Archive for January, 2010
Apocalypse Averted
| Dick Langlois |
In a recent post, I lamented the willingness of pundits (and dissenting Justices) to see rights as a consequential exercise: we should restrict the speech of group X, in this case private corporations, because allowing such speech would lead to a bad outcome, in this case the corruption of democracy by corporate interests. (Feel free to substitute here your own favorite candidate for silencing and your own associated bad outcome.) But, of course, those who argue in this manner must also demonstrate that the asserted bad outcome would actually happen. A recent article in the Times — bless some reporter’s or editor’s contrarian heart — asks the question: so, what effect does corporate money actually have on democracy?” The answer seems to be: none at all. One of the economists cited is Peter’s Missouri colleague, and my former student, Jeff Milyo: “There is just no good evidence that campaign finance laws have any effect on actual corruption.”
And while we are at it, a study by the Insurance Institute for Highway Safety finds no effect of cell phone laws on traffic accidents. This hasn’t stopped Connecticut’s Governor from calling for even stricter cell phone laws.
Infographic of the Day: Bailouts Around the World
| Peter Klein |
Via HBR, bank bailouts and stimulus packages as percentages of GDP. China tops (bottoms?) the list with stimulus goodies worth a whopping 47% of GDP.
Now That’s a Complete Contract!
| Peter Klein |
A major theme of the contracting literature in organizational economics is that formal contracts are inevitably incomplete, meaning that they do not specify actions and remedies for every possible set of circumstances. Given genuine uncertainty about the future, parties may decide that formal contracts to not adequately protect relationship-specific investments, providing an important rationale for vertical integration or another mechanism to protect quasi-rents (alliances, equity-sharing arrangements, reputation, and other “hybrids”).
A recent WSJ piece suggests that writing complete contracts may not be so hard after all:
Decked out in sequined black and gold dresses, Anne Harrison and the other women in her Bulgarian folk-singing group were lined up to try out for NBC’s “America’s Got Talent” TV show when they noticed peculiar wording in the release papers they were asked to sign.
Any of their actions that day last February, the contract said, could be “edited, in all media, throughout the universe, in perpetuity.”
My Mom says she once told me I was the best little boy in the world, to which I responded, “and all the planets too?” The WSJ gives several examples of similarly expansive coverage:
- The terms of use listed on Starwars.com, where people can post to message boards among other things, tell users that they give up the rights to any content submissions “throughout the universe and/or to incorporate it in other works in any form, media or technology now known or hereafter developed.”
- In a May 15, 2008, “expedition agreement” between JWM Productions LLC, a film-production company, and Odyssey Marine Exploration Inc., a shipwreck-exploration outfit, JWM seeks the rights to footage from an Odyssey expedition. The contract covers rights “in any media, whether now known or hereafter devised, or in any form whether now known or hereafter devised, an unlimited number of times throughout the universe and forever, including, but not limited to, interactive television, CD-ROMs, computer services and the Internet.”
And my personal favorite:
A 189-word sentence in a September agreement between Denver-based Spicy Pickle Franchising Inc. and investment bank Midtown Partners & Co. — which has helped raise capital for the sandwich and pickle shops dotted across the region — unconditionally releases Spicy Pickle from all claims “from the beginning of time” until the date of the agreement.
Says Spicy Pickle’s Marc Geman, “the length of the paragraph is only limited by the creativity of the attorney.”
The Era of Laissez-Faire?
| Peter Klein |
One of the established memes about the financial crisis is that it demonstrates the failure of unfettered capitalism, the dog-eat-dog, laissez-faire environment that prevailed in the West over the last few decades, all driven by the ideology of “free-market fundamentalism.” This seems to be a truism among most of the Commentariat. Of course, as pointed out repeatedly on this blog, the truth is virtually the opposite: there was never any “deregulation,” the Bush Administration spent public money like a drunken sailor, and government continued to expand as it always does. But a picture is worth a thousand words, so try these on for size. (US data; click charts for sources.)
One response I sometimes hear is “Sure, there are more regulations and more government spending, but the set of things that should be regulated and the amount of government spending the economy needs are growing even faster!” This is essentially the Krugman-DeLong view about the stimulus: it just wasn’t big enough. Or they say that financial markets were “deregulated,” de facto, because the number of regulations and regulators increased more slowly than the number of new financial instruments and new markets. I wonder, though: are these falsifiable propositions? No matter how big the government is, if there are any problems, it’s always because the government isn’t big enough!
