This year’s DRUID conference, “Innovation and Competitiveness: Dynamics of Organizations, Industries, Systems and Regions,” is 19-21 June 2012 in Copenhagen. See the call for papers below the fold. Submission deadline is 29 February. 

 

The October 2011 issue of the Journal of Economic Behavior & Organization is a special issue on the work of James Buchanan, guest edited by Pete Boettke, arising out of a recent FFSO conference. In addition to Boettke, the contributors are Kliemt, Marciano, Munger, Leeson, G. Vanberg, Voigt, Horwitz, Besley, Coyne, and Horn on a variety of topics. Amartya Sen and Elinor Ostrom contributed short appreciations. This issue is full of good stuff on a variety of topics.

I focus here on the lead article by Pete Boettke somewhat clumsily entitled, “Teaching Economics, Appreciating Spontaneous Order, and Economics as a Public Science.” For my part, this article alone makes the issue worthwhile getting. Boettke presents an overview of the many facets of Buchanan’s work (and as they developed over his career) helpfully connecting and contrasting it with Hayek. Some of these ideas are directly relevant to the organization and management context.

At the risk of distorting oversimplification, we may say that whereas Hayek concentrated on the problem of rationalistic hubris, Buchanan concentrated on the problem of opportunistic behavior. Both are inevitable and related problems of social systems, and each of their works thus complements the other. In a nutshell, each is an in-depth protracted examination of the knowledge problem and the incentive problem, respectively.

As points of emphasis in their respective works, Hayek concentrated on the limits on man’s knowledge at the abstract level, and the contextual nature of the knowledge residing in the economy at the concrete level, while Buchanan stressed the institutional/organizational logic of politics and the systemic incentives that different rule environments generate. In both, however, the central message of same players, different rules, produce different games is seen throughout their work in comparative political economy. To Hayek the puzzle was how to limit the rationalistic hubris of men, to Buchanan the puzzle was how to limit the opportunistic impulse of men. Both found hope in what they called a “generality norm” embedded in a constitutional contract — no law shall be passed, or rule established which privileges one group of individuals in society.

Hayek uses an evolutionary approach and Buchanan a “veil of ignorance” contractarian approach. But both are surely applicable to organizations of all types.

The European Group of Organizational Studies (EGOS) is having the 2012 annual conference in Helsinki, July 2-7. The overall theme is design, and one of the subthemes is “Self-reinforcing Processes in Organizations, Networks and Professions,” a subject sure to interest many O&Mers. See the links above for details. Blurb after the fold:

‘Self-reinforcement dynamics’ are defined as a process of positive feedback in which the increase of a particular variable leads to a further increase of this very variable. Examples of such intended and unintended processes, which bring about an action pattern which eventually gets deeply embedded in (inter-) organizational or professional practice, are self-justification, increasing returns, positive and negative network externalities, and adjusting expectations. The sub-theme particularly invites contributions that focus on one or more of the following issues:

• The role of triggering events and actions in self-reinforcing processes
• Organizational learning and self-reinforcing dynamics.
• The logic of self-reinforcing mechanisms and their development over time (network effects, economies of scale, complementarities, etc.)
• Surfacing self-reinforcing patterns in organizations and/or professions: making self-reinforcing dynamics reflexive
• Studying self-reinforcing processes and systemic practices in organizations and/or professions, e.g. the mutual institutionalization of professional roles and professional schools.
• Analyzing self-reinforcing processes in inter-organizational relations and practices, focusing, e.g., on science-industry relations, regional clusters, local and global financial markets, etc.
• The interaction between self-reinforcing processes at different levels (individual, group, organizational, network, field, profession) and the underlying linkages.
• Breaking the code: to stop self-reinforcement with the help of intentional and unintentional activities (e.g. stopping events, break outs, paradoxical interventions by third party, or designing unlearning patterns).
• Designing self-reinforcing mechanisms?
• Characteristics of “lock-in” stages and related events.

The sub-theme intends to foster an exchange of theoretical ideas and empirical research results across various substantive issues and theoretical traditions that are important for better understanding self-reinforcing dynamics. Papers that discuss such substantive issues, and possibly others, empirically or conceptually, comparatively or monographically, with regard to recent or more historical developments, are cordially invited.

If you don’t think this title is cool there is something very wrong with you. Here is the associated abstract:

Abstract: In the spirit of the many recent simple models of evolution inspired by statistical physics, we put forward a simple model of the evolution of such models. Like its objects of study, it is (one supposes) in principle testable and capable of making predictions, and gives qualitative insights into a hitherto mysterious process.

And this is the essence of the simple model⁽²⁾:

1. A physicist runs across or concocts from whole cloth a mathematical model which is simple, neat, and contains a great many variables of the same sort.
2. The physicists has heard of Darwin (1859), and may even have read Dawkins (1985) or some essays by Gould, but wouldn’t know Fisher (1958), Haldane (1932), and Wright (1986) from the Three Magi, and doesn’t dream that such a subject as mathematical evolutionary biology exists.
3. The physicist is aware that lots of other physicists are interested in annexing biology as a province of statistical physics.
4. The physicist interprets his multitude of variables as species or (if slightly more sophisticated) as genotypes, and proclaims that he has found “Darwin’s Equations” (cf. Bak et al. (1994)), or, more modestly, has made an important step towards eventually finding those equations.
5. His paper is submitted for review to other physicists, who are just as ignorant of biology as he, but see that it’s about equivalent to the other papers on evolution by physicists. They publish it.
6. The paper is read by other physicists, because at least it’s not another derivation of specific heats on some convoluted lattice under a Hamiltonian named for some Central European worthy now otherwise totally forgotten. Said physicists think this is cutting-edge evolutionary theory.
7. Some of those physicists will know or discover simple, neat models with lots of variables of the same type.

(Shalizi and Tozier, 1999, p. 2)

What could substitute for physics and evolution here if we wanted to make a social science analogy? I think game theory could play the role of physics in many cases. What else?

Market competition is often characterized as an evolutionary selection process. “[O]ne of the main functions of profits is to shift the control of capital to those who know how to employ it in the best possible way for the satisfaction of the public. The more profits a man earns, the greater his wealth consequently becomes, the more influential does he become in the conduct of business affairs” (Mises, “Profit and Loss,” 1951). Within a given population, then, the market process selects for those individuals with the greatest levels of entrepreneurial skill. But can the emergence of entrepreneurial skill as a human trait itself be explained in terms of natural selection? Here’s one attempt:

Evolution and the Growth Process:
Natural Selection of Entrepreneurial Traits
Oded Galor, Stelios Michalopoulos
NBER Working Paper No. 17075, May 2011

This research suggests that a Darwinian evolution of entrepreneurial spirit played a significant role in the process of economic development and the dynamics of inequality within and across societies. The study argues that entrepreneurial spirit evolved non-monotonically in the course of human history. In early stages of development, risk-tolerant, growth promoting traits generated an evolutionary advantage and their increased representation accelerated the pace of technological progress and the process of economic development. In mature stages of development, however, risk-averse traits gained an evolutionary advantage, diminishing the growth potential of advanced economies and contributing to convergence in economic growth across countries.

This is a (mathematical) theory paper with “entrepreneurship” modeled as tolerance for risk, so some readers will find the execution less interesting than the idea. But it is good to see these kinds of big-picture issues addressed in the mainstream literature.

The Journal of Institutional Economics, now in its seventh year of operation, is emerging as an important outlet in the intersection of new and old institutional economics, evolutionary economics and other more or less heterodox approaches. In addition, Geoff Hodgson and Benito Arrunada, the editors, are doing a splendid job of attracting contributions, not only from luminaries such as Richard Posner, but also from important non-economist thinkers whose work may have a bearing on economic issues (e.g., philosopher John Searle and evolutionary anthropologist Robin Dunbar).

The most recent issue of JoIE features a special issue on “Business Routines.” The SI includes particularly thoughtful essays by Ulrich Witt and Jack Vromen. As readers of this blog will know, probably ad nauseam, Teppo Felin and I have repeatedly discussed the troubling lack of micro-foundations for understanding the emergence, stability, change, etc. of routines (and other similar constructs, like capabilities). We also have a paper in the SI, launching related, but different critiques. Specifically, we explicate the behaviorist and empiricist foundations of the organizational routines and capabilities literature and the extant emphasis placed on experience, repetition, and observation as the key antecedents and mechanisms of routines and capabilities. 

