thatcher took office in 1980 and introduced a market-driven approach regarding
subsidization of industries.

Decision-traps limit the leader’s ability to deal with cyclical but especially longerterm changes. Decision-makers tend to anchor their expectations about the future in the past and to think in terms of their historical investments in their career and in their firm. Their career is their memory of events and decisions tend to be framed in terms of our experience. Decisions about the future of the firm tend to reflect the firm’s existing structure. Seldom do firms break out of character and set a new course. This causes them not to examine the marginal costs and benefits of moving to a new future. In addition, public policy makers are slow to recognize the changing character of competitiveness in industries (autos, textiles, and consumer electronics) and thereby subsidize such industries for far too long. This is not only a U.S. tendency but very much the general case as evidenced by the United Kingdom in the post-World War II period until Prime Minister Margaret Thatcher took office in 1980 and introduced a market-driven approach regarding subsidization of industries.

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