Platt Perspective on Business and Technology

Reexamining business school fundamentals – macroeconomics, microeconomics and the gap between

There is an open area in physics that I find myself thinking about when the general topic of economics comes up. On the one hand there is the theory of quantum mechanics, with its statistical models of matter and energy – of particles and waves of both sorts and how they interact. On the other there is the broad brush stroke theory of gravity. They operate on very different scales that are difficult to find a bridge between, and they are mathematically defined in terms of different metrics, and with systems of equations that do not seem to readily connect, at least without introducing new levels of complexity in the form of overarching theory. In this, there are several competing overarching theories that have been actively under development. String theory comes immediately to mind as one of this set that has become part of the popular vocabulary. The problem is that so far no empirically determinative phenomenon has been found that would unequivocally help us to determine which of these theories if any is correct as a predictive, descriptive model of reality, and even just within the variations on string theory if that in fact were to prove to be correct.

Modern economic theory is multiple-option and at both micro and macro efforts but more than that, the clusters of alternative approaches and theories that would be proposed for predictively, descriptively modeling economic systems at micro and macro levels do not connect together as a single overarching system – any more than quantum physics and gravitational theory do. Similarly, any validated overarching theory that would connect these two realms would have to be grounded in a specific empirically significant context that would provide reality check evidence in support and refutation of alternative theory proposed.

Mesoeconomics is a neologism that dates back to the 1980’s as a proposed bridge between the otherwise incommensurables of microeconomics and macroeconomics. Like a proposed bridging theory in physics, validation of the mesoeconomic concept would require a very specific empirically observable economic problem that could not be addressed at either the macro or micro scales alone, but would rather require tools and approaches from both – plus bridging framework concepts and tools.

When business and the economy takes place at the level of the individual company or organization with all else viewable as simply being its outside context and monolithic, or alternatively at the macro scale where any individual business or organization simply merges into a more anonymous aggregate context, and when that works as an effective conceptual framework, gap and all then any mesoeconomic theory will remain just a marginalized curiosity. When business and economic context and ongoing business and financial reality make that gap apparent and a problem for not being addressed, mesoeconomics becomes both viable and necessary as an actively developed approach. And I come to the concept of the value chain and to the increasing complexity of our supply chain systems and the compulsion to bridge this gap comes from increasing due diligence and risk remediation challenges that any individual business member of one of these networks faces. And this pressure to develop a valid mesoeconomic theory comes from a need to fill gaps that our dichotomous and gap-separated current approach cannot address.

There is a metaphor of an 800 pound gorilla in the room that everyone ignores because no one wants to have to deal with it. Part of the reason why we have so many alternative economic theories, and certainly at the macro level is that there are so many 800 pound gorillas in any room that economists would look into.

I pick up on one of them that has become something of an organizing issue for a number of my postings here in this blog, and not just in my series on Macroeconomics and Business. No one seems to know how to unequivocally set value for business intelligence, trade secrets or proprietary information, when these resources can in fact contain the vast majority of actual value that a business or organization holds – and not its wastebaskets and desk sets and other physical assets that can be monetized for resale or replacement values and costs.

Business intelligence is difficult if not impossible to set value on because so much of its value rests in whether and how other organizations could use it, and with use radiating out through organizational networks through value chains and supply chains – and directly into that middle ground that microeconomics and macroeconomics alone fail to cover.

And I further propose that it is precisely the immediate here and now requirements of our emerging ubiquitous computing and communications context, and the business opportunities and market spaces that creates, that make this important as a practical matter. We do need to be able to determine the value of information as a monetizable class of entities. Otherwise we find ourselves setting valuation on our businesses based on what may be more the window dressing than the core sources of value they contain and represent. I see this as both an issue worth reexamining, in light of earlier attempts to develop a true mesoeconomics, and an open issue that will have to be addressed in this 21st century and soon in that.

The next posting in this series is going to turn to issues of Personnel and Human Resources in a globally interconnected business context.

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