Author Archive
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
What We’re Really Doing
| Lasse Lien |
I’m often at pains to describe to my family what happens at academic conferences, and why its important that I attend them. But not any longer.
For further study, check out the associated paper.
HT: Eirik S. Knudsen
“A Simple Model of the Evolution of Simple Models of Evolution”
| Lasse Lien |
If you don’t think this title is cool there is something very wrong with you. Here is the associated abstract:
Abstract: In the spirit of the many recent simple models of evolution inspired by statistical physics, we put forward a simple model of the evolution of such models. Like its objects of study, it is (one supposes) in principle testable and capable of making predictions, and gives qualitative insights into a hitherto mysterious process.
And this is the essence of the simple model(2):
- A physicist runs across or concocts from whole cloth a mathematical model which is simple, neat, and contains a great many variables of the same sort.
- The physicists has heard of Darwin (1859), and may even have read Dawkins (1985) or some essays by Gould, but wouldn’t know Fisher (1958), Haldane (1932), and Wright (1986) from the Three Magi, and doesn’t dream that such a subject as mathematical evolutionary biology exists.
- The physicist is aware that lots of other physicists are interested in annexing biology as a province of statistical physics.
- The physicist interprets his multitude of variables as species or (if slightly more sophisticated) as genotypes, and proclaims that he has found “Darwin’s Equations” (cf. Bak et al. (1994)), or, more modestly, has made an important step towards eventually finding those equations.
- His paper is submitted for review to other physicists, who are just as ignorant of biology as he, but see that it’s about equivalent to the other papers on evolution by physicists. They publish it.
- The paper is read by other physicists, because at least it’s not another derivation of specific heats on some convoluted lattice under a Hamiltonian named for some Central European worthy now otherwise totally forgotten. Said physicists think this is cutting-edge evolutionary theory.
- Some of those physicists will know or discover simple, neat models with lots of variables of the same type.
(Shalizi and Tozier, 1999, p. 2)
What could substitute for physics and evolution here if we wanted to make a social science analogy? I think game theory could play the role of physics in many cases. What else?
Overdue on Boundaries/Crises
| Lasse Lien |
Good papers often seem like they are long overdue. One can’t help but wonder why they weren’t written a long time ago since the questions they raise are of such obvious interest and importance. In that sense I think this paper qualifies as overdue:
Abstract: How economic crises impact the boundaries of firms has been offered virtually no attention in the literature on the theory of the firm. I review the best-known theories of the firm and identify the variables that matter for the explanation of firm boundaries. I then examine how an economic crisis may impact these variables and change efficient firm boundaries. The various theories of the firm have difficulties explaining how firms efficiently adapt their boundaries to such prominent characteristics of economic crisis as declining demand and increased costs of external finance. However, all these theories stress uncertainty as an antecedent of firm organization, and as uncertainty is also an important characteristic of an economic crisis I examine how uncertainty is allowed to play out in the various theories in order to identify what predictions we can derive from the theory regarding changes in efficient firm boundaries as consequence of changes in uncertainty. The analysis suggests that we need to be more precise in describing the nature of the uncertainty that is assumed in the various theories. Moreover, allowing for changes in levels of uncertainty requires that we take the processes of boundary changes into account in the theory of firm boundaries.
Foss, Kirsten. 2010. How do economic crises impact firm boundaries? European Management Review7: 217–27.
Academic Nepotism in Italy
| Lasse Lien |
In case you wonder the author of this paper — Stefano Allesina — works in Chicago:
Abstract: Nepotistic practices are detrimental for academia. Here I show how disciplines with a high likelihood of nepotism can be detected using standard statistical techniques based on shared last names among professors. As an example, I analyze the set of all 61,340 Italian academics. I find that nepotism is prominent in Italy, with particular disciplinary sectors being detected as especially problematic. Out of 28 disciplines, 9 – accounting for more than half of Italian professors – display a significant paucity of last names. Moreover, in most disciplines a clear north-south trend emerges, with likelihood of nepotism increasing with latitude. Even accounting for the geographic clustering of last names, I find that for many disciplines the probability of name-sharing is boosted when professors work in the same institution or sub-discipline. Using these techniques policy makers can target cuts and funding in order to promote fair practices.
Allesina, S. (2011). “Measuring Nepotism through Shared Last Names: The Case of Italian Academia.” PLoS ONE 6(8): e21160. doi:10.1371/journal.pone.0021160
The Menger Sponge
| Lasse Lien |
Earlier the investigative arm of O&M (with only limited hacking of phones and bribing of police officers) discovered the sensational news that Peter is named after a bottle with no inside and no outside, the endlessly fascinating Klein bottle. Apparently this sort of thing is quite common in Austrian circles. We can now reveal that Menger is named after a sponge, the Menger sponge, which is described in greater detail here.
