Economic Rockstar

Connecting Brilliant Minds in Economics and Finance

157: François Allisson on Value and Prices in Russian Economic Thought

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157: François Allisson on Value and Prices in Russian Economic Thought

François Allisson is a scholar in history of economic thought and a senior lecturer at the Centre Walras-Pareto at the University of Lausanne in Switzerland.

His research interests encompass the whole history of Russian economic thought, with a special emphasis on the theories of value and prices at the end of the imperial period and the beginning of the Soviet era ( which covers the years from the 1870s to the 1920s).

Francois’s interests int the theories of value, distribution, money, crises, accumulation of capital and planning lead him to study various schools of economic thought and classical political economy as well as Marxism, and marginalism.

His book Value and Prices in Russian Economic Thought was awarded the European Society for the History of Economic Thought (ESHET) Best Book Award in 2016.

Francois is now engaged in a collective project intending towards an intellectual biography of Nikolay Ivanovich Sieber (1844–1888), a Swiss and Russian economist

His teaching activities include a course on the history of contemporary economic thought, which covers the history of macroeconomics since Keynes’s General Theory, in both mainstream and heterodox traditions.

Francois was recently elected Vice-President of the International Walras Association. Among other activities, he is General Secretary of the Association Charles Gide (the French association for history of economic thought) and a Managing Editor of Œconomia.

Talk about economic thought during the 1890s to 1920s and the Russian economists of the time.

About the classical theory of pricing based on the value of labour and how that has changed since the preferred neoclassical marginal revolution in pricing theory that we know of today.

Links:

Books:

Patreon

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076: Greg Ip on Foolproofing the Economy and Why Stability is Destabilizing

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076: Greg Ip on Foolproofing the Economy and Why Stability is Destabilizing

Greg Ip is one of the best-known economics journalists in the US.Greg Ip Economic Rockstar

He is currently chief economics commentator of The Wall Street Journal and writes about U.S. and global economic developments and policy each week in the Capital Account column and on Real Time Economics, the Wall Street Journal’s economics blog.

From 2008 to January 2015, he was U.S. Economics Editor of The Economist magazine. Greg is the author of Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe as well as author of The Little Book of Economics: How the Economy Works in the Real World.

“Stability is Destabilising”- Hyman Minsky

Economics:

In this episode, Greg mentions and discusses: junk bonds, capitalism, investment, growth, financial crisis, bank deposits, loans, currency, gold, exchange rates, money market funds, bank run, exchange traded funds, recessions, unintended consequences and the Paradox of Thrift.

Economists:

In this episode, Greg mentions and discusses: Paul Volcker, Hyman Minsky, Gary Gorton, Joseph Schumpeter and John Maynard Keynes.

 

In this episode you will learn:

  • about the theme behind Greg Ip’s latest book Foolproof.

  • when the pursuit of safety lead us into danger?

  • what forest fires have to do with Wall Street.

  • about the relationship between the financial market (and its potential for a crisis) and ecological systems.

  • the way we publicly and privately try to cope with risk and danger and how those choices can create unintended consequences.

  • about the Fallacy of Composition: Things you do that are safe actually end up making other people less safe.
  • what American Football can teach us about the Fallacy of Composition.
  • how making American Football safe with the introduction of helmets has created increased risk taking and more injuries.
  • what past economic and financial crises have in common.
  • how the financial system succeeded too well in making people feel their money was safe.
  • how banking regulations and capital controls introduced after the financial crisis will create risks in other parts of the economy and financial markets.

  • if savings is actually bad for the economy.

  • about Keynes’ Paradox of Thrift and how savings forces others to borrow.

  • whether exchange traded funds (ETFs) will be the next financial catastrophe.
  • about the Peltzman Effect on anti-lock brakes.

  • how Paul Volcker‘s regulation of capital flows caused the growth of shadow banking.

  • how The Great Moderation changed attitudes about debt and how relaxed laws allowed high-risk households to borrow for mortgages.

  • about Gary Gorton of Yale and his explanation for a financial crisis.
  • how being present in danger can remind ourselves of the things that aren’t always safe.
  • whether the finance industry could take the lessons learned about safety and regulation in the airline industry.
  • why the Lehman Brothers collapse surprised many due to the US government indicating to the market that banks and mortgage companies would be bailed out.
  • how German savers were much to blame for the euro crisis than their European counterparts that borrowed.
  • why we continue to build cities near water which can cause devastation in the form of floods and tidal waves.
  • why The Netherlands, with their ‘Room For The River’ programme, is destroying dykes and allowing their lands to flood.
  • why Greg Ip is worried about the situation in China and how the stability that the government is trying to maintain will eventually lead to instability.

“If banks are limited from lending then lending activity will migrate elsewhere. We see this happening at exchange traded funds and other shadowy parts of the financial system. And you worry that risks are starting to grow there.” – Greg IP

“One way to protect ourselves against disaster is to make use of the presence of danger to remind ourselves that things aren’t always safe and to take steps that keep us safe”.  – Greg IP

“What I worry about more is that the pendulum has swung too far against risk taking. And the risks that are been taken are being channeled too far in the direction of financial risk and not real economy risk – people starting new businesses or buying new homes.” – Greg Ip

“What I worry about China is that they have leadership that is worried about political and economic stability.”

