Posts filed under ‘– Klein –’
Positive Spillovers from Bad Behavior
| Peter Klein |
When I introduce in class the concept of influence activities I emphasize that these, like other forms of discretionary behavior, can have benefits as well as costs. Think of self-assessments, such as a faculty member’s annual report to the department head or Dean. Certainly, faculty will find creative ways to overstate their accomplishments, minimize their failures, make themselves look better relative to their peers, and so on, and the time and energy spent doing this can be considered influence costs. At the same time, a savvy department head or Dean knows how to read between the lines, to separate signal from noise, and generally how to extract useful information from these reports, information he or she might not otherwise have. The challenge for organizational design, then, is not to eliminate influence activities altogether, but to limit them to the point where marginal benefit equals marginal cost.
This popped into my mind the other day when I read (courtesy of Stephan Kinsella) the confessions of a self-described “law school asshole.” University of Pennsylvania 3L Steve Mendelsohn (writing in 1990) tells his fellow students: “You know who we are. We’re the ones who always have our hands up in class volunteering to answer the professor’s questions, or ready to ask one of our own at seemingly any and every opportunity. Everytime you hear one of our names called, you groan and turn to the person next to you and slowly shake your head from side to side.” He even admits his name was in the center square of the Asshole Bingo cards his fellow students would bring to class.
As with influence activities, however, law-school assholery seems to have public benefits: keeping the discussion going and the atmosphere lively, eliciting from the professor information that other students would like to have but are afraid to ask for, and so on. I confess that, as an instructor, I’d rather have a few such assholes in class than a room full of polite, well-behaved dullards.
The serious question is whether this applies to organizations more generally. Are “civilized” workplaces necessarily better than rough-and-rowdy ones? It’s easy to come up with examples of organizations run by jerks that failed, but do we have systematic empirical evidence that nice-guy firms finish first? Do the marginal costs of costs of placing rude, self-centered people in management positions outweigh the marginal benefits?
CFP: “Understanding Firm Growth”
| Peter Klein |
The Ratio Institute invites paper proposals from young scholars (sorry, O&M bloggers!) in economics, economic history, entrepreneurship, management, sociology, statistics, psychology, and related disciplines for a workshop on firm growth in Stockholm, 12-14 August 2010. David Audretsch and Alex Coad are keynoting. Suggested topics include the role of high-growth firms, determinants of the growth of firms, growth ambitions and attitudes towards growth, firm growth and the characteristics of the entrepreneur, the persistence of firm growth, barriers to growth, post-entry performance, firm growth in a historical perspective, and innovation and firm growth. Details here.
The Virtual Firm
| Peter Klein |
If the proprietor has been to business school, it can never be smaller than two persons:
Bonus material, via Craig Newmark: the Boston Globe ponders “The End of the Office.” But it won’t happen, IMHO.
OECD Data on Entrepreneurship
| Peter Klein |
A new OECD report provides data on startups and similar measures for 39 countries. Lots of variables, e.g.:
- Number of enterprises by size class
- Employment by size class
- Value added by size class
- Exports by size class
- Employer enterprise birth rates (manufacturing and services by industry, by size class)
- Employer enterprise death rates (manufacturing and services, by industry, by size class)
- One- and two-year survival rates (manufacturing and services)
- Share of one- and two-year-old employer enterprises in the population (manufacturing and services)
- Share of high-growth firms (employment)
- Share of high-growth firms (turnover)
- Share of gazelles (employment)
- Share of gazelles (turnover)
- Employment creation by enterprise deaths
PowerPoint Version of “I Have a Dream”
| Peter Klein |
Bill Easterly tries his hand at PPTParody and hits a winner. The Gettysburg Address version remains the standard, of course. See also our PowerPoint archive.
Experimental versus Conceptual Entrepreneurs?
| Peter Klein |
The latest paper in David Galenson’s artist series deals with architects, distinguishing between “experimental” and “conceptual” designers. The distinction calls to mind the different emphases of Knight’s and Kirzner’s concepts of the entrepreneur, the former centered on action and market feedback, the latter on the cognitive act of discovery. What do you think?
Innovators: Architects
David W. Galenson
NBER Working Paper No. 15661
Issued in January 2010Frank Lloyd Wright, Le Corbusier, and Frank Gehry were experimental architects: all worked visually, and arrived at their designs by discovering forms as they sketched. Their styles evolved gradually over long periods, and all three produced the buildings that are generally considered their greatest masterpieces after the age of 60. In contrast, Maya Lin is a conceptual architect: her designs originate in ideas, and they arrive fully formed. The work that dominates her career, the Vietnam Veterans Memorial, was designed as an assignment for a course she took during her senior year of college. The dominance of a single early work makes Lin’s career comparable to those of a number of precocious conceptual innovators in other arts, including the painter Paul Sérusier, the sculptor Meret Oppenheim, the novelist J.D. Salinger, and the poet Allen Ginsberg.
The Division of Labor, 1886
| Peter Klein |
Another interesting passage from Graham Robb’s The Discovery of France:
Every [French] town and village was a living encyclopedia of crafts and trades. In 1886, most of the eight hundred and twenty-four inhabitants of Saint-Étienne-d’Orthe, on a low hill near the river Adour, were farmers and their dependents. Of the active population of two hundred and eleven, sixty-two had another trade: there were thirty-three seamstresses and weavers, six carpenters, five fishermen, four innkeepers, three cobblers, two shepherds, two blacksmiths, two millers, two masons, one baker, one rempailleur (upholsterer or chair-bottomer), and one witch (potentially useful in the absence of a doctor), but no butcher and no storekeeper other than two grocers. In addition to the local industries and the services provided by itinerant traders (see p. 146), most places also had snake collectors, rat catchers with trained ferrets, and mole catchers who either set traps or lay in wait with a spade. There were rebilhous, who called out the hours of the night, “cinderellas,” who collected and sold ashes used for laundering clothes, men called tétaïres, who performed the function of a breast pump by sucking mothers’ breasts to start the flow of milk, and all the other specialists that the census listed under “trades unknown” and “without trade,” which usually meant gypsies, prostitutes, and beggars (p. 99).
This book is filled with economics. Here’s a passage about repeated games:
Deceit was a particular specialty of pedlars from the Auvergne. A single piece of cloth could be made to last a whole season if it was sold with the promise that a tailor would come the next day and make up the clothes for nothing. The tailor would arrive, measure the customer, take the cloth, and never return. The drawback was that a dishonest salesman had to cover vast areas compared to a pedlar who earned the trust of his clientele (p. 150).
Josh Lerner on Public Policy Toward Entrepreneurship
| Peter Klein |
Speaking of public entrepreneurship, here’s an interview with Josh Lerner about his new book Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed — and What to Do About It (Princeton, 2009). Excerpt:
There are two well-documented problems that can derail government programs to boost new venture activity. First, they can simply get it wrong: allocating funds and support in an inept or, even worse, a counterproductive manner. Decisions that seem plausible within the halls of a legislative body or a government bureaucracy can be wildly at odds with what entrepreneurs and their backers really need. . . .
Economists have also focused on a second problem, delineated in the theory of regulatory capture. These writings suggest that private and public sector entities will organize to capture direct and indirect subsidies that the public sector hands out. For instance, programs geared toward boosting nascent entrepreneurs may instead end up boosting cronies of the nation’s rulers or legislators. The annals of government venturing programs abound with examples of efforts that have been hijacked in such a manner.
Thanks to Ross Emmett for the tip.
Recession and Recovery: Six Fundamental Errors of the Current Orthodoxy
| Peter Klein |
A very good summary by Bob Higgs of “vulgar Keynesianism,” defined by Bob as the “pseudointellectual mishmash . . . that has passed for economic wisdom in this country for more than fifty years.” The key feature of VK is an emphasis on crude aggregates (“national income,” “the employment rate,” “the interest rate,” etc.) at the expense of relative prices, firm and industry effects, and cause and effect. Echoing one of this blog’s favorite themes, Bob highlights the VK economist’s inability to grasp the concept of capital structure, “the fine-grained patterns of specialization and interrelation among the countless specific forms of capital goods in which past saving and investment have become embodied. In [the VK] framework of analysis, it matters not whether firms invest in new telephones or new hydroelectric dams: capital is capital is capital.”
Update: See also David Henderson on aggregation.
New Book: The Invention of Enterprise
| Peter Klein |
I’m putting this one on my Amazon wish list: The Invention of Enterprise:
Entrepreneurship from Ancient Mesopotamia to Modern Times, edited by David Landes, Joel Mokyr, and Will Baumol (Princeton, 2010). Check out the Table of Contents — an all-star lineup of entrepreneurship scholars and economic and business historians.
Is Grad School a Cult?
| Peter Klein |
A Chronicle piece by a pseudonymous English professor, urging prospective humanities PhD students to consider alternative career paths, generated some buzz last week. I prefer the same writer’s 2004 article, “Is Graduate School a Cult?” (via Vedran Vuk). “For all its claims to the contrary, graduate education does not seem to enhance the mental freedom of many students, some of whom are psychologically damaged by the experience.” The writer focuses on the humanities, but the arguments could just as well apply to the social sciences. Check out this list of cult characteristics, and see if they sound familiar:
- Behavior control: “major time commitment required for indoctrination sessions and group rituals”; “need to ask permission for major decisions”; “need to report thoughts, feelings, and activities to superiors.”
- Information control: “access to non-cult sources of information minimized or discouraged (keep members so busy they don’t have time to think)” and “extensive use of cult-generated information (newsletters, magazines, journals, audio tapes, videotapes, etc.).”
- Thought control: “need to internalize the group’s doctrine as ‘Truth’ (black and white thinking; good vs. evil; us vs. them, inside vs. outside)” and “no critical questions about leader, doctrine, or policy seen as legitimate.”
- Emotional control: “excessive use of guilt (identity guilt: not living up to your potential; social guilt; historical guilt)”; “phobia indoctrination (irrational fears of ever leaving the group or even questioning the leader’s authority; cannot visualize a positive, fulfilled future without being in the group; shunning of leave takers; never a legitimate reason to leave”; and “from the group’s perspective, people who leave are ‘weak,’ ‘undisciplined.'”
Comments are open for everyone except University of Missouri graduate students.
Do Top Scholars Make the Best University Leaders?
| Peter Klein |
Yes, says Amanda Goodall here and here. Here’s a summary and here’s some commentary. Her argument is based on inside knowledge, the ability to set appropriate standards, signaling, and legitimacy. Signaling strikes me as the most plausible (non-academic administrators may not have knowledge or legitimacy but they can hire subordinates who do). I haven’t studied the work carefully, however. Kudos to Goodall for tackling an important subject.
Her Vox article singles out economist-administrators for special mention. They seem to be doing quite well, Larry Summers notwithstanding.
A Ranking We Like
| Peter Klein |
An analysis published in the Eastern Economic Journal ranks O&M the sixth-best economics blog, based on the academic reputation of its authors. As you can see from Table 2, we outpaced such obscure sites as Freakonomics, DeLong’s blog, Marginal Revolution, and The Blog Formerly Known as the Austrian Economists. I wonder how we would fare against our good-twin site, were it included?
Murray N. Rothbard
| Peter Klein |
Jeff Tucker reminds me that Murray Rothbard passed away 15 years ago today. I remember the moment when I heard the news, from Parth Shah at a restaurant in DC, where we were attending the American Economic Association meeting. (This was before smartphones, Twitter, and the like, and news traveled more slowly.) I was stunned — Rothbard was not yet 70 — but my wife reminded us that he hadn’t looked well when we saw him the last time, the previous summer at the Mises Institute instructional conference in Claremont. (He died of congestive heart failure.) Check out the photo montage at Jeff’s post — see if you can identify younger versions of Ralph Raico, Roger Garrison, Bill Evers, George Reisman, Leonard Liggio, and others.
I consider Rothbard one of the great theorists of the twentieth century, and think his contributions to technical economics are greatly undervalued, even by many of his Austrian-school admirers. My own work has been heavily influenced by Rothbard (one of my most-cited papers is basically a gloss on a Rothbardian idea). Joe Salerno and I are working on a price-theory text (based on our lecture series) that builds heavily on Rothbard’s analysis in Man, Economy, and State. We hope it contributes to renewed interest in mundane Austrian economics.
