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Tag: business & economics

How Can We Unlock Growth?

Posted on by Penguin India

Today is an age of experimental and innovative entrepreneurship. Business strategy is changing fast, and so are customers’ expectations. It is more imperative than ever to keep up.

As the business-world becomes increasingly competitive (and creative), treating your customers is no longer enough. There are new rules that have emerged, including taking care of employees. Happy employees make happy customers, and happy customers tend to be loyal.

‘The New Rules of Business’ by Rajesh Srivastava presents insights and anecdotes to explore how businesses can grow in the new-age world. Find out how growth and success is an achievable milestone, even if you are new to the field, in an excerpt below.

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Pivot to Unlock Growth

Business history is littered with examples of the initial strategy of an enterprise invariably failing. Successful enterprises don’t give up when their initial strategy proves ineffective. They pivot as many times as required, till they hit upon a successful strategy: either by chance, through superlative thinking or from a competitor’s mistake or by sheer luck. Once the successful strategy is discovered, the enterprise drops anchor.

Implied in this approach is an axiom: it is unwise to put all resources—financial and non-financial—into the initial strategy. Enterprises should hold back sufficient resources for subsequent strategic pivots they might have to undertake along the way till the successful one is identified. An enterprise, therefore identifies and places a bet on the best initial strategy and invests sufficient resources to make it a success. But it also holds back enough resources in case the initial strategy does not work out and the enterprise has to pivot to arrive at another strategy.

Enterprises that ignore the pivot strategy could make mistakes at a great cost to themselves and their shareholders.

Are there examples of enterprises that have embraced the pivot strategy to lay the foundation for business success?

Wikipedia

Wikipedia1 leads the list. It ‘pivoted’ its way to becoming the world’s largest collaborative, free encyclopaedia. In March 2000, Jimmy Wales, the founder of Wikipedia, launched an online encyclopaedia and called it ‘Nupedia’. As was the norm then, he assembled an advisory board of experts to mentor this project. They in turn developed an intensive acceptance and editing process that included multi-step peer review process to control the content of the articles.

After twelve months, merely twelve articles were written, despite many contributors evincing interest. The strategy of having experts to control and drive the project was clearly not working. Wales needed to pivot, and quickly.

In 2001, a second free online encyclopaedia was launched where anyone could contribute. It was called Wikipedia. It operated on the principles of software industry where a collaborative approach was followed. Work released at the earliest possible opportunity and refined subsequently. This process is called ‘beta testing’. Leading software companies are in a state of perpetual beta: they are striving for continuous improvements. A leading proponent of this strategy is Google.

80 per cent ready. And then based on user feedback, it keeps improving the software, live.

Wikipedia too released the earliest possible version of an article, letting several people work simultaneously to rapidly refine it. The new pivot got traction and Wikipedia, as we know it, was born. Nupedia, which decided to remain rigid and not pivot, shut shop in 2003.

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Author Rajesh Srivastsava brings to this book three decades of corporate experience to present advice that is both accessible and actionable.

Feed your entrepreneurial spirit by getting a copy of the book today!

The Game of Business: Excerpt from Simon Sinek’s ‘The Infinite Game’

Posted on by Penguin India

In today’s world lead by young entrepreneurs, what does competition in businesses actually mean?

An optimist, motivator and author, Simon Sinek lays out a clear framework to help us navigate the world of business – which he presents as an ‘infinite game’, with no clear finish lines, losers or winners.

Read on for an excerpt that introduces this idea.

The Infinite Game of Business

The game of business fits the very definition of an infinite game. We may not know all of the other players and new ones can join the game at any time. All the players determine their own strategies and tactics and there is no set of fixed rules to which everyone has agreed, other than the law (and even that can vary from country to country). Unlike a finite game, there is no predetermined beginning, middle or end to business. Although many of us agree to certain time frames for evaluating our own performance relative to that of other players – the financial year, for example – those time frames represent markers within the course of the game; none marks the end of the game itself. The game of business has no finish line.

