Archive for September, 2007

Social Science Factoid of the Day

| Peter Klein |

Thomas Schelling wrote several chapters of The Strategy of Conflict while on sabbatical in London. He shared a typist with Agatha Christie, then working on her classic play The Mousetrap. Wonder if any pages got switched?

From Robert Dodge’s The Strategist: The Life and Times of Thomas Schelling (Hollis Publishing, 2006).

15 September 2007 at 8:03 am Leave a comment

Menger the Empiricist

| Peter Klein |

Austrian economists eschew empirical analysis in favor of deductive, a priori reasoning. They don’t believe in prediction. Neoclassical economists, by contrast, endorse the “scientific method” of rigorous empirical testing. You know that, right?

Then you might be surprised to learn that Carl Menger (1840-1921), founder of the Austrian school, called his approach the “empirical method,” as distinguished from Léon Walras’s “rational method.” Menger was a prominent economic journalist before turning to scientific work and his primary interest, as a scholar, was to explain the actual pricing processes he observed in the marketplace, processes that did not at all resemble those described in contemporary textbooks. Menger’s purpose, writes Guido Hülsmann in Mises: Last Knight of Liberalism, was

to demonstrate that the properties and laws of economic phenomena result from these empirically ascertainable “elements of the human economy” such as individual human needs, individual human knowledge, ownership and acquisition of individual quantities of goods, time, and individual error. Menger’s great achievement in [Principles of Economics, 1871] consisted in identifying these elements for analysis and explaining how they cause more-complex market phenomena such as prices. He called this the “empirical method,” emphasizing that it was the same method that worked so well in the natural sciences. (more…)

14 September 2007 at 9:54 am 5 comments

More Presentation Tips

| Peter Klein |

More for our ongoing series on PowerPoint:

You can find good tips at Presentation Zen. A nice rule of thumb is 6×6, though I favor 1×6.

Especially with a technical topic one is ensnared to use bullet points. It doesn’t help. It doesn’t stick. As the speaker, you will read the list point by point, with some intermediary “and” and “uh”, and bore the audience. Do it like Steve, not like Bill!

Animations? Cease and desist!

This is from Andreas Zwinkau’s tips on technical presentations.

14 September 2007 at 9:01 am 4 comments

Why Are Sociologists So Silent on Property Rights?

| Nicolai Foss |

I just finished reading Bruce Carruthers and Laura Ariovich’s “The Sociology of Property Rights,” published in The Annual Review of Sociology (2004) (no, Brayden, O&M is not the anti-sociology blog).  This is a nice piece, but it is debatable how much of it is sociology per se.  In actuality, most of the paper, which given the journal (research annual) that it is published one would expect to survey sociology contributions, turns out to be a survey of — economics. Specifically, the contributions of Coase, Demsetz, Barzel, and even Moore and Hart are highlighted and summarized.  The authors themselves acknowledge that sociology “neglects” property rights.  Others have made similar observations (e.g., Richard Swedberg).  

This neglect of property rights is bizarre; after all, property rights, in a sort of proto-Hartian understanding, were central in Marx’ thought.  Durkheim and Veblen also didn’t neglect property rights. Intuitively, one would think of property rights as a preeminent sociological theme, as it involves power, social stratification, inequality, and other sociology favorites.  So, what accounts for the neglect?

13 September 2007 at 2:37 am 4 comments

New Frontiers in Cross-Branding

| Peter Klein |

You, too, can afford a Bugatti. This one, not this one. (Via Gizmodo.)

12 September 2007 at 2:50 pm 2 comments

Mental Illness in the Academy: Elyn Saks’ Brave New World

| David Hoopes |

Monday’s LA Times had an amazing story about a USC law professor who has managed to attend Oxford, Yale Law School, and become Dean of Research at the USC law school while battling schizophrenia. Many O&M readers have probably read the book or seen the movie, “A Beautiful Mind,” the incredible story of mathematician John Nash. Like Nash, Elyn Saks suffered hallucinations, delusions, and a litany of other terrible effects of her disease. I probably should not use the past tense because I don’t believe medicine can remove these things. However, they can be tempered. Saks recently published a memior, “The Center Cannot Hold: My Journey Through Madness.” Thus, in addition to the direct suffering of the disease, Saks is now willing to take on the problems of social stigma, no small thing.

