Posts filed under ‘Ephemera’
| Peter Klein |
Almost all dissertations in economics and business are of the “three-essays” variety, rather than conventional book-length treatises. The main reason is pragmatic: economics, management, finance, accounting, etc. are mainly discussed in journal articles, not books. Students writing treatises must spend the first year post PhD converting the dissertation into articles for publication; why not write them that way from the start? (An extreme example — perhaps apocryphal — concerns Larry Summers, who began teaching at MIT several years before receiving his PhD from Harvard. Rumor has it he forgot to submit the PhD thesis, and simply bundled three of his published articles and turned it in.)
Some counter that the traditional model, or some variant of it, has value — for instance, the treatise conventionally includes a lengthy literature review, more than would be acceptable for a published journal article, which demonstrates the student’s mastery of the relevant literature. My view is that the standalone literature review is redundant at best; the student’s mastery of the material should be manifest in the research findings, without extra recitation of who said what. I tell students: don’t waste time putting anything in the dissertation that is not intended for publication!
The May 2013 AER has a piece by Wendy Stock and John Siegfried, “One Essay on Dissertation Formats in Economics,” on the essays-versus-treatise question. The evidence seems to weigh pretty heavily against the treatise:
Dissertations in economics have changed dramatically over the past forty years, from primarily treatise-length books to sets of essays on related topics. We document trends in essay-style dissertations across several metrics, using data on dissertation format, PhD program characteristics, demographics, job market outcomes, and early career research productivity for two large samples of US PhDs graduating in 1996-1997 or 2001-2002. Students at higher ranked PhD programs, citizens outside the United States, and microeconomics students have been at the forefront of this trend. Economics PhD graduates who take jobs as academics are more likely to have written essay-style dissertations, while those who take government jobs are more likely to have written a treatise. Finally, most of the evidence suggests that essay-style dissertations enhance economists’ early career research productivity.
| Peter Klein |
Have you noticed that when you search for a person on Google, the sidebar shows you other linked people searches (“People also search for”)? E.g., if you search for yours truly, it pulls up Nicolai Foss, Joe Salerno, Bob Murphy, and Israel Kirzner. I’m not sure how the algorithm works; is it the likelihood these searches are combined, or searched in sequence, or does it have to do with cross-links in search results? Anyway, it’s interesting to see who Google things is related to whom. For instance
Peter G. Klein ==> Nicolai Foss, Joseph Salerno, Robert P. Murphy, Israel Kirzner
Nicolai Foss ==> Peter G. Klein, Edith Penrose, Israel Kirzner, Oliver E. Williamson
Oliver E. Williamson ==> Ronald Coase, Elinor Ostrom, Douglass North, Armen Alchian
Murray N. Rothbard ==> Ludwig von Mises, Friedrich Hayek, Frédéric Bastiat, Henry Hazlitt
Paul Krugman ==> John Law, P. T. Barnum, Charles Ponzi, Beelzebub
| Peter Klein |
Going through some old files, I came across a 1995 Wall Street Journal piece I had saved, with the following passages highlighted:
Mr. Klein caught the fanaticism of the converted and convened a special commission to audit the books. It summed up its findings in six words: the need for change is urgent. Polls showed the public agreed. . . .
Mr. Klein doggedly pursued a program of breathtaking change. Government will fall from 24,000 to 18,000 in two and a half years. Sixty school boards were eliminated, the health budget was cut by 17%, and the number of hospital beds cut in half. Seniors earning over $21,000 (U.S.) a year were asked to pay their own Medicare premiums. . . .
The Klein Revolution did meet with opposition. . . . “My day wasn’t complete without a protest,” Mr. Klein recalls with a smile. But each success spurred him on: “You’re nervous the first time you try something new, but once you do it, you sort of get used to it.” . . .
Last year, he spoke to a group in Toronto and was asked if books by F.A. Hayek and Ludwig von Mises had inspired his policies. Mr. Klein smiled and said, . . . “Do I look like the kind of guy who would read those books?” The crowd laughed, because while Mr. Klein may not have read Hayek’s “The Road to Serfdom,” he has proved he knows how to build a policy exit ramp away from it.
