Archive for January, 2011

Remediableness Quote* of the Day

| Scott Masten |

In the matter of reforming things, as distinct from deforming them, there is one plain and simple principle; a principle which will probably be called a paradox. There exists in such a case a certain institution or law; let us say, for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, “I don’t see the use of this; let us clear it away.” To which the more intelligent type of reformer will do well to answer: “If you don’t see the use of it, I certainly won’t let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it.”

– G.K. Chesterton, The Thing (1929)

*Shouldn’t it be quotation of the day?

14 January 2011 at 8:31 am 2 comments

New Coase Interview

| Peter Klein |

In conjunction with Ronald Coase’s new book on China, he’s given a new interview to his co-author Ning Wang. (HT: Paul Walker via Mike Giberson.) Excerpt:

WN: You mentioned many times that you do not like the term, “Coasean economics,” and prefer to call it simply the “right economics” or “good economics.” What separates the good from bad, the right from wrong?

RC: The bad or wrong economics is what I called the “blackboard economics.” It does not study the real world economy. Instead, its efforts are on an imaginary world that exists only in the mind of economists, for example, the zero-transaction cost world.

Ideas and imaginations are terribly important in economic research or any pursuit of science. But the subject of study has to be real.

I’m sympathetic to this, but with some methodological reservations, expressed at the end of this post. Anyway, the interview focuses on China, its future economic prospects and likely influence, and the newly formed Coase China Society. Coase is bullish on China: “In the past, economics was once mainly a British subject. Now it is a subject dominated by the Americans. It will be a Chinese subject if the Chinese economists adopt the right attitude.” (more…)

13 January 2011 at 10:36 am 5 comments

CFP: Hayek and Behavioral Economics

| Peter Klein |

Forwarded on behalf of Roger Frantz:


“Hayek and Behavioural Economics” (2011). Palgrave Macmillan. Vol 4 of Archival Insights into the Evolution of Economics. Robert Leeson Series Editor. Vol 4 editors, Roger Frantz and Robert Leeson.

Papers on all aspects of Hayek’s work as it relates to behavioral economics defined broadly which includes but not limited to economics and psychology, neuroeconomics, and topics in the history of economic thought.

Papers will be due by the summer of 2011. Send inquiries and an abstract to Roger Frantz ( or Robert Leeson (

12 January 2011 at 11:08 am Leave a comment

History of Economic Thought Revival?

| Peter Klein |

More on the AEA meetings: I didn’t attend enough sessions to get a feel for overall directions and trends, but David Warsh (via Lynne) detected a revival of interest in the history of economic thought:

Interesting, too, was the undercurrent to be found in many conversations of interest in the history of economics itself.  History of economic thought — or history of science, if you prefer — is a subject that has all but disappeared in the last thirty years as a topic of major research interest or as a subject of courses in top graduate schools — precisely the period of economic triumphalism.

I certainly can’t prove a resurgence of interest in economics past as it bears upon the present, or even document it beyond a few suggestive facts. The history of thought sessions in the meetings proceeded in their customary grooves — a retrospective on the rational expectations assumption fifty years after it was introduced, Irving Fisher’s The Purchasing Power of Money at one hundred.

But there were portents of change in at least one session on “rethinking the core” of graduate education.  James Heckman, of the University of Chicago, endorsed the possibility of restoring to the graduate curriculum high-level elective courses in the history of economic thought. “People in the past were smart and they made mistakes and had insights,” he said afterwards. “We have sometimes forgotten the insights and we have sometimes repeated the same mistakes.”

An interesting challenge to what Murray Rothbard called the “Whig theory” of science, the view that dominates contemporary research in most of the social sciences.

11 January 2011 at 1:34 pm 4 comments

Entrepreneurship Lives!

| Scott Masten |

At the ASSA meetings in Denver this weekend, O&M impresario Peter Klein gave a typically (for him) enlightening and entertaining presentation on “Institutions and Entrepreneurial Opportunities: A New Approach.” (An audience member gushed afterward that it was one of the best presentations she had ever seen. Perhaps Peter can provide a link to the paper.) To illustrate one of his points, Peter used images of ruins from once-glorious buildings in Detroit such as this one:

Peter’s point was that, though on its face, such abandoned structures would appear to present unrealized entrepreneurial opportunities, such opportunities were probably illusory in light of Detroit’s decline.

