Posts filed under ‘– Klein –’
Oversight
| Peter Klein |
When I testified last year before Congress on the Federal Reserve System I focused not on monetary theory and policy, but on organization theory, pointing out that an independent, largely unaccountable organization lacking any systematic oversight or governance procedures cannot possibly perform well. O&M readers have heard these complaints before. Not surprisingly, the same issues are key to understanding the debate over the NSA’s domestic surveillance procedures. The NSA’s defenders say its actions are lawful and appropriate and that there is effective oversight and governance, because Congress is briefed on the programs and an independent (albeit secret) court approves specific policies and data requests. “The government does not know,” wrote Richard Epstein and Roger Pilon, “whether you’ve called your psychiatrist, lawyer or lover. The names linked to the phone numbers are not available to the government before a court grants a warrant on proof of probable cause, just as the Fourth Amendment requires.”
Thanks to Edward Snowden’s revelations, we know the first part of this claim is nonsense: a low-level contractor can request names and the content of actual calls with a few mouse clicks. (Even the collection of metadata is itself a gross violation of privacy.) More disturbing, the NSA now admits it has “three-hop” authority, meaning that it can access the calls not only of alleged terrorists, but those in contact with alleged terrorists, and those in contact with those in contact with alleged terrorists. (Watch out, Kevin Bacon!) More interesting is the claim about alleged judicial oversight. We’ve long known that the secret FISA court, which approves surveillance requests, gives the spy agencies what they want 99% of the time. To call the FISA court procedure a rubber stamp is an insult to rubber stamps. And what of the alleged Congressional participation and oversight? We heard this yesterday:
Congresswoman Zoe Lofgren revealed that an annual report provided to Congress by the government about the phone-records collection, something cited by intelligence officials as an example of their disclosures to Congress, is “less than a single page and not more than eight sentences.”
So much for transparency and detailed disclosure. (By comparison, my last annual report to my supervisor, reporting on such issues vital to national security as my academic publications, conference participation, teaching activities, etc., was 14 pages and 2,700 words.)
The bottom line is that, whatever one thinks is the appropriate scope for these surveillance programs, the US intelligence agencies operate without any de facto oversight and governance. Small groups of unelected officials and bureaucrats decide, at their sole discretion, what is and isn’t appropriate for “protecting national security.” You don’t need a course in organization theory to predict how such groups will behave.
Organizational Learning without Markets
| Peter Klein |
A really interesting NBER paper from Thomas Triebs and Justin Tumlinson confirms what you may suspect, that firms operating outside the market system — in this case, in the former East Germany — do not learn the capabilities for judging market signals. Triebs and Tumlinson compare East and West German firms after unification and find that East German firms did not anticipate, or respond to, market information as well as their West German counterparts, other things equal, suggesting that during the Communist period, firms lost (or failed to acquire) the ability to work within a market setting. The paper is based on a formal learning model but the empirical results seem to square with a variety of approaches, including resource-based and managerial capabilities theories.
Learning Capitalism the Hard Way—Evidence from Germany’s Reunification
Thomas P. Triebs, Justin Tumlinson
NBER Working Paper No. 19209, July 2013Communism in East Germany sought to dampen the effect of market forces on firm productivity for nearly 40 years. How did East German firms respond to the free market after being thrust into it in 1990? We use a formal learning model and German business survey data to analyze the lasting impact of this far-reaching treatment on the way firms in former East Germany predicted their own productivity relative to firms in former West Germany during the two decades since Reunification. We find in confirmation of our formal model’s predictions, that Eastern firms forecast productivity less accurately, particularly in dynamic and uncertain markets, but that the gap gradually closed over 12 to 13 years. Second, by analyzing the direction of firm level errors in conjunction with contemporaneous market signals we find that, in the years immediately following Reunification, Eastern firms estimate the market’s role as generally less potent than Western firm do, an observation consistent with overweighting experiences from the communist era; however, over roughly 14 years both converge to the same (incorrect) overestimate of the market’s role on their productivity.
I’m reminded of Mises’s remark that entrepreneurs, in a socialist economy, learn to excel at “diplomacy and bribery.” I suspect a study like Triebs and Tumlinson’s on political capabilities or skill at political entrepreneurship might yield the opposite result.
