Archive for November, 2011

Rafe Champion at Missouri

| Peter Klein |

It’s been fun hosting Australian writer (and frequent O&M commenter) Rafe Champion at Missouri the last couple of days. Rafe spoke to the economists about the philosophy of science (handout here), and to the graduate philosophy seminar of my colleague André Ariew on current research topics in the philosophy of biology. We’ve had many talks about Hayek, Mises, Popper, Parsons, and our mutual friend Bill Bartley, among others. Rafe  blogs at Catallaxy Files and the Critical Rationalist blog, and his website The Rathouse contains a treasure-trove of writings by, and commentary on, the most important twentieth-century philosophers of science.

30 November 2011 at 1:23 am Leave a comment

Shared Governance and the Coattail Effect

| Dick Langlois |

Speaking of football. I just now received an email newsletter from the American Association of University Professors (AAUP), the union of which I am necessarily a member. The newsletter calls attention to a New York Times op-ed by Michael Bérubé, an AAUP activist who happens to be the Paterno Family Professor of Literature at Penn State. For Bérubé and the AAUP, the Penn State sex-abuse scandal “coincided with the steady erosion of faculty governance.” Peter has written critically about shared governance, which is a central and long-standing platform of the AAUP; and we can argue about whether shared governance is likely to be efficient in general. But it seems to me dubious that faculty oversight of athletics would have meant quicker detection of the offense and the cover-up at Penn State: the problem is less one of incentives than of impacted knowledge in a large bureaucracy. In yesterday’s news came the announcement that a history professor at Utah had been arrested for viewing child pornography on his laptop during a plane flight. How could this be? Isn’t the History Department under faculty governance?

What struck me most about the AAUP newsletter was the extent to which it reflected the academic coattail effect: issues of great popular interest or concern sweeping up in their wake lots of long-existing and dubiously related academic hobby-horses. Global warming is another, more obvious, example. At a university function a while back, I heard a retired faculty member bemoan the inexplicable lack of research and funding into the role of the family in global warming. Needless to say, she was a historian of the family.

29 November 2011 at 4:38 pm Leave a comment

Urban Meyer’s Contract

| Peter Klein |

As sports-crazed American readers know, Urban Meyer was today named Ohio State University’s head football coach. The money’s not bad — $4 million per year. The contract itself, which you can find here, is pretty interesting (HT: Skip Oliva). There are lots of performance bonuses ($100k for winning the Big 10; $150k for making a BCS bowl; $250k for making the national title game), even some for academic achievement (e.g., $150k for an 80% player graduate rate — hmmm, no pressure on OSU professors here). Transportation will be by private jet; coach gets lots of free tickets; and the university will pay dues at “a mutually agreed-upon golf course.” I guess these are included in lieu of cash for tax purposes. The university also commits “to working with Coach to create the Urban Meyer Fellowship for Ethics and Leadership in Sports.”

28 November 2011 at 7:24 pm 4 comments

Are We Quacks?

| Lasse Lien |

Rich Bettis makes an important point in a forthcoming issue of SMJ. Bettis points out how two unfortunate practices interact with each other to create a very serious and fundamental problem for knowledge accumulation in (strategic) management.

One is the widespread practice of running numerous regressions on a given dataset and subsequently adapting (or in milder cases “tuning”) hypotheses or theory to fit the data. By itself this practice is quite unfortunate, since data patterns can and will occur by chance, and the more regression models one tries the more likely that one will “find” something. We obviously do not want such random patterns to influence either theory building or our catalog of empirical findings. However, this problem would be a great deal less serious if replication studies were common and we gladly published non-findings. Random correlations in the data would not survive replication tests, and would be eliminated fairly quickly.

As we all know, in management, replication studies cannot get published and are basically just not done. To make matters worse, we don’t publish non-findings either. This is the second unfortunate practice. Taken together these two practices may in the worst case indicate that much of what we think we know in management are just random data patterns, discovered through data mining, and protected by our lack of replication studies and refusal to publish non-findings. This is a sobering thought. As Bettis points out, we should all be very thankful that replication studies are more common in medical research than in management.

What is the solution? Well, a first step might be to launch the Journal of Managerial Replication Studies and give it the prestige it deserves. Either SMS or AOM should see the launch of such a journal as a crucial responsibility. I mean, we really don’t want to be quacks, do we?

