Archive for 2007
A Nobel for Organizational Economics?
| Peter Klein |
The econo-blogosphere is atwitter in anticipation of Monday’s Nobel Prize announcement. (Yes, I know it’s the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel, not a “real” Nobel, but who cares? The money spends just the same.) Mankiw, Cowen, Boettke, and other bloggers have made their recommendations and issued their forecasts. Even the sociologists are getting into the act.
How about a prize for organizational economics? Coase, of course, whose 1937 paper is foundational to the field, has already won, as have Akerlof, Spence, Stiglitz, Mirrlees, Vickrey, Hayek, and others whose work has greatly informed the study of organizations. But, for a prize recognizing organizational economics per se, whom would you pick? Williamson, Holmström, Milgrom, Roberts, Hart, Tirole, Aghion? Perhaps Alchian, Demsetz, or Jensen. Maybe a personnel economist (Lazear) or someone in corporate finance or accounting (Bill Schwert, Stewart Myers, René Stulz, Raghuram Rajan, Cliff Smith, Milton Harris, Artur Raviv)? Suggestions?
Academics and Ideology Redux
| Peter Klein |
More on academics and left-liberal ideology. Becker and Posner weigh in with explanations based on demographic change, selection bias, and other structural characteristics of higher education. See also these comments by Ilya Somin (1, 2) and David Bernstein on the new study by Gross and Simmons. David wins the quote-of-the-day prize with this gem:
It turns out, according to the study, that 17.6 of professors in the social scientists consider themselves Marxists. Only academics doing a survey of other academics could possibly think that this is low.
Call for Papers: Entrepreneurship — Strategy and Structure
| Peter Klein |
The Journal of Economics and Management Strategy, founded and edited by Dan Spulber, seeks papers for a special issue on “Entrepreneurship: Strategy and Structure.” Thomas Hellmann and Scott Stern are editing the special issue.
While submissions from a wide range of perspectives and topics are welcome, we specifically invite theoretical and empirical papers on the following:
- The sources of value creation by entrepreneurial ventures
- Game-theoretic approaches to the organization of new firms, and the impact of entrepreneurs on market outcomes
- The determinants of entrepreneurial activity across industries and locations
- The determinants and consequences of the structure of entrepreneurial finance
- The impact of formal and informal networks (including strategic alliances) on the structure and conduct of entrepreneurial firms
- The impact of innovation policy, including intellectual property rights policy, the tax system, and the legal system, on the formation and strategic impact of new ventures
Here are the submission guidelines. Deadline is 15 November 2007.
Foss & Klein Chapter on “Organizational Governance”
| Nicolai Foss |
Peter and I often get requests that we blog something of a more introductory nature on organizational economics, the theory of the firm, etc. Until now, we haven’t really had the opportunity.
However, we just completed a draft of a chapter on “Organizational Governance” for the Handbook of Rational Choice Social Research, a major project initiated by sociology professors Rafael Wittek, Tom Snijders and Victor Nee for the Russell Sage Foundations (thus dispelling strange claims by Brayden and others that this is the anti-sociology blog). As the title suggests, the contributors, representing economics (/game theory), anthropology, and sociology are united by their commitment to the rational choice approach. The project involves such luminaries as Avner Greif, Jean Ensminger, Sigwart Lindenberg, and others. You can find the chapter under “Papers.” (more…)
What Are Hybrid Forms and How Can They Be Modeled?
