Author Archive
Essay Contest on Property Rights
| Peter Klein |
My co-blogger, an enthusiast for the Coase-Alchian-Demsetz-Cheung-Barzel property-rights approach, will appreciate the topic for this year’s Sir John M. Templeton Fellowships Essay Contest, sponsored by the Independent Institute:
For decades social critics in the United States and throughout the Western world have complained that “property” rights too often take precedence over “human” rights, with the result that people are treated unequally and have unequal opportunities. Inequality exists in any society. But the purported conflict between property rights and human rights is a mirage — property rights are human rights.
— Armen Alchian, “Property Rights,” in The Concise Encyclopedia of Economics
Are property rights human rights? How are they related? What are their similarities and differences? If property rights are human rights, why have they enjoyed fewer legal protections and intellectual champions than other human rights?
The contest is for college students and “young” college professors (sorry Nicolai).
Nietzsche and Contemporary Philosophy
| Peter Klein |
“Nietzsche is peachy,” according to a bumper-sticker I once saw. Nietzsche is sometimes cited in management research as an authority on power, complexity, time, or relativism (e.g., Singer, 1994; Kilduff and Mehra, 1997; Mainemelis, 2001). But what did Nietzsche really say about these things? What are his main contributions to philosophy? Professional philosophers can’t seem to agree, as witnessed in this roundtable conversation with Peter Bergmann, Teodor Münz, Frantisek Novosád, Paul Patton, Richard Rorty, Jan Sokol, and Leslie Paul Thiele. Bergmann calls Nietzsche “the culture hero of modernism, a cultural revolution comparable to the Reformation or the Enlightenment. His critique of herd values is reflected in the posture of the avant-garde: elitist to the present, democratic to the future.” But Nietzsche was no nihilist, says Sokol; he was rather “an excessively sensitive person horrified by a world where nothing has rules and stands for nothing.”
All agree that Nietzsche bears no personal responsibility by the appropriation of his ideas by German nationalists, but Schrift notes that Nietzsche “chose to write in a style that invites misunderstanding — his use of metaphor, dissimulation, and hyperbole in particular, all make it easier for his words to be taken to mean something other than what he might have intended.” A warning to those of us who like jargon and are guilty of bad academic writing. (HT: 3quarks)
A Sociology Class I Might Actually Take
| Peter Klein |
SOC 121-015: “Introduction to Sociology: The Sociology of George Lucas and Steven Spielberg’s Films”
This class introduces students to the science of sociology utilizing examples from the real world of society, and the reel worlds of George Lucas and Steven Spielberg’s films. Sociological theories and research, and their application to culture, socialization, religion, technology, inequality, and media are the themes of the class. Films such as THX-1138, American Graffiti, Star Wars, Indiana Jones, Schindler’s List, Amistad, and E.T. will be used as examples oft he these themes, and the fans of Star Wars and Indiana Jones will be discussed. Students will present a paper about the sociological themes of the films and the movies illuminate about the 1970s to 2000s zeitgeist.
For more information about the class, contact Professor Tenuto at jtenuto@clcillinois.edu or at the college website www.clcillinois.edu.
Link via a Star Wars fan site.
If Einstein Wrote a Management Book
| Peter Klein |
It might look like this (via Newmark). Einsteinisms like “imagination is more important than knowledge,” “not everything that can be counted counts, and not everything that counts can be counted,” and “whoever is careless with the truth in small matters cannot be trusted with important matter” are pithy, to be sure, but not very operational. And Einstein did not seem to understand economics very well.
CEOs as University Presidents
| Peter Klein |
I could have titled this post “University Presidents as CEOs,” focusing on the characteristics and responsibilities of university administrators. But I’m interested here in universities hiring former corporate CEOs, rather than career educators, as presidents. Gary Forsee, Sprint-Nextel CEO from 2005 to 2007, became my boss yesterday when he began his term as President of the University of Missouri System. Forsee’s selection last year raised hackles among some faculty because he holds only a bachelor’s degree and has no faculty or university administrator experience. (A greater concern, among some faculty, was the eagerness with which Sprint, under Forsee’s leadership, participated in the Bush Administration’s warrantless wiretapping program.) The University of Colorado is apparently in a similar situation, though with far greater controversy.
