Archive for February, 2007
Economic Imperialism
| Peter Klein |
This item in Tuesday’s W$J, “Is an Economist Qualified To Solve Puzzle of Autism?”, is required reading for those interested in the scope and methods of modern empirical economics. The piece focuses on Michael Waldman’s paper (with Sean Nicholson Nodir Adilov) linking autism to television, a link vehemently denied by other autism researchers and advocacy groups. More generally,
Prof. Waldman’s willingness to hazard an opinion on a delicate matter of science reflects the growing ambition of economists — and also their growing hubris, in the view of critics. Academic economists are increasingly venturing beyond their traditional stomping ground, a wanderlust that has produced some powerful results but also has raised concerns about whether they’re sometimes going too far.
Ami Klin, director of the autism program at the Yale Child Study Center, says Prof. Waldman needlessly wounded families by advertising an unpublished paper that lacks support from clinical studies of actual children. “Whenever there is a fad in autism, what people unfortunately fail to see is how parents suffer,” says Dr. Klin. “The moment you start to use economics to study the cause of autism, I think you’ve crossed a boundary.”
Moreover — how unusual is this for a newspaper story — there’s also an extended discussion of instrumental-variables estimation. (more…)
The Essential Rothbard
| Peter Klein |
My admiration for the great libertarian polymath Murray N. Rothbard is no secret. Indeed, I would name Rothbard and Oliver E. Williamson as the most important influences on my own intellectual development. So I was delighted to receive a copy of The Essential Rothbard, an overview of Rothbard’s intellectual contributions by former O&M guest blogger David Gordon. David makes use not only of Rothbard’s published works — a bibliography, included at the end of the book, fills 53 pages of small type! — but also a huge collection of unpublished correspondence, memos, and manuscripts. (Justin Raimondo’s biography An Enemy of the State is also worth a read, but focuses more on Rothbard’s political activities than his core scholarly contributions.)
Particularly interesting is the 9th chapter, “The Unknown Rothbard: Unpublished Papers,” covering Rothbard’s thoughts on Leo Strauss, Willmoore Kendall, and Ernest Nagel (one of Rothbard’s teachers at Columbia) along with generally negative reviews of Hayek’s Constitution of Liberty, Anthony Downs’s Economic Theory of Democracy, and Douglass North’s Economic Growth of the United States, 1790-1860, among other books.
Temin on Landes
| Peter Klein |
We reported a while back on David Landes’s book Dynasties: Fortunes and Misfortunes of the World’s Great Family Businesses. Here is a review by the eminent economic historian Peter Temin of MIT. Excerpt:
[Landes] acknowledges the force of Chandler’s emphasis on managerial capitalism, but he argues that family firms have a prior role in economic development. In this claim, he associates himself on the one hand with Marc Bloch, who argued that Europe picked itself up from chaos in the tenth century by relying on the value of family connections. Landes associates himself on the other hand with modern economics and its concerns with asymmetric information and principal-agent problems. Landes argues that the failure of many development programs has been the neglect of the information and loyalty that are qualities of families — in his word, dynasties.
The stories illustrate these points, but Landes’s urge to tell a good story is at gentle odds with this justification for them. Most of the dynasties in this book have ruled over substantial enterprises. These enterprises employed many people other than family members. Normal business practice prevailed once these enterprises became major banks, auto firms, or mining companies. The importance of asymmetric information must have been concentrated in the early years.
Narcissism in Organizations
| Peter Klein |
How do you manage employees who care only about themselves? If you hire new college graduates you better think about it. An AP story reports that “[t]oday’s college students are more narcissistic and self-centered than their predecessors,” citing a study headed by Jean Twenge, author of Generation Me. “We need to stop endlessly repeating ‘You’re special’ and having children repeat that back,” says Twenge. “Kids are self-centered enough already.”
(One of my colleagues told me today that she was recently graded down on a student evaluation because, according to the student, “the teacher’s job is to make me feel good about myself” and my colleague hadn’t done that.)
Update: Here is an AMR paper on narcissism in organizations.
Nerd Alert, Part III
| Peter Klein |
I stopped at OfficeMax today to have new business cards printed and found myself drawn magnetically towards the pen section. I cannot resist trying new pens!
Today I bought a two-pack of Pentel EnerGel 0.7mm ballpoint retractable gel pens with purple ink. Oooooo, they write so smoothly . . . with such violet-purpleness . . . ahhhhh. . . .
That’s Anne Zelenka asking “Do You Have An Office Supply Fetish?” at Web Worker Daily. I’m sure some of you have one. What office supplies do you covet?
(I think we are ready now to add Nerd Alert as a general category.)
Those Arrogant String Theorists
| Peter Klein |
What do mathematical economists and string theorists have in common? Consider this characterization of the latter from Lee Smolin’s The Trouble With Physics, as summarized by reviewer Kenneth Silber in Reason (March 2007, not yet online):
Smolin portrays string theorists as tending toward arrogance, insularity, and groupthink; they value technical ability over original thought, follow faddishly the ideas of a few top physicists, and look down on adherents of other theories. This culture, in Smolin’s telling, eschews the philosophical bent of Einstein and quantum theory’s founders, preferring the “shut up and calculate” attitude of later particle physicists.
OK, the comparison to mathematical economists is a cheap shot, but I’m following Nicolai’s lead here. Anyway, Smolin suggests a useful taxonomy for scientists, distinguishing “craftspeople” from “seers.”
[Craftspeople are] focused on technical problems, [seers] on deeper meanings and new ideas. [Smolin] makes a plausible argument that physics institutions have become too geared toward producing craftspeople rather than seers. The way for young physicists to get jobs, tenure, and grants, he notes, is to fill in the details of research lines established by their elders.
Wow, does that sound familiar! Substitute economics and economists for physics and physicists and the statement rings equally true. (By the way, “seer” is a much nicer term than “puzzler,” the label used by Hayek to distinguish himself from the systematic, methodical “master of his subject.”)
Author Order
| Peter Klein |
Nicolai’s post on paper order got me thinking about author order, and how authorship ordering practices vary systematically across academic disciplines. In some scientific fields the lead author (or principal investigator) is listed first, while in others the lead author’s name comes last. In economics and business administration there isn’t a strong notion of “lead authorship,” and author names are usually listed alphabetically. There are, of course, prominent exceptions, such as Klein, Crawford, and Alchian (1978), Masten and Crocker (1985), and Hoskisson and Hitt (1994), to name just a few in organizational economics and strategy.
I’m curious to know how these practices evolved, and why they evolved differently in different disciplines. Surely some sociologists have written on this. (Academics tend to be narcissists, after all, and have shined the research spotlight on virtually every other aspect of their own profession!)
The social-science convention of usually-but-not-always-alphabetical ordering poses particular problems. How, for instance, do you communicate priority if the main author is first in the alphabet? Suppose my friends Mike Aarstol and Todd Zywicki get together. They can signal equal effort with “Aarstol and Zywicki” or give Todd the lead with “Zywicki and Aarstol.” But how do they give priority to Mike? “By Michael Aarstol, with special assistance from Todd Zywicki”?
Open-Source Cola
| Peter Klein |
This is what the Linux-heads are drinking these days instead of Coke or Pepsi. No joke. People can download the “source code,” modify it to their liking, and produce their own stuff, under the terms of the GNU General Public License. (Will somebody put the cocaine back in?)
I’ll bet this is Don Tapscott and Anthony Williams’s drink of choice!
CBS Workshop on Knowledge Sharing
| Nicolai Foss |
The Center for Strategic Management and Globalization hosts a workshop on “The Barriers to Intra- and Inter-firm Knowledge Transfer” at the Copenhagen Business School June 15. Keynote Speeches will be given by Linda Argote and Gabriel Szulanski. Paper proposals must be submitted prior to April 10 to the arranger, Dr. Koen Heimeriks at kh.smg@cbs.dk Here is the Call for Papers.
Demanding the Right to Be Offensive
| Nicolai Foss |
Here is an online campaign to defend unrestricted freedom of inquiry in universities, recently started by Academics for Academic Freedom. Its Statement of Academic Freedom reads:
‘We, the undersigned, believe the following two principles to be the foundation of academic freedom:
(1) that academics, both inside and outside the classroom, have unrestricted liberty to question and test received wisdom and to put forward controversial and unpopular opinions, whether or not these are deemed offensive, and
(2) that academic institutions have no right to curb the exercise of this freedom by members of their staff, or to use it as grounds for disciplinary action or dismissal.’
Leo Strauss, the Randian
| Nicolai Foss |
Yes, that’s right . . . well, almost: If you put together the key political ideas of neo-con idol Strauss, “we will arrive at Objectivist Libertarianism.” So says philospher Tibor Machan in the most recent issue of Philosophy Now (an excellent, bi-monthly journal written for, as they used to say, the “intelligent layman”). (more…)
Selling My Wife
| Peter Klein |
Alchian and Demsetz tell me I can fire my grocer. But can I sell my wife?
Here’s the context: Nicolai and I were discussing (via IM — we’re high-tech) my plans to attend an overseas conference. When he asked if I had checked with my wife before committing, I admitted that I hadn’t.
This led (naturally) to a discussion of original and derived judgment. I argued that while my wife has veto power over my travel plans (not to mention most other things), I am really in charge because I have given her this authority. In Foss-Foss-Klein terminology, her decision rights are delegated, or “derived,” while mine are primary, or “original.” (If you just fell off your chair, get back up and play along, just for the sake of argument.)
Nicolai reminded me that some of our colleagues think the original/derived distinction is a distinction without a difference. A de facto right is a right, whether we label it “original” or “derived.” I responded that there is a difference, namely that asset owners possess decision rights that non-owners do not. For example, the owner can sell the asset, while the hired worker, even if possessing a wide range of use rights, cannot. Moreover, the owner can choose — indeed must choose — which decision rights to delegate to subordinates. In general, no matter how “passive” the owner chooses to be, regarding day-to-day activities, the owner possess a kind of “ultimate” authority that cannot be delegated. (In the words of the great Canadian philosopher Geddy Lee, “If you choose not to decide, you still have made a choice.”) As evidence, note that the owner can take away all the subordinate’s decision rights by terminating the employment relationship — “selling” the subordinate, as it were.
We concluded that the original/derived judgment distinction can be applied to the family, but only if I have the right to sell my wife.
“Lead Papers”?
| Nicolai Foss |
Increasingly often you see the following in the publications section of academic CVs: “paper title, journal, volume, pages (lead paper).” I take it that the “lead paper” is the first paper in an issue. Obviously, the impression that the writer of the CV wants to convey is that somehow this paper is the best in that specific issue (or at least written by the biggest guy). Do any of our readers know whether this is something journal editors (consciously) do? Is having your paper printed as the first paper in an issue a reliable signal of quality? Or is the structuring of papers in an issue a more random thing?
The A..hole Factor in Economics
| Nicolai Foss |
I may be entirely mistaken, but my personal and admittedly casual observations after working in academia since 1989 seem to point toward something like the following approximate generalizations: “Orthodox” (or “mainstream”) economists and finance scholars are — I stress: as a crude approximation — reserved, not very wordy, introverted, but still direct (bordering on brutal, particularly in seminars). They are spiteful of “softies.” On the other hand, “heterodox” (“non-mainstream”) economists (including many management scholars) are generally more extroverted, easier to get along with, and less direct/brutal. However, they are as spiteful of mainstream economics as mainstream economists are of the soft stuff (Marxist economists are, however, a lot like mainstream economists). Again, this is just a tendency; there are many, many counter-examples. Am I right? Or just biased (e.g., by hanging out with too many heterodox types)? (more…)
Reputations Die Hard
| Peter Klein |
This debunking of Pythagoras (via Lew Rockwell) reminded me of our recent attempt at Galileo revisionism. Apparently Pythagoras was a cult leader and political activist but not a serious mathematician or philosopher. He didn’t even discover the Pythagorean Theorem!
As debunker M. F. Burnyeat observes, “beloved historical traditions die hard.”
Other debunkings that might interest our readers: Murray Rothbard on Adam Smith, Richard Rumelt on the “Honda Effect,” Ronald Coase on Fisher Body, and Phil Rosenzweig on Peters and Waterman.
A Classroom Experiment in Organizational Economics
| Peter Klein |
I don’t do classroom experiments, but some of my colleagues find them effective. Here’s an experiment that might appeal to the O&M readership:
We present a simple classroom principal-agent experiment that can effectively be used as a teaching device to introduce important concepts of organizational economics and contracting. In a first part, students take the role of a principal and design a contract that consists of a fixed payment and an incentive component. In the second part, students take the role of agents and decide on an effort level. The experiment can be used to introduce students to the concepts of efficiency, incentive compatibility, outside options and participation constraints, the Coase theorem, and fairness and reciprocity in contracting.
See Simon Gaechter and Manfred Königstein’s paper “Design a Contract! A Simple Principal-Agent Problem as a Classroom Experiment,” available on SSRN.
Microfinance and Growth
| Peter Klein |
As excitement over the Yunnus Nobel fades, microfinance skeptics continue to emerge. The latest is Thomas Dichter, who writes in a new Cato paper:
Most people, poor or otherwise, are not entrepreneurs, so there is little reason to think that mass credit would in general lead to viable business start-ups. Today as in the past, business start-ups in the advanced countries depend predominantly on savings and informal sources of credit; past forms of microcredit never played a role in small business development, and much microcredit is actually used for consumption rather than investment. In the history of today’s rich countries, moreover, economic growth occurred first, then came credit for the masses. That credit was and is predominantly for consumption rather than investment.
The paper is “A Second Look at Microfinance: The Sequence of Growth and Credit in Economic History. And here is a rare specimin, an empirical paper on microcredit that uses actual microdata.
Milton Friedman: Patron Saint of Blogging?
| Peter Klein |
Left to the free market of ideas and instant reader feedback, good writing, quality and reliability in blogging secures a readership and reputation solely on merit. The analogy to “democracy” may be clichéd but the blogosphere is a prime example of Milton Friedman’s credo (“Capitalism and Freedom”) that minimal (or no) regulation and state licensing are best; they are too often a pretext to shut down competition not protect the populace. — Jens F. Laurson and George A. Pieler
I appreciate the sentiment, but am not sure why Friedman deserves the honor. I suspect most bloggers would take Hayek instead (1, 2). (This cynic offers a slightly different take.)
Spooky CEO Research
| Nicolai Foss |
Research on corporate governance and the importance to value creation of CEOs is becoming increasingly morbid. Check out the abstract of a recent paper by CBS colleague Morten Bennedsen (as the paper doesn’t seem to be online, you will have to write Morten for a copy; mb.eco@cbs.dk):
Estimating the value of top managerial talent is a central topic of research that has attracted widespread attention from academics and practitioners. Yet, studying the impact of managers on firm performance is difficult because of endogeneity and omitted variables concerns. In this paper, we test for the impact of managers on firm performance in two ways. First, we examine whether top executive deaths have an impact on firm performance, focusing on the manager and firm characteristics that are associated to large manager-death effects. Second, we test for the interaction between the personal and professional activities of managers by examining the effect of deaths of immediate family members (spouses, parents, children, etc) on firm performance. Our main findings are three. First, CEO deaths are strongly correlated with declines in firms operating profitability, asset growth and sales growth. Second, the death of board members does not seem to affect firm prospects, indicating that not all senior managers are equally important for firms’ outcomes. Third, CEOs’ immediate family deaths are significantly negatively correlated to firm performance. This last result suggests a strong link between the personal and business roles that top management plays, a connection that is present even in large firms. Overall, our findings demonstrate CEOs are extremely important for firms’ prospects.
Call for Papers: Technological Change in Low- and Medium-Technology Industries
| Peter Klein |
Paul Robertson, author of many fine works with former O&M guest blogger Dick Langlois, is co-organizing a special issue of Research Policy on “Technological Change in Low- and Medium-Technology Industries.” Details below the fold (courtesy of EH.Net). (more…)
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