Posts filed under ‘Institutions’
Economists Try Open-Source Peer Review
| Peter Klein |
It didn’t work so well for Nature, but a new economics journal, e-conomics, is giving open-source peer review a try. The journal, associated with the Kiel Institute, “adopts a ‘Linux approach’ to publication, viewing research as a cooperative enterprise between authors, editors, referees and readers.” After a paper is submitted, it is posted on the journal’s site and registered readers are invited to comment and to rate other readers’ comments. Formal referee reports are also solicited and, when received, published on the site, along with author responses to the reader discussion and to the referees. If the paper is accepted, this history is preserved along with the final version of the paper, which remains freely available.
There are already some good submissions available for public review, including Oliver Williamson’s “Transaction Cost Economics: An Introduction,” a revised version of which will also constitute the introduction to the Elgar Companion to Transaction Cost Economics.
Hayek and Wikipedia
| Peter Klein |
This passage from a 2006 New Yorker essay on Wikipedia caught my eye:
As an undergraduate, [Wikipedia founder Jimmy Wales] had read Friedrich Hayek’s 1945 free-market manifesto, “The Use of Knowledge in Society,” which argues that a person’s knowledge is by definition partial, and that truth is established only when people pool their wisdom. Wales thought of the essay again in the nineteen-nineties, when he began reading about the open-source movement, a group of programmers who believed that software should be free and distributed in such a way that anyone could modify the code. He was particularly impressed by “The Cathedral and the Bazaar,” an essay, later expanded into a book, by Eric Raymond, one of the movement’s founders. “It opened my eyes to the possibility of mass collaboration,” Wales said.
The Hayek-Wikipedia connection has been noted before (e.g., this post by Cass Sunstein on Larry Lessig’s blog — scroll down for a comment by Jimmy Wales himself). While there’s no reason to doubt that Hayek was a significant influence on the wiki model, the passage above has an apocryphal ring. If “The Use of Knowledge in Society” made an impression on Wales as an undergraduate, I’m impressed; it’s not exactly an easy read. (I gave up assigning it in my classes a few years ago, substituting Jensen and Meckling’s “Specific and General Knowledge, and Organizational Structure” instead.) And who would describe Hayek’s rather dry, technical paper as a “free-market manifesto”?
NB: The New Yorker article is getting a lot of airplay this week because of a serious attribution error, discussed here.
Aoki on Institutional Change
| Peter Klein |
The April 2007 issue of the Journal of Institutional Economics (3:1) features Masahiko Aoki’s paper “Endogenizing Institutions and Institutional Changes.” Abstract:
This paper proposes an analytical-cum-conceptual framework for understanding the nature of institutions as well as their changes. First, it proposes a new definition of institution based on the notion of common knowledge regarding self-sustaining features of social interactions with a hope to integrate various disciplinary approaches to institutions and their changes. Second, it specifies some generic mechanisms of institutional coherence and change — overlapping social embeddedness, Schumpeterian innovation in bundling games, and dynamic institutional complementarities — useful for understanding the dynamic interactions of economic, political, social, organizational, and cognitive factors.
Other papers from the same issue that look interesting include “Hayek and Popper on Ignorance and Intervention” by Celia Lessa Kerstenetzky, “Why Are Cooperatives Important in Agriculture? An Organizational Economics Perspective” by Vadislav Valentinov, and David Reisman’s review of Richard Swedberg’s New Developments in Economic Sociology.
How to Commercialize Innovation: Sue Everybody
| Peter Klein |
We previously discussed the possibility of turning turn Bell Labs into a profit center. Now it seems that Bell Labs’s new parent, Alcatel-Lucent, has figured out how to commercialize the great Bell innovations of the past: become a patent troll. Here is Michael Perelman, writing at Against Monopoly on Alcatel’s patent-infringement suit against Microsoft:
Bell Labs was once a jewel of American science. After the Justice Department broke up the Bell System, AT&T let Bell Labs deteriorate until it spun them off as part of Lucent. Lucent, in turn, deteriorated until it was bought up by Alcatel, which seems to be now behaving as a patent troll.
Alcatel just won an enormous patent suit against Microsoft — $1.52 billion for using Bell Labs work on the MP3 format. The suit manner may or may not hold up, but I presume that Alcatel is now preparing suits against others, finally figuring out how it can commoditize the work of Bell Labs.
Author Order
| Peter Klein |
Nicolai’s post on paper order got me thinking about author order, and how authorship ordering practices vary systematically across academic disciplines. In some scientific fields the lead author (or principal investigator) is listed first, while in others the lead author’s name comes last. In economics and business administration there isn’t a strong notion of “lead authorship,” and author names are usually listed alphabetically. There are, of course, prominent exceptions, such as Klein, Crawford, and Alchian (1978), Masten and Crocker (1985), and Hoskisson and Hitt (1994), to name just a few in organizational economics and strategy.
