Archive for November, 2009
| Peter Klein |
Douglass North welcomes fellow new institutionalists Elinor Ostrom and Oliver Williamson to the Nobel Club (via Jeffrey Huang):
| Dick Langlois |
Now here is an opening line you will be glad you didn’t write. (From our local newspaper, the Willimantic Chronicle, November 25, 2009.)
WINDHAM — After being vacant for six years, former Windham First Selectman Jean de Smet appointed two co-town historians to preserve and share their knowledge about the town.
This is especially funny in light of the controversial character of de Smet’s administration, although vacancy wasn’t among the complaints, and indeed increased vacancy actually might have improved things. (She was elected on the Green Party slate.)
I have added this article to my file of amusing pedagogical examples of faulty agreement and misplaced clauses. Here are two of my favorites from that file, one from the UConn Daily Campus and another from the Chronicle.
| Peter Klein |
Last week was tough for Shakespeare scholars who wear tweed jackets with leather elbow patches and sip sherry in the faculty lounge. You know, the people otherwise known as Saab drivers.
That’s from a Friday WSJ piece on GM’s attempt to dump its Saab subsidiary. Readers outside the US may not get the joke. Trust me, it’s funny.
The article is actually pretty interesting, an illustration of Williamson’s “impossibility-of-selective-intervention” thesis. “The Saab saga also demonstrates how hard it is for a boutique company to retain its special appeal after being bought by a corporate goliath. GM did make some good Saabs over the years (the midsize 9-5 model of a decade ago was one), but they didn’t seem as special as the pre-GM Saabs, even though the key stayed in the floor.” Maybe, but it isn’t obvious why the mismanagement of the Saab brand (in the US) was GM’s fault, rather than that of Saab’s division heads. Saab may have tanked anyway. Anyway, I did learn a good line from Sir John Egan, the last independent CEO of Jaguar before its acquisition by Ford, that I’ll use the next time I’m teaching about selective intervention: “When an elephant gets in bed with a mouse, the mouse gets killed and the elephant doesn’t have much fun.” Oh, and the article ends well too: “As for those sherry-sipping profs, maybe they should consider buying Chevy Silverado pickups with all the trimmings: Mars lights, gun racks and monster-truck tires. Iconoclasm can take different forms, and the talk in the faculty lounge will never be the same.”
Bonus: That same issue of the Journal also contained a strange piece by John Cassidy praising Pigou, on the grounds that Pigou’s analysis of externalities gives us unique insight into the financial crisis. “Thus, for example, a blow-up in a relatively obscure part of the credit markets—the subprime mortgage industry—can undermine the entire banking system, which, in turn, can drag the entire economy into a recession, as banks refuse to lend.” Um, duh. “Externalities” are ubiquitous, and the idea of the general interdependence of markets has been discussed since, well, Bastiat, if not the Scholastics. Certainly Pigou didn’t offer any special insight into the interdependencies across financial markets or between financial markets and product markets. Writes Cassidy: “Economics textbooks have long contained sections on how free markets fail to deal with negative spillovers such as pollution, traffic congestion and the like. Since August 2007, however, we have learned that negative spillovers occur in other sectors of the economy, especially banking.” Since August 2007? Gee, before that, we all thought banking was an isolated sector of the economy with no connection to anything.
| Peter Klein |
It’s the introduction to a special issue of the Review of Financial Studies:
The special issue features seven papers on corporate governance that were presented in a meeting of the NBER’s corporate governance project. Each of the papers represents state-of-the-art research in an important area of corporate governance research. For each of these areas, we discuss the importance of the area and the questions it focuses on, how the paper in the special issue makes a significant contribution to this area, and what we do and do not know about the area. We discuss in turn work on shareholders and shareholder activism, directors, executives and their compensation, controlling shareholders, comparative corporate governance, cross-border investments in global capital markets, and the political economy of corporate governance.
Here it is on the NBER site; I couldn’t find an ungated version.
| Peter Klein |
Found this posted on a classroom wall in our building. Not quite as witty as this one, but then again, we keep them heavily sedated:
On a more serious note, here’s a conference celebrating the 50th anniversary of Coase’s landmark 1959 and 1960 papers, with an all-star lineup.
| Dick Langlois |
My last post implicitly lauds the science reporting of the New York Times. And I think they generally do a good job. But, still basking in the glow of UConn’s remarkable football win over Notre Dame on Saturday, I am reminded of a — presumably unintentionally — funny bit of science reporting recently in the Times. Reporter Alan Schwartz has been waging a (perhaps justified) campaign about the problem of head-injury risk in football. In one article last month, he quotes a neurosurgeon on the physics of football collisions.
“I go back to Einstein and E = mc2,” said Julian Bailes, a former Pittsburgh Steelers neurosurgeon and one of the leading researchers in the neurological effects of football concussions. “The players are definitely much more massive and that’s one factor. But you have 300-pound linemen running 4.3s — and that factor is squared. The impacts that players face today, not just the big ones that everyone sees but the routine ones in the trenches, is what really worries me.”
Converting the mass of a 100Kg football player (light by NFL standards) into energy according to the Einstein formula would yield about 2,000 megatons of energy, probably enough to cause head trauma even in an NFL lineman. (It is the quoted source who makes the mistake, but the reporter and his editors didn’t catch it or at least didn’t remark on it or change it.)
When I was in high school, the assistant football coach was also the physics teacher. He tried to psych us up for one game against (as always) a bigger and more talented opponent by quoting the correct version of the mechanics of collision — energy goes up as the square of your velocity, not the square of the speed of light. How fast you get going, he was telling us, is much more important than the weight of the opponent. I found this a refreshing change from the usual cliché about the manner in which the opposing players were likely to don their athletic supporters. But under the circumstances, and especially as I was one of the few who had any idea what he was talking about, I declined to point out that smacking into another football player is an inelastic collision, so energy isn’t conserved. Momentum is always conserved, but that’s linear in both mass and velocity. I didn’t play football very seriously or for very long, but I am happy to blame the experience for my increasing mental lapses as I grow older.
Extra point. By the way, the inelastic collision pictured above is between Notre Dame running back Armando Allen and UConn middle linebacker Greg Lloyd (son of the former Pittsburgh Steeler of the same name) at the goal line on Saturday. UConn won the game in the second overtime. In college football, each overtime session allows both teams a single possession from the 25-yard line. In the first overtime, both teams scored a touchdown and an extra point. In the second overtime, UConn held ND to a field goal and then scored a touchdown on their turn, thus winning the game. This differs from the professional rule: sudden death. On Sunday, the Patriots beat the Jets in overtime because they won the coin toss and then quickly got close enough to score a field goal. Thus, in the pro game, the coin flip determines the outcome with high probability, a circumstances that rightly causes consternation among fans. Economists have suggested auctioning off possession in overtime, with the currency being the field position from which you are willing to start. At the very least, they ought to use something like the college system.
| Peter Klein |
In an oft-cited passage from The Mechanisms of Governance (1996), Williamson describes the research program of transaction cost economics this way:
Transaction cost economics (1) eschews intuitive notions of complexity and asks what the dimensions are on which transactions differ that present differential hazards. It further (2) asks what the attributes are on which governance structures differ that have hazard mitigation consequences. And it (3) asks what main purposes are served by economic organization. Because, moreover, contracting takes place over time, transaction cost economics (4) inquires into the intertemporal transformations that contracts and organization undergo. Also, in order to establish better why governance structures differ in discrete structural ways, it (5) asks why one form of organization (e.g., hierarchy) is unable to replicate the mechanisms found to be efficacious in another (e.g., the market). The object is to implement this microanalytic program, this interdisciplinary joinder of law, economics, and organization, in a “modest, slow, molecular, definitive” way.
A footnote explains the origins of the phrase “modest, slow, molecular, definitive,” tracing them to a (secondhand) quotation from Charles Péguy. Here’s the footnote:
The full quotation (source unknown) reads:
“The longer I live, citizen. . .” — this is the way the great passage in Peguy begins, words I once loved to say (I had them almost memorized) — “The longer I live, citizen, the less I believe in the efficiency of sudden illuminations that are not accompanied or supported by serious work, the less I believe in the efficiency of conversion, extraordinary, sudden and serious, in the efficiency of sudden passions, and the more I believe in the efficiency of modest, slow, molecular, definitive work. The longer I ive the less I believe in the efficiency of an extraordinary sudden social revolution, improvised, marvelous, with or without guns and impersonal dictatorship — and the more I believe in the efficiency of modest, slow, molecular, definitive work.”
Well, we are nothing if not pedantic here at O&M, and in that spirit, I share (with permission) a note from my colleague and former guest blogger Randy Westgren, written to Williamson in January 2007, explaining that the anonymous source has botched the Péguy quotation. Here’s Randy:
After a long search, I found the quote from Péguy that you cite in footnote nine of the Prologue of The Mechanisms of Governance and noted again in footnote eleven of the first chapter. I was not able to find the secondary quote that is printed in the footnote, but I did find the original passage from Péguy. I have been searching for this since The Mechanisms was published, because I could not fathom how Charles Péguy could have denounced sudden, wondrous conversion and sudden, extraordinary social revolution when he was (1) a famously devout Catholic; a mystic whose poetry includes an exceptional hommage to Joan of Arc, and (2) a famously ardent socialist who believed strongly in the overthrow of the bourgeoisie. In fact, after giving up on the Catholicism of his youth while at the École Normale Supérieure, he returned to his faith in the middle of the first decade of the century, when he was in his early 30s. He was slain in the first battle of the Marne in 1914 at the age of 41. (more…)