The O-Ring theory of development deals with how firms and economies are organized when one weak link in the production process can destroy the entire value of
The O-Ring theory of development deals with how firms and economies are organized when one weak link in the production process can destroy the entire value of production. The model has implications for wages, inequality, and big push theories of development.
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At 19:28 the video mentions that talent likes talent and that there is a multiplier effect. This reminded me of a book I recently read by a UC Berkeley economist Enrico Moretti, The New Geography of Jobs, He, essentially, is making a similar point coming from a geographical perspective. Have you read it? Am I off base?
Yes, I have read Moretti's book and I agree that he is interested in explaining some of the same phenomena such as small differences having large effects, agglomeration, talent likes talent and so forth. It would be interesting to compare different explanations for the same phenomena to see if they made testable predictions about other phenomena that could distinguish the theories.
Indeed,this is a VERY interesting lecture,with an important insight into the oft-discussed issue of inequality.
How much insight is their into the economics of culture-specifically corporate or institutional culture?What is out there to look at?
In my limited understanding,culture may be thought of as emerging from a coordination game.What might game theory
tell us about culture of the firm,etc?
Where would this theory NOT apply? I guess what I am saying is, upon reflection, most if not all production seems to fit this description. I get uncomfortable with theories that explain almost everything.
The O-ring model suggests high quality labour should be paired with high quality labour in order to maximise effective output but how would we improve the overall quality of labour if not by pairing higher quality labour with lower quality labour?
Any empirical evidence for this? (Did Echo Luke (above) ever get an answer?)
Deeply suspicious of how this is being used to justify greater inequality (after 17 min mark), as if this was somehow a naturally evolving phenomenon (it's not us, guv, it's the production function"). Rising inequality in developed markets has, over the past 30 years, been propelled by state action against unions, regressive tax and policies and massive rent seeking in certain industries - a much better explanation for the large salaries in finance, for instance, than an application of O-ring theory. The global economy did a lot more than blow a financial gasket in 2007.