Posts filed under ‘Business/Economic History’
| Peter Klein |
We’ve addressed the widely held, but largely mistaken, view of creative artists and entrepreneurs as auteurs, isolated and misunderstood, fighting the establishment and bucking the conventional wisdom. In the more typical case, the creative genius is part of a collaborative team and takes full advantage of the division of labor. After all, is our ability to cooperate through voluntary exchange, in line with comparative advantage, that distinguishes us from the animals.
Christian Caryl’s New Yorker review of The Imitation Game makes a similar point about Alan Turing. The film’s portrayal of Turing (played by Benedict Cumberbatch) “conforms to the familiar stereotype of the otherworldly nerd: he’s the kind of guy who doesn’t even understand an invitation to lunch. This places him at odds not only with the other codebreakers in his unit, but also, equally predictably, positions him as a natural rebel.” In fact, Turing was funny and could be quite charming, and got along well with his colleagues and supervisors.
As Caryl points out, these distortions
point to a much broader and deeply regrettable pattern. [Director] Tyldum and [writer] Moore are determined to suggest maximum dramatic tension between their tragic outsider and a blinkered society. (“You will never understand the importance of what I am creating here,” [Turing] wails when Denniston’s minions try to destroy his machine.) But this not only fatally miscasts Turing as a character—it also completely destroys any coherent telling of what he and his colleagues were trying to do.
In reality, Turing was an entirely willing participant in a collective enterprise that featured a host of other outstanding intellects who happily coexisted to extraordinary effect. The actual Denniston, for example, was an experienced cryptanalyst and was among those who, in 1939, debriefed the three Polish experts who had already spent years figuring out how to attack the Enigma, the state-of-the-art cipher machine the German military used for virtually all of their communications. It was their work that provided the template for the machines Turing would later create to revolutionize the British signals intelligence effort. So Turing and his colleagues were encouraged in their work by a military leadership that actually had a pretty sound understanding of cryptological principles and operational security. . . .
The movie version, in short, represents a bizarre departure from the historical record. In fact, Bletchley Park—and not only Turing’s legendary Hut 8—was doing productive work from the very beginning of the war. Within a few years its motley assortment of codebreakers, linguists, stenographers, and communications experts were operating on a near-industrial scale. By the end of the war there were some 9,000 people working on the project, processing thousands of intercepts per day.
The rebel outsider makes for good storytelling, but in most human endeavors, including science, art, and entrepreneurship, it is well-organized groups, not auteurs, who make the biggest breakthroughs.
| Dick Langlois |
Attending academic presentations as a spectator – a pure consumer – can be great fun. On November 20, I drove up to Boston for one day of a wonderful conference, put together by the Business History program at Harvard Business School, on the History of Law and Business Enterprise (which probably merited its own separate blog post). This is an area that I am starting to get interested in. The conference was in many ways a showcase for the GHLR perspective on the history of corporate organization – the acronym referring to the work of Timothy Guinnane, Naomi Lamoreaux, Ron Harris, and Jean-Laurent Rosenthal, all of whom were there. The conference took place across the street from Harvard Stadium on the weekend of the Harvard-Yale game. Harvard won the football game (alas), but the conference was a Yale rout.
And last week I attended a presentation here at UConn that was even more vicarious fun. Our Humanities Institute invited Joel Kaye from Barnard to talk about his new book, A History of Balance, 1250-1375: The Emergence of a New Model of Equilibrium and Its Impact on Thought, which has just appeared from Cambridge. I was the token economist in the audience, even though two of his chapters are about economics. His argument is that medieval scholastic thought changed radically over this period, and produced by its end a different and arguably more sophisticated model of how the economic world works. This “new” model is not the standard Aristotelian version we are normally told about but was in fact something far closer to the views of the Scottish Enlightenment. (Needless to say, his telling of this was far more nuanced.) In addition to Nicole Oresme, whom I had heard of, he relies heavily on the work of Peter John Olivi, an earlier Franciscan theologian, whom I had never heard of. In Kaye’s telling, Olivi came close to something like the idea of the invisible hand. I took a quick look at standard history-of-thought texts, and nobody mentions Olivi at all – except Murray Rothbard, who credits him with discovering the subjective theory of value.
This is really a story about the Enlightenment of the High Middle Ages, which took place among academic clerics in an age of population growth, (extensive) economic growth, and urbanization. As Kaye apparently argues in an earlier book, these academics were constantly confronted with the market – especially in the thriving city of Paris – and were well versed in market practice; indeed, this knowledge of the market and money contributed to advances in physical and biological as well as social sciences. The medieval academic Enlightenment went into decline after the Black Death in the early fourteenth century. The resulting dislocations and the swing in relative prices – in favor of peasants and against landholders, including importantly the Church – reduced the centrality and authority of academic thought, even as they spurred institutional changes that would set the stage for growth in the early modern period. Population in Europe did not return to its pre-plague levels until the sixteenth or seventeenth century, and economic thought took just as long to recover. (I know this is whiggish, but I can’t help it.)
There was perhaps one connection between the two events. At HBS, Ron Harris talked about his ongoing research on the earliest history of the corporate form in the East and the West. Here the commenda contract is the centerpiece. That is presumably what schoolmen like Olivi called by the Latin term societas, which was not, however, the same institution as the societas publicanus of ancient Rome.
| Peter Klein |
We’ve featured some cool vintage diagrams before, such as the New York and Erie Railroad organizational chart and the diagrams of the Mundaneum. Here’s an information flow diagram from 1922, represented as a cutaway view of the Washington Star newspaper offices. As Jason Kottke notes, it provides “a fascinating view of how information flowed through a newspaper company in the 1920s. Raw materials in the form of electricity, water, telegraph messages, paper, and employees enter the building and finished newspapers leave out the back.”
| Peter Klein |
Via Michael Strong, a thoughtful review and critique of Western-style economic development programs and their focus on one-size-fits-all, “big idea” approaches. Writing in the New Republic, Michael Hobbs takes on not only Bono and Jeff Sachs and USAID and the usual suspects, but even the randomized-controlled-trials crowd, or “randomistas,” like Duflo and Banerjee. Instead of searching for the big idea, thinking that “once we identify the correct one, we can simply unfurl it on the entire developing world like a picnic blanket,” we should support local, incremental, experimental, attempts to improve social and economic well being — a Hayekian bottom-up approach.