I wish I could think of some profound comment or lesson. There are many among us who suffer from a variety of mental illnesses. For better or worse, more jokes about academics come to mind than profundities. Here’s to the day when the social stigma associated with mental illness is much smaller. I’ve always thought I’d wait until I got tenure to open up any of my (much more minor) nightmares.

12 September 2007 at 2:34 pm 2 comments

Conference on Public-Private Partnerships

| Peter Klein |

Our friends at ATOM are organizing a conference, “Public-Private Partnerships, Competition, and Institutions,” December 7-8 in Paris. Here is the call for papers. Submissions are due at the end of this week. “The conference will bring together academics, policymakers, and business representatives to discuss issues on the impact of institutional framework and competition on the efficiency of public services reforms and more particularly on the efficiency of public-private partnerships. The objective is to initiate a network of PhD students and researchers as well as practitioners interested in this specific issue.”

11 September 2007 at 11:07 pm 1 comment

9-11, Strategic Management, and Public Policy

| David Hoopes |

On this sad anniversary I find myself thinking about public policy and the field of strategic management. After six years, how well integrated are our intelligence agencies? A few management and strategic management scholars probably have a lot to say about such issues. Many more might struggle to apply what they work on to this problem or any other policy issue.

A few years back Bill Ouchi was commended by a panel at an Academy of Management meeting. Bill had long since forsaken traditional academic concerns and devoted his considerable intellect to public policy. His main target: public schools. Ouchi’s work has had a profound impact on a number of large and at one time largely dysfunctional school districts. Portions of the session were published in The Academy of Management Executive (recently renamed). I missed the session, but the account in AME had Bill’s talk followed by a number of notable management scholars opining about other applications of management research to public policy. I’ve met a few of the speakers. They are very nice people who are genuinely concerned about the field of management and about how we might be of service to a constituency beyond our students and the business world. Nevertheless, most of what these talented, hardworking, and successful scholars had to say about the field of management and its possible applications to public policy seemed far removed from a direct application to policy questions. (more…)

11 September 2007 at 7:10 pm Leave a comment

EBM Reconsidered

| Peter Klein |

Joe Mahoney, whose opinions are highly valued around here, thinks we are unfair to evidence-based management (EBM) (1, 2). Joe encourages readers to study Denise Rousseau’s 2005 Academy of Management Presidential Address and make up their own minds. Writes Joe:

Some of the leading folks in the evidence based-management (EBM) research program include past Academy of Management Presidents such as Jean Bartunek (Boston College), Jone Pearce (University of California, Irvine) and Denise Rousseau (Carnegie Mellon University). In the Strategy field, Ravi Madhavan (University of Pittsburgh), Alfie Marcus (University of Minnesota) and myself have recently become involved. The real leader of the Evidence-Based Management program is Denise Rousseau, who offers much of substance.

Joe reports that he attended a June 2007 workshop at Carnegie Mellon on EBM and came away much impressed. EBM, Joe writes, “means translating principles based on best evidence into organizational practices. Thus, organizational decisions are informed by social science and organizational research, which aid in solving organizational problems.” It’s hard to disagree with that.

11 September 2007 at 12:02 pm 1 comment

World’s Most Immodest Economist?

| Nicolai Foss |


11 September 2007 at 9:46 am 4 comments

Hayek Orchid Bleg

| Nicolai Foss |

Want to impress that free-market girlfriend (or potential girlfriend) of yours?  Buy a Paphiopedilum Friedrich von Hayek!

