Peter Principle. An illustration visualizing the Peter principle The Peter Principle is a concept in management theory in which the selection of a candidate for a position is based on the candidate's performance in his or her current role rather than on abilities relevant to the intended role. Thus, employees only stop being promoted once they can no longer perform effectively, and "managers rise to the level of their incompetence.
" The principle is named after Laurence J. Peter who co-authored with Raymond Hull the humorous 1969 book The Peter Principle: Why Things Always Go Wrong. Overview[edit] The Peter Principle is a special case of a ubiquitous observation: Anything that works will be used in progressively more challenging applications until it fails. Peter suggests that "[i]n time, every post tends to be occupied by an employee who is incompetent to carry out its duties"[2] and that "work is accomplished by those employees who have not yet reached their level of incompetence.
" Responses[edit] Video. Conversations with History: John Kenneth Galbraith. [World on Fire. Interview - Economist Dean Baker. Galbraith, AoU, Ep3 1/6: The Massive Dissent of Karl Marx. New Keynesian economics. New Keynesian economics is a school of contemporary macroeconomics that strives to provide microeconomic foundations for Keynesian economics.
It developed partly as a response to criticisms of Keynesian macroeconomics by adherents of New Classical macroeconomics. Origins[edit] Significant early contributions to New Keynesian theory were compiled in 1991 by editors N. Gregory Mankiw and David Romer in New Keynesian Economics, volumes 1 and 2.[2] The papers in these volumes focused mostly on microfoundations, that is, microeconomic ingredients that could produce Keynesian macroeconomic effects, and did not yet attempt to construct complete macroeconomic models. Microfoundations of price stickiness[edit] As Mankiw describes, a firm that lowers its prices because of a decrease in the money supply will be raising the real income of the customers of that product. Other sources of price stickiness include: Other microeconomic ingredients[edit] New Keynesian DSGE models[edit] See also[edit]
Innovation economics. Innovation economics is a growing economic doctrine that reformulates conventional economics theory so that knowledge, technology, entrepreneurship, and innovation are positioned at the center of the model rather than seen as independent forces that are largely unaffected by policy. Innovation economics is based on two fundamental tenets: that the central goal of economic policy should be to spur higher productivity through greater innovation, and that markets relying on input resources and price signals alone will not always be as effective in spurring higher productivity, and thereby economic growth.
This is in contrast to the two other conventional economic doctrines, neoclassical economics and Keynesian economics. Historical origins[edit] If Adam Smith is the patron saint of classical economics and Keynes of Keynesian economics, it is Joseph Schumpeter who is the patron saint of innovation economics, especially with his classic 1942 book Capitalism, Socialism and Democracy.