Posts filed under ‘People’
| Peter Klein |
I’m #57 on a new list of Top 100 Web-Savvy Professors. Teppo smokes me at #19, but I’m right up there with Clay Christensen, Noriel Roubini, Austan Goolsbee, Richard Thaler, and other luminaries. I don’t know the group behind the list or how the ranking was compiled, but it looks good to me. In any case, this will give you more names to follow on blogs or Twitter. Enjoy!
| Peter Klein |
Wallace Stevens was one of America’s greatest poets. The author of “The Emperor of Ice-Cream” and “The Idea of Order at Key West” was awarded the Pulitzer Prize for Poetry in 1955 and offered a prestigious faculty position at Harvard University. Stevens turned it down. He didn’t want to give up his position as Vice President of the Hartford Accident and Indemnity Company.
This lyrically inclined insurance executive was far from alone in occupying the intersect of business and poetry. Dana Gioia, a poet, Stanford Business School grad, and former General Foods executive, notes that T.S. Eliot spent a decade at Lloyd’s Bank of London; and many other poets including James Dickey, A.R. Ammons, and Edmund Clarence Stedman navigated stints in business.
Sure, quants rule, but literary types have a role to play in business too. And some of the great literary and artistic figures, such as Dickens, Rubens, and even Shakespeare, were successful business managers. The quoted passage is from John Coleman’s “The Benefits of Poetry for Professionals” in the HBR blog.
| Peter Klein |
Ronald Coase has a short piece in the December 2012 Harvard Business Review, “Saving Economics from the Economists” (thanks to Geoff Manne for the tip). Not bad for a fellow about to turn 102! I always learn from Coase, even when I don’t fully agree. Here Coase decries the irrelevance of contemporary economic theory, condemning economics for “giving up the real-world economy as its subject matter.” He also provides a killer quote: “Economics thus becomes a convenient instrument the state uses to manage the economy, rather than a tool the public turns to for enlightenment about how the economy operates.”
I’m sure that’s true for many economists and for some branches of the field, such as Keynesian macroeconomics. But Coase seems to reject economic theorizing altogether, even the “causal-realist” approach popular in these parts. To be useful, he argues, economics should provide practical guidance for the businessperson. However, “[s]ince economics offers little in the way of practical insight, managers and entrepreneurs depend on their own business acumen, personal judgment, and rules of thumb in making decisions.”
Well, that sounds about right to me. Economics provides general principles, or laws, about human action and interaction, mostly stated as “if-then” propositions. Applying the principles to concrete, historical cases requires Verstehen, and is the task of economic historians (as analysts) and entrepreneurs (as actors), not economic theorists. Deductive theory does not replace judgment. Without deductive theory, however, we’d have no principles to apply, and nothing to contribute to our understanding of the economy except — to quote Coase’s own critique of the Old Institutionalists — “a mass of descriptive material waiting for a theory, or a fire.” To be sure, Coase’s own inductive method has led to several brilliant insights. Coase himself has a knack for intuiting general principles from concrete cases (e.g., theorizing about transaction costs from observing automobile plants, or about property rights from studying the history of spectrum allocation), though not perfectly. But, as I noted before, Coase himself is probably the exception that proves the rule — namely that induction is a mess.
| Peter Klein |
You’ve probably heard the expression, “X is so extreme, he’s to the Right of Genghis Khan.” This basically means, “I don’t like X but have nothing intelligent to say about X or his ideas.” Mostly because we don’t know much about Genghis Khan, and what we do know presents a pretty complex picture. I mentioned before Jack Weatherford’s revisionist portrayal of the Great Khan as a somewhat progressive ruler, by the standards of his time. Now I learn, from Joe Salerno, about a paper by Andrius Valevicius “arguing that Genghis Khan’s successful empire building lay in his introduction of low taxes, stamping out of torture, and promotion of religious toleration and diversity and free scholarly inquiry in the conquered territories. The Great Khan also restricted his plundering to the wealth and property of the vanquished ruling elites while leaving their subjects generally unmolested in their persons and property and even distributing some of the plunder among them.”
| Dick Langlois |
I was saddened to hear today of the passing of Tom McCraw at the young age of 72. I didn’t always agree with him: he was a strong admirer of the Progressives, and even tried implausibly to suggest in Prophet of Innovation, his great biography of Schumpeter, that Schumpeter would have agreed with Progressive policies had he been alive today. But McCraw was a gentleman, a fine writer, and an important figure in business history. Prophet of Innovation is a terrific book. I wish I had written it.
| Peter Klein |
Indiana University’s Workshop in Political Theory and Policy Analysis has a memorial section for the Elinor and Vincent Ostrom, both of whom passed away this year. Here’s my colleague David O’Brien:
I was a graduate student in Sociology at Indiana University in the late 1960s when I was looking for some courses in Political Science to fulfill the requirements for a minor. I had signed up for a course but the professor left for another university and somehow, by default, I took Lin’s course on “Political Calculus.” Like so many others in my discipline at the time I saw the world from a zero-sum conflict perspective. At the beginning of the semester I felt like I was in intermediate Chinese and had not taken the basic course. Riker’s Theory of Political Coalitions and Buchanan and Tullock’s Calculus of Consent were among the many readings that baffled me. What I remember most about Lin’s teaching was her enthusiasm and the fun she was having in doing her work. There were a lot of serious, somewhat dour, professors around in the late 1960s and not many women in teaching positions in the social sciences. So Lin stood out by her demeanor as well as her intellectual gifts. She had genuine concern for other human beings, including someone like me who did not have a clue as to what was going on and she persistently nudged me to keep an open mind about how I would approach the world as a social scientist. She did something very unusual in those days, which was to suggest that the boundaries between disciplines were artificial.
I did not fully appreciate Lin Ostrom’s influence on my scholarly life until many years after I left IU. Her encouragement to look beyond the disciplinary walls led me to use Mancur Olson’s Logic of Collective Action, one of the books assisgned in the Political Calculus course, as the theoretical foundation of my first work on urban neighborhood organization. Her encouragement for working across disciplines encouraged me to work in partnership with psychologists, political scientists and economists on a variety of research projects find a comfortable home in a Division of Applied Social Sciences.
I thoroughly enjoyed my conversations with Vincent, who became a member of my dissertation committee. He helped me to understand how collective action challenges that we face in our day are analytically similar to those faced centuries ago. I am especially grateful to Vincent for introducing me to the importance of constitutions and federalism, but also to Tocqueville’s observations of the relationship between “association” and “habits of the heart.” Vincent’s insightful observations on the complex relationships between formal and informal institutions have had a significant impact on my approach to household and village adaptations to post-command economy transitions in the former Soviet Union and East Africa.
Most important, Lin and Vincent led by example. They were genuinely kind human beings who were always willing to listen to others and encourage them, engage in spirited debate and thoroughly enjoyed doing applied scholarship.
| Peter Klein |
Hayek, interviewed in 1983 by Encounter:
Hayek: “I regard ‘social justice’ as a nonsensical term….”
Interviewer: “But do we have the concept of the ‘social market economy’?”
Hayek: “May I tell you the story of when I last spoke to Dr. Ludwig Erhard? We were alone for a moment, and he turned to me and said, ‘I hope you don’t misunderstand me when I speak of a social market economy (Sozialen Marktwirtschaft). I mean by that that the market economy as such is social, not that it needs to be made social. . . .’ If you had to make the market economy ‘social,’ . . . you can justify every demand that cannot be reconciled with having the market determine prices and incomes. There’s no better way of destroying the market economy than with the concept of ‘social justice.’”
| Peter Klein |
There’s an old joke about God calling the Pope. “I’ve got good news and bad news. The good news is that I’ve answered your prayer — I’m uniting all the world’s religions under one church and one leader.” Great, the Pope responds, what’s the bad news? “I’m calling from Salt Lake City.”
It’s commonly observed that the academic fields of strategy, organization, and entrepreneurship are over-represented by scholars from the Mormon faith: Christensen, Clark, Barney, Hoskisson, Dyer, Whetten, Zenger, and Felin, to name just a few. Often this is explained by superior social networking and the role of BYU as an anchor entity. But I don’t know any systematic academic research on the phenomenon.
