Archive for July, 2007

Education Quote of the Day

| Peter Klein |

F. A. Hayek, writing in The Counter-Revolution of Science (pp. 195-96 of the Liberty Fund edition) on one consequence of the French Revolution:

The Revolution had swept away the old system of colleges and universities, which system was based largely on classical education, and replaced them in 1795 with the new écoles centrales, which became the sole centers of secondary education. In conformity with the ruling spirit and by an overviolent reaction against the older schools, the teaching in the new institutions was for some years confined almost exclusively to the scientific subjects. Not only the ancient languages were reduced to a minimum and in practice almost entirely neglected, even the instruction in literature, grammar, and history was very inferior, and moral and religious instruction, of course, completely absent. . . .

Thus, a whole generation grew up to whom that great storehouse of social wisdom, the only form indeed in which an understanding of the social processes achieved by the greatest minds is transmitted, the great literature of all ages, was a closed book. For the first time in history that new type appeared which as the the product of the German Reaschule and of similar institutions was to become so important and influential in the later nineteenth and the twentieth century: the technical specialist who was regarded as educated because he had passed through difficult schools but who had little or no knowledge of society, its life, growth , problems and values, which only the study of history, literature and languages can give.

In economics especially but also in sociology, political science, psychology, and other social sciences we have trained many generations of such “technical specialists.” Is this wise? Put differently, would a typical PhD student in one of these fields benefit more, on the margin, from taking a course in history or literature or philosophy instead of one more course in quantitative methods?

15 July 2007 at 8:20 pm 3 comments

“As Bad as PowerPoint”

| Peter Klein |

The ubiquitous PowerPoint, discussed frequently on these pages (1, 2, 3), is becoming a metaphor for casual or perfunctory thought, word, and deed. I noticed this passage in a (mostly negative) review of the new Harry Potter movie:

[Screenwriter] Goldenberg has succeeded in condensing the book into the film equivalent of a PowerPoint presentation, bouncing from incident to incident without anything amounting to much, while [director] Yates can’t rise above the material he’s been given, seemingly missing the emotional point of some crucial scenes and just clicking for the next slide to come up.

What a great addition to the urban dictionary! “I’m worried about Bob. He seems so aimless, going through life just clicking for the next slide to come up.”

14 July 2007 at 9:36 am 3 comments

Are Economists Free-Market Apologists?

| Peter Klein |

This New York Times piece describes contemporary economics as a rigid free-market orthodoxy, challenged by a few courageous iconoclasts who question free trade, support minimum wages, favor tax and spending increases, and the like. To the author: What color is the sky on your planet?

I was to blog a more detailed reaction but Alex TabarrokLarry White, and Greg Mankiw, among others, have beaten me to it. Note that Alex and Larry both refer to Dan Klein’s work on the ideological views of economists, which we’ve discussed often here at O&M. The Times piece did not bother to include any data, of course.

12 July 2007 at 3:52 pm 5 comments

Adam Smith and the Corporation

| Peter Klein |

Larry Elliott writes in the Guardian that Adam Smith would oppose the modern shareholder model of the corporation. Smith, he argues, “would have looked askance at an economy gripped by speculative fever, with the emphasis not on making things but on buying and selling, making a turn, churning, taking a punt, sweating an asset.” Leaving aside for the moment that the distinction between “making” and “buying and selling,” as used here, is entirely specious, is this a fair interpretation of Smith? Elliott continues:

Smith, indeed, predicted what might happen in the Wealth of Nations, when he supported the idea of private companies (or copartneries) against joint stock companies, the equivalent of today’s limited liability firm. In the former, Smith said, each partner was “bound for the debts contracted by the company to the whole extent of his fortune”, a potential liability that tended to concentrate the mind. In joint stock companies, Smith said, shareholders tended to know little about the running of the company, raked off a half-yearly dividend and, if things went wrong, stood only to lose the value of their shares.