Hayekian Comments on Student Papers
| Peter Klein |
A grad student inspired these:
“The writer clearly suffers from a fatal conceit.”
“Reading this proposal helps me understand the knowledge problem.”
“Your paper appears to be the result of human action, but not human design.”
“The proposed outline reveals how little people really know about what they imagine they can design.”
Your suggestions?
ISNIE 2010 Call for Papers
| Peter Klein |
The Call for Papers is out for the International Society for New Institutional Economics’s 2010 meeting, 17-19 June in Stirling, Scotland. Proposals are due 1 March. President-Elect Frank Stephen is putting together an impressive program with keynotes from Bruno Frey and two longtime ISNIE members you may have heard of: Elinor Ostrom and Oliver Williamson. Don’t miss it!
Keynes vs. Hayek Rap Battle
| Lasse Lien |
If you’re teaching macro or the history of economic thought and you feel you’re not getting through to the kids, this video might be worth a try.
Thanks to Eirik Sjåholm Knudsen for the pointer.
Mutual Admiration Clubs
| Lasse Lien |
Check out this cool paper by Wing Suen, titled “Mutual Admiration Clubs.”
This article proposes a theory of group formation based on the motive to seek informed opinion. Because an individual evaluates whether others are informed or not using his own priors, he identifies people with similar beliefs to be more informed than those with different beliefs. The result is an equilibrium in which like-minded individuals self-select into distinct groups, with members of each group believing that their own group is superior.
So is O&M a Mutual Admiration Club? I guess if we all agree that we are not, that is evidence that we are. So please disagree with each other on this issue.
New Issue of ICC
| Dick Langlois |
A new issue of Industrial and Corporate Change is out (TOC here) with a bunch of interesting articles. Prominent among them is a well-researched and nicely written piece by Pierre Desrochers that argues a politically unpopular view about corporations and the environment. Free speech in action?
Corporations Are People Too
| Craig Pirrong |
Legally, in some respects, anyways. That was a key issue in the recent Supreme Court decision re McCain-Feingold (see Dick’s post). I don’t have a lot to say about the specifics of the decision, as campaign finance law is way too arcane for me. Suffice it to say that I am inherently skeptical about any regulation regarding elections designed by incumbent politicians. People yammer about conflicts of interest all the time, but there’s a colossal one for you.
I just wanted to make a quick point about a debate between Stevens and Scalia carried out in the opinion and the dissent. Stevens noted that the Founders were deeply skeptical of corporations. Indeed so. Scalia noted that there are so many corporations today. Also true. The interesting question is how we got from A (Stevens) to B (Scalia).
The story is told in the North, Wallis and Weingast natural-state book Violence and Social Orders I’ve blogged about several times over at Streetwise Professor, mostly in the context of Russia. The relevant chapter is primarily based on John Wallis’s work. The basic story is that hostility to corporations — reflected very well in Adam Smith’s Wealth of Nations — was due to the fact that historically, English corporations were created by the crown, and were essentially very profitable favors provided to the politically connected. They were, in NWW terms, part of the “closed order” of the natural state, in which access to certain contracting forms was limited to a select powerful few. This animus towards corporations was inherited in the United States, but in the early years of the 19th century, state legislatures confronting issues associated with the financing of new infrastructure turned the corporate form into a prop of an open-order system in which this contracting form was made available to all. Rather than limit the right of incorporation to an elite, they made it available to everybody. The system changed from one in which legislatures had to grant every incorporation, to one in which pretty much anybody could incorporate if they met a set of general, universally applicable requirements. Hence, the proliferation of corporations. (more…)
Paging John Stuart Mill
| Dick Langlois |
I have been amused by the firestorm of outrage in the press over the Supreme Court’s recent mild affirmation of the free-speech rights of corporations. As many readers of this blog will probably appreciate, the point of a right to free speech is that it must apply even to speech, and to speakers, we don’t like. Many if not most angry commentators, like the writers of the Times editorial on the subject, don’t even bother to worry about the nature of rights. To the Times and many others, constitutional jurisprudence is a purely consequentialist exercise no different from legislation (which, sadly, may be often be true in practice). But other writers and organizations aghast at the Court’s decision have a thorny problem of argument, to the extent that they have themselves invoked the First Amendment in an effort to protect speech of which they approve (or, more generally, to protect specific sub-spheres of discourse in which they themselves participate). A case in point is People for the American Way, which has called for a constitutional amendment to outlaw corporate political speech (via William Saletan). “People For the American Way,” they write, “has been at the forefront of defense of free speech and the First Amendment for almost 30 years. We continue in that role today.” In order to square the circle, PFAM and like-minded pundits and Justices have to find a way to define corporate speech as not speech. The answer? Spending is not speech and corporations aren’t people. So: does this mean that it would be OK under this logic for the government, say, to decree that the New York Times must limit its editorial budget — limiting dollars not ideas, after all — because the Times is a corporation not an individual? Why should this logic not apply to the other Amendments as well? The Times should flat-out not have freedom of the press because it is a corporation; and the Roman Catholic Church should certainly not have freedom of religion.
