Opening Lines I Wish I’d Written

29 November 2009 at 12:01 am Peter G. Klein 1 comment

| 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.

Entry filed under: - Klein -, History of Economic and Management Thought, Management Theory, Syllabus Exchange, Teaching, Theory of the Firm.

Bebchuk-Weisbach Survey of Corporate Governance Opening Lines You’re Glad You Didn’t Write

1 Comment Add your own

1. Oliver Westall | 30 November 2009 at 10:45 am

The problem is more fundamental than the journo suggests. Of course, the Saab purchaser (outside Sweden) bought it because it was that really difficult trick – an distinctive car with high performance but social democrat associations. No-one could have dreamt that up – pure serendipity. In short, they bought it because it was different and explicitly because it wasn’t Ford or GM. True, the successor models were poor – usually because the GM components showed through, and GM had the crazy idea that Saab’s act should be cleaned up to make the car attractive to a wider market. That was to miss the whole point. I should know – I’m a sherry sipping tweed jacket academic who owned Saab’s consistently for thirty eight years, never even bothering to check out the competition, because that would be disloyal to the idea of being different. We were the people who stuck with Apple when it was unfashionable, because they weren’t PCs, and who won’t read anything from the Murdoch empire, because it’s so successful. What do I drive now? A BMW. It’s perfect by every objective test, but every time I drive it I feel an erosion of identity because they’re so ubiquitous.