Archive for August, 2006
Does France Have a Silicon Valley?
| Peter Klein |
Jeremy Fain says yes, in southwest Paris. Not quite Silicon Valley, perhaps, but an important innovation cluster nonetheless.
I find this sort of discussion interesting, but am troubled by the “How-can-we-create-another-Silicon-Valley” approach so common in the clustering literature. The assumption is that technology clusters are created, or at least encouraged, by government policy, and that such policies that are in principle replicable. By contrast, if clusters emerge from the bottom up, there is little that policymakers can do, besides removing obstacles to entrepreneurial activity. (See Desrochers and Sautet, “Cluster-Based Economic Strategy, Facilitation Policy and the Market Process.”)
Update: Austan Goolsbee says investing in universities is not likely to produce the next Silicon Valley.
NYU Journal of Law and Liberty
| Peter Klein |
The NYU Journal of Law and Liberty is a new journal focusing on classical liberal legal scholarship. Volume 1, Number 1 revisits Lochner v. New York, the landmark 1905 case that defended the freedom of contract and became, to its critics, a hated symbol of heartless, dog-eat-dog capitalism. (During the New Deal the word “Lochner” meant about what “Enron” means today.) Volume 1, Number 2 contains an interesting piece by Mario Rizzo, “The Problem of Moral Dirigisme: A New Argument Against Moralistic Legislation,” which opens thusly:
This Article applies a theory of rational choice to moral decision making. In this theory, agents act primarily on local and personal knowledge to instantiate moral principles, virtues, and moral goods. The State may seek to prevent them from acting as they independently determine by prescribing or proscribing certain conduct by formal legal means. If its purpose is to ensure that people act morally or become better persons, we call this “moral dirigisme.” Our thesis is that the need to use decentralized knowledge to determine the moral status of an act makes the task of the moral dirigiste well-nigh impossible.
“Critical” This and “Critical” That
| Nicolai Foss |
At the ongoing Academy of Management Meetings there are a number of sessions with titles such as “Critical Perspectives on Power in Organizations.” Of course, we all know that “critical” is a code-word for left-leaning (often extremely so) work on the issues with which social science deals, in the traditions of mainly European lefty and muzzy sociologists and philosophers, such as Foucault, Habermas, etc.
Still, I am somewhat disturbed that a scholarly organization, such as the AoM, can accept session titles of these kind. The clear implication of these kind of titles is that the rest of us, who may also be interested in, say, “power in organizations,” are not really critical — which to me means that we are not serious scholars. That implication is evidently preposterous, particularly given the low level of scholarship that often characterizes so-called “critical studies,” including those in management.
Architecture
| Richard Langlois |
I too am at the Academy of Management meeting in Atlanta. And I have already run into Peter and Nicolai more than once.
It occurred to me that I ought to write about whatever important new idea I’ve picked up here. I now think that I see such an idea, and it would come under the heading of architecture. (more…)
Joel Klein, Monopolist
| Peter Klein |
Joel Klein does not have a well-developed sense of irony. As Clinton Administration antitrust czar, he became a household name with his relentless pursuit of Microsoft, a $40 billion company with 70,000 employees in 100 countries. Today Klein heads the New York City public school system, a conglomeration of 1,450 schools with 136,000 employees, 1.1 million students, and a $15 billion operating budget. Oh, did I mention that it’s a monopoly? Not a private company with a large market share, but an actual monopoly, an organization protected from competition by an exclusive government franchise.
Klein was Distinguished Executive Speaker at tonight’s Academy of Management Convocation, which I attended. The speech was disappointing — not because of Klein’s political philosophy, which I don’t share — but because it was a shallow, fluffy talk about “leadership,” “accountability,” “change agents,” and the like. (I did enjoy his voice, however, a smoother version of Jimmy Durante’s.) (more…)
Thoughts on Stakeholder Theory
| Peter Klein |
Yesterday I attended the Academy of Management session “Stakeholders: The Keys to Effective Strategy and Performance Measurement.” Panelists included Joe Mahoney, Russ Coff, Christos Pitelis, Tom Donaldson, Amy Hillman, Sybille Sachs, and Kathryn Pavolovich. I’m pretty much an unreconstructed Friedmanite on this issue so I went to raise my consciousness.
What I learned was interesting, but I still have several questions about stakeholder theory, at least in its normative version. (more…)
New Entrepreneurship Journal
| Nicolai Foss |
I have been hearing the rumours for some time, but now it is an established fact: I just picked up a flyer annoucing the new Strategic Entrepreneurship Journal.
Sounds familiar? Not surprising, as this is launched as a sister journal to the Strategic Management Journal (the flyer displays the frontpages of both journals) with overlapping editors (Dan Schendel and Michael Hitt are the co-editors, the senior advisory board consists of Howard Aldrich, Arnold Cooper, Morton Kamien, Robert Strom and Michael Tushman). The launch of the new journal is so recent that it doesn’t even have a homepage with the publisher (Wiley).
