Posts filed under ‘– Klein –’
Government Funding and the Economic Organization of Scienctific Research
| Peter Klein |
A prominent climate scientist, Richard Lindzen of MIT, argues that the politicization of climate science over the last decade is but a symptom of a larger, more general problem caused by government science funding: namely an emphasis on demonstrable results that satisfy the public and have “practical” implications, rather than the pursuit of scientific truth (via Sean Corrigan).
For a variety of inter-related cultural, organizational, and political reasons, progress in climate science and the actual solution of scientific problems in this field have moved at a much slower rate than would normally be possible. Not all these factors are unique to climate science, but the heavy influence of politics has served to amplify the role of the other factors. By cultural factors, I primarily refer to the change in the scientific paradigm from a dialectic opposition between theory and observation to an emphasis on simulation and observational programs. The latter serves to almost eliminate the dialectical focus of the former. Whereas the former had the potential for convergence, the latter is much less effective. The institutional factor has many components. One is the inordinate growth of administration in universities and the consequent increase in importance of grant overhead. This leads to an emphasis on large programs that never end. Another is the hierarchical nature of formal scientific organizations whereby a small executive council can speak on behalf of thousands of scientists as well as govern the distribution of ‘carrots and sticks’ whereby reputations are made and broken. The above factors are all amplified by the need for government funding. When an issue becomes a vital part of a political agenda, as is the case with climate, then the politically desired position becomes a goal rather than a consequence of scientific research. This paper will deal with the origin of the cultural changes and with specific examples of the operation and interaction of these factors. In particular, we will show how political bodies act to control scientific institutions, how scientists adjust both data and even theory to accommodate politically correct positions, and how opposition to these positions is disposed of.
The paper is well worth reading by social scientists and organization theorists. Business-school faculty will recognize the parallels with the call for “relevance” in management education (see the links in Teppo’s recent post). And there are important connections to the arts and humanities; recent scholarship, for example, challenges the notion that public funding produces better art (painting, music, literature, drama) than patronage or commercial funding (Cantor, Cowen, Scherer). Some readers may respond, with Pilate, “What is truth?” Somebody has to pay the bills, in other words, and that party will want something in return. (more…)
29 September 2008 at 10:17 am Peter G. Klein Leave a comment
Mankiw: Defer to the Philosopher-Kings
| Peter Klein |
One of the most disappointing economist responses to the proposed bailout is Greg Mankiw’s. While not exactly endorsing the Paulson-Bernanke plan itself, Greg supports the process through which it emerged. His argument, essentially, is this: Paulson and Bernanke are very smart and have access to better information than the rest of us, so we should stop complaining and go along with whatever they propose.
I find this stunningly naive, for four reasons:
1. It ignores differences in theoretical frameworks or models. No doubt Karl Marx, John Maynard Keynes, Oskar Lange, Paul Samuelson, and Joseph Stiglitz were or are highly intelligent people. Do we have to accept all their policy conclusions? Surely intelligent specialists can come to different conclusions not only because they have access to different information (the Friedmanite view), but because they have different understandings of how the world works. (This is especially true when long-run, rule-utilitarian consequences are at stake.)
2. It ignores the distinction between theoretical and applied economics. Even if people agree on theoretical questions, they may disagree on the application of theory to specific historical situations, which is a matter of judgment, not intelligence.
3. It ignores private interests. Paulson and Bernanke are not disinterested, Platonic philosopher-kings pursing the common good. Presumably they are pursuing private interests, just like every other political actor. Has Greg never heard of public choice?
4. It ignores concerns other than economic efficiency. Economists, like everyone else, have normative opinions. Some may oppose the bailout not on utilitarian grounds, but because they think giving taxpayer dollars to failing enterprises is immoral, regardless of possible contagion effects.
GM-Fisher: Yet More
| Peter Klein |
The debate over the acquisition of Fisher Body by General Motors, like the Energizer bunny, keeps going, and going, and going. . . . The new issue of Industrial and Corporate Change has two more papers, “Lawyers Asleep at the Wheel? The GM–Fisher Body Contract” by Victor Goldberg and “The Enforceability of the GM–Fisher Body Contract: Comment on Goldberg” by Ben Klein. Here are the abstracts:
Goldberg: In the analysis of vertical integration by contract versus ownership, one event has dominated the discussion — General Motors’ (GM) merger with Fisher Body in 1926. The debates have all been premised on the assumption that the 10-year contract between the parties signed in 1919 was a legally enforceable agreement. However, it was not. Because Fisher’s promise was illusory the contract lacked consideration. This note suggests that GM’s counsel must have known this. It raises a significant question in transactional engineering: what is the function of an agreement that is not legally enforceable?
