No Required Ethics Course at Chicago-Booth
| Peter Klein |
Bucking the trend, the Chicago-Booth MBA program will not offer required courses in business ethics (via Cliff). The school “has no set standard for ethical case studies used in the classroom,” according to Executive Director of Faculty Services Lisa Messaglia,”but leaves it up to faculty, instead.”
[T]he business school is disciplined-based, meaning that classes are divided by disciplines such as sociology or psychology, rather than by industries. As a result, she said, professors may use different examples in their lectures, but Chicago Booth “[doesn’t] change required classes based on trends in the economy.”
I’m not keen on the way ethics is taught in most business schools so I’m sympathetic to the Chicago position. Some previous O&M posts on teaching ethics are here, here, here, here, here, and here.
1 comment 10 November 2009
The Guest Bloggers Are Dead; Long Live the Guest Blogger!
| Peter Klein |
Today we say thanks, and farewell, to guest bloggers Russ Coff and Glenn MacDonald for their thoughtful and provocative posts (archived here and here), and we welcome Craig Pirrong as our newest guest blogger. Craig is Professor of Finance and Energy Markets Director of the Global Energy Management Institute at the Bauer College of Business, University of Houston. He has also taught at Michigan, Washington University, and Chicago (where he got his PhD in 1987, working under Lester Telser). Craig’s work lies at the border of financial economics and industrial organization, and he has written extensively on financial and commodity markets, derivatives, energy, and the organization of exchange institutions, among other topics. Transaction cost economists will remember his influential 1993 paper on bulk shipping, which introduced the concept of “temporal specificity,” and his 1995 paper on commodity exchanges. He also blogs at Streetwise Professor.
Thanks again, Russ and Glenn, and welcome, Craig!
Add comment 9 November 2009
CFP: International Perspectives on Corporate Governance
| Peter Klein |
Posted on behalf of Alex Padilla:
CALL FOR PAPERS
Journal of Private Enterprise &
Association for Private Enterprise EducationSymposium on Corporate Governance: International Perspectives
Guest Editors: Alexandre Padilla, Nishat Abbasi, and Pierre Garello
Metropolitan State College of Denver & University Paul CézanneAssociation for Private Enterprise Education International Conference
Las Vegas, Nevada, April 11-13, 2010The Journal of Private Enterprise in collaboration with the Association for Private Enterprise Education, The School of Business at the Metropolitan State College of Denver, and the Centre d’Analyse Economique of the Université Paul Cézanne invite you to submit a proposal to present a paper at the Association for Private Enterprise Education International Conference. Proposals are due by November 20th. We want to have two sessions: one addressing issues of Corporate Governance in the America and another one addressing issues of Corporate Governance in Europe, Asia, Africa. We welcome papers written from an accounting, economics, finance, historical, philosophical, and political science perspectives. (more…)
Add comment 8 November 2009
Coasean Humor
| Peter Klein |
The grad students in my department recently cleaned up their student lounge. Some wag, remembering a line from my course — Coase’s famous dismissal of the “old” institutional economists — tagged a stack of papers thusly:
1 comment 7 November 2009
Citation Format Pet Peeve
| Peter Klein |
Many thanks to June Flanders for expressing, on the HET listserv, one of my own pet peeves about citation formats: using the reprint date, rather than the original date, in the in-text citation:
At the risk of sounding school-marmerish I should like to raise an issue that has been bothering me for a long time, and which reached a crisis point this afternoon. . . .
The issue is the dating of citations in papers and books on the basis of their most recent publication. As a result of this, generations of students undoubtedly think that Ricardo wrote The High Price of Bullion in 1956, and Keynes wrote The General Theory in 1973, etc. What broke my camel’s back today was a citation in an NBER paper that cited “Tacitus, Cornelius (1996). The Annals of Imperial Rome. New York: Penguin.” Not every reader of that paper (though, of course, every reader of this letter) will know that this is off by some 2,000 years.
I prefer the simplest solution, namely putting “Smith (1776)” in the text and specifying the particular edition in the bibliography entry, e.g.:
Smith, Adam. 1776. An Inquiry Into the Nature and Causes of the Wealth of Nations. Indianapolis: Liberty Fund, 1981.
