Archive for September, 2007
More on Eship and Transaction Costs
| Nicolai Foss |
As indicated here, I believe that transaction costs are key antecedents to opportunity discovery, that is, the exercise of entrepreneurship. The costs of establishing property rights to new discoveries, and the costs of combining and recombining resources, all transaction costs, influence which discoveries will be made. Here (or here) is an entirely different way of relating transaction costs and entrepreneurship, namely Steven Michael’s “Transaction Cost Entrepreneurship” which focus on transacting problems in the entrepreneur/consumer (user) interface. A fine piece that is highly recommended. Here is the abstract:
When offering a novel product, the entrepreneur desires the customer to choose to “buy” (from the entrepreneur) rather than to “make.” Transaction cost economics provides guidance to firms considering a make-versus-buy decision. In this paper we extend transaction cost economics to examine the novel transactions proposed by the entrepreneur. Application of the theory identifies three crucial considerations for the transaction: the cost of quality measurement, the risk of overconfidence by the entrepreneur (here termed identity risk), and the required cost of necessary transaction specific assets. By extending transaction cost analysis to cover novel transactions across customers, entrepreneurship can be analyzed using established theories and measures to generate novel propositions.
JC Spender Wonders …
| Nicolai Foss |
He mails this: “Why did Ted Schultz, a Nobel winner, in his 1961 Presidential Address to the American Economic Association, “Investment in Human Capital,” not reference any of Solow’s work — for which, after all he too was awarded the Nobel?” A very good question!
New Mises Biography
| Peter Klein |
Congratulations to Guido Hülsmann for the release of his 1,200-page biography of Ludwig von Mises, titled Mises: The Last Knight of Liberalism. Buy a copy here or read the whole thing online here. I’ve just started and the early chapters are terrific, placing Mises’s scientific ideas in their turn-of-the-century Viennese context and emphasizing the Jewish roots of Mises’s liberal Weltanschauung. I can’t wait to read the rest.
“What Does Austrian Economics Predict?”
| Nicolai Foss |
At the professional development workshop on “The Austrian School of Economics: Applications to Organization, Strategy and Entrepreneurship,” arranged by my co-blogger for this year’s Academy of Management Meetings, the first question raised from the audience after the presentations was the one in the heading to this post. (Fabio at orgtheory.net has also made related, ehhh, provocations, which we will deal with later here at O&M).
It wasn’t entirely clear what the person who asked the question meant, the acoustics in the room were terrible (he had to repeat the question twice), and I am sure that complex issues like the symmetry thesis were popping up in the minds of my co-panelists, so there was some hesitation in the panel to address the question. (Afterwards I learned that unfortunately this was taken by some audience members as an implicit admission that AE isn’t predictive).
The question was unclear because it could mean any of this: (more…)
Economic Darwinism During Recessions
| Peter Klein |
Some version of the survivor principle, or “economic Darwinism,” underlies much economics and strategy research. While the term “survivor principle” was coined by Stigler (1968), the idea is usually attributed to Alchian (1950) and Friedman (1953). Alchian argued that even though theories about rational decision makers making “optimal” choices are clearly unrealistic, the predictions of such theories need not be. The quest for profit, combined with competitive selection forces, ensures that the average firm will tend to behave like those described by theories of rational behavior (Alchian, 1950). Friedman (1953: 22), defending the profit-maximization hypothesis, puts it this way:
[U]nless the behavior of businessmen in some way or other approximated behavior consistent with the maximization of returns, it seems unlikely that they would remain in business for long. Let the apparent immediate determinant of business behavior be anything at all — habitual reaction, random choice, or whatnot. Whenever this determinant happens to lead to behavior consistent with rational and informed maximization of returns, the business will prosper and acquire resources with which to expand; whenever it does not, the business will tend to lose resources and can be kept in existence only by the addition of resources from outside. The process of “natural selection” thus helps to validate the [maximization] hypothesis or, rather, given natural selection, acceptance of the hypothesis can be based largely on the judgment that it summarizes appropriately the conditions for survival.
The problem with Friedman’s strong version of the survivor principle is that we know little about how such competitive selection processes actually work. (more…)
Fun Activities for B-School Geeks
| Peter Klein |
Found these in Wired 15.09 (October 2007):
- Pecha-kucha: a sort of PowerPoint haiku in which presentations of exactly 20 slides, displayed for 20 seconds each, compete for honor and glory.
- Miss Management, a simulation game that let’s you play middle manager. “You’ll have to juggle incoming work tasks, keep everyone from getting stressed out, and help the coworkers achieve their goals, from flirting at the watercooler to getting more work done than anyone else!” Oh boy.
- And by the way, here are some social networking sites to avoid. Example: Trek Passions. “What it is: Sci-fi personals for Star Trek fans. Who you’ll meet: Men — sad, lonely men.”
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