Does a university president need a PhD? Under the university-as-guild model, hiring a leader from outside the guild is unthinkable, akin to bringing in Richard Dawkins to head the Catholic Church, or hiring a guy who never played in the NBA to coach an NBA team (actually, that happened). On the other hand, if the university is just another service organization, then hiring leaders from outside makes perfect sense. (more…)
Economics of Higher Education: Sophism versus Virtue
| Peter Klein |
Donald R. Stabile’s new book Economics, Competition And Academia: An Intellectual History of Sophism versus Virtue (Elgar, 2007) contrasts the customer-oriented, for-profit model of education (which Stabile calls “sophism”) with the patronage-supported, non-market model (“virtue”). Stabile reminds us that the notion of higher education as a commercial enterprise was invented not by the University of Phoenix, but by the ancient Greeks. The Sophists believed in teaching practical subjects that students wanted to know, while Plato and Aristotle, wealthy aristocrats whose schools didn’t depend on student fees, favored the teaching of timeless truths independent of student demand. Reviewer Donald Frey thinks Stabile’s framework lacks precision; still, the book sounds like an interesting read.
Tyler Cowen’s In Praise of Commercial Culture, which traces the history of patronage (and, its modern-day equivalent, state funding) and market-based approaches in art, music, and literature, is worth consulting in this context. And don’t miss Paul Cantor’s lectures on commerce and culture, which you can listen to here.
The Stabile dust-jacket blurb is below the fold. (more…)
Bruno Leoni Institute Seminar for Young Scholars
| Peter Klein |
The Institute Bruno Leoni, named for the great classical liberal legal scholar, announces a seminar for young scholars (under 35 years old) on competition, regulation, and antitrust. It’s 3-5 October, 2008, in Sestri Levante (Italy). Economists, sociologists, philosophers, legal scholars, and historians are encouraged to apply. Here is the call for papers. Bill Niskanen and Steve Littlechild are the keynoters. Other than the blatant ageism, it looks like a great event.
Langlois Economics of Organization Course
| Peter Klein |
Don’t you wish you could sign up? Fortunately the reading list and slides are available to all. And check out this great homework assignment.
The Role of Economic Analysis in Public Policy
| Peter Klein |
Here are two views on the role of economic analysis in public policy, from a passage in Robert Dodge’s biography of Thomas Schelling recounting the early days of Harvard’s Kennedy School of Government:
A tension [among the faculty] began to develop over an ideological difference between two groups. The question that brought about the division concerned the proper role of the policy analyst. Schelling’s view was the same as it had been since the Cold War, and there were other economists in the school who generally agreed. They believed that the approach to policy analysis was to begin by rationally analyzing situations, seeking to understand how things work and what outcomes would be. His idea had been to “solve the puzzle first.” Policy was something that came after understanding. Throughout his career Schelling had fought against the idea of beginning with outcomes, what he saw as looking at problems backward, and had believed that strategic analysis was required in advance to understand situations before developing public policy.
A group headed by Steve Kelman and future Secretary of Labor, Robert Reich, held a different view. This group cared about policy management as well as public policy analysis. Their main argument was that values couldn’t be separated from public policy, and the antiseptic and purely analytical approach of Schelling’s group was incomplete. Policy analysis, the Reich group felt, was to be used in determining a successful path to the goal one hoped to achieve. They believed it was necessary to acknowledge and identify openly what one was trying to achieve or affirm when carrying out a policy. . . . (more…)
Dress for Success
| Peter Klein |
The professorial dress code has long been an object of (gentle) ridicule. “This diagram explains why I’m an expert on money yet I dress like a flood victim,” says an economics professor in a recent Dilbert strip. I remember one from years back in which an older professor says to the younger, “Congratulations on making tenure! Here are your elbow patches.”
Erik Jensen argues that professors should, instead, conduct themselves in a professional manner, which includes professional dress. For men that means jackets and ties; for women, suits or modest, professional dresses. His proposed Uniform Uniform Code: “Faculty members shall, when on college grounds or on college business, dress in a way that would not embarrass their mothers, unless their mothers are under age 50 and are therefore likely to be immune to embarrassment from scruffy dressing, in which case faculty members shall dress in a way that would not embarrass my mother.”
When I started my career I wore a tie every day in class, but eventually quit. This semester I’m teaching a class at Olin, where ties are the norm (except among the economists, apparently), and am wearing one again. I’d really prefer a gown, however. And when did students quit bowing?