We all understand that every ecosystem, each forest floor or coral reef, is the result of millions of interactions between its constituent parts, a balance of all the aggregated adaptations of plants and animals to their climate and each other. Adding a non-native species, or removing one that has always been there, changes these relationships in ways that are too intertwined and complicated to predict. . . .
[I]nternational development is just such an invasive species. Why Dertu doesn’t have a vaccination clinic, why Kenyan schoolkids can’t read, it’s a combination of culture, politics, history, laws, infrastructure, individuals—all of a society’s component parts, their harmony and their discord, working as one organism. Introducing something foreign into that system—millions in donor cash, dozens of trained personnel and equipment, U.N. Land Rovers—causes it to adapt in ways you can’t predict.
| Peter Klein |
I have a chapter in a new book edited by David Howden and Joseph Salerno, The Fed at One Hundred: A Critical View on the Federal Reserve System (New York: Springer, 2014). My chapter is called “Information, Incentives, and Organization: The Microeconomics of Central Banking,” and builds upon themes discussed many times on this blog, such as Fed independence. Here is a SSRN version of the chapter. The book comes out next month but you can pre-order at the Amazon link above.
| Peter Klein |
Another book recommendation, also courtesy of EH.Net. The book is Organizations in Time: History, Theory, Methods (Oxford University Press, 2014), edited by Marcelo Bucheli and R. Daniel Wadhwani. (Bucheli is author of an excellent book on the United Fruit Company.) Organizations in Time is about of the use of history in management research and education. Perhaps surprisingly, the field of business history is not usually part of the business school curriculum. In the US at least, business historians are typically affiliated with history or economics departments, not management departments or other parts of the business school. EH.Net reviewer Andrew Smith notes the following:
Until the 1960s, economic history and business history had an important place in business school teaching and research. Many management scholars then decided to emulate research models developed in the hard sciences, which led to history becoming marginal in most business schools. History lost respect among positivistic management academics because historians made few broad theoretical claims, rarely discussed their research methodologies, and did not explicitly identify their independent and dependent variables. Historians in management schools became, effectively, disciplinary guests in their institutions.
The period from 2008 to the present has witnessed a revival of interest in history on the part of consumers of economic knowledge in a variety of academic disciplines, not to mention society as a whole. . . . It is now widely recognized that there needs to be more history in business school research and teaching. However, as Marcelo Bucheli and Dan Wadhwani note in the introductory essay, this apparent consensus obscures a lack of clarity about what a “historic turn” would, in practice, involve (p. 5).
This volume argues that the historic turn cannot simply be about going to the historical record to gather data points for the testing of various social-scientific theories, which is what scholars such as Reinhart and Rogoff do. Rather than being yet another device for allowing the quantitative social sciences to colonize the past, the historic turn should involve the adoption of historical methods by other management school academics. At the very least, people in the field of organization studies should borrow more tools from the historian’s toolkit.
Read the book (or at least the review) to learn more about these tools and approaches, which involve psychology, embeddedness, path dependence, and other concepts familiar to O&M readers.
| Peter Klein |
As with other technologies involving network effects, the early telephone industry featured competing, geographically overlapping networks. Robert MacDougall provides a fascinating history of this period in The People’s Network: The Political Economy of the Telephone in the Gilded Age (University of Pennsylvania Press, 2013). From the book blurb:
In the decades around 1900, ordinary citizens—farmers, doctors, small-town entrepreneurs—established tens of thousands of independent telephone systems, stringing their own wires to bring this new technology to the people. Managed by opportunists and idealists alike, these small businesses were motivated not only by profit but also by the promise of open communication as a weapon against monopoly capital and for protection of regional autonomy. As the Bell empire grew, independents fought fiercely to retain control of their local networks and companies—a struggle with an emerging corporate giant that has been almost entirely forgotten.
David Hochfelder wrote a thoughtful review which appeared today on EH.Net. As Hochfelder points out, the history of the telephone is not just about technology and market structure, but broader social themes as well:
At one level, this is a story about industrial competition. At a deeper level, it reveals competing visions of an important technology, the social role that it ought to play. MacDougall shows that the Bell System and the Independents envisioned the telephone in far different ways. Bell, especially under Theodore Vail, president of AT&T between 1907 and 1919, sought to build a unified telecommunications network that spanned the United States. Bell Canada espoused a different vision, that the telephone ought to remain an expensive urban medium primarily used for business purposes. Both Bell systems shared the ideology that the telephone industry ought to be controlled by centralized, national corporations. On the other hand, the Independents described the Bell System as a grasping octopus that wanted a stranglehold over the nation’s communications. The Independents offered instead a vision of the telephone as a people’s network that enhanced local ties and preserved community autonomy. In the United States, MacDougall claims that the Independents’ vision for the telephone “descended from a civic understanding of communication that went back to the American Revolution,” that “free and open communications were a basic ingredient of democracy” (p. 5). On a more mundane level, the Independents encouraged social uses of the telephone — like gossiping and banjo-playing — that the Bell System actively discouraged at the time.