(Actually the Menger Sponge is named after Karl the mathematician, son of Carl.)
Productivity: The Mother of (Nearly) All Good Things
| Lasse Lien |
The mother of all good (material) things is productivity growth. Competitive advantage, firm level growth and survival, profits, economy-wide economic growth, job creation, and destruction, etc. are all outcomes that depend critically on relative productivity and productivity changes. So if you understood productivity really well, you would understand a lot about (material) outcomes across firms, industries and countries, too.
Also, if one wants to advance “the human condition” it is presumably better to advance the understanding of productivity than profits, since profits are contaminated by market power. Profit maximization is good because – or to the degree – it tends to raise productivity. So while profit maximization and competition are means, productivity growth is the goal.
Though few would argue against the fundamental importance of productivity, productivity is nevertheless quite rarely used as a dependent (or independent) variable in strategy, organizational economics, organization theory, leadership, innovation, etc. The reason is probably that the considerable problems associated with measuring productivity has scared us into focusing on more easily observable variables, such as accounting profits, Tobin’s Q, EVA, sales growth, survival, etc.
However, there is a large literature in economics that attacks productivity head on, and tries to elucidate its determinants. Though there is an unfortunate bias towards manufacturing in this literature (due to measurement issues), the findings from this research stream still makes extremely interesting reading (IMHO). Here is a recent review of the key findings from the past decade:
Economists have shown that large and persistent differences in productivity levels across businesses are ubiquitous. This finding has shaped research agendas in a number of fields, including (but not limited to) macroeconomics, industrial organization, labor, and trade. This paper surveys and evaluates recent empirical work addressing the question of why businesses differ in their measured productivity levels. The causes are manifold, and differ depending on the particular setting. They include elements sourced in production practices — and therefore over which producers have some direct control, at least in theory — as well as from producers’ external operating environments. After evaluating the current state of knowledge, I lay out what I see are the major questions that research in the area should address going forward. (JEL D24, G31, L11, M10, O30, O47)
Syverson, Chad. 2011. “What Determines Productivity?” Journal of Economic Literature 49(2): 326–65.
Klein Even Bigger
| Lasse Lien |
More has been added to Peter’s already considerable pile of honors and distinctions. This time it’s the European Management Review’s best paper award for 2010 for “Toward a Theory of Public Entrepreneurship,” European Management Review 7: 1-15 (2010) by Peter G. Klein, Joseph T. Mahoney, Anita M. McGahan, and Christos N. Pitelis. (Here’s the version at the publisher’s website.)
Congratulations to Peter and coauthors!
Entirely New Working Paper Approach
| Lasse Lien |
Here’s a new WP of mine (with T. Hillestad). Check out the sublimely boring title. We figure that the more boring we can make the title, the better what follows will appear. Earlier I have tended to do it the other way around, i.e. fancy title and intensely boring thereafter.
Recession, HR and Change
We document how the recession in the wake of the financial crisis created a general surge in pro-change attitudes and behavior. Next, we examine variation across firms with respect to this change boost. In particular we focus on how and why a firm’s use of HR-measures such as training, pay changes and layoffs matters. We find that training and layoffs increases the relative size of the effect, while pay cuts reduce it. We make sense of these findings by looking at managers’ choice among HR-measures as a signal used by employees to determine their employment risk. The level of employment risk is in turn linked to employees’ investments in change in a nonlinear, U-shaped fashion.
Social Science Is For the Asocial?
| Lasse Lien |
I went to a physics seminar the other day. The presenter, an eminent astronomer, made the following remark as he was trying to convey what it was like to work in the natural sciences:
If you hate people and would prefer to do most of your work alone in your office, you should join the social sciences. If you love people and would like to work closely with many others in large research teams, you should join the natural sciences.
The paradox is just beautiful. You self-select to the social sciences because you hate people and want as little as possible to do with them.
Biased Testing
| Lasse Lien |
The Onion asks whether tests are biased against students who don’t give a sh…. — and whether in fact the whole education system is catering to those who don’t think education is a boring waste of time.
Now that I think of it I have on several occasions noted that lazy, uninterested students tend to do systematically worse on my tests. So I am part of this unreasonable and unjust system, and I expect many O&M readers are too.
