Archive for March, 2007

University of Illinois Scraps For-Profit Subsidiary

| Peter Klein |

We noted previously the University of Illinois’s Global Campus, a proposed for-profit subsidiary that would offer an innovative, unorthodox program competing with nontraditional institutions like the University of Phoenix. Now I learn from Richard Vedder that the for-profit model has been scrapped due to objections from faculty. States the Chronicle of Higher Ed:

[P]rofessors and trustees never shared [President Joseph] White’s vision. They worried that a for-profit university would be more interested in market share than in academic quality control, and that a less-than-rigorous online wing might damage the reputation of the bricks-and-mortar institution.

Now the skeptics have scored a major victory: Mr. White has scaled back his plans for Global Campus, pitching it as an academic unit within the university, not as a separate corporate entity. The president has also scotched plans to seek independent accreditation for the online institution — a move that would have allowed Global Campus to adopt a fairly freewheeling curricular model by quickly adding and eliminating programs based on student demand.

Vedder draws a more general lesson about institutional culture and organizational inertia:

Changing the culture of existing institutions is nearly impossible. While I am all for strategies, such as bribing faculty, to try to effect a culture of innovation and receptivity to change, I think most of the dramatic new innovations will come from institutions created from scratch outside the rubric of existing universities, private or public.

31 March 2007 at 12:17 am 3 comments

Kicking Some AAS

| Peter Klein |

Bob Sutton may have a clever name with his “No A–hole” project, but here’s an even better one: Kick All Agricultural Subsidies, a.k.a “kickAAS.” It’s a blog, sponsored by the Guardian (UK), seeking the abolition of farm subsidies. Lots of interesting material there.

31 March 2007 at 12:16 am Leave a comment

Jargon Watch: Buckets, Not Silos

| Peter Klein |

I’ve never liked the term “silo,” as used in business administration to describe closed spaces like functional areas, research topics, or approaches. “Economists and sociologists need to come out of their silos and work together.” What are we, sacks of grain? Intercontinental ballistic missles? I long for simpler and less pretentious terms like “areas” or “topics.”

From Tuesday’s WSJ  we now learn that silos are out. The new preferred term is buckets. Dow Chemical CEO Andrew Liveris says that ethanol “doesn’t help the conservation efficiency bucket — it helps the diversity of supply bucket.” Cingular Wireless thinks its new rate plan helps customers “dig into their big bucket of night and weekend minutes.” Is the combined India and US market best conceived “as a whole, or as two buckets?” asks a Citigroup analyst. Why do such silly terms proliferate?

Readers are invited to supply their own favorite examples of business and academic jargon. Perhaps we can hold a contest to choose the silliest.

See also previous entries on adjacencies, wikis, bad cover letters, and bad academic writing

30 March 2007 at 1:02 pm 1 comment

The Kaleidic Career

| Peter Klein |

Old-timers may remember Ludwig Lachmann’s metaphor of the kaleidoscope, popularized in his 1976 essay “From Mises to Shackle: An Essay on Austrian Economics and the Kaleidic Society” (Journal of Economic Literature 14, no. 1: 54-62). Lachmann borrowed the metaphor from G.L.S. Shackle, who wrote of a society “interspersing its moments or intervals of order, assurance and beauty with sudden disintegration and a cascade into a new pattern.” In this fundamentally disorderly system, Lachmann maintained, there are no systematic equilibrating tendencies. As Roger Garrison succinctly put it, “In a kaleidic world, one pattern of prices gives way to another, but there can be no claim that a given pattern is any closer to a general equilibrium, or represents any higher degree of coordination, than the one that preceded it.”

Personally, I find the kaleidic metaphor rather unhelpful. As I’ve noted before, I see the Kirzner-versus-Lachmann debate over the “tendency toward equilibrium” that dominated Austrian economics during the 1980s as a big distraction. The point is not whether markets actually converge to some kind of long-run equilibrium, but whether in the absence of any change in the underlying data prices would tend to converge toward “final” equilibrium values. The founding Austrians such as Menger, Böhm-Bawerk, and Mises thought the profit motive was sufficient to establish such tendencies, but they were not primarily interested in long-run equilibrium prices. Instead, they sought a framework for explaining the actual, day-to-day prices that unfold in historical time. (Look for a paper on this soon.)

