IIT Bombay and The Institute for New Economic Thinking (IMET), New York are launching a new narrative in Economics "Samvaad" which embodies the spirit of creative thinking and open dialogue, breaking intellectual barriers to embrace new approaches to economics focussed on solution-based impact for society.
The inaugural lecture will be held on January 14, 2020. Details of the lecture follows:
Speaker: Prof. Oliver Hart (Nobel Laureate in Economics), The Lewis P. and Linda L. Geyser University Professor, Harvard University
Title: A New Approach to Contracts
Abstract: When Dell originally selected FedEx, in 2005, to handle all aspects of its hardware return-and-repair process, the companies drew up a traditional supplier contract. The 100-page- plus document was filled with “supplier shall” statements that detailed FedEx’s obligations and outlined dozens of metrics for how Dell would measure success. Unfortunately, it did not work. By the eighth year, the parties were at the breaking point. Each lacked trust and confidence in the other, yet neither could afford to end the relationship.
This story is not unique. We argue that the remedy is to adopt a totally different kind of arrangement: a formal relational contract that specifies mutual goals and establishes governance structures to keep the parties’ expectations and interests aligned over the long term. Designed from the outset to foster trust and collaboration, this legally enforceable contract is especially useful for highly complex relationships in which it is impossible to predict every what-if scenario. These include complicated outsourcing and purchasing arrangements, strategic alliances, joint ventures, franchises, public-private partnerships, major construction projects, and collective bargaining agreements. A growing number of large organizations—such as the Canadian government, Dell, Intel, AstraZeneca, and the Swedish telecommunications firm Telia—are successfully using this approach.
About the Speaker: Prof. Oliver Hart is currently the Lewis P. and Linda L. Geyser University Professor at Harvard University, where he has taught since 1993. He is the 2016 co-recipient of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, a Fellow of the Econometric Society, the American Academy of Arts and Sciences, th British Academy, and the American Finance Association, a Distinguished Fellow of the American Academy of Arts and Sciences, the British Academy, and the American Finance Association, a Distinguished Fellow of the American Economic Association, a member of the National Academy of Sciences, President of the American Law and Economics Association and a Vice President of the American Economic Association.