Archive for January, 2016

Popular Economics Readings

| Peter Klein |

CDYFOCnUsAEllehThe Open Syllabus Project is a useful repository of course reading lists from almost every academic discipline. (Hey, we had the idea first!) A fun feature is the ability to browse by popularity, i.e., to see the most frequently assigned readings in a particular field. Of course, the sample consists of syllabi posted on public websites, so it may be biased toward particular kinds of courses or universities. Still, the findings are interesting. This article complains that The Communist Manifesto is near the top across all disciplines, but confusingly bounces back and forth between economics and other fields and doesn’t distinguish among textbooks, research monographs, and research articles.

I made my own list of most popular items under Economics, excluding textbooks and other non-research materials. The results are interesting:

  1. Coase, “The Problem of Social Cost”
  2. Smith, The Wealth of Nations
  3. Keyness, The General Theory
  4. Hardin, “The Tragedy of the Commons”
  5. Marx, Capital
  6. Pritchett, “Divergence, Big Time”
  7. Coase, “The Nature of the Firm”
  8. Tiebout, “A Pure Theory of Local Expenditures”
  9. Akerlof, “The Market for Lemons”
  10. Hayek, “The Use of Knowledge in Society”
  11. North, Institutions, Institutional Change, and Economic Performance
  12. Friedman, Capitalism and Freedom
  13. Stiglitz, Globalization and Its Discontents
  14. Friedman, “Monetary Policy”
  15. Solow, “A Contribution to the Theory of Economic Growth”
  16. David, “Clio and the Economics of QWERTY”
  17. Spence, “Job Market Signaling”
  18. Marx, Communist Manifesto
  19. Dornbusch, “Expectations and Exchange Rate Dynamics”
  20. Easterly, The Elusive Quest for Growth
  21. Friedman, “The Role of Monetary Policy”
  22. Grossman and Helpman, “Protection for Sale”
  23. Diamond, “Social Security”
  24. Kremer, “Population Growth and Technological Change: One Million B.C. to 1990”
  25. Stigler, “The Theory of Economic Regulation”
  26. Freeman, “Are Your Wages Set in China?”
  27. Duflo, “Schooling and Labor Market Consequences of School Construction in Indonesia”
  28. Arrow, “Uncertainty and the Welfare Effects of Medical Care”
  29. Rogoff, “The Purchasing Power Parity Puzzle”
  30. Barro, “Are Government Bonds Net Worth?”

Pretty much all classics, and not surprising to see any on a reading list. But some surprising omissions. No Samuelson, Becker, Lucas, Krugman, Sargent, Kahneman, or Fama, just to mention a few Nobelists. No Shleifer, Tirole, Mankiw, Holmstrom, Simon, Jensen, Kreps, Alchian, Demsetz, and others with highly cited SSCI or RePEC papers. Of course, these are undergraduate as well as graduate syllabi, so highly technical articles assigned to PhD students are less likely to make the cut. Still, this might be a good “Books and Articles Every Economist Should Know” kind of list.

29 January 2016 at 3:41 pm 1 comment

Is Terrorism a Disease?

| Peter Klein |


US Defense Secretary Ash Carter is making the rounds with a speech about ISIL being a “cancer” that must be cured with aggressive treatment. “[L]ike all cancers, you can’t cure the disease just by cutting out the tumor. You have to eliminate it wherever it has spread, and stop it from coming back. . . . . [We have] three military objectives: One, destroy the ISIL parent tumor in Iraq and Syria by collapsing its two power centers in Mosul, Iraq and Raqqah, Syria. . . . Two, combat the emerging metastases of the ISIL tumor worldwide wherever it appears. . . .” Terrorism, in other words, is a cancer metastasizing from the underlying tumor of Islamic fundamentalism.

This language may rally the troops, but it is particularly unhelpful in understanding the nature, antecedents, consequences, and remedy for terrorism. As Robert Pape, David Card, and other social scientists have shown, terrorism is a tactic, a form of purposeful human action, and should be understood as such, not as a mindless, undirected biological phenomenon.

Edith Penrose warned more than sixty years ago about the limits of biological analogies in understanding social issues. “The chief danger of carrying sweeping analogies very far is that the problems they are designed to illuminate become framed in such a special way that significant matters are frequently inadvertently obscured. Biological analogies contribute little either to the theory of price or to the theory of growth and development of firms and in general tend to confuse the nature of the important issues.” I have written before about the problem of treating gun violence as a disease, rather than a legal, social, and criminological issue. To understand why people shoot guns, on purpose or accidentally, we need to focus on their preferences, beliefs, and actions. (This does not imply some kind of straw-man “rationality,” by the way.) Likewise, if we want to reduce terrorist acts, we should treat terrorism as a military tactic, designed to achieve specific ends, rather than a disease or epidemic whose “growth” we have to stop.

Update (27 Jan): From David Levine I learn of another example of a medical researcher trying to address a social science problem without apparently understanding the concept of selection bias (he samples on the dependent variable).

26 January 2016 at 12:06 pm Leave a comment

Baylor University PhD Program in Entrepreneurship

| Peter Klein |

bbusiness_green_w-1iyteaaMuch as I hate to use this blog for self-promotion, … Hahahahaha. OK, seriously. As many of you know I joined Baylor University this fall and will be heavily involved with Baylor’s new PhD program in Entrepreneurship. Prospective students interested in entrepreneurship, strategy, organizational economics, innovation, creativity, institutions, business history, governance, the theory of science, Austrian economics — i.e., the regular topics of this blog — should consider applying. Detailed information about the program, including application materials and instructions, are on the program website. The formal deadline for Fall 2016 admission is next Friday, January 15, so time is short! I’m happy to answer any questions.

6 January 2016 at 1:41 pm 8 comments

Dynamic Competition

| Dick Langlois |

I was recently asked by a staffer of the UK House of Lords to contribute written testimony on an inquiry into “online platforms and the EU Digital Single Market.” They wanted to hear about the concept of dynamic competition, and they gave me a set of questions, which I answered in a rather abstract way. The testimony has now been published on Parliament’s website.

4 January 2016 at 2:14 pm Leave a comment

SMACK-down of Evidence-Based Medicine

| Peter Klein |

Mother-Child-300x199As a skeptic of the evidence-based management movement (championed by Pfeffer, Sutton, et al.) I was amused by a recent spoof article in the Journal of Evaluation in Clinical Practice, “Maternal Kisses Are Not Effective in Alleviating Minor Childhood Injuries (Boo-Boos): A Randomized, Controlled, and Blinded Study,” authored by the Study of Maternal and Child Kissing (SMACK) Working Group. Maternal kisses were associated with a positive and statistically significant increase in the Toddler Discomfort Index (TDI):

Maternal kissing of boo-boos confers no benefit on children with minor traumatic injuries compared to both no intervention and sham kissing. In fact, children in the maternal kissing group were significantly more distressed at 5 minutes than were children in the no intervention group. The practice of maternal kissing of boo-boos is not supported by the evidence and we recommend a moratorium on the practice.

The actual author, Mark Tonelli, is a prominent critic of evidence-based medicine, described by the journal’s editor as a “collapsing” movement and in a recent British Journal of Medicine editorial as a “movement in crisis.” Most of the criticisms of evidence-based medicine will sound familiar to Austrian economists: overreliance on statistically significant, but clinically irrelevant, findings in large samples; failure to appreciate context and interpretation; lack of attention to underlying mechanisms rather than unexplained correlations; and a general disdain for tacit knowledge and understanding.

My guess is that evidence-based management, which is modeled after evidence-based medicine, is in for a similarly rocky ride. Teppo had some interesting orgtheory posts on this a few years ago (e.g., here and here). Evidence-based management has been criticized, as you might expect, by critical theorists and other postmodernists who don’t like the concept of “evidence” per se but the real problems are more mundane: what counts as evidence, and what conclusions can legitimately be drawn from this evidence, are far from obvious in most cases. Particularly in entrepreneurial settings, as we’ve written often on these pages, intuition, Verstehen, or judgment may be more reliable guides than quantitative, analytical reasoning.

Update: Thanks to Ivan Zupic for pointing me to a review and critique of EBM in the current issue of AMLE. 

2 January 2016 at 5:06 pm Leave a comment


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