A Wednesday HBR blog entry, “How Mormons Have Shaped Modern Management,” takes a different tack, focusing on the beliefs and practices of the Mormon church. An interesting read. See also a 2011 Business Week piece on the role of the Mormon mission.
| Peter Klein |
Missouri friends, please join us next Tuesday for a lecture by Henry Manne on the governance and organization of US higher education institutions:
The Crisis in Higher Education:
Origins and Problems of University Governance
Henry G. Manne
Dean Emeritus, George Mason University Law School
Tuesday, October 23, 2012, 3:30-4:45pm
MU Student Center, Room 2206
University of Missouri
Sponsored by the Liberty and Justice Colloquium, University of Missouri
Free and Open to the Public
Henry G. Manne is Dean Emeritus of the George Mason School of Law and an expert on insider trading, legal education, university governance, and law and economics. He has also taught at St. Louis University, the University of Wisconsin, George Washington University, the University of Rochester, Stanford University, the University of Miami, Emory University, the University of Chicago, and Northwestern University.
Dean Manne is an Honorary Life Member of the American Law and Economics Association, which honored him as one of the four founders of the field of Law and Economics. He launched the Law and Economics Center at Emory University and the University of Miami before bringing it to George Mason University. His monograph, An Intellectual History of the School of Law, George Mason University, traces the development of the law and economics.
Dean Manne’s other writings include such seminal works as Insider Trading and the Stock Market, Wall Street in Transition (with E. Solomon), and “Mergers and the Market for Corporate Control” Journal of Political Economy, 1965). He is also a frequent contributor to the Wall Street Journal. In 1999, the Case Western Reserve Law Review published the papers from a symposium honoring the many contributions of Dean Manne to the law and economics movement as The Legacy of Henry G. Manne. The Liberty Fund recently published The Collected Works of Henry G. Manne in three volumes.
Dean Manne holds a B.A. from Vanderbilt University (1950), J.D. from the University of Chicago (1952), J.S.D. from Yale University (1966), LL.D. from Seattle University (1987), and LL.D. from the Universidad Francesco Marroquin in Guatemala (1987).
| Peter Klein |
A few quick thoughts on today’s Nobel Prize announcement. More later, once better informed people, from whom we can steal ideas, have weighed in.
- Market design is basically the study of exchange without prices. As most of economics deals with prices, this is a somewhat specialized subfield. The best-known example, courtesy of Al Roth, deals with kidney exchanges. Most economists will tell you that the best way to deal with shortages of transplantable organs like kidneys is to legalize kidney sales. (My friend Andy Barnett and the late David Kaserman wrote extensively on this.) If, for whatever reason, that is infeasible — Roth notes that many people find such sales “repugnant” — then various matching algorithms may be better than nothing. Roth and colleagues have studied and compared these matching algorithms.
- To get up to speed, Roth’s 2007 article in Harvard Business Review is probably a good place to start. For more technical comments see Josh Gans and Alex Tabarrok, and. Knowledge Problem is my go-to source for this kind of stuff, so I’m eagerly awaiting the commentary there.
- We discussed market design at O&M in 2007.
- Shapley’s contribution’s to cooperative game theory underlie Roth’s work. It’s a bit trite to point this out, but I’ll point out anyway that the huge popularity of game theory over the last three decades, particularly in IO and business strategy, rely almost entirely on noncooperative game theory, while the cooperative branch has been somewhat neglected. But bargaining is clearly important for strategy, organization, and entrepreneurship, so look for increased interest in this branch.
- Someone pointed out that Roth appears to be the first economics blogger to win the Nobel. (I’m not counting Krugman, who’s not what I’d call an academic blogger.)
- Enthusiasm among my informal circle of professional friends is muted. One suggests that, rather than take cultural resistance to the price mechanism (e.g., for kidney allocation) as exogenous, scholars should work to overcome this resistance. Another calls this “one of the most boring prizes yet. At best it is a prize for some no doubt useful ideas in some small contexts of effecting coordination, but the real coordinating marvel is the market.” A third calls Shapley’s UCLA lectures on cooperative game theory “the most useless classes that I took in college. . . we would go through one division rule after another to see which axioms they satisfied. When I asked him how you picked between different division rules that satisfied the same axioms, Lloyd said that it all depended on what conclusion that you wanted to reach.”
| Peter Klein |
The Strategic Management Society conference has just wrapped up from the lovely city of Prague. Three-fourths of the O&M team,along with several former guest bloggers, enjoyed the festivities. There were many excellent papers, panels, workshops, and social events. Too many to summarize here, but I’ll mention a few highlights:
- A panel organized by good-twin Teppo Felin, “What Are the Big Questions in Strategy?” More on this soon from one of the participants, who used the opportunity to plug his new book shamelessly.