Despite the fact that companies are playing in a game that cannot be won, too many business leaders keep playing as if they can. They continue to make claims that they are the “best” or that they are “number one.” Such claims have become so commonplace that we rarely, if ever, stop to actually think about how ridiculous some of them are. Whenever I see a company claim that it is number one or the best, I always like to look at the fine print to see how they cherry-picked the metrics. For years, British Airways, for example, claimed in their advertising that they were “the world’s favourite airline.” Richard Branson’s airline, Virgin Atlantic, filed a dispute with Britain’s Advertising Standards Authority that such a claim could not be true based on recent passenger surveys. The ASA allowed the claim to stand, however, on the basis that British Airways carried more international passengers than any other airline. “Favourite,” as they used the word, meant that their operation was expansive, not necessarily preferred.

To one company, being number one may be based on the number of customers they serve. To another, it could be about revenues, stock performance, the number of employees or the number of offices they have around the globe. The companies making the claims even get to decide the time frames in which they are making their calculations. Sometimes it’s a quarter. Or eight months. Sometimes a year. Or five years. Or a dozen. But did everyone else in their industry agree to those same time frames for comparison? In finite games, there’s a single, agreed-upon metric that separates the winner from the loser, things like goals scored, speed or strength. In infinite games, there are multiple metrics, which is why we can never declare a winner.

Are you playing an inifinite game or finite game? Read The Infinite Game to find out!

5 Specific Weaknesses that Have Prevented India from Realizing its Full Potential from ‘India: Still a Shackled Giant’

Posted on by Penguin India

India is one of the largest economies in the world today and it has been predicted that it would become the third largest economy by 2030. Yet, an average Indian is worse off than his counterpart in other developing nations like Algeria, Indonesia, Mongolia and Morocco. The tethers of corruption and fragility have prevented it from becoming an Asian Tiger.

In India: Still A Shackled Giant, Dev Kar, a former senior economist at the International Monetary Fund shines light on why India is still, even after 70 years of independence, unable to reach its full potential to join democratic giants like the United States, Germany, and Japan.

 

Fragility

Fragility is a state of affairs, consisting of many economic, social, demographic, political, environmental, and security-related pressure points that either strengthen or weaken a nation state. If fragility is left unchecked, the nation can slide towards civil war and break up. The overall fragile states index (FSI) is derived from twelve sub- indices which are: demographic pressures, economic inequality, economy, external intervention, factionalized elites, group grievance, human flight and brain drain, human rights, public services, security apparatus, state legitimacy, and refugees and internally displaced persons (IDPs). (page 15)

India’s overall fragility increased from the ninety-third rank in 2006 to the seventy-second rank in 2018. India’s slide by twenty-one ranks over this period was mainly driven by uneven development (such as rising income inequality), human flight and brain drain, state legitimacy, demographic pressures and security apparatus.

Dirty Politics

There is no doubt that the source of corruption in India is its rotten politics. If politicians can use black money to get elected, criminals can contest elections and win, and if they can all play vote bank politics, what kind of example do they set for the rest of the country? These days, it seems every political party needs criminals to intimidate the opposition, suppress dissent, and extract rent in order to ensure its hold over power. Under the circumstances, there can be neither raj (rule) nor neeti (ethics) left in rajneeti (politics).

Another way of looking at this sad state of affairs is that many voters perceive the criminal politicians to be more effective in delivering government services. I think, either way, from the supply of criminal politicians to the demand for them, they pose a huge problem for any democracy and its governance.

A Taxing Problem

Ever since Independence, India has had two main problems with taxation—a narrow tax base and significant tax evasion. A narrow tax base means only a small portion of India’s population is paying income taxes. Out of a population of some 1.3 billion people, only about 4 per cent file pay income taxes, which make up the largest part of direct taxes. (page 141)

A country trying to raise adequate tax revenues from a narrow base ends up running large fiscal deficits given increasing government expenditures to meet multiple development objectives. Fiscal deficits in turn hamper economic growth and lead to economic instability through rampant inflation, higher interest rates, or increasing foreign debt. It is the poor who suffer disproportionately.

