Archive for July, 2013
Climate Science and the Scientific Method
| Peter Klein |
This article on climate science skeptics is making the rounds, and drawing the expected denouncements in the usual quarters. It actually makes some reasonable, and quite mild, statements, namely that climate science, like astronomy or evolutionary biology, is a different kind of “science” than physics or chemistry or geology or other mundane sciences. In the former fields, the fundamental assumptions and key mechanisms are usually not falsifiable, the data are often fuzzier than usual, and there is frequently a lot of hand-waiving to fill in gaps.
Many climate sceptics worry climate science cannot be dubbed scientific as it is not falsifiable (as in Popper’s demarcation criterion). They claim that while elements of climate science may be testable in the lab, the complexity of interactions and feedback loops, as well as the levels of uncertainty in climate models, are too high to be a useful basis for public policy. The relationship of observations to these models are also a worry for climate sceptics. In particular, the role of climate sensitivity.
As well as their use of models, the quality of observations themselves have been open to criticism; some of which have been attempts to clean up issues deriving from the messiness of data collection in the real world (eg the positioning of weather stations), while others have focused on perceived weaknesses in the proxy methods required to calculate historic temperature data such as cross-sections of polar ice sheets and fossilised tree rings.
Such claims are of variable quality, but what unites them is a conviction that data quality in various branches of climate science are below those required by “real science”.
What strikes me the most about these “big” sciences is the language and tone typically used to communicate the results to the public. Where scientists in mundane fields express their conclusions cautiously, emphasizing that results and conclusions are tentative and always subject to challenge and revision, climate scientists seem to view themselves as Brave Crusaders for Truth, striking down “Deniers” (who must be funded by the oil industry or some other evil group). They shout that we “know” this or that about climate change, what the planet will be like in 5,000 years, etc. You hardly ever hear other scientists talk like this, or act as if skeptics are necessarily prejudiced and irrational.
“Trapped” in Rental Contracts
| Peter Klein |
In today’s feature on the US housing market, an NPR correspondent sadly notes that foreclosure victims are “trapped” in rentals. Why, those poor, unlevered souls, choosing to purchase a flow of housing services over time, rather than buying a huge, illiquid housing asset outright, using borrowed funds. Tragic!
It made me think of similar tragedies:
- Mercedes and BMW drivers trapped in lease contracts, rather than buying their cars with cash or credit
- Individuals trapped in wage and salary contracts, rather than raising the capital, arranging the inputs, and bearing the uncertainties to be sole proprietors
- Companies trapped in outsourcing agreements, rather than owning all upstream and downstream production processes directly, as vertically integrated firms
- Vacationers trapped in resort hotels, rather than owning their own vacation condos or timeshares
- Readers trapped by downloading and reading books on their Kindles, essentially “renting” them from Amazon, rather than buying physical books
- Movie fans trapped in DVD rental agreements with Netflix, rather than owning massive DVD libraries
Don’t these suckers know that goods and services should always be purchased outright, rather than rented or borrowed?
More Orson
| Peter Klein |
A useful management tip from the great director:
Orson Welles: Did I ever tell you the story of [Franz Joseph’s] visit to the provinces? It’s a great movie story. You can use it on set almost any day with an assistant director.
Henry Jaglom: What is it?
OW: Franz Joseph is riding in his carriage through this tiny provincial town, plumes and all. The trembling mayor is sitting next to him. He says, “Your Imperial Highness, I have to apologize to you in the profoundest terms for the fact that the bells are not ringing in the steeple. There are three reasons. First, there are no bells in the steeple — ” And Franz Joesph interrupts him and says, “Please don’t’ tell me the other two reasons.” Now, that’s a good answer for every assistant director, everyone in the world that you’ve had working for you in any capacity.
HJ: Where you just want to get a straight answer. . . .
OW: I tell that story when I make a movie, always. When somebody starts with the excuses, I say, “Bells in the steeple.” It stops them every time.
Student: “I didn’t finish the assignment because, well, um. . . .” Professor: “Bells in the steeple!” I’m putting that one on my syllabus.
