Posts filed under ‘Jargon Watch’

What Are “Transaction Costs” Anyway?

| Peter Klein |

A friend complains that management and entrepreneurship scholarship is confused about the concept of transaction costs. Authors rarely give explicit definitions. They conflate search costs, bargaining costs, measurement costs, agency costs, enforcement costs, etc. No one distinguishes between Coase’s, Williamson’s, and North’s formulations. “Transaction costs seem to be whatever the author wants them to be to justify the argument.”

It’s a fair point, and it applies to economics (and other social sciences and professional fields) too. I remember being asked by a prominent economist, back when I was a PhD student writing under Williamson, why transaction costs “don’t simply go to zero in the long run.” Indeed, contemporary organizational economics mostly uses terms like “contracting costs,” and since 1991 Williamson  has tended to use “maladaptation costs” (while retaining the term “transaction cost economics”).

When I teach transaction costs I typically assign Doug Allen’s excellent 2000 essay from the Encyclopedia of Law and Economics and Lee and Alexandra Benhams’ more recent survey from my Elgar Companion to Transaction Cost Economics (unfortunately gated). Doug, for example, usefully distinguishes between a “neoclassical approach,” in which transaction costs are the costs of exchanging well-defined property rights, and a “property-rights approach,” in which transaction costs are the costs of defining and enforcing property rights.

What other articles, chapters, and reviews would you suggest to help clarify the definition and best use of the “transaction costs”? Or should we avoid the term entirely in favor of narrower and more precise words and phrases?

6 February 2014 at 12:28 pm 17 comments

Postrel on Dynamic Capabilities

| Peter Klein |

Former guest blogger Steve Postrel weighs in on the future of the dynamic capabilities approach (reprinted, with permission, from a thread on Academia.edu). Steve responds to the question, “Is the dynamic capabilities approach outdated?” with some typical insightful remarks.

Since DC is primarily an ex post facto construct measured by sampling on the dependent variable — i.e., if the firm successfully adapts, then it had DC — its prominence is not a sign that it is doing much intellectual work. . . .

[T]o a first approximation, arguments for the importance of DC have tended to be of the form “We know a priori that firms need to be able to change their operational capabilities from time to time; we have examples of successful firms that have adapted in this way and examples of less-successful firms that haven’t; therefore we can say that the successful adapters had more of this valuable thing we will call ‘dynamic capability.’”

Certainly there have been empirical papers that do better than that, by, for example, trying to look at firms that have adapted multiple times, or by identifying specific organizational structures and practices that might enhance adaptability. The difficult issue with looking at a “precursor” like experience is that theoretically experience could reduce DC by causing specialization and lock-in. Other putative precursors suffer from the ex post measurement problem — how do we know if a firm has the right knowledge for adaptation until we see whether it succeeds?

I suspect there are also deeper conceptual problems because DC is equivocal even with perfect measurement. It would be pretty hard to specify what one meant by the “amount” of DC a firm has or to compare the “amounts” that any two firms have. DC is certainly not a completely ordering relation and I’m not sure it’s even a partial order. Without presenting formal models and going back and forth between those and peoples’ intuition about what DC is “supposed” to mean, however, one really can’t pin these problems down enough to tell if they are serious. . . . (more…)

10 December 2013 at 9:42 am 3 comments

Critical Agrifood Scholarship

| Peter Klein |

A friend tipped me off to this, um, interesting paper on farmers markets, which the authors place within the larger field of “critical agrifood scholarship.” We all know what “critical” means, and I’m familiar with much of the agrifood literature, but I didn’t know about this particular field. I learned a lot from the paper about the slow-food movement’s ability to “create political transformation,” and build a “radicalized space” even though such markets “cluster around property and privilege.” The authors seek to “unpack the racialized and class-inflected narratives at play in farmers markets [and] to extend the alternative agriculture movement’s strategic rupturing of the veil of commodity fetishism to include the systemic inequalities on which both conventional and alternative agriculture depend.” How about that thesis statement! In passing, the authors manage to chide the slow-food movement’s “complacency with capitalism and consumerism, systems that are inherently exploitative and divisive,” while adding editorial remarks to such important scientific phenomena as “the working class performances of ‘god, guns and country’ that fill the rhetoric of the GOP.”

