Posts filed under ‘New Institutional Economics’
| Peter Klein |
I’ve long been involved with the International Society for New Institutional Economics (ISNIE). (In fact, I first met the esteemed Professor Foss at the inaugural ISNIE conference in St. Louis in 1997.) ISNIE was established as an global academic society promoting the study of institutions within the broad tradition established by the organization’s co-founders Ronald Coase, Oliver Williamson, and Douglass North. ISNIE has been a great success, holding annual conferences in the US and Europe, sponsoring an important working-paper series, and boasting thousands of members from all over the world.
Times change, and over the last two decades the study of institutions has moved from the periphery towards the center of economic, social, political, and legal analysis. The statement, “institutions matter,” which might have been controversial in social science in the 1990s, seems trite today. As such, some of ISNIE’s leaders and members saw a need to reposition and rebrand the society to reflect the current academic and policy climate. Last year ISNIE’s members voted, and this year the board approved, a name change. The organization is now SIOE, the Society for Institutional and Organizational Economics. Along with the change is a new website, featuring news, information, a blog, and many other features. The site is a work in progress and editors Bruno Chaves and Jens Prüfer would be happy to receive comments and suggestions.
I’m looking forward to the next twenty years with SIOE!
| Peter Klein |
O&M friends Avner Greif, Lynne Kiesling, and John Nye have edited an important collection of essays by students, colleagues, and friends of the distinguished economic historian Joel Mokyr: Institutions, Innovation, and Industrialization: Essays in Economic History and Development (Princeton University Press, 2015). Dust-jacket blurb:
This book brings together a group of leading economic historians to examine how institutions, innovation, and industrialization have determined the development of nations. Presented in honor of Joel Mokyr — arguably the preeminent economic historian of his generation–these wide-ranging essays address a host of core economic questions. What are the origins of markets? How do governments shape our economic fortunes? What role has entrepreneurship played in the rise and success of capitalism? Tackling these and other issues, the book looks at coercion and exchange in the markets of twelfth-century China, sovereign debt in the age of Philip II of Spain, the regulation of child labor in nineteenth-century Europe, meat provisioning in pre-Civil War New York, aircraft manufacturing before World War I, and more. The book also features an essay that surveys Mokyr’s important contributions to the field of economic history, and an essay by Mokyr himself on the origins of the Industrial Revolution.
| Peter Klein |
We have been using the term “judgment-based view” to describe our approach to entrepreneurship. The term “judgment” of course comes from Knight, and was used also by Mises, Casson, and many others. Contemporary entrepreneurship research is still dominated by the opportunity-discovery view, but increasing criticism from the judgement-based view, the effectuation and bricolage approaches, the opportunity-creation view, and other perspectives is challenging the notion that profit opportunities exist, waiting to be discovered, and even that “opportunity” is a meaningful construct at all.
Nicolai and I organized a themed section in the Journal of Institutional Economics on the judgment-based view with papers from Niklas Halberg, Jeff McMullen, and Andrew Godley and Mark Casson. Our introduction reviews the increasing importance of entrepreneurship in economics and management research, explains the relationship between entrepreneurship and economic organization, discusses some microfoundations of judgment, and distinguishes judgment from luck and judgment per se from good or skilled judgments.
The papers are available electronically at the links above, and in hardcopy in the Fall 2015 issue of JOIE.
| Peter Klein |
I took this photo in the conference room of the Beijing Information Science and Technology University, School of Economics and Management. A display case holds a large collection of Chinese works and just two books in English. Most of you will recognize the silver one with the blue letters. Now, where is Organizing Entrepreneurial Judgment?
| Peter Klein |
Last weekend the Ronald Coase Institute held a conference, “The Next Generation of Discovery: Research and Policy Change Inspired by Ronald Coase.” The impressive lineup featured Kenneth Arrow, Oliver Williamson, Gary Libecap, Sam Peltzman, John Nye, Claude Menard, Ning Wang, Lee and Alexandra Benham, Mary Shirley, and many others. The Institute has now made both days of the program available on video. Great stuff.
| Peter Klein |
Corporate culture is hard to define and measure (Kreps’s game-theoretic version is probably the one most familiar to economists), but may play a role in explaining variation in firm performance. Of course, one should not invoke “culture” as an explanation for outcomes without specifying some microfoundations. And culture may be as much the result of firm performance as the cause.
But organizations can also serve as a sort of laboratory for understanding the links between informal institutions like culture and more formal institutions such as written rules, policies, and procedures in society at large, a very important issue for economic history, growth, public policy, etc. So say Luigi Guiso, Paola Sapienza, and Luigi Zingales in this short note:
Unlike large societies, however, corporations give hopes to identify the link between culture and formal institutions. . . . First, the creation of a firm is a moment where the founder has the power to set values on a blank slate. Identification of this moment is easier (it is recorded, it is recent) than identifying when and who sets the values of a large community (e.g. a country). Second, culture is easier to change in a corporation. Through hiring and firing corporations can select values by selecting people, avoiding the more difficult strategy of changing their minds. And can punish them if they do not adapt (e.g. by deferring promotion). In large societies only the difficult strategy is available, and slow adaptation is hard to punish, unless slow-adapters are outlawed, which makes culture and law undistinguishable. Third, it is easier to establish the link with performance. Performance is continuously recorded, for the corporation as a whole and often for its segments and divisions in order to implement compensation schemes. Hence, one can study the role of shared norms and beliefs while controlling for the power of economic incentives. Finally, because firms break up and merge much more often than countries, an observer can collect exposure of a firm to a new culture much more often than one can for larger societies.
| Peter Klein |
Thanks to Danny Sokol for passing on this paper by Alan Meese.
Alan J. Meese
Antitrust Law Journal 79, no. 3 (2014)
This essay, prepared for a conference examining Robert Bork’s antitrust contributions, examines Bork’s hitherto unknown role in the transaction cost economics (“TCE”) revolution. The essay recounts how, in 1966, Bork helped rediscover Coase’s 1937 article, The Nature of the Firm and employed Coase’s reasoning to explain how various forms of partial integration could reduce transaction costs. As the essay shows, Bork described how exclusive territories, customer restrictions and horizontal minimum price fixing that accompanied otherwise valid integration were voluntary efforts to overcome the costs of relying upon unfettered markets to conduct economic activity. To be sure, Bork did not develop a complete account of TCE capable of informing a full-fledged research program. Nonetheless, Bork did articulate and apply various tools of TCE, tools that reflected departures from the applied price theory tradition of industrial organization.
The essay also offers some brief speculation regarding why scholars have not recognized Bork’s early contributions to TCE. For one thing, Bork did not purport to offer a new economic paradigm. Instead, Bork repeatedly characterized his work as an application of basic price theory, the very economic paradigm that TCE overthrew with respect to the interpretation of non-standard contracts. Moreover, Bork did not persist in his critique of price theory’s once-dominant account of non-standard contracts. After reiterating his views in 1968, for instance, he did not revisit the economics of non-standard agreements for nearly a decade. Finally, when Bork did return to the topic, he deemphasized TCE-based arguments and focused more on the claim that such agreements could not add to the market power already possessed by manufacturers and thus could not produce economic harm. In short, Bork’s failure to reiterate his TCE-based interpretation of non-standard agreements seems partly responsible for the lack of recognition his early contributions have received.
On Bork see also Jack High’s useful 1984 paper, “Bork’s Paradox: Static vs. Dynamic Efficiency in Antitrust Analysis.”