Archive for June, 2011

Mahoney and Pitelis Talk Public Entrepreneurship

| Peter Klein |

Here’s a podcast with my colleagues and good friends Joe Mahoney and Christos Pitelis on public entrepreneurship, part of an ongoing research project on public-private boundaries. Check it out!

16 June 2011 at 2:21 pm Leave a comment

Blessed Anonymity

| Peter Klein |

Critics of the market, from Marx and Karl Polanyi to Alasdair MacIntyre, John Gray, Robert Putnam, and some contemporary sociologists, decry the anonymity of commercial relations. Strong, local, community ties, they complain, are being displaced by long-distance, ad hoc, impersonal, weak ties. “Increasingly,” writes anthropologist Stephen Gudeman, “we commoditize things, leisure, body parts, reproductive capacities, DNA, and social relationships. As people flock to cities, sell their hardwood trees, change clothing styles, and watch television, community . . . shrinks.” (Thanks to Virgil Storr for this and many other good references.)

One response is to invoke Mises’s idea that social cooperation under the division of labor is actually the foundation of community. “The fundamental facts that brought about cooperation, society, and civilization . . . are the facts that work performed under the division of labor is more productive than isolated work and that man’s reason is capable of recognizing this truth” (Human Action, p. 144). Writers like Thomas Sowell and Walter Williams argue, for example, that the growth of the market stymies racism and other forms of prejudice.

Last week’s Economist had an interesting piece on supermarkets that brought these arguments to light:

The nostalgics don’t even have their history right. A big research project at the universities of Surrey and Exeter is currently studying shopping in post-war England. For one thing, high streets were not as quaint as politicians think. As far back as 1939, chain stores and co-operative (ie, mutual) retail societies already controlled about half of the grocery market. It was middle class matrons, the sort who dressed up to go shopping, who missed the deference shown by traditional grocers. Supermarkets were often welcomed by younger and working-class women. A retired secretary interviewed by the project recalled, as a young bride, asking the butcher for a tiny amount of mince. “Oh, having a dinner party, madam?” he sneered. A woman who bought anything expensive or unusual risked disapproving gossip, spread by shop assistants. The project found press advertisements promoting the anonymity of supermarkets, as well as their convenience.

Some of you will remember a scene from Woody Allen’s Bananas, which also illustrates this point nicely.

15 June 2011 at 9:45 am 2 comments

Do Senior Managers Make Better Decisions Than Students?

| Nicolai Foss |

Even management students may occasionally suffer from confidence and self-esteem problems. I have had many students confide that they were more than a little scared at the prospect of landing a real job where their decision-making skills would be compared to older, wiser, smarter, etc. colleagues. Rather than directing them to this site, in the future I am going to give such students a copy of Gary E. Bolton, Axel Ockenfels and Ulrich Thonemann’s “Who Is the Best at Making Decisions? Managers or Students?” They set up a simple experiment based on a simple profit maximizing problem, and find that practitioner performance isn’t as good as graduate business students’. Moreover, the learning curve of the latter is steeper than that of practicioners. (more…)

12 June 2011 at 2:30 pm 8 comments

More on Free Speech

| Nicolai Foss |

We have blogged a number of times in the past on (the economics of) free speech. John Stuart Mill is, of course, the towering figure when it comes to philosophical defenses of free speech. Here is a recent working paper, “Speech, Truth, and Freedom: An Examination of John Stuart Mill’s and Justice Oliver Wendell Holmes’s Free Speech Defenses,” that compares Mill with Holmes’ views, undertakes a dehomogenization exercise, and argues that their different free speech positions are rooted in different underlying views of liberty. For free speech afficionados, perhaps, but still recommended.

12 June 2011 at 2:04 pm Leave a comment

Upcoming Conferences

| Peter Klein |

  • ISNIE, 16-18 June in Palo Alto. Registrations are closed but latecomers could try lobbying the Treasurer to accept a late payment — never mind, that’s me, don’t bother.
  • “Open Source, Innovation, and New Organizational Forms,” 1 August in Johannesburg. “This first IPEG conference intends to explore new theoretical and empirical advances in open source organization: the interest is not just on voluntary Open Source Software production and its potential innovation implications, but also on such related ‘open source’ phenomena as collective invention, online collaboration (e.g., Wikipedia), online social networking (e.g., Facebook), open innovation, open science, open source biology, and open standards.” The conference website is not live as of this posting, but organizer Giampaolo Garzarelli can provide details. O&M’s Dick Langlois is a keynote speaker. 500-word abstracts are due 24 June.
  • “Achieving Coexistence of Biotech, Conventional & Organic Foods in the Marketplace,” 26-28 October in Vancouver. Speakers include FAO Deputy Director General Ann Tutweiler and Canadian Ag Minister Gerry Ritz. Coexistence conferences have been held every other year since 2003; the first 3 conferences came out of EU Commission efforts, the next was in Australia, and this one is the first to be held in North America. A co-organizer tells me “we hope to bring a more ‘practical’ view of coexistence than is commonly held in Europe.”

10 June 2011 at 12:00 pm Leave a comment

Incomplete Contracts and the Theory of the Firm

| Peter Klein |

A very useful survey article from the Spring 2011 Journal of Economic Perspectives: “Incomplete Contracts and the Theory of the Firm: What Have We Learned over the Past 25 Years?” by Philippe Aghion and Richard Holden. From the introduction:

In the first section of this paper, we spell out Grossman and Hart’s argument using a simple numerical example, then then we show how the incomplete contracts approach can be extended beyond the firms’ boundaries issue to analyze firms’ internal organization; firms’ financial decisions; the costs and benefits from privatization; and the organization of international trade between inter- and intrafirm trade. In the second section, we discuss several criticisms of the incomplete contracts/property rights methodology, especially what we call the “implementation criticism,”  and then we briefly review some recent developments of the incomplete contracts approach.

I plan to use it in “Economics of Institutions and Organizations” this fall.

Update: Thanks to Stéphane Saussier for the pointer to the upcoming conference, Grossman and Hart at 25, June 24-26 in Brussels.

9 June 2011 at 5:37 am 6 comments

An Ancient Rejection Letter

| Peter Klein |

Via Josh Gans, here’s the response from Geometrika: A Most Prestigious Journal with Really Special Referees to poor Ptolemaeus, regarding his submitted paper, “An Argument that the Earth Is Round, and a Method to Determine its Circumference.” Sadly, the reviewers were not impressed, one feeling that “the idea that the Earth is round is both (i) too simple and well known to be really surprising and worth of publication, and (ii) utterly deceptive, misleading and wrong.” The editor’s skillful close:

I am sorry to bring you what must be disappointing news. Please keep in mind that we can only publish less than 8 percent of submissions. I also hope that the brilliant comments of the referees will help you to revise this paper for a submission to a more appropriate eld journal, such as Forms of Miscellaneous Objects or Maritime Inquiries.

On the bright side, I feel that you must now be in the mood of refereeing a few papers for our great journal. I will not tell you, which, if any, of the attached papers is authored by referees 1 to 3, but you can of course guess. I would have liked to receive your reports on these papers by yesterday, so you can also consider this letter as your rst reminder notice for these reports.

8 June 2011 at 2:36 pm 4 comments

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Our Recent Books

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).