I’m curious to know how these practices evolved, and why they evolved differently in different disciplines. Surely some sociologists have written on this. (Academics tend to be narcissists, after all, and have shined the research spotlight on virtually every other aspect of their own profession!)
The social-science convention of usually-but-not-always-alphabetical ordering poses particular problems. How, for instance, do you communicate priority if the main author is first in the alphabet? Suppose my friends Mike Aarstol and Todd Zywicki get together. They can signal equal effort with “Aarstol and Zywicki” or give Todd the lead with “Zywicki and Aarstol.” But how do they give priority to Mike? “By Michael Aarstol, with special assistance from Todd Zywicki”?
“Lead Papers”?
| Nicolai Foss |
Increasingly often you see the following in the publications section of academic CVs: “paper title, journal, volume, pages (lead paper).” I take it that the “lead paper” is the first paper in an issue. Obviously, the impression that the writer of the CV wants to convey is that somehow this paper is the best in that specific issue (or at least written by the biggest guy). Do any of our readers know whether this is something journal editors (consciously) do? Is having your paper printed as the first paper in an issue a reliable signal of quality? Or is the structuring of papers in an issue a more random thing?
Microfinance and Growth
| Peter Klein |
As excitement over the Yunnus Nobel fades, microfinance skeptics continue to emerge. The latest is Thomas Dichter, who writes in a new Cato paper:
Most people, poor or otherwise, are not entrepreneurs, so there is little reason to think that mass credit would in general lead to viable business start-ups. Today as in the past, business start-ups in the advanced countries depend predominantly on savings and informal sources of credit; past forms of microcredit never played a role in small business development, and much microcredit is actually used for consumption rather than investment. In the history of today’s rich countries, moreover, economic growth occurred first, then came credit for the masses. That credit was and is predominantly for consumption rather than investment.
The paper is “A Second Look at Microfinance: The Sequence of Growth and Credit in Economic History. And here is a rare specimin, an empirical paper on microcredit that uses actual microdata.
Milton Friedman: Patron Saint of Blogging?
| Peter Klein |
Left to the free market of ideas and instant reader feedback, good writing, quality and reliability in blogging secures a readership and reputation solely on merit. The analogy to “democracy” may be clichéd but the blogosphere is a prime example of Milton Friedman’s credo (“Capitalism and Freedom”) that minimal (or no) regulation and state licensing are best; they are too often a pretext to shut down competition not protect the populace. — Jens F. Laurson and George A. Pieler
I appreciate the sentiment, but am not sure why Friedman deserves the honor. I suspect most bloggers would take Hayek instead (1, 2). (This cynic offers a slightly different take.)
What Did the Legal Realists Believe, Really?
| Peter Klein |
I posted a while back on Karl Llewellyn and legal realism, its recent revival, and what this all means for the O&M crowd. Brian Tamanaha says that the legal realists were not, contrary to popular belief, “proto- or early-day Crits (members of Critical Legal Studies) who exposed the rampant indeterminacy of law and insisted that judging is inevitably infused with and shaped by the subjective views of judges.” Rather, Tamanaha maintains, the Realists favored a common-sense, empirically grounded approach over the overly formal and deductive method preferred by their contemporaries.
Llewellyn’s point was that the Realists were indeed critical of mechanistic accounts of judicial decision-making — as deductive and exclusively rule-focused — but they did not commit the opposite error of suggesting that judging is purely subjective and not legally constrained. Rather, the Realists brought attention to other stabilizing aspects of the craft of law and judicial decision-making besides just the legal rules. While they denied that law was certain to the extent that formalism portrayed, they agreed that there was a great deal of certainty and predictability in law (though not attributable to the legal rules alone). They also argued that in some cases policy decisions were called for and should be done openly by judges, although they recognized that many cases were routine and determined by the legal rules.
Thanks to Orin Kerr for the pointer.
European Entrepreneurship
| Peter Klein |
Europe’s economic problem, writes Nobel Laureate Ned Phelps in last week’s Wall Street Journal, is its lack of dynamism — “how fertile the country is in coming up with innovative ideas having prospects of profitability, how adept it is at identifying and nourishing the ideas with the best prospects, and how prepared it is in evaluating and trying out the new products and methods that are launched onto the market.”
Europe, Phelps argues, lacks the economic culture and economic institutions to encourage dynamism. Europe’s economic institutions “typically exhibit a Balkanized/segmented financial sector favoring insiders, myriad impediments and penalties placed before outsider entrepreneurs, a consumer sector not venturesome about new products or short of the needed education, union voting (not just advice) in management decisions, and state interventionism.”