Airport Security Quote of the Day
| Peter Klein |
From Chris Westley: “Every time I take off my shoes in the security screening process at the airport, I find it consoling to remind myself that at least Richard Reid wasn’t wearing an underwear bomb.”
Update: Civil libertarians warn that new passenger screening technologies might as well be underwear searches.
Private and Public Investment in R&D, Crime-Prevention Division
| Peter Klein |
Further to Nicolai’s post on terrorists and cops: Government security officials have attenuated incentives not only for effort, but also for innovation. Just yesterday I read about the new Volvo S80, which has a special key fob that beeps when someone is hiding in the locked car (using a heartbeat sensor). Can you imagine the police coming up with that?
More generally, Bruce Benson offers compelling evidence, in his 1998 book To Serve and Protect, that the reduction in crime in the US over the last decade and a half owes little to improved police protection, but is due instead to increased investments in private security. (See also Benson’s short piece “Why Crime Declines.”)
Property Rights at the AoM
| Nicolai Foss |
A host of economics approaches have been influential in strategic management research, inclucing transaction cost economics, and the highly overlapping approaches of information economics, game theory, and industrial organization theory.
However, property rights economics as developed by Ronald Coase, Harold Demsetz, Steven Cheung, and its perhaps most sophisticated contemporary proponent, Yoram Barzel, has not been much used in strategic management, save for discussions of intellectual property rights (a big problem with communicating principles of property rights economics is that most academics immediately associate to IPR which, of course, is just a small subset of the many applications of property rights economics).
Things may be changing, however. (more…)
Where Are the Academic Management Blogs?
| Peter Klein |
Our inaugural post noted the dearth of academic blogs in management, strategy, and other parts of business administration, compared with the many in economics and law. Tonight witnessed a gathering of the near-universe of academic management bloggers — Nicolai, Teppo Felin of orgtheory.net, and myself (Brayden King joins us later) — at the Academy of Management meeting in Atlanta. Why, we asked ourselves, are there so few academic management blogs?
One possibility is opportunity cost. Economists and law professors have fewer consulting opportunities than management professors, and hence more time for blogging. Another is that bloggers appropriate very little of the value their blogs create (OK, assume, arguendo, positive value creation), and business-school professors are too savvy to give away knowledge for free. (Of course, while that might apply to researchers in corporate strategy, which is all about making money, it hardly applies to those in organizational behavior and the other “softer” areas of management.)
I suspect another explanation. Blogging requires a certain temperment, a particular way of thinking. The best bloggers have not only catholic interests, but also — more important — a belief that they can explain a variety of interesting and important phenomena with a few basic principles, consistently applied, and in just a short paragraph or two. This is exactly the way most economists think. “Give me a simple model, and I can explain the world.” Those who prefer more subtle, complex, and ambiguous modes of thought are apt to find blogging an unsatisfying pursuit.
Why Are Terrorists More Inventive Than Cops?
| Nicolai Foss |
National Review Online has an interesting symposium, “Plans Destroyed,” on yesterday’s terror plot (which caused me to spend 3 hours in the airport here in Atlanta; well, perhaps not the worst way to spend your time in Atlanta ;-)). Daniel Pipes offers his reflections, arguing that
Airplanes represent an outdated target because passenger screening techniques quickly adapt to threats. As soon as terrorists implement new techniques (box-cutters, shoe-bombs, liquid components), security promptly blocks them … Conversely, trains, subways, and buses, as shown by attacks in Madrid, London, and Bombay, offer far richer opportunities for terrorists, for access to them can never be so strictly controlled as to aircraft.
Indeed; but as he points out himself terrorists do target planes, and “One cannot but wonder, however, why creatively, cops invariably lag behind criminals.” Pipes is surely not the first to make this observation; however, as far as I know nobody has tried to seriously answer it.
One answer may be that criminals are smarter than cops. For petty criminals that is probably very far from the truth. For terrorists it may come a bit closer to the truth: Many of today’s terrorists are likely to be better educated than many, perhaps most, cops. Still, intelligence agencies have, of course, highly educated experts employed.
Rather than a capability explanation, the explanation may turn on incentives/property rights. Intelligence officers are government bureaucrats with twarthed incentives to think ahead of highly motivated terrorists (even if their motivation is wholly derived from the expectation of other-worldly rewards). Career ladders may, perhaps, provide incentives, but these are extremely blunt. May this be an argument for privatizing intelligence services?
