O&M co-founder Nicolai Foss will give the 2012 Sherlock Hibbs Distinguished Lecture in Business and Economics Tuesday, 6 March 2012, 10:00-11:30am, in 205 Cornell Hall on the University of Missouri campus. The title is “Open Entrepreneurship: The Role of External Knowledge Sources for the Entrepreneurial Value Chain.” The lecture is sponsored by the Hibbs Professors of the University of Missouri’s Trulaske College of Business and the University of Missouri’s McQuinn Center for Entrepreneurial Leadership (which I direct).

The full announcement (with Nicolai’s impressive bio) is below the fold. The lecture is free and open to the public, so all are welcome!

The Hibbs Professors of the University of Missouri’s Trulaske College of Business and the University of Missouri’s McQuinn Center for Entrepreneurial Leadership invite you to the 2012 Sherlock Hibbs Distinguished Lecture in Business and Economics:

Open Entrepreneurship: The Role of External Knowledge Sources for the Entrepreneurial Value Chain

Nicolai J. Foss
Copenhagen Business School and Norwegian School of Economics and Business

Tuesday, March 6, 2012
205 Cornell Hall
10:00 – 11:30am

Sponsored by the Hibbs Professors of the University of Missouri’s Trulaske College of Business and the University of Missouri’s McQuinn Center for Entrepreneurial Leadership, the lecture is free and open to the public.

Nicolai J. Foss is a Professor of Strategy and Organization at the Copenhagen Business School, a part-time Professor of Knowledge-based Value Creation at the Norwegian School of Economics and Business Administration, and the Head of Department of the Department of Strategic Management and Globalization at CBS. He also holds part-time and visiting professorships at the Lund University, Luiss Guido Carli-Roma, and Agder University. He founded the Center (now Department) of Strategic Management and Globalization at the Copenhagen Business School in 2005, building it from a center with 5 faculty members to a full department with 17 faculty members along with postdocs and PhD students.

He is author or editor of 22 books, 136 journal articles, and 81 book chapters. His work has appeared in the Academy of Management Review, Academy of Management Journal, Organization Science, Strategic Management Journal, Journal of International Business Studies, Journal of Management Studies, Strategic Organization, Strategic Entrepreneurship Journal, Industrial and Corporate Change, Organization Studies, and other leading academic journals. His articles and books have been translated into Chinese, Russian, and Spanish. His newest book, Organizing Entrepreneurial Judgment: A New Approach to the Firm (with Peter G. Klein), is forthcoming from Cambridge University Press.

Foss was a founder of the Danish Research Unit for Industrial Dynamics and a co-founder of the industry-funded Center for Policy Studies, the most influential privately funded Danish think tank. Since 2000 he has raised over €2 million in external funding as research leader and has participated in many additional funded research projects. He is a panel member of the European Research Council and serves as a member of the three-person management group of the Norwegian Center for Service Innovation at the Norwegian School of Economics and Business Administration, which is supported by a €20 million, 8-year grant.

Educated as an economist from the Copenhagen University (1989), Foss his received his PhD from the Copenhagen Business School in 1993, where he has been Assistant, Associate and Full Professor.

Over the last few years, CBS has bestowed honorary doctoral degrees on the likes of Jay Barney, Oliver Williamson, Oliver Hart, Michael Brennan, and other luminaries in strategy, the theory of the firm, and finance (in addition to a number of reps of pomo in management research that are of small interest to O&M readers). At a ceremony on 19 April a CBS honorary doctorate will be bestowed upon Birger Wernerfelt.

Wernerfelt is the JC Penney Professor of Management of the MIT Sloan School of Management. A Danish citizen, Wernerfelt holds degrees from the University of Copenhagen and Harvard. Wernerfelt’s best known work is no doubt “A Resource-based View of the Firm.” With more than 12,000 cites (google scholar) this paper is also one of the most cited social science research articles ever, and, of course, one of the founding papers of strategy’s (still) dominant view, the resource-based approach. The paper develops a conception of firms as bundles of heterogeneous and partly firm-specific resources, and links this conception to sustainable performance differences between firms as well as to growth strategies through resource-based diversification. These ideas opened up several paths of research in strategic management in the following decades, including Wernerfelt’s own influential empirical work (with Cynthia Montgomery) on diversification and its link to performance (e.g., here).

More recently, Wernerfelt has been working on other truly fundamental aspects of the theory of the firm, namely the reason why firms exist and what explains their boundaries and internal organization. Thus, in a series of papers, Wernerfelt has developed an argument that the employment relationship exists because it allows the parties to the contract to exploit economies of scale in bargaining costs (e.g., here) — a stream that may be seen as  much more true to the original message in Coase’s (1937) “The Nature of the Firm” than the asset-specificity branch of the theory of the firm. Wernerfelt has extended the argument to the understanding of asset ownership, communication within and between firms, and the strength of incentives in firms versus markets. In addition to these contributions to strategic management and the theory of the firm, Wernerfelt has contributed to the economics of search and numerous important contribution to marketing theory.

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.

We’ve been somewhat critical on this blog of the Freakonomics approach, but not as critical as Andrew Gelman. Here’s his latest (with Kaiser Fung) in the American Scientist:

On the heels of Freakonomics, the pop-economics or pop-statistics genre has attracted a surge of interest, with more authors adopting an anecdotal, narrative style.

As the authors of statistics-themed books for general audiences, we can attest that Levitt and Dubner’s success is not easily attained. And as teachers of statistics, we recognize the challenge of creating interest in the subject without resorting to clichéd examples such as baseball averages, movie grosses and political polls. The other side of this challenge, though, is presenting ideas in interesting ways without oversimplifying them or misleading readers. We and others have noted a discouraging tendency in the Freakonomics body of work to present speculative or even erroneous claims with an air of certainty. Considering such problems yields useful lessons for those who wish to popularize statistical ideas.

Here’s some additional commentary from Andrew.

My unease with Freakonomics is not its anecdotal, narrative style, but the emphasis on clever puzzles rather than substantive problems, over-reliance on weird instrumental variables, and belief that one can tackle almost any phenomenon with only the barest knowledge of its history and prior literature. Economic theory is indeed quite general and powerful, but not to be thrown around willy-nilly. After all, with great power comes great responsibility.

It’s been fun hosting Australian writer (and frequent O&M commenter) Rafe Champion at Missouri the last couple of days. Rafe spoke to the economists about the philosophy of science (handout here), and to the graduate philosophy seminar of my colleague André Ariew on current research topics in the philosophy of biology. We’ve had many talks about Hayek, Mises, Popper, Parsons, and our mutual friend Bill Bartley, among others. Rafe  blogs at Catallaxy Files and the Critical Rationalist blog, and his website The Rathouse contains a treasure-trove of writings by, and commentary on, the most important twentieth-century philosophers of science.

Friend of O&M and leading management scholar Anita McGahan will present the University of Missouri’s Monroe-Paine Distinguished Lecture in Public Affairs, “The Health of Humanity 2050,” Thursday, 27 October 2011. She’ll also do a faculty-student seminar, “Changing the World,” that morning. Besides her important contributions to industry and competitor analysis Anita has become a leading expert in public health, poverty, and economic growth. Local O&Mers, make plans to attend!

Monroe-Paine Distinguished Lecture in Public Affairs

You’re invited to attend
Dr. Anita McGahan
Associate Dean-Research, Director of the PhD Programs, Professor of Strategic Management and
Rotman Chair in Management, Rotman School of Management,
Munk School of Global Affairs, University of Toronto

will present

“The Health of Humanity 2050”
October 27, 2011 — 1:30 pm
2501 Missouri Student Center, Chambers Auditorium
RSVP to McGahan Lecture
For more information on Dr. McGahan, please visit the Truman School website.

A recent issue of the Review of Austrian Economics (edited by Virgil Storr) honors the contributions of Don Lavoie who died at a very young age in 2001. It contains contributions by Storr, Boettke and Prychitko, Klamer, Chamlee-Wright, Horwitz, Lewis, and High. In addition, published for the first time is a seminal article by Lavoie on the interpretive turn in economics.

Lavoie was an audacious pioneer. Like many such pioneers he was ahead of his time. The newly re-emergent Austrian school was not ready for him — did not understand what he was about. Most of them either ignored Lavoie’s products (and those of his collaborators at the Program on Social and Organizational Learning — a center he co-founded with Jack High), or else marginalized him. To the latter his preoccupation with late Continental Philosophy and hermeneutics was seen as a real threat to doing social science. His young, loyal and creative collaborators were caught in the crossfire. After his death the furor simply died down.

With the publication of this issue it is possible to gain a fresh perspective (something Lavoie’s hermeneutics might have predicted). For me it is a case of “distance lends enchantment to the view.” I confess I was in the group who neglected his work for lack of sufficient understanding of its significance.

