Knowing and Making

From a conversation with Richard Thinks yesterday: Thanks for the link today...looking back through the emails I notice we had another conversation about transparency a few months ago. I think the idea of publishing standardised information about financial products is one of the strongest part of Osborne's proposals - but the way it's sold as enabling "price comparison websites" is a bit misleading. One of the oddities about the price comparison market (and I wrote, with a colleague, the first version of confused.com so I have a bit of inside knowledge) is that they make their profits precisely because the providers do not offer their products in a standardised way. Instead, everyone (deliberately) distinguishes their products in many different dimensions so that they cannot be directly compared. Ever tried to figure out which mobile phone deal is the cheapest? This is why those sites are so popular. If everyone did publish their terms and conditions in a common mach...

According to Robert Peston , European corporations are going to have to repay about $1 trillion of debt in 2009. $800 billion is owed by financial companies and $200 billion by non-financial, which provides some reassurance - no doubt much of the financial debt is owed to other financial companies and some will net out. But without further huge government guarantees (and we might get them anyway) I think we are going to have to restructure some businesses to operate on less capital. Here is a list of ways in which they may be able to do that: Change in revenue and pricing models. One example is a method called structured pricing , where payment for goods and services is made after the fact based on the value they create. I have developed a model which shows that this can reduce the capital requirements of the economy by around 7-10%; I will be posting a more detailed paper on this within the next few weeks. Of course there are many other examples of how to do this, but it is definitely...

Thanks to Dani Rodrik for pointing out this thoughtful and original analysis on transparency by Steve Waldman. Intellectual Business  is making some proposals on the subject which go further than Steve is willing to, but he has given an excellent and quirky example of how to analyse the potential gains or losses from transparency.