Thank goodness for taxpayer-subsided universities. If there were a free market for higher education, this kind of valuable scholarship would probably be grossly underfunded.

20 April 2013 at 1:32 am 4 comments

No Best Practice for Best Practice

| Lasse Lien |

An important selling point for the consulting industry is that consultants can presumably help a firm identify and implement “best practice.” Surely the consulting industry is an important channel for disseminating knowledge of better ways of doing things, but identifying what constitutes best practice for a given firm in a given situation is no trivial task, and even if the best practice could be identified, transferring it will be a significant challenge.

This begs the question of whether there is a best practice for identification and transfer of best practices, and whether the consulting industry has identified and adopted such a practice. According to this paper Benjamin Wellstein and Alfred Kieser, the consulting industry in Germany is nowhere near a best practice for best practice. This goes for for both inter- and intra-industry transfer. I’ll bet my hat that this finding holds everywhere.

Well, I guess as long as the consulting industry keeps finding better practices for transferring better practices, we shouldn’t be too disappointed that there is no best practice for best practice. (HT: E.S. Knudsen)

20 April 2012 at 4:56 am 4 comments

What Did Keynes Mean by “Animal Spirits”?

| Peter Klein |

Keynes’s idea that investors are motivated by “animal spirits” has come back into vogue with the recent Keynesian revival, but the term is often misunderstood. Keynes referred not to psychological factors that make investors reluctant to invest, but those that make them invest at all — in the face of deep uncertainty, he thought, only a manic, driven, strong-willed person would put capital at risk. When animal spirits are strong, investment is sufficient to maintain aggregate demand; when they lag, aggregate demand falls, and the economy lapses into depression. (Lord Skidelsky approvingly calls this the “mood swings theory” of business cycles — an idea just crazy enough to spawn a recent NBER paper.)

The new issue of Capitalism and Society features a piece on What Keynes Really Meant on this issue, and it’s a good read:

Animal Spirits Revisited

Alexander Dow, Glasgow Caledonian University
Sheila C. Dow, University of Stirling

The term ‘animal spirits’ has returned to academic and public discourse in a way which departs significantly from the original use of the term by Keynes. The new behavioural economics literature uses the term to refer to a range of behaviour which falls outside what is normally understood as rational. This treatment follows from the mainstream dichotomisation between rationality and irrationality. However, Keynes explained that, given fundamental uncertainty, rationality alone was insufficient to justify action. Animal spirits was the name he gave to the (psychological) urge to action which explained decisions being taken in spite of uncertainty; animal spirits for him were neither rational nor irrational. Nor are they beyond analysis. We explore how the nature and role of animal spirits can vary according to context (as between different sectors, types of firm and within firms). This analysis indicates ways in which policy can promote structural change to strengthen animal spirits in the long term as well as offset short-term weakening in animal spirits.

20 December 2011 at 9:39 am 1 comment

Terminology

| Peter Klein |

An interesting example of scholars in different fields using the same specialized terms to mean entirely different things:

Creating Capabilities: The Human Development Approach
MARTHA C. NUSSBAUM

In this powerful critique, Martha Nussbaum argues that our dominant theories of [economic] development have given us policies that ignore our most basic human needs for dignity and self-respect. For the past twenty-five years, Nussbaum has been working on an alternate model to assess human development: the Capabilities Approach. She and her colleagues begin with the simplest of questions: What is each person actually able to do and to be? What real opportunities are available to them?

Creating Capabilities . . . affords anyone interested in issues of human development a wonderfully lucid account of the structure and practical implications of an alternate model. It demonstrates a path to justice for both humans and nonhumans, weighs its relevance against other philosophical stances, and reveals the value of its universal guidelines even as it acknowledges cultural difference. In our era of unjustifiable inequity, Nussbaum shows how — by attending to the narratives of individuals and grasping the daily impact of policy — we can enable people everywhere to live full and creative lives.