- The Dan and Mary Lou Schendel Best Paper Prize, “to honor substantial work published in the SMJ,” at least five years prior to the award, to Oliver Williamson for his 1991 paper “Strategizing, Economizing, and Economic Organization.”
- A panel on teaching strategic entrepreneurship at the undergraduate, MBA, and PhD levels. I covered the third of these; my slides are here.
- A “common ground” session on “Austrian Economics and Creative Destruction,” demonstrating the growing interest in the Austrian school among management and organizational scholars.
I also participated in a pre-conference workshop on career strategy, and was asked to talk about social media. Should PhD students and untenured assistant professors blog, tweet, share professional information on Facebook, etc.? I said I could see no evidence that a social media presence had hurt any young scholar; quite the contrary, blogs (like this one) and other, appropriate, uses of social media, can enhance a scholar’s presence and reputation. I argued that it’s a mistake to view these as competing with serious research; after all, it’s not like someone’s going to say, “I was going to complete a major research article today, but decided to send a tweet instead.” Rather, judicious use of blogs, Facebook, Twitter, etc. is a complement to serious research. I think of it as water-cooler or lunch-table chatter with colleagues. You learn about people’s broader interests, their sense of the field, what topics they think are particularly interesting, what they’re reading, etc. Professionals like to know this about each other. Learning these sorts of things about colleagues certainly doesn’t make you think less of them!
There’s much more to report — including an episode of me impersonating a female colleague — but that will have to wait for a future post.
| Peter Klein |
Luigi Zingales, an important contributor to organizational economics as well as finance and macroeconomics, and frequently cited here at O&M, is guest blogging at EconLog. I’m looking forward to his posts!
| Peter Klein |
Former O&M guest blogger Benito Arruñada has a new book, Institutional Foundations of Impersonal Exchange: Theory and Policy of Contractual Registries (University of Chicago Press, 2012), presenting his influential and important work on the measurement of property rights and transaction costs. Here’s the blurb:
Governments and development agencies spend considerable resources building property and company registries to protect property rights. When these efforts succeed, owners feel secure enough to invest in their property and banks are able use it as collateral for credit. Similarly, firms prosper when entrepreneurs can transform their firms into legal entities and thus contract more safely. Unfortunately, developing registries is harder than it may seem to observers, especially in developed countries, where registries are often taken for granted. As a result, policies in this area usually disappoint.
Benito Arruñada aims to avoid such failures by deepening our understanding of both the value of registries and the organizational requirements for constructing them. Presenting a theory of how registries strengthen property rights and reduce transaction costs, he analyzes the major trade-offs and proposes principles for successfully building registries in countries at different stages of development. Arruñada focuses on land and company registries, explaining the difficulties they face, including current challenges like the subprime mortgage crisis in the United States and the dubious efforts made in developing countries toward universal land titling. Broadening the account, he extends his analytical framework to other registries, including intellectual property and organized exchanges of financial derivatives. With its nuanced presentation of the theoretical and practical implications, Institutional Foundations of Impersonal Exchange significantly expands our understanding of how public registries facilitate economic growth.
My copy is on the way, and I’m eagerly looking forward to reading it!
| Peter Klein |
Paul Krugman writes a typically silly column on the Austrian school’s approach to defining the money supply. As usual, his purpose is not to inform, or analyze, or explore, but to ridicule anyone who disagrees with The Paul. A few reactions:
- The substantive question, do Austrians consider money-market mutual funds as part of the money supply, is easily answered with 30 seconds of research, which is apparently more than Paul could muster up. Paul, use The Google!
- Krugman frequently mocks ideas he does not understand, so his tone and style here are hardly surprising. But it’s interesting that he finds Ron Paul’s “hard-money” views influential enough to mention.
