Posts filed under ‘Former Guest Bloggers’

Arrunada Seminar: Grand Opening

| Lasse Lien |

Today we are proud to launch a virtual seminar over Benito Arruñada’s important new book: Institutional Foundations of Impersonal Exchange: Theory and Policy of Contractual Registries (U. of Chicago Press).

First, what on earth is a virtual seminar? In this case a virtual seminar means that we over the next two weeks will launch a series of posts that address issues in Arruñada’s book, or issues that are inspired by issues in Arruñada’s book. Our hope is that many of you will join the discussion by adding your reflections, objections, or thoughts under the lead posts in the usual O&M way. Please note that if you haven’t had the time to read the book, but have thoughts on the subjects brought up or think additional subjects should be brought up, don’t let that stop you. We want to hear your thoughts!

Who is Benito? Benito is Professor of Business Organization at the Department of Economics and Business at Pompeu Fabra University, Barcelona. Prior to joining Pompeu Fabra and after graduating from the universities of Oviedo and Rochester, he held positions at the Universities of Oviedo and León, and was John M. Olin Visiting Scholar in Law and Economics at Harvard Law School. He has also taught at the Universities of Paris (I and X), Frankfurt, Autónoma de Madrid and Pablo de Olavide in Seville, and visited UC Berkeley, Washington and George Mason Universities. Benito Arruñada was a member of the founding board of directors and served as President (2005-2006) of the International Society for New Institutional Economics, ISNIE. And most prestigious of all; he is a former guest blogger at O&M.

What about the book? As the title reveals, the essence of the book is the institutional foundations for impersonal exchange. If you are reading a blog called Organizations and Markets, it seems safe to assume that you will find this topic interesting and profoundly important. To flesh it out a bit more, what could be better than to let Benito himself explain the main thrust of the book:

| Benito Arruñada |

Governments and development agencies spend considerable resources building property and company registries to protect property rights. When these efforts succeed, owners feel secure enough to invest in their property and banks are able use it as collateral for credit. Similarly, firms prosper when entrepreneurs can transform their firms into legal entities and thus contract more safely. Unfortunately, developing registries is harder than it may seem to observers, especially in developed countries, where registries are often taken for granted. As a result, policies in this area usually disappoint.

In this book, I have aimed to avoid such failures by deepening our understanding of both the value of registries and the organizational requirements for constructing them. Presenting a theory of how registries strengthen property rights and reduce transaction costs, I analyze the major tradeoffs and propose principles for successfully building registries in countries at different stages of development. The focus is on land and company registries, explaining the difficulties entailed, including current challenges like the subprime mortgage crisis in the United States and the dubious efforts being made in developing countries toward universal land titling. But the analytical framework covers other registries, including intellectual property and organized exchanges of financial derivatives.

Arruñada, Benito, Institutional Foundations of Impersonal Exchange: Theory and Policy of Contractual Registries, University of Chicago Press, Chicago, 2012. (Amazon site: http://ow.ly/cBMU5).

3 January 2013 at 7:57 am Leave a comment

Elinor Ostrom (1933-2012)

| Peter Klein |

A guest post from former guest blogger Joe Mahoney, the Caterpillar Chair in Business and Director of Graduate Studies in the Department of Business Administration, University of Illinois:

As many readers of O&M know by now, Elinor Ostrom of Indiana University (born August 7, 1933) died of pancreatic cancer on Tuesday, June 12th at the age of 78.  She shared the Nobel Prize in Economics in 2009 with Professor Oliver Williamson (UC-Berkeley). Elinor along with her husband Vincent Ostrom (now 93) founded Indiana University’s Workshop in Political Theory and Policy in the mid-1960s, in which she remained active until this Spring, only a couple of weeks before her hospitalization. She also donated most of her Nobel Prize money to the Workshop, as Elinor and Vincent had no children and few living relatives.  Williamson said in a statement that Ostrom was “a great human being,” an inspiring teacher and colleague and accomplished social scientist. “She had a wonderful sense of joy about the importance of her work that she successfully communicated to others,” he said. A record five women won Nobel prizes in 2009, and Elinor Ostrom is the only woman to have been awarded the prize in Economics.

