Posts filed under ‘Business/Economic History’
Schumptoberfest
| Peter Klein |
Kudos to former guest blogger David Gerard for helping organize and host the conference with the über-cool name, Schumptoberfest, 21-23 October at Lawrence University in Appleton, Wisconsin. David Hounshell is giving the keynote address, and the rest looks good too.
Two Finance Papers of Interest
| Peter Klein |
Two recent review-type papers from NBER:
Behavioral Corporate Finance: An Updated Survey
Malcolm Baker, Jeffrey Wurgler
NBER Working Paper No. 17333
Issued in August 2011We survey the theory and evidence of behavioral corporate finance, which generally takes one of two approaches. The market timing and catering approach views managerial financing and investment decisions as rational managerial responses to securities mispricing. The managerial biases approach studies the direct effects of managers’ biases and nonstandard preferences on their decisions. We review relevant psychology, economic theory and predictions, empirical challenges, empirical evidence, new directions such as behavioral signaling, and open questions.
A Brief History of Regulations Regarding Financial Markets in the United States: 1789 to 2009
Alejandro Komai, Gary Richardson
NBER Working Paper No. 17443
Issued in September 2011In the United States today, the system of financial regulation is complex and fragmented. Responsibility to regulate the financial services industry is split between about a dozen federal agencies, hundreds of state agencies, and numerous industry-sponsored self-governing associations. Regulatory jurisdictions often overlap, so that most financial firms report to multiple regulators; but gaps exist in the supervisory structure, so that some firms report to few, and at times, no regulator. The overlapping jumble of standards; laws; and federal, state, and private jurisdictions can confuse even the most sophisticated student of the system. This article explains how that confusion arose. The story begins with the Constitutional Convention and the foundation of our nation. Our founding fathers fragmented authority over financial markets between federal and state governments. That legacy survives today, complicating efforts to create a financial system that can function effectively during the twenty-first century.
The Institutional Revolution
| Peter Klein |
I’m very excited about Doug Allen’s forthcoming book The Institutional Revolution (University of Chicago Press). Trained by Yoram Barzel (and hence part of the Tree of Zvi), Doug is a leading contemporary scholar on property rights, transaction costs, contracting, and economic history. His work on agricultural contracting with Dean Lueck, including their 2002 book The Nature of the Farm, is a classic contribution to the economics literature on economic organization. He also has a very good introductory textbook. More information is at Doug’s informative (and amusing) website.
Here’s the cover blurb for the new book:
Few events in the history of humanity rival the Industrial Revolution. Following its onset in eighteenth-century Britain, sweeping changes in agriculture, manufacturing, transportation, and technology began to gain unstoppable momentum throughout Europe, North America, and eventually much of the world—with profound effects on socioeconomic and cultural conditions.
In The Institutional Revolution, Douglas W. Allen offers a thought-provoking account of another, quieter revolution that took place at the end of the eighteenth century and allowed for the full exploitation of the many new technological innovations. Fundamental to this shift were dramatic changes in institutions, or the rules that govern society, which reflected significant improvements in the ability to measure performance—whether of government officials, laborers, or naval officers—thereby reducing the role of nature and the hazards of variance in daily affairs. Along the way, Allen provides readers with a fascinating explanation of the critical roles played by seemingly bizarre institutions, from dueling to the purchase of one’s rank in the British Army.
Engagingly written, The Institutional Revolution traces the dramatic shift from premodern institutions based on patronage, purchase, and personal ties toward modern institutions based on standardization, merit, and wage labor—a shift which was crucial to the explosive economic growth of the Industrial Revolution.
Bonus: Here’s the syllabus from Doug’s course on the economics of property rights.
Technology Quote of the Day
| Peter Klein |
Jobs and Apple have done the best job of answering with their products the question posed by wiki inventory Ward Cunningham: What’s the simplest thing that could possibly work? As I’ve stressed before, most technologists / nerds / geeks don’t think this way — they think that success comes from cramming in features and functions, bells and whistles.
