Posts filed under ‘– Klein –’
Interview with James March
| Peter Klein |
The October 2006 Harvard Business Review features an interview with James March, one of the most important organizational theorists of the twentieth century. Here’s an online version (possibly behind a subscription firewall). Here’s a summary from the Jackson Library Blog (which I’m finding more and more useful all the time):
The article is called ‘Ideas as Art’ (pp. 82-89). In the introductory part, the author quotes the University of Chicago professor John Padgett who once wrote: “Jim March is to organization theory what Miles Davis is to jazz.” In the interview, March elaborates on the distinction he makes between the practical managerial needs and concerns and scholarly approach to new ideas. He values ideas which contain “some form of elegance or grace or surprise — all the things that beauty gives you” and not being relevant to the immediate needs of an organization manager in a short run. He also explains the essence of his rather famous and colorfully named theories: “garbage can theory”, “technology of foolishness”, and “hot-stove effect”. The interview reveals not only a great and original scholar but also the multifaceted personality of Jim March, a man with appreciation for literature, a poet himself and an author of several books of poetry. In his own words: “What might make a difference to us, I think, is whether in our tiny roles, in our brief time, we inhabit life gently and add more beauty than ugliness.”
Aside from being a brilliant and original thinker, March is also one of the funniest people I have ever met, a brilliant after-dinner speaker who has as many Wisconsin jokes as Garrison Keillor has Minnesota jokes.
Here’s a longer interview from 2000 by Mie Augier and Kristian Kreiner.
Netflix Tries Crowdsourcing
| Peter Klein |
Movie-rental firm Netflix appeals to the masses for a new recommendation system. Beat the system currently in place and walk away with $1 million.
Sharpe Rethinks CAPM
| Peter Klein |
A core Kuhnian principle is that scholars never change their minds. This is especially when their original views lead to Nobel Prizes. So what a surprise to learn that Nobel Laureate William Sharpe, co-creator (with Harry Markowitz) of the Capital Asset Pricing Model (CAPM), is rethinking his views on asset pricing.
[Sharpe’s] latest book, “Investors and Markets: Portfolio Choices, Asset Prices and Investment Advice,” may send investors and academics scurrying. Published this month by Princeton University Press, the book eschews mean-variance analysis — the mathematically complex formula that relates rewards to risks of securities or portfolios — in favor of a “state preference” approach that relies on an easy-to-understand simulation. That approach is based on a model closer to that used in financial engineering than in the ivory tower.
Markowitz, apparently, is not convinced, and will debate Sharpe at an upcoming conference. (Via Mark Thoma)
American Economists: Not So Free-Market After All
| Peter Klein |
I’ve blogged previously about Daniel Klein’s work on the political identities and policy views of economists and other academics (here and here). A new paper by Klein and Charlotta Stern surveys American Economic Association members on various policy issues, finding that “about 8 percent of AEA members can be considered supporters of free-market principles, and that less than 3 percent may be called strong supporters. . . . Even the average Republican AEA member is ‘middle-of-the road,’ not free-market.”
Why are economists almost universally perceived as strong supporters of the free market? Klein and Stern offer several conjectures. One is that economists tend to be strong supporters of (international) free trade and at least partial liberalization, making it look like economists support free-market principles more generally. Another is that most academics in the social sciences and humanities are strongly opposed to the free market, making economists look like radical free-marketeers by comparison. Yet another is that most of the strong supporters of the free market (in academia) are economists, leading to the mistaken inference that most economists are strong supporters of the free market.
Rise of the Aerotropolis
| Peter Klein |
Historically, cities have sprung up at the junctions of oceans and rivers (New Orleans) or railroad networks (Chicago), which made the docks or the blocks around the central station the choicest real estate in town. But “cities are always shaped by the state-of-the-art transportation devices present at the time of their founding,” observes Joel Garreau, author of Edge City and chronicler of American sprawl. “The state of the art today is the automobile, the jet plane, and the networked computer. Because of the airport, it’s possible to imagine a world capital in a place that was once an absolute backwater — a Los Angeles or a Dallas appearing in an utterly improbable location, including Bangkok.”
Hence the rise of the “aerotropolis,” the name for the cities springing up around mega-airports like Thailand’s Suvarnabhumi (near Bangkok), which will handle 100 million passengers per year (as much as New York City’s three major airports combined), and Dubai World Central, which will be able to accommodate twice as many passengers as Frankfurt’s airport and will host a permanent population of 750,000. (more…)
Wikipedia: Friend or Foe?
| Peter Klein |
Is Wikipedia “the ultimate vindication of universal education, or a widening crack in the edifice of our culture?” Stanford’s Jackson Library blog directs our attention to “Know It All” in the New Yorker and “The Hive” in the Atlantic for different perspectives.
As economists, of course, we happily consume wikis but wonder why anyone bothers to produce them. (After all, wikis aren’t just vanity projects, like organizational economics blogs.)
Phelps on Personal Knowledge
| Peter Klein |
I thought I had a scoop with this Phelps item on entrepreneurship, but he makes many of the same points in an essay, “Dynamic Capitalism,” on today’s WSJ editorial page. Here’s a passage of particular interest to O&M readers: (more…)
Phelps on Entrepreneurship
| Peter Klein |
Here is a short piece by Edmund Phelps on entrepreneurship (scroll down to page 26 of the pdf). Snippet:
In real-life entrepreneurial economies . . . entrepreneurs are like fighter pilots: they cannot explain completely their thinking and the decisions they make; the financiers can understand even less. In the modern theory, the entrepreneur-creators of projects and the financiers weighing the projects face radical uncertainty, and therefore do not all make the same valuations.
A usefully structured model would portray each financier as seeking to back the idea of an entrepreneur whose “thinking,” or model, seems like his — thinking with regard to which industry is the best bet, swinging for the fences or not, etc. The insight here, which originates with Hayek and M. Polanyi, is that everyone in a capitalist system carries around a sort of personal model of the economy — at any rate, some piece of it. Thus, the “capital market” is a sort of matching process that mates a financier to an entrepreneur, whom the former sees as having a model compatible with his own model. In such a theory, the heart of the capitalist system is a profusion of ideas represented as competing models of the economy (or a piece of it).
Economics Nobel
| Peter Klein |
The Nobel Prize in Economics goes to macroeconomist Edmund Phelps. No award this year for organizational economics (Williamson, Hart, Holmström, Milgrom, Alchian, Demsetz) or the economics of entrepreneurship (Baumol, Kirzner).
Reaction from the econo-blogosphere is generally favorable, but subdued. “A safe pick” is the modal comment. Lynne Kiesling adds a little sizzle: “For my money, the value of his work is in dialing down the hubris of the government policymaker who thought that monetary and fiscal policy were dials that they could twiddle to control and manage the economy. Phelps’ work helped to introduce some humility to counter that control-oriented exuberance.” And here’s Tyler Cowen on What It All Means:
The big questions still matter. Unemployment, economic growth, labor markets, capital accumulation, fairness, discrimination, and justice across the generations are indeed worthy of economic attention. Phelps contributed to all of those areas. Normative questions matter. Relevance and breadth triumph over narrow technical skill.
Problems over puzzles, in other words. Three cheers for that.
Russ Roberts provies this list of dead economists who should have won the Prize: Peter Bauer, Frank Knight, Fritz Machlup, Ludwig von Mises, Oskar Morgenstern, Joan Robinson, and Julian Simon.
Berkeley Puts Class Lectures on Google Video
| Peter Klein |
My alma mater UC Berkeley has become the first university to give away its class lectures for free, via Google Video. “Google Video presents us with a wonderful opportunity to share UC Berkeley’s amazing faculty with a global community of lifelong learners,” says vice provost Christina Maslach. “We see this endeavor as one part of our expanding digital bridge that is directly connecting the public we serve with the intellectual riches of the campus.” (Via Paul Reist.)