My favorite line, from Justice Stevens (in dissent): “The Court’s blinkered and aphoristic approach to the First Amendment may well promote corporate power at the cost of the individual and collective self-expression the Amendment was meant to serve.” So freedom of speech is really a neoclassical or Benthamite exercise in which we aren’t trying to protect individual (let alone corporate) speech but are instead trying to maximize the total amount of self-expression in society.
In its recent obituary of Erich Segal, the Times cites the following cringe-inducing line, spoken by college-student protagonist Oliver Barrett IV, as a measure of the literary caliber of Segal’s novel Love Story: “Jenny, for Christ’s sake, how can I read John Stuart Mill when every single second I’m dying to make love to you?” This suggests that many a Justice, editorial writer, and pundit must have fallen prey to similar distractions in college. They certainly failed to read John Stuart Mill.
Endogenous Indoctrination
| Dick Langlois |
I have been wanting for some time to write about an interesting paper by Gilles St. Paul called “Endogenous Indoctrination.” (I wasn’t familiar with his work, but he seems to do interesting things, including this.) Here’s the abstract:
Much of the political economy analysis of reform focuses on the conflict of interest between groups that stand to gain or lose from the competing policy proposals. In reality, there is also a lot of disagreement about the working of the policy: in addition to conflicting interests, conflicting views play an important role. Those views are shaped in part by an educational bureaucracy. It is documented that the beliefs of that bureaucracy differ substantially from those of the broader constituency. I analyse a model where this effect originates in the self-selection of workers in the educational occupation, and is partly reinforced by the insulation of the educational profession from the real economy (an effect which had been discussed by Hayek). The bias makes it harder for the population to learn the true parameters of the economy if these are favourable to the market economy. Two parameters that govern this capacity to learn are social entropy and heritability. Social entropy defines how predictable one’s occupation is as a function of one’s beliefs. Heritability is the weight of the family’s beliefs in the determination of the priors of a new generation. Both heritability and social entropy reduce the bias and makes it easier to learn that the market economy is “good,” under the assumption that it is. Finally I argue that the capacity to learn from experience is itself affected by economic institutions. A society which does not trust markets is more likely to favour labour market rigidities that in turn reduces the exposure of individuals to the market economy, and thus their ability to learn from experience. This in turn reinforces the weight of the educational system in the formation of beliefs, thus validating the initial presumption against the market economy. This sustains an equilibrium where beliefs and institutions reinforce each other in slowing or preventing people from learning the correct underlying parameters.
I was catalyzed to write today because of a related article I recently saw in the Times, which enthuses giddily about a paper called “Why Are Professors Liberal?” by two sociologists called Fosse [N. B. not Foss] and Gross. The Times lauds the paper for its sophistication and use of the quantitative. (more…)
Top Scholar Presidents and University Performance
| Nicolai Foss |
Last Friday my unit at CBS, the Center for Strategic Management and Globalization, sponsored a seminar with Dr. Amanda Goodall, the author of Socrates in the Boardroom: Why Research Universities Should be Led by Top Scholars. (For an earlier O&M post on Goodall, see here). Not only did the upper CBS echolons show up (the Research Dean and the President — both highly cited scholars, BTW), but we also had a long and lively discussion. A highly undull seminar!
