Archive for February, 2011

São Paulo Workshop on Institutional Analysis

| Peter Klein |

The next Coase Institute workshop for young scholars is 15-21 May 2011 in São Paulo. The application deadline is 15 February, so don’t delay!

9 February 2011 at 12:02 pm Leave a comment


| Peter Klein |

Every academic and professional discipline has its own specialized vocabulary. In some cases, this brings clarity and precision; in others, it serves mainly to bamboozle the uninitiated. Even architecture studies is no exception:

Other architects, especially those teaching in universities, reacted to the collapse of Modernism by attempting to reinvent the field as a theoretical discipline. The theories did not come from the evidence of the practice of architecture, as one might expect (that was left to Christopher Alexander), but from arcane historical tracts and the writings of French literary critics in hermeneutics, poetics, and semiology. Thus began a new phase in professional jargon.

Thanks to Witold Rybczynski for giving us an entry for both our jargon watch and Pomo Periscope series. What would Fabio say?

8 February 2011 at 11:12 am 5 comments

What the Seminar Speaker Really Means

| Peter Klein |

A useful guide. Written primarily for natural scientists, but applies more-or-less across the curriculum. Updates Stigler’s famous “Conference Handbook.” Sample:

When the speaker says: I’m pleased to give you this talk this morning because I always enjoy sharing my research with young scientists.

The speaker really means: I was promised a small honorarium.

When the speaker says: First, a little background.

The speaker really means: I am about to show you the only slide in which I have any confidence.

When the speaker says: This has been an incredibly exciting field for us to research.

The speaker really means: Five or six labs in the world care about this. You don’t.

When the speaker says: To be fair, there has been some debate in the scientific community about this point.

The speaker really means: We have a laboratory of mortal enemies at another institution, and they are so very wrong.

When the speaker says: This led us to ask a different question.

The speaker really means: Our grant ran out.

When the speaker says: I’ll just talk briefly about this.

The speaker really means: I will talk about this for at least an hour. I am unaware that time is finite. I am your overlord.

When the speaker says: This result was completely unexpected.

The speaker really means: This result pissed us off. Two postdocs cried.

When the speaker says: At this point, I went back to the literature.

The speaker means: At this point, I instructed my graduate student to go back to the literature.

Although, actually, the speaker really means: At this point, I instructed my graduate student to go back to the literature, but he just used Wikipedia, so I went back to the literature. (more…)

7 February 2011 at 12:48 am 4 comments

The Performative Effects of Social Constructionist Professors in Business Schools

| Nicolai Foss |

Many European business schools praise disciplinary diversity. Some style themselves as “business universities,” rather than “traditional” business schools. Such schools may have a substantial contingent of faculty from the humanities, including historians, literary theorists, and philosophers, as well as sociologists and political scientists. The probability of such faculty subscribing to social constructionism is high. Typically, this perspective is taught to the students in courses on communication, whether intercultural or not, the theory of science, cross-cultural management, and so on. It is pretty much everywhere.

Those in sociology who stress “reflexivity” and “performativity” tell us that our theorizing, as mediated through teaching, influences the objects of theorizing. What may be the performative effect of social constructionist professors? My hypothesis is that the students they teach will end up acting like Hayek’s “constructivist rationalists” on the level of society, that is, managers who believe everything in organizations is malleable, and may therefore do substantial damage to the organizations they manage. The Wiki on social constructionism provides a neat summary of Ian Hacking’s celebrated critique of social constructionism:

Ian Hacking, having examined a wide range of books and articles with titles of the form “The social construction of X” or “Constructing X”, argues that when something is said to be “socially constructed”, this is shorthand for at least the following two claims:
(0) In the present state of affairs, X is taken for granted; X appears to be inevitable.
(1) X need not have existed, or need not be at all as it is. X, or X as it is at present, is not determined by the nature of things; it is not inevitable.
Hacking adds that the following claims are also often, though not always, implied by the use of the phrase “social construction”:
(2) X is quite bad as it is.
(3) We would be much better off if X were done away with, or at least radically transformed.

If this is foundational for you as a manager, you will likely have little respect for what has evolved inside an organization, because “it is not inevitable.” You will be unimpressed by efficiency arguments from economics and functionalist arguments from sociology that explain the presence of a given feature of an organization. Your urge is to change the organization erratically according to your whims, and nourish ongoing turmoil. Psychological/implicit contracts suffer. Negative implications for productivity and firm-level performance follow.

4 February 2011 at 4:35 pm 24 comments

Another Field Experiment

| Lasse Lien |

As previously pointed out, field experiments are rare. Here is another. This one is on the quality of decision making. I guess the authors’ finding that men are more consistent (i.e. rational) decision makers than women will raise an eyebrow or two. I don’t know about other male O&M readers, but I am definitely taking home a copy to show my wife.

Who Is (More) Rational?
Syngjoo Choi, Shachar Kariv, Wieland Müller, and Dan Silvermany

Revealed preference theory offers a criterion for decision-making quality: if decisions are high quality then there exists a utility function that the choices maximize. We conduct a large-scale field experiment that enables us to test subjects’ choices for consistency with utility maximization and to combine the experimental data with a wide range of individual socioeconomic information for the subjects. There is considerable heterogeneity in subjects’ consistency scores: high-income and high-education subjects display greater levels of consistency than low-income and low-education subjects, men are more consistent than women, and young subjects are more consistent than older subjects. We also find that consistency with utility maximization is strongly related to wealth: a standard deviation increase in the consistency score is associated with 15-19 percent more wealth. This result conditions on socioeconomic variables including current income, education, and family structure, and is little changed when we add controls for past income, risk tolerance and the results of a standard personality test used by psychologists.

4 February 2011 at 3:23 pm 6 comments

WSJ on Conglomerates

| Peter Klein |

Industrial conglomerate ITT announced in January a split into three more focused companies, one concentrated in hotels and gaming, one in education (technical training centers), and a slimmed-down ITT Corporation containing the remaining manufacturing businesses. This is the second major restructuring for ITT, once the poster child of the conglomerate movement of the 1960s and early 1970s.

The Wall Street Journal’s article of 13 January contains a nice graphic on the firm’s history, including a picture of Harold Geneen, the quintessential “management by the numbers” CEO (click to enlarge). It also includes ruminations on the conglomerate form more generally, about which I have a continuing research interest. Yale’s Jeffrey Sonnenfeld says conglomerates represented “an unholy mix of opportunistic investment bankers, misguided consultants and the vanities of CEOs.” A companion article puts it this way: “Conglomerates blossomed five decades ago, when favorable interest rates made it relatively easy to boost revenue and stock prices with serial acquisitions. But they fell out of favor when the stock increases slowed and investors began to question whether promised efficiencies would materialize.”

But this is not quite right. In fact, the research literature finds little evidence that conglomerate growth was fueled mainly by cheap credit and rising stock prices. (more…)

4 February 2011 at 1:56 pm 1 comment

John Nye on the New Institutional Economics and Economic Development

| Peter Klein |

The always-thoughtful and interesting John Nye, speaking last December on the New Institutional Economics and economic development.

BTW, for your convenience, a copy of the hard-to-find 1989 Nabli and Nugent paper, “The New Institutional Economics and Its Applicability to Development,” is available here.

3 February 2011 at 12:39 pm Leave a comment

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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).
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).