Is Lean Manufacturing a practical application of Austrian economic theory?
Having followed Austrian economics and especially the audio lectures for a couple of years I was wondering what the relationship with lean manufacturing and its underlying ideas would be. My interest stems from being a consultant/trainer for lean thinking and lean manufacturing myself. What actually triggered the question for the relationship is the importance of value in both Austrian economics and lean manufacturing as well some other issues that may somehow interface.
The main principles of lean manufacturing / lean thinking are:
Here are other possible relationship or fields common interest between Lean Thinking and Austrian Economics: * Value Theories - Value as defined by customer * Lean enterprise and spontaneous organisation around a value stream. * The lean enterprise and the theory of the firm. * Lean Approaches versus bureaucratic approaches * Lean and business cycles.
I am more then willing to investigage this further and provide more information on the matter and would like to hear more comments on this. Of course I would like to write articles on this and publish them on my web site on lean manufacturing citing information I got here , too
The free market is generally defined by an absense of government intervention into the market.
Entrepreneurship is not an exact science. It is an art. There are no exact methods which will guarantee success. In sciences, there are exact solutions to problems.
I never said that technical knowledge and soft skills guarantee success, just that they have more to do with lean manufacturing than Austrian economics does.
A pure fiat currency can only come about through government intervention. So sound money falls into the category of non-intervention into the market so its not necesarry to spell out.
The law of supply states that the price of a good will fall or remain the same if the supply of that good increases, and that it will rise or remain the same if the supply of the good diminshes, all other things being equal. This is an exact theorem. It holds true in all cases and at all times. So, you're simply wrong about economic science being exact.
Also, I skimed through your book. You know alot about lean manufacturing, but you only have an elementary understanding of economics. You should give Man, Economy, and State a good read. Then rewrite your book.
I never said that economic science was exact. Please read my posts again. My point was that it is not, but neither is lean. In my first post I wrote "" Economics is an art form and not an exact science,and the same with lean. Anyone that tries to tell you that Economics is an exact science is a snake oil salesmen, just like many lean consultants.'' then in a later post ""Lean is not an exact science, Economics, and Austrian Economics is not an exact science either from what I have read. Human action, can not be measured or predicted as an exact science.""
So I am not sure how you came about this conclusion. No worries.
You are correct in regards to my economic knowledge as a formal education. However I do run an international manufacturing company, so I have alot of experience in the real world concerning economic activity and turning around failing companies. I have read a few economic books and honestly I find them basically blah, blah. I did like Human Action though. Fuzzy sciences like economics or psychiatry bore me, since the education system can be vey one sided in their views, and then they dont have the science prove their ideas 100%. Engineering, Law. Those studies are straight forward similar to running a business. I doubt many economic professors can run a manufacturing business. Similar to lean consultants. They know how to talk, but ask them to show the actual bottom line results and they run away.
I will read the book though and I appreciate the advice.
The goal of my book was just to try and make the lean community look into Austrian Economics. Most of the lean leaders are college professors, or have govt connections, so they support bailouts, and the current system, and dont understand how the economic system creates waste. I still regard Henry Ford's book "Today and Tomorrow" as my guide on these issues. He ran a company. The company that had the greatest influence in how we live today. His idea of wage motive was compelling. I dont want to dive into complex economic theory in the book. I only wanted to hit the high points. I dont see the point of it. You are free to make comments on the websites or point out flaws. Then I might update. Its a lean book at this stage. the updates will be written by my customers. Its a hobby, and a pesonal mission. I am not selling it for profit. So far its doing quite well. I am getting alot of hits on the website.
Hope to see you there
John
Sorry. Typing error on my part. Yes, you are arguing that it is not an exact science and I am arguning that it is. That's my bad. Sorry about that.
I don't have a formal education in economics either. I have a BEng. in Manufacturing Engineering. So I am familiar with lean concepts, though its been a while. I am still a student in Austrian Economics, though I have read over 15000 pages of literature on or related to Austrian Economics. I am somewhat puzzled that you have read human human action and regard economics to be a fuzzy science. Mises is quite thourough and rigorous. He explains how action is different from animal behaviour, how we concieve of and understand action, what the various necessary categories that precede action are, and then goes on to reconstruct the body of classical economic laws and theorems from theses categories, adding several of his own innovations along the way.
It is not as though the law of returns or law of marginal utility can be fuzzy laws. They simply always hold true because they are implied by action.
You will probably see me on your site.
John Podlasek: Then how to you justify, Porche?, Virgin Airlines, Polo, and many other companies that sell products at much higher costs then competition. Lean is not so easily defined by one business model. You produce only what the customer wants, and if you keep getting customers then you are doing something right. The worst thing you can do in business is try to copy some other business. It means you have alread lost the battle. Toyota laughs at all these lean copy cats. lean is not only about productivity, but if the siesta works, why not? John
Then how to you justify, Porche?, Virgin Airlines, Polo, and many other companies that sell products at much higher costs then competition. Lean is not so easily defined by one business model.
You produce only what the customer wants, and if you keep getting customers then you are doing something right.
The worst thing you can do in business is try to copy some other business. It means you have alread lost the battle. Toyota laughs at all these lean copy cats.
lean is not only about productivity, but if the siesta works, why not?
Sorry, but I don't get this thread at all. Are Porsche, Virgin, and Polo applying lean (as opposed to fat) manufacturing? Isn't "lean manufacturing" redundant like harmonious singing, fast racing, or reasonable thinking? What business wouldn't prefer the leanest (cheapest) manufacturing yielding the largest amounts of product sold at highest prices possible? Are there any proponents of fat manufacturing out there?
Here actually you are stating that economics has exact solutions.
You need to be consistent.
Sorry, but I don't get this thread at all. Are Porsche, Virgin, and Polo applying lean (as opposed to fat) manufacturing? Isn't "lean manufacturing" redundant like harmonious singing, fast racing, or reasonable thinking? What business wouldn't prefer the leanest (cheapest) manufacturing yielding the largest amounts of product sold at highest prices possible? Are there any proponents of fatmanufacturing out there?
Lean is about results. Lean in its current model is not the answer to every business model. One size does not fit all.
In fact I prefer to have the leanest (most efficient & highest quality) yeilding exactly the amount of product to meet customer orders, at the highest price possible. However the highest price possble concept is not lean, and is a function of Keynesian economics.
Stephen, Ok I see you straightened it out. Would be glad to have you on the site.
Stephen
The reason that economics to me is a fuzzy science is just based on the world as it is. We dont have Austrian economics, so it is just a theory that can not be proved. We can look back to pre-1913, and use that time as a reference, and I try to do that in my book, but to say its an exact science, when it can not be actually measured in any way, just makes it a theory.
What you state about laws of returns or law or marginal utility I can agree with, but those are just components of the larger picture.I am sure your knowledge in this area far exceeds mine, so I would not start to debate these topics with you.
I like the theory. It has merit in my opinion, but the fact of the matter is that we have evolved into this current sitution due to Human Action. The Constitution or, free market, depends on moral people to function properly. We are not a moral people. We dont elect moral people. I have no problem with self interest, but immoral people have self interests as well. The Free market depends on creative destruction to succeed. People dont like creative destruction. I wish we were a moral people, but most people are sheep and like to be farmed. Make their life simple, with little complications. Austrian economics and the free market take effort, responsibility and honestly we have moved back on the evolutionary scale. Human Action is not a predictive science. If it is then we have to accept that Human Action brought us to this point.
Henry Ford warned us all abou this in his book "Today and Tomorrow". A must read for all wanting to understand the roots of lean. The "Wild Wheel", which can be purchased here at Mises, also is a great book for those wanting to understand how lean in its pure form was destroyed by the banking elite.
Most important I am willing to learn, and I appreciate any constructive critcism, or suggestions, or ideas. This is the way to move forward
John Podlasek:Lean is about results.
And manufacturing/business (lean or otherwise) in general isn't?
In fact I prefer to have the leanest (most efficient & highest quality) yeilding exactly the amount of product to meet customer orders, at the highest price possible.
Who doesn't? Fat manufacturers?
However the highest price possble concept is not lean, and is a function of Keynesian economics.
So non-Keynesians prefer to sell their wares below the highest price possible?
John Podlasek:lean manufacturing is austrian economics.
Thanks for the reply John, I am amazed by the Tsunami of responses we just got! John Podlasek:The reason lean fails to make any headway is that we do not have an actual free market as described by Mises.