This paper is followed by three comments by Sidney Winter, Brian Pentland, and Geoff Hodgson and Thorbjørn Knudsen, respectively, that take critical (in the case of Pentland, extremely critical) issue with various aspects of our argument. Winter and Knudsen and Hodgson raise many fundamental points, but unfortunately Pentland has thoroughly misunderstood the nature of the micro-foundations projects we advocate, and therefore concludes that all we add to the field is “confusion.” Although there is no such thing as bad publicity, Teppo and I are working on a rejoinder to these comments. More to come!

Note that the chart nicely illustrates not only the competition among formats, but the industry’s overall decline. Indeed, “creative destruction” is a good name for the the damage done to the creative arts by the recording industry’s approach to digital media.

Responsibilities abroad kept me from attending the recent Douglass North celebration, but the University of Missouri was well represented by a group of energetic and enthusiastic PhD students, who sent me the following report:

The conference on Legacy and Work of Douglass North was an outstanding meeting with discussions on the past, present, and future of the New Institutional Economics. Top scholars discussed the contribution and influence of North (and the New Institutional Economics) in a diverse range of fields, covering everything from the impact of the initial contributions to the outlook for continued research.

It’s hard to summarize the insights and contributions from six paper sessions, Elinor Ostrom’s keynote, and the roundtable on North and the Rise of the New Institutional Economics. One takeaway was the depth and breadth of North’s contributions – many speakers were North coauthors working on a wide variety of topics, from many different perspectives (economics, political science, history, cognition, etc.). North’s influence is huge across the social sciences.

One burning issue: what’s the next step for New Institutional Economics? Besides bridging or integrating Northean institutional analysis with Williamsonian organizational economics, many speakers emphasized the need to be more rigorous, to examine more details, to go farther than the “big picture” studies that are so prominent in the field. There are too many grand, sweeping claims, and not enough mundane, middle-of-the-road analysis. (John Nye, for example, expressed concern that some Northean ideas are very difficult to operationalize, a particular problem since younger scholars are confronted with very high standards for formalization, empirical technique, etc.)

What methods are most appropriate for studying these details? Several papers displayed new and interesting methods, techniques, approaches, etc. for applying Northean concepts to real-life phenomena and small-scale problems of much lesser scope. The context of empirical analysis is very important. Ostrom’s embrace of multiple methods — case studies, meta-analysis, comparative studies, game theory, experimental economics, etc. – provides one model. Ostrom’s success should serve as a model for many researchers in the New Institutional Economics. Unfortunately, there weren’t a lot of details; Sebastián Galliani’s session, which featured mostly younger scholars, focused on empirical methods but this wasn’t a major theme of the rest of the program. The best discussion on method was Ostrom’s keynote, which discussed the benefits of using existing case studies to produce a sort of empirical meta-analysis to support one’s case. Indeed, the perceived need to create an original dataset may push graduate students to pursue novelty over substance and usefulness; old data can be a great source for empirical analysis! [Editor’s note: I’m reminded of a conversation with Ronald Coase in which he worried that empirical contract researchers focus too much on getting new data, most of which is of course proprietary, while ignoring the treasure trove of archival data, e.g., procurement contracts from 100 years ago, much of which firms are happy to share.]

Washington University, St. Louis is hosting a major international conference, 4-6 November, on the Legacy and Work of Douglass North. The all-star panel includes Lee Alston, Robert Bates, Joel Mokyr, Elinor Ostrom, Ken Shepsle, Barry Weingast, and many others. The conference is organized by Wash U’s Center for New Institutional Social Science.

In other conference news, the CFP for next year’s Atlanta Competitive Advantage Conference, 17-19 May 2011, has been posted. Featured presenters include Jay Barney, Joel Baum, and Rebecca Henderson.

In addition to the review of Doug Puffert’s book that Peter discusses in his most recent post, EH.net has also just issued reviews of two books on economic growth that should be of interest to O&M readers. One is of Michael Heller’s Capitalism, Institutions, and Economic Development. I hope this one gets wide circulation despite being an expensive Routledge title. The other is of Matt Ridley’s The Rational Optimist: How Prosperity Evolves. That one should get a lot of attention.