I think we should all reflect on this over the weekend.
Thanks to Eirik S. Knudsen for the pointer.
If You’re Not a Cynic Yet, this Might Help…
| Lasse Lien |
Revolving Door Lobbyists
Jordi Blanes i Vidal, Mirko Draca, Christian Fons-Rosen.Abstract: Washington’s “revolving door” — the movement from government service into the lobbying industry — is regarded as a major concern for policy-making. We study how ex-government staffers benefit from the personal connections acquired during their public service. Lobbyists with experience in the office of a US Senator suffer a 24% drop in generated revenue when that Senator leaves office. The effect is immediate, discontinuous around the exit period and long-lasting. Consistent with the notion that lobbyists sell access to powerful politicians, the drop in revenue is increasing in the seniority of and committee assignments power held by the exiting politician.
By See the full paper here.
Something to Ruin Your Weekend
| Lasse Lien |
On a Monday morning, a professor says to his class, “I will give you a surprise examination someday this week. It may be today, tomorrow, Wednesday, Thursday, or Friday at the latest. On the morning of the examination, when you come to class, you will not know that this is the day of the examination.”
Well, a logic student reasoned as follows: “Obviously I can’t get the exam on the last day, Friday, because if I haven’t gotten the exam by the end of Thursday’s class, then on Friday morning I’ll know that this is the day, and the exam won’t be a surprise. This rules out Friday, so I now know that Thursday is the last possible day. And, if I don’t get the exam by the end of Wednesday, then I’ll know on Thursday morning that this must be the day (because I have already ruled out Friday), hence it won’t be a surprise. So Thursday is also ruled out.”
The student then ruled out Wednesday by the same argument, then Tuesday, and finally Monday, the day on which the professor was speaking. He concluded: “Therefore I cannot get the exam at all; the professor cannot possibly fulfill his statement.” Just then, the professor said: “Now I will give you your exam.” The student was most surprised, but the professor seems to have kept his word.
Not Entirely Sure I Got This…
| Lasse Lien |
From the British Journal of Management I got this abstract.
The Sublime Object of Desire (for Knowledge): Sexuality at Work in Business and Management Schools in England
This paper explores why and how sexuality intertwines with gender in the organizational context of academic institutions. Drawing on insights from the work of psychoanalyst post-structuralist feminists Luce Irigaray, Hélène Cixous and Julia Kristeva, we explore the institutionalized abjection of the real and imagined (woman’s) body as the root cause of her relative exclusion from knowledge (creation) and her subordinate position in it. The project is analytical as well as political: it both unravels and opposes the ways gender is superimposed on sexuality and how we as academics might collude, legitimize and perpetuate and gendered sexualized (and therefore exclusionary) ways of organizing in/of society. The findings of an empirical study of a sample of women academics in management and business schools in England are discussed in the light of the proposed theory.
I am not sure I fully get this, but my hunch is that I am guilty and should try to improve — but what, specifically, should I do?
The AER Canon
| Lasse Lien |
The American Economic Review is celebrating its 100th anniversary and, to commemorate, Volume 101, Issue 1 names the top 20 papers during its first 100 years as judged by the following committee: Kenneth J. Arrow, B. Douglas Bernheim, Martin S. Feldstein, Daniel L. McFadden, James M. Poterba, and Robert M. Solow. The list and the committee’s justification for including each paper can be found here. The committee admits using a combination of quantitative as well as qualitative criteria, but I cannot see that the list is idiosyncratic in any particular way. A balanced and reasonable canon IMHO:
Alchian, Armen A., and Harold Demsetz. 1972. “Production, Information Costs, and Economic Organization.”American Economic Review, 62(5): 777–95.
Arrow, Kenneth J. 1963. “Uncertainty and the Welfare Economics of Medical Care.” American Economic Review, 53(5): 941–73.
Cobb, Charles W., and Paul H. Douglas. 1928. “A Theory of Production.” American Economic Review,18(1): 139–65.
Deaton, Angus S., and John Muellbauer. 1980. “An Almost Ideal Demand System.” American Economic Review, 70(3): 312–26.
Diamond, Peter A. 1965. “National Debt in a Neoclassical Growth Model.” American Economic Review, 55(5): 1126–50.
Diamond, Peter A., and James A. Mirrlees. 1971. “Optimal Taxation and Public Production I: Production Efficiency.” American Economic Review, 61(1): 8–27.
Diamond, Peter A., and James A. Mirrlees. 1971. “Optimal Taxation and Public Production II: TaxRules.” American Economic Review, 61(3): 261–78.