| Nicolai Foss |
Many scholars have argued that hierarchies are increasingly infused by market mechanisms (e.g., here and here), and that elements of authority can increasingly be witnessed in market transactions. This has been referred to as the “swollen middle hypothesis.” A major step forward in the understanding of such hybrid governance is Williamson’s seminal 1991 paper in the ASQ, “Comparative Economic Organization: The Analysis of Discrete Structural Alternatives,” and Holmström and Milgrom’s equally important 1994 paper in the AER, “The Firm as an Incentive System.” (more…)
Terence Hutchison (1912-2007)
| Peter Klein |
Terence W. Hutchison, the iconoclastic British methodologist and historian of economic thought, died today. Hutchison’s Significance and Basic Postulates of Economic Theory (1938) was an early and influential attempt to incorporate logical positivism into economic method. Frank Knight’s excellent 1940 article, “What is ‘Truth’ in Economics?” is framed as a reply to Hutchison. Hutchison later sparred with Fritz Machlup on Mises’s methodology; Murray Rothbard sided with Hutchison. I enjoyed parts of Hutchison’s The Politics and Philosophy of Economics: Marxians, Keynesians and Austrians (1981). And who can forget his distinction between “Hayek I” and “Hayek II”?
NB: In an otherwise favorable review of my edited volume, The Fortunes of Liberalism, vol. 4 of The Collected Works of F. A. Hayek, Mark Blaug took me to task for consistently misspelling Hutchison as “Hutchinson.” Good thing I left in that error to distract reviewers from the other errors!
Kleins Behaving Badly
| Peter Klein |
Cousin Naomi is in the news again. Her new book, The Shock Doctrine: The Rise of Disaster Capitalism, is attracting a lot of attention in the econo-blogosphere, virtually all negative. The Economist offers this guide to the commentary. The only sensible person who likes the book appears to be Joe Stiglitz, taken to task here by Pete Boettke. Klein’s shocking treatment of Milton Friedman has raised hackles everywhere (see this and this). Ultimately, her thesis is unsupported by any historical evidence. When one is a “cultural critic,” however, facts and reason are not too important.
World Freedom Atlas
| Peter Klein |
Here is a terrific resource: the World Freedom Atlas, a “geovisualization tool” — i.e., cool interactive map — for world statistics. It includes the most important variables used by economists including income and purchasing power from the Penn World Table, legal origin from LLSV, economic freedom from the Fraser Institute and the Heritage Foundation, policy constraints from Witold Henisz, the World Bank’s governance indicators, and a host of other variables from Acemoglu, Johnson and Robinson; Barro and Lee; Easterly and Levine; Persson and Tabellini; and several others. All that’s missing is links to the original datasets. Still, an impressive tool. (HT: Mike Kellermann)
Me and Yu
| Peter Klein |
My review of Tony Yu’s Firms, Strategies, and Economic Change (Elgar, 2005) for the QJAE (volume 10, number 1, Spring 2007) is now online.
The Future That Never Was
| Peter Klein |
I’ve been thinking about Oskar Morgenstern, specifically his collaboration with John von Neumann (mentioned briefly here). The relationships between Morgenstern and von Neumann, and between Morgenstern and his Habilitation supervisor Ludwig von Mises, raise interesting questions about the possible “Austrian” roots of game theory. (See the discussion by this brilliant economist-blogger.)
Some of Morgenstern’s most important works — Economic Prediction (1928), “Perfect Foresight and Economic Equilibrium” (1935), and On the Accuracy of Economic Observations (1950) — deal with problems of prediction in economics. (Morgenstern holds to a middle ground between the perfect-foresight, rational expectations view of Lucas and Sargeant and the “radical uncertainty” position associated with Shackle and Lachmann.)
Prediction was on my mind when I stumbled across a reference (in yesterday’s WSJ) to the Paleo-Future Blog, a fun site dealing with past predictions about technological progress. Even just a few decades ago everyone assumed that by 2007 we’d have personal robots, flying cars, and push-button meals. (We do have personal communicators, microwave ovens, and an internet nobody foresaw.)
See also this review of Daniel Wilson’s Where’s My Jetpack?
Getting a PhD Takes Too Long
| Peter Klein |
So says the (US and Canadian) Council of Graduate Schools, studying ways to shorten the process, as reported in today’s NY Times. Some startling figures:
The average student takes 8.2 years to get a Ph.D.; in education, that figure surpasses 13 years. Fifty percent of students drop out along the way, with dissertations the major stumbling block. At commencement, the typical doctoral holder is 33, an age when peers are well along in their professions, and 12 percent of graduates are saddled with more than $50,000 in debt.
