Archive for May, 2007

Core Economics for Managers

| Peter Klein |

Previously I’ve noted the new managerial economics texts by Dwight Lee and Richard McKenzie and Luke Froeb and Brian McCann. Joshua Gans was kind enough to send me a copy of his Core Economics for Managers (Thomson, 2005) and it looks like a good option as well.

The first thing one notices about the book is its brevity and clean, minimalist design: just 206 pages, no fancy graphics, and few sidebars or mini-cases. The book focuses on the “core” areas of pricing, competitive strategy, incentives, and contracts, omitting corporate strategy, human resource management, and peripheral areas like ethics. As its main pricing model, the book features not the increasingly irrelevant perfectly competitive (general or partial) equilibrium model, but a negotiation framework like that in Brandenburger and Nalebuff’s 1996 book Co-opetition. That is, unlike the typical strategy text, cooperative game theory gets as much attention as its more familiar noncooperative counterpart.

Part IV of the book, on contracting, looks particularly good. It favors the property-rights approach to the firm (in my judgment, the correct approach) over the nexus-of-contracts approach, and features a section on relational contracting, a topic usually omitted from introductory managerial texts.

Joshua will be revising the text in the coming months for a new edition and would appreciate suggestions for improvement.

31 May 2007 at 4:22 pm 1 comment

More on the Austrian Firm Conference

| Peter Klein |

Anthony Evans offers further reflections on the “Austrian Market-Based Approaches to the Theory and Operation of the Business Firm” conference, including the epic Klein-Sautet showdown.

31 May 2007 at 9:31 am Leave a comment

Gintis Smashing Heterodox Economics

| Nicolai Foss |

Remember the “post-autistic” movement in economics that began in France in 2000? Have you, too, been irritated by the sometimes, ehmm, bizarre claims that are put forward by members of the “post-autistic economics network“? Do you think utterances such as the following one are, to put it nicely, not accurate representations of modern economic theory:

Game theory cannot be “applied”: it only tells little “stories” about the possible consequences of rational individuals’ choices made once and for all and simultaneously by all of them. . . . Akerlof, Spence and Stiglitz have no new “findings”, they just present, in a mathematical form, some very old ideas — long known by insurance companies and by those who organize auctions and second hand markets. . . . Amartya Sen, as an economist, is a standard microeconomist (that is what he was awarded the Nobel Prize for): only the vocabulary is different (“capabilities”, “functionings”, etc.).

(The quotation can be found here). (more…)

31 May 2007 at 3:27 am 3 comments

Scientific Progress in Strategic Management?

| Nicolai Foss |

OK, I persist in using O&M for the purpose of shameless self-promotion: I have written “Theory of Science Perspectives on Strategic Management Research: Debates and a Novel View” (I know — not an elegant title) for The Elgar Handbook of Research on Competitive Strategy, edited by Giovanni Battista Dagnino.  I will be happy to send you a copy if you drop me a mail at (more…)

30 May 2007 at 5:10 pm Leave a comment

Average versus Marginal: Blowback Edition

| Peter Klein |

Republican Presidential candidate Ron Paul caused a stir recently by suggesting, to the horror of the other Republican candidates, that US foreign policy might have something to do with Muslim anger toward the US. The Bush Administration, of course, maintains that “they hate us for our freedom.” No matter what the US government does, in other words, Islamic extremists will target Americans in retaliation for the Declaration of Independence, McDonalds, and Paris Hilton. (Rudy Giuliani, incredibly, claims he has never even heard of blowback.)

Of course, these explanations are not incompatible. US culture and institutions could, in theory, account for the average level of anti-Americanism in the Islamic world. To explain a specific terrorist act, however, we have to think in marginal terms. What we call “terrorism,” as Robert Pape has brilliantly explained, is a tactic, not an ideology. Whatever his general attitude toward the enemy, the terrorist must choose to attack this target or that, to attack now or later, to select one more target or one less. Even if exogenous US characteristics were responsible for overall terrorist attitudes and beliefs, blowback is probably still the best explanation for specific terrorist acts.

Note that this is an application of a more general point about intrinsic and extrinsic motivation, an important issue for management theory. (more…)

30 May 2007 at 11:42 am 5 comments

O&M at the AoM

| Peter Klein |

O&M will be well represented at the Academy of Management annual meeting in Philadelphia, 3-8 August 2007. Former guest blogger (and Philly native) Joe Mahoney is president-elect and program chair for the Business Policy and Strategy Division, so you know the program will be good.

I am chairing a Professional Development Workshop (PDW) titled “The Austrian School of Economics: Applications to Organization, Strategy, and Entrepreneurship” featuring former guest bloggers Mahoney and Dick Langlois along with Elaine Mosakowski, Yasemin Kor, Nicolai, and myself. Teppo of has put together a session on “Entrepreneurship and Strategic Organization: Taking Stock, Problems, and Future Directions” which includes Jay Barney, Todd Zenger, Kirsten Foss, Mosakowski, Nicolai, and me. Other sessions of note include a PDW on the fifth anniversary of the excellent Strategic Organization (Nicolai is in that one too, along with O&M favorite and guest blogger Chihmao Hsieh’s mentor Jackson Nickerson); a session on the philosophical and epistemological foundations of strategy and organization theory, organized by Teppo and featuring regular O&M commentator J. C. Spender; a session on cognitition in organizational economics; and many other interesting workshops, lectures, and sessions on organization, strategy, entrepreneurship, and the market process.

PS: Before you go, be sure to study this article on Philadelphia dining from the current issue of Food and Wine Magazine.

29 May 2007 at 2:15 pm Leave a comment

War, American Idol, the New “Kidney” Reality Show, and Markets for Attention

| Chihmao Hsieh |

I read two news articles today. One of them describes Cindy Sheehan’s decision to give up her anti-war protest, where she exclaims that Americans live in “a country which cares more about who will be the next American Idol than how many people will be killed in the next few months.” (For those of you who don’t watch any TV, American Idol is the American version of that popular season-long show where 15-20 contestants sing and compete for a record contract, voted upon via SMS text messaging by TV viewers like you and me.) The other news article describes the newest reality TV program in the Netherlands, where a patient with an inoperable brain tumor is donating her kidney and choosing the beneficiary based on televised interviews of three contestants, in a manner apparently reminiscent of a game show format.

How I described the latter article may not make you furl your eyebrows, but listen to this: TV viewers will vote via SMS text messaging who gets to receive the kidney.

Likely many types of societal issues are raised by the juxtaposition of these two news articles. One of the likely-provocative questions I have for the readership: Would you prefer to associate with a world that promotes “American Idol” or a world that promotes this new kidney donation game show?

UPDATE: The kidney reality show was all apparently an elaborate hoax.

29 May 2007 at 10:11 am 5 comments

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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).