Temin on Landes

28 February 2007 at 1:42 pm Peter G. Klein Leave a comment

| 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.