Archive for September, 2009

Elgar Companion to Transaction Cost Economics

| Peter Klein |

Mike Sykuta and I are editing a volume for the Elgar Companion series, The Elgar Companion to Transaction Cost Economics. The volume is currently in production with an expected publication date in mid-2010. We’ve created a page here on O&M with more information, including a table of contents and some sample chapter drafts. Enjoy!

30 September 2009 at 11:41 am 2 comments

The Most Interesting Scholar in the World

| Peter Klein |

With apologies to Dos Equis:

His work would pass peer review . . . if he had peers.

Students take his classes, just because they find them interesting.

His main intellectual predecessor . . . is himself.

His Erdős number is negative.

He once rejected one of his own articles, just to see how it felt.

He reads Sanskrit . . . in mathematics.

A man came out of a coma after touching one of his books.

Football players at his university have season tickets to his lectures.

Stay thirsty for knowledge, my friends.

29 September 2009 at 7:20 am 6 comments

Alchian and Demsetz (1972), Dallas Cowboys Edition

| Peter Klein |

In Alchian and Demsetz’s (1972) nexus-of-contracts approach to the firm, bosses don’t necessarily hire workers; workers may just as easily hire bosses. Recall Cheung’s (1983, p. 8) famous illustration: “My own favorite example is riverboat pulling in China before the communist regime, when a large group of workers marched along the shore towing a good-sized wooden boat. The unique interest of this example is that the collaborators actually agreed to the hiring of a monitor to whip them.” In Alchian and Demsetz’s example, the employee can “fire” his employer by quitting, just as I can “fire” my grocer by shopping at a different store.

Here’s the Onion applying this logic to the NFL’s Dallas Cowboys:

IRVING, TEXAS — In an attempt to cut the franchise’s losses and “move forward in a positive direction,” the Dallas Cowboys severed ties with controversial owner Jerry Jones Monday, ending their tumultuous 20-year relationship with the divisive figure.

According to sources within the Cowboys organization, the decision to release Jones was influenced by the lack of any playoff victories in more than 12 years, the owner’s distracting sideline antics, and his selfish, “me first” attitude, which many said was having a cancerous effect on the clubhouse.

“We value Jerry’s contributions to the Cowboys over the past two decades, but it has become painfully clear that we just don’t share the same priorities,” Cowboys public relations director Richard Dalrymple said. “This wasn’t an easy choice to make, but we’re confident it is a decision that can only make our team better.”

I can see it now: “An NFL owner has no power of fiat, no authority, no disciplinary action any different in the slightest degree from ordinary market contracting between any two football players. . . .”

27 September 2009 at 2:18 pm 6 comments

Nerd Rap

| Peter Klein|

Weird Al’s version — already deconstructed by our friends at — has style, but the CERN Rap has substance. As do these econ vids.

26 September 2009 at 5:32 pm Leave a comment

QWERTY in the Long Run

| Dick Langlois |

The new issue of Industrial and Corporate Change has an article by Andreas Reinstaller and Werner Hölzl called “Big Causes and Small Events: QWERTY and the Mechanization of Office Work.” Although it’s an interesting paper in many respects, I think it fails in its avowed aim to defend Paul David against the attack of Liebowitz and Margolis. Mostly, they don’t get L&M right (and explicitly get them wrong in footnote 1). The issue is whether the QWERTY keyboard is an example of what L&M call “third-degree” path dependency, that, is path dependency leading to an outcome that is both regrettable ex post and would somehow have been remediable ex ante. The criterion of “remediable” to R&H seems to be whether contemporaries “knew about” superior alternatives. That’s not quite right, of course: the real issue is whether any alternative institutional structure could have done a better job of choosing a standard under the conditions of knowledge at the time. Their only example is the existence of a French “Ideal” keyboard layout (which some people “knew about”) that was swept aside by the tidal wave of the American QWERTY standard (and became AZERTY in France). But they have no evidence about how much better this keyboard was — or if it was better at all. In footnote 1 they cite Donald Norman’s interesting book on design to the effect that the Dvorak keyboard is 10 per cent faster than QWERTY. But (A) Norman’s point in the book is how insignificant this difference is and (B) that doesn’t demonstrate third-degree path dependency, since no one “knew about” the Dvorak keyboard until Dvorak invented it (an extremely laborious process, according to Norman).

Again, I don’t want to be too hard on R&H: I think there’s a lot that’s interesting in the paper, especially the discussion of the mechanization of office work. What really struck me in this context, however, is how irrelevant, or at least dated, the QWERTY saga is. And I say this not for the usual reason: that computers now allow us to have any keyboard layout we like. Rather, what struck me is that the production of documents has long since become demechanized, making even more-than-nominal differences in typing speed irrelevant. Since we now all (or almost all) compose right on the computer, and never send our documents out to the typing pool, manuscript production has become a craft again. What is slowing us down is how quickly we think of something to say, not how fast we can type. And I doubt that, fifties nostalgia notwithstanding, we are unlikely to see the return of the typing pool anytime soon. So, from a historical perspective, QWERTY will have been technically inefficient (though not therefore economically inefficient) only for that brief historical period between the invention of Dvorak and the coming of the personal computer.

The same issue of ICC also has a paper by Ashish Arora and coauthors that’s worth a look.

25 September 2009 at 1:20 pm 3 comments

The Soviets Really Did Have a Doomsday Machine

| Peter Klein |

000strangeloveAccording to the new issue of Wired (via the Economist), the Soviets really did have a doomsday machine and, as in Dr. Strangelove, didn’t tell anyone about it. Interestingly, the interpretation is that the Soviets, like Schelling’s rational addict, were directing the credible commitment not toward their opponents, but toward themselves:

The silence can be attributed partly to fears that the US would figure out how to disable the system. But the principal reason is more complicated and surprising. According to both Yarynich and Zheleznyakov, Perimeter was never meant as a traditional doomsday machine. The Soviets had taken game theory one step further than Kubrick, Szilard, and everyone else: They built a system to deter themselves.

By guaranteeing that Moscow could hit back, Perimeter was actually designed to keep an overeager Soviet military or civilian leader from launching prematurely during a crisis. The point, Zheleznyakov says, was “to cool down all these hotheads and extremists. No matter what was going to happen, there still would be revenge. Those who attack us will be punished.”

This wouldn’t deter a Jack D. Ripper type, I suppose. Still, fascinating discussion for those who teach about strategic commitment.

25 September 2009 at 12:08 am 4 comments

Page and Reference Counts: AER versus AJS

| Peter Klein |

Thanks to Teppo for linking to these interesting graphs. Since 1960, the page count and reference list of the average American Journal of Sociology article have risen dramatically, while those for the American Economic Review have remained about the same. I’d be curious to see these figures for the Academy of Management periodicals as well. What explains these trends? Are sociologists simply more verbose than economists?

Update: Here are some more graphs, this time including ASQ and Management Science, as well as some additional sociology journals. ASQ and MS appear to be somewhere in the middle.

24 September 2009 at 11:42 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).