- Krugman seems to believe that the Republican Establishment, and Paul Ryan in particular, are in thrall to the economic teachings of the Austrian school, which would be news to everyone in the Republican Establishment and the Austrian school. In his defense, I think Krugman recognizes only Krugman and non-Krugman, so he cannot quite grasp that there may be some diversity among his critics.
- Krugman dimly recognizes that Austrians have some objections to fractional-reserve banking in connection with government intervention, and sneers that “[t]his is historically wrong, but maybe the actual history of banking is deep enough in the past for that wrongness to get missed.” He also seem to think that Austrians want to ban the use of money-market mutual funds. Of course, Krugman has never read anything written by an Austrian economist, and he offers no citations or quotes, so it’s hard to know where he gets these ideas. To my knowledge. no Austrian has called for banning MMMFs. On fractional-reserve banking, the opinion among Austrian scholars ranges from those who think FRB is inherently unworkable and illegitimate and could not survive apart from government intervention (most Rothbardians) to those who think that private FRB is legitimate and workable but that the current system of government deposit insurance, government fiat currency as the base money, the Fed as the lender of last resort, etc. is inefficient and illegitimate (Larry White, George Selgin). Needless to say, Austrian scholars have written thousands of pages on these issues, including detailed studies of the history of banking. Krugman apparently thinks Austrians are merely journalists or propagandists, as he himself has become.
| Peter Klein |
Carpenter’s Strategy Toolbox, named for the late Mason Carpenter, is a terrific resource for teachers in strategic management and related fields. Here’s an advertisement from former guest blogger Russ Coff:
Some of you may be familiar with Mason Carpenter’s old teaching toolkit. I have initiated a new site that includes everything from that site plus quite a few additional exercises and videos. Please check it out at:
You can filter by type of tool (exercise, video, etc.) using the tabs at the top or you can filter by topic (entrepreneurship, 5 forces, RBV, global, alliances, etc.) using the categories on the right side. You should find something useful in no time at all.
Here are links to a few exercises and resources that you might find especially useful (to give you a quick feel):
- Egg Drop Auction is an exercise where profit is determined by finding new uses for materials that others did not anticipate.
- Blue Ocean Strategy summary video (plus several related videos like Cirque Du Soliel).
- Tinkertoy exercise for scenario planning or first mover advantage.
- Entrepreneurship and innovation tool page. This is a listing of the resources that are tagged for entrepreneurship content.
Please help make the site more useful:
- Comment on tools you have used (adding tips, etc.)
- Submit new tools so the resource is always growing
- Let me know if you have any questions or suggestions
| Peter Klein |
I only met Larry Ribstein a few times but was deeply impressed with his erudition and insight. He is best known for his work on unincorporated businesses but was an expert in a number of areas of business law (as well as music and cinema).
This November the GMU Law School is hosting a conference in his honor, “Unlocking the Law: Building on the Work of Professor Larry Ribstein.” Speakers include Henry Manne, Richard Epstein, Gillian Hatfield, Todd Henderson, Cliff Whinston, and many others. Hit the link above for the details.
| Peter Klein |
A guest post from former guest blogger Joe Mahoney, the Caterpillar Chair in Business and Director of Graduate Studies in the Department of Business Administration, University of Illinois:
As many readers of O&M know by now, Elinor Ostrom of Indiana University (born August 7, 1933) died of pancreatic cancer on Tuesday, June 12th at the age of 78. She shared the Nobel Prize in Economics in 2009 with Professor Oliver Williamson (UC-Berkeley). Elinor along with her husband Vincent Ostrom (now 93) founded Indiana University’s Workshop in Political Theory and Policy in the mid-1960s, in which she remained active until this Spring, only a couple of weeks before her hospitalization. She also donated most of her Nobel Prize money to the Workshop, as Elinor and Vincent had no children and few living relatives. Williamson said in a statement that Ostrom was “a great human being,” an inspiring teacher and colleague and accomplished social scientist. “She had a wonderful sense of joy about the importance of her work that she successfully communicated to others,” he said. A record five women won Nobel prizes in 2009, and Elinor Ostrom is the only woman to have been awarded the prize in Economics.
Elinor Ostrom, who was born and raised in Los Angeles as a child of the Great Depression, and received her education from undergraduate through Ph.D. at UCLA, contributed to our understanding of the evolution of institutions for collective action in common resource contexts such as forests, fisheries, oil fields, and grazing lands. She emphasized citizen involvement, the creativity of local communities, and cutting through sterile dichotomous classifications and ideological “solutions” that are glib and inaccurate. Ostrom states that “neither the State nor the market is uniformly successful in enabling individuals to sustain long-term, productive use of natural resources” (1990: 1). She emphasized the complementarities between public and private mechanisms for solving collective good problems (see Governing the Commons, Cambridge University Press, 1990.) Ostrom conducted field studies of the world’s fisheries, roamed with shepherds in Swiss pastures, and trudged around the Los Angeles water basin (during her dissertation work) to distill the essentials of harnessing cooperation. She writes in the preface to her 1990 book: “It is my conviction that knowledge accrues by the continual process of moving back and forth from empirical observation to serious efforts at theoretical formulation.” From this theoretically informed field case study method Elinor Ostrom concludes that instead of presuming that individuals sharing a common resource are “inevitably caught in a trap from which they cannot escape, . . . the capacity of individuals to extricate themselves from various types of dilemma situations varies from situation to situation” (1990: 14).
Ostrom championed unlocking the spirit of “public entrepreneurship” — a term she coined in her 1965 UCLA dissertation. Her spirit can live on within us, if we decide to “make it so.” Good years.
| Peter Klein |
The latest issue of the Erasmus Journal for Philosophy and Economics features an interview with Gary Becker on rational choice. I am not a Chicagoite positivist, but I sympathize with Gary’s overall take on the behavioral revolution: Meh.
Interviewer: Following the crisis, many economists and methodologists have argued that more realistic behavioral underpinnings of economic theory would have made forecasts more accurate. Do you think that one of the things the recent crisis has shown us is that people just do not behave rationally? Or did the crisis rather show exactly the opposite—that people did in fact react to incentives and that the consequences of introducing new financial instruments were just not foreseeable?
Becker: I think it is mainly the latter. There were incentives, both on the borrower and on the lender side, that these subprime loans would be made available at the lowest interest rates; and there was pressure from the government to do so; and probably those involved did not understand the financial instruments. Now, is it that we have to change our theories radically with respect to their behavioral structure or even switch to a new behavioral framework? There is very little evidence that would support such a move.
A later remark supports my argument that “disequilibrium analysis” is not the defining characteristics of the Austrian school:
I have read some of the literature on the critique of equilibrium, not so much by philosophers but by the Austrian school of economics, and I could just never make sense out of it, because I do not see what they are substituting for it. Even Friedrich Hayek, who is listed as one of the top Austrians, if you read his analysis, you see that he is using equilibrium analysis.
| Peter Klein |
Russ Roberts interviews Coase on EconTalk. Familiar stuff, but it’s great to hear Coase talk about it at age 101. Some highlights:
Roberts: “[I]t’s hard to measure transactions costs; it’s hard to quantify the theory. Is that correct or is it irrelevant.” Coase: “It’s very relevant. But the state of economics is such that people don’t try to measure these things, to study them, and so people can engage in discussions and explanations without any real knowledge of what happens in the real world.”
Roberts: “What was your reaction to [game theory] and its influence on the study of the firm?” Coase: “I think the influence was wholly bad, because people developed high theoretical approaches instead of approaches based on what actually happens.”
Roberts: “[D]id you have contact with Keynes and Hayek, two great economists of that era in England?” Coase: “Yes. I was very friendly with Hayek. I liked him, and he liked me. But we didn’t have great contact. He tended to deal with these big questions, and I’m always interested in how the actual system operates. Therefore, in much smaller matters than Hayek.” Roberts: “And how about Keynes? Did you know Keynes?” Coase: “I can tell you– I was helping when Britain was trying to get a loan from the United States immediately after the war, and I was talking to one of Keynes’s assistants. And Keynes came in the room and walked over to us and the man I was talking to us said, ‘This is Coase, who is helping us with the statistics. I don’t think you know him.’ And Keynes said, ‘No, I don’t.’ And walked off. And that’s my life with Keynes. “