Sampling on the Dependent Variable, Robert Putnam Edition
| Peter Klein |
Famed sociologist Robert Putnam makes his case for government funding of social science research:
One of the harshest critics of National Science Foundation funding of political science has even praised my study [on civil society and democracy] as “one of the most influential pieces of practical research in the last half-century.”
Ironically, however, if the recent amendment by Sen. Tom Coburn (R-Okla.) that restricts NSF funding for political science had been in effect when I began this research, it never would have gotten off the ground since the foundational grant that made this project possible came from the NSF Political Science Program.
Well, yes, if it hadn’t been for NASA, we wouldn’t have put a man on the moon. What this shows about the average or marginal productivity of government science funding is a little unclear to me.
Of course, Putnam’s piece is a short editorial making an emotional, rather than logical, appeal. But this kind of appeal seems to be all the political scientists have offered in response to the hated Coburn Amendment.
Culture, Entrepreneurship, and Innovation: French Edition
| Peter Klein |
Quote of the day, from Peter Gumbel’s France’s Got Talent: The Woeful Consequences of French Elitism, an interesting first-person account of the French educational system:
[T]he patterns of behavior established at [French] school appear to continue in later life, reproducing themselves most obviously in the workplace. If you learn from an early age that volunteering answers at school may prompt humiliating put-downs from your teachers, how active a participant will you be in office strategy discussions in the presence of an authoritarian boss? If working together in groups was discouraged as a child, how good a team player will you be as a grown-up? If you are made to believe as a 10-year-old that it’s worse to give a wrong answer than to give no answer at all, how will that influence your inclination to take risks?
I won’t repeat the apocryphal George W. Bush quote that “the problem with France’s economy is that the French have no word for entrepreneur,” but I will say that I have found French university students to be less aggressive than their US or Scandinavian equivalents. To be fair, when I’ve taught in France it has been in English, and I initially attributed the students’ reluctance to speak up, to answer questions, and to challenge the instructor to worries about English proficiency. But talking to French colleagues, and reading accounts like Gumbel’s (based on his experiences teaching at Sciences Po), I think the problem is largely cultural. The French system tends to favor conformity and memorization over creativity and spontaneity, which may or may not have a harmful effect on the performance of French organizations and French attitudes toward entrepreneurship and innovation.
I’m curious to know what our French readers think (but don’t hammer me with Bourdieu or Crozier references, please).
Mokyr on Cultural Entrepreneurship
| Peter Klein |
I am wary of adding yet another conceptual margin for entrepreneurial action but I highly recommend a new (and for the moment, ungated) paper in the Scandinavian Economic History Review by the distinguished economic historian Joel Mokyr on “cultural entrepreneurship.” Starting from a broadly Schumpeterian perspective, Mokyr focuses on individuals who introduce and disseminate novel ideas:
[E]ach individual makes cultural choices taking as given what others believe. It is not a priori obvious how that affects one’s choices. It may affect them positively because conformism implies that there is some social cost associated with deviancy, or because people may reason that if the majority believes a certain thing, there may be wisdom in it (thus saving on information costs). But there can be a reverse reaction as well, with non-conformists perversely rebelling against existing beliefs. What matters for my purposes is that for a small number of individuals, the beliefs of others are not given but can be changed. I shall refer to those people as cultural entrepreneurs. Their function is much like entrepreneurs in the realm of production: individuals who refuse to take the existing technology or market structure as given and try to change it and, of course, benefit personally in the process. Much like other entrepreneurs, the vast bulk of them make fairly marginal changes in our cultural menus, but a few stand out as having affected them in substantial and palpable ways.
Succinctly expressed: “cultural entrepreneurs are the creators of epistemic focal points that people can coordinate their beliefs on.”
Mokyr’s focus, like Schumpeter’s, is not entrepreneurship per se, but its effects, particularly on long-run economic growth, and his entrepreneurship construct is somewhat undertheorized. But he provides fascinating examples, ranging from Mohammed and Luther to Francis Bacon, Isaac Newton, and Adam Smith. He focuses in particular on Bacon and Newton, describing Bacon’s work as “the coordination device which served as the point of departure for thinkers and experimentalists for two centuries to come. The economic effects of these changes remained latent and subterranean for many decades, but eventually they erupted in the Industrial Revolution and the subsequent processes of technological change.” Newton and the Royal Society “raise[d] the social standing of scientists and researchers as people who should be respected and supported and [provided] them with a comfortable material existence.” (Mostly good.)