The full article is below the fold. (more…)
| Nicolai Foss |
So, my school is now deep into discussing the results of the recent “employee satisfaction survey.” Thus, each department is expected to spend minimum 2,5 hours discussing the results, and to come up with an action plan to handle those problems that — per definition — exist. And in my capacity as department head I have just ended this round of annual reviews which focus on the “competence development” of faculty. The practice of management has changed, to be sure. An approach that is decidedly not acceptable anymore, at least in my part of the world, is exemplified by this great drummer chewing out the band he led (more here; here is the mandatory Hitler version; and, in case you really want to practice, here are the transcriptions). Bob Sutton wouldn’t like it.And yet, badass approaches to management may work — perhaps not for those autonomously motivated, self-directed types (i.e., us), but certainly for those with motivational issues (see Emily Bazelon’s Slate piece on Rutgers coach Mike Rice). Toughness has costs and benefits. It seems that much current management thinking focuses on the costs of tough management approaches and neglects the potential benefits. No?
| Peter Klein |
Nicolai was kind enough to mention my Facebook page but neglected to add that he has one too, and that O&M itself is on Facebook and Twitter. You can read, like, share, and comment on O&M posts at those sites as well as the main site. Which raises the interesting issue, is the blog format obsolete? We started O&M in 2006, an eon ago in Internet time. Since then, Twitter, Facebook, Google Plus, LinkedIn, and other social media platforms have appeared, and they duplicate most functions of the old-fashioned blog. They usually allow cross-posting and let you compose on one and push to the others. So, are blogging platforms like WordPress (which we use) on the way out? Google’s unfortunate decision to kill Google Reader has some people suggesting that RSS itself is dead. What should we do, to stay on the cutting edge? What’s the future of structured online group discussion? Should we create the first MOOOB (Massively Open Online Organizations Blog)?
| Nicolai Foss |
Our Moral Leader at O&M has his own fan page on Facebook. He mixes entertaining libertarian outbursts with info on new conferences and links to cool new papers, articles, and so on–in other words, O&M en miniature. Pay a visit and like Peter’s page.
| Peter Klein |
Hayek famously argued that prices embody information and that economic actors, responding to price changes, act as if they knew the underlying circumstances generating these changes. “[I]n a system in which the knowledge of the relevant facts is dispersed among many people, prices can act to coordinate the separate actions of different people in the same way as subjective values help the individual to coordinate the parts of his plan.” To economize, people don’t need “knowledge of the particular circumstances of time and place,” they only need access to prices. “The mere fact that there is one price for any commodity . . . brings about the solution which (it is just conceptually possible) might have been arrived at by one single mind possessing all the information which is in fact dispersed among all the people involved in the process.” Hayek illustrates with his famous example of the tin market: “All that the users of tin need to know is that some of the tin they used to consume is now more profitably employed elsewhere and that, in consequence, they must economize tin. There is no need for the great majority of them even to know where the more urgent need has arisen, or in favor of what other needs they ought to husband the supply.”
Hayek offers a powerful argument against interference with the price mechanism. But we should remember that prices embody information about the past, and the entrepreneur’s job is to anticipate, or “appraise,” the future. Entrepreneurs, far from discovering and exploiting “gaps” in the existing structure of prices, deploy resources in anticipation of expected — but uncertain — profits generated by future prices. For this, they rely on what Mises called a “specific anticipative understanding of the conditions of the uncertain future,” an understanding that requires a lot of knowledge of particular circumstances of time and place!
