Forget about equations and forecasts. Powerful economic concepts have given rise to companies and transformed industries. Ignore economists at your peril.
As business leaders seek to stay ahead of the curve, they should ensure that somewhere in their range of view are the ideas of economists. Not forecasts or models or the dry parade of graphs and equations found in the typical introductory textbook, but rather economists’ insights and ideas, which sometimes have an enormous impact on the evolution of industries and also have been put to use in very practical and profitable ways by real companies. I am an economist, so this assertion may seem a bit self-serving. But I wouldn’t make it if there weren’t powerful evidence in its corner.
In this article, I’ll focus on one example: the Internet economy we know today would not have been possible, in scale or in speed of adoption, without an extremely important policy development of the 1970s and 1980s—the deregulation of transportation—in which economists played an important role. Nor would the business model of two of the Internet’s well-known players have been possible without the embrace of an idea—auctions—that has its roots deep in economics. I don’t think the Internet is an isolated case. I’ll close with an example of how a big economic idea could, in the future, have major implications for another major industry: pharmaceuticals.
by Robert E. Litan
About the author
Robert Litan returned in 2014 to the Brookings Institution as a nonresident senior fellow after directing research at Bloomberg Government and the Kauffman Foundation. He previously directed the Institution’s Economic Studies Program and served for nearly two decades at Brookings as a resident senior fellow. This article draws on his new book, Trillion Dollar Economists: How Economists and Their Ideas Have Transformed Business (John Wiley & Sons, 2014).
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