In fact, Peter, in a rare lapse, simply failed to look deeply enough into the question. Entrepreneurship is alive and well even in Detroit! (more…)

9 January 2011 at 7:59 pm 6 comments

Impressive Lunch Bunch

| Peter Klein |

Whenever the economics Nobel goes to an American, the AEA has a luncheon at the next (year+1) annual meeting, and this year the 2009 recipients were honored. Elinor Ostrom was unable to attend, so Oliver Williamson was the lone honoree. Avinash Dixit gave a nice talk summarizing Ostrom’s and Williamson’s achievements and Williamson offered some informal, personal remarks.

The head table, pictured below — sorry for the poor picture quality, my phone is megapixel-challenged, but you can click to enlarge — seated an impressive bunch: Bengt Holmström, Bob Hall, David Teece, Paul Joskow, Carl Shapiro, Steve Tadelis, Pablo Spiller, Orley Ashenfelter (behind podium), Avinash Dixit (at podium), Williamson, Gérard Roland, John Morgan, Dale Mortensen, Jackson Nickerson, Scott Masten, and David Kreps.

To my knowledge the only blogger among that group is our own Scott Masten, making O&M the sole blog represented on the panel. Take that, self-styled rivals!

8 January 2011 at 8:32 pm 3 comments

AEA Papers on Organizations, Institutions, and Entrepreneurship

| Peter Klein |

O&M readers attending the American Economic Association annual meeting in Denver may find these papers of particular interest:

Industrial Policy, Entrepreneurship, and Growth
PHILIPPE AGHION (Harvard University)

Does Management Matter: Evidence from India
NICHOLAS BLOOM (Stanford University)
BENN EIFERT (University of California-Berkeley)
APRAJIT MAHAJAN (Stanford University)
JOHN ROBERTS (Stanford University)

Efficiency and Adaptation in Organizations and Institutions
PETER G. KLEIN (University of Missouri-Columbia)
JOSEPH T. MAHONEY (University of Illinois)
ANITA M. MCGAHAN (University of Toronto)
CHRISTOS N. PITELIS (University of Cambridge)

The Coevolution of Culture and Institutions in Seventeenth Century England
PETER MURRELL (University of Maryland) (more…)

7 January 2011 at 8:59 pm 3 comments

The Future of Managerial Economics

| Peter Klein |

The December 2010 issue of Managerial and Decision Economics features an editorial by Paul Rubin and Tony Dnes on the state of the field, “Managerial Economics: A Forward Looking Assessment.” As they note, the “traditional approach” — basically applied neoclassical microeconomics, production theory in particular — has been augmented by new developments,

particularly in areas such as globalization, the economics of organization, information economics, strategic behavior, the learning organization, risk management, business ethics, and behavioral economics. All of these topics are hot in modern managerial economics and are slowly feeding through into MBA and similar courses.

The modern trends are often referred to as “the new managerial economics.” Some modern texts even use the term explicitly (Boyes, 2008) and focus on questions of “organizational architecture” including areas such as incentive structures in personnel economics. There are increasing numbers of specialist works emerging in these areas, which are coming to feature in influential handbooks (Lazear, 2009). Personnel economics, for example, applies economics to human resources topics, including information interactions, problems of team coordination, morale, and seniority systems. . . . In managerial terms, this field is a natural development of the economics of organization and of labor economics, and we hope to see much future research coming through. (more…)

5 January 2011 at 11:46 pm 2 comments

Why Do Bad Ideas Spread? Luzzetti and Ohanian on the Rise and Fall of Keynesianism

| Peter Klein |

O&M generally takes a dim view of Keynesian economics. And yet Keynesianism triumphed after WWII and, while mostly dormant among academics from the 1970s to the 2000s, made a sweeping comeback over the last 2-3 years. If we anti-Keynesians are so smart, why is Keynesianism so popular?

This is an important question for the history, philosophy, and sociology of science, and we’ve addressed it before. Keynesianism appeals to fine-tuners, is easily formalized, appeared to “work” during and after WWII, has a “progressive” and “scientific” veneer, and justifies policies that governments have long championed (but all serious economists opposed).

Matthew Luzzetti and Lee Ohanian propose a similar narrative in their new NBER paper, “The General Theory of Employment, Interest, and Money After 75 Years: The Importance of Being in the Right Place at the Right Time.” In a nutshell, Keynesianism told people what they wanted to hear, gave them hope that the “new” economics could cure the Depression and bring long-term prosperity, worked well with the new empirical methods appearing in the 1940s and 1950s, and seemed consistent with observation. By the 1970s, however, the situation became almost reversed, and Keynesianism was dumped by the research community. Here’s an excerpt from the introduction: (more…)

3 January 2011 at 11:21 am 2 comments

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Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
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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).
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