Some people like to write the in-text citation, and maybe the bibliography entry too, as “Smith ([1776] 1981),” but I find that cumbersome. In any case, putting the original publication date in the text lets the experienced reader know, immediately, what is being referred to. In my field everybody knows Smith (1776), Menger (1871), Coase (1937), Mises (1949), Porter (1980), etc. It’s a nuisance having to flip to the back to find that “Menger (1981)” is Menger’s Grundsätze (the NYU Press edition). While I’m reading the article or book in question, I don’t care if the writer was referring to the original hardbound edition or the paperback edition or the large-print edition or the books-on-tape edition or whatever. If I want to check page numbers, then I flip to the back to find out what edition was used, but otherwise I breeze right along. Simple enough?
1 comment 6 November 2009
CFP: “Institutions in Economic Thought”
| Peter Klein |
That’s the theme for the next meeting of the Charles Gide Association for the Study of Economic Thought (ACGEPE), to be held at the University of Paris Panthéon-Sorbonne, 27-29 May 2010. Steve Medema, Malcolm Rutherford, and O&M friend Claude Ménard are the keynote speakers. Proposal deadline is 27 November. Details here.
Add comment 5 November 2009
Teaching Large Classes
| Peter Klein |
Advice on teaching large introductory classes, from a Facebook friend of a Facebook friend:
Stick with the stories! Walter Heller made it all the way through introductory macro at Minnesota entirely on stories from his days in the Kennedy Administration. I don’t recall him actually mentioning the word macroeconomics for the entire quarter. The class was so large a woman choked in the back without anyone noticing.
2 comments 4 November 2009
The Limits of Antitrust Revisited
| Dick Langlois |
I also just returned from an interesting conference, this one at the Searle Center at Northwestern Law School. The topic was the 25th anniversary of Frank Easterbrook’s 1984 paper “The Limits of Antitrust.” Here’s the agenda. I don’t think the papers are all available online, but the plan is to publish them eventually.
Thursday, October 29th
Welcome and Introduction
Henry N. Butler, Executive Director, Searle Center on Law, Regulation and Economic Growth
Opening Remarks: “The Limits of Antitrust” and the Chicago School Tradition, George Priest, Yale Law School
Session One – Easterbrook on Errors, Fred S. McChesney, Class of 1967 James B. Haddad Professor of Law, Northwestern Law
Session Two – The Limits of Antitrust in the New Economy, Joshua D. Wright, George Mason University School of Law, and Geoffrey A. Manne, Lewis & Clark Law School and ICLE .
Dinner Keynote Address: Ronald A. Cass, Dean Emeritus, Boston University School of Law.
Friday, October 30th
Session Three – The Limits To Simplifying the Application of Current U.S. Antitrust Law, Richard S. Markovits, John B. Connally Chair, University of Texas at Austin, School of Law.
Session Four – Microsoft and the Limits of Antitrust, William H. Page, Marshall M. Criser Eminent Scholar, University of Florida, Levin College of Law.
Closing Remarks: Hon. Frank H. Easterbrook, United States Court of Appeals for the Seventh Circuit.
Add comment 3 November 2009
Sidak and Teece on Dynamic Competition
| Peter Klein |
A “neo-Schumpeterian” framework for antitrust analysis that favors dynamic competition over static competition would put less weight on market share and concentration in the assessment of market power and more weight on assessing potential competition and enterprise-level capabilities. By embedding recent developments in evolutionary economics, the behavioral theory of the firm, and strategic management into antitrust analysis, one can develop a more robust framework for antitrust economics.
Via Truth on the Market (where my colleague Mike Sykuta has joined the blogging team). On a related note, see Jesús Huerta De Soto’s Theory of Dynamic Efficiency. It was a pleasure meeting De Soto at last week’s fantastic Mises conference in Salamanca, where he spoke on dynamic efficiency (based on the book’s first chapter). You have to love medieval university towns. We held our meetings in the Convent of San Esteban, including breakfast in the room where Christopher Columbus reportedly waited to hear if Queen Isabella would finance his little expedition West.
2 comments 3 November 2009
Cultural Economics Conference in Copenhagen
| Nicolai Foss |
My colleague Dr. Trine Bille is the organizer of next year’s “International Conference of the Association of Cultural Economics International” in Copenhagen (CBS). Here is the Call. Submit a paper!