I’ve made this point many times in my speaking and teaching on technology and innovation, particularly with regard to so-called “QWERTY effects” and the claim that markets with network externalities tend to select suboptimal technologies. A serious problem in this literature is that “optimal” is almost always defined from the engineer’s point of view, not the consumer’s (e.g., Betamax was “really” better than VHS because the picture quality was higher and the tapes more compact, even though the recording time was shorter and the recorders much more expensive). Aside from what the market chooses, by what standard do we deem one technology more “efficient” — in an economic sense — than another?
As one disgruntled RIM employee complained recently to upper management: “The whole campaign around the [Blackberry] Playbook seems to be ‘IT DOES FLASH! LOOK!’ . . . but honestly, my mother doesn’t know or care about that. She wants to know ‘can I play Angry Birds?’”
Entrepreneurship in Africa
| Dick Langlois |
Inspired by Peter Lewin’s recent post on the beauty of Africa, I decided to hop on a plane to Peter’s native South Africa. I haven’t been to a wildlife park, though I have found myself twice down in caves, one containing fossils and one a disused gold mine. I also took in the Apartheid Museum, which seemed to me (as an outsider) to be extremely well done. It didn’t pull any punches but always appeared neutral, even analytical. For me, the museum’s story underscored the point that Walter Williams and others always used to argue while apartheid was going on: that the system required, and was implemented through, central planning and massive government intervention in markets. (Apparently they even had a wacky scheme to move people from their distant segregated homes to and from urban work using high-speed bullet trains.) I was struck by how similar the revolution here was to the contemporaneous one in Eastern Europe. It was a revolt by a middle class that was denied human and political rights — and also economic opportunity — by an increasingly inefficient and distortive state apparatus.
A couple of exhibits at the Apartheid Museum asserted that in the heyday of gold mining the British had “fixed the price of gold.” This price fixing forced the mine owners constantly to lower production costs, which they did by deskilling mining operations – using technology to break the process into simpler tasks (Ames and Rosenberg 1965) — in order to hire cheaper labor. By contrast, the mining museum suggested that there was plenty of skill-enhancing innovation as well, like pneumatic drills replacing the hammer and chisel, which reduced from eight hours to five minutes the time it took a worker to carve out a blasting hole.
Oddly, neither museum mentioned that gold was the monetary standard. (You know this already: it’s not that the “price of gold” was fixed; it’s that the value of the currency was defined in terms of units of gold.) This might sound like an economist’s carping. But I mention it because on this trip I also encountered the strange combination of task design and monetary economics in a strikingly different African context. I’m actually in south Africa not primarily for the tourism (at least in principle) but to visit Giampaolo Garzarelli and his Institutions and Political Economy Group at the University of the Witwatersrand and, as Peter Klein mentioned in an earlier post, to attend a conference on “Open Source, Innovation, and New Organizational Forms,” which took place on Monday. Joel West, another of the participants, has already blogged elsewhere about the conference. One paper, by an MA student from Kenya – Joel has already blogged about this as well – discussed an amazing phenomenon I had never heard about before: crowdsourcing in developing countries using mobile phones. A company called txteagle allows customers to outsource cognitive work by breaking tasks into small pieces, which pieces are then sent to participants via text message. (As phones have become cheaper they have become ubiquitous in the developing world.) For example, the participant could be asked to translate a phrase into his or her local language or to transcribe a voice snippet. The txteagle computers then aggregate the output and use redundancy and artificial intelligence to validate the results. The participant is paid for the task, via the same mobile phone, using M-Pesa, a system I first heard about only a couple of weeks ago. Interestingly, M-Pesa is itself a formalization of a spontaneous monetary system – think cigarettes at a prison camp – in which people without access to banks would save and transact in airtime minutes. The amount a participant can earn in this system is quite meaningful in the context of poor countries with high unemployment.
Rogoff on Leverage
| Peter Klein |
An important point from Ken Rogoff:
Many commentators have argued that fiscal stimulus has largely failed not because it was misguided, but because it was not large enough to fight a “Great Recession.” But, in a “Great Contraction,” problem number one is too much debt. If governments that retain strong credit ratings are to spend scarce resources effectively, the most effective approach is to catalyze debt workouts and reductions.
For example, governments could facilitate the write-down of mortgages in exchange for a share of any future home-price appreciation. An analogous approach can be done for countries. For example, rich countries’ voters in Europe could perhaps be persuaded to engage in a much larger bailout for Greece (one that is actually big enough to work), in exchange for higher payments in ten to fifteen years if Greek growth outperforms.
I don’t agree with all of the discussion, for example Rogoff’s call for price inflation to mitigate the burden on debtors, but this is a big advance over the vulgar Keynesianism that passes for analysis at the New York Times. (See also Peter L.’s post on Rumelt.) The main point is that a recession like the present one is structural, and has nothing do with shibboleths like “insufficient aggregate demand.” I wish Rogoff (here or in his important book with Carmen Reinhart) talked about credit expansion as the source of structural, sectoral imbalances that generate macroeconomic crises.
Confronting Convenient Historical Distortions
| Peter Lewin |
From management professor Richard Rumelt. This is very interesting.
Today, households carry a much greater relative debt burden than they did in 1929, largely due to a 25-year mortgage binge. Between 1980 and 2007, disposable income grew at 5.9% per year while household indebtedness grew at 8.7% per year — a clearly unsustainable situation. As in 1939, this hangover of debt blocks new rounds of consumption and dulls the impact of fiscal and monetary stimuli.
From today’s WSJ: here.
The Downside of Case Studies
| Peter Klein |
As Herbert Simon once noted, while a case study is only a sample of one, a sample of one is infinitely more informative than a sample of none. This is surely true, but cases must be used with caution, particularly when more systematic evidence is available.
A couple months back I saw a Huffington Post piece claiming that, because Lincoln Electric retains workers even during recessions, and Lincoln Electric is a profitable company, firms should not fire workers when the demand for their products declines. QED. The author laments that business schools don’t teach the virtues of a “no-layoffs” policy more generally. As evidence that business schools are corrupt or incompetent, the author shows that management experts do not, in fact, believe that such a policy is desirable.
A more troubling reason is that many professors at Harvard and other MBA schools are deeply skeptical of offering workers such a bargain.
“It’s a terribly non-optimal and inefficient policy,” says George P. Baker, the co-chair of the HBS doctoral program. “Lincoln Electric is a special case. Unless there is some other reason for having it, as part of an incentive system, you would be wrong to recommend it.”
“I’m not unsympathetic to guaranteed employment and the long-term social strengths it builds,” says James Rebitzer, Chair of the Business Policy Department at Boston University’ School of Management, “But I think there are only a very few special circumstances where a commitment to no-layoffs actually improves operating efficiency.”
Harvard students such as Corey Crowell (MBA 2009), who read the [Lincoln Electric] case just days before we met, got the message: “I just worry that the sense of a guaranteed job would create complacency . . . look at the auto industry.”
There you have it. Despite a wealth of theory and evidence that guaranteed lifetime employment is generally harmful to firm performance, if one firm follows such a policy and prospers, then all firms should do so. That business schools don’t embrace the non sequitur is “troubling.” Okey dokey.
Sovereign States Default, Repudiate; Sun Still Rises
| Peter Klein |
Frivolous commentary on the US debt crisis (like this) attributes to opponents of raising the debt ceiling the view that “defaults don’t matter.” Sensible people recognize, of course, that default (and even repudiation) are policy options that have benefits and costs, just as continuing to borrow and increasing the debt have benefits and costs. Reasonable people can disagree about the relevant magnitudes, but comparative institutional analysis is obviously the way to go here. (Unfortunately, most of the academic discussion has focused entirely on the possible short-term costs of default, with almost no attention paid to the almost certain long-term costs of continued borrowing.)
I’m a bit surprised no one has brought up William English’s 1996 AER paper, “Understanding the Costs of Sovereign Default: American State Debts in the 1840′s,” which provides very interesting evidence on US state defaults. It’s not a natural experiment, exactly, but does a nice job exploring the variety of default and repudiation practices among states that were otherwise pretty similar. Here’s the meat:
Between 1841 and 1843 eight states and one territory defaulted on their obligations, and by the end of the decade four states and one territory had repudiated all or part of their debts. These debts are properly seen as sovereign debts both because the United States Constitution precludes suits against states to enforce the payment of debts, and because most of the state debts were held by residents of other states and other countries (primarily Britain). . . .