HT: Helge Thorbjørnsen

28 November 2011 at 5:23 am 14 comments

Rationalistic Hubris and Opportunistic Behavior

| Peter Lewin |

The October 2011 issue of the Journal of Economic Behavior & Organization is a special issue on the work of James Buchanan, guest edited by Pete Boettke, arising out of a recent FFSO conference. In addition to Boettke, the contributors are Kliemt, Marciano, Munger, Leeson, G. Vanberg, Voigt, Horwitz, Besley, Coyne, and Horn on a variety of topics. Amartya Sen and Elinor Ostrom contributed short appreciations. This issue is full of good stuff on a variety of topics.

I focus here on the lead article by Pete Boettke somewhat clumsily entitled, “Teaching Economics, Appreciating Spontaneous Order, and Economics as a Public Science.” For my part, this article alone makes the issue worthwhile getting. Boettke presents an overview of the many facets of Buchanan’s work (and as they developed over his career) helpfully connecting and contrasting it with Hayek. Some of these ideas are directly relevant to the organization and management context.

At the risk of distorting oversimplification, we may say that whereas Hayek concentrated on the problem of rationalistic hubris, Buchanan concentrated on the problem of opportunistic behavior. Both are inevitable and related problems of social systems, and each of their works thus complements the other. In a nutshell, each is an in-depth protracted examination of the knowledge problem and the incentive problem, respectively.

As points of emphasis in their respective works, Hayek concentrated on the limits on man’s knowledge at the abstract level, and the contextual nature of the knowledge residing in the economy at the concrete level, while Buchanan stressed the institutional/organizational logic of politics and the systemic incentives that different rule environments generate. In both, however, the central message of same players, different rules, produce different games is seen throughout their work in comparative political economy. To Hayek the puzzle was how to limit the rationalistic hubris of men, to Buchanan the puzzle was how to limit the opportunistic impulse of men. Both found hope in what they called a “generality norm” embedded in a constitutional contract — no law shall be passed, or rule established which privileges one group of individuals in society.

Hayek uses an evolutionary approach and Buchanan a “veil of ignorance” contractarian approach. But both are surely applicable to organizations of all types.

27 November 2011 at 2:42 pm Leave a comment

Easterly at the Southerns

| Peter Lewin |

I should also mention that Bill Easterly gave the distinguished guest lecture this year on “Does Development Economics Cause Economic Development?” I thought it was excellent — both entertaining and informative — especially for non-specialists. I hope he publishes it.

Just one instance — a story about controlled random experiments in a development context (perhaps some of you have heard this). An interesting study showed that teacher absenteeism declined when teacher attendance was monitored and rewarded (imagine that). But when the same idea was applied to health-care workers, health-care workers in the treatment group (the monitored group) declined! Apparently, as a result of being monitored, health-care workers started asking for excused absences and found out that their supervisors actually did not care one way or another. As a result excused absences increased dramatically. This illustrates the power of unintended consequences and the importance of local knowledge, and how a seemingly unobtrusive experiment actually ended up providing locals with valuable knowledge that made things worse.

24 November 2011 at 12:57 pm 1 comment

Entrepreneurial Paradoxes and Simulations

| Peter Lewin |

Back from the SEA meetings in Washington DC, the venue for our annual SDAE conference and membership meeting. At the annual banquet we honored Leonard Liggio for his contribution to the teaching of Austrian economics. Dick Wagner gave the presidential address. Both received a standing ovation.

The panels were well attended and, from what I could tell, the quality very high. I presented my paper on Entrepreneurial Paradoxes (which has been around for a while). Young Bak Choi commented on it and presented an interesting paper on the role of entrepreneurship in economic development and development policy. David Harper and Anthony Endres presented a paper on another variation on the theme of heterogeneous capital and its structure. Perhaps most interesting was a paper by a strategic management Ph.D candidate at York University, Mohammad Keyhani (co-authored with Moren Lévesque), on “The Role of Entrepreneurship in the Market Process: A Simulation Study of The Equilibrating and Disequilibrating Effects of Opportunity Creation and Discovery.” Randy Holcombe commented. Interesting that the issue of equilibration is considered important enough to investigate with simulations. But it raises some important questions. My own current view, having spent a lifetime contemplating the issue, is that we are no nearer an answer than we ever were, and that perhaps the more important distinction is between entrepreneurial actions that add value and those that do not.

Next year’s meetings will be in New Orleans. The president-elect of the SDAE is Larry White. He will be putting together the panels. So if you have an interest in presenting a paper, discussing one, or chairing a panel, let him know (lwhite11@gmu.edu).

24 November 2011 at 12:15 am 7 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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