Introducing the Policy Bites series
It’s easy to think of business and academia as entirely separate and unrelated. Two worlds, each doing their own thing and never meeting. Yet these worlds come together in everyday life more than we might expect. Academic ideas and terminology creep out into the wider world and into business culture. We hear them in meetings, in water cooler conversations and in social catchups.
BankEdge has decided to run an occasional series, delving into terminology from public policy theory, academic economics and political science. Each ‘Policy Bite’ will take a term like perfect competition, ‘nudge’, or transaction costs: we’ll explain it, give examples of where we see it in our normal business lives and show how it helps us understand our work at a deeper level.
The central focus of the Policy Bites series will always be what it means for business and, in particular, what it means for the relationship between a business and its bank.
The theory in bank margins
The bank-margin negotiation meeting is a complex and fascinating interaction spanning numerous economic, political, and behavioural theories, from asymmetric information to rational choice to bounded rationality.
Understanding and applying these academic ideas can help those of us in business understand the world around us better, the way people and organisations operate, and some of the problems we face in business.
In short, understanding the theory behind everyday interactions can offer a real competitive advantage.
In producing the Policy Bites series, BankEdge is partnering with Dr Joff Lelliott, an academic working in political science, public policy and political economy. Before returning to academia in 2011, Joff spent five years working in Business Banking and then General Insurance. This series is a continuation of discussions that began over coffee after a chance meeting at a toddler-time group around 7 years ago. We are looking forward to sharing our combined learnings on topics at the intersection of academia and banking for your benefit.
What’s up next?
In the first of the Policy Bites series, we look at Asymmetric Information: what happens when one party to a transaction has far more information than the other, and what can be done to level the playing field (a classic problem in negotiating with a bank). We’ll also be looking at Transaction Costs: the costs we’d rather not pay when we’re trying to achieve something (for example, paying lawyers to look over contracts or hard to quantify costs when refinancing).
- Behavioural economics – how it helps us understand everyday business behaviour,
- Perfect competition – why it is hard to find examples in the modern world and why it isn’t necessarily ideal anyway,
- Rational choice – how it can and can’t explain business and banking dynamics,
- How we got here: implementation of modern economic theory – walk through of the significant political figures that adopted new models into their economies; Reagan, Thatcher, Hawke/Keating and Howard.
- Bounded rationality – how it helps us understand our limitations and how to find strategies to compensate,
- Choice overload – why it may limit our ability to make the best choices between products.
There will be many others along the way covering a broad range of topics. But always aiming to be relevant to your business and aiming to help you better understand your relationship with your bank.