Posts filed under ‘New Institutional Economics’
| Peter Klein |
Via Michael Strong, a thoughtful review and critique of Western-style economic development programs and their focus on one-size-fits-all, “big idea” approaches. Writing in the New Republic, Michael Hobbs takes on not only Bono and Jeff Sachs and USAID and the usual suspects, but even the randomized-controlled-trials crowd, or “randomistas,” like Duflo and Banerjee. Instead of searching for the big idea, thinking that “once we identify the correct one, we can simply unfurl it on the entire developing world like a picnic blanket,” we should support local, incremental, experimental, attempts to improve social and economic well being — a Hayekian bottom-up approach.
We all understand that every ecosystem, each forest floor or coral reef, is the result of millions of interactions between its constituent parts, a balance of all the aggregated adaptations of plants and animals to their climate and each other. Adding a non-native species, or removing one that has always been there, changes these relationships in ways that are too intertwined and complicated to predict. . . .
[I]nternational development is just such an invasive species. Why Dertu doesn’t have a vaccination clinic, why Kenyan schoolkids can’t read, it’s a combination of culture, politics, history, laws, infrastructure, individuals—all of a society’s component parts, their harmony and their discord, working as one organism. Introducing something foreign into that system—millions in donor cash, dozens of trained personnel and equipment, U.N. Land Rovers—causes it to adapt in ways you can’t predict.
SMS Special Conference, “From Local Voids to Local Goods: Can Institutions Promote Competitive Advantage?”
| Peter Klein |
Please consider submitting a proposal to the upcoming SMS Special Conference in Santiago, Chile, 19-21 March 2015, on the theme “From Local Voids to Local Goods: Can Institutions Promote Competitive Advantage?” Here’s the description:
A recent stream of strategy research has examined how institutional voids pose fundamental challenges for industrial development in emerging markets, which bring detrimental effects to the competitiveness of local firms. Yet, in many countries, policymakers, to various degrees and levels, have adopted a rather positive agenda, to try and foster local firms through the provision of public resources, such as investments in infrastructure, specialized industrial policies, as well as knowledge-generation systems. Concomitantly, firms themselves have pursued collective synergies that individual firms alone would be able to attain. In sum, strategies embedded in the local environment may promote rather than limit competitive advantage. To advance this discussion, we are gathering a group of established scholars and practitioners in Santiago, one of the most modern Latin American cities. Chile is also well known for its distinctive institutional reforms, which promote a thriving business climate. The Conference will thus offer a unique opportunity to discuss how firms and institutions interact to spur entrepreneurship and development.
I am chairing the track on “Institutions and Local Entrepreneurship,” and looking for papers dealing broadly with the relationships among legal, political, and social institutions, entrepreneurship (broadly defined), public policy, and economic performance. I would love to see submissions from O&Mers. The submission deadline (extended abstract, not full paper) is 15 October 2014, just around the corner. Let me know if you have any questions.
| Dick Langlois |
I write on the flight back from the inaugural conference of the World Interdisciplinary Network for Institutional Research (WINIR), which met on the Prime Meridian these last few days. The conference was a great success, not only for its wonderful location in the Old Royal Naval College astride the Cutty Sark but also for the overall quality of the organization and the presentations.
As I have mentioned before, WINIR was created to encourage institutional research from a wide range of perspectives and disciplines. The annual conference institutionalizes this (you might say) by having keynote speakers from five different disciplines. The political scientist was Kathleen Thelen from MIT, one of my fellow editors on the Journal of Institutional Economics; the legal scholar was Katharina Pistor from Columbia; and the sociologist was Geoffrey Ingham from Cambridge, who made some interesting observations about Chinese institutions in the context of the “great divergence” debate in economic history. Serious and well-known scholars all. The economist was Timur Kuran, who updated us on his fascinating work on the economics of the pre-nineteenth-century Islamic waqf. But the most interesting – or at any rate most surprising – keynote was the philosopher Barry Smith from Buffalo, whom some of you may have heard of for his early work on the philosophy of Austrian economics. Smith’s talk was about “ontology,” which in my ignorance I had expected to be an hour of head-breaking essentialism. It turns out that “ontology” now means the practice of classification – giving things the right names and putting them in the right boxes. As much computer science as philosophy, it seemed to me. The main applications are in databases and sciences more generally, including things like Department of Defense databases and Human Genome data. Smith is a world-leading practitioner of this kind of ontology, having founded something called the National Center for Ontological Research. (I must confess that the first thing that popped into my mind when I heard this title was the High-Energy Magic Building at Terry Pratchett’s Unseen University.) Basically, ontology appears to be about modularization and standardization, something quite fitting to talk about in the shadow of the Royal Greenwich Observatory. I discovered that Smith was unaware of the modularity literature, so I plan to send him some references.