Goodall’s findings are mainly based on UK data. Roughly, they are that university rankings correlate rather closely with how well-cited the presidents of the relevant universities are, and that there is strong evidence of the research standing of presidents driving university performance. It is hard to understand why this finding (or the book in general) was dissed by Tyler as a “radical attack on economic reasoning” (here).
Anyway, Goodall’s findings made me wonder whether the finding of causality from president/vice-chancellor/BSchool dean generalizes to other university bureaucrats, notably department heads (and deans in general, not just BSchool deans). Many of the things that are being said in the book of the top scholar-president (an example, somebody who defines the standard, an expert etc.) are things that can be said of department heads in well-functioning research universities. Perhaps one of the ways in which university presidents/VCs/deans matter to research performance is by picking good department heads. Also,Goodall claims that top scholars will not have positive performance consequences if they assume the presidency of bad or mediocre universities. She doesn’t really present evidence for this claim, although it does sound intuitive that a Nobel Prize winner is not best placed at the helm of University of Crapville. However, it may be interesting to look at less extreme cases. I do think there are cases of highly regarded scientists helping rather mediocre universities to improve.
Positive Spillovers from Bad Behavior
| Peter Klein |
When I introduce in class the concept of influence activities I emphasize that these, like other forms of discretionary behavior, can have benefits as well as costs. Think of self-assessments, such as a faculty member’s annual report to the department head or Dean. Certainly, faculty will find creative ways to overstate their accomplishments, minimize their failures, make themselves look better relative to their peers, and so on, and the time and energy spent doing this can be considered influence costs. At the same time, a savvy department head or Dean knows how to read between the lines, to separate signal from noise, and generally how to extract useful information from these reports, information he or she might not otherwise have. The challenge for organizational design, then, is not to eliminate influence activities altogether, but to limit them to the point where marginal benefit equals marginal cost.
This popped into my mind the other day when I read (courtesy of Stephan Kinsella) the confessions of a self-described “law school asshole.” University of Pennsylvania 3L Steve Mendelsohn (writing in 1990) tells his fellow students: “You know who we are. We’re the ones who always have our hands up in class volunteering to answer the professor’s questions, or ready to ask one of our own at seemingly any and every opportunity. Everytime you hear one of our names called, you groan and turn to the person next to you and slowly shake your head from side to side.” He even admits his name was in the center square of the Asshole Bingo cards his fellow students would bring to class.
As with influence activities, however, law-school assholery seems to have public benefits: keeping the discussion going and the atmosphere lively, eliciting from the professor information that other students would like to have but are afraid to ask for, and so on. I confess that, as an instructor, I’d rather have a few such assholes in class than a room full of polite, well-behaved dullards.
The serious question is whether this applies to organizations more generally. Are “civilized” workplaces necessarily better than rough-and-rowdy ones? It’s easy to come up with examples of organizations run by jerks that failed, but do we have systematic empirical evidence that nice-guy firms finish first? Do the marginal costs of costs of placing rude, self-centered people in management positions outweigh the marginal benefits?
CFP: “Understanding Firm Growth”
| Peter Klein |
The Ratio Institute invites paper proposals from young scholars (sorry, O&M bloggers!) in economics, economic history, entrepreneurship, management, sociology, statistics, psychology, and related disciplines for a workshop on firm growth in Stockholm, 12-14 August 2010. David Audretsch and Alex Coad are keynoting. Suggested topics include the role of high-growth firms, determinants of the growth of firms, growth ambitions and attitudes towards growth, firm growth and the characteristics of the entrepreneur, the persistence of firm growth, barriers to growth, post-entry performance, firm growth in a historical perspective, and innovation and firm growth. Details here.
The Virtual Firm
| Peter Klein |
If the proprietor has been to business school, it can never be smaller than two persons:
Bonus material, via Craig Newmark: the Boston Globe ponders “The End of the Office.” But it won’t happen, IMHO.
OECD Data on Entrepreneurship
| Peter Klein |
A new OECD report provides data on startups and similar measures for 39 countries. Lots of variables, e.g.:
- Number of enterprises by size class
- Employment by size class
- Value added by size class
- Exports by size class
- Employer enterprise birth rates (manufacturing and services by industry, by size class)
- Employer enterprise death rates (manufacturing and services, by industry, by size class)
- One- and two-year survival rates (manufacturing and services)
- Share of one- and two-year-old employer enterprises in the population (manufacturing and services)
- Share of high-growth firms (employment)
- Share of high-growth firms (turnover)
- Share of gazelles (employment)
- Share of gazelles (turnover)
- Employment creation by enterprise deaths
PowerPoint Version of “I Have a Dream”
| Peter Klein |
Bill Easterly tries his hand at PPTParody and hits a winner. The Gettysburg Address version remains the standard, of course. See also our PowerPoint archive.
Call for Applications: “International Business in Historical Perspective: The Emergence of Global Entrepreneurship”
| Peter Klein |
The Henley Business School at the University of Reading and the Institute for Economic and Social History at the Georg August University of Göttingen are organizing a Conference/Summer School on “International Business in Historical Perspective: The Emergence of Global Entrepreneurship,” 19-20 March (conference) and 21-25 March (summer school) 2010. Details here. “During the combined conference and summer school, scholars and students will explore the concept of entrepreneurship applied to historical examples in an international context. Topics include, for instance, the performance of multinationals in foreign markets, immigrant entrepreneurship, international family firms, and the institutional framework in which entrepreneurial decisions were made.”
Experimental versus Conceptual Entrepreneurs?
| Peter Klein |
The latest paper in David Galenson’s artist series deals with architects, distinguishing between “experimental” and “conceptual” designers. The distinction calls to mind the different emphases of Knight’s and Kirzner’s concepts of the entrepreneur, the former centered on action and market feedback, the latter on the cognitive act of discovery. What do you think?
Innovators: Architects
David W. Galenson
NBER Working Paper No. 15661
Issued in January 2010Frank Lloyd Wright, Le Corbusier, and Frank Gehry were experimental architects: all worked visually, and arrived at their designs by discovering forms as they sketched. Their styles evolved gradually over long periods, and all three produced the buildings that are generally considered their greatest masterpieces after the age of 60. In contrast, Maya Lin is a conceptual architect: her designs originate in ideas, and they arrive fully formed. The work that dominates her career, the Vietnam Veterans Memorial, was designed as an assignment for a course she took during her senior year of college. The dominance of a single early work makes Lin’s career comparable to those of a number of precocious conceptual innovators in other arts, including the painter Paul Sérusier, the sculptor Meret Oppenheim, the novelist J.D. Salinger, and the poet Allen Ginsberg.
Ennen and Richter on Complementarity
| Nicolai Foss |
The notion of complementarity unites a number of the key concerns of this blog: It has been central in Austrian capital theory since Menger, it is key both in (sociological) organization theory (e.g., here) and in organizational economics (e.g., here), and it is of considerable relevance to the explanation of (sustained) performance difference (e.g., here). (In organizational economics and strategic management, complementarity is usually given the specific interpretation of “Edgeworth complementarity“). Complementarity has also helped to link some of these areas (e.g., here and here).
In a paper, “The Whole is More Than the Sum of Its Parts, Or Is It? A Review of the Empirical Literature on Complementarities in Organizations,” in the most recent issue of the Journal of Management, Edgar Ennen and Ansgar Richter of the European Business perform what is probably the first stocktaking of the complementarity literature. It is very well done and in many ways an eye-opener. Of particular interest is their separation of the literature in those that take an “interaction approach,” focusing on specific interaction effects among specific (typically few) elements (e.g., of organization structure) and those that take a “systems approach” and consider the performance outcomes of entire sets of multiple elements. (My own work with Keld Laursen on complementarity falls in the latter category). Here is the abstract:
The concept of complementarity denotes the beneficial interplay of the elements of a system where the presence of one element increases the value of others. However, the conceptual work on complementarities to date has not progressed sufficiently to constitute a theory that would offer specific predictions regarding the nature of the elements that form complementary relationships or the conditions for their emergence. To advance our understanding of complementarities, the authors provide a synoptic review of the empirical studies on this concept in leading journals in management, economics, and related disciplines over the period 1988-2008. The authors find that whether a study provides evidence of complementarities in organizations is at least partially driven by its investigative approach. On the basis of the findings, the authors argue that complementarities are most likely to materialize among multiple, heterogeneous factors in complex systems. Therefore, the absence of complementary relationships between a limited set of individual factors may not negate the possibility of complementarities, but rather point to the need for including further systems-specific factors in the analysis. The authors conclude by providing directions for future theoretical and empirical research and outlining managerial implications of the work.
The Division of Labor, 1886
| Peter Klein |
Another interesting passage from Graham Robb’s The Discovery of France:
Every [French] town and village was a living encyclopedia of crafts and trades. In 1886, most of the eight hundred and twenty-four inhabitants of Saint-Étienne-d’Orthe, on a low hill near the river Adour, were farmers and their dependents. Of the active population of two hundred and eleven, sixty-two had another trade: there were thirty-three seamstresses and weavers, six carpenters, five fishermen, four innkeepers, three cobblers, two shepherds, two blacksmiths, two millers, two masons, one baker, one rempailleur (upholsterer or chair-bottomer), and one witch (potentially useful in the absence of a doctor), but no butcher and no storekeeper other than two grocers. In addition to the local industries and the services provided by itinerant traders (see p. 146), most places also had snake collectors, rat catchers with trained ferrets, and mole catchers who either set traps or lay in wait with a spade. There were rebilhous, who called out the hours of the night, “cinderellas,” who collected and sold ashes used for laundering clothes, men called tétaïres, who performed the function of a breast pump by sucking mothers’ breasts to start the flow of milk, and all the other specialists that the census listed under “trades unknown” and “without trade,” which usually meant gypsies, prostitutes, and beggars (p. 99).
This book is filled with economics. Here’s a passage about repeated games:
Deceit was a particular specialty of pedlars from the Auvergne. A single piece of cloth could be made to last a whole season if it was sold with the promise that a tailor would come the next day and make up the clothes for nothing. The tailor would arrive, measure the customer, take the cloth, and never return. The drawback was that a dishonest salesman had to cover vast areas compared to a pedlar who earned the trust of his clientele (p. 150).
Josh Lerner on Public Policy Toward Entrepreneurship
| Peter Klein |
Speaking of public entrepreneurship, here’s an interview with Josh Lerner about his new book Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed — and What to Do About It (Princeton, 2009). Excerpt:
There are two well-documented problems that can derail government programs to boost new venture activity. First, they can simply get it wrong: allocating funds and support in an inept or, even worse, a counterproductive manner. Decisions that seem plausible within the halls of a legislative body or a government bureaucracy can be wildly at odds with what entrepreneurs and their backers really need. . . .
Economists have also focused on a second problem, delineated in the theory of regulatory capture. These writings suggest that private and public sector entities will organize to capture direct and indirect subsidies that the public sector hands out. For instance, programs geared toward boosting nascent entrepreneurs may instead end up boosting cronies of the nation’s rulers or legislators. The annals of government venturing programs abound with examples of efforts that have been hijacked in such a manner.
Thanks to Ross Emmett for the tip.
Recession and Recovery: Six Fundamental Errors of the Current Orthodoxy
| Peter Klein |
A very good summary by Bob Higgs of “vulgar Keynesianism,” defined by Bob as the “pseudointellectual mishmash . . . that has passed for economic wisdom in this country for more than fifty years.” The key feature of VK is an emphasis on crude aggregates (“national income,” “the employment rate,” “the interest rate,” etc.) at the expense of relative prices, firm and industry effects, and cause and effect. Echoing one of this blog’s favorite themes, Bob highlights the VK economist’s inability to grasp the concept of capital structure, “the fine-grained patterns of specialization and interrelation among the countless specific forms of capital goods in which past saving and investment have become embodied. In [the VK] framework of analysis, it matters not whether firms invest in new telephones or new hydroelectric dams: capital is capital is capital.”
Update: See also David Henderson on aggregation.
Designing Internal Organization for External Knowledge Sourcing
| Nicolai Foss |
The heading to this post is the title of an upcoming special issue of the European Management Review, edited by my colleague at the Center for Strategic Management and Globalization at CBS, Dr. Larissa Rabbiosi, in collaboration with Dr. Toke Reichstein (also at CBS) and Prof. Massimo Colombo of the Politecnico di Milano. Two previous workshops organized by Larissa and Toke have dealt with similar issues (here and here). The theme of the workshop may be seen as concerning the organizational dimensions of “absorptive capacity,” a somewhat elusive concept. It has the potential of integrating key aspects of organizational economics with key ideas of the capabilities view. Submit a paper!
Separated at Birth?
| Dick Langlois |
In reading the obituary of French New Wave director Eric Rohmer, I was struck by his uncanny resemblance to (fellow Frenchman) Gérard Debreu. Many things to ponder here, including the relationship of general-equilibrium theory to the cinema of the nouvelle vague.
New Book: The Invention of Enterprise
| Peter Klein |
I’m putting this one on my Amazon wish list: The Invention of Enterprise:
Entrepreneurship from Ancient Mesopotamia to Modern Times, edited by David Landes, Joel Mokyr, and Will Baumol (Princeton, 2010). Check out the Table of Contents — an all-star lineup of entrepreneurship scholars and economic and business historians.
Is Grad School a Cult?
| Peter Klein |
A Chronicle piece by a pseudonymous English professor, urging prospective humanities PhD students to consider alternative career paths, generated some buzz last week. I prefer the same writer’s 2004 article, “Is Graduate School a Cult?” (via Vedran Vuk). “For all its claims to the contrary, graduate education does not seem to enhance the mental freedom of many students, some of whom are psychologically damaged by the experience.” The writer focuses on the humanities, but the arguments could just as well apply to the social sciences. Check out this list of cult characteristics, and see if they sound familiar:
- Behavior control: “major time commitment required for indoctrination sessions and group rituals”; “need to ask permission for major decisions”; “need to report thoughts, feelings, and activities to superiors.”
- Information control: “access to non-cult sources of information minimized or discouraged (keep members so busy they don’t have time to think)” and “extensive use of cult-generated information (newsletters, magazines, journals, audio tapes, videotapes, etc.).”
- Thought control: “need to internalize the group’s doctrine as ‘Truth’ (black and white thinking; good vs. evil; us vs. them, inside vs. outside)” and “no critical questions about leader, doctrine, or policy seen as legitimate.”
- Emotional control: “excessive use of guilt (identity guilt: not living up to your potential; social guilt; historical guilt)”; “phobia indoctrination (irrational fears of ever leaving the group or even questioning the leader’s authority; cannot visualize a positive, fulfilled future without being in the group; shunning of leave takers; never a legitimate reason to leave”; and “from the group’s perspective, people who leave are ‘weak,’ ‘undisciplined.’”
Comments are open for everyone except University of Missouri graduate students.
Deja Vu?
| Craig Pirrong |
Writing near to the event, in Capitalism, Socialism, and Democracy, Schumpeter argued that policy shocks, and policy uncertainty generally, lengthened the Great Depression:
The subnormal recovery to 1935, the subnormal prosperity to 1937 and the slump after that are easily accounted for by the difficulties incident to a new fiscal policy, the new labor legislation and a general change in the attitude of government to private enterprise all of which can, in a sense to be defined later, be distinguished from the working of the productive apparatus as such.
Since misunderstandings at this point would be especially undesirable, I wish to emphasize that the last sentence does not in itself imply either an adverse criticism of the New Deal policies or the proposition — which I do believe to be true but which I do not need right now — that policies of that type are in the long run incompatible with the effective working of the system of private enterprise. All I mean to imply is that so extensive and rapid a change in the social scene naturally affects productive performance for a time, and so much the most ardent New Dealer must and also can admit. I for one do not see how it would otherwise be possible for the fact that this country which had the best chance of recovering quickly was precisely the one to experience the most unsatisfactory recovery. [Emphasis in original]
Some of the specifics are different (e.g., health care legislation vs. labor legislation) but the overall thrust of Schumpeter’s analysis of the 1930s is quite applicable today. An “extensive and rapid change in the social scene” is currently in progress, and like Schumpeter, I believe that “policies of [the] type [being considered] are in the long run incompatible with the effective working of the system of private enterprise.” And even if you don’t buy into that, as Schumpeter notes, just the massive rise in uncertainty associated with this policy ferment is sufficient to impede measured economic performance because it is rational for businesses and individuals to delay investment and hiring decisions until the uncertainty is resolved.
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