Archive for November, 2007

The Perils of Microcelebrity

| Peter Klein |

I was pleased to learn that I might be a microcelebrity: someone “extremely well known not to millions but to a small group — a thousand people, or maybe only a few dozen.” This definition comes from Clive Thompson, who suggests in the current issue of Wired that anyone with a blog, a Facebook page, a Flickr account, or a similar web presence can be a microcelebrity in this sense. “Odds are there are complete strangers who know about you — and maybe even talk about you.”

Okay, in my case perhaps “nanocelebrity” is the better term. The broader point, according to Thompson, is that in today’s highly transparent, densely networked, web 2.0 world in which more and more of our personal information ends up preserved for posterity in the Google cache, people may be reluctant to say or do anything that could be controversial.

Blog pioneer Dave Winer has found his idle industry-conference chitchat so frequently live-blogged that he now feels “like a presidential candidate” and worries about making off-the-cuff remarks. Some pundits fret that microcelebrity will soon force everyone to write blog posts and even talk in the bland, focus-grouped cadences of Hillary Clinton (minus the cackle).

As a university professor I worry about this from time to time. Will some off-hand remark made in class end up on a student’s blog? Some students record my lectures on their mp3 players (usually, though not always, with prior permission). Will audio clips — or, heaven forbid, video clips — of me fumbling and stumbling over some difficult concept end up on YouTube?

30 November 2007 at 12:23 am Leave a comment

Was Whole Foods Choking On Their -5% Net?

| David Hoopes |

I’ve used a couple of Ben and Jerry’s cases over the years. One of the interesting things about B&J is that they seem to suffocate under their desire to “do good.” In general, it seems they would have been able to donate a good deal more to charity if they had run their business to be a good business. Then, Ben and Jerry could have taken their salaries or capital gains or dividends and given them to their favorite charities.

Whole Foods, like B&J had a concentrated ownership for quite a while. I don’t know what it’s like now. For a long time John Mackey and his Dad owned 51%. John did not take a large salary. So, giving away Whole Foods’ profits was like he was spending his own money anyway. And, anyone involved with WFM after John got rid of his co-founders knew WFM was John’s thing.

The point with WFM is that it’s an unusual example of corporate charity in part because of concentrated ownership, the marketing benefits of donating money, and the political inclinations of many if not most of its employees (far more left-wing than J. Mackey). Unlike B&J, WFM did not suffocate itself by not paying professional executives. Also, Mackey never felt guilty about turning a profit and is a tried and true capitalist (guilt free).

I worked for Whole Foods when they only had two stores in Austin (oh so long ago). I’m afraid John considered me a pest (I suppose I was).

Did they ever buy Wild Oats? That’s another story.

29 November 2007 at 1:48 pm 2 comments

Pomo Periscope XVI: An Unusually Honest Journal

| Nicolai Foss |

It might be that the most popular category of posts on O&M has the same name as this journal — but, seriously, would you read a journal that is this explicit about its aims, content, readership, etc.? Then again, if you do you might be exposed to nifty little nuggets like this delicately titled piece. Or, you might be able to join a conference where

Researchers, activists and media-artists meet on the Trans-Siberian train from Moscow to Beijing September 11th-20th 2005.

The conference “Capturing the Moving Minds” gathers a pack of people … artists, economists, researchers, philosophers, activists … who are interested in the new logic of the economy, the new form of war against terrorism and in the new cooperative modes of creation and resistance, together in a space moving in time. Spatially moving bodies and bodies moving in time (through the different time zones) creates an event, a meeting that not really ‘is’ but ‘is going on’.

The nonsense continues in the same vein; read the rest yourself. One thing is certain: This will not be the last time that the Periscope zooms in on Ephemera!

29 November 2007 at 8:26 am 4 comments

Bounded Rationality and Economic Organization

| Nicolai Foss |

While many economists and management scholars agree that bounded rationality is important to the understanding of economic organization and there is no shortage of calls for integrating it more with existing theory (e.g., here), how exactly this should be done has been unclear. A problem is that there are so many different conceptions of bounded rationality. Thus, should Ariel Rubinstein´s approach be foundational in attempts to integrate BR with organizational economics? Or the behavioral tradition that stems from Tversky and Kahneman’s research? Or something else?

Moreover, it seems to be notoriously more difficult to work with cognitive assumptions derived from bounded rationality ideas than to doctor utility functions, which may explain why we currently see more research on how alternative specifications of agent motivation (rather than agent cognition) influence economic organization. It is therefore not surprising that to the extent that bounded rationality appears in the organizational economics literature, it is either as a label for “something that makes contracts incomplete” (Williamson, Hart) or as “whatever makes agents commit errors of evaluation” (Sah and Stiglitz) or “whatever makes agents’ information processing speed less than infinite” (team theory). Anything seems to go when it comes to modelling BR, and one is often left wondering what exactly BR is. (more…)

29 November 2007 at 5:32 am 1 comment

Shane Seminar in Entrepreneurship

| Peter Klein |

Scott Shane’s PhD seminar in entrepreneurship takes place twice this summer, 23-27 June and 4-8 August 2008. Two of my PhD students have gone in recent years and each came back with a glowing report. (I wouldn’t mind seeing some of these papers on the reading list, but hey, nobody’s perfect!)

