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Whom Do We Trust?

“The United States is enduring an unprecedented crisis of trust,” writes Richard Edelman, summarizing the results of this year’s Edelman Trust Barometer. “The root cause of this fall is the lack of objective facts and rational discourse.” However, trust in one group has inched up: employers. “There’s an interest for businesses to solve larger problems for society,” says Kim Hart of Axios.

What's the government worth?

"Government shutdown follies feed an ideologically loaded narrative that government is hopelessly incompetent and can never be counted on to do much that is useful,” writes Washington Post columnist E.J. Dionne. Despite the recent kerfuffle, Dionne argues that the public sector is critical and competent. As evidence he points to an underappreciated government success in “keeping capitalism from flying off the rails.”

Is There an App for Ending Poverty?

Can Silicon Valley deal with society’s intractable problems? Apps and other tech tools can be invaluable to low-income populations, yet existing business models have produced little innovation. Fast Company examines startups breaking Silicon Valley’s rules to do better fighting poverty.

Understanding Economic Inequality

We’re thinking about economic inequality all wrong, says Nobel-laureate Angus Deaton. Economic inequality emerges from both positive processes, like innovation and invention, and negative ones, like monopolistic behavior and badly designed policies. “Inequality is not the same thing as unfairness; and, to my mind, it is the latter that has incited so much political turmoil in the rich world today,” Deaton told Quartz.

Who Benefits?

Whatever one thinks of the politics of the Republican tax plan, it seems certain that the major changes in individual and business tax rates will create plenty of work for accountants and tax lawyers. Washington Post columnist Catherine Rampell writes, “Congress has once again taken pity upon the nation’s poor accountants and guaranteed them all lifetime employment.”

Upending Economic Thinking

Richard Thaler won this year’s Nobel Memorial Prize in Economic Sciences for his foundational contributions to behavioral economics. The key insight of the growing field is that contrary to traditional economic models, humans don't always act rationally.

That seemingly self-evident insight has transformed economic thought, though not easily. Robert Shiller, also a Nobel winner and a pioneer in behavioral economics, wrote after Thaler's win that “there has been antagonism—and even what appeared to be real animus—toward our research agenda.”

In conversation with the New York Times, Thaler explained how seemingly silly things can lead to serious insights on sunk costs, supply and demand, and choice architecture that improved economic theory and had real-world policy implications.

Back in 2009, Yale Insights talked with Thaler about how governments and businesses can use “nudges” to encourage better outcomes.

After the Equifax Breach

Is there any way past the cycles of breach and contrition? Equifax let hackers steal the private financial and personal details of 143 million Americans by leaving a hole in its system unpatched for months.

Bryce Covert’s New York Times op-ed notes, “We are not the customers of credit reporting companies, but the product.” In her view, there shouldn’t be a private credit rating industry. “Given how poorly they operate and how little incentive their business model gives them to improve, their duties should be handed over to public institutions.”

Even such a significant shift would not be a fix alone, according to experts consulted by Knowledge@Wharton. They call for laws clarifying the obligations of companies, harsher penalties for firms that don’t fulfill their duties, and a defined role for the military in securing our digital borders.

What about those who were exposed in the breach? Ron Lieber of the New York Times has been fielding reader questions and explaining what to do next ("freeze" your credit file at all three major agencies, when you can get through.) He has been struck by a sense of "helplessness" among consumers—"the recognition that we are at the mercy of an industry that makes money off our data, treats us with disdain and answers to no one."

The Lifecycle of a Crisis

With Houston’s sprawl submerged under its third “500-year flood” since 2015, Texas governor Greg Abbott predicted years of recovery and “a new and different normal for the entire region.”

“Crisis has a lifecycle,” noted a white paper from Deloitte, “and so does crisis management.” The most heroic actions often happen on a sunny day in a conference room, long before any crisis, as responsibilities and redundancies are established in scenario planning sessions. And the hard work of dealing with impacts from natural disasters persists long after the public’s attention has moved elsewhere.

But the best-laid plans don’t always lead to the intended result. Michael Grunwald, writing in Politco, points out that the National Flood Insurance Program was created in 1968 to discourage building in flood-prone areas. Powerful lobbying morphed it into an expensive subsidy that underwrites actuarily-unviable development despite decades of warnings from researchers.

Before the Flood

Climate change is creating new problems and difficult choices everywhere, but coastal zones are particularly susceptible because of the double whammy of sea-level rise and increasingly intense storms.

In the U.S., the National Flood Insurance Program is supposed to keep flood insurance affordable while staying fiscally solvent. Climate change is making that mandate all but impossible. The Washington Post examines the politically fraught challenges of getting incentives right for a program that is $25 billion in debt and still underwriting properties that have filed as many as 40 claims.

Meanwhile, a century-old cranberry bog in Massachusetts is being re-wilded as an experiment in creating “natural infrastructure” that can buffer coastal regions, according to the New York Times.

For the Philippines, an archipelagic nation in the typhoon belt of the Pacific, the challenges are critical. Kenneth Hartigan-Go of the Asian Institute of Management has an overview in Global Network Perspectives.

Winner Take All?

Nine retail brands have declared bankruptcy this year and 3,000 stores have closed. Meanwhile, Amazon is moving into bricks and mortar—opening bookstores, experimenting with convenience stores that don’t need cashiers, and most recently buying Whole Foods.

The New York Times points to an economy-wide fight for scale as markets increasingly favor a few big winners. Research finds these “superstar firms” pay more, explaining much of the increasing pay inequality.

That’s great for those on the winning teams, but Stanford’s Nicholas Bloom writes in the Harvard Business Review, “Workers outside this charmed circle experience something quite different.”

Yale SOM’s Lisa Kahn found another explanation of divergence between companies: as many tasks are computerized, the more successful companies are the ones that learn to complement technology with uniquely human capabilities.