Add comment 2 November 2009
Pomo Periscope XIX: Leiter on Foucault
| Nicolai Foss |
Here is a nice discussion of Foucault by UChicago Law School professor Brian Leiter. It is not a smashing per se, but rather a critical discussion that indicates a central flaw in Foucault’s philosophy. Leiter points to Foucault’s well known discussion of the “pretence” of the “human sciences,” something Foucault seems to explain on the basis of the “influence of economic, political, and moral considerations on their development” (Leiter, p. 16). As Leiter points out, however,
[I]t is now surely a familiar point in post-Kuhnian philosophy of science that the influence of social and historical factors might be compatible with the epistemically special standing of the sciences as long as we can show that epistemically reliable factors are still central to explaining the claims of those sciences. And that possibility is potentially fatal to Foucault‟s critique. For recall that central to Foucault‟s critique is the role that the epistemic pretensions of the sciences play in a structure of practical reasoning which leads agents concerned with their flourishing to become the agents of their own oppression. And the crucial bit of “pretense” is, as we noted earlier, that the human sciences illuminate the truth about how (normal) human beings flourish in virtue of adhering to the epistemic strictures and methodologies of the natural sciences. Recall also that Foucault, unlike Nietzsche, does not contest the practical authority of truth (i.e., the claim of the truth to determine what ought to be done); he rather denies that the claims in question are true or have the epistemic warrant that we would expect true claims to have. So the entire Foucauldian project of liberation turns on the epistemic status of the claims of the human sciences. And on this central point, Foucault has, surprisingly, almost nothing to say beyond raising “suspicion.”
3 comments 2 November 2009
Tracking a Moving Arrow Core
| Nicolai Foss |
As argued by Nelson and Winter in their 1982 book, An Evolutionary Theory of Economic Change, and more explicitly by Winter and Gabriel Szulanski in their 2001 paper, “Replication as Strategy,” many firms leverage their competitive advantages by means of replication. Franchise chains come immediately to mind (the “McDonalds Approach”) but also firms like The Body Shop. In the Winter and Szulanski approach, replication is essentially a two-stage process: In the first stage, the replicator defines a template that approximates the “Arrow Core,” that is, essentially the full and correct specification of the fundamental replicable features of a business model as well as its ideal target applications. Unfortunately, no one can determine in advance the exact contents of the Arrow Core, and knowledge about it must be acquired through experiential learning. Learning about the Arrow Core may lead to one outlet being identified as a concrete “template” for further replication, or the template may be understood more abstractly in terms of a specification of preferred location choices, standard operating procedures, the products that shall be offered, etc., that is, a “formula.” In the second phase, the replicator replicates the template, trying to “copy exactly.” In this phase, the template or formula for replication is “frozen.”
In a recent paper, “Tracking a Moving Arrow Core: Replication-as-Strategy in IKEA,” Anna Jonsson, a Lund University expert on IKEA, and I argue that IKEA has not followed the rigid two-phase replication strategy described (and recommended) in Winter and Szulanski and other contributions to the replication literature, but has adopted and organized an approach that may be characterized as an ambidextrous one: Exploration and exploitation in IKEA are more like simultaneously ongoing processes than sequential ones. We also describe the organizational mechanisms that IKEA has implemented to steer this process, such as internal units that are responsible for intra-firm knowledge sharing, and we discuss how it is supported by organizational principles, such as corporate values that stress the importance of employees questioning proven solutions while continuously engaging in knowledge sharing. In other words, IKEA organization is geared towards the tracking of a constantly changing Arrow Core. Drop me a mail at njf.smg@cbs.dk if you want a copy of the paper.
Add comment 1 November 2009
Terence Hutchison Special Issue
| Nicolai Foss |
It is a sad fact that I spent a considerable part of my early 20s browsing the pages of the major economics journals of the interwar period. I was particularly interested in what was then called the “monetary theory of the trade cycle” and the role of expectations in the business cycle (Myrdal, Lindahl, Hawtrey, Robertson — and of course Hayek and his many followers and conversants, such as Lachman, Kaldor, and various UK Labour Party economists who until the advent of Keynes’ GT were surprisingly bent on Hayekian business cycle theory. (Here is one of the results of that work). My forays led to the “discovery” of Terence Hutchison’s 1937 paper, “Expectation and Rational Conduct,” in Zeitschrift für Nationalökonomie, a paper that, while over the top in a number of ways, is also an early anticipation of rational expectations and the problems of RE.
