Archive for March, 2009

Literature Review Bleg

| Dick Langlois |

One of my graduate students has been working on an idea to formalize Henry Hansmann’s approach to the ownership of enterprise. Hansmann thinks about the ownership margin — which set of “patrons” in the nexus of contracts should own the residual rights of control and of income? The idea of this work would be to think simultaneously about the Coasean margin, the boundaries of the firm, which should be determined endogenously along with ownership. That means that firms would have different levels of vertical integration depending on which patrons own them. One interesting question: what happens to the level of vertical integration of banks if the government comes to own them?

We need to locate this idea in the literature and to find out if anyone else has done anything along these lines. So, if you know of anything remotely related, please send it along.

26 March 2009 at 2:31 pm Leave a comment

The Economics of Prehistory

| Dick Langlois |

Greg Dow at Simon Fraser is organizing a conference this summer on “Early Economic Developments.”

This conference is a meeting for scholars interested in economic aspects of prehistoric events. The organizers welcome proposals for papers on topics at the boundaries among economics, archaeology, and anthropology. Topics can include economic prehistory, the economics of human biological evolution; pre-industrial economic history; and the evolution of economic, social, and political institutions.

Looks interesting. Abstract deadline is April 15, which I guess isn’t tax day in Canada.

26 March 2009 at 2:14 pm Leave a comment

The Danish Mortgage System to the Rescue?

| Nicolai Foss |

As many O&M  readers will remember, George Soros recommended a “Danish fix” for the US mortgage crisis. The American Enterprise Institute is sponsoring a whole-day event today on the related, if more cautious, topic, “Can Elements of the Danish Mortgage System Fix Mortgage Securitization?” Here is the wiki on the Danish mortgage system.

26 March 2009 at 1:48 pm Leave a comment

New Friedman Book

| Nicolai Foss |

K. Puttaswamaiah has edited Milton Friedman, Nobel Monetary Economist: A Review of his Theories and Policies (Isle Publishing Co., 2009). I only know the names of a few of the contributors, but I do recognize a certain Samuelson, who recently “remembered” Friedrich Hayek in a scandalously superficial and misleading note published in the pages of the Journal of Economic Organization and Behavior. Ones hopes that Friedman isn’t up for a similar treatment, but perhaps he is: One of the chapters in the volume is titled, “Milton Friedman: A Late and Overestimated Master of Sophistry.”

26 March 2009 at 11:56 am Leave a comment

Management Innovation Conference

| Nicolai Foss |

There are reasons to think that changes in organization designs, administrative systems, and managerial technologies are important sources of firm-level value creation. It is also quite conceivable that changes that amount to  innovations in organization design, etc. may give rise to sustained competitive advantages. Business history, popular management writing, and some academic papers offer examples, notably the introduction of the M-form, TQM, the Oticon spaghetti organization, the HRM practices of Lincoln Electric, and so on. And yet, very little systematic, research-based knowledge exists about such “management innovation.” The first conceptual and theoretical treatment of management innovation as a subject deserving of focused inquiry is Julian Birkinshaw and Michael Mol’s paper in the Academy of Management Review — which was published in 2008!

To further research on management innovation, the Center for Strategic Management and Globalization at the Copenhagen Business School is arranging a conference on management innovation later this year (3-4 September 2009). Keynote speeches will be delivered by Julian Birkinshaw, Ed Zajac and Richard Burton. Details on the conference homepage (version 1.0). Submit a paper!

26 March 2009 at 11:36 am 1 comment

Selection, Meritocracy, and Educational Quality

| Dick Langlois |

We have all heard complaints about the decline in the quality of students over, say, the second half of the twentieth century. The usual interpretation is that this has to do with decline in the quality of schools, especially high schools, or in the curriculum delivered in those schools. I always like to point out to people (that is, to non-economists) that much of the perceived decline is likely a matter of demographic and selection effects. Access to secondary and higher education expanded tremendously after World War II, which changed the underlying distribution of abilities of students finishing high school and attending college. (This is also relevant to discussions of the quality of American college students versus Europeans or others — the fraction of students going on to college is higher in the U. S. than elsewhere, so comparing just the mean is misleading.) Education also became more meritocratic after the War, in that colleges and universities began to screen students by academic ability rather by other characteristics (like income).

I just ran across an interesting new paper by Lutz Hendricks and Todd Schoellman that analyzes these issues in a thorough and illuminating way. Here is the abstract:

Student Abilities During the Expansion of U.S. Education, 1950-2000

Since 1950, U.S. educational attainment has increased substantially. While the median student in 1950 dropped out of high school, the median student today attends some college. In an environment with ability heterogeneity and positive sorting between ability and school tenure, the expansion of education implies a decrease in the average ability of students conditional on school attainment. Using a calibrated model of school choice under ability heterogeneity, we investigate the quantitative impact of rising attainment on ability and measured wages. Our findings suggest that the decline in average ability depressed wages conditional on schooling by 31-58 percentage points. We also find that the entire rise in the college wage premium since 1950 can be attributed to the rising mean ability of college graduates relative to high school graduates.

This has a number of significant implications. As the authors point out, average ability has declined at all levels of schooling. This should color our interpretation of the much-touted fact that real wages haven’t increased much since 1960. At the same time, the wage gap between low and high levels of educational attainment has increased over time — because improved sorting has selected people of higher ability into college and selected people of lower ability out of college.

24 March 2009 at 2:08 pm 2 comments

Dutch Treat

goldmember-771165| Peter Klein |

There’s only two things I hate in this world. People who are intolerant of other people’s cultures, and the Dutch. — Nigel Powers

Karel Davids’s new book, The Rise and Decline of Dutch Technological Leadership: Technology, Economy, and Culture in the Netherlands, 1350–1800 (Brill, 2008), provides an interesting look at knowledge flows within and between regions, an important idea in the modern literatures on economic geography and regional innovation. Writes EH.Net reviewer William TeBrake:

According to Davids, the northern Netherlands, the territory encompassed by the Dutch Republic, was the technological leader during much of the seventeenth and eighteenth centuries, before relinquishing that role to England by 1800, and in the process of explicating the rise and fall of Dutch technological leadership, he has called into question a number of commonplace assumptions found in the historiography of the period in question. . . .

One of the most interesting features of his study is the attention he pays to the truly remarkable concentration during the seventeenth and eighteenth centuries of literally hundreds of industries powered by windmills in the Zaan district, just across the IJ/harbor from Amsterdam, forcing the reader to reconsider how revolutionary the English Industrial Revolution really was. Further, there are several important areas in which he has significantly revised current understanding of the course of technology, economy, and society during the late-medieval and early-modern periods. . . . [For example], Davids makes clear that technological leadership in the Dutch Republic was much less tied to economic advancement than is usually assumed. Indeed, the Republic’s technological leadership began to peak only when the economy of the Dutch Republic already had begun to decline, during the late seventeenth century, and such leadership continued for another century thereafter, before giving way to England only after 1780. Finally, Davids makes a compelling case for locating the causes of technological leadership (and its decline) not only in market forces but also in institutional and cultural conditions, including the relative openness or secrecy of economic, cultural, and political life.

23 March 2009 at 10:38 am 5 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).