Author Archive
Bob Higgs on Peer Review
| Peter Klein |
Robert Higgs, an economic historian with a distinguished record of publication in mainstream journals, puts peer review in perspective:
Peer review, on which lay people place great weight, varies from important, where the editors and the referees are competent and responsible, to a complete farce, where they are not. As a rule, not surprisingly, the process operates somewhere in the middle, being more than a joke but less than the nearly flawless system of Olympian scrutiny that outsiders imagine it to be. Any journal editor who desires, for whatever reason, to knock down a submission can easily do so by choosing referees he knows full well will knock it down; likewise, he can easily obtain favorable referee reports. As I have always counseled young people whose work was rejected, seemingly on improper or insufficient grounds, the system is a crap shoot. Personal vendettas, ideological conflicts, professional jealousies, methodological disagreements, sheer self-promotion and a great deal of plain incompetence and irresponsibility are no strangers to the scientific world; indeed, that world is rife with these all-too-human attributes. In no event can peer review ensure that research is correct in its procedures or its conclusions. The history of every science is a chronicle of one mistake after another. In some sciences these mistakes are largely weeded out in the course of time; in others they persist for extended periods; and in some sciences, such as economics, actual scientific retrogression may continue for generations under the misguided belief that it is really progress.
This is from a piece on the role of peer review and scientific consensus in the global-warming debate. Notes Higgs: “Science is an odd undertaking: everybody strives to make the next breakthrough, yet when someone does, he is often greeted as if he were carrying the ebola virus. Too many people have too much invested in the reigning ideas; for those people an acknowledgment of their own idea’s bankruptcy is tantamount to an admission that they have wasted their lives.”
Of course, admitting these problems does not by itself suggest an alternative. As discussed here, the challenge is to design an institution that minimizes both Type I error and Type II error, taking into account the costs of each (presumably the costs of the former — missing an important breakthrough — are higher than the costs of the latter, which are largely wasted trees, electrons, and time, though the lower overall signal-to-noise ratio increases the chance that a published breakthrough will be overlooked).
Hayek-Klein Day
| Peter Klein |
It’s Hayek-Klein Day. How are you planning to celebrate? (One suggestion: browse old O&M posts on Hayek.)
The Hotelling Effect, Wi-Fi Edition
| Peter Klein |
A cafe without free wi-fi is as rare these days as, well, your neighborhood Starbucks. Indeed, in my town virtually every coffee shop where students, professors, and townspeople hang out provides free wireless to its patrons. The only exception is Starbucks, which offers pricey metered service through T-Mobile.
Strategic response by an upstart wireless provider? Give routers and access points to homes and businesses next to a Starbucks. This is the strategy employed by FON, an Argentine startup backed by Skype, Google, and other heavies.
The routers, which usually cost $40, split an Internet broadband connection into two wireless signals — one for personal Internet use and the second for public use, which can be accessed by anyone within range for $2 per day. The routers’ owners get to pocket half of the sign-on fee, and FON takes home the rest.
Read about it here. Thank goodness for Hotelling effects!
HBR Freebies
| Peter Klein |
Harvard Business Review’s “Forethought” essays are now free, one month at a time, to non-subscribers. Here’s one on open-source R&D by Nicolai’s CBS colleague Lars Bo Jeppesen.
Taxis and Limos
| Peter Klein |
Murray Rothbard told a story about his first encounter with the terms taxis and cosmos, used by Hayek to distinguish “planned” from “spontaneous” orders. Upon seeing a lecture announcement Rothbard’s wife Joey exclaimed, “Look, Hayek’s giving a lecture on taxis!” As life-long New Yorkers they naturally assumed Hayek meant the yellow ones with lights on the roof.
