The point is that creating and deploying knowhow is an important source of wealth creation. After all, Apple, Google, and Facebook are jointly worth more than $1 trillion, even though the capital originally invested in them is a minuscule fraction of that.
Who gets to pocket the difference is up for grabs. Knowhow resides in coherent teams, not individuals. Everybody in the team is crucial, but outside the team each individual is worth much less. Shareholders may want to take the difference as profits, but they cannot do without the team.
This is where the super-managers come in: they strive to pocket part of the value created by the team. Behind the growth of wealth and inequality lies not just capital, but also knowhow.Project Syndicate
Piketty’s Missing Knowhow
Ricardo Hausmann | Pofessor of Economics and Director of the Center for International Development, at Harvard University, and former minister of planning of Venezuela and former Chief Economist of the Inter-American Development Bank
9 comments:
Cheating and fraud are also a matter of know how. Further there is another matter of power relationships. Hausmann seems to equate differences in power relationships to "know how" All the examples given by him can be attributed more to power relationships than to actual "know how"
Everybody in the team is crucial, but outside the team each individual is worth much less
Sounds like what someone in a clique would say. I wonder what sociologist would have to say about it.
David,
I think you misinterpreted what Hausmann sad. He implied that super-managers getting more than the rest of the team was because of their "know how" IMO it is much more likely because of the differential power relationships coupled with relationships to the holders of the purse strings - the BOD
Also, it should be noted, that Hausmann was connected to the pre Hugo Chavez power structure in Venezuela, and was on the losing side of Chavez' Bolivarian revolution
Actually, Ricardo Hausmann (as Moisés Naím, also mentioned in this blog some time ago) knows a lot.
The late Hugo Chávez would probably have agreed on that and that he had plenty to thank Hausmann for the latter's "know how".
After all, Hausmann's performance as "former minister of planning of Venezuela" was instrumental in the genesis of Chávez's so-called Bolivarian revolution. I don't mean that Hausmann intended that, and he might not wish to hear about it, but he did help, in a slaughtered golden-eggs goose kind of way.
So I'd advise our overlords to hear Hausmann very attentively, particularly when he speaks of know how.
The know how of which he speaks is most rent extraction.
The people extracting the most rent are those with access to mass markets and the political system.
Mass markets have largely spelt an end to entrepreneurialism as it used to exist. Entrepreneurialism is now most new product development with the existing structure.
Celebrities are people that have access to mass markets through the institutions that serve them, and due to their brand power, they have the ability to demand being cut in on the rents.
We aren't talking about greater value added but rather multiplication of transactions. Very often this can be traced to political power, such as intellectual property rights, privatization of public resources, and building on public investment, e.g., in R&D. This amounts to a free ride, or a very low cost one.
And very often the people mot responsible for the innovation that made the gains possible were paid only modestly in comparison with the amount of gain.
Dr Haussmanns observations are congent and insightful revealing a oversight to Mr Piketts reasonings that merit attention .
He is an economist of impecable credentials as attested by his work with some of the most reputable of international and academic institutions .
Its shameful how partisans of the current venezuelan regime try to besmirch him by referring to his short period as a minister in a previoius administration. Its said that in Venezuela the regime has a group of hired writers constantly making supposedly spontaneous remarks on well known publications to try and defame those who oppose it .
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