According to the Centre for Monitoring Indian Economy (CMIE), nearly thirty-one million Indians are unemployed and looking for jobs. While economic growth has been humming along around 7–8 per cent per annum recently, the pace of job creation has been poor. While unemployment is naturally an emotive issue in a country of 1.3 billion people with a young workforce, the capacity to generate jobs is not in the hands of any politician, regardless of their promises. The bottom line is that for unemployment to come down during any period, the number of new jobs created must be greater than the number of people entering the labour market during that period. The problem of employment in India is twofold. First, India needs to invest in more education, vocational training and health. Second, there is a need to shrink the size of the informal sector by helping more workers to switch to jobs in the formal sector.

No Care about Healthcare

Healthcare in India still has a long way to go in terms of access to good facilities and reliable doctors, particularly in smaller towns and villages. While the rich in India can afford to get reasonable treatment at a price they can afford, the poor can’t. The quality of public hospitals is extremely poor and they pose serious risks to the life and well-being of patients. Moreover, the credentials of many doctors are suspect. To make matters worse, there are no independent regulatory bodies to accredit, monitor and disseminate reviews of medical providers.

Grab your copy of this book today to know learn about these barriers in detail and discover how India can find the road to redemption.

The Success of the Successor to Steve Jobs.

Posted on by Penguin India

When it came to picking a successor to Jobs, there were rumors that the Apple board was likely to choose someone from outside the company, but this was never actually the case. The board was Jobs’s board, sometimes controversially so, and they were always going to accept whomever Jobs picked for the role. Jobs wanted an insider who “got” Apple’s culture, and he believed there was no one who fit the bill more perfectly than Tim Cook, the man he had trusted to run Apple in his absence on two previous occasions.

Tim Cook is now the CEO of Apple, and here is how Apple has been doing under his leadership.

Apple has become the world’s first trillion dollar company under his leadership

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Apple is on its way to having a more diverse workforce. Progress is slow, but it’s encouraging to hear that in 2017, half of Apple’s new hires in the United States were from underrepresented groups in tech.

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Apple’s products have received high praise from accessibility advocates. In 2017, the company won three major awards for innovations in accessibility. Being blind shouldn’t be a barrier to using the iPhone, and Apple is working hard to ensure that its products are for everyone.

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Because of Cook’s values, Apple will likely never experience privacy scandals to the same extent that Facebook has.

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Tim Cook has placed a clear emphasis on environmental efforts at Apple. Apple has made world- changing investments in renewable energy, responsible forestry, and sustainable manufacturing.  Apple’s operations now run on 100 percent renewable energy in twenty- fi ve countries, and it’s starting to bring the supply chain along. Apple’s supply chain— which accounts for 70 percent of its carbon footprint— will be 100 percent renewable in a decade or less.

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Aside from big, world- dominating products, Apple under Cook has innovated in many other areas. Apple’s AirPods are a giant hit, and they are remapping the wireless headphone space.

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Apple Pay is slowly taking off and is tipped to become the biggest contactless payment system in the United States; it’s projected to account for a third of all payments by 2022.

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The first major new product category launched under Cook, the Watch was initially greeted with skepticism and even scorn. But three years later, the Apple Watch is the biggest smartwatch on the market and is bigger than the entire Swiss watch industry. Apple is estimated to have sold forty- six million to date. It is likely to develop significantly in coming years.

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Since Cook took over the company, AAPL stock has tripled in value. Some experts attribute the trillion- dollar valuation to the success of the iPhone, the iPhone X especially.

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Apple under Cook has launched a comprehensive set of initiatives, from elementary schools to colleges, to improve the numbers of women and underrepresented minorities going into tech.

Drawing on access with several Apple insiders, Leander Kahney tells the inspiring story of how one man attempted to replace someone irreplaceable, and–through strong, humane leadership, supply chain savvy, and a commitment to his values–succeeded more than anyone had thought possible. Get your copy here!

Six Proven Principles that Indian Entrepreneurs Can Use to Co-create Frugal Solutions

Posted on by Penguin India

The groundbreaking new book Do Better with Less by the bestselling authors of Jugaad Innovation—Navi Radjou,  and Jaideep Prabhu is here to show how India can harness the three megatrends — the sharing economy, the maker movement and the circular economy to drive inclusive and sustainable growth in the coming decades.

The world faces a stark challenge: meeting the needs of over 7 billion people without bankrupting the planet. India, with its large population and limited resources, offers a creative response to this. Its resilient jugaad mindset, dynamic entrepreneurial ecosystem of start-ups and NGO-government collaboration promises to meet its own requirements, and those of the world, in a sustainable way.

Read on for six proven principles that Indian entrepreneurs and businesses can use to co-create frugal solutions in education, energy, healthcare, food and finance!

Principle one: engage and iterate

Rather than using insular research and development (R&D) departments that rely on educated guesses about customer needs, E&I starts with customers, observing their behaviour in their natural environment, and then considers how products can be made as relevant as possible, going back and forth between the customer and the lab to refine designs. As former CEO of Intuit, Brad Smith says: ‘If you never lose sight of the customer problem, how you attack the solution can remain more flexible and iterative and ultimately be more likely to succeed.’ This innovation model is based not on pushing new technologies onto customers, but on starting with customer insights and looking for ways to solve their actual problems.

 

 

Principle two: flex your assets

Customers are becoming ever more demanding. They increasingly want tailored products and services where and when they desire. The trend towards mass customization,  new tools (such as robotics and 3D printers) and new approaches (such as social manufacturing and continuous production) can help operations and supply chain managers ‘flex’ their production, logistics and service assets to satisfy demanding customers better and more cheaply. The goal of flexing assets is not only about saving resources, such as carrying less inventory, but also about saving time—a business’s most valuable resource.

 

Principle three: Create sustainable solutions

This demonstrates how companies can implement sustainable practices such as cradle-to-cradle and the circular economy (where components and materials are repeatedly recycled) to design and manufacture waste-free products of value to customers. It shows how the sharing economy—in which customers share products as pay as- you-go services rather than own and consume them—can boost customer loyalty and generate new sources of revenue. And it explains how some pioneering firms are using techniques such as upcycling to combine and integrate the principles of the sharing and circular economies, thus paving the way for the ‘spiral economy’: a virtuous system that generates evermore value while reducing waste and the use of natural resources. Thus R&D and manufacturing managers can develop self-sustaining solutions that help both businesses and the environment



Principle four: shape customer behaviour

 Companies can influence consumers into behaving differently (for example, driving less or more safely) and feeling richer while consuming less. Marketing managers can improve brand loyalty and market share by tailoring frugal products and services more closely to the way customers actually think, feel and behave—and by properly positioning and communicating the aspirational value of these frugal solutions. Indian brands can use clever design and marketing techniques to encourage Indian consumers to adopt a healthy and sustainable lifestyle.

 

 

Principle five: co-create value with prosumers

Consumers want a ‘conversation’ with their brands. Consumers now design, build and sell products themselves especially the tech-savvy millennials and Generation Z (those born between 1981 and 2012)—are evolving from passive individual users into communities of empowered ‘prosumers’, who collectively design, create and share the products and services they want. Sales and marketing managers can build greater brand affinity and deepen their engagement with customers by co-creating greater value for all.

The horizontal economy which allows consumers to design, build, market, distribute and trade goods and services by and among themselves, is being encouraged by Fab Labs and maker spaces, the low-cost building blocks of DIY products, Peer-to-peer sharing platforms, collective buying platforms, and crowdfunding platforms that finance new ventures.

 

 

Principle six: make innovative friends

R&D and operations managers can develop frugal products, services and business models more efficiently by collaborating with diverse external partners (such as suppliers, universities, venture capitalists and start-ups) than by working alone.  In addition, makerspaces can connect large companies and nimble inventors and enable them to co-create new products faster and cheaper using digital prototyping tools.  Brands must increase the breadth and depth of their partnerships in order to understand the real nature of the so-called wicked problems and solutions. Companies must also transform themselves from within by setting up an innovation-brokering function, increasing internal agility, and monetizing, intellectual capital beyond just protecting it.

 

Do Better With Less is India’s guide to claiming global leadership in frugal innovation.