Where to Find Greg Ip:

Books:

Other Interesting Links:

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045: Jon Manning on the Art of Pricing and How Economic Theory Has Got Pricing All Wrong

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045: Jon Manning on the Art of Pricing and How Economic Theory Has Got Pricing All Wrong

Jon Manning is the Founder and Principal Consultant of Sans Prix and has over two decades of Pricing experiencejon manning in a wide variety of industries.

Since establishing Sans Prix, Jon (and his associates) have generated millions of dollars in incremental revenue for clients in places such as the UK, USA, India, and Australia.

Increasingly in demand as both a speaker and educator, Jon has spoken at many conferences, workshops, webinars and educational institutions across the Asia-Pacific, the Middle East and the United Kingdom.

In 2011, Jon and Greg Eyres established Pricing Prophets, the world’s first and only online pricing advisory service where clients can ask a panel of global pricing experts and thought-leaders what price to charge for a product or service and why.

Jon holds a Bachelor of Business (Applied Economics) from Deakin University (Australia), a Graduate Diploma of Business (Management) from Monash University (Australia) and a Master of Arts (European Studies), from The University of West London. He is a member of the Australian Institute of Management and the Professional Pricing Society.

In this episode, you will learn:

  • why Jon believes pricing is more of an a art than a science.
  • why pricing is based on human behavior that no scientific model can predict.
  • why there’s no such thing as Adam Smith’s Invisible Hand.
  • that 70% to 80% of companies use cost-based methods to set prices and few use a value-based method.
  • why customers don’t care about companies who use cost-based pricing and prefer companies that use value-based pricing methods.
  • why the best pricing strategy for a company is a value-based method.
  • the trials and tribulations of the pricing strategy adopted by Netflix and how it affected its share price.
  • how a $40 fine for returning a DVD late led to the founding of Netflix.
  • if the best strategy for companies to announce price increases to its customers is to do so a few years in advance.
  • how behavioral economics is opening up a minefield of exploration in pricing.
  • how Apple used anchoring techniques to sell their iWatch by offering a $10,000 iWatch. It makes the mainstream iWatch appear to be value for money.
  • how a $100 omelette was used by a restaurant to act as a decoy so it can influence your decision to pay for high-end or expensive goods.
  • how Goldilock Pricing helps a company, like Starbucks and Harvey Norman, sell more of a middle tiered product as it helps customers make decisions to buy.
  • how Starbucks found the that most of their customers have inelastic demand and decided to increase prices despite a recession in the US.
  • how the internet has changed the pricing model by offering freemium products and services and 30-Day money back guarantees.
  • if there are myths to pricing for companies.
  • how companies like Apple and Amazon price discriminate in order to capture market share and drive revenues upward.
  • how more and more companies are adopting dynamic pricing when selling into different markets.
  • the education pricing model in Ireland, Australia and the US.
  • about MOOCs and how it could have an impact on the future education model.
  • about Gaelic Football and how its players do not get paid unlike other sports.
  • how football games are using dynamic pricing models to charge for tickets based on opposition and weather.
  • that a 1% improvement in price leads to a 10% improvement in operating profit.
  • about the Banksy Experiment in New York where many passers-by failed to pick up an original for $60 that would otherwise fetch for $10,000 in an auction house.
  • how classical violinist Joshua Bell earned $26 in tips playing his $3.5 million violin but played to a packed audience for $100 per ticket the night before.
  • the 2 Golden Rules to Pricing.
  • about the ‘Pay What You Want’ model as followed by Radiohead and Jon Bon Jovi’s Soul Kitchen.

Economics:

In this interview, Jon mentions and discusses: pricing, the Invisible Hand, behavioral economics, heuristics, anchoring effects, framing, Extremeness Aversion, Goldilocks Pricing, demand, elasticity, elastic demand, inelastic demand, pricing architecture, consumer surplus, monopoly, price discrimination, dynamic pricing, marginal pricing and behavioral economics.

Economists:

In this interview, Jon mentions and discusses: Adam Smith, Dan Ariely, John H. Cochrane and Paul Samuelson.

Influencers:

Behavioral economists and marketers.

Quotes by Jon Manning in Episode 045 of the Economic Rockstar Podcast:

What they teach you in economics about pricing is true in theory but it’s irrelevant in practice – Jon Manning

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I know why there is interest in price elasticity but I sort of think it’s a bit like the abominable snowman – Jon Manning.

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There’s no formula to calculate the consumer surplus. You hear a lot of economists talk about the consumer surplus, which in the business community is known as leaving money on the table – Jon Manning.

There’s very few revolutionary monopolies around these days – Jon Manning.

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There’s one thing that’s not a myth and that is you get what you pay for – Jon Manning.

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The 2 Golden Rules to Pricing:

Rule #1: All value is subjective.

Value is in the eye of the customer. No matter what price you put onto something, at the end of the day, the customer is the single point of failure and if they don’t see value at the price you’ve attached to the product, they’re not going to buy. The ‘Pay What You Want’ pricing model is the purest form of value-based pricing since the customer can decide to pay for the product or service by attaching a value to it.

Rule #2: All value is contextual.

By placing a product or service in a certain context, people’s perceptions of its value change. A product placed in a high-end, up-market setting is more likely to command a higher price, whereas the exact same product placed in a low value setting or environment may only demand a smaller price. Joshua Bell and Banksy showed this golden rule of pricing in their experiments.

Companies Mentioned in this Episode Regarding their Pricing Methods:

Ryanair, EasyJet, Amazon, Apple, Uber, Starbucks, Harvey Norman and Netflix.

Recommended Books:

Internet Resource:

Where to Find Jon Manning:

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