Dixit, Avinash K., and Joseph E. Stiglitz. 1977. “Monopolistic Competition and Optimum Product Diversity.” American Economic Review, 67(3): 297–308.
Friedman, Milton. 1968. “The Role of Monetary Policy.” American Economic Review, 58(1): 1–17.
Grossman, Sanford J., and Joseph E. Stiglitz. 1980. “On the Impossibility of Informationally Efficient Markets.” American Economic Review, 70(3): 393–408.
Harris, John R., and Michael P. Todaro. 1970. “Migration, Unemployment and Development: A Two-Sector Analysis.” American Economic Review, 60(1): 126–42.
Hayek, F. A. 1945. “The Use of Knowledge in Society.” American Economic Review, 35(4): 519–30.
Jorgenson, Dale W. 1963. “Capital Theory and Investment Behavior.” American Economic Review, 53(2): 247–59.
Krueger, Anne O. 1974. “The Political Economy of the Rent-Seeking Society.” American Economic Review, 64(3): 291–303.
Krugman, Paul. 1980. “Scale Economies, Product Differentiation, and the Pattern of Trade.” American Economic Review, 70(5): 950–59.
Kuznets, Simon. 1955. “Economic Growth and Income Inequality.” American Economic Review, 45(1): 1–28.
Lucas, Robert E., Jr. 1973. “Some International Evidence on Output-Inflation Tradeoffs.” American Economic Review, 63(3): 326–34.
Modigliani, Franco, and Merton H. Miller. 1958. “The Cost of Capital, Corporation Finance and the Theory of Investment.” American Economic Review, 48(3): 261–97.
Mundell, Robert A. 1961. “A Theory of Optimum Currency Areas.” American Economic Review,51(4): 657–65.
Ross, Stephen A. 1973. “The Economic Theory of Agency: The Principal’s Problem.” American Economic Review, 63(2): 134–39.
Shiller, Robert J. 1981. “Do Stock Prices Move Too Much to Be Justified by Subsequent Changes in Dividends?” American Economic Review, 71(3): 421–36.
Another Field Experiment
| Lasse Lien |
As previously pointed out, field experiments are rare. Here is another. This one is on the quality of decision making. I guess the authors’ finding that men are more consistent (i.e. rational) decision makers than women will raise an eyebrow or two. I don’t know about other male O&M readers, but I am definitely taking home a copy to show my wife.
Who Is (More) Rational?
Syngjoo Choi, Shachar Kariv, Wieland Müller, and Dan SilvermanyRevealed preference theory offers a criterion for decision-making quality: if decisions are high quality then there exists a utility function that the choices maximize. We conduct a large-scale field experiment that enables us to test subjects’ choices for consistency with utility maximization and to combine the experimental data with a wide range of individual socioeconomic information for the subjects. There is considerable heterogeneity in subjects’ consistency scores: high-income and high-education subjects display greater levels of consistency than low-income and low-education subjects, men are more consistent than women, and young subjects are more consistent than older subjects. We also find that consistency with utility maximization is strongly related to wealth: a standard deviation increase in the consistency score is associated with 15-19 percent more wealth. This result conditions on socioeconomic variables including current income, education, and family structure, and is little changed when we add controls for past income, risk tolerance and the results of a standard personality test used by psychologists.
Academic Discourse – Math Edition
| Lasse Lien |
(01-27) 05:04 PST San Fernando, Calif. (AP) –
A California university professor has been charged with peeing on a colleague’s campus office door.
Prosecutors charged 43-year-old Tihomir Petrov, a math professor at California State University, Northridge, with two misdemeanor counts of urinating in a public place. Arraignment is scheduled Thursday in Los Angeles County Superior Court in San Fernando.
Investigators say a dispute between Petrov and another math professor was the motive.
The Los Angeles Times says Petrov was captured on videotape urinating on the door of another professor’s office on the San Fernando Valley campus. School officials had rigged the camera after discovering puddles of what they thought was urine at the professor’s door.
Finally — a Field Experiment!
| Lasse Lien |
Field experiments represent a killer combination of a causal design and external validity — the best of both the classical (laboratory) experiment and the natural experiment. Unfortunately, field experiments in strategy, management, organizational economics, etc. are often prohibitively costly, morally questionable, or both. But sometimes a field experiment is feasible, and when it is, it tends to stand out as particularly interesting.
This paper illustrates this point quite well, IMHO. The paper is a field experiment on the not entirely trivial question: Does Management Matter?