Who knows the story behind this? Hayek’s father was a Professor of Botany. Might he have named an orchid after his son? Or was it named by a later Hayek-admiring botanist? Or, are we talking about an altogether different Hayek (not likely)?

11 September 2007 at 6:32 am 1 comment

Instrumental Variables versus Randomized Controlled Trials

| Peter Klein |

Despite the popularity of instrumental-variables estimators some empirical social-science researchers suggest dumping structural models altogether in favor of randomized controlled trials (RCTs), as used in biomedical research. (Like evidence-based management, but with substance.) MIT’s Poverty Action Lab (J-PAL) is the home of this movement. Princeton’s Angus Deaton is intrigued, but reminds us that RCTs are no panacea.

The movement is not modest in its claims, and it has attracted a good deal of acclaim from outside the profession. [J-PAL’s Abhijit] Banerjee has argued that the World Bank should cease to fund any activity (including presumably macro policy advice) that has not been previously subject to evaluation by an appropriate RCT. . . . There is much to be excited about in this program. J-PAL and other experimental researchers have come up with several surprising results that upset previous beliefs. And by replicating similar experiments in different settings they are beginning to create an impressive and valuable body of evidence. As might be expected in the first flush of enthusiasm, there has to date been less attention to some of the problems that have bedeviled RCTs in medicine, such as their limited value to physicians in practice, nor to the extent to which RCTs really do solve the standard problems of econometric analysis. (Indeed, many RCT papers subject their experimental results to various econometric corrections and analyses.) And the jury is still out on whether RCTs are any better than large data sets as substitutes for theory.

Thanks to Marshall Jevons (this one, not this one) for the pointer.

11 September 2007 at 12:03 am Leave a comment

Culture, Cognition, and Strategy

| David Hoopes |

Although managers frequently refer to their companies’ culture, culture’s influence on business strategy receives limited attention in the academy. Over the years, organizational culture has gone in and out of fashion. Currently, it remains out of fashion. Yet, strategy researchers often stress the importance of shared beliefs, shared values, administrative history, and other organizational characteristics presumably influenced by or reflecting an organization’s culture. A cogent theory of culture and organizational culture can better integrate organizational beliefs, values, and knowledge with current theories of strategy (and for my interests in competitive heterogeneity). Of particular interest to me is a branch called cognitive anthropology.

Most anthropologists include themselves in one of two traditions. One, generally associated with Ward Goodenough, considers culture to be knowledge necessary to get along in a particular society. The other, generally associated with Clifford Geertz, considers culture as something outside of any particular person. Thus Geertz (1973: 12) decries “…the cognitive fallacy [that] culture consists of mental phenomena.” Building on Goodenough’s work, cognitive anthropologists describe culture in terms of member’s schema or cognitive models (e.g. D’Andrade, Hollins, Quinn, Hutchinson). D’Andrade states that cultural schema are “Socially inherited solutions to life’s problems” (1995: 249). (more…)

10 September 2007 at 1:17 pm Leave a comment

Content Analysis Using

| Peter Klein |

Arthur Diamond uses’s “Search Inside” feature to find books discussing “creative destruction” or other Schumpeterian concepts. Conclusion: Book authors, writing for the general reader, love Schumpeter while academic journal authors, writing for their fellow specialists, tend to ignore Schumpeter because his ideas are too difficult to model formally.

See also my earlier attempt to use Amazon to quantify bad academic writing.

10 September 2007 at 9:12 am Leave a comment

How to Give a Guest Lecture

| Peter Klein |

Steve Carrell shows how it’s done on one of my favorite episodes of The Office. Seeing him rip up an economics textbook is classic. And how often do you hear the words “Herfindahl Index” on prime-time TV?

Update (7 November 2007): NBC’s lawyers made YouTube take down the clip. But here’s another (albeit incomplete) version.