Man, how simplistic and comical can you get?
Call for Papers: Law and Economic Development
| Peter Klein |
The Global Economic History Network is sponsoring a conference at Utrecht University, 21-23 September 2007, on “Law and Economic Development: a Historical Perspective. Abstracts are due 31 March 2007. From the call for papers:
This conference aims to bring a truly global and multi-disciplinaryperspective to the relationship between law and long-term economic growth. We focus on formal legal rules, procedures and institutions in the wide context of legal traditions and their relationship with contract enforcement and property rights. We aim to broaden the scope of our discussion with a global perspective that includes both Western and important non-Western legal traditions such as the Chinese, Islamic or Hindu that have been largely neglected in the”legal origin” debate.
The legal origin debate, if you’re not familiar with this literature, began with the influential paper by La Porta, Lopez-de-Silanes, Shleifer, and Vishny, “Law and Finance” (JPE, 1998). LLSV argued for a strong correlation between a nation’s financial-market development and the origin of its legal system. (English common-law countries fare the best, while countries with a legal system based on — you guessed it — French civil law are the worst.) This paper, and a series of follow-up studies by the same authors, established a new strand of literature on economic development using large, cross-country panel datasets containing various measures of legal, poltical, social, and cultural institutions.
Critics argue that financial-market development and overall economic performance are driven not by legal origin but by politics, culture, and geography, among other factors, and that LLSV oversimplify the causal relationships between institutions and growth. (The chapter by Thorsten Beck and Ross Levine in the Handbook of New Institutional Economics — which also contains a very nice chapter on the make-or-buy decision, by the way — provides a useful overview and critique of this literature.)
Taxi Drivers in Nam
| Nicolai Foss |
It is always lovely to witness our theories come alive. So, here is an illustration of the agency problem for the benefit of our non-American readers (the example will be lost on Americans for reasons that will become clear :-)). A favorite examplification of agency problems are taxis (not Hayekian ones — real ones), because of the complex ownership arrangements of these assets.
When I visited Vietnam in January with my family, the way we got around in the cities was mainly using the private and extremely inexpensive taxis (there is virtually no public transportation in this supposedly commie country). Most other transport options (certainly bikes, “cyclos”, motorbikes, even walking) increase the death risk rather dramatically in the horrendous Vietnamese traffic. (more…)
An Un-Valentine’s Market
| Cliff Grammich |
Earlier today I followed up an earlier post of Peter’s on the business of weddings. It appears that’s not the only business that might boom around Valentine’s Day — my friend Liz Birge reports the divorce (legal) services market does as well . . .
More on the Business of Weddings
| Cliff Grammich |
In an earlier discussion of the business of weddings, Peter, responding to one commenter, expressed hope that by the time his “daughter is of marryin’ age, some kind of ‘peasant weddings’ will be in style.” I might even encourage elopement, although it’s fascinating how this assumedly cheap option has apparently evolved into the less cheap “destination wedding.” (more…)
15 February 2007 at 10:21 am Clifford Grammich Leave a comment
Intellectual Property: Who Needs It?
| Peter Klein |
Michele Boldrin and David K. Levine provide a succinct overview of the economic argument against strong IP in the January 2007 issue of the Freeman. In “Open-Source Software: Who Needs Intellectual Property?” Boldrin and Levine argue that open-source developers benefit primarily not from writing code, but from selling complementary services such as support, and that these incentives, not altruism, are responsible for the substantial innovations coming out of the open-source community. They conclude:
[T]he market for software is not unique. Innovation and competition unprotected by patent and copyright have gone hand in hand in other industries, from financial securities to fashion. The message of open-source software is a message for all industries: IP not needed for innovation here.
The University of Phoenix and the Economic Organization of Higher Education
| Peter Klein |
The Sunday New York Times features a lengthy, and mostly unflattering, look at the University of Phoenix, the world’s largest for-profit university. The tenor of the Times piece is set by the headline, “Troubles Grow for a University Built on Profits” — the p-word clearly chosen to shock the Times’s modal reader. (Where were the stories on the Times’s Judith Miller scandal titled “Troubles Grow for a Newspaper Built on Profits”?)