John Podlasek:The reason lean fails to make any headway is that we do not have an actual free market as described by Mises.
I was thinking to bring that into my course (under the module for theory and historical roots of lean) discussing amongst others Adam Smith, Wealth of nations, removal of political obstacles to the flow of goods etc. John Podlasek:Please contact me if you want to try and work together on this. My goal is to start a lean economics conference in which lean leaders and free market leaders come together to promote these ideas.
John Podlasek:Please contact me if you want to try and work together on this. My goal is to start a lean economics conference in which lean leaders and free market leaders come together to promote these ideas.
That sounds like a great idea. I am droping you an email. Surely more could be achieve, if the lean enterprise institute, mises institute etc. would team up.
If you have articles or want to promote the conference, I am more the willing to publish that on my lean manufacturing web site.
z1235:Sorry, but I don't get this thread at all. Are Porsche, Virgin, and Polo applying lean (as opposed to fat) manufacturing? Isn't "lean manufacturing" redundant like harmonious singing, fast racing, or reasonable thinking?... Are there any proponents of fat manufacturing out there?
Torsten: If it would be redundant, how would you explain for example accounting practices in evaluating your business based on principles that aren't lean (With the common misconceptions relating to mass production and a fat asset base). Just have a look into factories, workshops, offices and I can assure you they aren't lean with value adding activities being far less then 5 percent.
If it would be redundant, how would you explain for example accounting practices in evaluating your business based on principles that aren't lean (With the common misconceptions relating to mass production and a fat asset base). Just have a look into factories, workshops, offices and I can assure you they aren't lean with value adding activities being far less then 5 percent.
I meant the "lean" part of "lean manufacturing" is redundant. Incurring expenditures (costs) that are not justified toward better or more products (i.e. your "value adding activities") is not "not lean" or "fat" -- it's plain ignorant or stupid. Every business targets the "leanest" point of its cost/benefit optimization curve.
z1235:Every business targets the "leanest" point of its cost/benefit optimization curve... I meant the "lean" part of "lean manufacturing" is redundant.
I guess you would have to tell what exactly is fat manufacturing. I have am not up to date with that.
yes non Keynesians do, if you look back to the time when the US was the closest to an Austrian Economy, a man name Henry Ford evolved and created the greatest lean company in world history and his idea of wage motive over profit motive is buried by Keynisian and banking interests.
Henry Ford stated, "The real progress of our company dates from 1914, when we raised the minimum wage from somewhat more that two dollars to a flat five dollars a day, for then we increased the buying power of our own people, and they increased the buying power of other people, and so on and so on. It is this thought of enlarging buying power by paying high wages and selling at low prices which is behind the prosperity of this county.
This is in direct conflict with the popular idea of "Profit Motive" - (this is still the prevailing system in today's society). On "Profit Motive", Ford stated, "we have discovered a new motive for industry and abolished the meaningless terms "capital," "labor," and "public." "For many years we have heard the phrase "profit motive," which meant that someone called a capitalist provided tools and machinery, employed men - that is, labor - at the least possible wage, and then manufactured goods and sold them to some strange collection of people known as the "public." The capitalist sold to this public at the highest price he could get and pocketed his profits. Apparently, the public came out of the air and also got its money out of the air, and it had to be protected from the profiteering capitalist. The workman also had to be protected, and someone invented the "living wage" notion. All of which grows out of a complete misconception of the entire industrial process."
"It is true that petty business can work on the capital-labor-public mistake, but big business cannot, nor can little business grow big on the theory that it can grind down its employees. The plain fact is that the public which buys from you does not come from nowhere. The owner, the employees, and the buying public are all one and the same, and unless industry can so manage itself to keep wages high and prices low, its destroys itself, for otherwise it limits the number of its customers."
"Since the public is the business, the primary obligation of business is to the public. Those who work for and with the business are part of the public. And this settles on fundamental corporate policy - to whom shall the benefits of improvements accrue?
Suppose an industry, through efficiency and approved service, is able to reduce costs to the customer. It gives the benefits of its improvements to its customers. If an article costs a dollar less to produce than formerly, a dollar comes off the price charged to the consumer. By that process more people are able to buy. More buyers make a still larger business. A larger business still further reduces costs, which in turn increases the business still more."
The banks shut Ford down.
read my book at www.leaneconomics.org