I’m not an expert on cultural theory or history and am not sure how much the “cultural entrepreneur” construct ads to our understanding of cultural change (other than relabeling, a frequent worry in entrepreneurship studies). But the paper is a great read, highly provocative and informative, and addresses big questions. Check it out.
Autocrats in the Lab
| Peter Klein |
We noted before the Taylorite quality of many great restaurant kitchens. From Pierre Azoulay we learn that scientific laboratories are also sometimes organized as rigid hierarchies, presided over by an autocratic PI. (The key references is Pasteur.) Pierre suggests a sorting between PI and researcher characteristics so that labs run by autocrats are about as productive as labs run by softies. Probably the same is true in many groups. This reminds us that the Demsetz-Lehn critique applies to lots of work in management. If there is competition among organizational forms, and heterogeneity among individuals, then we shouldn’t expect one form to outperform the others, on average — a lesson often forgotten in empirical management research.
ISNIE 2013
| Peter Klein |
ISNIE is holding its annual conference next week in Florence. I hope to see many O&Mers there. Eric Maskin and Samuel Bowles are keynoting, and there are special tracks or sessions to honor Elinor Ostrom (who passed away last year) and Oliver Williamson (who recently turned 80).
Advice to Journal Editors
| Peter Klein |
The Story of French, a fun and interesting history of the French language by Jean-Benoit Nadeau and Julie Barlow, offers a number of valuable insights for writers and editors. Aspiring journal editors could learn from François de Malherbe (1555–1628), described by Nadeau and Barlow as “the biggest and most brazen language snob the world has ever seen.” Despite being “a fretful fault-finder who spent his life attacking, both verbally and in writing, every mistake — or what he regarded as mistakes — he could find and anyone who made one,” Malherbe had sound editorial instincts. In particular, he valued simplicity and clarity and despised unnecessary verbiage.
As a pastime, Malherbe edited Ronsard’s poetry, removing about half the words. His future biographer, Honorat de Racan, once asked him, “Does this mean you approve of the rest?” Malherbe responded by erasing what was left on the page.
Tough, but fair. . . . Anyway, Malherbe was clearly onto something. He “preached the virtues of clarity, precision, and rigor” while denouncing “ornamentation, repetition, archaisms, regionalisms, and hyperbole.” Perhaps academic journals need a few more Malherbes.
Incentives Still Matter, Medical Care Edition
| Peter Klein |
Old-fashioned pay-for-performance schemes are about as fashionable these days as Taylorite hierarchy. In the academic and practitioner literatures on compensation and motivation, ideas about biases and heuristics, team motivation, trust, framing, etc., are in; work on agency costs and opportunism is out. So I was interested to see a new empirical paper on physician motivation — a randomized controlled trial set in Rwanda — with pretty conventional findings. Check it out:
Using Performance Incentives to Improve Medical Care Productivity and Health Outcomes
Paul Gertler, Christel Vermeersch
NBER Working Paper No. 19046, May 2013We nested a large-scale field experiment into the national rollout of the introduction of performance pay for medical care providers in Rwanda to study the effect of incentives for health care providers. In order to identify the effect of incentives separately from higher compensation, we held constant compensation across treatment and comparison groups – a portion of the treatment group’s compensation was based on performance whereas the compensation of the comparison group was fixed. The incentives led to a 20% increase in productivity, and significant improvements in child health. We also find evidence of a strong complementarity between performance incentives and baseline provider skill.
Rise of the Three-Essays Dissertation
| Peter Klein |
Almost all dissertations in economics and business are of the “three-essays” variety, rather than conventional book-length treatises. The main reason is pragmatic: economics, management, finance, accounting, etc. are mainly discussed in journal articles, not books. Students writing treatises must spend the first year post PhD converting the dissertation into articles for publication; why not write them that way from the start? (An extreme example — perhaps apocryphal — concerns Larry Summers, who began teaching at MIT several years before receiving his PhD from Harvard. Rumor has it he forgot to submit the PhD thesis, and simply bundled three of his published articles and turned it in.)
Some counter that the traditional model, or some variant of it, has value — for instance, the treatise conventionally includes a lengthy literature review, more than would be acceptable for a published journal article, which demonstrates the student’s mastery of the relevant literature. My view is that the standalone literature review is redundant at best; the student’s mastery of the material should be manifest in the research findings, without extra recitation of who said what. I tell students: don’t waste time putting anything in the dissertation that is not intended for publication!
The May 2013 AER has a piece by Wendy Stock and John Siegfried, “One Essay on Dissertation Formats in Economics,” on the essays-versus-treatise question. The evidence seems to weigh pretty heavily against the treatise:
Dissertations in economics have changed dramatically over the past forty years, from primarily treatise-length books to sets of essays on related topics. We document trends in essay-style dissertations across several metrics, using data on dissertation format, PhD program characteristics, demographics, job market outcomes, and early career research productivity for two large samples of US PhDs graduating in 1996-1997 or 2001-2002. Students at higher ranked PhD programs, citizens outside the United States, and microeconomics students have been at the forefront of this trend. Economics PhD graduates who take jobs as academics are more likely to have written essay-style dissertations, while those who take government jobs are more likely to have written a treatise. Finally, most of the evidence suggests that essay-style dissertations enhance economists’ early career research productivity.
The paywalled article is here; a pre-publication version is here. (Thanks to Laura McCann for the pointer.)
More Bad News for Microfinance
| Peter Klein |
Microfinance and microenterprise have been touted as a new model for economic development, a way to encourage investment, innovation, and business creation and raise living standards without having to go through large-scale industrialization. We’ve tended to be skeptical, however, particularly about the most touted microfinance providers such as the Grameen Bank. Theoretically, the kinds of repayment plays that make microfinance feasible (high interest rates, strong peer monitoring) seem to limit its scope; besides, not everyone wants to be a business owner. The empirical evidence has not been encouraging — microfinance may achieve some social goals, like a sense of empowerment among microenterprise owners, but does not seem to have much impact on overall economic activity. It may not be possible to jump from a largely rural, agrarian society to an entrepreneurial capitalist one without going through a period of large-scale industrial development.
These musings are inspired by a new NBER working paper from the J-PAL group which uses a randomized controlled trial to study the effects of microfinance in an urban Indian setting. The results confirm the suspicions above: access to microfinance brings about some changes in behavior, but has no noticeable effect on standards of living or overall economic performance. Here’s the info:
The Miracle of Microfinance? Evidence from a Randomized Evaluation
Esther Duflo, Abhijit Banerjee, Rachel Glennerster, Cynthia G. Kinnan
NBER Working Paper No. 18950, May 2013This paper reports on the first randomized evaluation of the impact of introducing the standard microcredit group-based lending product in a new market. In 2005, half of 104 slums in Hyderabad, India were randomly selected for opening of a branch of a particular microfinance institution (Spandana) while the remainder were not, although other MFIs were free to enter those slums. Fifteen to 18 months after Spandana began lending in treated areas, households were 8.8 percentage points more likely to have a microcredit loan. They were no more likely to start any new business, although they were more likely to start several at once, and they invested more in their existing businesses. There was no effect on average monthly expenditure per capita. Expenditure on durable goods increased in treated areas, while expenditures on “temptation goods” declined. Three to four years after the initial expansion (after many of the control slums had started getting credit from Spandana and other MFIs ), the probability of borrowing from an MFI in treatment and comparison slums was the same, but on average households in treatment slums had been borrowing for longer and in larger amounts. Consumption was still no different in treatment areas, and the average business was still no more profitable, although we find an increase in profits at the top end. We found no changes in any of the development outcomes that are often believed to be affected by microfinance, including health, education, and women’s empowerment. The results of this study are largely consistent with those of four other evaluations of similar programs in different contexts.
Keynes in the Spotlight
| Peter Klein |
As the Niall Ferguson kerfuffle begins fading from memory it’s worth revisiting the underlying issue: What kind of person was John Maynard Keynes, and (how) did his social, cultural, moral, and aesthetic views affect his scientific work?
Here are a few recommended readings:
- Ralph Raico, “Was Keynes a Liberal?” (Independent Review, 2008)
- Schumpeter’s obituary of Keynes (AER, 1946)
- Murray Rothbard, “Keynes the Man” (in Dissent on Keynes, 1992)
These works are not kind to ole’ John Maynard (I’m posting them, what did you expect?). Rothbard, for example, emphasizes Keynes’s “overweening egotism, which assured him that he could handle all intellectual problems quickly and accurately and led him to scorn any general principles that might curb his unbridled ego,” also referring to Keynes’s “deep hatred and contempt for the values and virtues of the bourgeoisie,” including savings and thrift. It’s hard to imagine that Keynes’s personal views on thrift could be unrelated to the now-ubiquitous, über-Keynesian idea that spending, not savings and capital accumulation, is the driver of economic growth.
On time preference, and its social and cultural causes and consequences, I recommend Time and Public Policy by T. Alexander Smith (University of Tennessee Press, 1988), which unfortunately appears to be out of print. Here is a brief review by Israel Kirzner.
Online Education, Organizational Diversity, and Higher Education
| Peter Klein |
On this blog we’ve tended to celebrate, rather than denigrate, diversity in higher education. While others fear that MOOCs and other forms of online learning will cheapen the product, we think that “education,” like “health care,” is not a homogeneous blob but a set of discrete, marginal goods and services that can be offered in a variety of combinations, at different prices, and via many forms of delivery, local and remote. Naturally, the dominant incumbents try to resist the innovative incumbents by erecting entry barriers — what else would you expect?
A recent New Yorker piece on MOOCs recognizes this diversity, and makes the fundamental point that US higher education is already diverse — in other words, the digital revolution is simply pushing the industry down a path it was already going.
When people refer to “higher education” in this country, they are talking about two systems. One is élite. It’s made up of selective schools that people can apply to—schools like Harvard, and also like U.C. Santa Cruz, Northeastern, Penn State, and Kenyon. All these institutions turn most applicants away, and all pursue a common, if vague, notion of what universities are meant to strive for. When colleges appear in movies, they are verdant, tree-draped quadrangles set amid Georgian or Gothic (or Georgian-Gothic) buildings. When brochures from these schools arrive in the mail, they often look the same. Chances are, you’ll find a Byronic young man reading “Cartesian Meditations” on a bench beneath an elm tree, or perhaps his romantic cousin, the New England boy of fall, a tousle-haired chap with a knapsack slung back on one shoulder. He is walking with a lovely, earnest young woman who apparently likes scarves, and probably Shelley. They are smiling. Everyone is smiling. The professors, who are wearing friendly, Rick Moranis-style glasses, smile, though they’re hard at work at a large table with an eager student, sharing a splayed book and gesturing as if weighing two big, wholesome orbs of fruit. Universities are special places, we believe: gardens where chosen people escape their normal lives to cultivate the Life of the Mind.
But that is not the kind of higher education most Americans know. The vast majority of people who get education beyond high school do so at community colleges and other regional and nonselective schools. Most who apply are accepted. The teachers there, not all of whom have doctorates or get research support, may seem restless and harried. Students may, too. Some attend school part time, juggling their academic work with family or full-time jobs, and so the dropout rate, and time-to-degree, runs higher than at élite institutions. Many campuses are funded on fumes, or are on thin ice with accreditation boards; there are few quadrangles involved. The coursework often prepares students for specific professions or required skills. If you want to be trained as a medical assistant, there is a track for that. If you want to learn to operate an infrared spectrometer, there is a course to show you how. This is the populist arm of higher education. It accounts for about eighty per cent of colleges in the United States.
Most citizens of the elite world described above know little about the second world, but have a vague sense that it is cheap and tawdry (and that its uninformed consumers are exploited by fly-by-night, for-profit producers). The online revolution has already had a huge effect on vocational education, though most of the media attention is on the so-far modest, very marginal effects on the elite world.
Clusters of Entrepreneurship and Innovation
| Peter Klein |
That’s the title of a new review paper by Aaron Chatterji, Ed Glaeser, and William Kerr (a gated NBER working paper, unfortunately). Agglomeration has been a huge issue in the entrepreneurship, technology strategy, innovation policy, and economic growth literatures and it’s nice to have an up-to-date, not-very-technical review paper. (Hopefully there is an ungated copy out there somewhere.)
Clusters of Entrepreneurship and Innovation
Aaron Chatterji, Edward L. Glaeser, William R. Kerr
NBER Working Paper No. 19013, May 2013This paper reviews recent academic work on the spatial concentration of entrepreneurship and innovation in the United States. We discuss rationales for the agglomeration of these activities and the economic consequences of clusters. We identify and discuss policies that are being pursued in the United States to encourage local entrepreneurship and innovation. While arguments exist for and against policy support of entrepreneurial clusters, our understanding of what works and how it works is quite limited. The best path forward involves extensive experimentation and careful evaluation.
Update: ungated version here.
Google-Linked Scholarship
| Peter Klein |
Have you noticed that when you search for a person on Google, the sidebar shows you other linked people searches (“People also search for”)? E.g., if you search for yours truly, it pulls up Nicolai Foss, Joe Salerno, Bob Murphy, and Israel Kirzner. I’m not sure how the algorithm works; is it the likelihood these searches are combined, or searched in sequence, or does it have to do with cross-links in search results? Anyway, it’s interesting to see who Google things is related to whom. For instance
Peter G. Klein ==> Nicolai Foss, Joseph Salerno, Robert P. Murphy, Israel Kirzner
Nicolai Foss ==> Peter G. Klein, Edith Penrose, Israel Kirzner, Oliver E. Williamson
Oliver E. Williamson ==> Ronald Coase, Elinor Ostrom, Douglass North, Armen Alchian
Murray N. Rothbard ==> Ludwig von Mises, Friedrich Hayek, Frédéric Bastiat, Henry Hazlitt
Paul Krugman ==> John Law, P. T. Barnum, Charles Ponzi, Beelzebub
The Klein Revolution
| Peter Klein |
Going through some old files, I came across a 1995 Wall Street Journal piece I had saved, with the following passages highlighted:
Mr. Klein caught the fanaticism of the converted and convened a special commission to audit the books. It summed up its findings in six words: the need for change is urgent. Polls showed the public agreed. . . .
Mr. Klein doggedly pursued a program of breathtaking change. Government will fall from 24,000 to 18,000 in two and a half years. Sixty school boards were eliminated, the health budget was cut by 17%, and the number of hospital beds cut in half. Seniors earning over $21,000 (U.S.) a year were asked to pay their own Medicare premiums. . . .
The Klein Revolution did meet with opposition. . . . “My day wasn’t complete without a protest,” Mr. Klein recalls with a smile. But each success spurred him on: “You’re nervous the first time you try something new, but once you do it, you sort of get used to it.” . . .
Last year, he spoke to a group in Toronto and was asked if books by F.A. Hayek and Ludwig von Mises had inspired his policies. Mr. Klein smiled and said, . . . “Do I look like the kind of guy who would read those books?” The crowd laughed, because while Mr. Klein may not have read Hayek’s “The Road to Serfdom,” he has proved he knows how to build a policy exit ramp away from it.
The full article is below the fold. (more…)
Hart on Incomplete Contracts
| Peter Klein |
Transaction cost economics, the property-rights approach to the firm, and the judgment-based view all assume that contracting parties cannot sign complete, contingent contracts, in which case firm boundaries would be arbitrary and unimportant. TCE tends to attribute incompleteness to bounded rationality, while the judgment-based view appeals to Knightian uncertainty and subjectivism to describe markets for judgment are incomplete. The property-rights approach of Grossman, Hart, and Moore did not have an explicit theory of incompleteness, which critics such as Maskin and Tirole saw as a major weakness.
Oliver Hart has written a series of recent papers on “reference points” as a new explanation for incompleteness. The newest, released today as an NBER working paper (with Maija Halonen-Akatwijuka), is the most explicit. It argues that parties deliberately leave gaps in contracts because explicit clauses can make it more difficult for parties to parties to renegotiate after the fact. Check it out and see what you think.
More is Less: Why Parties May Deliberately Write Incomplete Contracts
Maija Halonen-Akatwijuka, Oliver D. Hart
NBER Working Paper No. 19001, April 2013Why are contracts incomplete? Transaction costs and bounded rationality cannot be a total explanation since states of the world are often describable, foreseeable, and yet are not mentioned in a contract. Asymmetric information theories also have limitations. We offer an explanation based on “contracts as reference points”. Including a contingency of the form, “The buyer will require a good in event E”, has a benefit and a cost. The benefit is that if E occurs there is less to argue about; the cost is that the additional reference point provided by the outcome in E can hinder (re)negotiation in states outside E. We show that if parties agree about a reasonable division of surplus, an incomplete contract can be strictly superior to a contingent contract.
Shelanski Tapped for Top Regulatory Post
| Peter Klein |
My old classmate, fellow Oliver Williamson student, and coauthor Howard Shelanski has been nominated to head the Office of Information and Regulatory Affairs (the post typically described as Regulation Czar). Howard was in the joint PhD-JD program at Berkeley, went on to clerk for Antonin Scalia, joined the faculty at Berkeley’s School of Law, and served in a number of regulatory posts before moving to Georgetown. He currently heads the FTC’s Bureau of Economics.
