Archive for December, 2012

Top Posts of 2012

| Peter Klein |

It’s been a wild and crazy 2012, with the continued global recession, new developments and trends in strategic management and entrepreneurship research and practice, the resurgence of the Austrian school, and perhaps the most exciting worldwide event of 2012, the publication of the Foss and Klein book. We have an exciting 2013 planned as well.

Here are our most popular posts written in 2012:

31 December 2012 at 1:56 pm 2 comments

Quickmemes for Academics

| Peter Klein |

True confession: I love quickmemes. Yes, I know, they’re juvenile, most are silly, and more than a few are vulgar. But they make me laugh, sometimes uncontrollably. What about versions for academics? We could have Success Prof, Overly Attached Coauthor, Successful Grad Student, Sheltering Suburban Department Head, and so on. I’ve made a few below; try your hand at the quickmeme site and share the results in the comments.

Success ProfOverly Attached CoauthorSuccessful Grad StudentSheltering Suburban Department HeadGood Guy ScholarBad Luck Instructor

Bonus: Earlier this year I was struggling with a particularly difficult revision and created this Karate Kyle collage as a therapeutic exercise. (It did make me feel better.)

23 December 2012 at 12:31 am 2 comments

Virtual Seminar with Benito Arruñada – Reminder

| Lasse Lien |

2013 will get a flying start here at O&M. Wednesday the 3rd of January we will kick off a virtual seminar over former guest blogger Benito Arruñada’s new book, Institutional Foundations of Impersonal Exchange (Chicago UP). Here are some reasons you should log on and join the discussion:

  • The book deals with issues that O&M readers love: Conditions that make transactions more or less difficult, and the implications of this for—among other things—investment, economic growth, and a number of other issues. Benito’s analysis is not some slightly modified version of the standard transaction cost story, though. It is quite original in its focus on the importance of impersonal exchange, and the tradeoffs involved in designing institutions that facilitate impersonal exchange.
  • The book is both original and well written, but don’t take my word for it. As Henry E. Smith of Harvard Law School puts it: “This is law and economics at its best. Benito Arruñada’s brilliant book greatly advances our understanding of how law and legal institutions affect the possibilities for trade. Very unusually, it also demonstrates how the needs of transacting parties and the interests of those who serve them profoundly shape a wide range of institutions from contract enforcement to title registries.”
  • A number of interesting contributors have already agreed to post comments, critique, and thoughts inspired by Benito’s book, including:
    • Wade Channell (USAID)
    • Pamela O’Connor (Monash University)
    • Klaus Deininger (World Bank)
    • Paul Dower (New Economic School)
    • Nuno Garoupa (University of Illinois)
    • P.J. Hill (Wheaton College and PERC)
    • Paul Holden (The Enterprise Research Institute)
    • Philip Keefer (World Bank)
    • Stuart Kerr (Millennium Challenge Corporation)
    • Amnon Lehavi (Radzyner School of Law, IDC)
    • Corrado Malberti (University of Luxembourg and Commissione Studi Int.li Consiglio Nazionale del Notariato)
    • Richard Messick (Consultant)
    • John Nye (George Mason University)
    • Matteo Rizzolli (Free University of Bozen)
    • Rod Thomas (Auckland University of Technology)
    • Giorgio Zanarone (CUNEF)
    • And of course Benito himself….

We hope many more will join in the discussion as it get’s going from Wednesday January 3rd. The more the merrier. So read the book and join the discussion—or join the discussion even if you haven’t read the book, but have thoughts on the subjects discussed.

20 December 2012 at 2:07 pm 2 comments

You See the Apocalypse, I See a Profit Opportunity

| Peter Klein |

Game theorists often discuss finitely repeated games by asking, “What if both parties know the world ends in period T?” If the principle of backwards induction holds, then I suppose no Mayans have been able to achieve cooperation in a repeated prisoners’ dilemma game for thousands of years — both parties know the other will defect in T-1, so each defects in T-2, and so on. . . . But where beliefs about the end of the world differ, there are potential gains from trade.

download (3)

See also this Hummer commercial, one of my favorites in explaining how time preference and discount rates affect behavior.