29 November 2007 at 12:35 am 3 comments

Fundamental Questions About Organizations

| Peter Klein |

Our most popular tag here at O&M seems to be ephemera, but occasionally we write a “big think” post (e.g., this one). Today I’ll offer another. A colleague recently asked me to write down, for a research project we’re sketching out, some “fundamental questions about organizations.” He wanted my off-the-cuff response, not a carefully crafted set of ideas. Here’s what I came up with:

1. Does organizational form matter? How much does it really affect performance, however measured? Organizational form might not be that important because (a) its effects on performance are small relative to the performance effects of technical or allocative efficiency; (b) organizational form is easily changed and always chosen optimally to fit the circumstances; or (c) organizational form is merely a legal distinction without any economic significance. (more…)

28 November 2007 at 3:25 pm 9 comments

Integrity and the Academy: Are Academicians in a Position to Preach About Social Responsibility?

| David Hoopes |

Do college faculty — generally untrained in ethics (except for philosophy professors, etc.) — have any business teaching social responsibility and ethics? This question comes from my most recent post.

I interviewed for a job at the Army War College a few years back. I was fortunate enough to hear a high-ranking general speak to the students (mostly lt. colonels). One of things he said is that he stayed in the armed services because of the high integrity of its members. I know in some corners this will be scoffed at. However, I think there is no small amount of truth to this.

I thought, “Cannot say that about academia.” Why so cynical? There are many things one could complain about. There are more passive-aggressive people in the academy than most other place. Academics seem especially prone to speaking with a forked tongue.

The clearest example I can think of is the tenure process. Certainly the tenure process can bring the worst out in people. Beyond that, it is amazing how sexually biased the tenure process seems to be. It is especially amazing to see how entrenched the “old boy” network is among men who fancy themselves liberal or progressive.

I have no proof that the tenure process is sexually biased. Nevertheless, in management it certainly seems easy to think of women getting left out of the loop. Thus, fewer social interactions, fewer coauthored papers, less mentoring. Now part of this may have to do with where I have worked: schools that have had multiple discrimination and harassment charges brought against them.

Yet, I don’t think this is limited to management departments. It’s pretty strange that an institution that fancies itself as being so progressive is so backwards when it comes to mentoring and networking women through the old (or young) boys clubs.

Here is a link that offers some evidence. I found the stuff at the bottom of the page most useful.

27 November 2007 at 5:41 pm 10 comments

Teaching Social Responsibility

| David Hoopes |

I am on the planning committee and the goals committee here at Cal State Dominguez Hills. At a recent meeting it came up that one of the schools goals was academic excellence and social responsibility. I suggested that they are two very different topics but was roundly rebuked. I have a few problems with considering social responsibility to be part of the same goal as academic excellence for college professors.

My first complaint is that “social responsibility” is not very easy to define or operationalize. Usually, it seems to imply donating money to some left wing cause. I might be able to find some left wing causes I like. However, I’m not sure how teaching students to tithe is similar to teaching students a course of study or an academic discipline.

My second complaint is that I don’t think academicians are qualified to teach social responsibility. I admit to being jaded and cynical. But I do not find academicians to be shining examples of virtue. Getting a Ph.D. in management, economics, or sociology hardly qualifies one to determine what students should consider to be socially virtuous.

I do think colleges (especially state funded) have some obligation to promote citizenship and promote and encourage ethical and moral behavior. Additionally, I am very happy to have those who specialize in ethics and related topics to teach them (the philosophy department?).

However, again, I don’t see this as our primary mandate. I might feel better about this if I felt that academics were paragons of ethical and moral behavior. On the contrary, I am continually disappointed in the standards to which academicians hold themselves. Having worked a variety of odd and not so odd jobs before heading to the academy I feel pretty comfortable saying that academicians certainly do not appear to have superior ethical and moral behavior.

What, you might ask, makes me think of academics as being ethically or morally lacking? Well that’s for another post.

26 November 2007 at 11:52 pm 4 comments

Pure Inflation and Nominal Interest Rates

| Steve Phelan |

Can someone with a solid macro background tell me if this paper supports Austrian monetary theory (or not)?