Many of the parallel sessions were also of high quality. I could attend only a fraction of them (what with sneaking out to visit the longitude exhibit at the National Maritime Museum). But let me plug a couple of papers by my friends. Giampaolo Garzarelli and Lyndal Keeton modeled “internal exit” in pre-colonial Southern Africa, the fissioning off of subtribal groups to found new polities. (I was impressed with the quality of that entire session.) As I was chairing a competing session later, I missed Roger Koppl and Caryn Devin talking about their paper “Against Design,” written with Stuart Kauffman and Teppo Felin. A version of that collaboration will appear in JOIE as a target article with solicited comments. (more…)
| Peter Klein |
At the recent Academy of Management conference in Philadelphia I was pleased to participate in a pre-conference workshop organized by Paul Drnevich, Larry Tribble, and David Croson, “Theories and Their Words: A Cross-Academy Discussion of Perspectives on Value Creation and Capture.” From the blurb:
In this workshop a panel of senior and emerging scholars provides a forum to examine and discuss the roles and implications of several prominent management theories and their differing terminology for creating and capturing value. Our distinguished panelists will provide an overview of the value implications of several well-known foundational theories of the existence and purpose of business organizations: Transaction Cost Economics (TCE), Property Rights Theory (PRT), the Capabilities and Resource-based View (RBV), and Industrial Organization (IO), discuss challenges often encountered in efforts to integrate these theories and their terminology, and explore commonalities and intersections across these perspectives that may yield opportunities for future research. We provide perspectives from the distinguished scholars as a means of clarifying how each theory explains the core concepts of value creation and value capture, without which a sustainable business cannot exist. We then offer a discussion of points of commonality and integration of the theories around value creation and value capture with an open forum Q&A session with the presenters regarding directions for future research. We conclude with round-table breakout discussions, each led by a senior scholar and focused on a specific aspect of the theory they presented for more detailed discussion of future research in that theoretical stream.
The presentations from the workshop are online here. You may find them interesting for for research and for teaching. My own presentation on strategy and transaction cost economics covered the basics of TCE and asked if TCE is really a theory of strategy (short answer: no and yes).
Update: Mike Ryall’s presentation is viewable here.
| Peter Klein |
I have a chapter in a new book edited by David Howden and Joseph Salerno, The Fed at One Hundred: A Critical View on the Federal Reserve System (New York: Springer, 2014). My chapter is called “Information, Incentives, and Organization: The Microeconomics of Central Banking,” and builds upon themes discussed many times on this blog, such as Fed independence. Here is a SSRN version of the chapter. The book comes out next month but you can pre-order at the Amazon link above.
| Peter Klein |
The International Society for New Institutional Economics has established four new awards, named after the pioneers of new institutional social science: the Ronald Coase Best Dissertation Award, Oliver Williamson Best Conference Paper Award, Douglass North Best Paper or Book Award, and Elinor Ostrom Lifetime Achievement Award. Details on the awards, and a call for nominations for the Coase, North, and Ostrom awards, are on the ISNIE site. (Sadly, my suggestion for a Best Organizational and Institutional Economics Blog Award was not heeded.)
| Peter Klein |
That’s the title of an interesting new law review article by Kevin Davis (New York University Law Review, April 2013). Just as we can treat organizational structure as as sort of technology, and study the introduction and diffusion of new organizational forms with the same theories and methods used to study technological innovation and diffusion, we can think of contracts as structures or institutions that emerge, are subject to experimentation and competition, and evolve and diffuse. Here’s the abstract:
If technology means, “useful knowledge about how to produce things at low cost”, then contracts should qualify. Just as mechanical technologies are embodied in blueprints, technologies of contracting are embodied in contractual documents that serve as, “blueprints for collaboration”. This Article analyzes innovations in contractual documents using the same kind of framework that is used to analyze other kinds of technological innovation. The analysis begins by laying out an informal model of the demand for and supply of innovative contractual documents. The discussion of demand emphasizes the impact of innovations upon not only each party’s incentives to collaborate efficiently, but also upon reading costs and litigation costs. The analysis of supply considers both the generation and dissemination of innovations and emphasizes the importance of cumulative innovation, learning by-doing, economies of scale and scope, and trustworthiness. Recent literature has raised concerns about the extent to which law firms produce contractual innovations. In fact, a wide range of actors other than law firms supply contractual documents; including end users of contracts, specialized providers of legal documents, legal database firms, trade associations, and academic institutions. This article discusses the incentives and capabilities of each of these potential sources of innovation. It concludes by discussing potential interventions such as: (1) enhancing intellectual property rights, (2) relaxing rules concerning the unauthorized practice of law and, (3) creating or expanding publicly sponsored clearinghouses for contracts.
See also Lisa Berstein’s comment. (HT: Geoff Manne)