Author Archive

An Official O&M Holiday

| Mike Sykuta |

This date, May 8, is a holiday of sorts at O&M and certainly in the field of Austrian economics. As Peter is traveling today and has thus far not taken the opportunity to remind us of the day’s significance, I simply refer you to one of Peter’s earlier posts and wish you (and Peter) a Happy Hayek-Klein Day.

8 May 2009 at 1:18 pm 6 comments

Economists More Ethical; US Researchers Not

| Mike Sykuta |

Thanks to Josh Wright over at TOTM, I found Ben Edelman and Ian Larkin’s recent HBS Working Paper on “Demographics, Career Concerns or Social Comparison: Who Games SSRN Download Counts?” Their abstract reads:

We use a unique database of every SSRN paper download over the course of seven years, along with detailed resume data on a random sample of SSRN authors, to examine the role of demographic factors, career concerns, and social comparisons on the commission of a particular type of gaming: the selfdownloading of an author’s own SSRN working paper solely to inflate the paper’s reported download count. We find significant evidence that authors are more likely to inflate their papers’ download counts when a higher count greatly improves the visibility of a paper on the SSRN network. We also find limited evidence of gaming due to demographic factors and career concerns, and strong evidence of gaming driven by social comparisons with various peer groups. These results indicate the importance of including psychological factors in the study of deceptive behavior.

Their results suggest that papers published in the Economics Research Network of SSRN are significantly less likely to have “fraudulent” downloads (as measured in their paper) while papers in the Finance, Legal, and Accounting Networks are significantly more likely to have fraudulent downloads. Aren’t these the places in which ethics are being more broadly taught? Business and Law?

Among their other interesting results, papers by non-US authors are less likely to have fraudulent downloads. Perhaps surprisingly, one’s status on the tenure track seems not to be important, but one’s peer comparisons do. Sadly, there is no attempt to directly measure the O&M effect.

20 April 2009 at 11:08 am Leave a comment

GM vs. TCE: Another “Block Upon Block”?

| Mike Sykuta |

Ronald Coase has spent the past two decades or more lamenting the lack of progress in economic theory. He bemoans the fact that economics, unlike its physical-science counterparts, fails to dispose of (or pursue new versions of) theories when facts show that prevailing theories are inaccurate or incomplete.

Among his many arguments, Coase has pointed to Williamson’s Transaction Cost Economics (TCE) as one that seems impervious to the facts. Part of Coase’s discontent with the TCE story rests on his observation that many firms sustain relationships characterized by high degrees of asset specificity using contractual means. While Ben Klein and others pointed to General Motors-Fisher Body as evidence to support the TCE story, Coase pointed to relations with auto frame manufacturer A.O. Smith at the same time that were not subsumed by vertical integration. This eventually led to the infamous GM-Fisher Body debate that seems for want of a real conclusion (see some of Peter’s previous comments on this here, here and here).

Well once again, General Motors seemingly plays the foil against TCE. Several weeks ago, GM announced plans to purchase Delphi Group’s global steering manufacturing operations. Delphi operated the steering unit solely for GM’s use. Delphi, in bankruptcy since October 2005, has been able to use GM’s dependence on Delphi’s operations to secure roughly $450 million in liquidity capital from GM to maintain its operations. Sounds like the classic hold-up problem, doesn’t it? But wait! (more…)

17 April 2009 at 2:13 pm 14 comments

Another Regulation Not Worth Its Salt

| Mike Sykuta |

Thanks to Randy Westgren for calling attention to an April 7 article in the New York Times concerning a new regulatory initiative in the Big Apple. It seems Mayor Bloomberg has decreed that salt consumption should be cut in half and has pledged the coercive power of New York City’s food industry regulatory system to launch a “nationwide initiative” to pressure the food industry to change its salty ways.

Apparently Mayor Bloomberg has identified salt consumption as a major public health crisis. Never mind that scientific research fails to demonstrate a causal relationship between salt consumption and actual health outcomes. Never mind that the human body requires some level of salt and there is no research demonstrating the potential health consequences of restricting persons’ salt intake to the level the Mayor prescribes. And don’t even think about the idea of personal responsibility and liberty in choosing what to eat and whether (and how much) salt to consume.

“if the salt has become tasteless, how can it be made salty again? It is no longer good for anything, except to be thrown out and trampled under foot by people.” Perhaps a better approach would be to throw out such ill-founded regulations and trample them under foot.

7 April 2009 at 9:42 pm Leave a comment

Another Attack on Outrageous Bonuses

| Mike Sykuta |

For the second time in a week, the Obama Administration attacked what it referred to as “outrageous” bonuses paid during a time of economic struggle for so many Americans. The announcement came as a reaction to Walmart’s announcement that the Arkansas-based retailer paid almost $1 billion in bonuses to its employees. Adding in profit-sharing, 401K contributions, and employee discounts, the total giveaway is closer to $2 billion, according to company officials.

