Posts filed under ‘Institutions’
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).
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.
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…)
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.
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…)
Data Sharing, When It Might Really Matter
| Peter Klein |
Social scientists aren’t the only ones reluctant to share raw data. Medical researchers are equally touchy about it, even when granting other people access to the data could lead to real breakthroughs. Biostatistician Andrew Vickers writes in yesterday’s Times about his experiences trying to replicate or extend cancer studies:
Not long ago, I asked a respected cancer researcher if he could send me raw data from a trial he had recently published. He refused. Sharing data would make the study team members “uncomfortable,” he said, as I might use this to “cast doubt” on their results. . . .
[W]e wrote to [another research team] and asked whether they would share their data. They refused on the grounds that they might consider a similar analysis at some point in the future. But years have passed, no such analyses have been forthcoming and few patients are benefiting from what could be a very effective drug. . . .
When a colleague and I wanted to analyze the data from a completed breast cancer trial, merely getting permission to speak to the study’s organizing committee required a one-hour phone call with the scientist in charge of the agenda. Only after another one-hour call with the committee itself were we allowed to submit a formal proposal — to which we received no response. . . .
Researchers give all kinds of reasons for refusing to share — concerns about patient confidentiality, appropriate research methods, and so on — but, Vickers concludes, “the real issue here has more to do with status and career than with any loftier considerations. Scientists don’t want to be scooped by their own data, or have someone else challenge their conclusions with a new analysis.”
Thanks to Research on Innovation blog for the lead.
Schools of Thought in Behavioral Economics
| Peter Klein |
Gary Lynne sent me John Tomer’s paper from the June 2007 Journal of Socio-Economics, “What is Behavioral Economics?” Tomer summarizes the various strands of behavioral economics and scores each according to “narrowness,” “rigidity,” “intolerance,” “mechanicalness,” “separateness,” and “individualism.” Coverage includes the Carnegie tradition, Katona’s Michigan school, modern experimental economics, Akerlof’s behavioral macro, and more. Tomer defines the field more broadly than I would — he includes evolutionary economics à la Nelson and Winter, for example — but the commentary is insightful.
Legal Entrepreneurship
| Steve Phelan |
I just had lunch with the general counsel of an internet retailer, which is headquartered here in Las Vegas. He was bemoaning the fact that the biggest headache in his job is patent infringments… (more…)
Reflections on LLSV
| Peter Klein |
I meant to blog on the newest LLSV paper (actually LLS, in this case) but never got around to it. LLSV, you’ll recall, inaugurated a stream of empirical research on the financial and economic effects of legal systems (focusing on the differences between common- and civil-law countries). The newest paper clarifies the argument and reflects on ten years of research, discussion, and debate on the role of legal origins.
Fortunately, Daniel Sokol has written some comments on the Conglomerate blog (one of my regular reads, by the way — keep up the good work, guys!). Daniel notes, wisely:
I believe that LLSV makes certain assumptions about history and political economy in legal origins that are not exactly supported by the underlying historical record. A number of scholars have attacked LLSV on these grounds. Nevertheless, I still find myself strangely attracted to LLSV. In many ways, the results are what you would intuitively expect if you were on your own to attempt to rank countries based on investor protection or other similar features. More importantly, a number of the variables that LLSV uses are a bit squishy but we have yet to come up with better cross country measurements. Indeed, as a result of the critiques, LLSV have gotten better as to how they measure shareholder protection. From a policy perspective, the key to change to various bottlenecks requires not merely a top down approach in the change of the legal system but a bottom up approach by the users of these legal systems to overcome various bottlenecks that are regulatory. This makes me believe that over time the common law/civil law distinction will be seen as a rather false one where instead you will find countries lumped into categories based on their ability to respond to local and changing conditions (even the United States, which in recent years may have created increased regulatory bottlenecks such as SOX). This evolutionary approach is what I believe holds the key to understanding how to think about law and institutions.