Measuring the Returns to R&D
| Peter Klein |
A new paper by Bronwyn Hall, Jacques Mairesse, and Pierre Mohnen surveys the technical literature on private and aggregate returns to R&D, focusing on econometric issues. A great overview, with the relevant factoids conveniently summarized in tables. The version linked above is gated; I don’t know if there is an ungated one.
Dilbert takes a somewhat different perspective.
Update: an ungated version is available on Bronwyn’s research papers page.
The Collected Works of Henry Manne
| Peter Klein |
Via Geoff Manne, a description and ordering information for the new Collected Works of Henry Manne, produced by Liberty Fund. A great collection of scholarly articles, reviews, and shorter popular pieces divided into three volumes, “The Economics of Corporations and Corporate Law,” “Insider Trading,” and “Liberty and Freedom in the Economic Ordering of Society.” Order your copy today!
A New Hawthorne Study
| Peter Klein |
Tanjim Hossain and John List have done a Hawthorne-type study on a Chinese high-tech manufacturing company. The paper, “The Behavioralist Visits the Factory: Increasing Productivity Using Simple Framing Manipulations,” is unfortunately gated at NBER. I’m surprised it’s taken this long for someone to take advantage of the current craze for field experiments to do this kind of study. (I wonder if IRB approval is easier when the test subjects are in China?) Check out the abstract:
Recent discoveries in behavioral economics have led to important new insights concerning what can happen in markets. Such gains in knowledge have come primarily via laboratory experiments — a missing piece of the puzzle in many cases is parallel evidence drawn from naturally-occurring field counterparts. We provide a small movement in this direction by taking advantage of a unique opportunity to work with a Chinese high-tech manufacturing facility. Our study revolves around using insights gained from one of the most influential lines of behavioral research — framing manipulations — in an attempt to increase worker productivity in the facility. Using a natural field experiment, we report several insights. For example, conditional incentives framed as both “losses” and “gains” increase productivity for both individuals and teams. In addition, teams more acutely respond to bonuses posed as losses than as comparable bonuses posed as gains. The magnitude of the effect is roughly 1%: that is, total team productivity is enhanced by 1% purely due to the framing manipulation. Importantly, we find that neither the framing nor the incentive effect lose their importance over time; rather the effects are observed over the entire sample period. Moreover, we learn that worker reputation and conditionality of the bonus contract are substitutes for sustenance of incentive effects in the long-run production function.
See also List’s paper with Levitt on the original Hawthorne experiments.
Studying Entrepreneurs
| Peter Klein |
Great opening from Robert Whaples’s EH.Net review of T.J. Stiles, The First Tycoon: The Epic Life of Cornelius Vanderbilt (Knopf, 2009):
Economists have always had a hard time dealing with entrepreneurs — as individuals and in the aggregate. We sort of know what entrepreneurship is and that it can have a profound impact on economic performance, but it’s usually just too difficult to model and measure. What we do not understand, we simply ignore and leave to others. After all, we are firm believers in comparative advantage and studying entrepreneurship — even if it is economically important — doesn’t seem to be our comparative advantage. In the view of most economic historians, it is the rules of the game — the incentives and the institutions — that really matter, not the players. American economic history has been cast as the story of millions of diligent and clever beavers working away and transforming the landscape. Take one of them away and nothing of great importance will really change. (In fact, most of us seem to believe that if you take away an entire technological complex, like the railroads, little of much importance would really change.)
Why, then, should economic historians study the careers of entrepreneurs? Not all of us should. But for some, the study of entrepreneurs will illuminate the past and the present — and put life into our cliometric narrative.
Joe Salerno has a valuable treatment of this problem in his 2008 paper “The Entrepreneur: Real and Imagined.”
Felin and Foss Best Paper Award
| Peter Klein |
Congratulations to Nicolai and Teppo Felin for winning this year’s SO!WHAT Award for Scholarly Contribution for their 2005 paper “Strategic Organization: A Field in Search of Micro-Foundations” (ungated version). These are given by the journal Strategic Organization for the best paper published five years earlier (i.e., after some seasoning, based on impact as well as substance and originality). Look here (about half-way down the page) for praise from Jay Barney and Bruce Kogut. Way to go, guys!
Here are some prior O&M posts on microfoundations.
Organizations and Markets 
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