Anyway, the kaleidic metaphor eventually fell out of favor with Austrian economists. But now it’s back, in the context of the “kaleidic career.” (more…)

30 March 2007 at 12:19 am Leave a comment

More on Prematurity

| Peter Klein |

We noted before some work on prematurity, the phenomenon in which scientific discoveries are initially resisted because they lie too far outside the mainstream consensus.

Here is a paper — appropriately enough, not yet published — listing discoveries resisted, and scientific papers rejected, even though their authors would go on to win Nobel prizes for these same discoveries. (HT: Bayesian Heresy.) All the examples are from the hard sciences, but I was reminded of Joshua Gans and George Shepherd’s “How Are the Mighty Fallen: Rejected Classic Articles by Leading Economists” (Journal of Economic Perspectives, Winter, 1994). Akerlof’s “Market for Lemons” was rejected by three journals before the QJE agreed to publish it in 1970. Robert Lucas’s “Expecations and the Neutrality of Money” (1972) was dismissed by the AER as too technical. William Sharpe’s 1964 paper introducing the CAPM model was rejected by the Journal of Finance because of its “preposterous” assumption that investors share common beliefs (a new set of editors subsequently accepted a revised version). There are many other examples.

These stories are interesting, but I’m not sure they tell us much about the journal publication process, or scientific discovery, more generally. After all, there are surely many more examples of Type II error than these examples of Type I error — pick up the current issue of your favorite academic journal if you don’t believe me! Would a different system of peer review, or an alternative sociology of science, produce a better overall result?

29 March 2007 at 3:13 pm 6 comments

See, We Can Study Religion Too

| Peter Klein |

Dan Hammond shows how economists approach religion with this cheeky  summary of Ekelund, Hébert, and Tollison’s Marketplace of Christianity (MIT, 2006).

The Roman Catholic Church had an enviable monopoly for centuries, so powerful that it was able to engage in first degree price discrimination. Like all monopolists, though, it struggled with technical inefficiency and potential entry. The former manifested itself in excess capital investment in beautiful cathedrals and paintings. To forestall entry it practiced usual monopolistic techniques such as limit pricing, but also tortured and killed competitors. By the end of the fifteenth century the Vatican’s pursuit of ever larger monopoly rents against the background of technological progress (the printing press) set the stage for successful entry by an entrepreneurial monk named Martin Luther. Once Luther’s firm got a foothold, all hell broke loose. Actually, it was not all hell; it was all heaven. For as every student of economics learns, when monopoly gives way to competition consumer surplus expands. There were direct gains for consumers as the price fell from the breakup of the Catholic monopoly and, in addition, the entrants lowered real production costs.

The latter welfare gains warrant explanation. What happened is that the entry of Protestant firms reduced the real cost of itch relief by doing away with ornate churches, daily masses, pilgrimages, sacraments, and middlemen confessors. This is a classic case of efficiency gains from entrepreneurial innovation, not unlike the more recent case of Wal-Mart.

And you wonder why people worry about economic imperialism?

29 March 2007 at 11:18 am 1 comment

Design Puzzles

| Steven Postrel |

So you’ve purchased your coffee and chosen to sit at one of those round outdoor tables. As you lean on the table to write comments on a paper, it rocks annoyingly, possibly spilling some of your coffee. You try moving the table slightly on the uneven pavement, hoping to stumble into a stable configuration for its four feet, but several attempts fail. Eventually you resort to shimming one of the table feet with a piece of folded up paper, or a stack of sweetener packets, and this creates at least a metastable condition. Looking around, you notice that many other tables have similar combat repairs, so that the cafe looks like a furniture trauma ward. (more…)

28 March 2007 at 2:54 pm 49 comments

Older Posts


Nicolai J. Foss | home | posts
Peter G. Klein | home | posts
Richard Langlois | home | posts
Lasse B. Lien | home | posts


Former Guests | posts


Recent Posts



Our Recent Books

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).