Archive for June, 2007

Spousal Combinations

| Peter Klein |

This post got me thinking: who are the top husband-and-wife teams (not named Foss or Klein) in economics, management, finance, and related fields? Some candidates:

  • George Akerlof and Janet Yellen
  • Birger Wernerfelt and Cynthia Montgomery
  • David and Christina Romer
  • Guido Imbens and Susan Athey
  • Scott Schaefer and Rachel Hayes

There must be many more. Suggestions? More importantly, is there a good explanation — perhaps from team theory — for greater (or lower) productivity in spousal teams, compared to other types of collaborative units? (Serious answers only, please!)

30 June 2007 at 9:37 am 16 comments

What Job Instability?

| Peter Klein |

A truism among management scholars is that jobs, in the new, knowledge-based, hypercompetitive, deregulated, entrepreneurial, dog-eat-dog, Schumpeterian, long-tail economy, have become less secure. Perhaps my father or grandfather spent his career with a single firm and got a gold watch upon retirement but I constantly switch jobs, by choice or necessity, resulting in a loss of firm-specific or job-specific human capital, increased employee anxiety, and a deterioration of social bonds.

The data, however, suggest otherwise. In “The More Things Change, The More They Stay the Same: Trends in Long-Term Employment in the United States, 1969-2002,” Ann Huff Stevens finds in 1969, the average tenure for US men in their longest job was 21.9 years. In 2002, the figure is 21.4 years. The percentage of male workers working for a single employer for 20 years or more is the same was the same in 2002 as it 1969. By this measure, at least, jobs are as “stable” today as they were in the Good Old Days.

29 June 2007 at 10:57 am 7 comments

Thanks to Chihmao

| Peter Klein |

Thanks to Chihmao Hsieh for guest blogging over the last several weeks. We’ve greatly enjoyed his contributions and look forward to his continued participation in the comment threads and his insights on entrepreneurship, innovation, organization, and strategy. Thanks, Chihmao!

29 June 2007 at 10:43 am 1 comment

Estimating the Value of Creative Invention

| Chihmao Hsieh |

One final bit of shameless self-promotion, as I soon head off into the figurative sunset from all this blogging: an empirically-oriented working paper of mine entitled “The Identification of Opportunities and the Value of Invention” can now be found here at SSRN. Any comments or suggestions are absolutely welcomed! Description of the research lies below. (more…)

29 June 2007 at 3:43 am Leave a comment

“Made in China”: The Name of a Creative Firm

| Chihmao Hsieh |

Today I received in the mail a sample issue of Fast Company. The cover story — full-text version found here — describes a China that is dramatically shifting from a country of copycat and imitation to a country of creativity and inventiveness. While its education system “does little to inspire,” and both government censorship and a very weak IPR policy do little to help support creativity, China’s younger citizens (e.g., aged 15-35) are finding and institutionalizing platforms to make themselves heard. And yes, the article mentions a London-based creative agency named “Made In China.”

29 June 2007 at 2:31 am Leave a comment

Best Sentence I Read Today

| Peter Klein |

From Fabio at

No one has forbidden the marriage of two economists, even though the thought churns my stomach.

What will he do if he runs into these people?

28 June 2007 at 10:49 am 1 comment

Signal Extraction Problems: Recommendation Letters

| Nicolai Foss |

Some kinds of recommendation letters need careful interpretation. A letter written for a student to help him or her study abroad usually doesn’t need much interpretation. But a letter written by a colleague for a colleague to a colleague is a different matter. One reason is that writers of recommendation letters differ. Some express themselves very directly, others more indirectly. The same words mean different things to different people. “Solid research” may mean “boring and unimaginative” to one person, but may mean, well, “solid” to another person.   (more…)

28 June 2007 at 6:29 am 4 comments

Human ATMs

| Peter Klein |

As economies grow they tend to substitute capital for labor. Hence the literature on the social effects of technological change focuses on labor displacement and absorption. But what happens when a capital-intensive process appears in a developing economy where labor is cheap?

Here’s a fascinating example of labor displacing capital: a Ugandan financial institution has created an ATM network without ATMs. The machines are too expensive to put in rural areas, so the bank contracts with local shopkeepers who receive and disburse currency using inexpensive smart-card readers linked wirelessly to a central database. (HT: Timbuktu Chronicles)

If this catches on, will we see despondent ATM terminals wandering the streets like that poor robot in the GM Super Bowl commercial?

27 June 2007 at 11:30 pm 2 comments

More on Journal Rankings

| Peter Klein |

The HES (History of Economics Society) listserv is buzzing over ERIH, the European Science Foundation’s ranking of journals in the history and philosophy of science. Writes Deirdre McCloskey, for example:

Among [the] many bad effects [of ranking journals] is to encourage people to rank another person not by reading and considering (a sample of) her work but by counting how many Grade A journals she has contributed to. It takes scientific and scholarly judgment out of the hands of actual readers of the actual work and puts it into the hands of the median voter in a beauty contest. It leads to mediocrity in science, such as the practice of using t tests as the sole criterion of importance in statistical studies. The beauty contest is based on rumor, not reading. When reputation rankings include a dummy journal with a plausible sounding name the respondents claim familiarity with the journal and firmly rank it. Don’t we need to stop this corrupt practice, not encourage it?

Other commentators largely agree. David Colander notes that productivity rankings of economists based on journal articles use proxies (journal articles) that “are only a small portion of economists’  total output (which includes teaching, other research, and service) (I estimate 20%) and that emphasis in one reduces emphasis in the others, so the probability of the rankings carrying through is exceedingly small, even if there is positive correlation with other activities.”

You can read the whole thread here (start with David Teira Serrano’s entry “European Reference Index for the Humanities (ERIH).” See also Leland Yeager’s work discussed here.

26 June 2007 at 3:49 pm 4 comments

Richard Vedder Is Getting More Radical

| Peter Klein |

Murray Rothbard delighted in describing Lord Acton as “one of the few figures in the history of thought who, charmingly, grew more radical as he grew older.” Richard Vedder, researching the US higher education system, is experiencing a similar transformation:

Usually, the more you study something, the more moderate you become. The simple radical solutions prove to be impractical, infeasible, or not so simple as originally thought. My evolution, however, has been rather different — I have become more, not less, radicalized in my view that fundamental reform is needed in higher education. This viewed has evolved not because of some sort of ideological change of life, or a quasi-religious conversion of some sort. It has come from running regression models — studying the evidence. The more evidence that I see that I believe is creditable and meaningful, the more I am convinced of the following:

* Too many students, not too few, are going to college;

* College and universities are extremely inefficient, and at the margin public spending on them more likely lowers rather than raises economic growth; (more…)

26 June 2007 at 12:11 am 6 comments

Efficient Organizational Design by Marco Weiss

| Nicolai Foss |

Good textbooks in organizational economics are badly missing from the market. In particular, good textbooks that are more advanced than Brickley, Smith, and Zimmerman’s Managerial Economics and Organizational Architecture (great book, BTW), but still more accessible than the average organizational economics research papers, basically do not exist. Milgrom and Roberts’s Economics, Organization, and Management has much interesting material in it, but there is simply too much material (students drown) and the book is extremely uneven in terms of readability (some chapters, e.g., chpt. 4 are hard to read even for advanced readers and even more for students). George Hendrikse’s Economics and Management of Organizations is organized much like the Milgrom and Roberts book but is more readable. However, parts of it are too difficult for the average 3rd or 4th year business student. (more…)

25 June 2007 at 2:57 pm Leave a comment

Should We Axe the (US) Small Business Administration?

| Peter Klein |

A debate in Business Week.

The entries don’t have references, but there is a large literature on small business lending. See in particular papers by Phil Strahan here and here, showing that bank deregulation and consolidation has helped small business lending and entrepreneurship.

25 June 2007 at 10:59 am 1 comment

No, Innovation is Not Overrated

| Chihmao Hsieh |

This is posted in response to the book commentary within Peter’s post. If the indented synopsis indeed captures the book’s main thesis, it might be “concise and elegant,” and “provocative” to a person crawling out from underneath prehistoric rock, but suffice it to say it’s about as far from innovative (hmm, how ironic) as it gets. Some might call it the result of being direly underinformed.

What’s technological innovation for? Aside from a few exceptions, and aside from nuances introduced by incentives, technological innovation serves to support and appeal to our physical well-being,* emotional well-being, and psychological well-being in the context of a (limited) 70-100+ yr life span. Full stop. (So O&M founder Nicolai Foss has been passing around a thought-provoking working paper addressing the nature of opportunities, one example cited therein describing the technology of the barbed wire fence. Is the barbed wire fence an invention that appeals to those three sources of well-being? Not directly, it seems. But it is elementary to conclude that its absence would reduce our capability to feed ourselves, which does support physical well-being.) (more…)

25 June 2007 at 9:45 am 3 comments

Is Innovation Overrated?

| Peter Klein |

Technological innovation is not as important as we think, argues David Edgerton in The Shock of the Old: Technology and Global History since 1900 (Oxford, 2006). Edgerton’s book, writes Steven Shapin in the New Yorker,

is a provocative, concise, and elegant exercise in intellectual Protestantism, enthusiastically nailing its iconoclastic theses on the door of the Church of Technological Hype: no one is very good at predicting technological futures; new and old technologies coexist; and technological significance and technological novelty are rarely the same — indeed, a given technology’s grip on our awareness is often in inverse relationship to its significance in our lives. Above all, Edgerton says that we are wrong to associate technology solely with invention, and that we should think of it, rather, as evolving through use. A “history of technology-in-use,” he writes, yields “a radically different picture of technology, and indeed of invention and innovation.” (HT: Against Monopoly)

Edgerton provides numerous examples, mainly from military history, of old technologies proving more important than new technologies (horses, for instance, were more important in World War II than V-2 rockets or atomic bombs). Useful innovation, not innovation per se, is what matters.