Elinor Ostrom, who was born and raised in Los Angeles as a child of the Great Depression, and received her education from undergraduate through Ph.D. at UCLA, contributed to our understanding of the evolution of institutions for collective action in common resource contexts such as forests, fisheries, oil fields, and grazing lands. She emphasized citizen involvement, the creativity of local communities, and cutting through sterile dichotomous classifications and ideological “solutions” that are glib and inaccurate. Ostrom states that “neither the State nor the market is uniformly successful in enabling individuals to sustain long-term, productive use of natural resources” (1990: 1). She emphasized the complementarities between public and private mechanisms for solving collective good problems (see Governing the Commons, Cambridge University Press, 1990.) Ostrom conducted field studies of the world’s fisheries, roamed with shepherds in Swiss pastures, and trudged around the Los Angeles water basin (during her dissertation work) to distill the essentials of harnessing cooperation. She writes in the preface to her 1990 book: “It is my conviction that knowledge accrues by the continual process of moving back and forth from empirical observation to serious efforts at theoretical formulation.” From this theoretically informed field case study method Elinor Ostrom concludes that instead of presuming that individuals sharing a common resource are “inevitably caught in a trap from which they cannot escape, . . . the capacity of individuals to extricate themselves from various types of dilemma situations varies from situation to situation” (1990: 14).

Ostrom championed unlocking the spirit of “public entrepreneurship” — a term she coined in her 1965 UCLA dissertation. Her spirit can live on within us, if we decide to “make it so.” Good years.

13 June 2012 at 6:44 pm 2 comments

Lewin on Austrian Capital Theory

| Peter Klein |

A very nice overview of “Austrian” capital theory and its relevance for the current economic crisis from former guest blogger Peter Lewin.

With the resurgence of Keynesian economic policy as a response to the current crisis, echoes of past debates are being heard — in particular the debate from the 1930s between John Maynard Keynes and Friedrich Hayek. . . . Hayek pointed out that capital investment does not simply add to production in a general way but rather is embodied in concrete capital items. That is, the productive capital of the economy is not simply an amorphous “stock” of generalized production power; it is an intricate structure of specific interrelated complementary components. Stimulating spending and investment, then, amounts to stimulating specific sections and components of this intricate structure.

See also the recent SO!APbox essay by Rajshree Agarwal, Jay Barney, Nicolai, and me, “Heterogeneous Resources and the Financial Crisis: Implications of Strategic Management Theory.”

4 June 2012 at 11:35 pm 1 comment

Time to Say Goodbye, but Not Really

| Peter Lewin |

After a most enjoyable and productive tour as a guest blogger on this site (at least for me), the time has come to say goodbye.

I do so at an auspicious moment, having just received my copy of Organizing Entrepreneurial Judgment. This book brings together important work by two of the hosts of this site in a very accessible format that promises to spread their message to many who have yet to hear it. To understand the firm one must understand entrepreneurship and vice versa. We live in a dynamic world in which individual judgments concerning the value of resources and the path of future events play a key role and organizational structures develop to give traction to those judgments. For an unrepentant Austrian subjectivist like me it is all very exciting. I look forward to observing further developments as an observer and casual participant on this blog, and elsewhere.

I would like to warmly thank the hosts of this blog Dick, Nicolai, Lasse, and Peter for extending to me the invitation to participate and look forward to ongoing productive associations with all of them.

19 April 2012 at 2:45 pm 1 comment

New Article from Langlois

| Peter Lewin |

Since it hasn’t been mentioned here yet, I would like to take the liberty of recommending a great “how it all fits together” article by Dick Langlois forthcoming in the Review of Austrian Economics, entitled “The Austrian Theory of the Firm: Retrospect and Prospect.” I just reread it with great pleasure (I saw it a few years ago at a seminar). With characteristic Langlois ease (or so it seems) Dick weaves the connections between Coase, Hayek, Lachmann, Richardson, Pensrose, Chandler, Foss, Langlois, and others to provide a very clear picture.

1 March 2012 at 10:55 am 3 comments

Perceptions of Opportunities – Part 2

| Peter Lewin |

The second review article in the latest issue of AMR by Venkataraman, Sarasvathy, Dew, and Forster (VSDF) is more ambitious than the first by Shane, discussed in Part 1. In fact one might describe the ambition motivating the article as grandiose. VSDF “seek to recast entrepreneurship as a science of the artificial” an entirely new way of looking at entrepreneurship in the interest of uncovering (what I take to be universal) principles that can serve as the basis of a new empirical and policy-useful science of entrepreneurship. [I see this article as a companion piece to the article by Sarasvathy and Venkataraman (SV) in ET&P January, 2011, in which this grandiose vision is even more apparent.]

The science of the artificial(supposedly a distinct category of science from natural or social science) is derived from the work of Herbert Simon (1996).

As a theory develops it splits into two streams: (1) “basic” research that continues to refine the causal explanations and (2) “applied” research that seeks to alter the variables of explanation. At that point the phenomenon of interest has become an artifact. …

A science of the artificial is interested in phenomena that can be designed [and controlled]. … Design lies is the choice of the boundary values; control lies in the means to change them. (24).

So a useful theory is itself an artifact something that can be used to understand and (importantly) control aspects of the (social) world. And, I suppose, the new science of entrepreneurship will eventually develop such artifacts. [At the end of the article they talk about “recasting opportunities as artifacts” – so I am not sure how this is all connected.]

My lack of expertise regarding the work of Herbert Simon (something which I am now more encouraged to remedy) prevents me from pronouncing with confidence on this part of the article. Suffice it to say that the meaning and contribution of this new “science of the artificial” is far from clear to me. I am left with a feeling that if it is indeed such an important and path-breaking meta-scientific turn, the authors should be able to explain it better. It should be more accessible and transparent. I am left highly skeptical, but I urge readers of this post to read the article and perhaps enlighten me and others. (more…)

5 February 2012 at 1:32 am 8 comments

Perceptions of Opportunities – Part 1

| Peter Lewin |

The January 2012 issue of the AMR (available here for subscribers or those with academic access) features two review articles assessing the progress of the “Promise” examined in the well-known article by Scott Shane and Sankaran Venkataraman (AMR 2000: The Promise of Entrepreneurship as a Field of Research) — one from each of the original co-authors. The first is an interesting, if somewhat pedestrian, article by Scott Shane. The second is a much more profound and ambitious contribution by Venkataraman together with Saras Sarasvathy, Nicholas Dew, and William Forster.

In the decade since that article there has, indeed, been a significant shift in the focus of research in entrepreneurship. Most notable, perhaps, is the focus on entrepreneurial “opportunities” — familiar to Austrian economists from the work of Israel Kirzner, but by now a standard element in the story. Each of the articles spends considerable time revisiting questions about the nature of entrepreneurial opportunities and provides its own resolutions. Here I will provide just a quick overview of this part of Shane’s article. (I intend to provide one for the second article soon).

In considering the “nexus of opportunities and individuals” offered originally in “Promise” as a reason to shift attention from the person to the function, Shane addresses the question of whether entrepreneurial opportunities should be considered “objective” or “subjective” — a question that has proliferated in this research stream, albeit with varying focus and terminology. The problem is, it seems to me, that the notion of “opportunity” is one that depends on the formation of a mental image by some individual or individuals. Opportunity implies plan — a plan of action to use, transform, combine, existing resources in a profitable way. Without the plan there is just the world. So how can “opportunity” be objective? This is related to the question: are opportunities “discovered” (Alvarez and Barney: Organizaҫões em Contexto, 2007) or are they created; or in the words of Venkataraman, et. al. are they made or found? (more…)

23 January 2012 at 3:38 pm 18 comments

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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).