A really relevant lead piece on the relevance of initial research and theorisation. But Robert's main point is that even the most modern enterprises have something to learn from the academics.
Auctions. Consider first the increasing use of auctions, which have a distinguished history in the development of economics. In the 1900s, French mathematician-economist Leon Walras envisioned prices in a market economy being set by an auctioneer (since known as the “Walrasian auctioneer”) conducting continuous auctions for all kinds of commodities.
It may be tempting to think that the Walrasian auction is just a theoretical construct, useful primarily in a classroom setting for thinking about markets, and in the real world, only for scarce commodities or unique items, of the kind put up for sale by Sotheby’s or Christies. But that would be a mistake.
The late Julian Simon (better known, perhaps, for his optimistic views about population growth and resource abundance) thought up the idea for having airlines auction off overbooked seats and persuaded the Civil Aeronautics Board, which used to regulate airlines fares and entry, to permit the idea in the 1970s. Economist Ronald Coase proposed auctioning off segments of the electromagnetic spectrum in late 1950s, a policy idea that was later adopted in the 1990s. Many economists since have been hired by the U.S. and other governments to help them design these often complicated auctions and by telecommunications companies trying to figure out the best strategies for bidding.
Two well-known companies have also made auctions famous, and economists have played central roles in the success of each. Google generates most of its revenue through an auction-based system of selling ads that was developed by two engineers but validated by its chief economist, Hal Varian, a former consultant to the company who was also the first Dean of the School of Information Sciences at the University of California at Berkeley. Varian has since overseen the hiring of a large corps of statisticians and economists who developed other innovations for the company, notably Google Trends, which can be used to track the number of search terms that can be helpful in predicting various real world events (such as the progress of the flu or forthcoming official unemployment statistics).
