Archive for July, 2015


| Peter Klein |

rs_300x300-150728134433-600.Cecil-The-Lion.jl.072815No doubt you’ve heard about Walter Palmer, the American dentist who shot the lion, “Cecil,” in Zimbabwe, pushing aside Sir Tim Hunt as the Internet’s Most Hated Person. (Aside from calling Palmer cruel and depraved — even wishing his death by bow and arrow — some are labeling him a sociopath, which makes me wonder, are lions now considered members of society? Orgheads?)

I don’t hunt and have no particular emotional attachment to lions, so I find the outrage level bewildering. However, I think this can be a teachable moment. Specifically, there are lessons here about trophy hunting and endangered species. Not surprisingly to anyone who has studied property-rights economics, there is evidence that allowing trophy hunting is a good means of protecting endangered species. This is a version of the general argument that defining and enforcing property rights in scarce resources, including wildlife, provides incentives for individuals to protect and maintain those resources. (You’ve probably heard the quip that the world isn’t running out of chickens and dairy cattle.) Groups like PERC have produce dozens of studies on endangered species and private conservation more generally and there are plenty of nerdier papers too. If Cecil’s unfortunate end helps stimulate thoughtful discussion on how to avoid the tragedy of the commons, then he will not have died in vain.

29 July 2015 at 6:01 pm 9 comments

Masahiko Aoki

| Dick Langlois |

I was saddened to learn that Masa Aoki passed away on July 15. He was only 77. Masa was a towering figure in the economics of institutions and organizations, and a true gentleman.

22 July 2015 at 9:36 am 1 comment

Piece Rates and Multitasking

| Peter Klein |

pieceA canonical result of multitask agency theory is that, when agents are assigned to multiple activities and some are more easily measured than others, piece-rate incentive schemes encourage agents to focus on the measurable activities while shirking the others. Professors at research universities, for example tend to focus on research at the expense of teaching — not because they don’t care about teaching, but because research output is easy to measure, while teaching quality isn’t, so administrators wishing to reward good performance tend to base their evaluations on research productivity. Or so I’ve heard (ahem). The implication is that, to encourage balanced effort and performance across activities, supervisors should rely at least partly on subjective, holistic evaluation criteria, and not just objective, quantitative measures of employee performance, or even do away with incentive compensation altogether.

An interesting paper in the January 2015 Southern Economic Journal offers a different theory, and some experimental evidence to back it up, suggesting that piece rates may actually be better than other schemes under multitasking. The idea is that agents may be uncertain about the principal’s monitoring ability, and the choice of a piece-rate scheme signals that the principal is a good monitor. This signaling effect can, under certain conditions, overcome the standard distortionary effect described above. Put differently, relying on subjective, holistic evaluation criteria, or abandoning performance measurement altogether (Alfie Kohn cheers!), may signal a sophisticated, experienced principal, but may also signal a principal who is too lazy to pay attention to employee behavior at all.

The paper is by Omar Al-Ubaydli, Steffen Andersen, Uri Gneezy, and John List and is cleverly titled “Carrots That Look Like Sticks: Toward an Understanding of Multitasking Incentive Schemes.” (Yes, it is part of the List Project on which we have mixed opinions.) Here is more on multitasking.

20 July 2015 at 8:32 am 1 comment

ICC Special Issue on Steve Klepper

| Dick Langlois |

The new issue of Industrial and Corporate Change is a special issue devoted to the legacy of Steve Klepper, who died a couple of years ago at age 64. The editors provide a good survey of Steve’s work, and there are a number of interesting papers in the issue, including one by David Mowery comparing Klepper with Alfred Chandler.

17 July 2015 at 12:45 pm 1 comment

Entrepreneurial Opportunity: The Oxygen or Phlogiston of Entrepreneurship Research?

| Peter Klein |

PhlogistoncollectorDon’t miss this PDW at the upcoming Academy of Management conference in Vancouver. From organizer Per Davidssson:

I just wanted to bring your attention to a PDW I am organizing for the upcoming AoM meeting, where we will engage in frank and in-depth discussions about the problems and merits of the popular notion of “entrepreneurial opportunity”. We have been fortunate to gather a collection of very strong scholars and independent thinkers as presenters and discussants in this PDW: Richard J. Arend, Dimo Dimov, Denis Grégoire, Peter G. Klein, Moren Lévesque, Saras Sarasvathy, and Matthew Wood. . This illustrious group of colleagues will make sure the deliberations do not focus on a “beauty contest” between “discovery” and “creation” views but instead reach beyond limitations of both.  

I encourage you to join us for this session, and to make absolutely sure I won’t send you to the wrong place at the right time I have copied the details straight from the online program:

Title: Entrepreneurial Opportunity: The Oxygen or Phlogiston of Entrepreneurship Research? (session #365)

Date & Time: Saturday, August 08, 2015, 12:30:00 PM – 3:00:00 PM

Hotel & Room: Vancouver Convention Centre, Room 012

Further elaboration follows below. Heartily welcome!


7 July 2015 at 10:51 am 3 comments


| Peter Klein |

logoI’ve long been involved with the International Society for New Institutional Economics (ISNIE). (In fact, I first met the esteemed Professor Foss at the inaugural ISNIE conference in St. Louis in 1997.) ISNIE was established as an global academic society promoting the study of institutions within the broad tradition established by the organization’s co-founders Ronald Coase, Oliver Williamson, and Douglass North. ISNIE has been a great success, holding annual conferences in the US and Europe, sponsoring an important working-paper series, and boasting thousands of members from all over the world.

Times change, and over the last two decades the study of institutions has moved from the periphery towards the center of economic, social, political, and legal analysis. The statement, “institutions matter,” which might have been controversial in social science in the 1990s, seems trite today. As such, some of ISNIE’s leaders and members saw a need to reposition and rebrand the society to reflect the current academic and policy climate. Last year ISNIE’s members voted, and this year the board approved, a name change. The organization is now SIOE, the Society for Institutional and Organizational Economics. Along with the change is a new website, featuring news, information, a blog, and many other features. The site is a work in progress and editors Bruno Chaves and Jens Prüfer would be happy to receive comments and suggestions.

I’m looking forward to the next twenty years with SIOE!

6 July 2015 at 1:01 pm Leave a comment


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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).