Posts filed under ‘Ephemera’
Entrepreneurial Studies and Applied Economics at the AOM 2011
| Peter Lewin|
Back from the AOM 2011 meetings in San Antonio, it is worth adding a few words on the Professional Development Workshop (PDW) on Austrian Economics organized by the Henrik Berglund, Todd Chiles, and our own Peter Klein. Also there were Roggl Koppl and Maria Minniti.
I, for one, found the session extremely enjoyable and worthwhile. I am not good at estimating numbers, but I believe there were in excess of fifty people there of diverse backgrounds — all shapes and sizes. The one thing they had in common was an interest in Austrian economics as applied to entrepreneurship. Some appeared to know more about it than others, but they all seemed to be genuinely curious. Very encouraging for those of us laboring for many years on behalf of the Austrian School.
Henrik began with a nice introduction, which he later followed up with a discussion of Kirzner on entrepreneurship. Peter Klein was first up with a masterful overview of Austrian Economics for newcomers, and Todd finished up with an interesting account of Lachmann’s work drawing on his recent work. We then split into spontaneously organized small groups to discuss various topics leading to suggested research topics. The group I was in arrived at the topic “The Anatomy of Disequilibrium Order.”
As I suggest to Peter K, this might be a manifestation of a development many of us have anticipated — in a nutshell, the bifurcation of the discipline of economics. While the mainstream has moved on to ever more narrowly technical and precisely irrelevant scholarly activities, those wishing to do real economics (economics that matters for the real world) are drawn to other closely related fields. I see this developing into a kind of “applied economics.”
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
No Wonder Our Readers Find Us Witty and Clever
| Peter Klein |
Confirmation bias, it appears, affects not only our scientific and political beliefs, but our aesthetic preferences as well. Now I understand why certain people read orgtheory.net!
More Serious Stuff
| Nicolai Foss |
Economists may have models of zero intelligence traders, but so far there are no models of zombie traders (that I know of). Possible inspiration for future modeling efforts here.
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.)
Old Economics Test Questions
| Peter Klein |
The University of Missouri’s sprawling new student center recently opened Mort’s, a reproduction of an old campus hangout called The Shack, made famous by Beetle Bailey creator and Mizzou alumnus Mort Walker. I snapped the photos below from the entrance to Mort’s, which is full of old Walker cartoons. I spied a 1950 cartoon featuring an economics test. Click to enlarge the strip.
Funny, but what was Professor Brown smoking when he wrote that question? (Maybe he was just a Keynesian, bless his heart.)
Institutions and Political Economy Group
| Peter Klein |
The Institutions and Political Economy Group (IPEG) is a new research group at the University of the Witwatersrand that “promotes the study of the relationship among institutions, organizations and markets through the simple principles of economic reasoning.” Sounds good to me! IPEG is directed by O&M friend Giampaolo Garzarelli.
An Ancient Rejection Letter
| Peter Klein |
Via Josh Gans, here’s the response from Geometrika: A Most Prestigious Journal with Really Special Referees to poor Ptolemaeus, regarding his submitted paper, “An Argument that the Earth Is Round, and a Method to Determine its Circumference.” Sadly, the reviewers were not impressed, one feeling that “the idea that the Earth is round is both (i) too simple and well known to be really surprising and worth of publication, and (ii) utterly deceptive, misleading and wrong.” The editor’s skillful close:
I am sorry to bring you what must be disappointing news. Please keep in mind that we can only publish less than 8 percent of submissions. I also hope that the brilliant comments of the referees will help you to revise this paper for a submission to a more appropriate eld journal, such as Forms of Miscellaneous Objects or Maritime Inquiries.
On the bright side, I feel that you must now be in the mood of refereeing a few papers for our great journal. I will not tell you, which, if any, of the attached papers is authored by referees 1 to 3, but you can of course guess. I would have liked to receive your reports on these papers by yesterday, so you can also consider this letter as your rst reminder notice for these reports.