 

The Economic Puzzle of Demonetization – an excerpt

Posted on by Penguin India

In his book Of Counsel: The Challenges of the Modi–Jaitley Economy, Arvind Subramanian provides an inside account of his rollercoaster journey as the chief economic advisor to the Government of India from 2014–18. Subramanian’s trusteeship saw the country through one of the most hotly contested and turbulent periods of economic governance and policymaking in recent decades, including the controversial recall of 85 per cent of circulated currency during demonetization.
In a chapter titled The Two Puzzles of Demonetization, he lays out his hypothesis on the political and economic puzzles of demonetization as a post facto analysis based on publicly known facts.
Puzzle 1: Why was demonetization so popular politically if it imposed economic costs? Specifically, why did demonetization turn out to be an electoral vote winner in the short-term (in the Uttar Pradesh elections of early 2017) if it imposed so much hardship on so many people?
Puzzle 2: Why didn’t the draconian 86 per cent reduction in the cash supply have bigger effects on overall economic growth? To put this more provocatively, the question was not whether demonetization imposed costs—it clearly did—but why it did not impose much greater costs?
Here is an excerpt of the second puzzle.

Why didn’t the draconian 86 per cent reduction in the cash supply have bigger effects on overall economic growth? To put this more provocatively, the question was not whether demonetization imposed costs—it clearly did—but why did it not impose much greater costs?
Demonetization was a massive, draconian, monetary shock: in one fell swoop 86 per cent of the currency in circulation was withdrawn. Figure 1 shows that real GDP growth was clearly affected by demonetization. Growth had been slowing even before, but after demonetization the slide accelerated. In the six quarters before demonetization growth averaged 8 per cent and in the seven quarters after, it averaged about 6.8 per cent (with a four-quarter window, the relevant numbers are 8.1 per cent before and 6.2 per cent after).

I don’t think anyone disputes that demonetization slowed growth. Rather, the debate has been about the size of the effect, whether it was 2 percentage points, or much less. After all, many other factors affected growth in this period, especially higher real interest rates, GST implementation and rising oil prices.
I do not have a strongly backed empirical view apart from the fact that the welfare costs especially on the informal sector were substantial.
As a monetary economist, though, what is striking is how small the effect was compared to the magnitude of the shock. There are many ways of seeing this. Figure 2 compares what happened to cash with what happened to nominal GDP. It is a stunning picture. Prior to demonetization, cash and GDP move closely together. Then, currency collapses and recovers (the dotted line), but through all of this, the economy seems to have been chugging along almost unmindful of the currency in circulation. You have to squint to see any downward movement of the solid black line (for nominal GDP) after demonetization: in fact, there isn’t, and all the downward blips reflect seasonality, which leads to a lower level of activity in the first (April–June) quarter every year.

What could possibly explain this apparent resilience? A number of hypotheses need to be considered. First and foremost, it could simply be an artefact of the way that GDP numbers are created. In India, there are no timely measures of informal sector activity, so it is proxied by formal sector indicators. Normally, this is not a problem, since the two move in tandem. But when a shock like demonetization occurs that primarily affects the informal sector, relying on formal indicators to measure overall activity will overstate GDP.
This hypothesis goes only a small way towards explaining the puzzle, since any squeeze in informal sector incomes would depress demand in the formal sector, and this effect should have been sizable.
As a result, we need to search for other explanations. One possibility is that people found ways around the note ban, for example by continuing to use the Rs 500 note even after its use had been formally banned, so the currency shock wasn’t actually as big as conventionally measured. Another possibility is that production was sustained by extending informal credit: people simply agreed to pay their bills as soon as currency became available. Finally, to a certain extent, people may have shifted from using cash to paying by electronic means, such as debit cards and electronic wallets.
Or, there may be other, completely different explanations that have eluded my understanding of demonetization, one of the unlikeliest economic experiments in modern Indian history.

Recognized as one of the Top 100 Global Thinkers according to Foreign Policy magazine, Arvind Subramanian’s Of Counsel: The Challenges of the Modi-Jaitley Economy is a deep-dive into the man, the moments, the measures and the means

Rebuilding Lost Trust – An Excerpt from ‘Trust’

Posted on by Penguin India

To succeed, entrepreneurs in developing countries need to build trust within the existing structures. Those who assume that they will have the same legal, governmental, and institutional protections as their counterparts in the west, will fail. And Tarun Khanna’s new book Trust shows how it is done.
Here is an excerpt from his book, that talks about rebuilding lost trust.