Howard’s a super-smart guy, whom I’d describe as an antitrust moderate (unlike me, an anti-antitrust extremist). He’s sympathetic to “post Chicago” antitrust theory and policy, but more of a nuts-and-bolts, case-by-case guy. I’m not a fan Cass Sunstein, current head of the OIRA, and I expect to like Howard’s performance much better. Howard doesn’t share Sunstein’s enthusiasm for behavioral analysis, for example, as seen in an interview last December, where he said this about the role of behavioral economics in antitrust:
I think there is a role, but one needs to be very modest and cautious. There has been a lot written and a lot said about how behavioral economics fundamentally undermines the models on which we do antitrust analysis. And I think most people involved with antitrust enforcement, most people who think about competition issues, would disagree that there is some fundamental new paradigm shift in the works. But behavioral economics does supply insights into how consumers might respond to certain kinds of information, contracting practices, or pricing schemes. This can be very useful to understanding certain kinds of market performance and has led to greater modesty about imputing perfect foresight or rationality to consumers.
But one needs to understand that that is not the sign of a broader behavioral economics revolution in antitrust.
My general feelings about regulatory czars are well summarized by this passage from Fiddler on the Roof, quoted today by Danny Sokol in the same context:
Young Jewish Man: Rabbi, may I ask you a question?
Rabbi: Certainly, my son.
Young Jewish Man: Is there a proper blessing for the Tsar?
Rabbi: A blessing for the Tsar? Of course! May God bless and keep the Tsar . . . far away from us!
Critical Agrifood Scholarship
| Peter Klein |
A friend tipped me off to this, um, interesting paper on farmers markets, which the authors place within the larger field of “critical agrifood scholarship.” We all know what “critical” means, and I’m familiar with much of the agrifood literature, but I didn’t know about this particular field. I learned a lot from the paper about the slow-food movement’s ability to “create political transformation,” and build a “radicalized space” even though such markets “cluster around property and privilege.” The authors seek to “unpack the racialized and class-inflected narratives at play in farmers markets [and] to extend the alternative agriculture movement’s strategic rupturing of the veil of commodity fetishism to include the systemic inequalities on which both conventional and alternative agriculture depend.” How about that thesis statement! In passing, the authors manage to chide the slow-food movement’s “complacency with capitalism and consumerism, systems that are inherently exploitative and divisive,” while adding editorial remarks to such important scientific phenomena as “the working class performances of ‘god, guns and country’ that fill the rhetoric of the GOP.”
Thank goodness for taxpayer-subsided universities. If there were a free market for higher education, this kind of valuable scholarship would probably be grossly underfunded.
AMP Symposium on Private Equity
| Peter Klein |
The new issue of the Academy of Management Perspectives features a symposium, edited by Mike Wright, on “Private Equity: Managerial and Policy Implications.” The symposium includes “Private Equity, HRM, and Employment” by Mike with Nick Bacon, Rod Ball, and Miguel Meuleman; “The Evolution and Strategic Positioning of Private Equity Firms” by Robert E. Hoskisson, Wei Shi, Xiwei Yi, and Jing Jin; and “Private Equity and Entrepreneurial Governance: Time for a Balanced View” by John L. Chapman, Mario P. Mondelli, and me. The symposium came out very nicely, if I may say so, covering a variety of strategic, entrepreneurial, and organizational issues related to private equity firms and companies receiving private equity finance.
In his introduction Mike highlights five main contributions:
First, the papers address the need to consider the systematic evidence on the managerial and strategic aspects of PE, in relation to both portfolio firms and PE firms, which has been largely fragmented if not nonexistent. Second, the papers analyze the impact of PE during economic downturns and demonstrate the underlying resilience of PE-backed portfolio firms. Third, the symposium provides an opportunity to develop insights that compare the managerial impact of PE with different forms of ownership and governance. Fourth, the articles in this symposium highlight the heterogeneity of the private equity phenomenon. Finally, in the context of continuing public attention to PE, which has been heightened by the U.S. presidential race and the global recession, the evidence presented in this symposium paints a rather more positive view than the hyperbole of some of the industry’s critics would suggest. Taken together, these contributions indicate a need for caution in attempts to tighten the regulation of PE lest the economic, financial, and social benefits be lost.
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