Relative Goods’ Prices and Pure Inflation, by Ricardo Reis and Mark W. Watson, NBER WP 13615, November 2007 [open link]:

Abstract: This paper uses a dynamic factor model for the quarterly changes in consumption goods’ prices to separate them into three components: idiosyncratic relative-price changes, aggregate relative-price changes, and changes in the unit of account. The model identifies a measure of “pure” inflation: the common component in goods’ inflation rates that has an equiproportional effect on all prices and is uncorrelated with relative price changes at all dates. The estimates of pure inflation and of the aggregate relative-price components allow us to re-examine three classic macro-correlations. First, we find that pure inflation accounts for 15-20% of the variability in overall inflation, so that most changes in inflation are associated with changes in goods’ relative prices. Second, we find that the Phillips correlation between inflation and measures of real activity essentially disappears once we control for goods’ relative-price changes. Third, we find that, at business-cycle frequencies, the correlation between inflation and money is close to zero, while the correlation with nominal interest rates is around 0.5, confirming previous findings on the link between monetary policy and inflation.

(HT: Mark Thoma at Economist’s View)

26 November 2007 at 11:34 pm 1 comment

The Power of Incentives, Monday Morning Edition

| Peter Klein |

1. The Vatican is trying incentive pay. (Prediction from Bob, Jeff, and company: performance will fall as worldly, extrinsic motivation pushes out warm, ethereal “feelings for the entity.”) (Via Luke Froeb)

2. My friend Tim Terrell reports on this new program at Wofford College:

My college recently instituted a free bicycle sharing program on campus. There was a lot of self-satisfied puffery from those responsible for the program, with even a “Blessing of the Bikes” ceremony carried out by our chaplain.

Informal polls I conducted in my classrooms indicated that the bikes are being tossed in the shrubbery, left unlocked, used as makeshift shot-puts on Fraternity Row, etc. etc. I passed one left lying on the grass, unlocked of course, on my short walk in to my office this morning. One student says he saw a vagrant in the neighborhood riding around on one. After a little over a week, another student remarked that most of the bikes were in the maintenance shop for repairs. We are now subject to a barrage of flyers, e-mail announcements, etc. pleading with students to treat the bikes well and lock them up (there is a single code to all the combination locks — want to guess how long it took people from the neighboring campus to figure out  the code?).

Bob and Jeff, what happened? Surely all these opportunistic, ethically challenged students can’t be economics majors.

26 November 2007 at 10:48 am 4 comments

Capabilities and Comparative Advantage

| Steve Phelan | 

Brad DeLong recently posted an interesting set of questions on his blog about corporate nationality: (more…)

26 November 2007 at 12:40 am 1 comment

JMS Special Issue on the Entrepreneurial Theory of the Firm

| Peter Klein |

In the Spring of 2005 I attended a terrific workshop on “The Entrepreneurial Theory of the Firm,” organized by Sharon Alvarez and Jay Barney and held at Ohio State University. Participants included Mark Casson, Dick Langlois, Sid Winter, Ulrich Witt, Ivo Zander, Simon Parker, Todd Zenger, Steve Michael, Bill Schultze, and several others. The papers and discussions explored a variety of approaches for linking the theory of entrepreneurship to the economic and strategic theory of the firm, a subject near and dear to our hearts here at O&M.

The workshop papers have now been published as a special issue of the Journal of Management Studies (volume 44, number 7, November 2007), edited by Sharon and Jay. A special contribution from Brian Loasby, who wasn’t able to attend the workshop, is included. And don’t miss this paper from an unusually structured joint-spousal team.

25 November 2007 at 10:12 pm Leave a comment

Gobble, Gobble

| Peter Klein |

Happy Thanksgiving to our American readers, who gather around the table today to celebrate with family and friends and give thanks for that great legacy bequeathed to us by our Pilgrim forebears — property rights, of course!

22 November 2007 at 11:48 am 1 comment

Seven Wonders of the Totalitarian World

| Peter Klein |

north-korea-monument.jpgOn a recent trip to Paris my wife suddenly remarked, in horror, “Do you realize that all the famous Parisian landmarks are government buildings?” It’s true, there’s not a private-sector creation among them, unless you count churches or the Tour Montparnasse (which I think was built with private funds). Come on kids, let’s see the next monument to government waste!

On a related note, if you like black humor, check out this Esquire piece on the Seven Wonders of the Totalitarian World. It’s fascinating, in a creepy sort of way. (Only structures built by second- and third-world despots are included, which rules out the grotesque US Embassy in Baghdad.) (HT: Steve Sailer)

21 November 2007 at 12:24 am 13 comments

Deconstructing Bob and Jeff

| David Hoopes |

For better or worse the hard-hearted authors at O&M have hurt the feelings of our colleagues in other fields. In the spirit of being more specific about why the bloggers here are so harsh I’d like to take a look at an award-winning paper from the Academy of Management Review (Ferraro, F., Pfeffer, J., and Sutton, R.I., “Economics Language and Assumptions: How Theory Can Become Self-Fulfilling”). In this paper we are told how the language of economics (the assumptions that people are selfish cheats) encourages people to be selfish cheats. Aside: in my opinion sociologists have a much darker image of humankind than economists (if we must make careless generalizations).

As I note in an earlier post, the idea of self-interest is often grossly misrepresented. Perhaps economists can thank themselves for this. I don’t know. However, it is important to examine this component of price theory by looking at its roots. In developing public policy toward government intervention in the allocation of goods (mercantilists vs. free traders in Smith’s day) allowing people to make their own decisions is more efficient than having a handful of people making the decisions for everyone. And even if individuals focus on their own needs the result for society is better than having a few people guessing at what everyone else wants and imposing their guesses.

The starting point of the AMR critique is the ever-present complaint about the economics world telling us all that we need to be selfish and greedy (make decisions based on our own self-interest). From here, our friends in the org. theory camp state, “If people are relentless in the pursuit of their own self-interest and equally relentless in the their lack of concern for others’ interests. . . .” What? Where did that second part come in? A very important bridge theory has been added. If people pursue their own self-interest then they also cannot care about anyone else. Management scholars wonder why their (our) work is not used in public policy debates. Small wonder. (more…)

20 November 2007 at 7:33 pm 7 comments

Organizational Learning: Observations from the Shadow of the Fires

| David Hoopes |

A few Mondays [more than a few now] ago the T.V. got turned on pretty early and we found a host of officials discussing a couple of very large fast-moving fires. Someone in charge of emergencies spoke. The sheriff spoke, the fire chief, and more. Winds were blowing above 40 miles per hour and fires were spreading . . . like wildfire! My wife and I started gathering important papers (my ES-137) and other things in case we needed to make a run for it.

We did have to evacuate. However, our house was fine except for some minor wind damage.

What amazed many in the San Diego area was how well local media, emergency institutions, the private sector, and the public coordinated. The news media were very helpful (wow!), fire fighters, sheriff’s office, and other such crews were clear about how people could help them (get out of the way), and local grocery stores delivered lots of food and other supplies to shelters.

It seems there was quite a bit of learning from the many problems that occurred in a previous fire (2003).

20 November 2007 at 7:25 pm Leave a comment

Things That Make You Go Hmmm . . . .

| Steve Phelan |

I had an interesting encounter with two economists in my college last week. The first was during a presentation I was giving to the MBA Association on buying opportunities in Las Vegas following the subprime debacle. I assured the audience that buying opportunities existed but you needed to to be very knowledgeable about the area of town in which you intended to buy. The professor of economics who preceded me in the presentation immediately retorted, “if so many opportunities exist then why isn’t everybody buying?” (more…)

20 November 2007 at 5:51 pm Leave a comment


| Steve Phelan |

I have used a lot of simulation studies in past papers and I currently sit on the editorial board of the Journal of Computational and Mathematical Organization Theory (CMOT). However, I was surprised to stumble upon an emerging field in economics called “metanomics.” (more…)

20 November 2007 at 5:42 pm 1 comment

Mizzou-KU in the WSJ

| Peter Klein |

p1-aj645_border_20071119202142.gifWe don’t normally discuss trivia such as college football here at O&M (we prefer other trivia). But when your team’s big game makes the front page of the WSJ, you have to say something.

A story in today’s paper, “New Powers in College Football Carry Old Baggage,” focuses on this weekend’s showdown between the undefeated 2nd-ranked Kansas Jayhawks and the 4th-ranked Missouri Tigers, two normally-mediocre teams that have exploded onto the national stage this season. The subject is not the game itself, but the historical hatred between Missourians and Kansans that goes back to the Civil War (or, as we call it around here, the War or Northern Aggression).

This hatred dates back to the 1850s, when the Great Plains state of Kansas became a beachhead for men around the country committed to ending slavery. Many, however, hid behind that noble cause, all the while killing, pillaging and raping their way across the culturally Southern state to the east, Missouri. These Kansas guerrillas called themselves Jayhawkers — supposedly a combination of two birds, the jay and the hawk. (more…)

20 November 2007 at 3:03 pm 1 comment

Agency Theory and Intrinsic Motivation

| Nicolai Foss |

Agency theory represents one of the most influential and controversial bodies of microeconomics. To some, it is an extraordinarily powerful theory that can be applied in all sorts of ways and provides the theoretical foundation for the understanding of reward systems, many contractual provisions, the use of accounting methods, corporate governance, etc. To others (e.g., Bob, Jeff, and Alfie), it is the brainchild of overly cynical economists, responsible for most evil in the World, including bad managerial practices and Enron. (more…)

20 November 2007 at 8:00 am 13 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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