Archive for April, 2012

The Bizarro World of Professor Sen

| Peter Klein |

Here is another of those head-scratchers, this one from Amartya Sen, about how neoclassical economics is partly responsible for the financial crisis because neoclassical economists believe that markets work “perfectly”:

Since the crisis broke out the economics profession in general and mainstream economics in particular have been severely criticised. Do you think this is justified?

The criticism of mainstream economics is justified to a limited extent. It is certainly true that the focus of attention in mainstream economics has tended to be on assuming the market to be working perfectly and there being no need for regulation. However, while this view has been a very dominant part of mainstream economics, you have to bear in mind that mainstream economics is not all centered around one unified theme. I don’t think all of mainstream economics should be held responsible.

Do you think that neoclassical macro economists should bear the brunt of the blame?

This would be an oversimplification. Neoclassical economics has many different paths. There are mainstream neoclassical economists who have been very critical of the complete reliance on the markets.

I’ve been around neoclassical economists since my undergraduate days and I can’t think of a single neoclassical economist who says that markets work “perfectly” and favoring “complete reliance on the markets.” David Friedman comes to mind, but even his arguments for anarchism are not based on the belief that markets are somehow “perfect,” but that they are less imperfect than regulation. The truth, of course, is that virtually all neoclassical economists favor a substantial amount of economic regulation — government production of law and order, government control of the monetary system, competition policy, and other government actions to combat purported market failures.

Statements like Sen’s make sense only as a rhetorical ploy to fool the reader. If the mainstream thinks, say, that government should control 25% of the economy, and you think government should control 75%, you describe the mainstream as “extremists” who believe in “no government,” thus making your position seem like a reasonable middle ground.  Krugman of course employs the same rhetorical strategy. Sen is obviously too intelligent to mean what he says literally, so I can only assume mendacity. Am I missing something?

26 April 2012 at 10:12 am 2 comments

Part-time Work and Discursive Resistance and Foucault and Stuff

| Lasse Lien |

I both challenge and reify this:

Contributing to a Foucauldian perspective on ‘discursive resistance’, this paper theorizes how part-time workers struggle to construct a valid position in the rhetorical interplay between norm-strengthening arguments and norm-contesting counter-arguments. It is thereby suggested that both the reproductive and the subversive forces of resistance may very well coexist within the everyday manoeuvres of world-making. The analysis of these rhetorical interplays in 21 interviews shows how arguments and counter-arguments produce full-time work as the dominant discourse versus part-time work as a legitimate alternative to it. Analysing in detail the effects of four rhetorical interplays, this study shows that, while two of them leave unchallenged the basic assumptions of the dominant full-time discourse and hence tend instead to reify the dominant discourse, two other interplays succeed in contesting the dominant discourse and establishing part-time work as a valid alternative. The authors argue that the two competing dynamics of challenging and reifying the dominant are not mutually exclusive, but do in fact coexist.

Nentwich, J. and Hoyer, P. (2012), “Part-time Work as Practising Resistance: The Power of Counter-arguments.” British Journal of Management, forthcoming.

24 April 2012 at 2:22 am 3 comments

Explosive Economists

| Peter Klein |

I’ve always liked the actor John Lithgow, not only because of his smarmy yet likeable weirdness (keep your comments to yourselves, please), but also because he’s married to an economist, the UCLA economic historian Mary Yeager. (The late Fred Bateman told me that when he and Yeager were just starting out, no one in their professional circles could understand why she was hanging out with this struggling actor who was obviously never going to make it big.)

So I was amused by a profile in Thursday’s WSJ about Lithgow’s role in an upcoming Broadway play about cold-war journalist Joseph Alsop. Reporter: “You portray Joe Alsop as an explosive man. Did you model him on someone from your own life?” Lithgow: “I’ve known mercurial people who emotionally completely turn on a dime, and they’re very exciting people. My wife is a little like that.”

OK, most economists are not exciting, but I’ve known plenty of mercurial and explosive ones.

22 April 2012 at 9:10 pm 1 comment

Birger Wernerfelt Receives Honorary Doctorate from CBS

| Nicolai Foss |

Wernerfelt, a key originator of the resource-based view of strategy (here) who has made numerous important contributions to the economics of organization, marketing, and other fields, received the degree at a ceremony at the Copenhagen Business School yesterday (another recipient of the honorary doctoral degree was Deirdre McCloskey). I motivated the degree with the following remarks: (more…)

20 April 2012 at 4:58 pm 1 comment

No Best Practice for Best Practice

| Lasse Lien |

An important selling point for the consulting industry is that consultants can presumably help a firm identify and implement “best practice.” Surely the consulting industry is an important channel for disseminating knowledge of better ways of doing things, but identifying what constitutes best practice for a given firm in a given situation is no trivial task, and even if the best practice could be identified, transferring it will be a significant challenge.

This begs the question of whether there is a best practice for identification and transfer of best practices, and whether the consulting industry has identified and adopted such a practice. According to this paper Benjamin Wellstein and Alfred Kieser, the consulting industry in Germany is nowhere near a best practice for best practice. This goes for for both inter- and intra-industry transfer. I’ll bet my hat that this finding holds everywhere.

Well, I guess as long as the consulting industry keeps finding better practices for transferring better practices, we shouldn’t be too disappointed that there is no best practice for best practice. (HT: E.S. Knudsen)

20 April 2012 at 4:56 am 4 comments

Time to Say Goodbye, but Not Really

| Peter Lewin |

After a most enjoyable and productive tour as a guest blogger on this site (at least for me), the time has come to say goodbye.

I do so at an auspicious moment, having just received my copy of Organizing Entrepreneurial Judgment. This book brings together important work by two of the hosts of this site in a very accessible format that promises to spread their message to many who have yet to hear it. To understand the firm one must understand entrepreneurship and vice versa. We live in a dynamic world in which individual judgments concerning the value of resources and the path of future events play a key role and organizational structures develop to give traction to those judgments. For an unrepentant Austrian subjectivist like me it is all very exciting. I look forward to observing further developments as an observer and casual participant on this blog, and elsewhere.

I would like to warmly thank the hosts of this blog Dick, Nicolai, Lasse, and Peter for extending to me the invitation to participate and look forward to ongoing productive associations with all of them.

19 April 2012 at 2:45 pm 1 comment

Paradigm Shift

| Peter Klein |

Did you know this year is the semicentennial of Kuhn’s Structure of Scientific Revolutions? David Kaiser offers some reflections at Nature.

At the heart of Kuhn’s account stood the tricky notion of the paradigm. British philosopher Margaret Masterman famously isolated 21 distinct ways in which Kuhn used the slippery term throughout his slim volume. Even Kuhn himself came to realize that he had saddled the word with too much baggage: in later essays, he separated his intended meanings into two clusters. One sense referred to a scientific community’s reigning theories and methods. The second meaning, which Kuhn argued was both more original and more important, referred to exemplars or model problems, the worked examples on which students and young scientists cut their teeth. As Kuhn appreciated from his own physics training, scientists learned by immersive apprenticeship; they had to hone what Hungarian chemist and philosopher of science Michael Polanyi had called “tacit knowledge” by working through large collections of exemplars rather than by memorizing explicit rules or theorems. More than most scholars of his era, Kuhn taught historians and philosophers to view science as practice rather than syllogism.

Kuhn did not, to my knowledge, say much about the social sciences, though in a later essay he described them in somewhat unflattering terms:

[T]here are many fields — I shall call them proto-sciences — in which practice does not generate testable conclusions but which nonetheless resemble ph9ilosophy and the arts rather than the established sciences in their developmental patters. I think, for example, of fields like chemistry and electricity before the mid-eighteenth century, of the study of heredity and phylogeny before the mid-nineteenth, or many of the social sciences today. In those fields, . . . though they satisfy [Popper’s] demarcation criterion, incessant criticism and continual striving for a fresh start as primary forces, and need to be. No more than in philosophy and the arts, however, do they result in clear-cut progress.

Murray Rothbard took an explicitly Kuhnian approach to his history of economic thought, agreeing with Kuhn that there is no linear, upward progression and condemning what he called the “Whig theory” of intellectual history.

18 April 2012 at 10:00 am 4 comments

Get Off My Lawn

| Peter Klein |

The boys from were parking in our maintenance lot, so we had to put up signs. (Spotted in Champaign, IL.)