In economics, this problem has been alleviated, to some degree, by the rise of the three-essays dissertation, now the dominant model at the major research universities. In many economics departments, at least one essay is mostly finished by the end of the second year (written as a required second-year econometrics paper). Sociology, despite having become — like economics and strategy — a discipline that communicates mostly through articles, not books, seems to have stuck with the “grand treatise” model for the dissertation.
Crowdfarming
| Peter Klein |
We use crowds to predict things and even to make stuff. Why not use them to generate electricity? (Harmlessly, not like this.)
What Is a Capability and What Does It Matter?
| David Hoopes |
I am often surprised when I present or submit papers because audience members and reviewers find my construct definitions problematic. Often, people find my definitions are too narrow. Also, sometimes others don’t find the scholars whose work I would like to develop merit the attention I give them. This attention sometimes comes in the form of using their definition. Case in point: Sid Winter and capabilities. In a couple of papers I’m working on my co-authors and I have based our definition of capabilities on one Sid Winter has used in an SMJ paper and a book he edited. Tammy Madsen and I have stuck with Sid’s definition. Steve Postrel and I have taken Sid’s definition and made it more specific to our work. Some readers and listeners have had a hard time with this (and given me a hard time). Now, there’s one “school,” that generally does not like definitions or theoretical constructs to be very narrow. Thus, “can’t X, Y, or Z also be a capability?” “Well, it could be. Just not in this paper.” “Aren’t capabilities just resources?” “Sure. So and So big shot thinks so. We just think of resource and capabilities as being two different things.” Another “school” doesn’t understand why we should care about Sid’s opinion. “Shouldn’t you use Other Big Shot’s definition?” “Well, I don’t really understand her definition. Sid has been doing this capability thing for a while.” “Isn’t it the same as Selznick?” “I don’t think so. Sid doesn’t think so” (see Intro to edited volume with Dosi).
I don’t mind that people prefer other definitions. Yet, I am surprised by how agitated people get. I get agitated by definitions when 1) There aren’t any; 2) I don’t understand what the author/presenter is saying; 3) The definition includes everything and the kitchen sink (presumably because that’s the way life is, “complex”).
So, I stumble along with my narrow definitions and hope not to get yelled at too much.
Mises and Mises (and Knight and Hoppe) on Probability
| Nicolai Foss |
O&M has featured a number of posts on uncertainty as a phenomenon that, in some sense, goes beyond risk. Contributors to these kind of discussions often delight in employing notions such as “Knightian uncertainty,” “genuine, real, true . . . uncertainty,” “the unlistability problem,” “surprise functions,” etc., and they debate whether so-called Knightian uncertainty really is inconsistent with a Bayesian perspective, whether Shackle’s notion of uncertainty is in some sense deeper than Knight’s, etc.
Much of the debate is, if perhaps not a quagmire, then certainly an area where conceptual clarification and some serious formal work would seem to be much needed (with respect to the latter, see this). Conceptual clarification may occasionally involve going back to important figures in the debates and consider what they (really) said. (more…)
Budapest: The Golden Years
| Peter Klein |
My paternal grandparents were Hungarian émigrés so I tend to take an interest in all things Magyar. I was pleased to hear (from Marshall Jevons) about “Budapest: The Golden Years,” a panel discussion at this year’s Neumann Memorial Lectures at Princeton. “The panel will use their familiarity with the life, times, and person of John von Neumann to explore the circumstances of his education and upbringing, as well as those of the many other creative and productive mathematicians and scientists from that time and place.” The discussion revolves around Tibor Frank’s paper on Hungarian exiles, “The Social Construction of Hungarian Genius, 1867–1930,” exploring the background of famous twentieth-century Hungarian scientists like von Neumann, Edward Teller, and Leo Szilard, along with Karl and Michael Polanyi and many others.
Hungary has produced some decent economists too: John Harsányi and Janos Kornai come to mind. George Stigler was half Hungarian, and both of Milton Friedman’s parents were born in Carpatho-Ruthenia, then part of Hungary (now in Ukraine).
Here’s a page celebrating Hungarian Nobel Laureates. Here are some von Neumann jokes. Here is Oskar Morgenstern’s account of his collaboration with von Neumann (but see this third-party account which gives Morgenstern a smaller role).
Spam Filtering and Academic Research
| Peter Klein |
You may or may not like the discussion of sexual identity spawned by Nicolai’s post, but our spam filter definitely does not like it. Quite a few of the comments on that thread have been recovered from the spam queue; presumably anything with the word “sex” or its derivatives is per se suspicious. (If you posted a serious comment and it didn’t appear, let me know; it may be stuck in the queue.)
So I’m wondering: What if someone is doing legitimate academic research on erectile dysfunction, refinancing, lottery tickets, or the inheritance practices of Nigerian dictators? How do such people communicate their research results to colleagues? How do they send emails to grant agencies, conference organizers, and journal editors? “Dear Bob: Here is the latest draft of my paper on Ci@li$.” Perhaps such papers deserve extra credit for degree of difficulty.
Institutions: It’s All Greek to Me
| Peter Klein |
The relationship between formal institutions (e.g., the legal environment) and informal rules (norms, culture, social conventions) is one of the least-well understood areas of the New Institutional Economics. Do norms create “order without law,” to borrow Robert Ellickson’s phrase, or should we understand private arrangements and law as complements, rather than substitutes (Cooter, Marks, and Mnookin, 1982)?
To understand all this, suggest Anastassios Karayiannis and Aristides Hatzis, we should turn to the ancient Greeks. Karayiannis and Hatzis’s paper, “Morality, Social Norms and Rule of Law as Transaction Cost-Saving Devices: The Case of Ancient Athens,” argues for a close relationship between Athenian legal institutions and supporting social norms:
Athenians developed a highly sophisticated legal framework for the protection of private property, the enforcement of contracts and the efficient resolution of disputes. Such an institutional framework functioned effectively, cultivating trust and protecting the security of transactions. This entire system however was based on social norms such as reciprocity, the value of reputation and business ethics. Conformity to social norms as well as moral behavior was fostered by social-sanction mechanisms (such as stigma) and moral education. The Athenian example is a further proof of the importance of morality and social norms as transaction cost-saving devices even in quite sophisticated legal systems. Their absence or decline leads inevitably to the need for more regulation, clear-cut rules, less judicial discretionary power and more litigation.
More Fun with Names
| Peter Klein |
Our silly posts (1, 2) are among our most popular, so let’s have more fun.
Whatever she does lies within her Kor competence.
His writings are all Peer reviewed.
Their paper covers everything from A to Z.
Blogfest at Sundance
| Peter Klein |
The BYU Conference on Comparative Organizations at Sundance begins today. Your humble correspondent is here, along with Teppo, Brayden, Fabio, and Omar of orgtheory.net, Gordon Smith of Conglomerate, and luminaries from throughout the world of organization studies. I haven’t yet seen Robert Redford (but if he shows up I’ll ask him to clarify his views on property rights).
This is an interdisciplinary conference, though the participants are primarily sociologists (with a few outsiders, like yours truly, thrown in for comic relief). The purpose is to develop better frameworks for making comparisons across organizational types. From the conference blurb: “[C]ontemporary organizational scholarship can not provide a coherent answer to questions regarding how one might translate corporate data on the predictors of employee motivation into a hospital or military setting, or to what extent conclusions regarding the relationship between financial performance and socially responsible business practices based on studies of small, young, private firms hold for large, old, public firms.”
I think there is actually a fair amount of empirical literature in organizational economics and strategy making these kinds of cross-sectional comparisons (public versus private firms, venture-backed versus non-venture-backed startups, M-form versus H-form conglomerates, etc.). The analysis is not particularly “deep,” however; it relies generally on reduced-form models with performance as the only dependent variable. I’m looking forward to learning about more nuanced approaches.
Organizations and Markets 
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