Schmoller and Pareto
| Peter Klein |
Tim Swanson reminds me of a funny Schmoller story told by Vilfredo Pareto:
Vilfredo Pareto, the influential Italian economist, while giving a talk in the early 1900s at an economics conference in Geneva, was repeatedly and noisily interrupted by his powerful colleague Gustav von Schmoller. Von Schmoller, who from his throne at the University of Berlin ruled the German academic world, apparently kept shouting in patronizing tone, “But are there laws in economics?” Despite his aristocratic upbringing Pareto had little respect for appearances, reportedly having written his monumental work Trattato di Sociologia Generale while owning a single pair of shoes and one suit. It was therefore easy for him to transform himself into a beggar the next day and approach von Schmoller on the street. “Please, sir,” Pareto said, “can you tell me where I can find a restaurant where you can eat for nothing?” “My dear man,” replied van Schmoller, “there are no such restaurants, but there is a place around the corner where you can have a good meal very cheaply.” “Ah,” said Pareto, laughing triumphantly, “so there are laws in economics!”
This version is in Albert-Laszlo Barabasi, Linked: The New Science of Networks (2002). The original source is Pareto’s The Mind and Society (1916).
Pareto, by the way, is an extremely interesting, and neglected, social theorist, whose contributions go far beyond the ubiquitous “Pareto optimality.”
International Journal of Strategic Change Management
| Peter Klein |
The new International Journal of Strategic Change Management aims to join the Strategic Management Journal and Strategic Organization in the top tier of strategic management journals. IJSCM will focus on dynamics and change and on new developments in the economics of organization and in the applied fields of strategic management, industrial organization, and international business.
The journal’s leadership includes Editor-in-Chief Patricia Ordoñez de Pablos, Consulting Editors Anita McGahan and Oliver Williamson, and Executive Editor Margaret Peteraf. Former O&M guest blogger Joe Mahoney serves as Associate Executive Editor, and Nicolai and I are on the Editorial Board, so you know journal is in good hands.
Submissions can be sent by email to patriop@correo.uniovi.es. Instructions for authors are here. Submit a paper today!
Open Letter to a Technology Entrepreneur: No More Handouts
| Peter Klein |
Vinod Khosla is a co-founder of Sun Microsystems, general partner at Kleiner, Perkins, Caufield, and Byers, and one of the world’s top venture capitalists. He is also a strong advocate for ethanol and co-chair of the campaign for California’s Proposition 87, a ballot initiative to tax oil companies to subsidize research on alternative fuels. Shikha Dalmia castigates Khosla for relying on government, rather than the market, to pick winners in technology markets.
Inviting the government to meddle in the affairs of private business is never a good idea, and if anyone should understand this, it is you. You reportedly left your country because of its hostile business environment and thrived spectacularly in this land of (semi) free enterprise, co-founding Sun Microsystems — one of the most successful computer companies on the planet. . . . But, with all due respect, even a man of your stellar track record can’t simply will markets to do his bidding; an economy is not a machine that can be manipulated according to its maker’s grand designs. If it were, India’s central planners would have made rivers of energy flow into every Indian home. . . .
Some commentators have suggested that your support for Prop 87 is a rent-seeking move, meant to boost your recent investments in ethanol by debilitating competitors. I don’t buy that. Yet, the issue is, if ethanol has all the advantages you says it does — if it is renewable, cleaner, less volatile, more reliable, easily transportable etc. — surely you of all people could convince enough investors to cough up the $4 billion that Prop 87 would raise. Are you not turning to taxpayers because you don’t want to assume that kind of risk — and can’t convince fellow investors to either?
HT: Lynne Kiesling
Does Transaction Cost Economics Need Opportunism?
| Peter Klein |
During a recent discussion of transaction cost economics a commentator asked: “I am always puzzled by why we need opportunism when we have individuals pursuing their self-interests as a postulate.” Opportunism, of course, is Oliver Williamson’s concept of “self-interest seeking with guile.” In a world of opportunism individuals cannot be assumed to keep their promises, to fulfil their obligations, and to respect the interests of their trading partners unless “safeguards” are in place. The task of economic organization, in Williamson’s terms, is to “organize transactions so as to economize on bounded rationality while simultaneously safeguarding them against the hazards of opportunism.”
But is opportunism just another word for self-interest? Neither Klein, Crawford, and Alchian (1978) nor Grossman and Hart (1986) nor Baker, Gibbons, and Murphy (2002) nor other contemporary treatments of the economic theory of the firm invoke the concept of opportunism. Instead, they rely simply on the economists’ usual notion of self-interested, maximizing behavior. What, then, is the point of introducing opportunism? (more…)
Prophetic Company Names
| Peter Klein |
This morning I caught an NPR story on a recent US outbreak of E. coli linked to contaminated spinach. The FBI is now investigating two California spinach-processing plants for possible criminal violations. Of course, even if no legal sanctions are imposed, the firm that packed the contaminated spinach will likely go out of business, the victim of reputation effects. The firm’s customers, including Dole and Cosco, are almost certain to change vendors. In short, this episode is a good illustration of the Darwinian struggle for survival under market competition.
The firm’s name? Natural Selection Foods.
Celebrating the Entrepreneur in Film
| Peter Klein |
Like other cutting-edge, deeply committed educational professionals, I use film clips in class wherever possible. When teaching entrepreneurship I show the courtroom scene at the end of Francis Ford Coppola’s fine 1985 film Tucker: The Man and His Dream. Jeff Bridges (as Preston Tucker) delivers a magnificent speech on the entrepreneur’s right to dream, to experiment, to take chances, and to be wrong. The scene moves me to tears. (Then again, so does the segment on the for-profit lifeguard in John Stossel’s “Greed” special.) In any case, Tucker, along with the 1951 Alec Guinness flick The Man in the White Suit, have been the only entrepreneurship films in my collection.
Now from Stephen Carson I learn of another film celebrating the entrepreneur: Boom Town (1940):
A marvelous and fun ode to entrepreneurship starring Clark Gable and Spencer Tracy as two wildcatters that take extreme risks hunting for oil in 1918 Texas. The roles of risk, capital and entrepreneurial insight are all portrayed wonderfully. The cherry on top is when competitors invoke the Sherman Antitrust Act to go after a company they can’t defeat fair and square in the marketplace (imagine that!)
The courtroom speech at the end includes an argument indicating how private owners of capital are motivated to wisely manage natural resources(!) and this wonderful tribute to entrepreneurs: “McMasters is a wildcatter. If it wasn’t for automobiles he’d be driving a covered wagon. It’s always been his breed that has opened up the country and made it what it is. So now, I’m wondering… Is it getting to be out of line in these Unites States for a man like him to make a million dollars with his brains and with his hands? Because if that’s true, then we’d better rewrite this land-of-opportunity stuff.” Did Hollywood really make this film? Wow!
It’s moving to the top of my Netflix queue.
Schmoller Revisited
| Peter Klein |
The Jahrbuch für Gesetzgebung, Verwaltung, und Volkswirtschaft, edited by Gusav Schmoller — commonly known as Schmollers Jahrbuch — was one of the most important and influential economics journals of the nineteenth century. Schmoller was the leader of the younger German Historical School and the main opponent of Carl Menger in the Methodenstreit, or battle over methods, that raged between the German historicists and the fledgling Austrian School. (It was Schmoller and his followers who coined the phrase “Austrian School,” the word Austrian being synonymous, among German-speaking intellectuals, for provincial and second-rate). Schmoller and his school are little known to contemporary social scientists, suffering the same fate that befell their American disciples, the Institutionalists Thorstein Veblen, John R. Commons, and Wesley Clair Mitchell. (As Coase once remarked: “Without a theory they had nothing to pass on except a mass of descriptive material waiting for a theory, or a fire.”)
