Archive for May, 2009

You Go, Gordon Gekko!

| Peter Klein |

Several folks in my part of the blogosphere have noted John Hasnas’s terrific op-ed in yesterday’s WSJ, “The ‘Unseen’ Deserve Empathy, Too.” Hasnas invokes the great Bastiat to counter President Obama’s call for judges who have compassion, empathy, and understanding of “people’s hopes and struggles.” As Hasnas points out, judges should consider the effects of legal rulings not only on the parties before the bar, but also on the “unseen” whose lives will be affected:

One can have compassion for workers who lose their jobs when a plant closes. They can be seen. One cannot have compassion for unknown persons in other industries who do not receive job offers when a compassionate government subsidizes an unprofitable plant. The potential employees not hired are unseen. . . .

The law consists of abstract rules because we know that, as human beings, judges are unable to foresee all of the long-term consequences of their decisions and may be unduly influenced by the immediate, visible effects of these decisions. The rules of law are designed in part to strike the proper balance between the interests of those who are seen and those who are not seen. The purpose of the rules is to enable judges to resist the emotionally engaging temptation to relieve the plight of those they can see and empathize with, even when doing so would be unfair to those they cannot see.

wallstreet460This was on my mind when, channel surfing last night, I came across Oliver Stone’s 1987 classic “Wall Street,” which I haven’t seen in its entirety in years. To my surprise (perhaps not yours), I found myself rooting for Michael Douglas’s Gordon Gekko, the corporate raider who serves as the movie’s arch-villain. The main sub-plot revolves around Gekko’s attempted buyout of Blue Star Airlines. Bud thinks the buyout can save the struggling airline, where his father still works, and helps convince the pilots’ and flight attendants’ unions to Gekko’s move. Later, Bud discovers Gekko is really planning to break up the company and sell off the pieces and Bud feels betrayed, leading to a climactic confrontation. (The film feels remarkably fresh, despite the glowing green CRT screens and brick-sized cellular phones, and Douglas’s performance is dazzling.) (more…)

30 May 2009 at 2:42 pm 9 comments

How Many Strategists Does It Take to Change a Light Bulb?

| Peter Klein |

More profound musings from Joe Mahoney and Christos Pitelis, with additional contributions from Anita McGahan, Yasemin Kor, and myself (no attribution is given for individual entries, for our own protection). Please add your suggestions in the comments.

How many strategists does it take to change a light bulb?

“Only one, that will be $125, please.” — strategy consultant

“One, and the one who changes it achieves sustained competitive advantage.” — mainstream strategy scholar

“Approximately 1.0000000000000000000.” — one of the small cadre of mathematicians in the strategy field

“The first person who discovers the burned-out light bulb has an opportunity for entrepreneurial gain.” — Kirznerian strategic entrepreneurship scholar

“The old bulb will be swept away by the perennial gale of creative
destruction.” — Schumpeterian strategic entrepreneurship scholar

“Light bulbs are social constructs.” — trendy contemporary management scholar

“I can’t answer without first knowing the relevant players, strategy spaces, and preference maps.” — game theorist (more…)

29 May 2009 at 10:32 pm 4 comments

Sociology that We Like

| Nicolai Foss |

Contrary to the conviction perhaps held by the boys over at, O&M bloggers are not at all hostile to sociology. In fact, we are highly sympathetic to what is sometimes called “analytical sociological theory,” that is, James Coleman, Raymond Boudon, Jon Elster, Peter Abell, Diego Gambetta, Siegwart Lindenberg, Karl-Dieter Opp, and so on. Here is a nice summary of AST, which — we are told — embraces realism and objectivity, is anti-relativist, appreciates formalization and the use of models, is reductionist, eschews bullshit, etc. (Also check out the nice and entirely well taken acerbic treatment of Foucault on p. 7). Now we only need to know: How exactly does AST differ from microeconomics?

29 May 2009 at 11:16 am 6 comments

Entrepreneurship Exemplars Conference

| Dick Langlois |

The Center for Entrepreneurship and Innovation at the UConn business school is sponsoring an “exemplars” conference in conjunction with the Entrepreneurship Division of the Academy of Management. The idea of the conference is to help young scholars by providing “exemplars” of good scholarship. Editors from the top management and entrepreneurship journals are here (including frequent O&M participant Joe Mahoney) to comment on these exemplar papers and provide advice.

The conference started last night with a keynote by Venkat Venkataraman and continues through Saturday. You can actually participate in the conference online: register here. I am about to wander over (physically, not electronically) to hear Jay Barney’s keynote at 10:50 EDT.

29 May 2009 at 9:35 am Leave a comment

The Book (Value) of Revelations

| Dick Langlois |

Here’s the abstract of the day:

Irrational Exuberance in the U.S. Housing Market: Were Evangelicals Left Behind?

Christopher W. Crowe

Summary: The recent housing bust has reignited interest in psychological theories of speculative excess (Shiller, 2007). I investigate this issue by identifying a segment of the U.S. population — evangelical protestants — that may be less prone to speculative motives, and uncover a significant negative relationship between their population share and house price volatility. Evangelicals’ focus on Biblical prophecy could account for this difference, since it may enable them to interpret otherwise negative events as containing positive news, dampening the response of house prices to shocks. I provide evidence for this channel using a popular internet measure of “prophetic activity” and a 9/11 event study. I also analyze survey data covering religious beliefs and asset holding, and find that ‘end times’ beliefs are associated with a one-third decline in net worth, consistent with these beliefs providing a form of psychic insurance (Scheve and Stasavage, 2006a and 2006b) that reduces asset demand.

Interestingly, the author is with the International Monetary Fund. When I googled to find where I had seen this abstract, the search returned several links pointing out that many Evangelicals consider the IMF (and the World Bank) to be the work of the Devil. (Not a few economists feel this way as well, of course, but wouldn’t put it in quite the same terms.) If you believe the end times are imminent, why would you bother to hold assets at all?

28 May 2009 at 4:18 pm Leave a comment

The Industrious Revolution

| Peter Klein |

Hans-Joachim Voth calls Jan de Vries’s new book on household behavior during the early modern period “staggeringly erudite, insightful, stimulating, and on all the main points, convincing.” The book, The Industrious Revolution: Consumer Behavior and the Household Economy, 1650 to the Present (Cambridge,  2008) builds on de Vries’s earlier concept of an Industrious Revolution, the two centuries before the Industrial Revolution in which consumers increased their production of marketable goods, largely at the expense of leisure time. “The industrious revolution was a household-level change with important demand-side features that preceded the Industrial Revolution, a supply-side phenomenon” (De Vries, 1994). Adds Voth:

The sheer amount of hard work that went into every aspect of these chapters is hard to convey. Surveying the rise of consumer items through the prism of probate inventories shows the author confidently mastering the abundant historical literature in four or five languages. De Vries’ reconstruction of Europeans’ increasing consumption of “colonial luxuries” — sugar, tea, and coffee — alone is going to be useful for all scholars working in the area.

This book may be of interest not only to economic and business historians, but also to management scholars in marketing and consumer behavior.

28 May 2009 at 12:34 pm Leave a comment

Way to Go Curtis

| Peter Klein |

A teacher’s greatest accomplishment is seeing his students go where he himself has never gone. So it was with great delight that I saw that one of my former undergraduate students, Curtis Melvin, got his picture on the front page of last Friday’s Wall Street Journal. Larry White and Radley Balko have already written on the substance of the story, which profiles Curtis’s activities as a North Korea sleuth. Way to go, Curtis!


27 May 2009 at 12:39 pm 1 comment

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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).