Archive for 2007
Congratulations to Drs. Chambers, Chapman, and Xue
| Peter Klein |
Three PhD students whose dissertation committees I chaired or co-chaired completed their work this semester. Molly Chambers (University of Missouri) studied the emergence of “new generation” cooperatives in Renville County, Minnesota and developed a conceptual model of team or “collective” entrepreneurship. The new generation cooperative is a patron-owned firm characterized by closed membership, appreciable and partially transferable equity shares, binding delivery obligations, and an emphasis on value creation, rather than the protection of existing rents — a model designed to mitigate the problems of vaguely defined property rights that characterize traditionally organized cooperative. Molly used a survey and structured interviews to compare the effects of transaction costs, ownership costs, and spawning conditions on the development of the Renville cluster during the 1990s. (more…)
This Bud’s For You
| Peter Klein |
Most of my academic colleagues are anti-American food snobs. Why, those poor Yanks, they think Parmesan cheese is the white, powdery stuff in plastic cylinders rather than the expensive, thick wedge with its maker’s mark on the skin. (Note the section “Other cheeses erroneously named Parmesan” in the Wikipedia entry on Parmigiano Reggiano.) Americans even think Budweiser comes from St. Louis, not České Budějovice!
Well, I myself am a bit of an anti-American food snob but I do insist on getting the facts right. In Bud’s case, as pointed out in this brilliant piece by Daniel Davies, the original, and better, Budweiser is Adolphus Busch’s American brew, not the Czech Budvar pretender. Davies explains:
- Anheuser-Busch has been selling Budweiser since 1876, 20 years before the Budvar brewery was even built. Its brew is the original Bud.
- Bud is all natural, failing to comply with German “purity” standards only because it contains rice (as do Kiran, Bintang, and Efes).
- More generally, and most importantly, the beer we know and love today — even the fanciest, premium beer — is a product of capitalism, not some romanticized, pre-industrial “craft brewing” era. Beer brewed before the Industrial Revolution was probably horrible and until recently couldn’t be produced in small batches with any acceptable level of quality. Three cheers for the Factory System!
Design for the Bottom of the Pyramid
| Peter Klein |
C. K. Prahalad’s “Bottom-of-the-Pyramid” approach to development gets mixed reviews. This firm takes it seriously: Paul Polak’s International Development Enterprises, which develops and markets low-cost, low-tech tools and implements for farmers in the developing world. Here is the web version of a Smithsonian exhibition, “Design for the Other 90%,” highlighting such products and services. “The majority of the world’s designers focus all their efforts on developing products and services exclusively for the richest 10% of the world’s customers,” says Polak. “Nothing less than a revolution in design is needed to reach the other 90%.”
Some designs, like the Q Drum, are breathtakingly simple, while others, like the Aquastar Plus! and Portable Light Project, are more sophisticated. The One Laptop Per Child project is also featured.
Hat tip to Fast Company, which provides additional information.
Colin Camerer on Strategic Management
| Nicolai Foss |
Strategic management researchers are, as a rule, practically oriented folks who typically do not have much patience with lofty debates in the theory of science. Say the word “ontology” and you will have eyes rolling in the audience (yes, I have tried it!).
I am currently working on a chapter on methodological/philosophy-of-science discussions in strategic management for Giovanni Battista Dagnino’s forthcoming Handbook of Research on Competitive Strategy and, given the above characterization, I have actually been surprised by the number of published papers on meta-theoretical issues in strategic management. (more…)
Private Provision of Public Goods, Mario Puzo Edition
| Peter Klein |
Nicolai tells me The Sopranos is the most popular show among Danish libertarians. I bet they like the Godfather trilogy as well. What libertarian can resist this classic exchange between Michael Corleone and Kay Adams in the first film:
Michael: My father is no different than any powerful man, any man with power, like a president or senator.
Kay: Do you know how naive you sound, Michael? Presidents and senators don’t have men killed.
Michael: Oh. Who’s being naive, Kay?
The films are terrific, but the original novel by Mario Puzo is even better. (The newer books by Mark Winegardner aren’t bad either.) One of Puzo’s themes, which isn’t emphasized so much in the movies (aside from the opening scene in the first film), is how the Mafia functioned as a kind of private government, providing protection for people, primarily poor immigrants, who were refused protection from the inefficient and corrupt formal legal authorities. (more…)
The Legacy of Max Weber
| Peter Klein |
Ludwig Lachmann’s influential Legacy of Max Weber (1971) is now available free online, courtesy of the Mises Institute’s e-book collection.
Weakly Informative Priors
| Peter Klein |
I clearly remember an incident from my first week of graduate school. I asked Professor X if he thought I should take Professor Y’s econometrics course. “Well, Y is a good teacher,” X replied. “Of course,” he added quietly, with a conspiratorial glance, “you know he’s a Bayesian, right?”