Hutchison (1912-2007) is nowadays best known as an economic methodologist, perhaps the first explicit proponent of logical positivism and later Popper’s falsificationism. His 1938 book, The Significance and Basic Postulates of Economic Theory, is often taken as a response to Lionel Robbins’ strongly Austrian-influenced Essay on the Nature and Significance of Economic Science(1932/1935). Hutchison later engaged in a debate with Fritz Machlup, and Hayek buffs will know that Hutchison coined the notion of “Hayek I” and “Hayek II” (based on Hayek’s acceptance of Misesian praxeology).
The latest issue of the always-interesting Journal of Economic Methodology features a special issue symposium on Hutchison. Among the highlights is the publication of a hitherto unpublished, semi-autobiographical essay by Hutchison, and the reproduction by Bruce Caldwell of some revealing letters by Hayek and Hutchison (Hayek did not agree with Hutchison’s interpretation of his changes in the 1930s).
2 comments 1 November 2009
Governing Firm-Specific Knowledge Assets
| Nicolai Foss |
In spite of book titles such as Competitive Advantage Through People, a whole subfield dedicated to linking human resources and firm-level performance outcomes (i.e., strategic HRM), and a general recognition that many knowledge-based competitive advantages are ultimately rooted in a web of complementary and firm-specific human capital, surprisingly little serious quantitative research exists that links firm-specific knowledge, employee governance mechanisms, and firm-level performance. In fact, there are few theoretical contributions that accomplish this. Work by Russ Coff as well as Gottschalg and Zollo come to mind (as well as this paper).
In “Firm-Specific Knowledge Resources and Competitive Advantage: The Roles of Economic- and Relationship-based Employee Governance Mechanisms,” in the December issue of the Strategic Management Journal (I received my copy October 28!), Heli Wang, Jinuy He, and former O&M guest blogger Joe Mahoney explore the economic- and relationship-based governance mechanisms that mitigate the latent underinvestment problem of employees making firm-specific human-capital investments. Overall, their results suggest that firms with more firm-specific knowledge resources are more likely to adopt those governance mechanisms that can reduce key employees’ concerns about potential hold-up.
The paper is very neat and clear, and my personal candidate for the best research paper in SMJ in 2009. Here is the abstract:
The resource-based view of the firm emphasizes the role of firm-specific resources, especially firm-specific knowledge resources, in helping a firm to achieve sustainable competitive advantage. However, the deployment of firm-specific knowledge often requires key employees to make specialized human capital investments that are not easily redeployable to other settings. Thus, in the absence of effective safeguards and trust building devices, employees with foresight may be reluctant to make such specialized investments. This study explores both economic- and relationship-based governance mechanisms that might mitigate this underinvestment problem. Effective use of these governance mechanisms enables a firm to obtain greater performance from its efforts to deploy firm-specific knowledge resources. Empirical results further support these key arguments.
1 comment 31 October 2009
Multitasking
| Peter Klein |
I was flipping channels last night and came across a Jimi Hendrix biopic. Lots of concert footage, with Hendrix doing his usual amazing Hendrix things — singing, crazy guitar riffs, playing with his teeth. Then I noticed something I hadn’t seen before: He’s doing all this while chewing gum. How can he sing without choking or spitting it out? How does he pluck guitar strings with his teeth and not leave a big wad on the pickups? Some people have trouble walking and chewing gum at the same time. How is he doing this?
Naturally, this got me thinking about multitask principal-agent problems. I liked one article that appeared in 2005 but didn’t generate much attention: Besanko, Regibeau, and Rockett’s “A Multi-Task Principal-Agent Approach to Organizational Form” (Journal of Industrial Economics, December 2005). Multitasking has often been applied performance evaluation, specifically the use of objective versus subjective performance measures. (If the agent is assigned multiple tasks, only some of which are measurable, than a quantitative evaluation scheme biases the agent’s effort toward more easily measurable tasks.) Besanko et al. apply this logic to divisionalization, examining the choice between product-line and functional organization:
This paper studies the choice of organizational forms in a multi-task principal-agent model. We compare a functional organization in which the firm is organized into functional departments such as marketing and R&D to a product-based organization in which the firm is organized into product lines. Managers’ compensation can be based on noisy measures of product-line profits. Measures of a functional area’s contribution to total profits are not available, however. This effect favors the product organization. However, if there are significant asymmetries between functional area contributions to organizational success and cross-product externalities within functions, organizing along functional lines may dominate the product organization. The functional organization can also dominate when a function is characterized by strong externalities while the other is not.
An obvious example: university faculty who are tasked with research, teaching, and service. Research is (in principle) easy to measure: publications, citation counts, grants, speaking invitations, etc. Teaching and service outputs are fuzzier. Even well-intentioned administrators tend to reward what they can count, which means refereed journal articles (and, in some fields, grant dollars) end up being the primary performance metric. Need I point out what this does to teaching?
The same issue is explored in Williamson (1975, pp. 155-75), where the ability to reward division managers based on standalone, divisional profit figures is cited as an advantage of the M-form structure.
3 comments 30 October 2009
Economic Methodology in Erkenntnis
| Nicolai Foss |
Economic methodology, or, meta-theoretical discussion of (and in) economics, has gone significantly beyond with theme that many practicing economists associate with the field, namely the realism-of-assumptions theme prompted by Friedman’s famous 1953 essay, “The Methodology of Positive Economics.” Of course that theme is by no means unimportant, and it has, of course, resurfaced under the impact of the financial crisis.
However, the main themes of the current economic methodology discussion have shifted from the role of assumptions to economic models in their entirety. Two main perspectives are sometimes distinguished, namely the “isolationists” who literally see economic models as simplified redescriptions of the mechanisms and causal factors of the real world, and the “fictionalists” who, as the name indicate, ascribe much less realism to models and think of them as purely mental laboratories that may still, however, allow for certain inferences to the real world.
The January 2009 issue of Erkenntnis: An International Journal of Analytical Philosophy is a special issue, edited by Till Grüne-Yanoff, dedicated to exploring these two positions, and entitled “Economic Models as Credible Worlds or as Isolating Tools?” Among the heavyweight contributors are Robert Sugden, Uskali Mäki, and Nancy Cartwright. I particularly liked Mäki’s argument that the two positions are in actually very close rather than opposed. Highly recommended for those who want to acquaint themselves with frontier issues in economic methodology.
2 comments 29 October 2009
How Machiavellian Are You?
| Peter Klein |
A test for university presidents, deans, department heads, center directors, etc. (via Anu).
(Yes, of course, there are management and leadership literatures on old Niccolò. Don’t act surprised!)
1 comment 29 October 2009
My Favorite New-Media Entrepreneur
| Peter Klein |
It’s Ben Huh, the brains behind FAIL Blog, Engrish Funny, and, of course, I Can Has Cheezburger. The best of the user-generated-content sites. Huh is profiled here in Fast Company. Interestingly, he’s a quant guy:
[W]e rely on the tools of the Internet — metrics and measurements and stuff like that — to help us decide what to post. We don’t have some guy somewhere deciding, “Oh, I think this it funny. I’m going to post it on the homepage.” That actually fails 50% of the time, because people are very bad at understanding what’s funny for other people. Everything we promote is there for a logical reason.
Add comment 28 October 2009
Internal Capital Market Activeness
| Lasse Lien |
In these Williamsonian times, here is a nice new working paper relevant to his internal capital market hypothesis. The paper measures, in various ways, how active a firm is in reallocating capital across its businesses. The paper finds that the more active a firm is, the lower the firm’s industry-adjusted profitability tends to be. This of course raises the question of whether active internal capital markets cause inferior performance, or whether inferior performance causes active internal capital markets. Using an impressive battery of robustness checks the authors conclude that internal capital markets are inefficient.
If the subject appeals to you, you have presumably already read this and this.
3 comments 27 October 2009
Sampling on the Dependent Variable: French Peasant Edition
| Peter Klein |
A useful example of the methodological flaw that plagues the “great companies” and “great leaders” literature in management, from Graham Robb’s excellent The Discovery of France (Norton, 2007):
[N]early every autobiographical account of ordinary life in eighteenth- and nineteenth-century France comes from the early chapters of memoirs written by exceptional men who rose through the ranks of the army or the Church, woo wrote their way to fame or who were plucked from obscurity by a patron, a lover or, eventually, an electorate. Few men and even fewer women had the means or the desire to write a book on “How I failed to overcome my humble origins.” Apart from the countless riches-to-riches tales written by aristocrats, almost all the lives that we know about follow the same untypical upward trend: the farmer’s son Restif de la Bretonne, the cutler’s son Diderot, the watchmaker’s son Rousseau, the Corsican cadet Napoleone Buonaparte.
These spectacular success are more typical of long-term trends than of individual lives. Categorical terms like “peasants,” “artisans,” and “the poor” reduce the majority of the population to smudges in a crowd scene that no degree of magnification could resolve into a group of faces. They suggest a large and luckless contingent that filled in the background of important events and participated in the nation’s historical development by suffering and engaging in a semblance of economic activity.
Likewise, business and entrepreneurial strategies can be understood by studying not only firms that tried them and succeeded, but also those that used the same strategies and failed. Reducing the majority of companies to smudges in an industry-wide or economy-wide crowd scene tells us little about what does and doesn’t work.
2 comments 25 October 2009
The Hodgson Petition
| Peter Klein |
Several friends and colleagues urged me to sign Geoff Hodgson’s petition on the financial crisis, but I declined. I agree with Krugman that economists have tended to mistake mathematical beauty for truth, but think this has little to do with the financial crisis. As discussed in previous posts, I view the financial crisis and recession as the (predicable!) result of government failure — massive credit expansion by the central bank, mortgage-lending rules and policies designed to inflate the housing market, a state-sponsored cartel of securities-rating agencies — not market failure resulting from unrealistic behavioral assumptions.
I respect many of the signatories to the petition, but statements like this (from Krugman), at the heart of the petition, are preposterous:
[Economists] turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets — especially financial markets — that can cause the economy’s operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don’t believe in regulation. . . . When it comes to the all-too-human problem of recessions and depressions, economists need to abandon the neat but wrong solution of assuming that everyone is rational and markets work perfectly.
“Regulators who don’t believe in regulation?” Paul, what color is the sky on your planet (1, 2, 3)? Notably absent from the petition’s list of villains is the Fed, Fannie and Freddie, the Treasury, or indeed anyone remotely connected with a government body.
Keep in mind it was Krugman himself who wrote in 2002: “To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that . . . Greenspan needs to create a housing bubble to replace the Nasdaq bubble.” St. Alan followed Krugman’s advice to the letter, and here we are today.
8 comments 23 October 2009
Making and Unmaking Economic Orders
| Dick Langlois |
The new issue of the online journal Capitalism and Society has a number of articles that should interest readers of this blog. Each is probably deserving of its own post. (Ah, but time prohibits.)
Jon Elster has a piece called “Excessive Ambitions” that criticizes not only mainstream rational-choice models (as we would expect from Elster) but also modeling in general. Roman Frydman and Michael Goldberg have a piece that applies something like Leijonhufvud’s “corridor” to risk regulation: when swings of asset values are small, government should stay out, since such swings are actually beneficial; but when asset prices get too far from “underlying values,” government regulation is called for.
My favorite paper is by Thorbjørn Knudsen and Richard Swedberg. Here’s the abstract:
This is a theoretical paper in which we attempt to present an economic and sociological theory of entrepreneurship. We start from Schumpeter’s idea in Theory of Economic Development that the economy can be conceptualized as a combination and innovations as new combinations. Schumpeter also spoke of resistance to entrepreneurship. By linking the ideas of combination and resistance, we are in a position to suggest a theory of capitalist entrepreneurship. An existing combination, we propose, can be understood as a social formation with its own cohesion and resistance — what may be called an economic order. Actors know how to act; and profit is low and even in these orders. Entrepreneurship, in contrast, breaks them up by creating new ways of doing things and, in doing so, produces entrepreneurial profit. This profit inspires imitators until a new order for how to do things has been established; and profit has become low and even once more. Entrepreneurship is defined as the act of creating a new combination that ends one economic order and clears the way for a new one. The implications of this approach for a number of topics related to entrepreneurship are also discussed.