“This total exemption from trouble and from risk, beyond a limited sum, encourages many people to become adventurers in joint stock companies who would, upon no account, hazard their own fortunes in any private copartnery. The directors of such companies, however, being the managers rather of other people’s money than their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own.” (more…)

12 July 2007 at 10:22 am 4 comments

Workshop in Economic Methodology

| Peter Klein |

The Stirling Centre for Economic Methodology (SCEME) is soliciting proposals for its 9th workshop on economic methodology, 13 October 2007 at the University of Stirling, UK. This year’s theme is “Knowledge, Information, and the Economy.” Proposals are due 27 July 2007. Here is the call for papers and here is additional information.

11 July 2007 at 11:48 pm Leave a comment

Brilliant But Neglected Articles

| Nicolai Foss |

Because markets for science hardly work perfectly, a certain number of papers that are truly excellent will tend to be overlooked. The scientific community may collectively commit Type 1 errors, or may simply overlook certain papers because they were published at a time when the interests of the community were elsewhere, or were published in obscure journals, or in non-English languages, etc. etc. (more…)

11 July 2007 at 12:17 am 13 comments

Empirical Research in the RBV

| Peter Klein |

Empirical work in transaction cost economics has been examined in several detailed reviews. Joskow (1988), Shelanski and Klein (1995), Klein (2005), and Macher and Richman (2006) are sympathetic to TCE while David and Han (2004) and Carter and Hodgson (2006) find the evidence less convincing. The critics of TCE raise some good points but do not, in my judgment, show that any rival theory has greater explanatory power. How about the resource-based view?

Surprisingly, while the RBV is central to much recent empirical work in strategy and organization, its empirical track record has not been scrutinized systematically as has TCE’s. Strategic Organization published a paper last year, “Tests of the Resource-Based View: Do the Empirics Have Any Clothes?” by Richard Arend, that begins to fill this gap. (more…)

11 July 2007 at 12:07 am 19 comments

The Efficient Markets Hypothesis: Web Design Edition

| Peter Klein |

A few years back, web designer Matt Jones coined the term lazyweb — the notion that there are so many other smart people out there working on the web alongside you, and that if you wait long enough, someone else will write, build, or design that cool thing you were thinking about, and save you the bother of doing the actual work.

This is from Mike Gunderloy, who obviously does not subscribe to the Kirznerian or Knightian versions of the efficient sidewalk theory. To be fair, he’s not talking about final goods (Why bother to make and sell something when someone else will have already made and sold it?) but intermediate goods (Why make something myself when I can free ride on the efforts of others?). Naturally we fully endorse such free riding.

10 July 2007 at 12:53 pm 1 comment


| Nicolai Foss |

Here are some Great Beards in Philosophy. Robert Aumann could join that club. So could my M.Sc. thesis committee member, the late Karl Vind. Both arguably contributed (almost) as much to analytical philosophy as to economics. The only management scholar with a comparable beard I know of (or at least remember) is R. Edward Freeman. Sid Winter and Michael Cohen come close, however. Are beards over-represented among philosophers and under-represented among economists and management scholars? Why?

10 July 2007 at 9:18 am 7 comments

Michael Cohen on Routines

| Nicolai Foss |

In the field of organization studies, Michael Cohen is a towering figure. What he says is listened to. In a recent Essai in Organization Studies (yes, in case you didn’t know, Org Studies belongs to the same continent as Michel de Montaigne; pretentious, nous?), Cohen talks about the inspiration he has gained from American pragmatist philosopher John Dewey. He mentions that, somewhat to his surprise, he has found out that he is far from unique in his Dewey interest. Another Dewey-reader with interests similar to Cohen’s is Sid Winter; in his recent bashing of methodological individualism at the DRUID conference, Winter enlisted Dewey among the enemies of MI.  (more…)

10 July 2007 at 8:19 am Leave a comment

Management Journal Impact Factors 2006

| Nicolai Foss |

The new journal impact factors for 2006 are now available from the ISI Web of Knowledge (here). Consider the journal list within “management” or “business” (the former includes information system journals, the latter includes marketing journals). (more…)