The knowledge requirements of the successful entrepreneur or arbitrageur are vividly illustrated in this passage from Carsten Jensen’s magnificent novel, We the Drowned, in a passage about 19th-century ship brokers, entrepreneurs who own, lease, and manage ships and shipping contracts:
A ship broker needs to know how the Russo-Japanese War will hit the freight market. He doesn’t need to be interested in politics, but he has to pay attention to his skippers’ finances, so a knowledge of international conflict is essential. Opening up a newspaper — he’ll see a photograph of a head of state and if he’s bright enough, he’ll read his own future profits in the man’s face. He might not he interested in socialism, in fact he’ll swear he isn’t: he’s never heard such a load of starry-eyed nonsense. Until one day his crew lines up and demands higher wages, and he has to immerse himself in union issues and other newfangled notions about the future organization of society. A broker must keep up to date with the names of foreign heads of state, the political currents of the time, the various enmities between nations, and earthquakes in distant parts of the world. He makes money out of wars and disasters, but first and foremost he makes it because the world has become one big building site. Technology rearranges everything, and he needs to know its secrets, its latest inventions and discoveries. Saltpeter, divi-divi, soy cakes, pit props, soda, dyer’s broom — these aren’t just names to him. He’s neither touched saltpeter nor seen a swatch of dyer’s broom. He’s never tasted soy cake (for which he can count himself lucky), but he knows what it’s used for and where there’s a demand for it. He doesn’t want the world to stop changing. If it did, his office would have to close. He knows what a sailor is: an indispensable helper in the great workshop that technology has made of the world.
There was a time when all we ever carried was grain. We bought it in one place and sold it in another. Now we were circumnavigating the globe with a hold full of commodities whose names we had to learn to pronounce and whose use had to be explained to us. Our ships had become our schools. They were still powered by the wind in their sails, as they had been for thousands of years. But stacked in their holds lay the future.
Arrunada Seminar: Nuno Garoupa – From the Washington Consensus to Arruñada’s Institutional Foundations of Impersonal Exchange
| Nuno Garoupa |
From the Washington Consensus to Arruñada’s Institutional Foundations of Impersonal Exchange
Since the Washington Consensus and the deregulation movement took place thirty years ago, administrative simplification and reduction of bureaucracy has been on the agenda of policymakers. In fact, economists tended to agree that a strongly market-based approach requires an effective public administration imposing light burdens on economic players (thus creating a business-friendly economic environment). This view was later popularized by De Soto’s The Other Path in 1989 which inspired the work of many international organizations and the (by now) famous Doing Business Project in the late 1990s. Simplification, cutting red tape, one-stop bureaucratic agencies, reduction of licenses and procedures, de-formalizing business activities have become popular slogans with many governments around the world.
The important work of Benito Arruñada takes a fresh look at these issues. We all know that the Washington Consensus promotes deregulation, but it also defends strong legal security for property rights (understood in a nontechnical way, that is, both rights in rem and rights in personam) in the tradition of Coase, Williamson and North. In his book, Arruñada convincingly shows that certain simplifications of procedures and some forms of de-formalization actually hurt important safeguards. In other words, there could be an intrinsic and convoluted trade-off between the popularized programs of administrative simplification and adequate legal certainty. Eliminating certain formalisms might save some apparent costs in the immediate, but augment considerably transaction costs in time, therefore damaging the proper functioning of markets.
Economists have a tendency to see formalism as an example of capture by private interests, thus promoting rents, increasing transaction costs and, as a consequence, damaging business activity (including business creation and investment) and economic growth. In the context of contractual registries, Arruñada explains that some formalism responds to efficient institutional design precisely to reduce transaction costs and facilitate impersonal exchange. More importantly, in the absence of such formalism, efficient transactions might not take place and market failures could be more acute.
My understanding of the policy implications from Arruñada’s work is simple. First, not all simplification is good, not all formalism is bad. A degree of formalism is important to promote development and trade in a globalized world of impersonal exchange. Second, when de-formalizing, policymakers should consider the extent to which they are eliminating unnecessary procedures (those in place to satisfy mainly a few particular private interests) and not institutions governing property rights protection. Finally, the appropriate formalization in the context of contractual registries (for property as well as for business transactions) responds to a set of determinants identified by Arruñada that could vary across jurisdictions. Concerning de-formalizing, there is no such thing as a “one-size-fits-all” policy.
Professor Nuno Garoupa. H. Ross and Helen Workman Research Scholar. Co-Director, Illinois Program on Law, Behavior and Social Science
| 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:
- The Sorry State of Economic Journalism
- Life in the Echo Chamber
- What Is a Firm?
- Italian Social Science: Generalized Low Quality?
- Perceptions of Opportunities – Part 1
- Hayek on Schumpeter on Methodological Individualism
- The Bizarro World of Professor Sen
- A Curious Case of Vertical Integration
- “Give Me Money!”
- Handbook of Economic Organization
- Coase-Theorem Behavior Actually Does Happen
- Perceptions of Opportunities – Part 2
- Economists, (Hard) Data, and (Soft) Data
- First, They Ignore You. . . .
- Against Brainstorming
| 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.
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.)
| 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.
| 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.
See also this Hummer commercial, one of my favorites in explaining how time preference and discount rates affect behavior.
| Nicolai Foss |
Proto-pomo Jean-Paul Sartre was a certified commie. I was therefore baffled to read about Sarte’s views on ownership (here). In Being and Nothingness Sarte argues that “to have” is one of the three fundamental categories of human existence (along with “to do” and “to be”), and notes that the “totality of my possesions reflects the totality of my being … I am what I have … what is mine is myself.” More broadly, there is a highly interesting literature on “psychological ownership,” informed mainly by philosophy and psychology, but with interesting linkages to evolutionary anthropology. The ”endowment effect” in behavioral economics may be seen as part of this. Although the main applications of psychological ownership theory so far seems to have been to organizational behavior (e.g., this paper), there seem to me to be potentially interesting applications to the political philosophy, particularly for those who find the Lockean theory of ownership a bit lacking in the psychological dimension.
| Nicolai Foss |
In economics, the hierarchical firm arises for reasons related to economizing with transaction costs, managerial attention allocation, information synthesis and what not. Many organizational economists would argue that absent transaction costs, there would be no hierarchies as there would be no firms. But, what if the existence of hierarchy has a partly genetic basis, that is, humans evolved in such a way that they have come to “like” hierarchies (which may therefore exist even if transaction costs were zero)? After all, those small hunting bands roaming the African savannahs 30, 000 years ago likely had leaders, a division of labor and so on, and evolutionary anthropology suggests that our brains evolved to handle the intricacies of handling this division of labor. Thus, we may be “hardwired for hierarchy.”
OK, speculation to be sure, but in “The Fluency of the Social Hierarchy: The Ease With Which Hierarchical Relationships Are Seen, Remembered, Learned, and Liked,” recently published in the prestigious Journal of Personality and Social Psychology, Emily Zitek and Larissa Tiedens provide some potentially supportive evidence: In five studies, they show that hierarchies are perceived, understood, remembered and learner faster and more efficiently than other kinds of social relationships.
There may be many reasons for this finding, but one is the simple one that hierarchical superiors have potentially strong influence on our lives. Very apropos, another recent study, “The hierarchical face: higher rankings lead to less cooperative looks,” by four UMichigan psychologists, finds that the “higher ranked an individual’s group is, the less cooperative the facial expression of that person is judged to be.” Interestingly, one of their settings is interaction with deans!
Abstracts below. (more…)
| Nicolai Foss |
Observing how economists relate to psychology is interesting. On the one hand, there is considerable fascination: Social psychology research often produces interesting findings about human interaction, and motivational and cognitive psychology yields insight in human behavior and decision-making which is more fine grained than most econ research. On the other hand, there is an often ill-tempered dismissal, too often based on an incomplete understanding of the relevant material, of any psychology findings that may be seen as going against the standard economics model of rationality. “This is entirely consistent with maximization once you take all constraints into consideration,” “This is just another instance of altruistic preferences”, etc. etc. are conventional defensive stratagems that are entirely understandable given the metaphysical status of the standard model in economics.
An area where many economists, at least as seen from my perspective as an outsider, seems to have given in concerns so-called “motivation crowding.” This is the idea that “extrinsic motivators” (such as performance pay) can crowd-out out “intrinsic motivation,” the kind of inner motivation that, many motivational psychologists argue, is the most suitable one for tasks involving creativity, problem-solving and learning. Since this effect was first imported (from self-determination theory in motivational psychology) into economics in the mid-1990s by, first, Bruno Frey, and then David Kreps, it has been rather generally acknowledged by many organizational economists, personnel economists and labor economists as a real and worrying phenomenon. “Worrying” because it suggests that conventional incentive instruments may be counter-productive.
A recent paper by Meiyu Fang and Barry Gerhart (2012), “Does Pay for Performance Diminish Intrinsic Interest?” suggests that economists should perhaps think twice before they embrace the crowding effect, at least in the context of real world organizations.The authors question random assignment experiments on the grounds that in organizations assignment is anything but random. But perhaps more substantively they argue that “perceived competence” and “perceived autonomy” (key constructs in self-determination theory) are positively related to pay for individual performance, rather than negatively as the crowding effect would posit. For example, being exposed to performance-contingent rewards may drive feelings of control and autonomy (“I decide myself how much I wanna make here”, “If I deliver, the Man has to pay” etc.). These ideas are tested on data from a survey of 609 white collar Taiwanese employees, and largely confirmed. A fascinating and recommended read.
| Nicolai Foss |
Mark Casson is one of the most influential scholars in the international business and entrepreneurship fields. He is also living proof that huge influence can be won and held, not by regularly cranking out papers in the “A journals,” but by writing solid monographs. Although Casson has certainly written his share of high-level papers, he is arguably best known for two books, namely his slim 1976 monograph with Peter Buckley, The Future of the Multinational Enterprise, and his 1982 (single-authored) book, The Entrepreneur: an Economic Theory. While the former is one of the founding contributions to the theory of the multinational corporation (some say, the founding contribution), the latter was, at the time it was published, the perhaps most sophisticated economics-based treatment of entrepreneurship theory. I reread it about a year ago, and was struck by how up-to-date and fresh it still is. (Here is a brief popular statement of Casson’s views on entrepreneurship).
Professor Andrew Godley of the Henley Business School has put together an exciting conference (15-16. Dec., University of Reading) to celebrate the thirtieth anniversary of Casson’s book. The program includes luminaries such as Mike Wright, Saras Sarasvathy, Ram Mudambi and my former PhD student and colleague, Jacob Lyngsie. Unfortunately, I am not able to participate myself, but the conference should be of interest to the O&M readership. Here is the program.
| Nicolai Foss |
I have seldom attended a meeting or conference on management research where the notion of “normative theory” hasn’t been brought up. A couple of decades ago when transaction cost economics was making its influence felt in management research, it was frequently dismissed as “just another normative contingency theory.” Discussants may quiz presenters on whether they are “doing positive or normative theory,” and gravely tell them that they must heed the difference between the two.
While I am all for being upfront about one’s (normative) premises, I am not sure the notion of “normative theory” makes a lot of sense. (There is ethical theory which may be partly falsifiable, but this is usually not what is meant by “normative theory”). There are theoretically informed statements about what ought to be the case — but these are simply derived from positive theories with the addition of an “ought” clause. To be sure, one can build theory that is designed to help remedy some state in the real world that one considers undesirable. Theorizing (i.e., the construction of theory) is, of course, shot through with normative considerations, as Gunnar Myrdal famously argued. But, that doesn’t make the theory a “normative theory” per se. A theory can be (should be) 100% wertfrei although its emergence is entirely explainable in terms of moral, political, etc. considerations.
Theory can be (should be?) used as an instrument, to be sure. Thus, the proponent of a theory may tell decision-makers that if they want to achieve X, they should do Y. That is still not “normative theory,” because the proponent doesn’t tell decision-makers that X is something they ought to pursue. Fairly simple stuff, to be sure. But, many management scholars apparently haven’t fully absorbed the basic implications of what Hume, Menger, and Weber said on these issues. And in today’s method-obsessed graduate programs, they likely won’t.
| Nicolai Foss |
Given the importance they usually ascribe to the sinister forces of ”neo-liberalism,” it is — perhaps– surprising that prominent pomo writers seldom engage with the major economists with more or less strong classical liberal/libertarian leanings, such as Nobel Prize Winners Gary Becker, James Buchanan, Ronald Coase, Milton Friedman, and Friedrich Hayek. However, most of these write very clearly; for example, it is hard to imagine a stronger contrast to the murky prose of pomo than Nobelist Gary Becker’s refreshingly direct and clear writing.
And yet, pomo demi-god and arguably the clearest writer among the pomo social critics and philosophers, Michel Foucault critically dealt with Gary Becker in his 1979 “Birth of Biopolitics” lectures. In a recent UChicago WP, “Becker on Ewald on Foucault on Becker’: American Neoliberalism and Michel Foucault’s 1979 ‘Birth of Biopolitics’ Lectures,” Foucault’s assistant at the time of these lectures, Francois Ewald, debate Foucault’s Becker-reading with Bernard Harcourt, and–the scoop of this transcribed dialogue–Becker himself.
The whole debate is (unlike the Pomo Periscope) highly civilized; in fact, Becker notes that “I was very happy to read these two lectures, which impressed me in a number of directions. They are very clear, I thought. He had a good understanding of what human capital consisted of.” However, in spite of his politeness Becker offers a direct refutation of the Foucauldian critique that economics in general, and human capital theory in particular, dehumanize people and portray them stimulus-response puppets:
Instead of saying that the vision of man is poor, I would say the vision of man is rich in this approach, because you enrich both what people do as consumers—that’s why I think Foucault says this was an interesting theory of consumption—and you enrich what they do in terms of a lot of their other life decisions that would go beyond consumption, in terms of their education, how they might invest to respond to different government laws, how they might evade bad laws.
A fun read!! HT to Henrik Lando.
| Peter Klein |
We hope you will be pleased with this revision and will ®nally recognize how urgently deserving of publication this work is. If not, then you are an unscrupulous, depraved monster with no shred of human decency. You ought to be in a cage. May whatever heritage you come from be the butt of the next round of ethnic jokes. If you do accept it, however, we wish to thank you for your patience and wisdom throughout this process, and to express our appreciation for your scholarly insights. To repay you, we would be happy to review some manuscripts for you; please send us the next manuscript that any of these reviewers submits to this journal.
| Peter Klein |
What explains the dominance of the US in elite higher education? Shailendra Mehta offers a novel explanation: the role of alumni. Graduates of US colleges and universities tend to identify strongly with their institutions and care deeply about their school’s reputation and ranking. Only in the US do alumni play such a strong role, not only in financial support (often connected with athletics), but governance.
[N]o group cares more about a university’s prestige than its alumni, who gain or lose esteem as their alma mater’s ranking rises or falls.
Indeed, alumni have the most incentive to donate generously, and to manage the university effectively. Given their intimate knowledge of the university, alumni are also the most effective leaders. Through alumni networks, board members can acquire information quickly and act upon it without delay.
All great universities are nonprofit organizations, created to administer higher education, which benefits society as a whole. But US universities found a way to integrate competition’s benefits into the European concept of nonprofit, or so-called eleemosynary, corporations. The lack of profit does not diminish an alumni-dominated board’s incentive to compete for prestige by, for example, hiring distinguished faculty, accepting meritorious students, and striving for athletic or artistic achievement.
I asked Scott Masten, O&M’s resident higher-education expert, for a reaction:
Interesting, but incomplete. Although boards have formal authority in most universities, in practice they exercise very little, as the recent brouhaha at the University of Virginia serves to illustrate. In fact, the “American model” traces only to the post-Civil War era, when research universities came into being, and effective authority devolved to varying degrees to an administrative bureaucracy and faculty. It was only following that period that U.S. institutions began their dominance. On that alone, one could argue just as convincingly that it was faculty governance that accounted for the success of American higher education. It seems to me there’s a paper on that out there somewhere.