One might not think that Boeing and the Minneapolis Police Department have much in common, but they do. Both had longstanding unseen negative issues that suddenly exploded into public scandal and internal crisis. Both face difficult and uncertain recoveries.
How each came to these points and how each might recover don’t involve pure economics any more than pure psychology or sociology. Yet all three disciplines study actions and interactions of human beings with insights that bear on current headline problems. What answers does economics provide? Economics studies how humans allocate finite resources to meet their needs — as individuals, in businesses and other organizations, or through government.
Introductory econ study assumes a simplified model of real life: Choices are made by individuals; decisions of organizations are assumed to directly reflect interests of stakeholders; those of governments reflect the needs of citizens. But these assumptions seldom hold fully true in real life, where randomness can force choices that deviate from academic models. So what about real life? Let’s start with Boeing.
Forty years ago, when three U.S. companies manufactured jet airliners, Boeing was an undisputed world leader.
Its finances were sound even as competitors Douglas and Lockheed struggled. Boeing’s manufacturing was world-leading with excellent quality controls. Now, Boeing is in crisis.
Perhaps this happened gradually, and largely unseen, as a new generation of managem.
