Archive for August, 2007

David Laidler

| Nicolai Foss |

I have been shocked to realize that the young modern macro-economists I’m acquainted with have no knowledge of the work of David Laidler. There was a time when Laidler was seen as primary spokesman for monetarism, as one of the world’s pre-eminent monetary theorists, and as an eminent historian of monetary thought. Laidler was one of my early influences; in particular, I remember being impressed by his excellent 1981 Economic Journal article, “Monetarism: an Interpretation and an Assessment.” Anyway, Laidler (b. 1938) is still very active, and his work is very much worth looking at if you entertain an interest in the theory and history of money, and the doctrinal history of monetary theory. Here is Laidler’s homepage at the University of Western Ontario. And here is the Wiki. 

20 August 2007 at 12:09 pm 1 comment

Two Entrepreneurship Papers

| Peter Klein |

  • “International Financial Integration and Entrepreneurial Firm Activity” by Laura Alfaro and Andrew Charlton. Evidence from a large cross-country dataset establishes a strong correlation between entrepreneurial activity (what I call “structural entrepreneurship,” the proportion of new and small firms to total firms) and various measures of international financial integration. Suggests that international capital flows are good for economic growth (take that, neo-mercantilists!). See Maury Obstfeld’s 1998 JEP paper for some background.
  • “Charles Le Maistre: Entrepreneur in International Standardization” by JoAnne Yates and Craig Murphy. Le Maistre was a pioneer of voluntary, international cooperation on technical standards. Summarizing Le Maistre’s accomplishments, Yates and Murphy argue that “industrial standardization, usually thought of as a staid field that limits, rather than promotes, innovation, is populated by multiple individuals who can be seen as entrepreneurs of standardization, either in a particular technical arena or on a broader, organizational level. “

20 August 2007 at 10:52 am Leave a comment

Entrepreneurship, Arbitrage, and Capital

| Peter Klein |

Over the years I’m increasingly convinced that Israel Kirzner’s metaphor of entrepreneurship as costless discovery — a form of arbitrage, exploiting differences between actual prices and their Walrasian equilibrium values — is a misleading way to think about entrepreneurship. Emphasizing knowledge, the awareness of facts that other market participants do not possess, the metaphor leads our attention away from action, the employment of scarce means to achieve economic ends. I’ve argued in a series of papers (1, 2, 3) that opportunity exploitation, not opportunity discovery, drives the market process.

A key problem for the Kirznerian metaphor is that entrepreneurship does, in practice, involve capital investment, despite Kirzner’s insistence that “pure entrepreneurship” does not require ownership of resources. (As Joe Salerno reminds us, favorable reviews of Kirzner’s Competition and Entrepreneurship by Austrians Murray Rothbard, Henry Hazlitt, and Percy Greaves all pointed to the separation of entrepreneurship and property ownership as the lone weakness in Kirzner’s otherwise excellent exposition.) But what about financial-market arbitrage, an example often cited in the Kirznerian literature? Isn’t arbitrage an example of costless discovery of pure profit? Doesn’t the arbitrageur operate without capital? (more…)

18 August 2007 at 10:28 am 12 comments

Managing the Philanthropic Enterprise

| Peter Klein |

McKinsey’s Luis Ubiñas will become Ford Foundation CEO next year, reports the Chronicle. This is an unusual move because philanthropic foundations have traditionally chosen career insiders for top management posts. “It runs counter to the idea that grant making is a closed profession, that you stay in this field and you simply move through the field,” says UT-Austin’s Peter Frumkin, quoted in the Chronicle piece. Have foundations decided, like many US corporations, that functional expertise is less important than general managerial skill?

17 August 2007 at 4:08 pm Leave a comment

Software for Deconstructionists

| Peter Klein |

Software developer Andy Brice performs a Sokal experiment, with similar results.

17 August 2007 at 8:26 am 2 comments

Agency Theory in Management

| Nicolai Foss |

I believe that agency theory is one of the most informative, useful, and interesting theories coming out of economics ever. It is surely also one of the most influential econ theories in management. Agency theory is, however, fundamentally complicated, and difficult to teach. I find it impossible to teach without making use of at least some math (specifically, simple versions of the linear model). In particular, grasping the role that the risk premium plays in the theory, and, in this connection, what is really the source of the agency loss, is often very difficult  for students.

However, not only students but also management academics have difficulties understanding the theory. (more…)

17 August 2007 at 2:12 am 11 comments

Publish or Perish 2.2

| Peter Klein |

Anne-Wil Harzing’s Publish or Perish software, discussed here by Nicolai, is available in a new version. Anne-Wil notes that “[t]he choice for Google Scholar is particularly relevant for Management scholars as many good journals in our field are not ISI listed and hence citations in these journals are not counted by ISI.”