This has some affinities to arguments I have made in the past. I am thanked in the acknowledgements, presumably for conversations that Richard and I had at a Schumpeter conference at Harvard last year; but I’m not cited. (Assume sad-faced emoticon here.)
I will talk about the fourth paper in the issue soon in a separate post.
Add comment 22 October 2009
Penrose (1959) Golden Anniversary
| Peter Klein |
This year marks the 50th anniversary of Edith Penrose’s Theory of the Growth of the Firm (1959), one of the most important and influential books on the firm and firm strategy. To celebrate, Yasemin Kor and Christos Pitelis organized a roundtable at last week’s SMS conference with remarks by Christos, Yasemin, Joe Mahoney, Margie Peteraf, and Maurizio Zollo. The participants have graciously allowed me to post their slides and materials (1, 2, 3, 4). Christos, Penrose’s friend and literary executor, has edited and introduced a new edition of the 1959 book, which you can purchase here. You can read his introduction here. Nice!
Penrose trivia: During the 1950s Murray Rothbard made his living by reviewing literature and grant proposals for the William Volker Fund. When going through Rothbard’s correspondence a few years ago I came across a proposal for a study on firm growth submitted jointly by Penrose and Fritz Machlup, her dissertation supervisor at Johns Hopkins. Apparently at one point, the book was going to be a joint project. (Rothbard thought the ideas in the proposal didn’t fit with Penrose’s earlier warnings about the use of biological analogies in economics. However, as Joe Mahoney has noted, there is no inconsistency between the 1952 article and the 1959 book; Penrose is careful in her work on growth not to treat growth tendencies in firms as automatic, but to model them based on the preferences, beliefs, and actions of the firm’s personnel. In other words, she accepts natural selection in this context but not random mutation.)
BTW, what other important works in our field appeared in 1959, to be celebrated this year? Coase’s article on the Federal Communications Commission is one. The 1970s may have been the golden decade but there were major contributions in the previous decades as well. What are your favorites? Whose anniversary should we be preparing to celebrate?
3 comments 21 October 2009
Other Brushes with Official Greatness
| Peter Klein |
In the spirit of Lasse’s post, here are stories about some of my other direct and indirect contacts with academic royalty, people whose achievements have nothing to do with anything I’ve ever said or done.
- As regular O&M readers know, there is a history of disagreement between Ronald Coase and Benjamin Klein over the GM-Fisher case, among other issues. A few years ago I spent some time with Coase during his visit to Missouri for the CORI Distinguished Lecture. He concluded one conversation by announcing, with evident satisfaction: “I see all Kleins are not alike.”
- One of the funniest, and most unusual, people I knew at Berkeley was Matthew Rabin, then a new assistant professor and now a chaired professor, John Bates Clark medalist, and probable future Nobel laureate in economics. He had a little construction-paper clock on his office wall with one hand tracking years until the tenure decision and another, going the opposite direction, counting publications. I was later his TA for the second PhD micro theory course. Sample test question: “I have the opportunity to lock you up. If I lock you up, you will scream for help with probability p, which gives me a benefit of minus 30. . . .” I laughed often.
- My Dad had this remarkable distinction: there were two future Nobel laureates in his high school class. (It was an unusual school.) Herbert Hauptman got the prize in chemistry and Julian Schwinger in physics. Ken Arrow went to the same school, which also produced six Pulitzer Prize winners. (more…)
Add comment 19 October 2009
Secret to Writing Student Essays
| Peter Klein |
Thanks to PB for this one.
1 comment 19 October 2009
Best Part About Winning a Nobel Prize at Berkeley
| Peter Klein |
I might not believe it if I hadn’t seen these parking spaces — in very choice locations — with my own eyes. (Thanks to Peter H. for the link.)
The spaces are marked with special signs that read: “Reserved For NL/Special Permit Required At All Times.” That “NL,” of course, stands for Nobel laureate.
Physics professor George Smoot, who won the Nobel Prize in 2006, said there’s a catch to the permit: It’s free, but it’s not automatically renewed each year. Some of Berkeley’s Nobel laureates have let their permits lapse.