More on ACAC
| Peter Klein |
About a decade ago I served a term as a Senior Economist with the Council of Economic Advisers. The Junior Economist assigned to work with me was a young Harvard PhD student named Dan Elfenbein. Dan turned out to be not only the brawn, but the brains of the partnership as well. (He may have had me in the looks department too.) Dan has gone on to do great things at Washington University and I was delighted to see him receive the ACAC Best Paper Award yesterday for his joint work with Anne Marie Knott, “No Exit: Failure to Exit under Uncertainty.” Here’s the abstract:
Delayed exit is a substantial economic problem. Studies indicate if VCs exited ventures optimally, returns would triple, and if corporations divested underperforming business units, shareholder wealth would increase 13.6%. A prevalent explanation for delayed exit is behavioral biases associated with escalated commitment. In general however exit will exhibit inertia even absent bias. This arises both from decision maker efforts to avoid Type I error while discovering the long run prospects of an endeavor (passive learning) and from the option value of exit. Solutions to exit delays differ depending upon which source predominates, yet empirical tests to date have not disentangled the relative importance of these sources. We characterize exit delay in the population of U.S. banks between 1984 and 1997, and examine its causes. We find that a substantial proportion of exit occurs beyond “rational” benchmarks that incorporate option value. While the bulk of this delay appears to represent efforts to minimize Type I error, there is also evidence of the behavioral biases associated with escalated commitment.
As noted by Bill Bogner at the awards seminar, this makes Dan the only two-time winner of this important award.
Also at ACAC: A fascinating address by Joel Baum about the intellectual history of two strands of literature, one on competitive advantage and one on network advantage. It turns out these strands share a common intellectual heritage, one I’ll have more to say about later. (Hint: the University of Vienna plays a critical role.) Rebecca Henderson also gave an excellent talk about the role played by relational contracts within firms (from a joint research project with Bob Gibbons, the leading authority on relational contracting). Relational contracts are often seen as more flexible and adaptive than formal contracts but, as Rebecca pointed out, it is difficult for managers to implement strategic changes when they cannot commit to explicit rewards and punishments — hence relational contracting may impede the adoption of superior work practices (such as the Toyota Production System). Look for a forthcoming Gibbons-Henderson paper in Organization Science spelling this out.
Economist Quote of the Day
| Peter Klein |
Arthur Goldhammer on the upcoming French elections:
This will be Dominique Strauss-Kahn’s challenge, since he will be running, if he runs, in part on his credentials as an economist. He has to make sure that this word means something other than “scold” or, worse, “tool of capital.”
I would imagine that heading the IMF is not a particularly popular launching point for the Presidency either. In other countries being a leader of the Socialist Part might hurt but, well, this is France.
Google as Emergent Organization?
| Peter Klein |
People are going to do what they are going to do, and you’re there to assist them. They don’t need me, they are going to do it anyway. They are going to do it for their whole lives. Maybe they could use a little help from me. At Google, we give the impression of not managing the company because we don’t really. It sort of has its own borg-like quality if you will. It sort of just moves forward.
This quote from Google CEO Eric Schmidt is getting some buzz (e.g., Phil Bowermaster, via Ewin Barnett). It gives the impression of a wikified firm, or an emergent organization (to use Hayekian terminology). Indeed, Google makes extensive use of teams, information sharing, and delegation, and the firm has a fairly flat organizational structure. The “Ten Golden Rules” internal document, written in 2005 by Schmidt and Hal Varian (and quoted in the Google HBS case), says “the role of the manager is that of an aggregator of viewpoints, not the dictator of decisions.” But there are decisions, and management, like George W. Bush, is the Decider. As with 3M, Google allows engineers to spend 20 percent of their time on their own projects. Still, these projects are subject to approval and monitoring. After all, the Borg believe in tight coordination!
“Entrepreneurship and the Economic Theory of the Firm”
| Peter Klein |
That’s the title of my recent CORS lecture at the University of São Paulo. You can watch the whole thing here. (Hopefully, clicking on the link will save the .wmv file to your computer or start playing the file in a media application.)
O&M Five-Year Anniversary
| Peter Klein |
O&M went live exactly five years ago, 25 April 2006. Since then we’ve run 2,549 posts and hosted 7,375 comments, most of them insightful and informative. How to celebrate? We are not as self-aggrandizing as some, so here’s a low-key approach. First, the all-time most popular posts, in descending order:
- Management Journal Impact Factors 2008
- PhD Candidate Shortage in Accounting
- Agency Theory in Management
- Method versus Methodology
- Physics Envy and All That
- Agency Theory and Intrinsic Motivation
- 21 Economic Models Explained
- The University of Phoenix and the Economic Organization of Higher Education
- Management Journal Impact Factors 2005
- The SWOT Model May Be Wrong
- Design Puzzles
- Is Entrepreneurship a Factor of Production?