In spite of the inability of the foreign creditors to impose direct sanctions, most U.S. states repaid their debts. It appears that states repaid in order to maintain their access to international capital markets, much like in reputational models. The states that repaid were able to borrow more in the years leading up to the Civil War. while those that did not repav were, for the most part, unable to do so. States that defaulted temporarily were able to regain access to the credit market by settling their old debts. More surprisingly, two states that repudiated a part of their debt were able to regain access to capital markets after servicing the remainder of their debt for a time.
Amazingly, the earth did not crash into the sun, nor did the citizens of the delinquent states experience locusts, boils, or Nancy Grace. Bond yields of course rose in the repudiating, defaulting, and partially defaulting states, but not to “catastrophic” levels. There were complex restructuring deals and other transactions to try to mitigate harms.
A recent CNBC story on Europe cited “the realization that sovereign risk, and particularly developed market sovereign risk exists, because most developed world sovereign was basically treated as entirely risk free,” quoting a principal at BlackRock Investment Institute. “With hindsight, we can say . . . that they have never been risk free, it’s just that we have been living in a quiet time over the last 20 years.” Doesn’t sound like Apocalypse to me.
Weird Economics Dissertation of the Day
| Peter Klein |
John Nash’s 1950 Princeton dissertation is odd, though brilliant. Khieu Samphan’s 1959 University of Paris dissertation, “Cambodia’s Economy and Problems of Industrialization,” is frightening, as it foreshadows the genocidal policies Samphan implemented as a top Khmer Rouge official in the 1970s. A NYT story excerpts key passages like this one, arguing that white-collar workers
add no value to the society from the perspective of the economy as a whole. They simply profit from a transfer of value issuing from other productive activities within society (agriculture, crafts, small industry). And the transfer of produce within society does not enlarge the total value of production obtained by society in any way. The distinction made by the Scottish economist Adam Smith between productive and unproductive work deserves to be carefully considered here.
This is far from saying, for example, that a civil servant or a soldier would be useless to society. However, the greater the reduction in numbers of individuals concerned with general social organization, the greater the number who can contribute to production and the faster the enrichment of the nation.
Presumably this was in Samphan’s mind when he had office workers marched at gunpoint to the fields, where many starved and where millions were later executed.
New Issue of Business History Review
| Peter Klein |
The March 2011 issue of Business History Review, just now online, contains several excellent papers, including “The Origin and Development of Markets: A Business History Perspective” by Mark Casson and John Lee, “Economics, History, and Causation” by Randall Morck and Bernard Yeung, “Globalization, Development, and History in the Work of Edith Penrose” by Christos Pitelis, and “Economic Theory and the Rise of Big Business in America, 1870–1910″ by Jack High.
Morck and Yeung take the (perhaps surprising, almost Misesian) position that “[i]nstrumental variables can lose value with repeated use because of an econometric tragedy of the commons: each successful use of an instrument creates an additional latent variable problem for all other uses of that instrument,” and that “[e]conomists should therefore”consider historians’ approach to inferring causality from detailed context, the plausibility of alternative narratives, external consistency, and recognition that free will makes human decisions intrinsically exogenous.”
High notes that “by 1910, the entrepreneur was an important figure in American economics. He appeared regularly in textbooks written by American economists and his influence in the economy, especially in large firms, was generally recognized.” Entrepreneurship at that time was not about startups, but coordination more generally: J. R. Commons called the entrepreneur “the speculating, progressive, organizing, inventive, economizing agent of industry.”
2011 Spengler Prize
| Peter Klein |
Congratulations to Robert Leonard for winning the 2011 Joseph J. Spengler Prize for the best book in the history of economics for Von Neumann, Morgenstern and the Creation of Game Theory: From Chess to Social Science 1900-1960 (Cambridge University Press, 2010). I’ve only skimmed the book but it looks exceptionally well done. Required reading for O&Mers interested in intellectual history, methodology, Austrian economics, strategy, and/or game theory. . . . (That’s pretty much all of you.)
ISNIE Conference Papers
| Peter Klein |
ISNIE held its fifteenth annual meeting last week in lovely Palo Alto, California. President-Elect Barry Weingast put together a terrific program, which you can view here. Many of the papers are also available for public viewing here. A few highlights:
Private Entrepreneurs in Public Services: a Longitudinal Examination of Outsourcing and Statization of Prisons - abstract and paper
Sandro Cabral, (Federal University of Bahia)
Sergio Lazzarini, (Insper)
Paulo Furquim de Azevedo, (FGV-SP)What is Law? a Coordination Account of the Characteristics of Legal Order - abstract and paper
Gillian K. Hadfield, (University of Southern California)
Barry R. Weingast, (Stanford University)Law As Byproduct: Theories of Private Law Production - abstract and paper
Bruce H. Kobayashi, (George Mason Univeristy School of Law)
Larry E. Ribstein, (University of Illinois College of Law)On the Evolution of Collective Enforcement Institutions: Communities and Courts - abstract and paper
Scott E. Masten, (University of Michigan)
Jens Prüfer, (Tilburg University)The ‘Fundamental Transformation’ Reconsidered: Dixit Vs. Williamson - abstract and paper
Antonio Nicita, (University of Siena, and EUI)
Massimiliano Vatiero, (University of Lugano)In the Shadow of Violence: the Problem of Development in Limited Access Societies - abstract and paper
Douglass North, (Washington University (St Louis))
John Wallis, (University of Maryland)
Steven Webb, (World Bank)
Barry Weingast, (Stanford University)
Alberto Diaz-Cayeros, (University of California San Diego)
Gabriella Montinola, (University of Californa Davis)
Jong-Sung You, (University of California San Diego)Entrepreneurial Finance and Performance: a Transaction Cost Economics Approach - abstract and paper
Alicia Robb, (Ewing Marion Kauffman Foundation)
Robert Seamans, (NYU Stern School of Business)Expanding the Concept of Bounded Rationality in TCE: Incorporating Interpretive Uncertainty in Governance Choice - abstract
Libby Weber, (UC Irvine)
Kyle J. Mayer, (University of Southern California)
See the complete list for many more excellent papers.
Bonus (via Lynne Kiesling): the program for a Festschrift conference at Northwestern in honor of Joel Mokyr.
Update: More on the Mokyr conference from Lynne.
Against (Karl) Polanyi
| Peter Klein |
I mentioned Karl Polanyi (not to be confused with Michael) in yesterday’s post on anonymity. Gavin Kennedy points us today to Mark Pennington, who writes that Polanyi’s claims “are either historically inaccurate or based on a crude misrepresentation of classical liberalism.” Specifically,
classical liberalism has never claimed that narrowly selfish behaviour is all that is required to sustain the social fabric. Of course markets are always “embedded” in a broader nexus of institutions, but the question we need to ask is precisely what sort of institutional and social norms are required to facilitate social cooperation on the widest possible scale. Polanyi and his followers prefer to rely on hackneyed accounts of the Wealth of Nations rather than recognise that Smith’s support for markets and “self interest” constituted part of a broader ethical system set out in the Theory of Moral Sentiments. Specifically, Smith was concerned to elucidate the balance between the social norms appropriate to contexts of commercial exchange and those appropriate in more intimate environments. From Smith’s point of view feelings of sympathy which include love, friendship and reciprocity are reserved for people of whom we have detailed personal knowledge. The morals expected in commercial relations which are often between relative strangers, however, tend to be more impersonal, focussed on principles such as the observance of contracts and are oriented more towards the “self interest” of the parties involved rather than the direct benefit of “others.” The great mistake is to suppose that the type of ethos that pervades family life or that in tight knit communities can operate on a much wider scale. The development of inclusive markets requires a more impersonal ethos which enables people to engage with diverse actors who may not share the same moral outlook. If people deal only with those who share the same moral outlook or trade only with “locals” rather than engage in transactions with “foreigners” then the sphere of potentially cooperative relationships will be reduced. The alternative to self-interest is not solidarity, but suspicion if not outright conflict.
Blessed Anonymity
| Peter Klein |
Critics of the market, from Marx and Karl Polanyi to Alasdair MacIntyre, John Gray, Robert Putnam, and some contemporary sociologists, decry the anonymity of commercial relations. Strong, local, community ties, they complain, are being displaced by long-distance, ad hoc, impersonal, weak ties. ”Increasingly,” writes anthropologist Stephen Gudeman, “we commoditize things, leisure, body parts, reproductive capacities, DNA, and social relationships. As people flock to cities, sell their hardwood trees, change clothing styles, and watch television, community . . . shrinks.” (Thanks to Virgil Storr for this and many other good references.)
One response is to invoke Mises’s idea that social cooperation under the division of labor is actually the foundation of community. “The fundamental facts that brought about cooperation, society, and civilization . . . are the facts that work performed under the division of labor is more productive than isolated work and that man’s reason is capable of recognizing this truth” (Human Action, p. 144). Writers like Thomas Sowell and Walter Williams argue, for example, that the growth of the market stymies racism and other forms of prejudice.
Last week’s Economist had an interesting piece on supermarkets that brought these arguments to light:
The nostalgics don’t even have their history right. A big research project at the universities of Surrey and Exeter is currently studying shopping in post-war England. For one thing, high streets were not as quaint as politicians think. As far back as 1939, chain stores and co-operative (ie, mutual) retail societies already controlled about half of the grocery market. It was middle class matrons, the sort who dressed up to go shopping, who missed the deference shown by traditional grocers. Supermarkets were often welcomed by younger and working-class women. A retired secretary interviewed by the project recalled, as a young bride, asking the butcher for a tiny amount of mince. “Oh, having a dinner party, madam?” he sneered. A woman who bought anything expensive or unusual risked disapproving gossip, spread by shop assistants. The project
found press advertisements promoting the anonymity of supermarkets, as well as their convenience.
Some of you will remember a scene from Woody Allen’s Bananas, which also illustrates this point nicely.
Upcoming Conferences
| Peter Klein |
- ISNIE, 16-18 June in Palo Alto. Registrations are closed but latecomers could try lobbying the Treasurer to accept a late payment — never mind, that’s me, don’t bother.
- “Open Source, Innovation, and New Organizational Forms,” 1 August in Johannesburg. “This first IPEG conference intends to explore new theoretical and empirical advances in open source organization: the interest is not just on voluntary Open Source Software production and its potential innovation implications, but also on such related ‘open source’ phenomena as collective invention, online collaboration (e.g., Wikipedia), online social networking (e.g., Facebook), open innovation, open science, open source biology, and open standards.” The conference website is not live as of this posting, but organizer Giampaolo Garzarelli can provide details. O&M’s Dick Langlois is a keynote speaker. 500-word abstracts are due 24 June.
- “Achieving Coexistence of Biotech, Conventional & Organic Foods in the Marketplace,” 26-28 October in Vancouver. Speakers include FAO Deputy Director General Ann Tutweiler and Canadian Ag Minister Gerry Ritz. Coexistence conferences have been held every other year since 2003; the first 3 conferences came out of EU Commission efforts, the next was in Australia, and this one is the first to be held in North America. A co-organizer tells me “we hope to bring a more ‘practical’ view of coexistence than is commonly held in Europe.”
Miscellaneous Links
| Peter Klein |
- A public service from our good-twin site: What makes a good review?
- History matters? “[T]he descendants of societies that traditionally practiced plough agriculture, today have lower rates of female participation in the workplace, in politics, and in entrepreneurial activities, as well as a greater prevalence of attitudes favoring gender inequality.”
- Another review of The Invention of Enterprise, by frequent O&M commenter Michael Marotta.
- Regression to the mean? A McKinsey report (via Russ) illustrates the difficulty of long-run supra-normal growth: “a startling 44 percent of all companies that grew at rates faster than 15 percent from 1994 to 1997 were growing at rates lower than 5 percent ten years later.”
- Another attempt to model the evolution of cooperation — this time by Acemoglu and Jackson.
Gulf & Western and the Mob
| Peter Klein |
As a fan of the Godfather films, and a student of conglomerate diversification in the 1960s and 1970s, I’m surprised that I didn’t know, until today, about the connections between Gulf & Western CEO Charles Bluhdorn and the mafia. Paramount, the studio that made Godfather I and II, was at that time a Gulf & Western subsidiary (along with dozens of companies in industries ranging from auto parts to clothing, books, financial services, mining, sugar, cigars — you name it). Gulf and Western was at that time organized as a holding company, or what Williamson calls an “H-form” firm, not a more tightly integrated “M-form,” or multidivisional organization. H-form subsidiaries are operated as highly autonomous units, with little interference from company headquarters, so one wouldn’t expect Bluhdorn to have had much day-to-day contact with Paramount executives.
But apparently he intervened quite a lot. Today’s WSJ featured a piece on Hollywood in the late 1960s and early 1970s, what some regard as a Golden Age of American cinema (besides Godfather, think Chinatown, Nashville, The Conversation, Rosemary’s Baby, etc. — all Paramount films). Evidently Bluhdorn was substantially involved with the production of Godfather, helping make casting decisions and even firing (and re-hiring) producer Al Ruddy. Why such close concern? Paramount executive Peter Bart thought that Bluhdorn had “the mind of a criminal” and was involved with “financiers who had close ties to the mob community.” One of these, I learn from a 2009 Vanity Fair article, was Michele Sindona, a mob-connected banker who died (by poisoning) in an Italian prison. Initially, the Mafia wanted the film scrubbed — unwanted attention and all that — but then relented and helped with production. Several mobsters acted as extras while others helped behind the scenes. A few of the major players, such as Al Lettieri, who played Sollozzo, and Gianni Russo, who played Carlo, were mob connected. Here’s how Russo described getting his part: “Charlie Bluhdorn had a lot of good friends. So I had some people call him and say, ‘You know, this guy Gianni Russo is a very close friend of ours.’”
Inventors During the Industrial Revolution
| Peter Klein |
Following up an earlier post on apprenticeship: Ralf Meisenzahl and Joel Mokyr discuss the role of apprenticeship in the diffusion of innovation among skilled craftsmen during the British Industrial Revolution. “Using a sample of 759 of these mechanics and engineers, we study the incentives and institutions that facilitated the high rate of inventive activity during the Industrial Revolution. First, apprenticeship was the dominant form of skill formation. Formal education played only a minor role. Second, many skilled workmen relied on secrecy and first-mover advantages to reap the benefits of their innovations. Over 40 percent of the sample here never took out a patent. Third, skilled workmen in Britain often published their work and engaged in debates over contemporary technological and social questions. In short, they were affected by the Enlightenment culture.”
Confusing Definitions of Entrepreneurship
| Peter Klein |
Some of you have heard me complain before about the confusing ways “entrepreneur” and its cognates are used in the literature. Sometimes entrepreneurship refers to an outcome or phenomenon (startups, self-employment, high-growth firms), other times to a behavior or attribute (creativity, alertness, innovation, judgment, adaptation). I find the occupational, structural, and functional taxonomy useful, but other organizing schemes may be useful too. In any case, reading the entrepreneurship literature can be a frustrating experience.
I’m glad I’m not the only one who thinks so:
[T]he book’s diversity of approaches and styles is both a strength and also an inherent weakness. Some chapters offer comprehensive descriptions over long periods of time (e.g., Hudson, Hau, Wengenroth, Chan), while others focus on narrow aspects of entrepreneurship (e.g., Yonekura and Shimizu, Mokyr, Wolcott). The first kind appears to be written for a broad audience of noneconomic historians, whereas the second type tends to be drier and more technical. Some authors follow Baumol and distinguish between productive and redistributive entrepreneurship (e.g., Hudson, Mokyr, Cain, Lamoreaux), while others use very broad definitions of entrepreneurship (e.g., Kuran, Casson and Godley, Gelderblom), and yet another group of authors associates entrepreneurship with innovation (e.g., Yonekura and Shimizu, Graham). This extreme diversity of definitions and approaches can overwhelm the reader. As a result, the volume’s ambition of tracing “the history of entrepreneurship throughout the world since antiquity” (p. vii) ends up being an interesting patchwork of insights drawn from different times and places rather than a unifying and synthetic history.
That’s from Michaël Bikard and Scott Stern’s Journal of Economic Literature review of The Invention of Enterprise: Entrepreneurship from Ancient Mesopotamia to Modern Times (ed. David S. Landes, Joel Mokyr, and William J. Baumol, Princeton, 2010), which we blogged about earlier. Obviously in a work of this scope, a common definition of entrepreneurship is likely to be elusive. But the wide variety of meanings in this lone volume give you a sense of the challenge in making sense of the wider literature.
Recent Comments