Posts filed under ‘Institutions’
| Dick Langlois |
I was fascinated to learn about the recent ballot proposal in Ohio to legalize marijuana by constitutional amendment. The unusual aspect of the proposal was that it would have come with a grant of a monopoly in commercial marijuana production to specific investors who owned suitable land. Because they stood to gain considerably from passing the proposal, these investors devoted resources to getting it passed, including professional canvassers, political strategists, and even a mascot with a head shaped like a marijuana bud. Basic Public Choice teaches that legislation benefiting many diffuse constituents is hard to pass because of transaction costs. In effect, the monopoly aspect of the Ohio proposal would have granted a patent to the investors, thus giving them the incentive to overcome the transaction costs of collective action. The proposal failed, and at the same time Ohio voters passed an amendment forbidding the use of ballot initiatives for personal gain. It is interesting nonetheless to think about the economics of such “patents” for institutional innovation.
| Dick Langlois |
Just ran across the abstract of a fascinating paper called “The Anti-Commons Revisited” by Jonathan Barnett at USC, which is forthcoming in the Harvard Journal of Law and Technology. Here’s the abstract.
Intellectual property scholars and policymakers often assert that technology and creative markets suffer from “anti-commons” (“AC”) effects that restrain innovation within a web of conflicting intellectual property claims. A minority view asserts that market players have incentives and capacities to correct for AC effects through transactional solutions. To assess the relative merits of each side of this debate, I review a large and diverse body of empirical evidence relating to AC effects in contemporary and historical markets. I independently replicate the most controversial empirical findings, supplement additional research on selected markets, and provide a survey of all documented IP-pooling arrangements in U.S. markets since 1900. The weight of the evidence strongly favors the minority view. Evidence for AC effects is scarce while evidence that markets correct for AC effects is abundant. AC effects are typically preempted or mitigated through cooperative arrangements among small numbers of IP holders or transactional solutions devised by entrepreneurial intermediaries for large numbers of IP holders. This pattern recurs over a diverse array of markets and periods, including automobiles, petroleum refining, aircraft, and radio communications in the early to mid-20th century, and information and communications technology markets from the late 20th century through the present. Contrary to standard assumptions, there is little evidence that these markets experienced reduced or delayed innovation or output despite intensive levels of patent issuance and litigation.
| Dick Langlois |
I was saddened to learn that Masa Aoki passed away on July 15. He was only 77. Masa was a towering figure in the economics of institutions and organizations, and a true gentleman.
| Peter Klein |
I’ve long been involved with the International Society for New Institutional Economics (ISNIE). (In fact, I first met the esteemed Professor Foss at the inaugural ISNIE conference in St. Louis in 1997.) ISNIE was established as an global academic society promoting the study of institutions within the broad tradition established by the organization’s co-founders Ronald Coase, Oliver Williamson, and Douglass North. ISNIE has been a great success, holding annual conferences in the US and Europe, sponsoring an important working-paper series, and boasting thousands of members from all over the world.
Times change, and over the last two decades the study of institutions has moved from the periphery towards the center of economic, social, political, and legal analysis. The statement, “institutions matter,” which might have been controversial in social science in the 1990s, seems trite today. As such, some of ISNIE’s leaders and members saw a need to reposition and rebrand the society to reflect the current academic and policy climate. Last year ISNIE’s members voted, and this year the board approved, a name change. The organization is now SIOE, the Society for Institutional and Organizational Economics. Along with the change is a new website, featuring news, information, a blog, and many other features. The site is a work in progress and editors Bruno Chaves and Jens Prüfer would be happy to receive comments and suggestions.
I’m looking forward to the next twenty years with SIOE!
| Peter Klein |
O&M friends Avner Greif, Lynne Kiesling, and John Nye have edited an important collection of essays by students, colleagues, and friends of the distinguished economic historian Joel Mokyr: Institutions, Innovation, and Industrialization: Essays in Economic History and Development (Princeton University Press, 2015). Dust-jacket blurb:
This book brings together a group of leading economic historians to examine how institutions, innovation, and industrialization have determined the development of nations. Presented in honor of Joel Mokyr — arguably the preeminent economic historian of his generation–these wide-ranging essays address a host of core economic questions. What are the origins of markets? How do governments shape our economic fortunes? What role has entrepreneurship played in the rise and success of capitalism? Tackling these and other issues, the book looks at coercion and exchange in the markets of twelfth-century China, sovereign debt in the age of Philip II of Spain, the regulation of child labor in nineteenth-century Europe, meat provisioning in pre-Civil War New York, aircraft manufacturing before World War I, and more. The book also features an essay that surveys Mokyr’s important contributions to the field of economic history, and an essay by Mokyr himself on the origins of the Industrial Revolution.
| Peter Klein |
We’ve featured several posts on the relationship between artistic and entrepreneurial creativity, arguing that great art, like great entrepreneurship, is rarely the product of isolated individuals, toiling away privately and swimming against the tide, misunderstood or ignored by the establishment. Rather, both art and entrepreneurship are usually highly social and commercial activities, with subtle and nuanced relationships among creators, patrons, rivals, and customers.
I’ve been reading two interesting books on modern art that emphasize the idea of an artistic “ecosystem,” a complex set of interactions among artists, curators, critics, buyers, and others with commercial interests, Daniel Seidell’s Who’s Afraid of Modern Art and Sarah Thornton’s Seven Days in the Art World. I see many parallels with the contemporary entrepreneurship literature and its focus on ecosystems of entrepreneurs, funders, suppliers, customers, makers of complementary products, regulators, and so on. Phone and tablet makers depend on app programmers and vice versa; engineers need venture capitalists and vice versa; founders and funders are embedded within clubs, networks, and associations; etc. As Seidell notes:
Serious art in the Western tradition — that is, art that is not content to “imagine” what we think we already know about the world of appearances and experiences, but probes more deeply into the nature of such reality through aesthetic form — has always been inextricably bound up with business. It is inseparable from patrons and collectors, with markets and dealers, with personalities and egos. . . .
Great art emerges out of the warp and woof — some would say the muck and mire — of commerce, of production and distribution that is at the very heart of [the art world].
Seidell is trying to help us understand the modern and contemporary art that frustrates and confuses most of us — abstract expressionism, pop art, Damien Hirst’s formaldehyde shark — by explaining that the value of these works comes not solely from the work itself, or even from the relationship between the work and the viewer, but from the way the work is perceived by critics, curators, collectors, and other artists. Much “high art” is actually produced for them, not for us. Of course, with entrepreneurship, the commercial value of any venture is ultimately determined by us, the consumers who willingly part with our hard-earned money for the services of the company or product. But, like art, entrepreneurship is a social activity, and great entrepreneurs know how to situate themselves within, or create from scratch, the ecosystem that makes their work great.
| Peter Klein |
Great illustration from the Mad Scientist Confectioner’s Club (via Fan Xia).