Archive for May, 2007

What Does “Zero Transaction Costs” Mean, Epistemically?

| Nicolai Foss |

What does the Coase Theorem require epistemically? To put it less mysteriously, what are the assumptions concerning agents’ knowledge that must be made for the Coase theorem to hold? Or, to rephrase it somewhat, what does zero transaction costs mean in terms of agents’ knowledge (an inquiry started by Carl Dahlman in this paper)?

In his retrospective (1988) discussion and assessment of the debate on the theorem, “Notes on the Problem of Social Cost,” Coase seems to imply that the Theorem requires omniscience. I think that Barzel makes the same inference in his Economic Analysis of Property Rights. In other words, the Coase Theorem holds iff all resource uses, current as well as future ones, are known by everyone.

Not all writers seem to agree with this interpretation, however. (more…)

29 May 2007 at 12:54 am 6 comments

Jewish Economic Theory

| Peter Klein |

Five principles of Jewish economic theory, as described in Judaism, Markets, and Capitalism: Separating Myths from Reality by Corinne Sauer and Robert M. Sauer (forthcoming from the Acton Institute):

  • Work, creative activity, and innovation are the avenues through which the divine image is expressed.
  • Private property rights are essential and must be protected.
  • The accumulation of wealth is a virtue not a vice.
  • Man has an obligation to care for the needy through charitable giving.
  • Government is inefficient and concentrated power is dangerous.

Sauer and Sauer compare this passage in 1 Samuel to Hayek’s warnings in The Road to Serfdom: (more…)

29 May 2007 at 12:07 am 3 comments

Conference on Austrian Economics and the Firm

| Peter Klein |

Last week I attended an interesting discussion conference sponsored by the Atlas Foundation, “Austrian Market-Based Approaches to the Theory and Operation of the Business Firm.” Former O&M guest blogger Dick Langlois was there, as were Pete Boettke and Fred Sautet of The Austrian Economists, Tony Woodlief of the Market-Based Management Institute, Saras Sarasvathy, Peter Lewin, Ivan Pongracic, Anthony Evans, and several others. (A selection of papers, written for the conference, will appear in the Review of Austrian Economics.)

The participants clearly believe the Austrian tradition has something of value for researchers and teachers in business administration. There may also be Austrian lessons for practitioners, though there was less consensus on exactly what these lessons are and how they should be communicated. One theme that emerged clearly from the discussions was the depth and variety of the Austrian approach. Despite a shared commitment to the general framework of the Austrian school there were many disagreements about core theoretical issues and much uncertainty about what these ideas imply for firm boundaries, strategy, entrepreneurship, and public policy. (more…)

28 May 2007 at 10:15 am 6 comments

Great Economists’ Autographs

| Nicolai Foss |

If you are into collecting autographs and admire Nobel Prize winning economists, ebay is (of course) the place for you. Here is Ronald Coase’s autograph — with a buy-it-now price of 10 USD; here is Nash’s — a bit more fancy (First Day Cover), and (therefore?) with a buy-it-now price of 85 USD; here is Uncle Milton at 34 USD, and one more Nash at 24 USD.  The latter Nash autograph, the Friedman and the Coase ones are all on 3×5 unlined index cards. Still, there is a heavy disparity in terms of the asked price. The market values Friedman more than Nash who is valued more than Coase.

28 May 2007 at 3:53 am 14 comments

Quote of the Day: Poetry About Prices

| Peter Klein |

One of my favorite quotes about the beauty of the price mechanism:

[The market price] synthesizes a number of factors, so that there is difficulty in identifying them and even more in forecasting them: quantities, qualities, possibilities, calculations of interest, memories, fears, hopes. A price is not only the result of statistical figures. It includes all the vibrations of man’s thoughts and soul, since ever they have exercised an influence on the market. (Louis Baudin, La Monnaie et la Formation des Prix, 1836, quoted in Hoff, Economic Calculation in the Socialist Society, p. 299.)

27 May 2007 at 3:46 pm 1 comment

Foss & Foss Paper on Opportunity Discovery and the RBV

| Nicolai Foss |

With my frequent co-author, Kirsten Foss, I have written “New Value Creation in the Resource-based View: How Knowledge and Transaction Costs Shape Opportunity Discovery.” (more…)

27 May 2007 at 10:45 am 5 comments

Pioneers of Industrial Organization

| Nicolai Foss |

Pioneers of Industrial Organization: How the Economics of Competition and Monopoly Took Shape is the title of a new volume edited by Henk de Jong to be published next month by Edward Elgar. My CBS colleague Peter Møllgaard and I have contributed a chapter on early (meaning pre-1980) IO research in the Scandinavian countries. (more…)

26 May 2007 at 5:52 am 2 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).