Klein: Goldberg unconvincingly claims that the General Motors (GM)–Fisher Body contract was in fact legally unenforceable. But even if Goldberg’s contract law conclusion were correct, it is economically irrelevant. It is clear from the actions of Fisher and GM and from the testimonial and other contemporaneous evidence that both transactors considered the contract legally binding and behaved accordingly. Therefore, proper economic analysis of the Fisher–GM case should continue to assume contract enforceability, and the economic determinants of organizational structure illustrated by the case remain fully valid.
Advice For Junior Faculty
| Peter Klein |
Last Friday the Chronicle of High Ed published the first in a series of articles giving strategic advice for pre-tenure faculty. In “A Call for Clarity” Cathy Trower and Anne Gallagher identify four common pitfalls facing early-career professors:
- Vague and inconsistent tenure guidelines
- Lack of constructive feedback
- A culture of “don’t ask, don’t tell”
- Divergence between policy and practice
In response they suggest that universities adopt formal written policies, offer tenure workshops, and provide clear interpretation of tenure rules. Good advice. (Thanks to Fabio Chaddad for the pointer.)
A New Hope
| Peter Klein |
Finally, encouraging signs of resistance to the Paulson-Bernanke Corporate Welfare Act of 2008. Naturally, the commentators at our favorite sites at our favorite sites listed in the “Links” section below and to the right have been been against the bailouts from the beginning, but now mainstream scholars and analysts are getting into the act. I don’t mean complaints from members of Congress or The Candidates that the recent and proposed bailouts don’t go far enough (e.g., homeowners should get bailed out too) or that the Paulson-Bernanke proposal doesn’t include enough new regulations. Rather, I’m talking about sensible analysis by prominent, mainstream economists and other experts explaining that a market economy in which profits are private while losses are socialized is, well, not a market economy at all but a socialist or corporate-fascist state. See, for example, statements by Luigi Zingales, John Cochrane, and Richard Epstein, among others. Maybe the Empire can be defeated after all. (Apologies to Seth MacFarlane for modding his image.)
Update: Casey Mulligan is also quite good.
Request for Urgent Confidential Business Relationship
| Peter Klein |
Perhaps you found this in your inbox today. But, really, is it any sillier than the real thing?
From: Minister of the Treasury Paulson
Subject: REQUEST FOR URGENT CONFIDENTIAL BUSINESS RELATIONSHIPDear American:
I need to ask you to support an urgent secret business relationship with a transfer of funds of great magnitude.
I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you.
I am working with Mr. Phil Gram, lobbyist for UBS, who will be my replacement as Ministry of the Treasury in January. As a Senator, you may know him as the leader of the American banking deregulation movement in the 1990s. This transactin is 100% safe.
This is a matter of great urgency. We need a blank check. We need the funds as quickly as possible. We cannot directly transfer these funds in the names of our close friends because we are constantly under surveillance. My family lawyer advised me that I should look for a reliable and trustworthy person who will act as a next of kin so the funds can be transferred.
Please reply with all of your bank account, IRA and college fund account numbers and those of your children and grandchildren to wallstreetbailout@treasury.gov so that we may transfer your commission for this transaction. After I receive that information, I will respond with detailed information about safeguards that will be used to protect the funds.
Yours Faithfully Minister of Treasury Paulson
Of course, the word “deregulation” above should be “change in regulation.”
See also: All Your Banks Are Belong to US (via Anthony).
Online Managerial Economics Seminar with Luke Froeb
| Peter Klein |
Luke Froeb, co-author (with Brian McCann) of the excellent MBA text Managerial Economics: A Problem-Solving Approach and co-blogger at Management R&D is conducting an online seminar this Wednesday, “Teaching MBA Students How to Solve Problems Using Economics.” (I can’t bring myself to use the word “webinar.”) All you need to participate is an internet connection and a phone. It’s free but you have to register.
What Would Hayek Say?
| Peter Klein |
About the events of the last week? Probably the same thing he said in 1932:
Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion. . . . To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection — a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end. . . . It is probably to this experiment, together with the attempts to prevent liquidation once the crisis had come, that we owe the exceptional severity and duration of the depression.We must not forget that, for the last six or eight years, monetary policy all over the world has followed the advice of the stabilizers. It is high time that their influence, which has already done harm enough, should be overthrown.
That’s from the introduction to Monetary Nationalism and International Stability, included in the new collection we mentioned earlier. Thanks to Jeff Tucker for the tip and links to the source material.
New History of Economics Blog
| Peter Klein |
It’s the History of Economics Playground, written by a team of young scholars in a charmingly irreverent style. “We will trade references. We will review books. We will bear witness to seminars and conferences. We will debate and gossip and express our feelings about life in scholarship.” Sounds like the program here at O&M. Except for this: “The terms of our senior colleagues and supervisors need not be our own.” Eh? What’s that? Speak up, sonny.
Latest Policy Statements from Washington
| Peter Klein |
Via Sean Corrigan:
- U.S. TREASURY TO ENSURE GOOD WEATHER ALL WEEKEND
- U.S. TREASURY TO ENSURE PERSONAL HAPPINESS
- PAULSON SAID TO BE GUARANTEEING ALL MARRIAGES
- BERNANKE PROMISES CUTE PUPPY FOR EVERY FAMILY
Naturally I’m doing my best to ignore the equally inane remarks of The Presidential Candidates. I’m reminded of the great title of Mises’s 1948 essay on Keynes, “Stones into Bread: The Keynesian Miracle.” Oy vey.
Best Few Sentences I Read Today, University Edition
| Peter Klein |
Fred Schwarz, writing about University programs to have incoming freshmen read and discuss a particular book (usually a propaganda piece like Barbara Ehrenreich’s Nickel and Dimed but in this case Garry Wills’s tedious Lincoln at Gettysburg):
I dislike the whole idea of making everyone read the same book. . . . Why do college administrators persist with schemes like this? They usually say they’re meant to give students “something in common.” So administrators spend half their time dividing students into groups by race, sex, religion, and so forth, and emphasizing their differences; then they spend the other half devising programs, workshops, and silly ideas like this to help everyone overcome them. Nothing surprising there; running a university, like many jobs, is largely a matter of making work for oneself.
Innovation Story of the Day
| Peter Klein |
OMG. Somebody has created this.
It reminds me of the 2-bladed, then 3-bladed, and now 5-bladed razor, the latter of which was famously spoofed by the Onion (caution: bad language), only to have Gillette actually bring it out the next year. (Both Saturday Night Live, in 1975, and Mad Magazine, in 1979, had the idea first.)
The Financial Crisis
| Peter Klein |
A regular reader asks why we haven’t written much on the US financial crisis. What, he asks, do organizational economics, strategic management, Austrian economics, entrepreneurship theory, and the new institutional economics say about the events of recent weeks?
I can’t speak for Nicolai, Dick, and Lasse, but I personally have avoided talking about it because, well, I’m too depressed — not so much about the crisis itself, which I view as a necessary corrective to two decades of potentially ruinous malinvestment, but about the political reaction to it. I agree with Larry White that the general level of discourse not just among laypeople but also among the political and financial elites, top journalists, and academics, has been shockingly vapid and vacuous, even by the usual standards. Listening to government officials, pundits, and analysts analyzing the crisis is like listening to my son’s first-grade class discussing the finer points of postmodern French literature. It was too much deregulation! (Huh?) The free market broke down yet again, just like in the 1930s! Market failure! Thank goodness the government is “stepping in”! Excuse me while I blow my groceries.
My view, in brief, is that the current crisis is the predictable result of a massive credit bubble that began under Greenspan in the 1990s and spilled over into the housing market, following the general outlines of the boom-bust cycle described by the Austrians, along with moral hazard encouraged by the financial “safety net” and the implicit (and, increasingly explicit) guarantees of the “too-big-to-fail” mentality. Of course, the US government’s reaction — spending taxpayer money like candy to bail out favored groups and institutions — can only exacerbate the problem. You can do your own Googling like this or this to find informed commentary. I have little to add but will highlight a few favorite comments: (more…)
Testing for Bias in Peer Review
| Peter Klein |
In a working paper entitled “Can We Test for Bias in Scientific Peer Review?”, Andrew Oswald proposes a method of detecting whether journal editors (and the peer review process generally, I suppose) discriminate against certain kinds of authors. His approach, in a nutshell, is to look for discrepancies between the editor’s comparison of two papers and how those papers were ultimately compared by the scholarly community (based on citations). In tests he runs on two high-ranking American economics journals, he doesn’t find a bias by QJE editors against authors from England or Europe (or in favor of Harvard authors), but he does find that JPE editors appear to discriminate against their Chicago colleagues.
That’s Andy Eggers, writing in the Social Science Statistics Blog. As Andy points out, it’s not completely clear what (raw) citation counts, and hence the experiment itself, are measuring. Also, Oswald uses within-journal paper order as a signal of the editor’s assessment of quality. Still, the technique is interesting, particularly if being the “lead paper” of a top journal generates additional citations, independent of paper quality.
(From the You Can’t Win department: I once had a colleague who had published two or three papers in the JPE, but these papers weren’t highly cited, which the department counted as a strike against him, on the assumption that every JPE paper should get at least a few cites merely be appearing in the JPE.)
NB: An older, unpublished paper by Smart and Waldfogel uses the same technique.