9 July 2007 at 10:29 am 4 comments

That Yearly Narcissist Exercise

| Nicolai Foss |

OK, let’s pretend that you are in fact interested in what I plan to read this summer.  All the other bloggers pretend, so why not? In other words, it is time for the yearly book-reading showoff/narcissist exercise (the social purpose of which may mainly be to let you inform the rest of the readership of the great books you will read — so please comment). So, here is what I plan to peruse in my two weeks of summer vacation starting on Friday: (more…)

9 July 2007 at 1:19 am 6 comments

Francis Hutcheson’s Classic Text on Natural Law

| Peter Klein |

O&M readers interested in the Scottish Enlightenment (and who isn’t?) may enjoy this new volume from Liberty Fund, Francis Hutcheson’s Philosophiae Moralis Institutio Compendiaria, with A Short Introduction to Moral Philosophy. Hutcheson, of course, was Adam Smith’s teacher at the University of Glasgow. Writes General Editor Knud Haakonssen:

Hutcheson’s Institutio was written as a textbook for university students and it therefore covers a curriculum which has an institutional background in his own university, Glasgow. This was a curriculum crucially influenced by Hutcheson’s predecessor Gershom Carmichael, and at its center was modern natural jurisprudence as systematized by Grotius, Pufendorf, and others. . . . The Institutio is the first major [published] attempt by Hutcheson to deal with natural law on his own terms. . . . It therefore encapsulates the axis of natural law and Scottish Enlightenment ideas, which so many other thinkers, including Adam Smith, worked with in their different ways.

The book includes both the Latin original and an English translation, so you can brush up on your Latin as you work through the text (an added bonus!).

8 July 2007 at 11:09 pm Leave a comment

Routines or Practices?

| Nicolai Foss |

I am growing increasingly skeptical of the extremely popular and influential  notion of routines, a central construct in large parts of management, notably organization and strategic management, and in evolutionary economics. My problems with the construct are these (among others):

1) There are still no clean definitions around of “routine.” Proponents of the routine notion sometimes delight in pointing out that it took transaction cost economics almost 4 decades to arrive at its unit of analysis, dimensionalize it, etc. However, with respect to TCE  it was only when the unit was finally decided on, defined and dimensionalized that real progress beyond Coase (1937) began to take place. Those who work with routines have not been so patient, and have not hesitated to introduce all sorts of derived concepts. Thus, capabilities are often defined in terms of routines, so that something undefined is defined in terms of something badly defined.

2) Although no clean definitions seem to exist, different views of routines are proffered in the literature. Indeed, there has a notable drift in the dominant conception of routines, from the standard operating procedures of Cyert and March to the emergent/undesigned, collectively held, largely tacit routines of Nelson and Winter.  

3) Routines are (partly because of 1)) too often used as a catch-all category that aims at capturing everything (at any level of analysis) about an organization that has some degree of stability/permanence. For example, the much cited “organizational learning” paper by Levitt and March (it has a whopping 1,655 hits on Google scholar) includes everything from individual-level heuristics (“rules of thumb”) to corporate strategy under the routine heading. (more…)

8 July 2007 at 11:02 am 14 comments

The Strategic Advantage of Bad Writing

| Peter Klein |

Murray Rothbard’s concise and typically witty explanation for the triumph of Keynesian macroeconomics:

How was the Keynesian Revolution accomplished? How was this mare’s nest of discredited Mercantilist fallacies put over? In the first place, by intellectual intimidation. The old fallacies were dressed up by Keynes in such a wilderness of unclear writing and pretentious jargon, in such a bewildering morass of strange concepts, that the Keynesian disciples claimed to be the only ones able to understand the Master.

From a 1959 article included as the introduction to a new edition of Henry Hazlitt’s Failure of the “New Economics”. I feel better now about my bad writing. If I only had disciples. . . . 

