Average versus Marginal: Blowback Edition

30 May 2007 at 11:42 am 5 comments

| 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.

As discussed frequently on this blog, critics of the economic approach to management such as Kohn, Pfeffer, Sutton, Ferraro, Ghoshal, and Mintzberg hold that workers are primarily motivated by intrinsic rewards and that attempts to mitigate moral hazard and opportunism through explicit incentives are not only unnecessary, but may actually destroy morale and organizational cohesion. Yet there is no inherent contradiction between intrinsic and extrinsic motivation. Intrinsic motivation could determine the average attitudes of employees toward their employers and occupations even while extrinsic motivation explains their marginal behavior.

For example, I chose to become a professor not because it pays well (it doesn’t), but because I enjoy research and teaching. On the margin, however, I am more likely to teach a specific course, advise a specific student, write a specific paper, or attend a specific conference if I am paid for it. Extrinsic incentives didn’t determine my general career choice, but given that I’m in that career, they have a strong effect on my behavior at the margin.

Entry filed under: - Klein -, Classical Liberalism, Management Theory.

O&M at the AoM Scientific Progress in Strategic Management?

5 Comments Add your own

  • 1. David Gordon  |  30 May 2007 at 8:29 pm

    I remember reading an argument by Michael Dummett that missed the point you raise. At the time he wrote, a large number of philosophers had left Oxford and Cambridge for America. Dummett thought this trend couldn’t be explained by higher American salaries, since many of the academics who had moved could make even more money in other jobs, e.g., as lawyers.

  • 2. Jeff  |  31 May 2007 at 12:13 pm

    I’m not convinced. Cause and effect of trends like terrorism are to complex to attribute to average and marginal levels. Could there not be such things as random fluctioations? One could just as easily argue that, due to internal cultural idiosyncrasies, a member of a terrorist-producing culture could decide, randomly, that it is the right time for an attack. He then does a quick search of current events and shops around for his cause. The stated reason for a particular attack may be a particular US action, but the root cause is something more akin to fashion. Does any one action cause fashions to catch on? What makes white the new black? What happens when chlorine gas attacks become the new black?

  • 3. Peter Klein  |  31 May 2007 at 12:39 pm

    Jeff, certainly one must be careful drawing general conclusions about a phenomenon as complex as terrorism. But I urge you to look at the Pape volume (which focuses specifically on suicide bombing). There is a lot of empirical analysis suggesting that such attacks are best understood as deliberate, targeted response to specific military and political policies, not simply random events that are justified ex post by appealing to some cause picked out of a hat.

    By analogy, one could argue that a firm’s “corporate culture” produces a vague feeling among employees that they should work harder, followed by them shopping around for an incentive program to which they can respond, giving them an ex post rationalization for their behavior. Possible, yes, but not very plausible.

  • 4. spostrel  |  5 June 2007 at 10:32 pm

    I agree with the thrust of the argument, but the application to terrorism appears backwards to me. Our actions affect jihadists on the margin primarily through the substitution effect–a low price for terrorism combined with high media and political rewards stimulates more of it. Weak American responses after Beirut 1983, …, USS Cole 1999 made terrorism against the US, and state sponsorship of same, fun and profitable. Hence 9/11. Bin Laden’s writings make it pretty clear that US weakness after previous incidents provoked him to action.

  • 5. Peter Klein  |  6 June 2007 at 12:22 am

    I think we are talking about different, but complementary, levels of analysis. Consider a jihadist with (1) a general, background level of anti-Americanism. He has (2) a specific strategic objective — say, the removal of US bases from Saudi Arabia. Given that strategic objective, he makes (3) tactical decisions based on the degree to which particular targets are fortified, the expected retaliation from hitting one target or another, and so on. We may usefully treat (1) as exogenous, but I would think both (2) and (3) are driven by marginal consideration. I agree that (3) is important, but think it is subordinate to (2).

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


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).

%d bloggers like this: