The Law of the Jungle

Is economics a game with no rules?

In college I was introduced to a game called “Jungleball.” The first rule of Jungleball is that there are no rules. The second rule is to disregard the first rule. Sometimes it would take the form of a volleyball game, where some players got onto their teammates’ shoulders to spike the ball, or where the server’s team would try to tackle their opponents from below the net. Other times it would be a soccer/football game that involved passing, throwing, kicking, tripping, and wrestling.

But economics isn’t Jungleball. When I go to an airport, I need my flights to arrive and leave on schedule. If I buy a coconut, I don’t expect it to be rotten inside. There are two forces that work to keep vendors on the straight-and-narrow. One is the threat of prosecution. Clearly, if you sell defective goods or make false claims for your services you can be charged with fraud. Even the most ardent libertarian will admit that enforcing contracts is a key function of the State.

But the other is even more powerful: reputation. In an era of Twitter feeds and Yelp reviews, no good or bad deed will go unrecognized. While the negative power a mob must be recognized, in general the increased information and transparency that come from Amazon reviews and other social media provide more accountability than a fleet of FDA inspectors. Let the seller beware!

By | 2012-03-20T03:09:59+00:00 March 20th, 2012|Economics, Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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