Even Rawley, a PhD Candidate in strategy at Berkeley, is doing interesting work on taxis (the yellow ones). I recently read his paper “Diversification and Adaptation: How Organization Drives Taxi Firm Performance,” which exploits a change in taxicab regulation to perform a natural experiment on the effects of related diversification on firm performance. Until the mid-1990s US taxi firms were prohibited from entering the market for limousines (the airport kind, not the stretch kind). As those restrictions were relaxed, taxi firms began to diversify into the limo market. Rawley uses Census data to show that diversifying taxi firms were less efficient and less likely to adopt computerized dispatching systems than non-diversifiers, which he interprets as a story of costly organizational adaptation. (more…)
Nerd Practical Jokes
| Peter Klein |
We nerds appreciate practical jokes. OK, mine are not quite at the level of an MIT hack. Unlike the gearheads, however, we economists appreciate opportunity cost and strive for the best results with the least effort. For example, from a pharmacist friend I obtained some “Caution: May Cause Drowsiness” stickers which I bring to seminars and discreetly affix to hard copies of papers that are being distributed — always good for a chuckle.
How about you? What are your favorite nerd practical jokes?
More on Legal Origin
| Peter Klein |
Back to the debate over the role of legal origin in economic performance (see here and here). Stefan Voigt proposes an interesting natural experiment: In many international transactions parties can choose the contract-law regime governing their relationship by designating a particular national legal system in a mandatory arbitration clause. As expected, English common law is most frequently chosen. Surprisingly, however, Swiss (German civil law) and French civil law are chosen almost as much. Unfortunately the data do not permit an econometric analysis of legal-regime choice that controls for other possible influences. Still, the fact that civil-law codes are chosen so often raises questions about the view of LLSV (not to mention Hayek, Leoni, and many others) that common law is fundamentally superior to civil law.
Econometricians versus Applied Statisticians
| Peter Klein |
Econometricians, the joke goes, are people good with numbers but lacking the personality to be engineers. How about applied statisticians? James Greiner offers this comparison:
[W]hat is the difference between an empirical, data-centered economist and an applied statistician? The stereotypes I’ve internalized from hanging out in an East Coast statistics department are that economists tend to focus more on parameter estimation, asymptotics, unbiasedness, and paper-and-pencil solutions to problems (which can then be implemented via canned software like STATA), whereas applied statisticians are leaning more towards imputation and predictive inference, Bayesian thinking, and computational solutions to problems (which require programming in packages such as R).
I imagine the former characterization would apply, a fortiori, to quantitative researchers in strategic management, marketing, accounting, and the like.
Podcast Interview with Nassim Taleb
| Peter Klein |
Mathematician, investor, and polymath Nassim Taleb’s books Fooled by Randomness and The Black Swan are attracting increasing attention among social scientists. (See previous O&M blog entries here and here.) Indeed, during the opportunity discovery workshop described by Nicolai Rich Makadok plugged The Black Swan so many times I figured he and Taleb must have a kickback arrangement. Anyway, here is an interview with Taleb by Russ Roberts on the EconTalk site for those of you into the podcast thing.
History of Best Practices Bleg
| Peter Klein |
A friend asks for help tracing the history of management thought on best practices:
I believe I can separate out two schools: the incrementalists (incremental improvement) and the revolutionists (redo your firm, industry). . . . Is there a journal article categorizing the big names (Drucker, Deming, Hamel, Collins) in a history of thought manner? That would really help me.
Any suggestions?
Inside the Economist’s Mind
| Peter Klein |
No, not a dark, scary place, but a book of interviews by Paul Samuelson and William Barnett: Inside the Economist’s Mind: Conversations with Eminent Economists (Blackwell, 2006). The subjects are Wassily Leontief, David Cass, Robert Lucas, János Kornai, Franco Modigliani, Milton Friedman, Paul Samuelson, Paul Volcker, Martin Feldstein, Chris Sims, Robert Shiller, Stanley Fishcher, Jacques Drèze, Thomas Sargent, Robert Aumann, James Tobin, and Robert Shiller. Here is the Amazon link. Here is the authors’ blog. Here is a review by Mike Szenberg and Lall Ramrattan.
What’s In a (University) Name?
| Peter Klein |
An organization’s name is an important part of its identity. Names can also be valuable signals to market participants about mission, values, and strategy. Certainly, names seem to matter: a 2001 paper by Michael J. Cooper, Orlin Dimitrov, and Raghavendra Rau, “A Rose.com by Any Other Name,” documented a positive and significant stock-price reaction to announcements of adding “dot-com” to company names. (No word on the reaction to the reverse, as when Monster.com changed its name to Monster in 2003.)
Two universities in my state have gotten into the act. In 2005 Southwest Missouri State University changed its name to Missouri State University to reflect a more national orientation. (In most US states the “University of XYZ” is the original state university and “XYZ State University” is the newer, land-grant institution; in Missouri, however, the land-grant designation was given in 1870 to the already-existing University of Missouri, officials of which strongly opposed giving the name Missouri State to a rival institution.) Now the University of Missouri system has announced that the University of Missouri-Rolla, one of four campuses in the state system (and home of guest blogger Chihmao Hsieh), will change its name to Missouri University of Science and Technology. The name change is “is part of chancellor John S. Carney III’s goal of making UMR one of the nations top 5 technological research universities by 2010,” according to a news release. But will it smell as sweet?
Update: My old college classmate Jim Surowiecki, author of The Wisdom of Crowds, wrote about corporate name changes for Slate back in 1997.
Tips for Academic Presentations
| Peter Klein |
Good tips from Jonathan Shewchuk (via Craig Newmark). Written for computer scientists but mostly applies across the board. Highlights:
A talk of 30 minutes or less should be an advertisement for the paper, not a replacement.
It is disturbing that so many presentations have large wasted bands of space on the border of every slide, as if to taunt the audience — “I could have used a readable font, but it’s just you.”
You communicate most powerfully when your every movement, facial expression, and utterance is in the service of the words you are saying right now, and no unproductive movement takes place.
Good speaking is about rhythm. The most common type of bad speaker delivers one talk-length paragraph at a uniform speed, never slowing for emphasis.
Most everything else, especially aesthetics, is learned through practice and feedback.
Includes great cartoons, like the one above.
The Dark Side of Capital Pooling
| Peter Klein |
The great advantage of joint-stock companies, whether public or private, is the ability to create value by pooling capital. Unfortunately, capital pools can also be channeled to activities that destroy value. (HT: Against Monopoly.)
Teaching Management through Demotivators
| Peter Klein |
Like many of you, I’ve considered using teaching my managerial economics course using a Dilbert collection as a secondary, or even primary, text. There are so many good ones! One could also use the wickedly funny Demotivators to illustrate key managerial and organizational theories and concepts. For example:
- Gains from trade: Consulting
- Agency costs: Get to Work, Indifference, Mediocrity
- Human capital: Incompetence, Potential
- Time preference, discounting: Procrastination
- Risk aversion: Risks
- Relative performance evaluation, internal labor markets, tournaments: Blame, Delusions, Elitism, Success
- Organizational innovation, strategic change management: Change
- Free riding, teams: Irresponsibility
- Hierarchy: Power
- Role of the institutional environment: Effort, Underachievement
The Language of Economists (and Sociologists)
| Peter Klein |
From the “news that will shock no one” department come the results of this linguistic analysis of four economics journals, the American Economic Review, Economic Journal, Journal of Economic Perspectives, and American Journal of Economics and Sociology, along with a control group containing the American Journal of Sociology, Journal of Microscopy, and Journal of the American Mathematical Society:
The present study aims to add to our knowledge about economic rhetoric by conducting a data-driven analysis of economic academic discourse, both synchronically in its contemporary form, and diachronically over the past four decades. We find (1) that linguistically, economics is clearly an academic genre of its own, (2) that there are at the same time clear differences in vocabulary and style usage across economic journals, and (3) that there have been major developments in economic prose during the past four decades. We argue that there is some, albeit tentative, evidence that the discipline may face an increasing methodological gap.
Here is the paper, “What Do Economists Talk About? A Linguistic Analysis of Published Writing in Economic Journals” by Nils Goldschmidt and Benedikt Szmrecsanyi (American Journal of Economics and Sociology 66, no. 2, April 2007). The “gap” is between journals like the AER and EJ that use increasingly formal, empirical (scientistic?) terminology and journals like JEP and AJES that favor broader, social-science terms and concepts (“justice,” “society,” “culture,” “institutions”). Interestingly, use of social-science terminology in the AER, relative to the other journals, dropped between 1965 and 1980 but rose again between 1980 and 1990. Too early to reflect the Freakonomics phenomenon, to be sure, but perhaps a marker for economic imperialism more generally?
Political Instability and Financial Development
| Peter Klein |
The latest salvo in the debate over the role of legal origin in financial-market performance comes from Mark Roe. In “Political Instability and Financial Development” (with Jordan Siegel) he argues that political instability is a more important determinant of financial development than trade openness, latitude, and, particularly, legal origin as modeled by LLSV. “Surprisingly, despite the widespread view in the law and finance literature of legal origin’s importance, not only is political stability highly robust to legal origin, but, for many years, our results for key indicators and specifications neither show Common Law to be consistently superior nor French Civil Law to be consistently inferior to other legal families in generating strong financial development outcomes.”
See also my “Politics and Productivity” on the interaction between political institutions, economic freedom, and national economic performance.
Five Blogs That Make Me Think
| Peter Klein |
When Nicolai and I started this blog a year ago we were hoping for a plural readership. Now that we’ve hit that target we can move on to the next: making our readers think. Fortunately, we’ve already succeeded with at least one reader: Nijma of Camel’s Nose, who named O&M one of five blogs that make her think. This is one of those “memes” in which each blogger named is supposed to name five bloggers who make him think, who in turn name five bloggers that make them think, and so on, until everyone is nested under someone else, sort of like Amway but without money changing hands.
The Thinking Blog’s Ilker Yoldas is responsible for all this (and for supplying the nice graphic above). Yoldas describes the exercise as a humanistic alternative to blog ranking systems like Technorati based on quantitative analysis of linking patterns, just as “human-powered” search engines like ChaCha are alternatives to Google.
Anyway, I’ll play along. Here are five blogs that make me think. (To make things interesting I’ve excluded the sites listed already on the blogroll below.)
- Eunomia by Daniel Larison
- Social Science Statistics Blog by a bunch of Harvard professors
- God of the Machine by Aaron Haspel
- 3 Quarks Daily by Abbas Raza and guests
- Mouthing Off by the editors of Food and Wine Magazine (does thinking with my stomach count?)
Reminder: Abstract Submission Deadline
| Peter Klein |
Next Tuesday, May 1, is the deadline for submitting an abstract to the University of Missouri’s Frameworks for Entrepreneurship Research conference. Keynote speakers include O&M favorites Pierre Desrochers and Randy Westgren (who comments as REW) so you don’t want to miss it.
Puzzles and Problems Redux
| Peter Klein |
In an earlier post, “Economics: Puzzles or Problems?”, I noted the tendency of talented young economists to focus on clever, yet ultimately unimportant, puzzles rather than the traditional “big problems” of economics (inflation, unemployment, poverty, economic growth, regulation, political economy, etc.). Steve Levitt, and the brand of “Freakonomics” he inspired, is usually singled out as the main culprit here. A recent piece in The New Republic, “Freaks and Geeks,” takes Levitt and company to task not only for wasting their time and talent, but also for being dilettantes who get key facts wrong (a point raised by Steve Sailer). Here are responses from Levitt (very unhappy), Joshua Angrist (also unhappy, though not for personal reasons), Josh Wright (mildly unhappy), and Greg Mankiw (neutral). Sadly, no one has picked up my (very clever) reference to the relationship between Wittgenstein and Popper.
Organizations and Markets 
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