8 September 2007 at 5:21 pm Leave a comment

The Best Business Book I’ve Read This Year

| Peter Klein |

It’s Phil Rosenzweig’s The Halo Effect (mentioned previously here). Rosenzweig systematically, but politely, demolishes the pretensions of best-selling management books and projects such as In Search of Excellence, Built to Last, Good to Great, and the Evergreen Project. These studies, Rosenzweig patiently explains, engage not in serious research — despite their pseudo-scientific pretensions (what Rosenzweig calls “The Delusion of Rigorous Research”) — but in storytelling.

The most common problems are sampling on the dependent variable (i.e., choosing a sample of high-performing companies and explaining what their managers did, ignoring selection bias) and using independent variables based purely on respondents’ ex post subjective assessments of strategy, corporate culture, leadership, and other “soft” characteristics. The latter is the “Halo Effect” of the book’s title. When a company’s financial or operating performance is strong, managers, consultants, journalists, and management professors tend to rate strategy, culture, and leadership highly, while rating the same strategies, cultures, and leadership poorly when a company’s performance is weak. It’s as if the authors of “guru” books have never taken a first-year graduate course on empirical research design. Or, as Rosenzweig puts it (p. 128): “None of these studies is likely to win a blue ribbon at your local high school science fair.” Ouch. (more…)

8 September 2007 at 11:41 am 5 comments

John Nash on YouTube

| Nicolai Foss |

Somewhat to my surprise I found clips with John Nash on YouTube. And I don’t mean trailers for A Beautiful Mind (but here it is), but the genuine article. Here and here he is. 

8 September 2007 at 6:58 am Leave a comment

Introducing Guest Blogger David Hoopes

| Nicolai Foss |

Peter and I are very pleased to welcome David Hoopes as our newest guest blogger.  David is an Associate Professor in the Management Department at the California State University-Dominguez Hills. He received his PhD in strategy and organization from the UCLA in 1996.  He has done excellent work with former O&M guest blogger Steven Postrel (e.g., this paper), and edited (with Tammy Madsen and Gordon Walker) one of the best special issues ever of the SMJ, the 2003 one on “Why Is There a Resource-based View: Toward a Theory of Competitive Heterogeneity.” David’s research centers on capability-based sustainable advantage, management of technology and product development, and the relation between knowledge sharing and organization. He has been a frequent participant in various O&M threads and we are very pleased to add him to the line-up.

7 September 2007 at 1:49 pm Leave a comment

Thank You, Steve

| Nicolai Foss |

Steve Postrel has served for more than half a year as O&M guest blogger, our longest-serving GB so far. Peter and I have been extremely happy for Steve’s long tenure here, for he has contributed some of the most profound posts on O&M. Not surprisingly, these posts have also been among the most popular O&M posts. Peter and I coined the internal notion of the “Postrel Effect” to refer to the surge of O&M views that has always followed a Postrel post. Luckily, Steve has promised to frequently visit O&M and comment, so perhaps this way we may still benefit from the Postrel Effect. Thanks, Steve, for your excellent work here!! 

7 September 2007 at 11:06 am Leave a comment

Dissing the Corporation

| Peter Klein |

Several papers in economic history, law, and political economy argue that the corporate form owes its emergence and persistence not to superior performance, but to legal privilege. This two-part series by Piet-Hein van Eeghen in the Journal of Libertarian Studies (1, 2) makes such a case, as do many essays by regular O&M commentator Kevin Carson. I tend to be somewhat skeptical of this literature, finding it insufficiently comparative institutional and not always consistent with the historical record as I understand it.

A new paper by Naomi Lamoreaux, whose work I very much admire, may force me to rethink my views, however. In “Putting the Corporation in its Place” (NBER Working Paper No. 13109) Lamoreaux and her coauthors Timothy Guinnane, Ron Harris, and Jean-Laurent Rosenthal argue that entrepreneurs in common-law countries tended to choose the corporate form over the next-best alternative, the partnership, only because a still more desirable alternative, the private limited liability company, was not available. (more…)

6 September 2007 at 10:50 am 6 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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