Two AoM PDWs of Interest
| Peter Klein |
O&Mers attending the AoM conference may find these Professional Development Workshops, sponsored by the Academy of Management Perspectives and based on recent AMP symposia, of particular interest:
The first PDW is on “Private Equity” and features presentations on the managerial, strategic, and public policy implications of private equity transactions. Presenters include Robert Hoskisson (Rice University), Nick Bacon (City University London), Mike Wright (Imperial College London), and Peter Klein (University of Missouri). The private equity session takes place Saturday, Aug 10, 2013 from 11:30AM – 12:30PM at WDW Dolphin Resort in Oceanic 5.
The second is on “Microfoundations of Management,” and features presentations from Nicolai Foss (Copenhagen Business School), Henrich Greve (INSEAD), Sidney Winter (Wharton), Jay Barney (Utah), Teppo Felin (Oxford), Andrew Van de Ven (Minnesota), and Arik Lifschitz (Minnesota). The microfoundations session takes place Monday, Aug 12, 2013 from 9:00AM
– 10:30AM at WDW Dolphin Resort in Oceanic 5
Preregistration isn’t required but please let Don Siegel or Tim Devinney know if you plan to attend, as space is limited.
Orson Welles on Organizational Structure
| Peter Klein |
Welles was perhaps the greatest auteur of cinema and modern theater, so it’s no surprise that he comes out in favor of flatter hierarchies:
OW: [Irving] Thalberg was the biggest single villain in the history of Hollywood. Before him, an producer made the least contribution, by necessity. The producer didn’t direct, he didn’t act, he didn’t write — so, therefore, all he could do was either (A) mess it up, which he didn’t do very often, or (B) tenderly caress it. Support it. Producers would only go to the set to see that you were on budget, and that you didn’t burn down the scenery. But [Louis B.] Mayer made way for the producer system. He created the fellow who decides, who makes the directors’ decisions, which had never existed before.
HJ: Didn’t the other studio heads interfere with their directors?
OW: None of the old hustlers did that much harm. If they saw somebody good, they hired him. They tried to screw it up afterwards, but there was still a kind of dialogue between talent and the fellow up there in the front office. They had that old Russian-Jewish respect for the artist. All they did was say what they liked, and what they didn’t like, and argue with you. That’s easy to deal with. And sometimes the talent won. But once you got the educated producers, he has a desk, he’s gotta have a function, he’s gotta do something. He’s not running the studio and counting the money — he’s gotta be creative. That was Thalberg. The director became the fellow whose only job was to day, “Action” and “Cut.” Suddenly, you were “just a director” on a “Thalberg production.” Don’t you see? A role had been created in the world. Just as there used to be no conductor of symphonies.
HJ: There was no conductor?
OW: No. The konzertmeister, first violinist, gave the beat. The conductor’s job was invented. Like the theater director, a role that is only 150, 200 years old. Nobody directed plays before then. The stage manager said, “Walk left on that line.” The German, what’s his name, Saxe-Meiningen, invented directing in the theater. And Thalberg invented producing in movies. He persuaded all the writers that they couldn’t write without him, because he as he great man.
Clearly Orson would not agree with my take on entrepreneurship and ultimate responsibility, as applied to the arts. Or do well in a restaurant kitchen. I have to admit, though, that Welles has a certain credibility on the subject of creativity.
Oversight
| Peter Klein |
When I testified last year before Congress on the Federal Reserve System I focused not on monetary theory and policy, but on organization theory, pointing out that an independent, largely unaccountable organization lacking any systematic oversight or governance procedures cannot possibly perform well. O&M readers have heard these complaints before. Not surprisingly, the same issues are key to understanding the debate over the NSA’s domestic surveillance procedures. The NSA’s defenders say its actions are lawful and appropriate and that there is effective oversight and governance, because Congress is briefed on the programs and an independent (albeit secret) court approves specific policies and data requests. “The government does not know,” wrote Richard Epstein and Roger Pilon, “whether you’ve called your psychiatrist, lawyer or lover. The names linked to the phone numbers are not available to the government before a court grants a warrant on proof of probable cause, just as the Fourth Amendment requires.”