Most of us are attracted to novelty; it’s no wonder that we tend to overrate its importance. We also forget that many new technologies are modest variations on existing technologies.

24 June 2007 at 11:16 pm Leave a comment

Against Holism: The Boudon-Montaigne Farting Example

| Nicolai Foss |

Sophisticated attacks by methodological holists on methodological individualism often take the form of admitting that while, strictly speaking, only individuals act, individuals are so strongly influenced and constrained by institutions (in a broad sense) that we might as well disregard those individuals and instead reason directly from institutions to social outcomes. Individuals are effectively malleable by social forces. “There is no such thing as a human nature independent of culture,” Clifford Geertz famously argued, tying the holist argument to cultural relativism. (more…)

24 June 2007 at 7:13 am 2 comments

Group-based Anti-Feng Shui?

| Chihmao Hsieh |

I’ve got a dream of building a house sometime in the next several years. Not for the matter of pride, but because around my 40’s I’d like a bona fide party house. I thought one key would be to have a loft-like open-air layout.

Then I read this post on Dr. Keith Sawyer’s blog about The Building that ‘Threw Up on Itself.’ (more…)

23 June 2007 at 3:32 pm 1 comment

Philosophy of Social Science 101

| Nicolai Foss |

As I recently informed the O&M readership (here), I was in a debate last week at the DRUID conference in Copenhagen on the issue of methodological individualism. The debate took place in the afternoon, and at lunch I overheard one professor asking another (both were tenured full professors at highly prestigious US universities), “Do you have any idea about the stuff that Sid and Nicolai will be debating later today?” The other person shook his head and said he had “no idea.” I tried to talk to as many people before and after the debate as I could. I was surprised at how many basically did not have a clue concerning the meaning of methodological individualism (including a fair amount of those who had been listening to the debate!). Some of the questions that were raised during the debate also revealed considerable ignorance. For example, a young lady in the audience took Peter Abell and I to task for defending a notion (i.e., MI) that is not falsifiable! (more…)

23 June 2007 at 10:27 am 15 comments

The Sociology of Heterodox Economics

| Peter Klein |

Tiago Mata’s dissertation, “Dissent in Economics: Making Radical Political Economics and Post Keynesian Economics, 1960-1980” (LSE, 2005) has received the Joseph Dorfman Best Dissertation award from the History of Economics Society. From the abstract:

The history of dissent in economics has thus far been subject to scant interest. The existing scholarship, authored by dissenters probing their own past, has failed to address the crucial questions of how dissent emerged and rooted itself.

This study is about two dissenting communities, Radical Political Economics and Post Keynesian Economics. I review the circumstances that led to their emergence in the late 1960s and early 1970s. I draw from the histories of religious and scientific dissent to explore the making of the dissenters’ challenge to the economics orthodoxy. Notably, I use the concept of boundary work to analyse the debates between dissenters and mainstream.

Here is Mata’s home page. Here are some previous posts about heterodox economics.

22 June 2007 at 11:57 pm 3 comments

Two Essays on Douglass North

| Peter Klein |

By Arnold Kling, here and here.

I usually recommend to my students North’s 1991 Journal of Economic Perspectives paper, “Institutions,” for an overview of his general approach to institutions and economic change.

22 June 2007 at 9:54 am Leave a comment

How to Get 19380+ People to Read Your Academic Work? The “F-Bomb” Constitutes Your Entire Title

| Chihmao Hsieh |

I got an auto-generated email early this morning telling me that some research I co-authored with Todd Zenger and Jackson Nickerson made one of the SSRN Top 10 downloaded lists (presumably Top 10 over the last 30 days?), apparently from the Entrepreneurship section of the website. So I’m searching around SSRN trying to find out where in the Top 10 this research landed, and that’s when I inadvertently found a very different, very unfamiliar research paper at the end of this “Top 10 All-Time Downloaded” list.

I hit the “Refresh” button and rubbed my eyes to make sure I wasn’t hallucinating. I don’t anticipate reading the manuscript, but I could see from the abstract that it is likely provocative. (more…)

22 June 2007 at 5:19 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).

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