Archive for July, 2006

Ignorance is Bliss, Among Economists

| Peter Klein |

Everyone knows that economists tend to be woefully uninformed about the history of their discipline. But one can still be surprised. At a recent luncheon I was seated next to an editor of one of the leading field journals in economics. This journal publishes mainstream, fairly technical articles in its specialty area and is quite highly ranked by the usual measures. The luncheon speaker was Kenneth Arrow.

The journal editor literally did not know who Arrow was. He recognized the name, and had a vague idea that Arrow was someone important, but could not name even one general area in which Arrow worked (general-equilibrium theory, information economics, social choice, etc.).

I resisted the temptation to ask if he’d heard of Adam Smith or Karl Marx.

31 July 2006 at 5:51 pm 1 comment

Law and Entrepreneurship

| Peter Klein |

Gordon Smith attempts to define this new field:

While legislatures, regulators, and courts sometimes tailor rules to small or emerging businesses, law typically is not organized according to whether the regulated actor is an entrepreneur. . . . “Law and entrepreneurship” is, at root, the study of the legal structure of organizations. This study includes the contracts, statutes/regulations, and common law doctrines that apply to the formation, governance, and termination of organizations.

Sounds encouraging, with the caveat that Gordon is focusing on what I call the “occupational” or “structural” concepts of entrepreneurship, rather than the broader “functional” concept emphasized in many of these papers.

31 July 2006 at 8:57 am Leave a comment

Rafe Champion on Talcott Parsons

| Peter Klein |

Rafe Champion has posted a working paper, “The Success and Failure of Talcott Parsons,” evaluating Parson’s methodology and comparing it to the approaches of Menger, Mises, and Popper. Here is the abstract:

At least three varieties of methodological individualism can be identified in the modern social sciences, all based on the achievement of Carl Menger. These are the praxeology of Ludwig Mises, the voluntarist theory of social action of Talcott Parsons and the situational analysis of Karl Popper. This paper describes how Talcott Parsons drew on Marshall, Pareto, Durkheim and Weber to foumulate an individualistic “action frame of reference” in his first book The Structure of Social Action (1937). The paper also signals some flaws in his approach which drove him to abandon individualism in his subsequent work and to devote himself to the elaboration of the general theory of social systems, a verbal counterpart to general equilibrium theory in economics.

Please send him feedback. And see Mises’s comments on Parsons.

30 July 2006 at 6:39 pm 1 comment

The Power of Ideas . . . ?

| Peter Klein |

Back to sociologists and economists. Brayden King says the leftward bias of academic sociology is largely due to selection. I think the same is true for economics. That is, crunchy, communitarian, big-government progressives are more likely to specialize in sociology or community development, while pro-market, steel-and-concrete individualist libertarians and conservatives are more likely to choose economics or finance.

What does this say, however, about the power of ideas to influence political beliefs? If scholars select into one scientific discipline or another based on prior commitment to a particular social and political worldview, then what generates those worldviews in the first place? Is it possible to change hearts and minds with reason and evidence?

Hayek reports that he started out a Fabian-style socialist but was converted to laissez-faire after reading Mises’s Socialism in 1922. Hayek says the same is true of Lionel Robbins, Bertil Ohlin, and Wilhelm Roepke. These cases seem highly exceptional, however. Can readers suggest other examples? In particular, are there any cases of free-marketeers converting to socialism or interventionism through the study of sociology?

29 July 2006 at 10:57 am 2 comments

The Enterprise of Law

| Peter Klein |

Bruce Benson’s terrific 1990 book The Enterprise of Law: Justice Without the State is back in print, courtesy of the Mises Institute.

See also his article archives at the Journal of Libertarian studies and the Independent Review.

Other useful books in this genre: Robert Ellickson’s Order Without Law, Benson’s To Serve and Protect, and David Beito’s From Mutual Aid to the Welfare State.

28 July 2006 at 10:07 am 5 comments

Unusual Business Ideas That Work

| Peter Klein |

See Uncommon Business for interesting examples of entrepreneurial creativity. (Via Craig Depken)

28 July 2006 at 9:33 am Leave a comment

Assets versus Activities

| Richard Langlois |

At the risk of injecting some substance into my posts, let me raise an issue in the economics of organization that I have been thinking about recently.

There has been much discussion in the literature about the differences between the transaction-cost and capabilities views of organization, something that Nicolai and I, among many others, have written about. But another division might be between asset theories and activity theories. Asset theories are of course the province of the mainstream economics of organization. In this literature, one typically defines vertical integration as joint ownership of productive assets, and integration typically arises because of hazards from cooperating without joint ownership. Activity theories come from the literatures on product design and modularity. Here the issue is how tasks (or activities) ought to be designed given the structure of the production process. In this literature, the logic of integrality versus modularity provides clues to which activities out to be “outsourced.” Perhaps the best example of this kind of thinking is by Baldwin and Clark. I have also tried to think about the issues in a paper that will be coming out in Organization Studies. In many ways, this approach harkens back to Adam Smith. (more…)

27 July 2006 at 1:46 pm 3 comments

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Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
Peter G. Klein and Micheal E. Sykuta, eds., The Elgar Companion to Transaction Cost Economics (Edward Elgar, 2010).
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).
Nicolai J. Foss, Strategy, Economic Organization, and the Knowledge Economy: The Coordination of Firms and Resources (Oxford University Press, 2005).
Raghu Garud, Arun Kumaraswamy, and Richard N. Langlois, eds., Managing in the Modular Age: Architectures, Networks and Organizations (Blackwell, 2003).
Nicolai J. Foss and Peter G. Klein, eds., Entrepreneurship and the Firm: Austrian Perspectives on Economic Organization (Elgar, 2002).
Nicolai J. Foss and Volker Mahnke, eds., Competence, Governance, and Entrepreneurship: Advances in Economic Strategy Research (Oxford, 2000).
Nicolai J. Foss and Paul L. Robertson, eds., Resources, Technology, and Strategy: Explorations in the Resource-based Perspective (Routledge, 2000).