One reviewer suggests the term “capabilitarianism” to describe this approach. Will we soon see management journal special issues on capabilitarianism and dynamic capabilitarianism? Felin and Foss critiques on the lack of microfoundations in capabilitarianism? Calls to join capabilitarianism and transaction costarianism?

4 October 2011 at 5:26 am 2 comments

A Krugmanian Slasher Flick

| Peter Klein |

Paul Krugman is furious about the deficit-reduction plan reportedly agreed to yesterday, which Krugman says will “slash government spending,” introducing “big spending cuts” that “will depress the economy even further.” And yet, the deal apparently does not cut one penny of government expenditures, but simply increases them at a slower pace (over ten years) than originally projected by the CBO. Remember, in Washington-speak, “cut” means “reduction in the planned rate of increase.”

Imagine a scene from a Krugman-style slasher flick: the villain approaches the victim, and gives him a smaller hug than the victim was expecting! The audience gasps as the victim screams in terror and flees from the vicious attack.

1 August 2011 at 12:14 pm 2 comments

Archispeak

| Peter Klein |

Every academic and professional discipline has its own specialized vocabulary. In some cases, this brings clarity and precision; in others, it serves mainly to bamboozle the uninitiated. Even architecture studies is no exception:

Other architects, especially those teaching in universities, reacted to the collapse of Modernism by attempting to reinvent the field as a theoretical discipline. The theories did not come from the evidence of the practice of architecture, as one might expect (that was left to Christopher Alexander), but from arcane historical tracts and the writings of French literary critics in hermeneutics, poetics, and semiology. Thus began a new phase in professional jargon.

Thanks to Witold Rybczynski for giving us an entry for both our jargon watch and Pomo Periscope series. What would Fabio say?

8 February 2011 at 11:12 am 5 comments

Jargon Watch

| Peter Klein |

  • Hydrocarbon denier — you know who you are
  • YouTube or it didn’t happen — common response from young people to a report of some event
  • The G-2 — the US and China, jointly controlling the world economy
  • Acluistic – clueless
  • Break your crayons — what that last journal reviewer did to me

Bonus material: Andrew Gelman’s urban dictionary for stats

18 March 2010 at 1:53 pm Leave a comment

Jargon Watch

| Peter Klein |

This week’s entries in our continuing series:

27 February 2010 at 9:52 am Leave a comment

Jargon Watch: “Green Shoots” of Recovery

| Peter Klein |

Thanks to Bill Easterly for noticing that Chauncey Gardner is In the House. G7 officials are now telling us they see “green shoots” of recovery. Can’t you just imagine this behind-the-scenes conversation at the summit?

President “Bobby”: Mr. Gardner, do you agree with Ben, or do you think that we can stimulate growth through temporary incentives?
[Long pause]
Chance the Gardener: As long as the roots are not severed, all is well. And all will be well in the garden.
President “Bobby”: In the garden.
Chance the Gardener: Yes. In the garden, growth has it seasons. First comes spring and summer, but then we have fall and winter. And then we get spring and summer again.
President “Bobby”: Spring and summer.
Chance the Gardener: Yes.
President “Bobby”: Then fall and winter.
Chance the Gardener: Yes.
Benjamin Rand: I think what our insightful young friend is saying is that we welcome the inevitable seasons of nature, but we’re upset by the seasons of our economy.
Chance the Gardener: Yes! There will be growth in the spring!
Benjamin Rand: Hmm!
Chance the Gardener: Hmm!
President “Bobby”: Hm. Well, Mr. Gardner, I must admit that is one of the most refreshing and optimistic statements I’ve heard in a very, very long time.
[Benjamin Rand applauds]
President “Bobby”: I admire your good, solid sense. That’s precisely what we lack on Capitol Hill.

Actually, this level of analysis can also be found at the typical graduate macroecomomics seminar. Oops, did I say that?