What’s remarkable about the article is not the conclusion, which is largely predictable, but the form of the argument. There is no attempt to evaluate the University of Phoenix’s efficiency or profitability, the quality of its product, or the value added of its degree. (Just a few quotes from disgruntled students, taken at face value; obviously no one at the Times reads RateMyProfessors.com.) Rather, the focus is on the production function. Because Phoenix uses an unusual production technology, the Times implies, its product is suspect. (more…)
Wikiversity
| Peter Klein |
Looking for a low-cost alternative to law school or business school? Try Wikiversity, “a multidimensional social organization dedicated to learning, teaching, research and service.” Yep, it’s a wiki — we’re talking 100% user-generated content. Unfortunately there isn’t much content yet, just mostly a shell. But there are spaces for law and business as well as academic disciplines including economics, sociology, psychology, political science, history, and philosophy.
Related resources: WikiSummaries and the Open Text Project.
Posner versus Hayek
| Peter Klein |
Todd Zywicki — what an unfortunate name in a profession where author order is usually alphabetical! — has a new paper with Anthony Sanders, “Posner, Hayek, and the Economic Analysis of Law.”
This Essay examines Richard Posner’s critique of F.A. Hayek’s legal theory and contrasts the two thinkers’ very different views of the nature of law, knowledge, and the rule of law. Posner conceives of law as a series of disparate rules and as purposive. He believes that a judge should examine an individual rule and come to a conclusion about whether the rule is the most efficient available. Hayek, on the other hand, conceives of law as a purpose-independent set of legal rules bound within a larger social order. Further, Posner, as a legal positivist, views law as an order consciously made through the efforts of judges and legislators. Hayek, however, views law as a spontaneous order that arises out of human action but not from human design. . . . This limits the success of judges in consciously creating legal rules because a judge will be limited in the forethought necessary to connect a rule to other legal and non-legal rules and what Hayek termed “the knowledge of particular circumstances of time and place.”
Paul Krugman once described Robert Barro as “esteemed but not revered” among professional economists (borrowing the phrase from a description of Stephen Hawking). Surely the same applies to Posner. Or perhaps it should be “admired but not esteemed.” One of my great pleasures in recent months was sharing a meal with a couple of University of Chicago law professors and listening to them swap Posner stories. Wow.
Is Law School a Waste of Time?
| Peter Klein |
We frequently criticize management education on these pages. To show that we’re equal-opportunity critics, we point you to this essay by George Leef, “Is Law School a Waste of Time?” Leef summarizes a recent Carnegie Foundation report taking law schools to task for “giv[ing] only casual attention to teaching students how to use legal thinking in the complexity of actual law practice” and “fail[ing] to complement the focus on skill in legal analyses with effective support for developing ethical and social skills.” Sounds a lot like business schools!
Writes Leef:
To anyone who thinks that merely because someone has graduated from law school, he “knows the law” and is capable of providing a client capable assistance, the Carnegie Foundation report is like a cold shower. It’s telling us that law students spend three or more years of their lives and huge amounts of money just to become qualified to start learning what they really need to know. While it’s true that law schools are good at instructing students in some basic things — how to do legal research and to “think like a lawyer” — the question is whether it needs to take so long and cost so much to accomplish that.
As we’ve noted before, graduate and professional degrees may function primarily as signals, but as such, they are very expensive signals. There must be more efficient ways to provide certification and social networking. (Look soon for Organizations and Markets University — for a modest fee we’ll give you a written test plus access to our private Facebook pages!)
Don’t Believe the E-Hype
| Peter Klein |
Tom Hazlett, writing in Monday’s Financial Times, brings the wiki crowd back to earth. Noting the excitement over user-generated content, club goods, and the electronic commons, Tom warns:
Overhype about the emerging markets is good clean fun when confined to mindless text-messaging. There is an undeniable “wow” factor. But there is also a madness to the e-crowd. Whenever a trend is spotted that captures the fancy of the zeitgeist, it is formulated as a linear trajectory, and shot into orbit. All cross traffic is banned. Call it “asymmetric triumphalism.”
This fits nicely with some of our own recurring themes: little is new under the sun (1, 2), “open” doesn’t always beat “closed” (1, 2), etc. Indeed, as Tom points out:
“Open” networks have evolved, and Time dutifully touts the success of Linux -– the open-source operating system mocked by Microsoft critics during the company’s US antitrust trial but now heralded as a bona fide competitive rival.
But iPod/iTunes is a proprietary platform that has magically restored order to the music download business while creating the iconic consumer electronics product of the 21st Century. Similarly, electronic games are driving explosive growth in entertainment software and broadband markets, riding on the backs of three consoles that are “open” only to the software licensed by their makers — Sony, Microsoft, or Nintendo.
The point is not that “closed” beats “open,” but that capitalism accommodates both.
My former colleague George Selgin, known for his dry sense of humor, used to say that a lot of thinking and writing on e-commerce, e-learning, e-etc. could be summarized in one word: “e-gnorance.”
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