16 August 2007 at 11:02 am Leave a comment

Euro Reward Management Conference

| Nicolai Foss |

The First European Reward Management Conference, organized by the European Institute for Advanced Studies in Management, will take place in Bruxelles Dec. 17-18 this year. Deadline for paper submission is Sept. 4. Who knows, perhaps Alfie Kohn will show up.

16 August 2007 at 3:13 am Leave a comment

More Podcasts: Gordon, Weingast, Salerno-Klein

| Peter Klein |

  • The History of Political Philosophy: From Plato to Rothbard by former O&M guest blogger David Gordon. A ten-lecture series delivered in June 2007 covering Plato, Aristotle, Aquinas, Hobbes, Locke, Rousseau, Kant, Hegel, Mill, Spooner, Spencer, Rawls, Nozick, Rothbard, and more. Only David Gordon could be an expert on all of these.
  • Russ Roberts’s interview with Barry Weingast about the new book by North, Wallis, and Weingast, A Conceptual Framework for Interpreting Recorded Human History (what a title!). Weingast has become so prominent in political science it is easy to forget that he has an economics PhD (from Cal Tech) and started his career as an economics professor at Washington University in St. Louis. (His critics have not forgotten.)
  • Fundamentals of Economic Analysis: A Causal-Realist Approach. Economics in the tradition of Carl Menger, starting with the basics of scarcity, choice, value, and exchange then moving to pricing, entrepreneurship, capital, competition, money, banking, and the business cycle. Joe Salerno and I give the lectures. You can also get these as videos in a handsome DVD set.

16 August 2007 at 12:05 am Leave a comment

Christian Asmussen Receives the Haynes Prize

| Nicolai Foss |

My colleague at CBS’s Center for Strategic Management and Globalization, Dr. Christian Geisler Asmussen, received the highly prestigious Haynes Prize, awarded to “Most Promising Scholar” at this year’s Academy of International Business Meetings, for his paper “Local, Regional or Global? Quantifying MNC Geographic Scope”. The Committee was chaired by Peter Buckley and the selection was made among 700 papers.

Christian started work at the Center as an Assistant Professor 2 months ago. With already 2 accepted articles in Journal of International Business Studies, and a string of book chapters and papers, Christian is unusually talented, a nice guy, and we are most lucky and happy to have him here at CBS-SMG. (Pls, no US offers ;-)).

15 August 2007 at 11:57 am Leave a comment

Machlup-Klein Day

| Peter Klein |

You all know about Hayek-Klein day. Did you know today is Machlup-Klein day? Economist Fritz Machlup, student and friend of Ludwig von Mises, contemporary of F. A. Hayek, and mentor to Edith Penrose, was born 15 August 1902. My dad’s birthday is also today, August 15! What is it about Kleins and great Austrian economists?

15 August 2007 at 11:25 am 2 comments

Economists and the Economy

| Peter Klein |

Chris Dillow, channeling yours truly, writes:

Economists are everywhere. Steve Levitt, Tim Harford and Steven Landsburg use newspaper columns and best-selling books to show how economics can account for why drug dealers live with their mums, why you can’t find space to park, why school teachers cheat, why people share umbrellas and why sexually transmitted diseases are so rife. Simple economics, it seems, can explain everything.

Everything, that is, except the economy. Although orthodox economics can do a good job of explaining why people get a divorce or the clap, it does a much worse job of accounting for what people think it should explain.

Dillow’s essay in the Times goes on to focus on the prediction problem. (more…)

15 August 2007 at 10:03 am Leave a comment

Mind Mapping

| Peter Klein |

Most academics I know take notes in a fairly linear, textual fashion. At your next conference, seminar, workshop, or committee meeting, why not try mind mapping instead?