Scarcity without Prices
| Richard Langlois |
Yesterday’s New York Times carried an op-ed by Stephen L. Sass, a professor of materials science at Cornell. Writing in the context of high oil prices, Sass makes the point that scarcity of materials has long driven humans to find and make use of alternative materials. He argues that a scarcity of tin led denizens of the Bronze Age to figure out how to smelt iron, just as a scarcity of charcoal impelled the British to figure out how to use coal to make steel. I read the piece eagerly, thinking I might use it in my upcoming introductory economics course — until I got to the last paragraph. Here Sass draws the implication that we need a Manhattan Project to develop alternatives to oil. (more…)
Greif and Hayek on Institutions
| Peter Klein |
The EH.Net review of Avner Greif’s new book provoked this testy exchange on a history of of economic thought mailing list:
Professor A: This doesn’t sound very profound or “pathbreaking,” just mathed-up Hayek with a soupçon of history.
Professor B: Avner Grief’s work is not “mathed-up” Hayek. His use of game theory allows him, inter alia, to examine the multiple equilibria in “spontaneous orders,” if you like, something to which Hayek paid very little attention.
Professor C: Quote from Greif: “Yet this private order was not, as advocates such as Friedrich A. von Hayek and Milton Friedman would have us believe, a result of ‘spontaneous order’ among economic agents. Rather, it was a product of intentional and coordinated efforts by many individuals […].” Greif (2006: 389)
I agree with Professor B. that Greif does more than simply put a modern gloss on Hayek’s (actually Menger’s) pioneering studies of institutions. But Greif misunderstands Hayek by reading “spontaneous” as “not planned or intended by anybody.” Hayek’s concept of spontaneous order obviously allows for individual purpose and intent, even if individuals’ actions help establish an order that was itself undesigned. (Hayek’s emphasis on rule-following behavior or instinct — OK, to be fair, behavior “between instinct and reason” — perhaps lends itself to Greif’s misunderstanding, however.)
For more on this see Dan Klein’s “The Two Coordinations.”
Yet More on Economists and Sociologists
| Peter Klein |
Adding more fuel to the fire are Gordon Smith and Larry Solom. Best line, from Gordon: “Economists just assume sociologists are stupid because that improves the r-squared of the economists’ world view.” (Via Brayden.)
Voting Isn’t Rational; Is Digging?
| Peter Klein |
Teppo Felin, reflecting on Wikipedia, notes that the entries in his own area of expertise are weak, but that he doesn’t bother to correct them — “as a firm believer in the ‘market,’ I am sure it will provide.” I feel the same way. Unless my knowledge is highly idiosyncratic, it is likely that someone else will make the necessary improvements before too long. Why contribute when you can free ride?
The same applies, a fortiori, to Digg.com, a hot new service that allows readers to vote on their favorite news items (from mainstream media outlets, alternative sources, blogs, or whatever) and lists them in descending order of popularity. My friend Stephen Carson urges libertarian subversives like myself to Digg our favorite stories and push them to the top. But the top articles on Digg.com typically have several hundred votes per day; on the margin, will my vote make a difference? (more…)
News on Socialism
| Nicolai Foss |
Here is an interesting site — a must-read for any Austrian — which proves that “the labour theory of value is a scientific theory in the strongest sense of the empirical sciences”, “labor values are closely correlated with prices” (i.e., competition works!), etc. An author-less paper (“Against Mises“) posted on the same site demonstrates that Mises was wrong: It is perfectly possible to calculate using labor values.
Higher-Education Entrepreneurship
| Peter Klein |
Richard Vedder explains the latest developments. (Also check out his Center for College Affordability and Productivity and his new book, Going Broke by Degree: Why College Costs Too Much.)
Attribution Error and Management Fads
| Peter Klein |
James Surowiecki on the changing fortunes of Airbus and Boeing:
What much of the talk about the inherent weakness of Airbus ignores is that, just a few years ago, it was Boeing that looked fundamentally flawed, while Airbus was seen as the future of the industry. . . . The problem with such prognostications is that they infer basic truths about a company’s prospects from its short-term performance. In fact, present success is often determined as much by context and chance as by fundamental viability. . . .
People are generally bad at accepting the importance of context and chance. We fall prey to what the social psychologist Lee Ross called “the fundamental attribution error” — the tendency to ascribe success or failure to innate characteristics, even when context is overwhelmingly important. . . .
Because we underestimate how much variation can be caused simply by luck, we see patterns where none exist. It’s no wonder that management theory is dominated by fads: every few years, new companies succeed, and they are scrutinized for the underlying truths that they might reveal. But often there is no underlying truth; the companies just happened to be in the right place at the right time.
Via Daniel Drezner. N.B.: While I can’t top Nicolai’s restaurant story, I’ll note that I was a college classmate and friend of Surowiecki at UNC-Chapel Hill. I didn’t anticipate Jim would become a brilliant business writer — but then again, who knew I’d turn out to be a brilliant organizational economist? (Insert your own punch line here.)
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