27 April 2009 at 11:04 am 1 comment

Adam Smith’s Famous Metaphor

| Peter Klein |

The indefatigable Gavin Kennedy explains, for the umpteenth time, that Adam Smith was ambivalent about market capitalism and that the famous metaphor of the “invisible hand” was not meant as a generalized defense of the market. As Gavin points out, Smith’s detailed analysis of the market economy appears in Books I and II of the Wealth of Nations, while the invisible hand metaphor appears only once, in Book IV, where Smith defends British merchants who, despite mercantilist export subsidies, preferred to keep their capital invested at home, to the benefit of the British economy. Notes Gavin:

So inconsequential was [Smith's] use of The Metaphor that neither he, nor anybody else until the late 19th century, commented upon it. . . .

Moreover, it was only in Chicago in the 1930s that The Metaphor was generalised into Smith’s so-called “law” of markets. Paul Samuelson (1948, 1st edition), in his famous textbook, Economics (16 editions), publicised this invention with the inevitable affect on modern economics, as tens of thousands of his readers took it on trust as true.

To be sure, the relevant passage in Smith also includes the famous lines, “By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good,” and the remark that “What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.” But Smith’s statements need to be understood in context; he is discussing the specific problem of trade monopoly, arguing against trade and industrial policies that subsidize particular markets or industries.

31 March 2009 at 11:41 am 4 comments

Towards Beyond

| Lasse Lien |

We all know that there is an enormous amount of papers published under the title “Beyond . . . (insert whatever)” and “Towards . . . (insert whatever).” On the theory that using these words in the title almost ensures publication (I admit sampling on the dependent variable here), I have decided to take this to the limit in a series of four papers.

The first one will have the snappy title: “Towards Beyond.” The second: “Beyond Towards.” The third: “Towards Towards.” And finally, the most ambitious one: “Beyond Beyond.” I only have the titles so far, so I am interested in coauthors who can fill in the rest. But given these great titles I consider this a trivial task, and insist that I get to be first author.

14 November 2008 at 4:46 am 14 comments

Please, No More “Preneurs”

| Peter Klein |

The term entrepreneur is well-established in the academic and practitioner literatures, if not always consistently used. (As I note here, the word is typically applied to self-employed individuals or, in adjective form, to new and small ventures, but I prefer the broader, functional notions of innovation, alertness, or judgment found in the classic economics literature on entrepreneurship.) The literal translation of the French entrepreneur, “undertaker,” isn’t quite right, though I’m rather drawn to the older English terms “adventurer” or “projector.”

In any case, there’s no excuse for the seemingly endless proliferations of
“-preneur” words floating around today. An entrepreneurial individual within a large firm is an intrapreneur. With some additional skills and an external perspective she might become an extrapreneur. A good manager can hope to be a manapreneur. You in the tech sector? You’re a technopreneur. Or you might be a minipreneur, actorpreneur, agripreneur, authorpreneurseniorpreneur, or even a mompreneur. Enough!

Let’s stick to simple ideas, like manurepreneurship.

19 August 2008 at 11:22 pm 8 comments

Stop Using Military Buzzwords Too

| Dick Langlois |

It seems that, like the British Local Government Association, the US military is keen to get its people to stop using buzzwords, at least according to this February 2007 “Army Doctrine Update” I happened to see posted on a bulletin board in the Brazilian military academy where the Schumpeter Society Conference was meeting. Here are some highlights.

  • Know the difference between maneuver and movement (we don’t maneuver networks; we move them).
  • Battlespace is no longer a joint or Army term. Use “operational environment.”
  • Use “civil considerations” (the C in METT-TC), not “human terrain.”
  • Don’t use “red zone” at all; the term is “close combat.”
  • Do not use “kinetic” and “nonkinetic” to describe operations, actions, activities, tasks, or targets. Use “lethal” and “nonlethal.”

 Or perhaps the point is that they want people to use the right buzzwords.