To my surprise I received an email today announcing a new issue of Schmollers Jahrbuch. I had no idea the journal was still being published. The announcement was for a special issue, “Schmoller’s Legacy for the 21st Century.” Papers include “Schmoller’s Impact on the Anglophone Literature in Economics” by Geoffrey Hodgson, “Schmoller and Modern Sociology” by Yuichi Shionoya, “Gustav Schmoller, His Heirs and the Foundation of Today´s Social Policy” by Gerold Blümle and Nils Goldschmidt, and “Gustav Schmoller and Globalisation” by Heinz Rieter and Joachim Zweynert.
Incidentally, Murray Rothbard used to tell the story that during an intense (but friendly) disagreement between himself and Mises at Mises’s New York seminar Mises teasingly called him a “Schmollerite” — the ultimate insult to an Austrian economist!
Lessig on the Two Economies
| Peter Klein |
The Internet has given us an alternate, parallel economy, says Lawrence Lessig:
One economy is the traditional “commercial economy,” an economy regulated by the quid pro quo: I’ll do this (work, write, sing, etc.) in exchange for money. Another economy is (the names are many) the (a) amateur economy, (b) sharing economy, (c) social production economy, (d) noncommercial economy, or (e) p2p economy. This second economy (however you name it, I’m just going to call it the “second economy”) is the economy of Wikipedia, most FLOSS development, the work of amateur astronomers, etc. It has a different, more complicated logic too it than the commercial economy. If you tried to translate all interactions in this second economy into the frame of the commercial economy, you’d kill it.
Lessig is an articulate and passionate advocate for legal rules that favor this second economy. I think he tends to overstate the differences between the two economies, and that a single set of behavioral models, frameworks, theories, etc. works fine for both. Hence I’m not convinced that special rules are needed to promote what Lessig calls the “hybrid” economy, one that links the first and second economies. But his thoughts on licensing practices like FLOSS (not to be confused with Foss) that “inspire the creative work of the second economy, while also expanding the value of the commercial economy” are worth reading.
For alternative perspectives on the relationship between norms and law in cyberspace compare Lessig’s Code and Bruce Benson’s “The Spontaneous Evolution of Cyber Law.”
Bob Sutton Responds
A response, of sorts, to my post on Evidence-Based Management by EBM co-founder Bob Sutton:
Perhaps the term is doesn’t do much for you, but evidence-based decisions and implementations are the exception rather than the rule. It may sounds obvious, but few managers are masters of the obvious. It may sound like common sense, but common sense is in fact uncommon. I travel back and forth between the academic and management worlds, and evidence-based practice is rare — faith-based management is a lot more common and so are management decisions based on dangerous and powerful cognitive biases. Indeed, if you look at some of the work that Kahneman won the Nobel Prize for, you will see that humans in fact have trouble spotting and responding to accurate patterns. Look at the bad merger decisions that are made over and over again. Look at the belief in creating big gaps between the best and worst paid employees despite a huge pile of data showing that the opposite is true. Sorry if it seems trite, but like evidence-based medicine, it sounds trite until it is your money — or your life — that is on the line. People also laugh when I tell them that only about 15 to 20% of medical decisions are based on evidence — until they think of what it means for them and those they love.
I submit that, if the term bewilders and you believe that “What other kind of management is there?” it is a sign that you have no idea how most managers do their work, nor do you understand how most human beings make decisions. Start by reading Max Bazerman’s book on managerial decision-making.
This deserves a full-length rejoinder, but for now a few brief remarks will have to suffice. (more…)
Theorists Need History, But Historians Need Theory Too
| Peter Klein |
We have previously lamented the lack of interest in doctrinal history among contemporary social scientists (here and here). Wanting to be Real Scientists, economists and management theorists tend to focus on the latest trendy theories and empirical techniques, paying little attention to what prior generations of scholars might have thought. If this means occasionally re-inventing the wheel, well, that’s the price of being on the cutting edge.
It is often argued that the increasing marginalization of doctrinal history — and its transformation into a specialized field with its own associations, conferences, journals, etc. — may be harmful to current practice. I share this concern. At the same time, however, the emergence of doctrinal history as a self-contained field may also be harmful to doctrinal history. (more…)
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