Thanks to Edward Snowden’s revelations, we know the first part of this claim is nonsense: a low-level contractor can request names and the content of actual calls with a few mouse clicks. (Even the collection of metadata is itself a gross violation of privacy.) More disturbing, the NSA now admits it has “three-hop” authority, meaning that it can access the calls not only of alleged terrorists, but those in contact with alleged terrorists, and those in contact with those in contact with alleged terrorists. (Watch out, Kevin Bacon!) More interesting is the claim about alleged judicial oversight. We’ve long known that the secret FISA court, which approves surveillance requests, gives the spy agencies what they want 99% of the time. To call the FISA court procedure a rubber stamp is an insult to rubber stamps. And what of the alleged Congressional participation and oversight? We heard this yesterday:
Congresswoman Zoe Lofgren revealed that an annual report provided to Congress by the government about the phone-records collection, something cited by intelligence officials as an example of their disclosures to Congress, is “less than a single page and not more than eight sentences.”
So much for transparency and detailed disclosure. (By comparison, my last annual report to my supervisor, reporting on such issues vital to national security as my academic publications, conference participation, teaching activities, etc., was 14 pages and 2,700 words.)
The bottom line is that, whatever one thinks is the appropriate scope for these surveillance programs, the US intelligence agencies operate without any de facto oversight and governance. Small groups of unelected officials and bureaucrats decide, at their sole discretion, what is and isn’t appropriate for “protecting national security.” You don’t need a course in organization theory to predict how such groups will behave.
The Coase Theorem in under 140 Characters
| Dick Langlois |
From the Stanford alumni newsletter:
Goodbye @SUAthletics, Hello @gostanford
Stanford athletics knows how to drive a hard bargain. The department recently traded its longtime Twitter handle, @SUAthletics, to Syracuse University in exchange for a yet-to-be determined order of local goods, including one case of oranges. The fruit will be used to refill Stanford’s 2011 Orange Bowl trophy. Athletics will now tweet as @GoStanford, which had emerged as a more popular choice.
Organizational Learning without Markets
| Peter Klein |
A really interesting NBER paper from Thomas Triebs and Justin Tumlinson confirms what you may suspect, that firms operating outside the market system — in this case, in the former East Germany — do not learn the capabilities for judging market signals. Triebs and Tumlinson compare East and West German firms after unification and find that East German firms did not anticipate, or respond to, market information as well as their West German counterparts, other things equal, suggesting that during the Communist period, firms lost (or failed to acquire) the ability to work within a market setting. The paper is based on a formal learning model but the empirical results seem to square with a variety of approaches, including resource-based and managerial capabilities theories.
Learning Capitalism the Hard Way—Evidence from Germany’s Reunification
Thomas P. Triebs, Justin Tumlinson
NBER Working Paper No. 19209, July 2013Communism in East Germany sought to dampen the effect of market forces on firm productivity for nearly 40 years. How did East German firms respond to the free market after being thrust into it in 1990? We use a formal learning model and German business survey data to analyze the lasting impact of this far-reaching treatment on the way firms in former East Germany predicted their own productivity relative to firms in former West Germany during the two decades since Reunification. We find in confirmation of our formal model’s predictions, that Eastern firms forecast productivity less accurately, particularly in dynamic and uncertain markets, but that the gap gradually closed over 12 to 13 years. Second, by analyzing the direction of firm level errors in conjunction with contemporaneous market signals we find that, in the years immediately following Reunification, Eastern firms estimate the market’s role as generally less potent than Western firm do, an observation consistent with overweighting experiences from the communist era; however, over roughly 14 years both converge to the same (incorrect) overestimate of the market’s role on their productivity.
I’m reminded of Mises’s remark that entrepreneurs, in a socialist economy, learn to excel at “diplomacy and bribery.” I suspect a study like Triebs and Tumlinson’s on political capabilities or skill at political entrepreneurship might yield the opposite result.