Why Business Ignores the Business Schools
| Peter Klein |
That’s the title of Michael Skapinker’s essay in the Financial Times (via Kenneth Amaeshi), which focuses on academic research in business administration (not teaching). Unlike their counterparts in law, medicine, and engineering, Skapinker argues, B-school professors focus almost exclusively on impressing their peers, leading to work that is too abstract, jargon-filled, and theoretical to interest practitioners. He blames not only the usual publish-or-perish incentives, but also the fact that “[w]ithin the university world, business schools suffer from a long-standing inferiority complex.” B-school faculty “prefer to adorn their work with scholarly tables, statistics and jargon because it makes them feel like real academics.” Ouch.
Interesting discussion fodder, and Skapinker is surely right that some research in management suffers from scientistic pretensions (perhaps less so in finance and accounting). I do think Skapinker overstates the close relationship between research and practice in medicine. (Try asking your family physician about something you read in the New England Journal of Medicine, or ask for a confidence interval on the point estimate you’re given about the likelihood drug X will cure your condition Y.)
ASSA 2008 Papers on Organizations
| Peter Klein |
Some interesting papers from the ASSA Meeting in New Orleans, where I’ll be spending the next couple of days. (I don’t have links, so you’ll have to do your own Googling to find the texts.)
ROBERT GIBBONS and REBECCA HENDERSON, Massachusetts Institute of Technology — What Do Managers Do? Suggestive Evidence and Potential Theories about Building and Managing Relational Contracts
CLAUDE MENARD, ATOM – University of Paris Pantheon-Sorbonne — The Governance of Interfirm Agreements: A Relational Contract Perspective
RICARD GIL, University California-Santa Cruz, and JEAN-MICHEL OUDOT, ATOM – University Paris Pantheon-Sorbonne — Contractual Completeness and Ex-post Efficiency: Trade-Offs between Ex-Ante and Ex-Post Costs in Contract Design
LUIS GARICANO and PAUL HEATON, University of Chicago — Information Technology, Organization, and Productivity in the Public Sector: Evidence from Police Departments
DANIEL SPULBER, Northwestern University — Entrepreneurs in the Theory of the Firm (more…)
Best Dissertation Title I Read Today
| Peter Klein |
“Pimps and Ferrets: Copyright and Culture in the United States, 1831-1891,” by Eric Anderson (Bowling Green State University, American Culture Studies/History, 2007). Abstract:
How did people think about copyright in the nineteenth century? What did they think it was? What was it for? Was it property? Or something else? How did it function? Who could it benefit? Who might it harm? Pimps and Ferrets: Copyright and Culture in the United States, 1831-1891 addresses questions like these, unpacking the ideas and popular ideologies connected to copyright in the United States during the nineteenth-century.
This era was rife with copyright-related controversy and excitement, including international squabbling, celebrity grandstanding, new technology, corporate exploitation, and ferocious arguments about piracy, reprinting, and the effects of copyright law. Then, as now, copyright was very important to a small group of people (authors and publishers), and slightly important to a much larger group (consumers and readers). However, as this dissertation demonstrates, these larger groups did have definite ideas about copyright, its function, and its purpose, in ways not obvious to the denizens of the legal and authorial realms.
This project draws on methods from both social and cultural history. Primary sources include a broad swath of magazine and newspaper articles, letters, and editorials about various copyright-related controversies. Examining these sources — both mainstream and obscure — illustrates the diversity of thinking about copyright issues during the nineteenth century, and suggests alternative frameworks for considering copyright in other times.
Via Bill Stepp, who says the “study fills a yawning gap in copyright history, and offers a radically different focus on the development of this institution from the dominant legal perspective.” You’ll have to download the searchable PDF to find the meaning of the title.
Are Journal Impact Factors Reliable?
| Peter Klein |
Not really, according to the RePEc blog (via Newmark). Thompson (formerly ISI) uses an imprecise and inconsistent method to compute journal impact factors and, even worse, refuses to release the raw data so that scores can be independently verified. Journals typically require authors to make data public as a condition of publication; why use rankings based on hidden data? Writes RePEc: “[A]ll of us should treat impact factors and citation data with considerable caution. Basing journal rankings, tenure, promotion, and raises on uncritical acceptance of [these] data is a poor idea.”
It would be nice to have more information about the magnitude and direction of the potential bias. Do these problems affect the rank ordering of journals, or simply the precision of the point estimates? Is there any research on this problem?
Markets in Everything, Gift Card Edition
| Peter Klein |
A new secondary market for gift cards, those ubiquitous plastic goodies that so many of us found in our Christmas stockings this year (via WWD). Lisa Fairfax provides more examples and some discussion. And don’t miss Jennifer Offenberg’s work.
New Videos: Roth, Tirole
| Peter Klein |
Boston University has put the last two Rosenthal Memorial Lectures online. Here’s Alvin Roth on “What Have We Learned From Market Design” (no, it’s not supposed to be self-contradictory) and Jean Tirole on “Economic Incentives, Self Motivation, and Social Pressure.” (HT: Marshall Jevons)
Open Source and Spontaneous Order
| Peter Klein |
Open-source software is often cited as an example of what Hayek termed spontaneous order, the organic, bottom-up, decentralized form of organization that characterizes the market system. Giampaolo Garzarelli, in an explicitly Hayekian analyis, says open-source projects are defined by “no hierarchy, self-organization, self-regulation, and no ownership structure.” Is this an accurate characterization?
Commercial law, manifest in the medieval law merchant or lex mercatoria, is another important example of spontaneous order in the literature (see Harold Berman and Bruce Benson). Fabrizio Marrella and Christopher Yoo use the law merchant as a benchmark, asking “Is Open Source Software the New Lex Mercatoria?”They think not, arguing that focal firms, individuals, and groups play a more important role in guiding the evolution of open-source projects than is usually recognized. As a result, “[o]pen source has not achieved the type of universality or uniformity of principles envisioned by proponents of the lex mercatoria.” (more…)
New Papers on the Economic Analysis of Religion
| Peter Klein |
The economic analysis of religion is a rapidly growing area of applied microeconomics. To some, it represents creative and clever applications of economic theory to social, cultural, and institutional phenomena. Others see it as a crude form of economic imperialism. Only economists could take the spirit out of spirituality!
The October 2007 issue of the American Journal of Economics and Sociology contains some examples of this genre:
John H. Beck, “The Pelagian Controversy: An Economic Analysis.” The present study analyzes the decision of church authorities in the early fifth century to reject the doctrine advanced by Pelagius in favor of the position taken by Augustine. Accounts of the controversy reveal two self-interested motives for the church hierarchy to reject the Pelagian doctrine: (1) the Pelagian view would have undermined the authority of the church hierarchy; and (2) by making greater demands for moral conduct, it would have raised the “cost” of being a Christian and thereby discouraged growth in church membership, particularly among the Roman upper class. (more…)
EU Research Productivity
| Steve Phelan |
Interesting post over at Vox EU on EU Research Productivity. Basically a recent study examines the ISI List of Highly Cited Researchers (HCRs) by country,
the United States gets the lion’s share with 66% of the total number of HCRs, while the EU17 (EU15 plus Norway and Switzerland) has 22.3%.
They then use an econometric model to estimate the effects of R&D expenditure as % of GDP, GDP per capita, Anglo-Saxon academic institutions, and the proportion of English speakers.
Raising R&D to 3% of GDP was predicted to increase EU share to only 28%. Interestingly, university governance reforms were predicted to increase performance the most (by an additional 9%).
The article is very vague about the supposed institutional benefits conferred by the US/UK academic system that generate the higher performance. If this result is true, then what is the reason? Is it more efficient incentives such as an up-or-out promotion based on top tier publications? Is it better PhD training? Is it higher rewards for top performers?
That being said, is the “the list of highly cited researchers on ISI” an appropriate dependent variable to measure comparative research performance? Is it biased towards US researchers? Note that English proficiency only explained 3-4% of the performance gap.
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