Friedman, 1953
| Lasse Lien |
Some things just cannot be ignored. A prime example is Friedman’s 1953 essay “The Methodology of Positive Economics.” As most O&M readers will know Friedman’s key claim is that a theory should be judged by its predictive accuracy, not the realism of its assumptions. On the contrary, a theory that makes dramatic (i.e., unrealistic) simplifying assumptions and still generates good predictive results is considered a better theory than a more complex (i.e., realistic) theory with the same predictive performance. Few texts, and surely no other text on economic methodology, is loved, hated, and cited by so many. In much of mainstream economics Friedman’s position — or some version thereof — is routinely relied upon. For example, imagine defending game theory on the realism of its assumptions.
In 2003, on the 50 year anniversary of its publication, a conference was held at the Erasmus University in Rotterdam where the legacy of this paper was discussed. In 2009 a book was published containing a collection of papers from this conference, edited by Uskali Mäki. A link to this book can be found here, and a recently published (harsh) review of the book can be found here. Note that the book review makes interesting reading even if you do not intend to read the book (but have read the original essay).
If this is your cup of tea, you might also like this remarkable paper.
The Viability of the Survivor Principle
| Lasse Lien |
The survivor principle holds that the competitive process weeds out inefficient firms, so that hypotheses about efficient behavior can be tested by observing how firms actually behave. This principle underlies a large body of empirical work in strategy, economics, and management. But do competitive markets actually display what is efficient? Can we safely make the shortcut of hypothesizing that, say X, is efficient, and then test that claim by observing whether firms actually do X? Surely the competitive process is somewhat noisy and imperfect. While we all know anecdotes that seem to disprove the SP it may still be a reasonable approximation in the aggregate. This astonishing paper tests the validity of the SP in the context of corporate diversification.
Counterintuitive Is Cool: The Case of Markups
| Lasse Lien |
Counterintuitive empirical findings are endlessly more fascinating than expected or obvious ones. One counterintuitive finding I have picked up since the onset of the financial crisis is that markups are on average counter-cyclical. To spell it out: markups go up in a recessions and they fall in a boom (on average). Maybe it’s just me, but if asked about this two years ago I would have bet that markups were bid down during recessions in all but extreme market structures.
Here is a cool new paper that deals with this and several other interesting aspects of the dynamics of business cycles:
We characterise endogenous market structures under Bertrand and Cournot competition in a DSGE model. Short-run mark ups vary countercyclically because of the impact of entry on competition. Long-run mark ups are decreasing in the discount factor and in productivity, and increasing in the exit rate and in the entry costs. Dynamic inefficiency can emerge due to excessive entry under Cournot competition. Positive temporary shocks attract entry, which strengthens competition so as to reduce the mark ups temporarily and increase real wages: this competition effect creates an intertemporal substitution effect which boosts consumption and employment. Endogenous market structures improve the ability of a flexible prices model in matching impulse response functions and second moments for US data.
Etro, F. and Colciago, A., “Endogenous Market Structures and the Business Cycle,” Economic Journal 120 (2010): 1201–33.
Survivor Bias: WW2 Edition
| Lasse Lien |
During World War 2 the British Royal Air Force (and Navy) pioneered the use of empirical and statistical analysis to improve performance — laying the foundation for the field we now know as Operations Research.
One fascinating anecdote is how these pioneers used data on damage from German air defense fire. The RAF collected large amounts of data on exactly where returning aircraft had received damage. The intuitive recommendation would be to reinforce the aircraft were the data indicated they took the most damage. However, realizing that they only had data from surviving aircraft, the OR group under leadership of Patrick Blackett recommended that they reinforce the aircraft in the sections where no damage was recorded in the data. Clever chaps, I dare say.