Bowling for Fascism
| Dick Langlois |
Speaking of Robert Putnam: Although I think the idea of social capital has its uses, Putnam’s claim that civic engagement in the US has been declining was long ago demolished by my late UConn colleague Everett Ladd. But I have also thought that social capital – and the Romantic “communitarian” movement in general – has been blind to the authoritarian side of community. The always-interesting Hans-Joachim Voth and his co-authors have illustrated this in a dramatic way in a new working paper. Here is the abtract.
Social capital – a dense network of associations facilitating cooperation within a community – typically leads to positive political and economic outcomes, as demonstrated by a large literature following Putnam. A growing literature emphasizes the potentially “dark side” of social capital. This paper examines the role of social capital in the downfall of democracy in interwar Germany by analyzing Nazi party entry rates in a cross-section of towns and cities. Before the Nazi Party’s triumphs at the ballot box, it built an extensive organizational structure, becoming a mass movement with nearly a million members by early 1933. We show that dense networks of civic associations such as bowling clubs, animal breeder associations, or choirs facilitated the rise of the Nazi Party. The effects are large: Towns with one standard deviation higher association density saw at least one-third faster growth in the strength of the Nazi Party. IV results based on 19th century measures of social capital reinforce our conclusions. In addition, all types of associations – veteran associations and non-military clubs, “bridging” and “bonding” associations – positively predict NS party entry. These results suggest that social capital in Weimar Germany aided the rise of the Nazi movement that ultimately destroyed Germany’s first democracy.
Sampling on the Dependent Variable, Robert Putnam Edition
| Peter Klein |
Famed sociologist Robert Putnam makes his case for government funding of social science research:
One of the harshest critics of National Science Foundation funding of political science has even praised my study [on civil society and democracy] as “one of the most influential pieces of practical research in the last half-century.”
Ironically, however, if the recent amendment by Sen. Tom Coburn (R-Okla.) that restricts NSF funding for political science had been in effect when I began this research, it never would have gotten off the ground since the foundational grant that made this project possible came from the NSF Political Science Program.
Well, yes, if it hadn’t been for NASA, we wouldn’t have put a man on the moon. What this shows about the average or marginal productivity of government science funding is a little unclear to me.
Of course, Putnam’s piece is a short editorial making an emotional, rather than logical, appeal. But this kind of appeal seems to be all the political scientists have offered in response to the hated Coburn Amendment.
Culture, Entrepreneurship, and Innovation: French Edition
| Peter Klein |
Quote of the day, from Peter Gumbel’s France’s Got Talent: The Woeful Consequences of French Elitism, an interesting first-person account of the French educational system:
[T]he patterns of behavior established at [French] school appear to continue in later life, reproducing themselves most obviously in the workplace. If you learn from an early age that volunteering answers at school may prompt humiliating put-downs from your teachers, how active a participant will you be in office strategy discussions in the presence of an authoritarian boss? If working together in groups was discouraged as a child, how good a team player will you be as a grown-up? If you are made to believe as a 10-year-old that it’s worse to give a wrong answer than to give no answer at all, how will that influence your inclination to take risks?
I won’t repeat the apocryphal George W. Bush quote that “the problem with France’s economy is that the French have no word for entrepreneur,” but I will say that I have found French university students to be less aggressive than their US or Scandinavian equivalents. To be fair, when I’ve taught in France it has been in English, and I initially attributed the students’ reluctance to speak up, to answer questions, and to challenge the instructor to worries about English proficiency. But talking to French colleagues, and reading accounts like Gumbel’s (based on his experiences teaching at Sciences Po), I think the problem is largely cultural. The French system tends to favor conformity and memorization over creativity and spontaneity, which may or may not have a harmful effect on the performance of French organizations and French attitudes toward entrepreneurship and innovation.
I’m curious to know what our French readers think (but don’t hammer me with Bourdieu or Crozier references, please).
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