Friday, November 18, 2011

Matthew Effect

Writing in his weekly column in the Catholic Times, on faith and finances, the bishop of Suwon explores the meaning of the Matthew Effect. A concept introduced some 40 years ago by a professor at Columbia, it is taken from the Gospel of St. Matthew: "For anyone who has will be given more, and he will have more than enough; but from anyone who has not,even what he has will be taken away."(Matt. 13:12).

The Matthew Effect can be found in many areas of life. In school those who have difficulty in reading will fall behind their classmates. Those who can read will read to learn while the others will be learning how to read. This will mean that they will fall behind as the others advance, and is obviously seen in many other areas of life. In the world of finance, we say the poor get poorer and the rich richer. Sadly we are hearing of this happening in China.

Another term similar in meaning to the Matthew Effect is 'cumulative advantage', meaning that those who have a head start because of education, money or place in society will advance quicker. This helps to understand the polarization we see in society today. Inventions and discovering new techniques and ways of doing things will entitle the person to get out in front with this vested interest, and gain superiority in the field. Apple's iPhone is one example out of many. Apple very quickly was listed number 8th in the world, superior in their field. They were superior to their competitors and working in partnership with others enabled these other companies to grow.
However, there are few of these types in big business. Most will try to monopolize the market and do all that is necessary to press their advantage, often putting smaller competitors out of business. This we saw recently in Korea when a big company entered the fried chicken business; with the advantage of money, personnel and cheaper prices, they were putting the small-business people out of work. This was going against business morality: an example of the Matthew Effect.

It is necessary for us in our globalized world of escalating economic development to see what is happening with eyes sharpened by our Christian values. We need to analyze the signs of the times and discern wisely about the fiercely competitive  world of commerce we live in.

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