For management and industrial organization types Lavoie’s work is highly relevant. There is a growing appreciation of the connection between language, communication, meaning, action, purpose and organization — about which Lavoie’s approach has much to say, not to mention his prescient contributions on culture, modularity, and computer science. For those wishing to benefit from his work, unless you have an interest in the epistemology of Continental philosophers, I would suggest concentrating on the contributions that have to do with information, knowledge, computing, and organization.

I guess I owe my own awaking to Bill Tulloh (onetime Lavoie student). Probably the first (and for a long time the only) time I heard the phrase “category killer” was when I was still working in CompUSA and our new CEO proclaimed in war-cry like fashion that CompUSA was going to be a “category killer” for the industry. I had no idea what this meant, but it stuck in my mind and when a few years later I finished my book on capital I incorporated the phrase in a passage.

We cope with the complexity in the world by converging on institutions. Thus once the arrival of new products, made possible by the development of a new technology, has been digested, new categories of classifications tend to be developed, into which these products are grouped. These categories emerge spontaneously out of individual attempts to communicate the attributes of the new products. A good example is the products of the computer industry. A whole range of products exist, whose workings remain a mystery to the vast majority of people, but whose purposes needed to be explained. … shorthands provide the increasingly informed public with a way to tailor their expectations when choosing between products. They enhance predictability by enhancing the interpretability of information. But these relatively predictable elements change with time and it is no accident that conscious innovation involving product differentiation is often referred to using the phrase “category killer.”

So I had begun to understand the important way in which we use language to establish modular categories in order to organize and coordinate our lives. My appreciation was further enhanced when this paragraph was quoted by Bill Tulloh in  an article of his (co-authored with Mark Miller) on the question of “abstraction” — which is the essential element behind the benefits of successful modularization, closely related to the benefits of institutions. I have since communicated with him and gained greater insight.

I’m very excited about Doug Allen’s forthcoming book The Institutional Revolution (University of Chicago Press). Trained by Yoram Barzel (and hence part of the Tree of Zvi), Doug is a leading contemporary scholar on property rights, transaction costs, contracting, and economic history. His work on agricultural contracting with Dean Lueck, including their 2002 book The Nature of the Farm, is a classic contribution to the economics literature on economic organization. He also has a very good introductory textbook. More information is at Doug’s informative (and amusing) website.

Here’s the cover blurb for the new book:

Few events in the history of humanity rival the Industrial Revolution. Following its onset in eighteenth-century Britain, sweeping changes in agriculture, manufacturing, transportation, and technology began to gain unstoppable momentum throughout Europe, North America, and eventually much of the world—with profound effects on socioeconomic and cultural conditions.

In The Institutional Revolution, Douglas W. Allen offers a thought-provoking account of another, quieter revolution that took place at the end of the eighteenth century and allowed for the full exploitation of the many new technological innovations. Fundamental to this shift were dramatic changes in institutions, or the rules that govern society, which reflected significant improvements in the ability to measure performance—whether of government officials, laborers, or naval officers—thereby reducing the role of nature and the hazards of variance in daily affairs. Along the way, Allen provides readers with a fascinating explanation of the critical roles played by seemingly bizarre institutions, from dueling to the purchase of one’s rank in the British Army.

Engagingly written, The Institutional Revolution traces the dramatic shift from premodern institutions based on patronage, purchase, and personal ties toward modern institutions based on standardization, merit, and wage labor—a shift which was crucial to the explosive economic growth of the Industrial Revolution.

Bonus: Here’s the syllabus from Doug’s course on the economics of property rights.

Adrián Ravier has put together a nice collection of Spanish-language interviews with economists of the Austrian school (volume 1, volume 2). The leading modern figures are all included: Mises, Hayek, Machlup, Lachmann, Rothbard, Kirzner, fellow travelers such as Buchanan and Shackle, and contemporary Austrians such as Garrison, Block, Hoppe, Higgs, Ebeling, Salerno, Boettke, and more.

Guest blogger Peter Lewin’s interview is coming out in a third volume, to be published later this year, and Adrián has given me permission to post the English version here. You’ll find Peter’s intellectual odyssey very interesting!

(I am also featured in the collection, via translation of an old interview from 1995. Those were the days!)

Daniele Besomi, writing at the SHOE list (and shared with permission):

[N]ot only memory is treacherous and selective, but even archival sources are not always fully reliable. In my work on the papers of Roy Harrod I have found examples of self-selection of documents to be preserved for posterity. Already aged 30 he annotated some documents as witnessing his position on some university matters; at 32 he preserved his own side of the correspondence he entertained with some politicians apparently because he deemed it important to keep a trace of it (he normally never kept copies of his outgoing correspondence, almost all handwritten); at 45 he started going through his own archives, annotating some correspondence for the benefit of “future historians of thought.”