In 2008, anxious parents in Gansu Province, deep in the Chinese mainland, began visiting hospitals with their ailing infants. Tests found that several domestic brands of dairy-based infant formula powders they were consuming contained melamine, an industrial chemical used in plastics and fertilizers that can cause kidney failure in small children. Ultimately six babies died and approximately 300,000 were affected during what became known as “the
Chinese milk scandal.”
Somewhere along the supply chain, intermediaries had been diluting raw milk with water and then adding melamine to fool quality tests (melamine is high in nitrogen, and most tests only look at nitrogen levels as a proxy for protein levels). In some cases, dairy farmers themselves engaged in this practice, with the tacit approval of big dairy companies like Sanlu, to squeeze out some extra profits in an industry with very low margins.
Despite government efforts to restrict negative media coverage during that summer’s Beijing Olympics, the scandal caused international outrage. Protests and lawsuits followed. The government eventually tried the chairwoman of Sanlu and sentenced her to life in prison. Two wholesalers were convicted of overseeing the dilution and contamination and then selling the contaminated products with full knowledge of the health risks—and they were actually executed in November 2009. These were unusual moves, since the government rarely cracks down so hard on bad actors in the food industry.
Indeed, this milk crisis was hardly the first instance in which food contamination threatened the health of the Chinese. There was the episode a few years back when farmers’ use of chemicals to accelerate growth resulted in a rash of watermelon explosions. Earlier in 2015, authorities found so-called “zombie beef ” in the supply chain. Certain vendors had somehow gotten access to forty-year-old beef that had been thawed and refrozen many times over and were selling it across China.
And then there was the discovery in March 2013 of more than 16,000 dead pigs floating in a tributary of the Huangpu River, a significant source of Shanghai’s drinking water. China Central Television reported that pig farmers in Zhejiang Province were selling pigs that had died of disease or natural causes to black market dealers, who then butchered them and illegally sold the pork. After a few of these malfeasants were sentenced to life in prison, the lucrative illegal trade in dead pigs plummeted, and farmers started dumping them in rivers in droves, instead of paying to discard them in pits. The images of masked and suited sanitation workers hauling the bloated carcasses out of the river with poles and nets repulsed the residents of Shanghai.
Even so, the tainted milk crisis was different. It struck a deeper chord. Why?
That crisis affected mostly young children and infants. Due to China’s long-standing one-child policy, there is an entire generation of parents who have invested all their hopes and energy into their single child. They are thus willing to go to greater lengths and expense to protect him or her: After the news broke, many parents undertook shelf-clearing expeditions to buy and bring back expensive foreign-brand infant formula from New Zealand, Singapore, and Hong Kong. Years later, this pattern continues.
This response neatly captures the net result of the scandal: Many Chinese simply don’t trust their domestic private food sector anymore. A trust vacuum exists.
This trust vacuum creates a vicious cycle, one that’s difficult to break. The problem stems from all sides in the dairy industry. For example, the price-sensitivity of consumers who are mostly not wealthy drives down prices for companies trying to win the market. This dynamic means that dairy farmers get low prices for their raw milk. If they are to make any profit at all, they have to lower their costs. For a small farmer wrapped up in the myriad daily challenges of running a dairy operation, the most expedient thing to do is to cut corners. Even if a farmer tries to take the high road—by investing in higher-quality feed for his cows, for example— and to recoup his costs by selling milk at a higher premium, it won’t pay off easily. Most consumers wouldn’t place any faith in his efforts, at least not for a while. This lack of trust persists because the level of trust in all dairy producers has become so vanishingly small.
In reality, many different players and methods can be involved with rebuilding trust. But rather than waiting for others to solve the problem, the entrepreneur can be the change agent herself. Her solution may be a tech solution. Or it might harness the community. Or both. She will almost certainly have to reimagine the role of talent, to attract it to an industry now perceived as staid and boring.

Trust by Tarun Khanna is now available. For most posts like this, follow Penguin India on Facebook!

The Republic of Beliefs – an Excerpt

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In The Republic of Beliefs, Kaushik Basu, one of the world’s leading economists, offers a radically new approach to the economic analysis of the law. He argues that the traditional economic analysis of the law has significant flaws and has failed to answer certain critical questions satisfactorily.
Here is an excerpt from a section of the introduction, titled Practice and Discipline.