13 April 2012 at 7:06 pm 1 comment

Qantum + Politics = Ψ(Fun)

| Lasse Lien |

O&M is nonpartisan, but this description of Mitt Romney as the first quantum politician is IMHO so funny that it would be downright irresponsible to ignore it.

After describing how other candidates operate under Newtonian principles, where a candidate’s position on an issue remains constant until acted upon by some outside force, David Javerbaum goes on to describe how things are very different in the quantum Romneality (excerpt):

Complementarity. In much the same way that light is both a particle and a wave, Mitt Romney is both a moderate and a conservative, depending on the situation. It is not that he is one or the other; it is not that he is one and then the other. He is both at the same time.

Probability. Mitt Romney’s political viewpoints can be expressed only in terms of likelihood, not certainty. While some views are obviously far less likely than others, no view can be thought of as absolutely impossible. Thus, for instance, there is at any given moment a nonzero chance that Mitt Romney supports child slavery.

Uncertainty. Frustrating as it may be, the rules of quantum campaigning dictate that no human being can ever simultaneously know both what Mitt Romney’s current position is and where that position will be at some future date. This is known as the “uncertainty principle.”

Entanglement. It doesn’t matter whether it’s a proton, neutron or Mormon: the act of observing cannot be separated from the outcome of the observation. By asking Mitt Romney how he feels about an issue, you unavoidably affect how he feels about it. More precisely, Mitt Romney will feel every possible way about an issue until the moment he is asked about it, at which point the many feelings decohere into the single answer most likely to please the asker.

Noncausality. The Romney campaign often violates, and even reverses, the law of cause and effect. For example, ordinarily the cause of getting the most votes leads to the effect of being considered the most electable candidate. But in the case of Mitt Romney, the cause of being considered the most electable candidate actually produces the effect of getting the most votes.

Duality. Many conservatives believe the existence of Mitt Romney allows for the possibility of the spontaneous creation of an “anti-Romney” that leaps into existence and annihilates Mitt Romney. (However, the science behind this is somewhat suspect, as it is financed by Rick Santorum, for whom science itself is suspect.)

What does all this bode for the general election? By this point it won’t surprise you to learn the answer is, “We don’t know.” Because according to the latest theories, the “Mitt Romney” who seems poised to be the Republican nominee is but one of countless Mitt Romneys, each occupying his own cosmos, each supporting a different platform, each being compared to a different beloved children’s toy but all of them equally real, all of them equally valid and all of them running for president at the same time, in their own alternative Romnealities, somewhere in the vast Romniverse.

David Javerbaum (NYT March 31).
HT: Svein T. Johansen

13 April 2012 at 4:47 am 3 comments

Dilbert on Jim Collins

| Peter Klein |

Looks like Scott Adams has been reading O&M!

12 April 2012 at 9:16 am Leave a comment

A Curious Case of Vertical Integration

| Peter Klein |

The WSJ reports that Delta Airlines wants to acquire a Pennsylvania oil refinery. The reporters, quoting the ubiquitous “people familiar with the situation,” says that Delta “could save between $20 and $25 a barrel on some of its jet-fuel costs by acquiring the refinery, a big advantage as industry costs now approach $140 a barrel, up 11% so far this year.” But how? No particular economies of integration are mentioned in the article (apparently the WSJ doesn’t consider this an important point). Jet fuel is a standardized commodity, so asset specificity isn’t an issue. Organizational capabilities don’t seem to be relevant. Market power? Price discrimination? I don’t see it. In short, I can’t imagine where these cost savings would come from. Any ideas?

10 April 2012 at 1:51 pm 11 comments

Stylish Academic Writing

| Peter Klein |

Helen Sword’s recent WSJ piece — “Yes, Even Professors Can Write Stylishly” — takes me back to an early O&M entry on academic writing. Sword offers some great pairwise comparisons:

Stodgy: The human capacity to synthesize linguistic complexity is exemplified by the grammatical phenomenon of verb irregularity.

Stylish: “This book tries to illuminate the nature of language and mind by choosing a single phenomenon and examining it from every angle imaginable. That phenomenon is regular and irregular verbs, the bane of every language student.” (Steven Pinker)


Stodgy: A significant variability in nutrient-gathering behaviors has been observed in various insect species.