Suing in America
| Lasse Lien |
As a temporary resident of the US I find much to enjoy and admire. What I find slightly less admirable is the American litigiousness and the transaction costs it creates (for example the endless number of forms and paperwork needed to get simple services ). Here are some “random” examples of lawsuits (via Clean Laughs):
An inmate filed a $5 million lawsuit against himself (he claimed that he violated his own civil rights by getting arrested) — then asked the state to pay because he has no income in jail. He said, “I want to pay myself 5 million dollars, but ask the state to pay it on my behalf since I can’t work and am a ward of the state.” The judge was not impressed by his ingenuity, and dismissed the suit as frivolous. (Source: CALA)
A convicted bank robber on parole robbed a California Savings and Loan Branch. The bank robber placed the money roll containing the hidden Security Pac in his front pants pocket. The Security Pac released tear gas and red dye resulting in second and third degree burns requiring treatment at a hospital. The bank robber sued the bank, the Security Pac manufacturer, the city the police and the hospital. (Source: ATRA)
A writer was sued for $60 million dollars after writing a book about a convicted Orange County serial killer. Although the inmate is on death row, he claimed that he was innocent in all 16 murders, so the characterization of him as a serial killer was false, misleading and “defamed his good name”. In addition, he claimed those falsehoods would cause him to be “shunned by society and unable to find decent employment” once he returned to private life. The case was thrown out in a record 46 seconds, but only after $30,000 in legal fees were incurred by the writer’s publisher. (Source: CALA)
A minister and his wife sued a guide-dog school for $160,000 after a blind man learning to use a seeing-eye dog trod on the woman’s toes in a shopping mall. South-eastern Guide Dogs Inc., a 13-year old guide-dog school and the only one of its kind in the Southeast, raises and trains seeing-eye dogs at no cost to the visually impaired. The school is located about 35 miles south of Tampa. The lawsuit was brought by Carolyn Christian and her husband, the Rev. William Christian. Each sought $80,000. The couple filed suit 13 months after Ms Christian’s toe was stepped on and reportedly broken by a blind man who was learning to use his new guide dog, Freddy, under the supervision of an instructor. They were practicing at a shopping mall. According to witnesses, Ms Christian made no effort to get out of the blind man’s way because she “wanted to see if the dog would walk around me”. (Source: ATRA and Houston Chronicle, 95-10-27) (more…)
Krugman on Interstellar Trade
| Lasse Lien |
You may disagree with Paul Krugman, but you cannot deny that he’s dealing with really, really big issues. Here is the abstract from his most recent paper:
This article extends interplanetary trade theory to an interstellar setting. It is chiefly concerned with the following question: how should interest charges on goods in transit be computed when the goods travel at close to the speed of light? This is a problem because the time taken in transit will appear less to an observer traveling with the goods than to a stationary observer. A solution is derived from economic theory, and two useless but true theorems are proved. (JEL F10, F30)
The full reference and the paper can be found here. The next step is to extend Krugman’s work to intergalaxy trade and wormholes in spacetime.
Where to Submit?
| Lasse Lien |
If you havent optimized your submission strategy this paper might be useful. Here’s the abstract:
In this paper, we analyze the problem faced by impatient researchers attempting to balance the considerations of journal quality, submission lags, and acceptance probabilities in choosing appropriate outlets for their work. We first study the case in which probabilities of submission outcomes are exogenous parameters and show that authors can find the optimal submission path through the use of journal ‘scores’ based only on the journals’ characteristics and the author’s degree of impatience. Then, we analyze a more realistic framework in which acceptance probability is determined by the quality of the manuscript, in which the reviewing process may be imperfect, and in which authors may not be certain of the manuscript’s quality. Throughout, we illustrate our analysis with data on actual economics journals. We also consider the problem of journals facing a large number of submissions, limited space, and limited resources to review papers and, in particular, we examine the relative effectiveness of using submission fees and reviewing lags to ration article submissions.
Reference: Martin Heintzelman and Diego Nocetti, Diego (2009), “Where Should we Submit our Manuscript? An Analysis of Journal Submission Strategies,” The B.E. Journal of Economic Analysis & Policy: 9 : Iss. 1 (Advances), Article 39.
Are Index Funds Immoral?
| Lasse Lien |
If I had money to invest, which I don’t, I would probably invest via an index fund. I know just enough empirical finance to realize that beating an index fund is very difficult (impossible according to some) unless you are either very lucky or an inside trader. The reason is of course the efficient markets hypothesis. The stock market factors in all relevant information at lightning speed and without bias. However, this can only be so because there are enough investors that do not invest via index funds. If everyone did, the pricing would not be informative at all. One might argue that index fund investors are free riders on those that do fundamental analysis, and a sinister threat to the very market efficiency that they thrive on.
I guess in equilibrium one would expect index investing to increase until market pricing is so inefficient that the expected returns from it is driven down to around the levels of the best alternative.
Unfairly Neglected Papers
| Lasse Lien |
I guess we’ve all read papers thinking: Why isn’t this paper routinely cited and part of the canon of …………. (insert whatever). Here is an example of such a paper — IMHO. Be warned that the abstract isn’t close to doing justice to the paper itself. I would love to see examples of the papers O&M readers think are most unfairly neglected. Of course we all feel that our own papers top this list, but ignoring those, which are they?
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.
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