“A Bayesian? My goodness, I had no idea!” I exclaimed, not having the faintest idea what a Bayesian was. Professor X said it the way he might have said “wife-beater,” so I was sure I wanted nothing to do with such a character. Later, after studying Bayesian inference, Bayes’s Theorem, the Bayesian approach to games of incomplete information, and the like, I came to regard Bayesians as a bit less dangerous, something like the eccentric uncle at a family reunion that everyone tolerates but tries to avoid. (more…)
Is there a Reputational Hierarchy in Management?
| Nicolai Foss |
We don’t often praise sociologists on O&M, but one of the more illuminating and interesting sociologists is Brit Richard Whitley, Professor at the University of Manchester Business School. Reference is here not so much to his recent, mainly descriptive, work on “business systems” (e.g., this one; for an early critique, see this) as to his more-than-two-decades-old work on the sociology of the sciences. (more…)
The Diffusion of IT in the Workplace
| Peter Klein |
Much research on information technology focuses on the IT sector itself (software, computer hardware, telecom, biotech). Less attention has been paid to the effects of IT on the rest of the economy, particularly “old economy” manufacturing and service industries. (Erik Brynjolfsson’s work constitutes perhaps the most prominent exception.) And yet we know that IT has had a significant impact on a range of industries including steel, machine tools, trucking, and banking.
One of the first book-length, single-industry, long-range studies of the effects of IT on workplace practices is JoAnne Yates’s 2005 book Structuring the Information Age, an analysis of the life-insurance industry over the last hundred years. As noted by Thomas Haigh, reviewing the book for EH.Net, life insurance is a conservative, heavily regulated industry concerned primarily with stability, not growth. But because its main activity is processing paperwork, improvements in record-keeping and information processing have always been critical to the industry’s performance. Life-insurance firms have been not only early adopters, but also creators and developers of IT. During the 1920s and 1930s they were the first to add printing capabilities to the tabulating machines that had been around since the 1890s and to develop the ability to process letters as well as numbers. From the 1940s to the 1970s they were among the earliest adopters of digital computing.
Writes Haigh: “I hope Yates succeeds in her stated aim of convincing historians that businesses can be creative users of technologies. We would all benefit if it can also serve what must have been an implicit aim: to remind business school faculty that history explains a great deal about how technology does and doesn’t work when applied within an industry.”
TV Dinners . . . and Non-TV Dinners
| Chihmao Hsieh |
Remember the times when families would get together at the dinner table for a meal and little Johnny would yell out, “Can we turn on the TV during dinner?” Ah yes, those were the good ol’ days.
How 1990s.
Nowadays, as highlighted in this AP article released today, television is not only losing its grip on families but also on individuals. (more…)
Bob Higgs on Peer Review
| Peter Klein |
Robert Higgs, an economic historian with a distinguished record of publication in mainstream journals, puts peer review in perspective:
Peer review, on which lay people place great weight, varies from important, where the editors and the referees are competent and responsible, to a complete farce, where they are not. As a rule, not surprisingly, the process operates somewhere in the middle, being more than a joke but less than the nearly flawless system of Olympian scrutiny that outsiders imagine it to be. Any journal editor who desires, for whatever reason, to knock down a submission can easily do so by choosing referees he knows full well will knock it down; likewise, he can easily obtain favorable referee reports. As I have always counseled young people whose work was rejected, seemingly on improper or insufficient grounds, the system is a crap shoot. Personal vendettas, ideological conflicts, professional jealousies, methodological disagreements, sheer self-promotion and a great deal of plain incompetence and irresponsibility are no strangers to the scientific world; indeed, that world is rife with these all-too-human attributes. In no event can peer review ensure that research is correct in its procedures or its conclusions. The history of every science is a chronicle of one mistake after another. In some sciences these mistakes are largely weeded out in the course of time; in others they persist for extended periods; and in some sciences, such as economics, actual scientific retrogression may continue for generations under the misguided belief that it is really progress.
This is from a piece on the role of peer review and scientific consensus in the global-warming debate. Notes Higgs: “Science is an odd undertaking: everybody strives to make the next breakthrough, yet when someone does, he is often greeted as if he were carrying the ebola virus. Too many people have too much invested in the reigning ideas; for those people an acknowledgment of their own idea’s bankruptcy is tantamount to an admission that they have wasted their lives.”
Of course, admitting these problems does not by itself suggest an alternative. As discussed here, the challenge is to design an institution that minimizes both Type I error and Type II error, taking into account the costs of each (presumably the costs of the former — missing an important breakthrough — are higher than the costs of the latter, which are largely wasted trees, electrons, and time, though the lower overall signal-to-noise ratio increases the chance that a published breakthrough will be overlooked).
Hayek-Klein Day
| Peter Klein |
It’s Hayek-Klein Day. How are you planning to celebrate? (One suggestion: browse old O&M posts on Hayek.)
The Hotelling Effect, Wi-Fi Edition
| Peter Klein |
A cafe without free wi-fi is as rare these days as, well, your neighborhood Starbucks. Indeed, in my town virtually every coffee shop where students, professors, and townspeople hang out provides free wireless to its patrons. The only exception is Starbucks, which offers pricey metered service through T-Mobile.
Strategic response by an upstart wireless provider? Give routers and access points to homes and businesses next to a Starbucks. This is the strategy employed by FON, an Argentine startup backed by Skype, Google, and other heavies.
The routers, which usually cost $40, split an Internet broadband connection into two wireless signals — one for personal Internet use and the second for public use, which can be accessed by anyone within range for $2 per day. The routers’ owners get to pocket half of the sign-on fee, and FON takes home the rest.
Read about it here. Thank goodness for Hotelling effects!
HBR Freebies
| Peter Klein |
Harvard Business Review’s “Forethought” essays are now free, one month at a time, to non-subscribers. Here’s one on open-source R&D by Nicolai’s CBS colleague Lars Bo Jeppesen.
Wittgenstein and the PoP System
| Nicolai Foss |
At the end of my stay in Columbia, MO where I was working with co-blogger Peter on our forthcoming book, “Organizing for Entrepreneurship: Opportunity Discovery and the Theory of the Firm” (Cambridge University Press), I borrowed Edmonds and Eidonow’s Wittgenstein’s Poker from him so as to have something to entertain me on the long flight back to Denmark. The book is a fun and light read, in fact, so light that I also had time to peruse another book borrowed from Peter (this one).
The book is an attempt to reconstruct the famous poker episode in 1946 where Wittgenstein allegedly threathened Popper with a poker during an Oxford University philosophy seminar, and a discussion of the inevitability of a clash between these two philosophers, given their extremely different philosophy, background, etc. At one point the authors observe that Wittgenstein would never have made it under the current tenure system; apart from the Tractatus, he apparently only published one minor paper. Still, he was promoted to Full Professor of Philosophy almost twenty years after the publication of this slim volume, and remained a Full Professor for almost a decade more. However, the philosopher who according to this (somewhat bizarre) poll was the third greatest philosopher ever wouldn’t have academically survived the present publish or perish system. (more…)
Taxis and Limos
| Peter Klein |
Murray Rothbard told a story about his first encounter with the terms taxis and cosmos, used by Hayek to distinguish “planned” from “spontaneous” orders. Upon seeing a lecture announcement Rothbard’s wife Joey exclaimed, “Look, Hayek’s giving a lecture on taxis!” As life-long New Yorkers they naturally assumed Hayek meant the yellow ones with lights on the roof.
Even Rawley, a PhD Candidate in strategy at Berkeley, is doing interesting work on taxis (the yellow ones). I recently read his paper “Diversification and Adaptation: How Organization Drives Taxi Firm Performance,” which exploits a change in taxicab regulation to perform a natural experiment on the effects of related diversification on firm performance. Until the mid-1990s US taxi firms were prohibited from entering the market for limousines (the airport kind, not the stretch kind). As those restrictions were relaxed, taxi firms began to diversify into the limo market. Rawley uses Census data to show that diversifying taxi firms were less efficient and less likely to adopt computerized dispatching systems than non-diversifiers, which he interprets as a story of costly organizational adaptation. (more…)
Nerd Practical Jokes
| Peter Klein |
We nerds appreciate practical jokes. OK, mine are not quite at the level of an MIT hack. Unlike the gearheads, however, we economists appreciate opportunity cost and strive for the best results with the least effort. For example, from a pharmacist friend I obtained some “Caution: May Cause Drowsiness” stickers which I bring to seminars and discreetly affix to hard copies of papers that are being distributed — always good for a chuckle.
How about you? What are your favorite nerd practical jokes?
More on Legal Origin
| Peter Klein |
Back to the debate over the role of legal origin in economic performance (see here and here). Stefan Voigt proposes an interesting natural experiment: In many international transactions parties can choose the contract-law regime governing their relationship by designating a particular national legal system in a mandatory arbitration clause. As expected, English common law is most frequently chosen. Surprisingly, however, Swiss (German civil law) and French civil law are chosen almost as much. Unfortunately the data do not permit an econometric analysis of legal-regime choice that controls for other possible influences. Still, the fact that civil-law codes are chosen so often raises questions about the view of LLSV (not to mention Hayek, Leoni, and many others) that common law is fundamentally superior to civil law.
Econometricians versus Applied Statisticians
| Peter Klein |
Econometricians, the joke goes, are people good with numbers but lacking the personality to be engineers. How about applied statisticians? James Greiner offers this comparison:
[W]hat is the difference between an empirical, data-centered economist and an applied statistician? The stereotypes I’ve internalized from hanging out in an East Coast statistics department are that economists tend to focus more on parameter estimation, asymptotics, unbiasedness, and paper-and-pencil solutions to problems (which can then be implemented via canned software like STATA), whereas applied statisticians are leaning more towards imputation and predictive inference, Bayesian thinking, and computational solutions to problems (which require programming in packages such as R).
I imagine the former characterization would apply, a fortiori, to quantitative researchers in strategic management, marketing, accounting, and the like.
Podcast Interview with Nassim Taleb
| Peter Klein |
Mathematician, investor, and polymath Nassim Taleb’s books Fooled by Randomness and The Black Swan are attracting increasing attention among social scientists. (See previous O&M blog entries here and here.) Indeed, during the opportunity discovery workshop described by Nicolai Rich Makadok plugged The Black Swan so many times I figured he and Taleb must have a kickback arrangement. Anyway, here is an interview with Taleb by Russ Roberts on the EconTalk site for those of you into the podcast thing.
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