- Porter’s Five Forces, Updated
- Econ Courses at Open Yale
- Four Theories of Profit
- Summary of Dodd-Frank Act
- Market-Based Management
- Why Study the Humanities?
- Accounting: A Brief History
- Funny Professor Names
- Taxes al Carbon
- Keynesian Economics in Four Paragraphs
- The New Bashing of Economics: The Case of Management Theory
- One Part of the Financial Sector Is Still Growing
- Management Journal Impact Factors 2009
- In Praise of the US Auto Industry
- Contronymns
- How Does Management Affect Capabilities?
- Management Journal Impact Factors 2006
- March & Simon: Early Socialist Calculation Revisionists
- Do We Need a Project Project?
- Has Corporate Corruption Increased?
- Coase and the Myth of Fisher Body
- The Logic of Appropriateness
- John Nash’s Dissertation
- The History of Marketing
- The Hawthorne Effect Revisited
- What Would Hayek Say?
- Why Did the Chicken Cross the Road: Strategic Management Edition
- How to Read an Academic Article
Second, a purely subjective list of some of our favorite comments: (more…)
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.
Recycling an Old Post
| Peter Klein |
These important announcements appeared originally April 1, 2007.
Foss, Klein, Postrel Join Harvard Faculty
Nicolai, Steve, and I are pleased to announce that we have accepted chaired positions at Harvard University:
Cambridge, Mass., April 1, 2007 – World-renowned scholars Nicolai J. Foss, Peter G. Klein, and Steven R. Postrel will join the Harvard faculty as University Distinguished Professors and co-directors of the newly formed Long Tail Institute for the Global Economy. Says incoming President Drew Faust: “I am delighted that Professors Foss, Klein, and Postrel are joining our team. I have always admired Foss and Klein’s work on judgment-based entrepreneurship, and I enjoyed Postrel’s columns in the New York Times before he changed his name to ‘Steve.’ After reading their blog I knew they were the ones to lead Harvard into the global information age.”
Announcing Guest Bloggers Jeff Pfeffer and Bob Sutton
We’re delighted to welcome Stanford University professors Jeff Pfeffer and Bob Sutton as our newest guest bloggers. Sutton writes: “Jeff and I have recently come out of what we call our ‘Blue Period,’ characterized by moodiness and irritability toward toward economists. We now realize that economic analysis is vital to the proper understanding of organizations. What better way to flaunt our new perspective than by joining the outstanding bloggers at Organizations and Markets? We’ll also be working on our new book, Not Ready to Make Nice in the Workplace.” Welcome, Jeff and Bob!
Google Acquires O&M
This hit the news wires today:
Mountain View, April 1, 2007 – Google Corporation announced today it has acquired a majority stake in the weblog Organizations and Markets, a leading provider of news and information on organizations, strategy, entrepreneurship, and anti-postmodernism. Google CEO Larry Schmidt noted that Google is seeking to expand beyond the search-engine business. “Let’s face it, search is yesterday’s technology. There’s too much junk out there. Instead of using computers to sort our information with confusing page-ranking algorithms, the time has come to hire experts to tell us what the world is really like. The authors of Organizations and Markets are just the experts we’ve been looking for.” Google shares dropped 42% in heavy trading upon the announcement.
Here are some important April 1 stories from prior years.
An Early Example of a Hold-up. . .
| Scott Masten |
. . . in which two Irishman sweep fifteen or thirty Italians into an open ditch.
The context is a dispute over a contract for the supply of water to Bayonne, NJ., circa 1896, as reported in The First History of Bayonne, NJ (1904: 92):
At the mayoralty election in the spring of 1895, Egbert Seymour, on the Democratic ticket, was elected Mayor. Several of the Councilmen who were elected at this election, and two or three city officials, were opposed to the new water contract, and attempted a “hold-up.” The trouble reached its height one day during the first year of Seymour’s administration.
While employees of the water company were tapping the old mains to make the necessary water connection, some city officials arrived on the scene. Immediately there was trouble.
The New York Times article (Nov. 24, 1896) on the right (click to enlarge) elaborates, amusingly, on the manner in which the holdup was executed.
I have not yet been able to verify it but, according the previous source, “The matter was taken before the Supreme Court of the United States by the water company, and an injunction was obtained against the city. United States marshals were stationed at the scene until the work was completed, to arrest any city official who interfered.” The city eventually bought out the company in 1918.
(Wish that I had found that quotation before completing this.)
Women and Children First
| Peter Klein |
Everything you ever wanted to know about the Titanic disaster. Well, everything behavioral economists want to know, namely who survived — a case study in “Behavior under Extreme Conditions” (Journal of Economic Perspectives, Winter 2011). Bruno Frey, David Savage and Benno Torgler note that the “common assumption . . . that in such situations, self-interested reactions will predominate and social cohesion is expected to ate and social cohesion is expected to disappear. . . . However, empirical evidence on the extent to which people in the throes of a disaster react with self-regarding or with other-regarding behavior is scanty.” Fortunately (?), the sinking of the Titanic provides “a quasi-natural field experiment to explore behavior under extreme conditions of life and death.”
Examining data on the social and demographic characteristics of survivors and non-survivors they find that women and children were more likely to survive, other things equal, as well as the wealthy and those in a stronger social network (traveling with family members, or being part of the crew). A morbidly interesting paper, to be sure.
Coasian or Coasean?
| Peter Klein |
For years I described things relating to Ronald Coase as “Coasian.” Walter Block continually needled me about this, insisting the proper spelling was “Coasean,” but I resisted. Now I see more people using the latter spelling, and I’ve started using it myself. But which is correct? I beats e, but not by much, in a Googlefight. But I think a more targeted crowdsourcing arrangement is warranted. So, dear O&M readers, which do you prefer? Vote below.
Addendum: Thanks to Scott for pointing out that this was debated before at Volokh, where many of the critical issues — and the most obvious snarks — were already presented. To me, the fact that Coase himself, and people at Chicago Law, use “Coasian” seems a pretty strong argument in favor of the non-standard spelling. But one can make a good case for either.
Paper Titles I Wish I’d Written
| Peter Klein |
“Schumacher meets Schumpeter” by Raphael Kaplinsky (Research Policy, March 2011). Asks if tech innovation benefits mostly the wealthy or the poorest in society as well. Great alliteration. (Thanks to Christos Kolympiris for the tip.)
I could still write books on Herbert Simon’s contributions (Simon Says), new developments in the resource-based view (Barney and Friends), or Marxist eschatology (Serf’s Up).
Stockman on the Crisis that Wasn’t
| Peter Klein |
I’ve been complaining since 2008 that the justification for TARP and other forms of monetary and fiscal stimulus was never clearly stated. “The financial system would have collapsed” if Paulson and Bernanke had not made their unprecedented moves. But there was never any serious analysis or argument for this, just a series of bold (bald?) assertions.
This weekend’s ASC speech by former Reagan OMB Director David Stockman took the same line:
Based on the panicked advice of Paulson and Bernanke, of course, the president had the misapprehension that without a bailout “this sucker is going down.” Yet 30 months after the fact, evidence that the American economy had been on the edge of a nuclear-style meltdown is nowhere to be found. . . .
Still, the urban legend persists that in September 2008 the payments system was on the cusp of crashing, and that absent the bailouts, companies would have missed payrolls, ATMs would have gone dark and general financial disintegration would have ensued.
But the only thing that even faintly hints of this fiction is the commercial-paper market dislocation. Upon examination, however, it is evident that what actually evaporated in this sector was not the cash needed for payrolls, but billions in phony book profits, which banks had previously obtained through yield-curve arbitrages that were now violently unwinding.
Stockman argues (persuasively, in my view) that the commercial-paper market was going through a much-needed correction, and that the best response would have been to let the loan market adjust, according to market forces. After all, “nowhere was it written that GE Capital or the Bank One credit-card conduit, to pick two heavy users of the space, had a Federal entitlement to cheap commercial paper — so that they could earn fat spreads on their loan books.”
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