5 July 2008 at 4:54 pm 3 comments

Stop Using Management Buzzwords

| Peter Klein |

That’s the command to town and village officials from Britain’s Local Government Association, which urges its members to dump trite words and phrases like core values, evidence base, facilitate, fast-track, holistic, level playing field, process driven, quick hit, and my personal favorite, predictors of beaconicity (no idea what it means). Here’s the list, and here’s the CNN story (via Josh). From CNN:

The list includes the popular but vague term “empowerment;” “coterminosity,” a situation in which two organizations oversee the same geographical area; and “synergies,” combinations in which the whole is greater than the sum of its parts.

Officials were told to ditch the term “revenue stream” for income, as well as the imprecise “sustainable communities.” The association also said councils should stop referring to local residents as “customers” or “stakeholders.”

The association’s chairman, Simon Milton, said officials should not “hide behind impenetrable jargon and phrases.”

Business-school educators, please take note!

30 June 2008 at 5:33 pm 7 comments

Nietzsche and Contemporary Philosophy

| Peter Klein |

“Nietzsche is peachy,” according to a bumper-sticker I once saw. Nietzsche is sometimes cited in management research as an authority on power, complexity, time, or relativism (e.g., Singer, 1994; Kilduff and Mehra, 1997; Mainemelis, 2001). But what did Nietzsche really say about these things? What are his main contributions to philosophy? Professional philosophers can’t seem to agree, as witnessed in this roundtable conversation with Peter Bergmann, Teodor Münz, Frantisek Novosád, Paul Patton, Richard Rorty, Jan Sokol, and Leslie Paul Thiele. Bergmann calls Nietzsche “the culture hero of modernism, a cultural revolution comparable to the Reformation or the Enlightenment. His critique of herd values is reflected in the posture of the avant-garde: elitist to the present, democratic to the future.” But Nietzsche was no nihilist, says Sokol; he was rather “an excessively sensitive person horrified by a world where nothing has rules and stands for nothing.”

All agree that Nietzsche bears no personal responsibility by the appropriation of his ideas by German nationalists, but Schrift notes that Nietzsche “chose to write in a style that invites misunderstanding — his use of metaphor, dissimulation, and hyperbole in particular, all make it easier for his words to be taken to mean something other than what he might have intended.” A warning to those of us who like jargon and are guilty of bad academic writing. (HT: 3quarks)

20 February 2008 at 12:42 am 2 comments

Jargon Watch: Paradigm Shifts

| Peter Klein |

Don’t you sometimes wish Thomas Kuhn had chosen another term?

paradigm_shifts.jpg

Via the New Yorker’s outstanding cartoon archive.

14 April 2007 at 8:57 am Leave a comment

Words and Phrases to Avoid

| Peter Klein |

More on jargon: Here are some words and phrases to avoid. Also check out Eric Rasumssen’s “Aphorisms on Writing, Speaking, and Listening” and the Economist’s style guide for many useful tips. And whatever you do, flee from egregious PowerPoint mistakes.

4 April 2007 at 10:44 pm 1 comment

Jargon Watch: Buckets, Not Silos

| Peter Klein |

I’ve never liked the term “silo,” as used in business administration to describe closed spaces like functional areas, research topics, or approaches. “Economists and sociologists need to come out of their silos and work together.” What are we, sacks of grain? Intercontinental ballistic missles? I long for simpler and less pretentious terms like “areas” or “topics.”

From Tuesday’s WSJ  we now learn that silos are out. The new preferred term is buckets. Dow Chemical CEO Andrew Liveris says that ethanol “doesn’t help the conservation efficiency bucket — it helps the diversity of supply bucket.” Cingular Wireless thinks its new rate plan helps customers “dig into their big bucket of night and weekend minutes.” Is the combined India and US market best conceived “as a whole, or as two buckets?” asks a Citigroup analyst. Why do such silly terms proliferate?

Readers are invited to supply their own favorite examples of business and academic jargon. Perhaps we can hold a contest to choose the silliest.

See also previous entries on adjacencies, wikis, bad cover letters, and bad academic writing

30 March 2007 at 1:02 pm 1 comment


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Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
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Peter G. Klein, The Capitalist and the Entrepreneur: Essays on Organizations and Markets (Mises Institute, 2010).
Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler, and the New Economy (Routledge, 2007).
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Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
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