Archive for January, 2011

Kirznerian versus Knightian Entrepreneurs in Film

| Peter Klein |

Kirzner’s entrepreneur is a pure discoverer who owns no capital. Knight’s entrepreneur is an uncertainty-bearing, resource owner with skin in the game. So who do you think is the real entrepreneur, Jerry Lundegaard or Wade Gustafson?

Bonus: my favorite scene from Miller’s Crossing, useful to illustrate the differences between action (emphasized by Knight) and cognition (emphasized by Kirzner):  (more…)

25 January 2011 at 8:35 am 4 comments

My New Favorite Journal

| Peter Klein |

It’s the Journal of Universal Rejection (HT: Joshua Gans). From the journal’s website:

The founding principle of the Journal of Universal Rejection (JofUR) is rejection. Universal rejection. That is to say, all submissions, regardless of quality, will be rejected. Despite that apparent drawback, here are a number of reasons you may choose to submit to the JofUR:

  • You can send your manuscript here without suffering waves of anxiety regarding the eventual fate of your submission.
  • You know with 100% certainty that it will not be accepted for publication.
  • There are no page-fees.
  • You may claim to have submitted to the most prestigious journal (judged by acceptance rate).
  • The JofUR is one-of-a-kind. Merely submitting work to it may be considered a badge of honor.
  • You retain complete rights to your work, and are free to resubmit to other journals even before our review process is complete.
  • Decisions are often (though not always) rendered within hours of submission.

If I submit a paper titled “The Ubiquity of Knightian Uncertainty,” would that constitute a performative contradiction?

22 January 2011 at 11:29 pm 2 comments

Finally — a Field Experiment!

| Lasse Lien |

Field experiments represent a killer combination of a causal design and external validity — the best of both the classical (laboratory) experiment and the natural experiment. Unfortunately, field experiments in strategy,  management, organizational economics, etc. are often prohibitively costly, morally questionable, or both. But sometimes a field experiment is feasible, and when it is, it tends to stand out as particularly interesting.

This paper illustrates this point quite well, IMHO. The paper is a field experiment on the not entirely trivial question: Does Management Matter?

21 January 2011 at 2:47 pm 1 comment

ISNIE Annual Conference, Stanford University, June 16–18

| Scott Masten |

The 15th Annual Conference of the International Society for New Institutional Economics will be held this year at Stanford University on June 16-18. The conference is being organized by President-Elect Barry Weingast, and my inside, not-yet-public information is that the conference will have two very interesting keynotes. The ISNIE website has the just-released Call for Papers.


21 January 2011 at 10:46 am Leave a comment

Organizing for Synergies

| Peter Klein |

Thanks for Mike S. for the pointer to this paper (published version here, ungated version here):

Organizing for Synergies
Wouter Dessein, Luis Garicano, and Robert Gertner

Large companies are usually organized into business units, yet some activities are almost always centralized in a company-wide functional unit. We first show that organizations endogenously create an incentive conflict between functional managers (who desire excessive standardization) and business-unit managers (who desire excessive local adaptation). We then study how the allocation of authority and tasks to functional and business-unit managers interacts with this endogenous incentive conflict. Our analysis generates testable implications for the likely success of mergers and for the organizational structure and incentives inside multidivisional firms.

This is an understudied topic in organizational design, I think. The large literature on the M-form, going back to Chandler and Williamson and flourishing in the 1970s and 1980s, compared functional to business-unit managers across organizations, but said much less about mixing them within organizations. The modern internal capital markets literature focuses on information problems between division heads and the central office, and conflicts over resources among division heads, but not the issues raised here by Dessein, Garicano, and Gertner. The vertical integration literature, as well, tends to treat firm-wide support services as peripheral to the incentive conflicts between vertically related divisions.

20 January 2011 at 11:05 pm Leave a comment

Economic Growth Quote of the Day

| Peter Klein |

The path of economic progress is strewn with the wreckage of failures. Every business man knows this, but few economists seem to have taken note of it. In most of the theories currently in fashion economic progress is apparently regarded as the more or less automatic outcome of capital investment, “autonomous” or otherwise. Perhaps we should not be surprised at this fact: mechanistic theories are bound to produce results which look automatic.

— Ludwig Lachmann, Capital and Its Structure (1956), pp. 36-37.

20 January 2011 at 10:05 am 1 comment

Famous Figure Omission

| Scott Masten |

My inbox today contained an advertisement for a new Elgar publication: Famous Figures and Diagrams in Economics:

I’m sure that everyone in the O&M-isphere will agree that such a volume is incomplete without (more…)

19 January 2011 at 2:57 pm 3 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).
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).
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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).
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