7 July 2007 at 9:38 pm 4 comments

A World Without Supermarkets

| Peter Klein |

It might be like Detroit, now the only major US city without a national chain supermarket. (Thanks to Cliff for the link.)

I’m sure these guys will produce a study soon showing how Detroit residents are better off without the big retailers.

6 July 2007 at 11:21 am 3 comments

History of Organizations Bleg from J.C. Spender

| Peter Klein |

Our friend J.C. Spender seeks help from the O&M readership:

I’m desperately searching for a history of organizations — not the history of corporations, nor of corporate law, nor of combinations, nor of Guilds, nor of military organizations, nor of religious ones either.

My problems are (1) to find literature about the history of organizations — are there some good books, papers, etc.? Now that I focus my mind on this I cannot come up with much other than the history of corporations and markets, rather than organizations and markets. My one discovery is the history of the Jesuit movement which, one might argue, was the first modernist “organization.”

(2) Barbara Czarniawska told me that the actual term “organization” only came into general use with the rise in “systems theory” — Henderson, Barnard, and Co. I find this unbelievable but I’m hard pressed to refute or in any other way resist her.

My intuition is that there is something here awaiting discovery about the decline of religion and the emergence of strictly secular and profit-oriented organizations — something beyond the Protestant Ethic therefore and entailing or legitimating a set of objectives which are not in the service of the public — quite to the contrary.

Any suggestions? Please share them below.

5 July 2007 at 10:38 pm 13 comments

One (Electronic) User at a Time, Please

| Peter Klein |

Remember the old days when you’d go the library for a book or journal and find it checked out? (Student readers: the “library” was a large building with books and print journals — hardcopies, basically — that users could borrow and return. Ask your parents or grandparents about this.) Now that most journals are available electronically, on the web, you can get the article you need regardless of who else is using the same item. Or can you?

I clicked today for an article from the American Journal of Sociology (don’t ask) and got the following error:

The institutional subscription you are using to access this protected content allows for only one user at a time. Someone at your organization is currently using this subscription. Please try again later. Otherwise, after 30 minutes of inactivity by the first user, this subscription will be available to you.

Now, how do I find this other user and pester him or her to quit?

5 July 2007 at 3:45 pm 2 comments

Americans and Caffeine

| Peter Klein |

An American thought for July 4. We Americans are aggressive, fast-talking, energetic, Type-A personalities. We drive Hummers and throw down a Jolt or Super Big Gulp while scarfing our Fourth Meal. We don’t do four-week vacations or afternoon siestas like wimpy Europeans or Latin Americans. So we are we the only people in the world who drink decaffeinated coffee?

The Pepper and Salt cartoon in Monday’s WSJ reminded me of living in Europe a few years ago. No decaf in restaurants or in grocery stores. Indeed, the concept is virtually unknown. Why is decaf so popular in the US? Any theories?

4 July 2007 at 9:55 am 7 comments

Industrial Recycling: Nothing New

| Peter Klein |

Popular myth holds that pre-industrial societies were models of environmental sensitivity, practicing “sustainable development” and minimizing waste. Industrialism, it is said, upset the delicate balance between man and environment, encouraging overproduction, overconsumption, and a disregard for the natural world. To many environmentalists, capitalism’s primary legacy is the strip mine and the garbage dump.

Shephard Krech’s Ecological Indian: Myth and History has done much to debunk the fable of pre-modern environmentalism, at least in the North American context. Pre-industrial societies produced massive amounts of garbage and cared little for environmental stewardship. Now we learn from Pierre Desrochers and Karen Lam that industrial recycling — a key component of modern sustainable development programs — was widespread during the Gilded Age. In “‘Business as Usual’ in the Industrial Age” (Electronic Journal of Sustainable Development, vol. 1, 2007) Desrochers and Lam describe how woollen rags, old iron, manure, animal parts, butter-making waste, and other byproducts were recycled, for profit, in the UK and US. Here’s but one of many colorful examples (not for the feint of heart or weak of stomach): (more…)

3 July 2007 at 4:26 pm 3 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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