The White House reacted strongly to such “corporate largess” less than a week after reports that bailout target AIG paid millions in bonuses to its employees. “At a time when so many Americans are losing their homes and unable to put food on their tables, it is unconscionable that a retailer that has benefited so much from consumers should be paying out such astronomical sums in bonuses to its employees. To make matters worse, we understand these bonuses were not even contractually obligated, as in the AIG case,” stated White House spokesman Robert Gibbs. “Obviously Walmart’s ‘Every Day Low Prices’ are not as low as they should be.” Congressional Democrats said they are considering legislation to tax Walmart employees’ bonus payments and to force the retailer to lower its prices further. (more…)

20 March 2009 at 10:08 pm 11 comments

Reducing Transaction Costs in Government Procurement

| Mike Sykuta |

Lest anyone think I (or, by association, O&M) am just a disgruntled Obama-basher, let me applaud the Administration’s announcement today of its intent to overhaul the ways in which the government contracts for goods and services, particularly in the Department of Defense. I suspect the collective “we” are all in favor of identifying methods and processes that will reduce transaction costs (and overall costs) in government procurement programs.

On this point, there is economic research that should help guide the Administration’s deliberations. To wit, William Rogerson provides a pretty thorough assessment of the economic incentives in defense procurement (JEP, 1994) and has a follow-up article on the optimal structure of fixed-priced cost reimbursement contracts (AER, 2003). Bajari and Tadelis (RAND J., 2001) provide a study of incentives versus transaction costs in procurement contracts. Although focused on private-sector construction, their findings are likely relevant to government procurement as well. Important lesson: cost-plus is not necessarily bad.

4 March 2009 at 1:30 pm 6 comments

Helland at Missouri

| Mike Sykuta |

Eric Helland will be on campus this Friday, 6 March, to give a seminar on the effects of insurance reimbursement policies on the provision of medical services. In this paper, Helland and his co-author Paul Heaton compare the level and number of treatments recommended for auto-injury trauma patients in Colorado before and after a change in state law that shifted the burden from more generous auto-policy reimbursements to less generous, traditional health-insurance policies. Following the change, doctors recommended more reimbursable treatments per patient despite negligible changes in the character of auto injuries or in the health outcomes of those cases.

This is the latest in a stream of research Eric has done examining the (sometimes perverse) incentive systems created by different market and regulatory structures and the political economy of such outcomes, including issues of corporate governance (here), class-action lawsuits (here), and workings of the judicial system (here and here).

Eric’s talk is part of the Economics Department’s seminar series. If you are within driving distance, I’m sure you would find it worth your while.

3 March 2009 at 5:44 pm Leave a comment

Blogging to Fame on CNN

| Mike Sykuta |

Nicolai’s recent post about improving your impact factor led to some friendly banter about the efficacy of being cited on O&M as a means to increase one’s exposure. Turns out there may be some truth in that nifty little nugget. I was contacted last week by a senior producer at CNN concerning my skeptical views on the U.S. stimulus package. I can only imagine some of my posts on O&M and my appearance on Brad Delong’s list of ethics-free-Republican-hacks had something to do with my reputation as an stimulus stickler.

The CNN crew came to town yesterday as part of their reporting on how (and how well) stimulus funds are being spent and interviewed me regarding the wisdom (or lack thereof) in the stimulus effort and the veracity of claims about job creation. I’m told the segment will air twice tonight on CNN, once on Campbell Brown’s “No Bias. No Bull” (8:00pm Eastern) and again on Anderson Cooper 360 (10:00pm Eastern). I tried to figure out a way to reference O&M directly. I hope the administrators will forgive my inability to work it into the conversation.

3 March 2009 at 5:06 pm 1 comment

New Theoretical Developments in Strategic Management

| Mike Sykuta |

“New Theoretical Developments in Strategic Management: Opportunities for Research Contributions” is the topic of an interactive online seminar Thursday, 26 February, 12:00-1:30pm EST. The speaker is Michael Hitt, Distinguished Professor of Management and the Joe B. Foster Chair in Business Leadership and the C.W. and Dorothy Conn Chair in New Ventures at Texas A&M University. During the 90-minute seminar participants will explore theoretical developments in strategic management including the resource-based view, institutional theory, and a new concept of strategic entrepreneurship, and will offer updates on how more established theories such as TCE and agency theory are being applied.

The seminar is sponsored by the Agribusiness Economics & Management (AEM) Section of the Agricultural & Applied Economics Association (AAEA). The AEM Section has sponsored online seminars previously on topics that may be new or less familiar to its members, one of the more valuable contributions any professional society provides. Although many of the “new theoretical developments” described above may not seem quite so new to frequent O&M readers, they are certainly more novel in the context of agribusiness research.

You can register for the conference as an individual or as a host location for as many people as can fit into your local class or conference room. This is an especially good opportunity for graduate students and faculty to learn more about the research opportunities in this area. I expect several of our Missouri colleagues and grad students will be participating. Check out the conference website for information about technical requirements and registration.

