Archive for January, 2010

Apocalypse Averted

| Dick Langlois |

In a recent post, I lamented the willingness of pundits (and dissenting Justices) to see rights as a consequential exercise: we should restrict the speech of group X, in this case private corporations, because allowing such speech would lead to a bad outcome, in this case the corruption of democracy by corporate interests. (Feel free to substitute here your own favorite candidate for silencing and your own associated bad outcome.) But, of course, those who argue in this manner must also demonstrate that the asserted bad outcome would actually happen. A recent article in the Times — bless some reporter’s or editor’s contrarian heart — asks the question: so, what effect does corporate money actually have on democracy?” The answer seems to be: none at all. One of the economists cited is Peter’s Missouri colleague, and my former student, Jeff Milyo: “There is just no good evidence that campaign finance laws have any effect on actual corruption.”

And while we are at it, a study by the Insurance Institute for Highway Safety finds no effect of cell phone laws on traffic accidents. This hasn’t stopped Connecticut’s Governor from calling for even stricter cell phone laws.

31 January 2010 at 7:15 pm 6 comments

Infographic of the Day: Bailouts Around the World

| Peter Klein |

Via HBR, bank bailouts and stimulus packages as percentages of GDP. China tops (bottoms?) the list with stimulus goodies worth a whopping 47% of GDP.

29 January 2010 at 3:09 pm 1 comment

Now That’s a Complete Contract!

| Peter Klein |

A major theme of the contracting literature in organizational economics is that formal contracts are inevitably incomplete, meaning that they do not specify actions and remedies for every possible set of circumstances. Given genuine uncertainty about the future, parties may decide that formal contracts to not adequately protect relationship-specific investments, providing an important rationale for vertical integration or another mechanism to protect quasi-rents (alliances, equity-sharing arrangements, reputation, and other “hybrids”).

A recent WSJ piece suggests that writing complete contracts may not be so hard after all:

Decked out in sequined black and gold dresses, Anne Harrison and the other women in her Bulgarian folk-singing group were lined up to try out for NBC’s “America’s Got Talent” TV show when they noticed peculiar wording in the release papers they were asked to sign.

Any of their actions that day last February, the contract said, could be “edited, in all media, throughout the universe, in perpetuity.”

My Mom says she once told me I was the best little boy in the world, to which I responded, “and all the planets too?” The WSJ gives several examples of similarly expansive coverage:

  • The terms of use listed on, where people can post to message boards among other things, tell users that they give up the rights to any content submissions “throughout the universe and/or to incorporate it in other works in any form, media or technology now known or hereafter developed.”
  • In a May 15, 2008, “expedition agreement” between JWM Productions LLC, a film-production company, and Odyssey Marine Exploration Inc., a shipwreck-exploration outfit, JWM seeks the rights to footage from an Odyssey expedition. The contract covers rights “in any media, whether now known or hereafter devised, or in any form whether now known or hereafter devised, an unlimited number of times throughout the universe and forever, including, but not limited to, interactive television, CD-ROMs, computer services and the Internet.”

And my personal favorite:

A 189-word sentence in a September agreement between Denver-based Spicy Pickle Franchising Inc. and investment bank Midtown Partners & Co. — which has helped raise capital for the sandwich and pickle shops dotted across the region — unconditionally releases Spicy Pickle from all claims “from the beginning of time” until the date of the agreement.

Says Spicy Pickle’s Marc Geman, “the length of the paragraph is only limited by the creativity of the attorney.”

29 January 2010 at 12:27 pm 4 comments

The Era of Laissez-Faire?

| Peter Klein |

One of the established memes about the financial crisis is that it demonstrates the failure of unfettered capitalism, the dog-eat-dog, laissez-faire environment that prevailed in the West over the last few decades, all driven by the ideology of “free-market fundamentalism.” This seems to be a truism among most of the Commentariat. Of course, as pointed out repeatedly on this blog, the truth is virtually the opposite: there was never any “deregulation,” the Bush Administration spent public money like a drunken sailor, and government continued to expand as it always does. But a picture is worth a thousand words, so try these on for size. (US data; click charts for sources.)

One response I sometimes hear is “Sure, there are more regulations and more government spending, but the set of things that should be regulated and the amount of government spending the economy needs are growing even faster!” This is essentially the Krugman-DeLong view about the stimulus: it just wasn’t big enough. Or they say that financial markets were “deregulated,” de facto, because the number of regulations and regulators increased more slowly than the number of new financial instruments and new markets. I wonder, though: are these falsifiable propositions? No matter how big the government is, if there are any problems, it’s always because the government isn’t big enough!

28 January 2010 at 2:08 pm 14 comments

Hayekian Comments on Student Papers

| Peter Klein |

A grad student inspired these:

“The writer clearly suffers from a fatal conceit.”

“Reading this proposal helps me understand the knowledge problem.”

“Your paper appears to be the result of human action, but not human design.”

“The proposed outline reveals how little people really know about what they imagine they can design.”

Your suggestions?

27 January 2010 at 1:40 pm 6 comments

ISNIE 2010 Call for Papers

| Peter Klein |

The Call for Papers is out for the International Society for New Institutional Economics’s 2010 meeting, 17-19 June in Stirling, Scotland. Proposals are due 1 March. President-Elect Frank Stephen is putting together an impressive program with keynotes from Bruno Frey and two longtime ISNIE members you may have heard of: Elinor Ostrom and Oliver Williamson. Don’t miss it!

27 January 2010 at 9:40 am Leave a comment

Keynes vs. Hayek Rap Battle

| Lasse Lien |

If you’re teaching macro or the history of economic thought and you feel you’re not getting through to the kids, this video might be worth a try.

Thanks to Eirik Sjåholm Knudsen for the pointer.

26 January 2010 at 9:18 am 2 comments

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Nicolai J. Foss and Peter G. Klein, Organizing Entrepreneurial Judgment: A New Approach to the Firm (Cambridge University Press, 2012).
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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).
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