“It’s a temporary permit,” Smoot explained. “You’ve got to renew it every year — like your Nobel laureate’s going to go away, or something! And so, twice now I’ve gotten tickets because I didn’t, you know, remember to renew it on time.”
But Williamson says a little paperwork will not discourage him from getting the permit.
“I think it ought to be automated, but apply if I must, apply I will,” he said.
Add comment 17 October 2009
Williamson’s “Economics of Institutions” Syllabus
| Peter Klein |
I was pretty clueless when I started graduate school. I had good undergraduate training in economics, and had the privilege of attending my first Austrian seminar, where I met Murray Rothbard, Hans Hoppe, Roger Garrison, and David Gordon, before beginning graduate work. But I really didn’t know exactly what I wanted to study. Like most economics PhD students, I wasn’t exactly turned on by the core theory and econometrics classes. Then I took Williamson’s course ECON 224, “Economics of Institutions,” and it was a revelation. The syllabus dazzled me, with readings from Coase, Simon, Hayek, North, Arrow, Chandler, Alchian, Demsetz, Ben Klein, and many other brilliant and thoughtful economists, along with sociologists, political scientists, historians, and others. I decided then that institutions and organizations would be my area, and I’ve never looked back.
Since Monday I’ve been digging through my files trying to find a copy of that syllabus. I found my folder for that course, containing notes, readings, and exams (no, you can’t see my test scores), but for some reason the syllabus has disappeared. I must have taken it out to study, perhaps when designing my own course in institutions and organizations, and it didn’t make its way back into the file. But I did find an older copy, the Fall 1988 edition. That was, I believe, Williamson’s first year at Berkeley, after arriving from Yale (where he didn’t teach PhD courses, his main appointment being in the law school). I took the course in 1989, but the syllabi are very similar. So here it is. Note the range of authors, journals, subject areas. Not at all like the typical economics PhD course!
3 comments 16 October 2009
Wodehouse
| Peter Klein |
We interrupt Williamson Week to remind you that today, 15 October, is the birthday of the great P. G. Wodehouse. If I were really clever I’d write something like “Principal-Agent Conflicts between Wooster and Jeeves” or “Lord Emsworth as Charismatic Leader,” but the best I can do is share some favorite Wodehouse quotes that might apply to writing, research, and university life:
“I pressed down the mental accelerator. The old lemon throbbed fiercely. I got an idea.”
“He had just about enough intelligence to open his mouth when he wanted to eat, but certainly no more.” [A university administrator? Journal reviewer?]
“I just sit at a typewriter and curse a bit.”
“I know I was writing stories when I was five. I don’t know what I did before that. Just loafed I suppose.”
Add comment 15 October 2009
Williamson and the Austrians
| Peter Klein |
My short piece on Williamsonian transaction cost economics and its relationship to the Austrian approach is up on Mises.org.
2 comments 14 October 2009
Williamson Miscellany, Continued
| Peter Klein |
5. Many useful summaries of Williamson’s (and Ostrom’s) contributions are appearing online, such as those by Ed Glaeser, David Henderson, John Nye, Jeff Ely, and Alex Tabarrok. I think the first few pages of my “make-or-buy” chapter in the NIE Handbook provide a decent overview too. I also have some slides on transaction cost economics (part 1, part 2) that may be helpful for those seeking more detail.
6. Joshua Gans credits me with anticipating the award, which is nice, but undeserved — it was just wishful thinking on my part!
7. Oliver’s son Dean reports that he’s having trouble getting through to his folks: “The house in Berkeley had become such a media circus with every media entity from UPI to Al Jazeera trying to get through that I’ve been holding off with some of my own phone calls.” More important, Dean says his dad
has had a good attitude about these things. For years Berkeley would ask him to sign off on candidate press releases. But this would just get him a little worked up, and he might have a hard time getting to sleep. Could they stop that, please? On top of that, he appreciates that life has been good. No complaints, no reason to get worked up. Better to be Zen about the whole thing.
8. Scott Masten tells me O&M made a list of 100 best professor blogs. Scott and I agree that Williamson would gladly trade the Nobel prize for this honor instead. (more…)
1 comment 14 October 2009