20 December 2012 at 10:23 am 3 comments

Review Paper on Prospect Theory

| Peter Klein |

We haven’t been entirely kind to behavioral economics, but we certainly recognize its importance, and have urged our colleagues to keep up with the latest arguments and findings. A new NBER paper by Nicholas Barberis summarizes the literature, focusing on prospect theory, and is worth a read.

Thirty Years of Prospect Theory in Economics: A Review and Assessment
Nicholas C. Barberis
NBER Working Paper No. 18621, December 2012

Prospect theory, first described in a 1979 paper by Daniel Kahneman and Amos Tversky, is widely viewed as the best available description of how people evaluate risk in experimental settings. While the theory contains many remarkable insights, economists have found it challenging to apply these insights, and it is only recently that there has been real progress in doing so. In this paper, after first reviewing prospect theory and the difficulties inherent in applying it, I discuss some of this recent work. While it is too early to declare this research effort an unqualified success, the rapid progress of the last decade makes me optimistic that at least some of the insights of prospect theory will eventually find a permanent and significant place in mainstream economic analysis.

18 December 2012 at 10:18 am 2 comments

TILEC Workshop on “Economic Governance and Organizations”

| Peter Klein |

The Tilburg Law and Economics Center (TILEC) is organizing a very interesting  workshop on ” Economic Governance and Organizations,” 6-7 June 2013 in Tilburg. The core themes revolve around governance mechanisms — legal, contractual, social, etc. — that can address social dilemmas (free riding). Keynote speakers are Luis Garicano, Henry Smith, Henry Hansmann, and Guido Tabellini. See the full details here. Sample questions of interest:

  • What makes organizations that combine classical incentives with some kind of pro-social mission, e.g. religious organizations or charities, more or less suitable to solve economic governance problems?
  • Can firms whose owners are mainly driven by profit incentives mitigate economic governance problems equally good as nonprofit organizations?
  • What are the effects on “industry structure” and  performance of allowing for-profits to enter into traditional not-for-profit sectors? Are there important differences between sectors?
  • There has been a recent trend to run charities as tightly controlled and efficiency-oriented as business firms (e.g. the Gates Foundation). What are the effects of this development on the effectiveness of those organizations (measured by the number of poor people helped, etc.)? What is the risk of crowding out charity workers’ intrinsic motivation by control?
  • (How) can organizations help to support political movements in the internet age, where decentralized social online networks seem omnipotent to coordinate citizens’ actions?
  • Is there a need to foster new organizational forms, such as “societal enterprises” next to traditional firms and not-for-profit organizations? If so, in which sectors, and what forms?
  • Is the decline of formal private organizations providing social capital, such as clubs or many other nonprofits, an inevitable consequence of technological advancements that enable individuals to do many things on their own that required big organizations in earlier times on their own today? If so, is this a problem?
  • What is the (a) de facto (b) optimal role of the state in allowing or promoting different types of organizations in order to mitigate economic governance problems? (How) does it differ between countries?
  • Is it true that the state has crowded out many private initiatives to support collective action, e.g. in the provision of local public goods such as water and sewage, but less so in contract enforcement? If so, which types of organizations are best suited to mitigate this or that economic governance problem? Why?
  • It seems that the number of old for-profit firms is very limited. In contrast, there are quite some religious (nonprofit) organizations which mitigate economic governance problems and are hundreds or even thousands of years old (e.g. Churches, monasteries or religiously affiliated hospitals/nursing homes). Is this impression true? If so, why? What can we learn from the longevity of many religious organizations for the organizational design of other nonprofit organizations?

15 December 2012 at 5:00 pm Leave a comment

Web-Savvy Profs

| Peter Klein |

top_web_savvy_professor_2012I’m #57 on a new list of Top 100 Web-Savvy Professors. Teppo smokes me at #19, but I’m right up there with Clay Christensen, Noriel Roubini, Austan Goolsbee, Richard Thaler, and other luminaries. I don’t know the group behind the list or how the ranking was compiled, but it looks good to me. In any case, this will give you more names to follow on blogs or Twitter. Enjoy!

11 December 2012 at 10:27 pm 2 comments

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Our Recent Books

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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