Feynman on (Quantitative Empirical) Social Science
| Peter Klein |
Thanks to Teppo for the pointer. Naturally I will accuse Feynmann of confusing science and scientism. As Rothbard put it:
In our proper condemnation of scientism in the study of man, we should not make the mistake of dismissing science as well. For if we do so, we credit scientism too highly and accept at face value its claim to be the one and only scientific method. . . . Science, after all, means scientia, correct knowledge; it is older and wiser than the positivist-pragmatist attempt to monopolize the term.
Organizational Economics and International Trade
| Peter Klein |
New NBER paper from Pol Antràs and Esteban Rossi-Hansberg, “Organizations and Trade” (ungated here). Surveys “an emerging literature at the intersection of organizational economics and international trade,” arguing that “a proper modelling of the organizational aspects of production provides valuable insights on the aggregate workings of the world economy.” Indeed, “certain predictions of standard models . . . are affected or even overturned when organizational decisions are brought into the analysis.”
A valuable survey, but the focus is quite narrow; an older and broader literature seeking to apply transaction cost economics to issues in international business, going back to Teece (1977), should also be consulted. (Joanne Oxley’s research page is a good place to start.)
Keep Academics Away from the Cinema
| Peter Klein |
Because they produce purple prose like this:
I have tried to show how the impossibility of a single filmic representation can serve as a refractory surface against which a series of analogies, paradigmatic shifts, and disarticulations located within distinct yet convergent planes of historical actualisation come into a view. It is in turn, across the strata of this unstable causal field (the discontinuities of which have been reconciled or reduced within the binary logic of the dominant supratext) that the reconstitution of the various ontogenetic stages of It’s All True (planning, production, dispersion) can be sketched.
This verbal assault is quoted, with appropriate mockery, by Simon Callow in the preface to volume 2 of his engrossing biography of Orson Welles, Hello Americans (2006). The reference is to Welles’s unfinished film It’s All True (about which an interesting documentary was made in 1993). Adds Callow: “The author of this remarkable passage, which, as far as I am aware, has not yet been translated into English, is a serious researcher who no doubt has much to tell us about Orson Welles, but we will never know what it is.”
Wiki Textbooks
| Peter Klein |
I teach two graduate courses without textbooks, Economics of Institutions and Organizations and Entrepreneurship: Theory, Applications, Debate. Maybe I should ask the students to create a Wiki Textbook? Anybody out there in the blogosphere want to coordinate such a project? (Thanks to Molly Burress for the link.)
See also previous entries on Wikisummaries, the Global Text Project, wiki notes, and Wikiversity.
Best Few Sentences I Read Today, Macroeconomics Edition
| Peter Klein |
Olivier Blanchard, writing on “The State of Macro[economics]”:
The editors of this new Journal asked me to write about “The Future of Macroeconomics.” Nobody should accept such a task. One can forecast the near future with some confidence: Research technology is largely Austrian in nature, with output following inputs later in time. One can see the various teams at work, and thus be confident that, sooner or later, they will succeed. But it is nearly impossible to forecast beyond that.
The paper is generating quite a lot of blogospheric buzz. Mark Thoma has posted a chunk for readers lacking NBER access. In case you’re wondering, no, the Austrian theory of the business cycle is not part of Blanchard’s anticipated future.
BTW I have not been able to figure out which journal this paper was written for. Does anybody know?
Call for Papers: International Entrepreneurship
| Peter Klein |
The new Strategic Entrepreneurship Journal is rapidly becoming one of my favorite reads. (And not just because I’m the SEJ’s #1 author — it’s true, when my colleagues and I submitted this paper, we were assigned manuscript number SEJ-0001.) Here’s a call for papers for a special issue on international entrepreneurship edited by Douglas Cumming, Don Siegel, and Mike Wright. The call lists several potential research questions::
- How do government policies impact incentives to form strategic alliances among entrepreneurial firms in domestic versus foreign settings?
- What is the role of laws and public policy in stimulating transnational and returning entrepreneurs?
- What is the role of social networks in international entrepreneurship?
- What factors lead to the success of immigrant entrepreneurs in different countries?
- What is the interaction between public policy and foreign investment in entrepreneurial ventures?
- What explains international differences in governmental policies regarding intellectual property, entrepreneurship, and entrepreneurial finance?
- How does international entrepreneurship affect firm performance?
- How important is product and geographic focus for entrepreneurial success within different public policy settings?
- What are the implications of corporate entrepreneurship for multinational companies?
- How do corporate governance regulations impact international entrepreneurship?
- How do venture capitalists and private equity firms make decisions in an international context, including the decision to make cross-border investments and how to enter international markets?
- What is the role of academic entrepreneurship in various nations? Is their convergence or divergence in policies to stimulate academic entrepreneurship?
- How do universities stimulate international technology transfer and commercialization?
- What is the relative importance of patenting, licensing, and property-based institutions, such as science parks and incubators in stimulating entrepreneurship in various nations?
Submissions are due 31 December. Accepted papers will be presented at a conference at York University in April.
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