The Early History of Silicon Valley
| Peter Klein |
Most historical accounts of Silicon Valley start in the 1970s or later. Christophe Lecuyer’s Making Silicon Valley: Innovation and the Growth of High Tech, 1930-1970, reminds us that the seeds of the first modern high-tech cluster were planted much earlier. Fairchild is central to the story, of course, but so is Eitel-McCullough (Eimac) in the 1930s and 1940s, Litton in the 1940s and 1950s, and Varian in the 1960s (them, not him). Lecuyer, writes reviewer Glenn Bugos,
seeks to define Silicon Valley as an industrial district, akin to the Marshallian industrial districts that economic historians have begun to explore. Also, he integrates into his story the many extant, divergent strands of Silicon Valley historiography. Into his manufacturing-driven narrative, we see the trends other historians have emphasized — military funding, the shake-out following the McNamara consolidation, the role of Stanford University in generating expertise, and the importance of workplace culture.
Inputs and Outputs
| Peter Klein |
In academia we measure outputs, not inputs. Promotion, tenure, and other rewards are based on publications, grants, teaching evaluations, and so on, not effort. So why do we talk so much about inputs? He’s in his office all the time! I get emails from her at 3:00am! Whenever I see him he’s typing at the computer! Even economists, who rightly reject the labor theory of value, talk this way. What gives?
I like the way Kieran puts it:
You have time to blog? I work so hard I couldn’t possibly fit that sort of frivolous nonsense into my day. You have time to watch television? I don’t even own a TV. (I am happy to see this one is now very nearly a cliché.) You go jogging in the morning? How do you find the time? You have time to shower afterward? Personal grooming distracts from the research effort. You walk to the other end of the building to use the bathroom? I specifically requested that my office have the toilet seat model of the Aeron chair installed. A real time saver, that one. You have small children? Actually, why am I even wasting my time talking to you right now? Goodbye.
It seems to me that very nearly all of this sort of guff is pure posturing, net of a very small kernel of obvious truth about not whiling away the weeks playing gin rummy or watching movies to the exclusion of all else. (more…)
Austrian Economics Study Guides
| Peter Klein |
Jérémie Rostan has produced a study guide for Menger’s Principles of Economics, a nice complement to Bob Murphy’s study guides for Man, Economy, and State and Human Action (see the study guide links after each chapter title). And there’s always Percy Greaves’s Mises Made Easier.
When will someone write Foss Made Easier? I would buy a Foss Companion.
Schumpeter and Knight on Democracy
| Peter Klein |
With the US primaries in full swing, and “democracy fever” sweeping the land, it’s perhaps a good time to share a couple of my favorite quotes on democratic governance:
Thus the typical citizen drops down to a lower level of mental performance as soon as he enters the political field. He argues and analyzes in a way which he would readily recognize as infantile within the sphere of his real interests. He becomes a primitive again. (Joseph A. Schumpeter, Capitalism, Socialism, and Democracy, 3rd edition, pp. 262-63.)
The probability of the people in power being individuals who would dislike the possession and exercise of power is on a level with the probability that an extremely tender-hearted person would get the job of whipping master in a slave plantation. (Frank H. Knight (1938), quoted in F. A. Hayek, The Road to Serfdom, p. 152.)
The Chicago School of Antitrust
| Peter Klein |
Josh Wright of GMU Law and Truth on the Market was on our campus this afternoon to present his paper “The Roberts Court and the Chicago School of Antitrust: The 2006 Term and Beyond” (thanks to Thom for hosting). The paper provides a nice overview of the evolution of antitrust theory and practice over the last several decades. Josh describes three historical phases of antitrust thinking: the Harvard approach (Bain’s structure-conduct-performance paradigm), the Chicago approach, and the modern “post-Chicago” approach (based on game-theoretic industrial organization).
Josh defines “Chicago” broadly to include not only Demsetz, Peltzman, B. Klein, Bork, Posner, and Easterbrook but also Williamson and others who in the 1970s and 1980s challenged the conventional wisdom that deviations from perfect competition (resale price maintenance, exclusive dealing, block booking, and the like) are per se anticompetitive. I think this is a reasonable taxonomy (though Williamson would be horrified to be included as a Chicagoan). Note that this definition rejects the caricature of Chicago economists as laissez-faire ideologues (indeed, Chicagoans are viewed by Austrians as wishy-washy interventionists on competition policy [1, 2]). Instead, it defines the Chicago approach as the “rigorous application of price theory,” “the centrality of empiricism,” and the “emphasis on the social cost of legal errors in the design of antitrust” (as emphasized by Easterbrook). (more…)
Hayek, Habermas, and the Blogosphere
| Peter Klein |
Cass Sunstein asks if the blogosphere is more like Hayek’s spontaneous market order or Habermas’s noisy “bourgeois public sphere,” concluding that it isn’t quite either:
The rise of the blogosphere raises important questions about the elicitation and aggregation of information, and about democracy itself. Do blogs allow people to check information and correct errors? Can we understand the blogosphere as operating as a kind of marketplace for information along Hayekian terms? Or is it a vast public meeting of the kind that Jurgen Habermas describes? In this article, I argue that the blogosphere cannot be understood as a Hayekian means for gathering dispersed knowledge because it lacks any equivalent of the price system. I also argue that forces of polarization characterize the blogosphere as they do other social interactions, making it an unlikely venue for Habermasian deliberation, and perhaps leading to the creation of information cocoons. I conclude by briefly canvassing partial responses to the problem of polarization.
The paper is in the January 2008 issue of Public Choice, a special issue edited by Daniel Drezner and Henry Farrell on the social and political aspects of blogging. (Thanks to Greg Ransom for the link.)
Is Britney Inefficent?
| Peter Klein |
My colleague Thom Lambert has a nice piece on Britney Spears over at Truth on the Market. Yes, really. Thom asks whether Britney’s popularity, which seems unrelated to intrinsic merit, is due to network effects — people are interested in her because other people are interested in her, and so on — leading us down an irreversible path toward Britneymania. Paul David, call your office! Britney, Thom suggests, may be like the QWERTY keyboard — grossly inefficient but hard to replace.
I like Thom’s analysis but think he should go further in exploring the welfare implications. Paul David’s fable of the inefficient typewriter keyboard has been pretty well demolished by Liebowitz and Margolis, among others; perhaps with Britney we finally have an example of market failure due to network effects! Then again, it’s hard to predict, ex ante, which promising young artists will achieve long-term success; given imperfect knowledge, there is always room for ex post regret, which doesn’t necessarily imply inefficiency. Moreover, if Britneymania isn’t remediable, to use Oliver Williamson’s term, then it’s not inefficient. Finally, what’s the alternative? Do we want a trade association or, even worse, a Ministry of Culture choosing the next pop diva? We might get the next Oleg Gazmanov.
Choosing a Dissertation Topic
| Peter Klein |
One of my PhD students sent me this (click to enlarge), from PhD Comics. Nothing as fancy as grad skool rulz, but a useful analysis nonetheless.
Porter’s Five Forces, Updated
| Peter Klein |
The current issue of HBR features Porter’s “The Five Competitive Forces That Shape Strategy,” a review and update of his famous framework (via Luke). The revision doesn’t include a sixth force, but Porter does add some refinements and clarifications (e.g., the differences between an industry’s underlying structure and observable attributes like the number of firms, industry growth, etc.), and he includes some discussion of dynamics. There’s also a video. Here’s the introductory blurb:
In 1979, Harvard Business Review published “How Competitive Forces Shape Strategy” by a young economist and associate professor, Michael E. Porter. It was his first HBR article, and it started a revolution in the strategy field. In subsequent decades, Porter has brought his signature economic rigor to the study of competitive strategy for corporations, regions, nations, and, more recently, health care and philanthropy. “Porter’s five forces” have shaped a generation of academic research and business practice. With prodding and assistance from Harvard Business School Professor Jan Rivkin and longtime colleague Joan Magretta, Porter here reaffirms, updates, and extends the classic work. He also addresses common misunderstandings, provides practical guidance for users of the framework, and offers a deeper view of its implications for strategy today.
There is of course a huge secondary and practitioner literature on the five-forces framework and its applications. (more…)
The Original Corporate Raider
| Peter Klein |
Did you catch Henry Manne’s tribute to Louis E. Wolfson, whom Manne calls “the original corporate raider,” in the 18 Jan WSJ?
[T]he obituaries dutifully acknowledged that he was a serious and valued benefactor of children’s health care, and that he devoted himself in later life to the cause of penal reform. . . . They missed the big story. Wolfson’s contribution to human welfare far exceeded the total value of all private philanthropy in history. He invented the modern hostile tender offer. This invention, which activated and energized the market for corporate control, was the primary cause of the revolutionary restructuring of American industry in the 1970s and ’80s, and the ensuing economic boom.
Before Wolfson’s innovation, executing a “hostile” (i.e., against the wishes of incumbent management) takeover required winning a long and potentially costly proxy contest. Now, potential bidders could appeal directly to shareholders, asking them to “tender” their shares at the offered price, bypassing the incumbent management team altogether. Naturally, this outraged the business establishment — the “powerful corporate elite of the 1960s,” as Manne calls them — and pressure mounted for legislation to restrict hostile takeover offers, leading to the 1968 Williams Act, designed to protect incumbent managers by giving them time to prepare counter-offers and otherwise restricting “raiders.” (more…)
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