Archive for November, 2006

Even Danes Respond to Incentives

| Peter Klein |

A critical news item for this Danophilic blog. The Telegraph reports, with some alarm, that fewer Danish Christmas trees are being exported to the UK this year.

Increasingly, [British] garden centres have been buying them in wholesale deals with Danish farmers. But last year Danish farmers saw subsidies for growing Christmas trees cut, and the result is that fewer have been exported.

Looks like even Danes respond to economic incentives. I’m sure that Pfeffer, Mintzberg, et al. will have an alternate explanation having nothing to do with the subdidies, however.

29 November 2006 at 12:23 pm Leave a comment

Mechanistic Analogies in Economics

| Peter Klein |

Paul Ormerod, in “The Fading of Friedman” (American Prospect, December 2006), compares the macroeconomic views of Friedman, Keynes, and Hayek and prefers the latter:

Both [Friedman and Keynes] believed that suitably empowered clever chaps could work out rules of behaviour that would smooth the fluctuations of the business cycle. Friedman came up with the rule of an independent central bank controlling the expansion of money at a fixed rate. Keynes essentially thought that if he and other old Etonians were put in charge, everything would be fine. . . . But Hayek sharply disagreed. He believed that there are inherent limits to knowledge in human social and economic systems which no amount of intellect can overcome.

Developments in economics are taking the subject in the direction of Hayek rather than Friedman and Keynes.

These remarks came to mind when I read Monday’s EH.Net review of Harro Maas, William Stanley Jevons and the Making of Modern Economics (Cambridge University Press, 2005). Jevons, in this regard, was the anti-Hayek. (more…)

29 November 2006 at 10:59 am Leave a comment

Patently Absurd: Ham Sandwich Edition

| Peter Klein |

On a day when the scope of patent law is being hotly debated before the Supreme Court, there’s news that McDonald’s has filed a 55-page patent application in Europe and the United States claiming “intellectual property rights” on how to make a hot deli sandwich. . . . 

The application discusses the “simultaneous toasting of a bread component” and inserting condiments into the sandwich with a “sandwich delivery tool.” The filling is placed in the ‘bread component’. The application explains: “Often the sandwich filling is the source of the name of the sandwich; for example, ham sandwich.”

Courtesy of the WSJ Law Blog. Each day I become more of an intellectual property skeptic (1, 2, 3).

The “hotly debated” case mentioned above is KSR International v. Teleflex, one of the most important patent cases to reach the US Supreme Court in years. I’m rooting for KSR.

28 November 2006 at 5:31 pm 2 comments

The Decline of Sociology

| Peter Klein |

Anthony Giddens, writing in the (UK) Guardian, worries that academic sociology “has disappeared from public view.”

Take the debate about globalisation, a debate which is an example of itself, because it is going on all over the world. Haven’t sociologists contributed significantly to this discussion? Indeed they have, but it has been driven far more by economists — such as Joseph Stiglitz — or those in the field of international relations. What about the impact of the communications revolution? Sociologists — notably the Spanish author, Manuel Castells, have written important works on the issue. But I don’t believe sociology has been the main source of contributions to the field.

Giddens suggests that decline of sociology stems from (a) the rise of “market fundamentalism” and (b) “the impotence many people feel in the face of the future.” Both explanations strike me as facile. But perhaps the essay will stimulate a thoughtful response from some of our sociologically inclined readers. (HT: Mark Thoma.)

Update: Brayden’s head is spinning. 

28 November 2006 at 3:46 pm 1 comment

Co-Authors From Hell

| Nicolai Foss |

Casual empiricism seems to indicate that co-authorship is constantly gaining ground vis-a-vis sole authorship (anyone who knows of any solid studies of social science authoring practice?). There are numerous forces that positively influence the choice of teaming up with other scholars for the purpose of writing books and articles, such as career concerns (writing with a Big Guy), hierarchical concerns (writing with a Local Big Guy may help your chances of promotion), political calls for co-authorship between academia and industry, and, of course, team-based benefits, such as exposure to new perspectives, effort sharing, the social experience, etc.

It is well known that there is a significant latent moral hazard problem in connection with teams (cf. this paper). But of course there is also a potentially heavy adverse selection problem. It does matter which type you pick to co-author a paper with. I have been involved in numerous co-authored paper projects, and usually I have been lucky with my co-authors. Indeed, Kirsten, Peter, Keld, Torben, Teppo, Joe, and Yasemin are exemplary and excellent co-authors.

But I certainly haven’t always been lucky. (more…)

28 November 2006 at 9:11 am Leave a comment

Economics of Department Stores

| Peter Klein |

Speaking of diversification, decentralization, and the effective use of local knowledge, Lynne Kiesling offers some interesting commentary on the economics of department stores. Department stores have been doing well in the last few years. Notes Lynne:

A retail business model originating in the late 19th century, the department store for decades epitomized elegance, convenience, ubiquity of options. Then in the 1990s the department store fell on hard times as nimble, smaller retailers struck better production and/or procurement contracts, had more direct contact with the preferences of consumers, or were able to offer niche products to enable consumers to craft their own, individual, modern images. . . .

I am not convinced that the large department store that is managing many brands and a national image can be more nimble than a specialty store, and nimbleness is what a department store will require to become a successful complex adaptive system.

Again, we have a problem of selective intervention. Imagine a department store that operates like a shopping mall, providing space and transaction management for individual vendors, and centralizing particular functions (marketing, sales, customer support) only when doing so generates net gains. Amazon.com and Ebay have shown how such a model can work in virtual space. If equally decentralized, why can’t a department store be as good — as a complex adaptive system — as a set of specialty retailers?

27 November 2006 at 11:12 pm 2 comments

New Edition of Menger’s Principles

| Peter Klein |

The Mises Institute has produced a new edition of Carl Menger’s path-breaking Grundsätze der Volkswirtschaftslehre [Principles of Economics], originally published in 1871. Menger’s Principles not only introduced the concept of marginal analysis, it presented a radically new approach to economic analysis, an approach that still forms the core of the Austrian theory of value and price.

The new edition includes Hayek’s introduction to the 1934 English edition and a new foreword by yours truly. The book itself continues to be availble in a free online edition.

27 November 2006 at 1:09 am Leave a comment

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Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Nicolai J. Foss and Volker Mahnke, eds., Competence, Governance, and Entrepreneurship: Advances in Economic Strategy Research (Oxford, 2000).
Nicolai J. Foss and Paul L. Robertson, eds., Resources, Technology, and Strategy: Explorations in the Resource-based Perspective (Routledge, 2000).

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