4 February 2009 at 5:33 pm Leave a comment

The Recipe for Recovery Is Revealed

| Mike Sykuta |

The Obama administration has apparently revealed its recipe for economic recovery. Based on the rhetoric and policy proposals fronted thus far, the recipe appears as follows:

  1. Do everything possible to discourage potential high-value executives from working in troubled industries by capping executive pay in struggling industries.
  2. Eliminate high-powered market-based incentives for mid-level employees to perform their jobs well.
  3. Encourage distressed companies to renege on long-term contracts that populist politicians find offensive (or consider easy to target so as to appear they are being responsible with taxpayers’ money).
  4. Dole out a trillion dollars of taxpayer funds to pet projects and interest groups in the name of “economic stimulus” (enabled by the perception of “responsibility” created by their railing against the targets of #1-3).
  5. Ignore the economic consequences of the incentives created (or destroyed) in #1-3 as well as the fact that someone at some point will have to pay that trillion dollar bill.
  6. Half-bake under the heat of political pressure and serve to the masses who are starved for quick-fix solutions that only impose costs on “that other guy” or “the rich fat-cats of corporate America.”

I don’t know about you, but I think it will be interesting to see how quickly the soufflé crashes . . . though I’m not looking forward to it being force-fed.

4 February 2009 at 11:11 am 21 comments

Yet More “Shameful” Interventionist Rhetoric

| Mike Sykuta |

It’s obviously not enough for regulators from the Obama administration to march down Wall Street and mandate changes in the incentive systems of rank-and-file workers or even mandating that these “bonus” payments be rescinded (see here and here). Now banks that received bailout money are being chastised and brow-beaten from the bully pulpit of the White House for honoring long-term contracts signed years before the current “crisis.”

Today’s Wall Street Journal reports Citigroup is considering reneging on its 20-year stadium naming rights deal with the New York Mets to appease the White House and the populist press. Citi has already caved on its commitment to purchase a new corporate jet to replace two aging planes (a move that would likely have enhanced both fuel and environmental efficiency, ironically enough). Although Citi and the Mets claim the deal is still on, the attitude from Washington is remarkable in its complete disregard for the complexity of business deals, if not for the very essence of the institutional structures that support exchange (and contracting).

First, despite all the clamoring about Citi spending $400 million on naming rights while receiving $350 million in TARP funds, the reality is Citi is obligated to pay $20 million a year for 20 years. So while taxpayers are being told they are paying to name the new Mets stadium Citi Field, only a relatively small amount — certainly by bailout standards — is being spent this year. If the purpose of the bailout is to get firms through these troubled times and into a more stable future, we’re not talking about taxpayers taking on a 20-year commitment. (more…)

3 February 2009 at 4:57 pm Leave a comment

Fortunes Even A Hack Can Tell

| Mike Sykuta |

A couple weeks ago, Brad DeLong included me in a list of ethics-free Republican hacks because I was among a number of economists who posted comments on Rep. John Boehner’s website critical of the proposed Democratic “stimulus plan.” To wit, I posted:

History has shown that the Obama team’s proposed ‘stimulus’ is not only going to have little to no effect in the short run, but will create a larger bureaucratic structure, lead to tremendous investments in unproductive political lobbying among ‘stimulus project’ wannabes, and dissuade/delay private investment, recovery and growth.

So imagine my surprise (or lack thereof) to see the headline article of today’s Wall Street Journal. The ink is not even dry on the legislative draft that Congress is expected to vote on sometime today, and lobbyists from stimulus project wannabes such as the concrete and asphalt industries are battling over how we should rebuild and repair roads and bridges; dairy and beef cattle producers are battling over talk of a government program to slaughter dairy cattle and increase milk prices. States are clamoring for bailouts. And the labor unions are singing on their way to the bank with plans for massive infrastructure spending.

In the spirit of Art Carden’s recent post, “Everything is proceeding precisely as I have foreseen.” Ethics-free hack or no.

28 January 2009 at 12:06 pm 2 comments

Another Voice in the (Contracts) Wilderness

| Mike Sykuta |

I have always been a bit reticent when it comes to blogging, as Peter (and my friend Thom Lambert over at Truth on the Market) can attest. But I’ve come to realize not everyone posts at the (obviously OCD-induced) rate that Peter does, and as a guest there is certainly less pressure to keep up with the Joneses . . . or the Kleins anyhow. Thanks, Peter, for your persistence and continued offer to join in the fun. I have long enjoyed lurking around O&M and posting an occasional comment or two.

As Peter mentioned, I am the Director and one of the co-founders of the Contracting and Organizations Research Institute (CORI). CORI was formed in 2000 as a collaborative effort with my colleague Steve Ferris in Finance and former colleague Bob Lawless in (ironically) the Law School. The purpose was to provide a forum for interdisciplinary discussion and research on issues of law, economics, and organization. Since then, we’ve been able to bring in additional faculty positions related to CORI and help recruit other new faculty with aligned interests to create a fairly large group of scholars with complementary, and in some cases congruent, research interests. (more…)

23 January 2009 at 12:33 pm 2 comments


Nicolai J. Foss | home | posts
Peter G. Klein | home | posts
Richard Langlois | home | posts
Lasse B. Lien | home | posts


Former Guests | posts


Recent Posts



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).

%d bloggers like this: