Posts filed under ‘– Klein –’
Combining Transaction Cost Economics and the Property Rights Approach
| Peter Klein |
The transaction cost framework associated with Ben Klein and Oliver Williamson and the property-rights approach of Grossman, Hart, and Moore have a complicated relationship, as Bob Gibbons has explained. Clearly, property-rights theory is not simply a formalization of TCE, as is sometimes believed (see Williamson, Whinston, and Whinston again on the differences). One key difference, emphasized by Williamson and by Gibbons, is that the PRT focuses on the alignment of incentives ex ante, assuming efficient bargaining ex post, while TCE emphasizes ex post hazards.
A recent paper by Patrick Schmitz, “Information Gathering, Transaction Costs, and the Property Rights Approach” (AER, March 2006) tries to reconcile the two perspectives by creating a GHM-style incomplete-contracting model in which parties can obtain private information about their ex post benefit, resulting in inefficient rent-seeking over the realized gains from trade. Under certain circumstances, the PRT conclusions are reversed — i.e., the party with the most important relationship-specific investment should not necessarily own the other party’s investment, as the PRT implies. Worth a read.
Call for Papers: Honoring the Life and Works of Alfred Chandler
| Peter Klein |
Shawn Carraher and John Humphreys are editing a special issue of the Journal of Management History devoted to the life and work of the late Alfred D. Chandler, Jr. (1918-2007). Submissions are due 7 April 2008. Details below the fold. (more…)
Why Business Ignores the Business Schools
| Peter Klein |
That’s the title of Michael Skapinker’s essay in the Financial Times (via Kenneth Amaeshi), which focuses on academic research in business administration (not teaching). Unlike their counterparts in law, medicine, and engineering, Skapinker argues, B-school professors focus almost exclusively on impressing their peers, leading to work that is too abstract, jargon-filled, and theoretical to interest practitioners. He blames not only the usual publish-or-perish incentives, but also the fact that “[w]ithin the university world, business schools suffer from a long-standing inferiority complex.” B-school faculty “prefer to adorn their work with scholarly tables, statistics and jargon because it makes them feel like real academics.” Ouch.
Interesting discussion fodder, and Skapinker is surely right that some research in management suffers from scientistic pretensions (perhaps less so in finance and accounting). I do think Skapinker overstates the close relationship between research and practice in medicine. (Try asking your family physician about something you read in the New England Journal of Medicine, or ask for a confidence interval on the point estimate you’re given about the likelihood drug X will cure your condition Y.)
Economists on Interdisciplinarity
| Peter Klein |
I missed the ASSA/AEA session “What Should Be the Core of Graduate Economics?” featuring Susan Athey, Ed Gleaser, Bo Honoré, Blake Lebaron, Derek Neal, and Michael Woodford but there is a write-up in the Chronicle (gated, though a free version is temporarily available here). Gleaser offers perhaps the most interesting comment for the O&M crowd:
“We actually shouldn’t be thinking narrowly in terms of first-year economics.” . . . “We should be thinking about first-year social science. The whole division between economics, sociology, and political science feels like a hangover from the 19th century. So many of the people in our profession are working on problems that have traditionally been seen as part of sociology or political science.
“We should probably be rethinking from the ground up all of the social sciences,” Mr. Glaeser continued. “A more attractive model might be a first-year course sequence that trains a social scientist to work on anything, rather than having separate first-year economics, sociology, and political science course work. But maybe that’s a discussion for a different panel.”
My guess is that such a first-year sequence would have two much economics-based sociology, economics-based political science, and the like to satisfy our friends at orgtheory.net. But it is an intriguing possibility. (more…)
Why Study the Humanities?
| Peter Klein |
Stanley Fish (not one of my favorites) channels G. H. Hardy:
To the question “of what use are the humanities?”, the only honest answer is none whatsoever. And it is an answer that brings honor to its subject. Justification, after all, confers value on an activity from a perspective outside its performance. An activity that cannot be justified is an activity that refuses to regard itself as instrumental to some larger good. The humanities are their own good.
What about the social sciences? Certainly they purport to be”useful,” in a way that the humanities do not. Scholars of business administration hope their research improves business practice. Economists maintain that sound public policy requires the economist’s unique understanding of complex social phenomena. (more…)
Econo-Bloggers and the Public Good
| Peter Klein |
An interesting result from Aaron Schiff’s survey of econo-bloggers (I was a respondent):
There [was] a series of questions asking respondents to rate factors according to their importance as motivations for blogging on a scale of 1 to 5. “Fun or entertainment,” “To raise my profile,” “Contribute to policy/political debates,” “To educate the public or disseminate research.” and “As a way of recording thoughts or ideas” were rated highest, all with a median score of 4. “Contribute to academic debates” had a median of 3, “To get reader feedback from comments” and “To improve writing skills” both scored 2, while “Actual or potential direct income” and “Actual or potential indirect income” both had a median of 1.
Economists’ desire to educate the public and to disseminate research, for the public good, is generally underrated, especially among non-economists. However, the pecuniary motives from blogging may be stronger than Aaron’s analysis suggests; the immediate rewards are few, but raising one’s profile has obvious long-term career benefits (as in the open-source case).
NB: Contrary to common belief, academic bloggers don’t think about blogging 24/7. A few times during the ASSA meeting I’d pull out my laptop during a session, to take notes or to work on my own presentation, and a panelist would ask me afterwards: “Were you blogging about me?”
O&M for the High-Time-Preference Reader
| Peter Klein |
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ASSA 2008 Papers on Organizations
| Peter Klein |
Some interesting papers from the ASSA Meeting in New Orleans, where I’ll be spending the next couple of days. (I don’t have links, so you’ll have to do your own Googling to find the texts.)
ROBERT GIBBONS and REBECCA HENDERSON, Massachusetts Institute of Technology — What Do Managers Do? Suggestive Evidence and Potential Theories about Building and Managing Relational Contracts
CLAUDE MENARD, ATOM – University of Paris Pantheon-Sorbonne — The Governance of Interfirm Agreements: A Relational Contract Perspective
RICARD GIL, University California-Santa Cruz, and JEAN-MICHEL OUDOT, ATOM – University Paris Pantheon-Sorbonne — Contractual Completeness and Ex-post Efficiency: Trade-Offs between Ex-Ante and Ex-Post Costs in Contract Design
LUIS GARICANO and PAUL HEATON, University of Chicago — Information Technology, Organization, and Productivity in the Public Sector: Evidence from Police Departments
DANIEL SPULBER, Northwestern University — Entrepreneurs in the Theory of the Firm (more…)
Best Dissertation Title I Read Today
| Peter Klein |
“Pimps and Ferrets: Copyright and Culture in the United States, 1831-1891,” by Eric Anderson (Bowling Green State University, American Culture Studies/History, 2007). Abstract:
How did people think about copyright in the nineteenth century? What did they think it was? What was it for? Was it property? Or something else? How did it function? Who could it benefit? Who might it harm? Pimps and Ferrets: Copyright and Culture in the United States, 1831-1891 addresses questions like these, unpacking the ideas and popular ideologies connected to copyright in the United States during the nineteenth-century.
This era was rife with copyright-related controversy and excitement, including international squabbling, celebrity grandstanding, new technology, corporate exploitation, and ferocious arguments about piracy, reprinting, and the effects of copyright law. Then, as now, copyright was very important to a small group of people (authors and publishers), and slightly important to a much larger group (consumers and readers). However, as this dissertation demonstrates, these larger groups did have definite ideas about copyright, its function, and its purpose, in ways not obvious to the denizens of the legal and authorial realms.
This project draws on methods from both social and cultural history. Primary sources include a broad swath of magazine and newspaper articles, letters, and editorials about various copyright-related controversies. Examining these sources — both mainstream and obscure — illustrates the diversity of thinking about copyright issues during the nineteenth century, and suggests alternative frameworks for considering copyright in other times.
Via Bill Stepp, who says the “study fills a yawning gap in copyright history, and offers a radically different focus on the development of this institution from the dominant legal perspective.” You’ll have to download the searchable PDF to find the meaning of the title.
Are Journal Impact Factors Reliable?
| Peter Klein |
Not really, according to the RePEc blog (via Newmark). Thompson (formerly ISI) uses an imprecise and inconsistent method to compute journal impact factors and, even worse, refuses to release the raw data so that scores can be independently verified. Journals typically require authors to make data public as a condition of publication; why use rankings based on hidden data? Writes RePEc: “[A]ll of us should treat impact factors and citation data with considerable caution. Basing journal rankings, tenure, promotion, and raises on uncritical acceptance of [these] data is a poor idea.”
It would be nice to have more information about the magnitude and direction of the potential bias. Do these problems affect the rank ordering of journals, or simply the precision of the point estimates? Is there any research on this problem?
Review Papers on Personnel Economics
| Peter Klein |
The economics of human resource management, or personnel economics as it’s come to be called, is surveyed in two new papers, this one by Edward Lazear and Paul Oyer for the forthcoming Handbook of Organizational Economics and this one by Lazear and my former CEA boss Kathryn Shaw for a future issue of the Journal of Economic Perspectives.
These reviews emphasize the generality of the economic approach and argue that it explains observed HR practices, such as the rising variance in pay across individuals, increased use of pay-for-performance schemes, greater reliance on teamwork, and the like better than rival theories. E.g., from Lazear and Shaw:
In the not-too-distant past, the typical textbook on human resources management would often eschew generalization, arguing that each situation is different. The economist’s approach is the opposite. Rather than thinking of each human resources event as separate and institutionally driven, economists place a premium on identifying the underlying general principles, and on using specific institutional details to identify the causal sources of the general principles.
I’m not sure all our sociologically and psychologically inclined readers will be comfortable with this generalization. Anyway, Lazear and Shaw’s conclusion, which describes the growth of the field, is worth quoting in full: (more…)
Most Popular Posts of 2007
| Peter Klein |
Our most popular posts of 2007:
- Physics Envy and All That
- Design Puzzles
- Contronymns
- Taxes al Carbon
- The University of Phoenix and the Economic Organization of Higher Education
- How Does Management Affect Capabilities?
- Market-Based Management
- Agency Theory in Management
- Has Corporate Corruption Increased?
- The SWOT Model May Be Wrong
- Management Journal Impact Factors 2005
- PhD Candidate Shortage in Accounting
- Things You Shouldn’t Say at Your Dissertation Defense
- Do We Need a Project Project?
- The Legacy of Max Weber
- The Language of Economists (and Sociologists)
- Accounting: A Brief History
- Is Entrepreneurship a Factor of Production?
- The Galileo Legend
- The New Bashing of Economics: The Case of Management Theory
What makes a popular post? The main determinant seems to be an incoming link from a high-traffic site; items 1-4, 6, and 13-15 above were all linked from sites like Instapundit, the Dynamist Blog, Greg Mankiw, and Marginal Revolution. Items 5, 9, 12, and 17 come up often in search -engine results. My guess that items 7, 8, 10, 16, 18, and 20 were the most popular among our regular readers.
Sociology Quote of the Day
| Peter Klein |
Jeremy Freese, trolling the comment threads at our good twin site:
As for sociology, it’s been more a cloud/confederacy than a discipline for more than 30 years anyway, bound together by a determined resolution to ignore the wild number of pairwise combinations of self-described sociologists who have nothing whatsoever in common intellectually except leftward politics.
Now, you can bet that if I’d written that I’d be hearing from the boys over at orgtheory.
Starbucks Is Good for Mom and Pop
| Peter Klein |
The WSJ ran a piece a few years back showing that independently owned coffeehouses do better after Starbucks moved to town. Taylor Clark (of Starbucked fame) provides similar figures in today’s Slate:
In its predatory store placement strategy, Starbucks has been about as lethal a killer as a fluffy bunny rabbit. . . . According to recent figures from the Specialty Coffee Association of America, 57 percent of the nation’s coffeehouses are still mom and pops. Just over the five-year period from 2000 to 2005 — long after Starbucks supposedly obliterated indie cafes — the number of mom and pops grew 40 percent, from 9,800 to nearly 14,000 coffeehouses. (Starbucks, I might add, tripled in size over that same time period. Good times all around.)
The theory is that Starbucks’s rapid growth (maybe not this rapid) has boosted the demand among US consumers for premium coffee, a demand that Starbucks alone cannot satisfy. Three cheers for positive spillovers! (Greg Mankiw, how about Pigouvian subsidies for poor old Howard Schultz?)
Markets in Everything, Gift Card Edition
| Peter Klein |
A new secondary market for gift cards, those ubiquitous plastic goodies that so many of us found in our Christmas stockings this year (via WWD). Lisa Fairfax provides more examples and some discussion. And don’t miss Jennifer Offenberg’s work.
New Videos: Roth, Tirole
| Peter Klein |
Boston University has put the last two Rosenthal Memorial Lectures online. Here’s Alvin Roth on “What Have We Learned From Market Design” (no, it’s not supposed to be self-contradictory) and Jean Tirole on “Economic Incentives, Self Motivation, and Social Pressure.” (HT: Marshall Jevons)
Open Source and Spontaneous Order
| Peter Klein |
Open-source software is often cited as an example of what Hayek termed spontaneous order, the organic, bottom-up, decentralized form of organization that characterizes the market system. Giampaolo Garzarelli, in an explicitly Hayekian analyis, says open-source projects are defined by “no hierarchy, self-organization, self-regulation, and no ownership structure.” Is this an accurate characterization?
Commercial law, manifest in the medieval law merchant or lex mercatoria, is another important example of spontaneous order in the literature (see Harold Berman and Bruce Benson). Fabrizio Marrella and Christopher Yoo use the law merchant as a benchmark, asking “Is Open Source Software the New Lex Mercatoria?”They think not, arguing that focal firms, individuals, and groups play a more important role in guiding the evolution of open-source projects than is usually recognized. As a result, “[o]pen source has not achieved the type of universality or uniformity of principles envisioned by proponents of the lex mercatoria.” (more…)
New Papers on the Economic Analysis of Religion
| Peter Klein |
The economic analysis of religion is a rapidly growing area of applied microeconomics. To some, it represents creative and clever applications of economic theory to social, cultural, and institutional phenomena. Others see it as a crude form of economic imperialism. Only economists could take the spirit out of spirituality!
The October 2007 issue of the American Journal of Economics and Sociology contains some examples of this genre:
John H. Beck, “The Pelagian Controversy: An Economic Analysis.” The present study analyzes the decision of church authorities in the early fifth century to reject the doctrine advanced by Pelagius in favor of the position taken by Augustine. Accounts of the controversy reveal two self-interested motives for the church hierarchy to reject the Pelagian doctrine: (1) the Pelagian view would have undermined the authority of the church hierarchy; and (2) by making greater demands for moral conduct, it would have raised the “cost” of being a Christian and thereby discouraged growth in church membership, particularly among the Roman upper class. (more…)
Christmas Classics
| Peter Klein |
It’s that magical season, time to enjoy your favorite Christmas classics — not The Night Before Christmas or It’s a Wonderful Life, but “In Defense of Scrooge” and “Economics of Santa’s Workshop” by Michael Levin from the old Free Market newsletter. Steve Landsburg’s 2004 piece on Scrooge is not as penetrating as Levin’s, but who can disagree with his conclusion: “Its taxes, not misers, that need reforming.”
Warmest holiday wishes to you and yours from the O&M crew!
Performance-Enhancing Drugs and Competitive Advantage
| Peter Klein |
Once again, performance-enhancing drugs are in the news. In a highly competitive environment some people will do anything to gain an advantage, despite the potential long-term health risks. How widespread is the problem, and what should be done about it?
No, not baseball. I’m taking about professors popping “smart pills” to improve their cognitive performance. Two Cambridge researchers report in Nature that colleagues studying brain disorders are themselves using drugs like Modafinil “to counteract the effects of jetlag, to enhance productivity or mental energy, or to deal with demanding and important intellectual challenge.”
Is this acceptable? “Should the life of the mind be chemically enhanced,” asks the Chronicle, “when, say, a professor needs to crank out a tenure-worthy paper?” Many of us consume massive quantities of caffeine already; perhaps Modafinil isn’t really all that different. Others see the practice akin to Ritalin abuse by college students. “It smells to me a lot like taking steroids for physical prowess,” says one critic.
My questions: If we discover that particular scholars are using these substances, should we put asterisks by their publications in reference lists? Should we deny them places in the academic Hall of Fame?
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