Stylish: “Insects suck, chew, parasitize, bore, store, and even cultivate their foods to a highly sophisticated degree of specialization.” (Richard Leschen and Thomas Buckley)

Plenty more are in her new book, Stylish Academic Writing. As I noted in the earlier post, economics and management scholarship has been blessed with some terrific prose stylists, but plenty of awful ones too.

10 April 2012 at 9:05 am 2 comments

And If You Can’t Teach, Teach Gym

| Peter Klein |

Kate Maxwell, writing at Growthology, is concerned about the distance between those who do entrepreneurship and those who teach or research entrepreneurship:

In my reading of the entrepreneurship literature I have been struck by the large gap between entrepreneurs and people who study entrepreneurship. The group of people who self select into entrepreneurship is almost entirely disjoint from the group of people who self select to study it. Such a gap exists in other fields to greater and lesser degrees. Sociologists, for instance, study phenomenon in which they are clearly participants whereas political scientists are rarely career politicians but are often actors in political systems.

But in the case of entrepreneurship the gap is cause for concern. My sense is that all too often those studying entrepreneurship don’t understand, even through exposure, the messy process of creating a business, nor, due to selection effects, are they naturally inclined to think like an entrepreneur might.

I agree entirely with this description, but am not sure I understand the concern. Kate seems to assume a particular concept of entrepreneurship — the day-to-day mechanics of starting and growing a business — that applies only to a fraction of the entrepreneurship literature. Surely one can study the effects of entrepreneurship on economic outcomes like growth and industry structure without “thinking like an entrepreneur.” Same for antecedents to entrepreneurship such as the legal and political environment, social and cultural norms, the behavior of universities, etc. Even more so, if we treat entrepreneurship as an economic function (alertness, innovation, adaptation, or judgment) rather than an employment category or a firm type, then solid training in economics and related disciplines seems the main prerequisite for doing good research.

Of course, this doesn’t mean that entrepreneurship scholars shouldn’t talk to entrepreneurs or study their lives and work. Want to know how if feels to throw the winning Superbowl pass? Ask Tom Brady or Eli Manning. The stat sheet won’t tell you that. But this doesn’t mean that only ex-NFL players can be competent announcers, analysts, sportswriters, etc. Similarly, I like to read about food, and have enjoyed the recent memoirs of great chefs like Jacques Pépin and Julia Child. These first-hand accounts are full of unique insights and colorful observations. But there are plenty of great books on the restaurant industry, on the relationship between food and culture, on culinary innovation, etc. by authors who couldn’t cook their way out of a paper bag.

What do you think?

7 April 2012 at 11:18 pm 6 comments

Why I Avoid Bourdieu: #2,538 in a Series

| Peter Klein |

I have little to add to this press release, summarizing a call by sociologists to treat the individual and social disease of failing to take climate change seriously:

LONDON — (March 26, 2012) — Resistance at individual and societal levels must be recognized and treated before real action can be taken to effectively address threats facing the planet from human-caused contributions to climate change.

That’s the message to this week’s Planet Under Pressure Conference by a group of speakers led by Kari Marie Norgaard, professor of sociology and environmental studies at the University of Oregon. . . .

“We find a profound misfit between dire scientific predictions of ongoing and future climate changes and scientific assessments of needed emissions reductions on the one hand, and weak political, social or policy response on the other,” Norgaard said. Serious discussions about solutions, she added, are mired in cultural inertia “that exists across spheres of the individual, social interaction, culture and institutions.”

“Climate change poses a massive threat to our present social, economic and political order. From a sociological perspective, resistance to change is to be expected,” she said. “People are individually and collectively habituated to the ways we act and think. This habituation must be recognized and simultaneously addressed at the individual, cultural and societal level — how we think the world works and how we think it should work.”

In their paper, Norgaard and co-authors Robert Brulle of Drexel University in Philadelphia and Randolph Haluza-DeLay of The King’s University College in Canada draw from the work of French sociologist Pierre Bourdieu (1930-2002) to describe social mechanisms that maintain social stability or cultural inertia in the face of climate change at the three levels. . . .

I note that the lead author recently published Living in Denial: Climate Change, Emotions, and Everyday Life (MIT Press, 2011), which sounds like a reasonable, balanced, and objective look at the climate-change debate.

1 April 2012 at 12:13 am 13 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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