At some (probably later) point in life he organized his own archives for the benefit of future readers, and he is likely to have manipulated some contents (besides rearranging the correspondence: annoyingly, the archivists undid some of Harrod’s work and moved some papers to different folders …).

It is in fact very strange that one who preserved tailor’s bills and bus tickets had kept no documents relating to his activities with the New Fabian Research Bureau in the early 1930s: he didn’t keep any of the memoranda he wrote (two at least survive in the NFRB’s archives) nor the correspondence he received about it (but the outgoing letters are in the recipients’ archives), except for a letter from James Meade dealing with theoretical matters and mentioning the NFRB in a postscript — perhaps (I am speculating here) Sir Roy turned conservative was embarrassed of the left-wing tendencies of his younger self.

Look below the fold for some annotations and sources (via Daniele).

aged 30: I am referring to the ‘diary notes’ mentioned in the editorial footnotes to the summary of two letters Harrod wrote in late 1930 (http://economia.unipv.it/harrod/edition/editionstuff/rfh.d5.htm#pgfId=17479) and early 1931 (http://economia.unipv.it/harrod/edition/editionstuff/rfh.dc.htm#pgfId=20640) to the Chair of a commissin encharged by the University of Oxford to propose arrangements for the Bodleian Library; in these notes Harrod gave his point of view on the state of the proceedings.

aged 32: I refer to the letters Harrod wrote to Walter Rnciman, then at the Board of Trade, in 1932. I could not reproduce them on the web site of the electronic reason for copyright reasons, but they are in the printed ed. (The Interwar Papers and Correspondence of Roy Harrod, 3 volumes: Cheltenham: Elgar, 2003) as letters 240, 243 and 249. Here, however, MY OWN memory was faulty: he kept this version not as a backup copy or to prove anything, but because he sent the MSS to a typist.

aged 45: Again I could not reproduce the document on the web edition for copyright reasons (I reproduced the note written in 1945 in a footnote to the first version (1928) of the 1930 paper where he produced the marginal revenue curve (Essay 6 in the printed version, pp. 1063 ff.). Harrod’s note was attached to the bundle of documents relating to this story, which he summarized as follows (Harrod’s summary is pretty accurate)

This letter is of some interest for the history of economic thought.

In 1928 I submitted an article for the Economic Journal setting out the marginal revenue curve as it has come to be called. Keynes submitted this to F.P. Ramsey who in effect rejected it. In the summer of 1928 my quasi-nervous breakdown came on and I could not vex my brain with such matters.

Later I returned to the charge. I approached Ramsey direct who withdrew his objections (see esp. first and last paragraphs). This letter dated July 6 must have been written in 1929. A projected week-end visit (when I was Senior Censor) was cut off by his death in 1930. His obituary appeared in the March Journal of 1930. My article appeared in June 1930.

Had it not been for Ramsey’s misunderstanding I should have been able to claim undisputed priority in setting out the marginal revenue curve (see Joan Robinson’s introduction to Economics of Imperfect Competition 1933).

However I loved Ramsey and bear him no grudge!

R. F. H.

When Ms. Robinson’s book appeared, I narrated to her the story here set out and received the attached postcard in reply (July 10, postmark 1933).

NFRB: The only 2 documents in Harrod’s archives mentioning the NFRB is a letter from Meade mainly on Harrod’s internatonal Economics and with some reference (http://economia.unipv.it/harrod/edition/editionstuff/rfh.128.htm), and another letter on a joint letter to the London Times on policymatters, where Meade refers to a meeting (without specifying that it was NFRB-related) (http://economia.unipv.it/harrod/edition/editionstuff/rfh.13f.htm#11688). The other related documents are all found in other people’s archives (verify by means of the internal search engine, link on left column here: http://economia.unipv.it/harrod/edition/editionstuff/contentsfr.htm, keywords ‘fabian’ or ‘NFRB’; on the importance and extension of Harrod’s commitment with the NFRB see the relevant passages in the general introduction, http://economia.unipv.it/harrod/edition/editionstuff/genintrofr.htm?rfh.7.htm).

REORGANIZATION OF THE ARCHIVES: see the editorial intro to the correspondence, http://economia.unipv.it/harrod/edition/editionstuff/genintrofr.htm?rfh.7.htm, in the section on the Harrod papers at Chiba University of Commerce, in particular notes 7 and 8.