Economists and legal scholars have had an abiding interest in the question of why so many laws languish unimplemented. But an even more intriguing and philosophically troubling question is its obverse. Why are so many laws so effective, being both enforced by the functionaries of the state and obeyed by the citizens? After all, a law is nothing but some words on paper. Once one pauses to think, it is indeed puzzling why merely putting some “ink on paper” should change human behavior, why a new speed limit law recorded in a book should prompt drivers to drive more slowly, and the traffic warden to run after the few who do not, in order to ticket them.
Traditional law and economics dealt with these questions by avoiding asking them. The purpose of this book is to take on this conundrum of ink on paper triggering action frontally. In the chapters that follow I spell out and explain the enigma, and then go on to provide a resolution. This forces us to question and in turn reject the standard approach and replace it with a richer and more compelling way of doing law and economics. The new approach, rooted in game-theoretic methods, can vastly enrich our understanding of both why so many laws are effective and why so many laws remain unimplemented, gathering dust. Given the importance of law and economics for a range of practical areas, from competition and collusion, trade and exchange, labor and regulation to climate change and conflict management, the dividend from doing this right can be large. This monograph contributes to this critical space that straddles economics and law, and is thus vital for understanding development and peace, and, equally, stagnation and conflict.
The hinterland between different disciplines in the social sciences is usually a rather barren space. Despite proclamations to the contrary, multidisciplinary research remains sparse, its success hindered by differences in method and ideology, and a touch of obstinacy.
The confluence of law and economics stands out in this arid landscape. Ever since the field came into its own in the 1960s, with the writings of legal scholars and economists showing recognition of the existence of and even need for one another, the discipline of law and economics has been gaining in prominence. The need for this field was so obvious and immense that it did not brook the standard hindrances to interdisciplinary research. Laws are being created and implemented all the time; one does not have to be an economist or a legal scholar to see that a poorly designed law can bring economic activity to a halt or that a well-crafted law can surge it forward. For this reason the confluence of law and economics was an active arena of engagement even before the field had a name. In the United States, for instance, concern about collusion among business groups dates back to the late nineteenth century. The Sherman Antitrust Act in 1890 and later the Clayton Antitrust Act of 1914 and the Robinson-Patman Act of 1936 were landmarks in the use of the law to regulate market competition and deter collusion.
As so often happens, practice was ahead of precept. While there was no subject called law and economics then, small principles were being discovered and acted upon by policymakers and practitioners. It was, for instance, soon realized by American lawmakers and political leaders that while curbing collusion was good for the American consumer, it handicapped US firms in the global space. In competing against producers in other nations and selling to citizens of other nations, it may be useful to enable your firms to collude, fix prices, and otherwise violate domestic-market antitrust  protections. This gave rise to the Webb-Pomerene Act of 1918, which exempted firms from the provisions of laws that ban collusion, as long as they could show that the bulk of their products were being sold abroad. Japan would later learn from this and create exemptions to its Antimonopoly Law, exempting export cartels from some provisions.
The realization of the power of the law to affect markets was in evidence when, soon after the defeat of Japan in the Second World War, the Allied Forces quickly imposed a carefully designed antitrust law on Japan. This was the so-called Antimonopoly Law 1947.
Japan would later modify it to reinvigorate its corporations. Not quite as directly as with the American experience but nevertheless with important implications for everyday life, the practice of law and economics goes much further back into history. Human beings were writing down laws pretty soon after they learned to write anything. The most celebrated early inscription was the Code of Hammurabi. Written in Akkadian, the language of Babylon, these laws were developed and etched on stone during the reign of the sixth king of Babylon, Hammurabi, who died in 1750 BCE. Ideas in this code survive today, such as the importance of evidence and the rights of the accused. It also gave us some of our popular codes of revenge, the best-known being “an eye for an eye.” The codes survived, but not without contestation. It is believed that it was Gandhi who warned us, nearly four thousand years later, “an eye for an eye will make the world blind.”

Highlighting the limits and capacities of law and economics, The Republic of Beliefs proposes a fresh way of thinking that will enable more effective laws and a fairer society. For more posts like this, follow Penguin India on Facebook!

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