15 August 2007 at 10:02 am Leave a comment

The Internet, Plagiarism, and Fabulism

| Nicolai Foss |

What is the net effect of the internet on the amount (and type) of plagiarism? Many people have predicted the demise of plagiarism as internet search engines make that nasty activity increasingly easy to detect. However, as any university teacher knows from sad experience with students who got tempted to cheat, the internet also prompts plagiarism because it strongly expands the set of texts that can be plagiarized at little direct cost. (more…)

15 August 2007 at 3:26 am 8 comments

São Paulo Workshop on Institutions and Organizations

| Peter Klein |

Three Brazilian institutions — Fundação Getúlio Vargas São Paulo, IBMEC São Paulo, and the University of São Paulo — are jointly sponsoring a “Research Workshop on Institutions and Organizations” in São Paulo, 2-4 September 2007. Keynote speakers are Jackson NickersonArmando Castelar, and me. From the blurb:

Seminar participants will discuss recent developments in the analysis of institutions and organizations through the lenses of Economics, Management, Sociology, Law and other social sciences. Instead of focusing on the contributions of specific disciplines dealing with institutions and organizations, workshop participants will emphasize differences and commonalities among different approaches, leading to potential advances and refinements in the field.

Here is registration information and a preliminary schedule.

14 August 2007 at 10:21 am 1 comment

Who Are Those Young Libertarian Org Scholars?

| Nicolai Foss |

In his keynote address to the 2006 meeting in Bergen (Norway) of the European Group for Organizational Studies, Jim March notes that “European organization studies were influenced deeply by the fact that expansion occurred in the decades following the protest and counterculture movements of the 1960s and 1970s . . . [as seen] . . . in such things as qualitative research on culture, gender, sense-making, social construction and power” (p. 14). (more…)

14 August 2007 at 6:48 am Leave a comment

Economic Freedom and Entrepreneurial Activity

| Nicolai Foss |

Christian Bjørnskov and I have just had our paper with the above title accepted for publication in Public Choice. I was very favorably impressed with the review process, which was comparable to the process at the top academy journals in terms of speed and thoroughness. Mail me at if you want a copy of the paper. Here is the abstract:

While much attention has been devoted to analyzing how the institutional framework and entrepreneurship impact growth, how economic policy and institutional design affect entrepreneurship appears to be much less analyzed. We try to explain cross-country differences in the level of entrepreneurship by differences in economic policy and institutional design. Specifically, we use the Economic Freedom Index from the Fraser Institute to ask which elements of economic policy making and the institutional framework are conducive to the supply of entrepreneurship, measured by data on entrepreneurship from the Global Entrepreneurship Monitor. We find that the size of government is negatively correlated with entrepreneurial activity and sound money is positively correlated with entrepreneurial activity. Other measures of economic freedom are not significantly correlated with entrepreneurship

14 August 2007 at 4:49 am Leave a comment

State-Owned Firms: Still Inefficient

| Peter Klein |

Generalissimo Francisco Franco is still dead, and state-owned firms are still inefficient. A survey of over 12,000 Chinese firms finds that “even after a quarter-of-century of reforms, state-owned firms still have significantly lower returns to capital, on average, than domestic private or foreign-owned firms.” This from “Das (Wasted) Kapital: Firm Ownership and Investment Efficiency in China” by David Dollar (great name!) and my former Berkeley classmate Shang-Jin Wei. “By our calculation,” they write, “if China succeeds in allocating its capital more efficiently, it could reduce its capital stock by 8 percent without sacrificing its economic growth.”

The paper is light on theory and interpretation, but there is a substantial literature on the problems of state ownership to which one can easily refer (good starting points here, here, and here.)

14 August 2007 at 12:02 am 1 comment

Bryan Caplan’s New Book

| Nicolai Foss |

During my libertarian awakening in the mid-1980s, I remember being particularly impressed by public choice theory. While I read the works of the major Austrians and felt strongly inspired by their vision, PC theory seemed richer in predictive implications and concrete policy proposals. It was also much closer to the mainstream economics I was being taught at the University of Copenhagen. (more…)

13 August 2007 at 1:56 pm Leave a comment

Austrian Economics at the AoM

| Peter Klein |

Last week’s Academy of Management meeting featured a pre-conference workshop, “The Austrian School of Economics: Applications to Organization, Strategy, and Entrepreneurship,” organized by Nicolai and myself. I began with an overview of the Austrian approach and reviewed some of the key figures in its development. Panelists Joe Mahoney, Yasemin Kor, Dick Langlois, Nicolai, and Elaine Mosakowski each gave some prepared remarks about aspects of the Austrian tradition that apply to their work, followed by general discussion among the panelists and the audience. Here are copies of the prepared remarks and here are some photos (courtesy of Peter Hofherr).

mahoney_aom20072.jpgWe weren’t sure what to expect — a dozen or so participants, perhaps? — and were delighted when over 100 people showed up, leaving standing room only. This and other indicators suggest growing interest in Austrian economics among management scholars. Of course, a belief in the relevance of the Austrian approach to business administration is a core value here at O&M.

13 August 2007 at 12:45 pm Leave a comment

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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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