Posts filed under ‘– Klein –’
Americans and Caffeine
| Peter Klein |
An American thought for July 4. We Americans are aggressive, fast-talking, energetic, Type-A personalities. We drive Hummers and throw down a Jolt or Super Big Gulp while scarfing our Fourth Meal. We don’t do four-week vacations or afternoon siestas like wimpy Europeans or Latin Americans. So we are we the only people in the world who drink decaffeinated coffee?
The Pepper and Salt cartoon in Monday’s WSJ reminded me of living in Europe a few years ago. No decaf in restaurants or in grocery stores. Indeed, the concept is virtually unknown. Why is decaf so popular in the US? Any theories?
Industrial Recycling: Nothing New
| Peter Klein |
Popular myth holds that pre-industrial societies were models of environmental sensitivity, practicing “sustainable development” and minimizing waste. Industrialism, it is said, upset the delicate balance between man and environment, encouraging overproduction, overconsumption, and a disregard for the natural world. To many environmentalists, capitalism’s primary legacy is the strip mine and the garbage dump.
Shephard Krech’s Ecological Indian: Myth and History has done much to debunk the fable of pre-modern environmentalism, at least in the North American context. Pre-industrial societies produced massive amounts of garbage and cared little for environmental stewardship. Now we learn from Pierre Desrochers and Karen Lam that industrial recycling — a key component of modern sustainable development programs — was widespread during the Gilded Age. In “‘Business as Usual’ in the Industrial Age” (Electronic Journal of Sustainable Development, vol. 1, 2007) Desrochers and Lam describe how woollen rags, old iron, manure, animal parts, butter-making waste, and other byproducts were recycled, for profit, in the UK and US. Here’s but one of many colorful examples (not for the feint of heart or weak of stomach): (more…)
Those Radical Bayesians
| Peter Klein |
Statistics is apolitical, right? Maybe not.
I remember that in graduate school, Xiao-Li Meng, now editor of [Statistica Sinica], told me they didn’t teach Bayesian statistics in China because the idea of a prior distribution was contrary to Mao’s quotation, “truth comes out of empirical/practical evidence.” I have no idea how Thomas Bayes would feel about this, but Pierre-Simon Laplace, who is often regarded as the first applied Bayesian, was active in politics during and after the French Revolution.
In the twentieth-century Anglo-American statistical tradition, Bayesianism has certainly been seen as radical. As statisticians, we are generally trained to respect conservatism, which can sometimes be defined mathematically (for example, nominal 95% intervals that contain the true value more than 95% of the time) and sometimes with reference to tradition (for example, deferring to least-squares or maximum-likelihood estimates).
This is from Andrew Gelman’s introduction to a special issue of Statistica Sinica on Bayesian statistics. The China referencce reminds me of this LA Times story on the challenge of teaching Marxist theory in today’s China, where students couldn’t care less.
Spousal Combinations
| Peter Klein |
This post got me thinking: who are the top husband-and-wife teams (not named Foss or Klein) in economics, management, finance, and related fields? Some candidates:
- George Akerlof and Janet Yellen
- Birger Wernerfelt and Cynthia Montgomery
- David and Christina Romer
- Guido Imbens and Susan Athey
- Scott Schaefer and Rachel Hayes
There must be many more. Suggestions? More importantly, is there a good explanation — perhaps from team theory — for greater (or lower) productivity in spousal teams, compared to other types of collaborative units? (Serious answers only, please!)
What Job Instability?
| Peter Klein |
A truism among management scholars is that jobs, in the new, knowledge-based, hypercompetitive, deregulated, entrepreneurial, dog-eat-dog, Schumpeterian, long-tail economy, have become less secure. Perhaps my father or grandfather spent his career with a single firm and got a gold watch upon retirement but I constantly switch jobs, by choice or necessity, resulting in a loss of firm-specific or job-specific human capital, increased employee anxiety, and a deterioration of social bonds.
The data, however, suggest otherwise. In “The More Things Change, The More They Stay the Same: Trends in Long-Term Employment in the United States, 1969-2002,” Ann Huff Stevens finds in 1969, the average tenure for US men in their longest job was 21.9 years. In 2002, the figure is 21.4 years. The percentage of male workers working for a single employer for 20 years or more is the same was the same in 2002 as it 1969. By this measure, at least, jobs are as “stable” today as they were in the Good Old Days.
Thanks to Chihmao
| Peter Klein |
Thanks to Chihmao Hsieh for guest blogging over the last several weeks. We’ve greatly enjoyed his contributions and look forward to his continued participation in the comment threads and his insights on entrepreneurship, innovation, organization, and strategy. Thanks, Chihmao!
Best Sentence I Read Today
| Peter Klein |
From Fabio at orgtheory.net:
No one has forbidden the marriage of two economists, even though the thought churns my stomach.
What will he do if he runs into these people?
Human ATMs
| Peter Klein |
As economies grow they tend to substitute capital for labor. Hence the literature on the social effects of technological change focuses on labor displacement and absorption. But what happens when a capital-intensive process appears in a developing economy where labor is cheap?
Here’s a fascinating example of labor displacing capital: a Ugandan financial institution has created an ATM network without ATMs. The machines are too expensive to put in rural areas, so the bank contracts with local shopkeepers who receive and disburse currency using inexpensive smart-card readers linked wirelessly to a central database. (HT: Timbuktu Chronicles)
If this catches on, will we see despondent ATM terminals wandering the streets like that poor robot in the GM Super Bowl commercial?
More on Journal Rankings
| Peter Klein |
The HES (History of Economics Society) listserv is buzzing over ERIH, the European Science Foundation’s ranking of journals in the history and philosophy of science. Writes Deirdre McCloskey, for example:
Among [the] many bad effects [of ranking journals] is to encourage people to rank another person not by reading and considering (a sample of) her work but by counting how many Grade A journals she has contributed to. It takes scientific and scholarly judgment out of the hands of actual readers of the actual work and puts it into the hands of the median voter in a beauty contest. It leads to mediocrity in science, such as the practice of using t tests as the sole criterion of importance in statistical studies. The beauty contest is based on rumor, not reading. When reputation rankings include a dummy journal with a plausible sounding name the respondents claim familiarity with the journal and firmly rank it. Don’t we need to stop this corrupt practice, not encourage it?
Other commentators largely agree. David Colander notes that productivity rankings of economists based on journal articles use proxies (journal articles) that “are only a small portion of economists’ total output (which includes teaching, other research, and service) (I estimate 20%) and that emphasis in one reduces emphasis in the others, so the probability of the rankings carrying through is exceedingly small, even if there is positive correlation with other activities.”
You can read the whole thread here (start with David Teira Serrano’s entry “European Reference Index for the Humanities (ERIH).” See also Leland Yeager’s work discussed here.
Richard Vedder Is Getting More Radical
| Peter Klein |
Murray Rothbard delighted in describing Lord Acton as “one of the few figures in the history of thought who, charmingly, grew more radical as he grew older.” Richard Vedder, researching the US higher education system, is experiencing a similar transformation:
Usually, the more you study something, the more moderate you become. The simple radical solutions prove to be impractical, infeasible, or not so simple as originally thought. My evolution, however, has been rather different — I have become more, not less, radicalized in my view that fundamental reform is needed in higher education. This viewed has evolved not because of some sort of ideological change of life, or a quasi-religious conversion of some sort. It has come from running regression models — studying the evidence. The more evidence that I see that I believe is creditable and meaningful, the more I am convinced of the following:
* Too many students, not too few, are going to college;
* College and universities are extremely inefficient, and at the margin public spending on them more likely lowers rather than raises economic growth; (more…)
Should We Axe the (US) Small Business Administration?
| Peter Klein |
The entries don’t have references, but there is a large literature on small business lending. See in particular papers by Phil Strahan here and here, showing that bank deregulation and consolidation has helped small business lending and entrepreneurship.
Is Innovation Overrated?
| Peter Klein |
Technological innovation is not as important as we think, argues David Edgerton in The Shock of the Old: Technology and Global History since 1900 (Oxford, 2006). Edgerton’s book, writes Steven Shapin in the New Yorker,
is a provocative, concise, and elegant exercise in intellectual Protestantism, enthusiastically nailing its iconoclastic theses on the door of the Church of Technological Hype: no one is very good at predicting technological futures; new and old technologies coexist; and technological significance and technological novelty are rarely the same — indeed, a given technology’s grip on our awareness is often in inverse relationship to its significance in our lives. Above all, Edgerton says that we are wrong to associate technology solely with invention, and that we should think of it, rather, as evolving through use. A “history of technology-in-use,” he writes, yields “a radically different picture of technology, and indeed of invention and innovation.” (HT: Against Monopoly)
Edgerton provides numerous examples, mainly from military history, of old technologies proving more important than new technologies (horses, for instance, were more important in World War II than V-2 rockets or atomic bombs). Useful innovation, not innovation per se, is what matters.
Most of us are attracted to novelty; it’s no wonder that we tend to overrate its importance. We also forget that many new technologies are modest variations on existing technologies.
The Sociology of Heterodox Economics
| Peter Klein |
Tiago Mata’s dissertation, “Dissent in Economics: Making Radical Political Economics and Post Keynesian Economics, 1960-1980” (LSE, 2005) has received the Joseph Dorfman Best Dissertation award from the History of Economics Society. From the abstract:
The history of dissent in economics has thus far been subject to scant interest. The existing scholarship, authored by dissenters probing their own past, has failed to address the crucial questions of how dissent emerged and rooted itself.
This study is about two dissenting communities, Radical Political Economics and Post Keynesian Economics. I review the circumstances that led to their emergence in the late 1960s and early 1970s. I draw from the histories of religious and scientific dissent to explore the making of the dissenters’ challenge to the economics orthodoxy. Notably, I use the concept of boundary work to analyse the debates between dissenters and mainstream.
Here is Mata’s home page. Here are some previous posts about heterodox economics.
Two Essays on Douglass North
| Peter Klein |
By Arnold Kling, here and here.
I usually recommend to my students North’s 1991 Journal of Economic Perspectives paper, “Institutions,” for an overview of his general approach to institutions and economic change.
More on Terrorism and Incentives
| Peter Klein |
In a recent post on intrinsic and extrinsic motivation I referred to Robert Pape’s analysis of suicide bombings and his conclusion, supported by substantial empirical evidence, that the specific pattern of contemporary suicide attacks cannot be explained by the attackers’ general belief systems (such as religious ideology) but by particular tactical objectives. Suicide bombers, in other words, economize on scarce means to achieve specific ends and adjust their behavior in response to the incentives they face.
For instance: What group is responsible for the most suicide bombings? Al-Qaeda? Hamas? Hezbollah? No, it’s the Tamil Tigers, a secular nationalist group fighting for an independent state in northern and eastern Sri Lanka. Tamil attackers are motivated not by visions of 40 virgins, but by the belief that such attacks are their only effective weapon against a better-armed foe.
For more on these questions check out this NBER working paper by Efraim Benmelech and Claude Berrebi, “Attack Assignments in Terror Organizations and the Productivity of Suicide Bombers.” Benmelech and Berrebi analyze a detailed dataset on the personal characteristics of Palestinian suicide bombers and find that older and more educated suicide bombers are systematically assigned to more important targets. Older and more educated bombers are less likely to fail in their missions and more likely to cause significant damage when they succeed. The authors take this as evidence that terrorist organizations behave “rationally,” in the economist’s usual sense of that term.
Dissing the IRB
| Peter Klein |
Most academic social-science researchers would rather calculate regression coefficients by hand than deal with their university’s Institutional Review Board. IRBs were created to protect human subjects in biomedical research (by requiring informed consent, for instance) but are now empowered to supervise research in the social sciences and humanities, all of which is classified as “human subjects” research. (An IRB official once told me I had to get IRB permission — by filling out numerous forms — before using accounting data from Compustat on publicly traded companies. These companies are staffed by human beings, after all.)
IRB skeptics may enjoy Todd Zywicki’s paper “Institutional Review Boards as Academic Bureaucracies: An Economic and Experiential Analysis,” which places the blame not on IRB personnel, but on the bureaucratic structure of the boards themselves. And don’t miss Zachary Schrag’s IRB blog.
The Costs of SOX
| Peter Klein |
“Sarbanes-Oxley and Corporate Risk-Taking” by Leonce Bargeron, Kenneth Lehn, and Chad Zutter:
Many policymakers and corporate executives have argued that the Sarbanes-Oxley Act of 2002 (“SOX”) has had a chilling effect on the risktaking behavior of U.S. corporations. This paper empirically examines this proposition. Using a large sample of U.S. and U.K. companies, we find that compared with their U.K. counterparts U.S. firms have significantly reduced their R&D and capital expenditures and significantly increased their cash holdings since SOX. We also find that the equity of U.S. companies has become significantly less risky vis-à-vis U.K. companies since SOX. Finally, using a large sample of U.S. and U.K. initial public offerings (“IPOs”), we find that the likelihood that an IPO was conducted in the U.K. increased significantly after SOX and that this effect was especially high for firms in high R&D industries. Taken together, the results support the view that SOX has had a chilling effect on risk-taking by publicly traded U.S. corporations.
Lehn is a former chief economist at the US Securities and Exchange Commission, a founding editor (along with my former colleagues Jeff Netter and Annette Poulsen) of the Journal of Corporate Finance, and former director of CORI‘s predecessor organization CRCSE (Center for Resarch on Contracts and the Structure of Enterprise).
Here is a nice critique of SOX within a broader regulatory perspective. And check out the Mises Institute’s anti-SOX archive.
PhD Candidate Shortage in Accounting
| Peter Klein |
Gary Peters sent me some data about the excess demand for PhD Candidates in accounting at US business schools. A large cohort of senior faculty is due to retire soon and there are too few new PhDs to replace them. The shortage is particularly acute at Tier I universities and within sub-disciplines like tax and auditing. Fewer students appear to be enrolling in PhD programs in accounting and fewer PhD graduates are opting for academic careers (as opposed to careers in consulting).
I’m not aware of a similar deficit in economics (historically there has been a substantial excess supply of PhD candidates) though I haven’t seen any data recently. This paper in the current issue of the Academy of Management Learning and Education (via Brayden) describes a shortage of qualified faculty in other business disciplines.
Formation of Beliefs About Markets
| Peter Klein |
What explains differences in beliefs about social and political institutions across groups? Are such beliefs learned from experience, acquired through rational persuasion, or given exogenously? Empirically, it is difficult to distinguish the effects of location or occupation from selection. Does living in Berkeley, for example, or studying sociology turn people to the Left, or do Lefties congregate in places like Berkeley and in sociology departments?
To gain insight into this problem, suppose you could take two virtually identical groups of people, place them in different institutional environments, and look later for differences in beliefs about market and society. Rafael Di Tella, Sebastian Galiani, and Ernesto Schargrodsky’s paper “The Formation of Beliefs: Evidence From the Allocation of Land Titles to Squatters” (Quarterly Journal of Economics, February 2007) investigates exactly this natural experiment.
We study the formation of beliefs in a squatter settlement in the outskirts of Buenos Aires exploiting a natural experiment that induced an allocation of property rights that is exogenous to the characteristics of the squatters. There are significant differences in the beliefs that squatters with and without land titles declare to hold. Lucky squatters who end up with legal titles report beliefs closer to those that favor the workings of a free market. Examples include materialist and individualist beliefs (such as the belief that money is important for happiness or the belief that one can be successful without the support of a large group). The effects appear large. The value of a (generated) index of “market” beliefs is 20 percent higher for titled squatters than for untitled squatters, in spite of leading otherwise similar lives. Moreover, the effect is sufficiently large so as to make the beliefs of the squatters with legal titles broadly comparable to those of the general Buenos Aires population, in spite of the large differences in the lives they lead.
Thanks to Dan Benjamin for the pointer.
Accountics
| Peter Klein |
Accounting research, like that in other social sciences, has become increasingly quantitative. Mainstream empirical research in accounting is mostly “accountics” — accounting plus econometrics. Not everyone is convinced this is a good idea:
In her Presidential Message to the American Accounting Association (AAA) in August, 2005, Judy Rayburn discussed the issue of the relatively low citation rate of accounting research compared to citation rates for research in finance, management, and marketing. Rayburn concluded that the low citation rate for accounting research was due to a lack of diversity in topics and research methods. In this paper, we provide a review of the AAA’s flagship journal, The Accounting Review (TAR), following its 80 years of publication and describe why some recent AAA leaders believe that significant changes should be made to the journal’s publication and editorial policies. At issue is whether scholarly accounting research is overly focused on mathematical analysis and empirical research, or “accountics” as it has sometimes been called, at the expense of research that benefits the general practice of accountancy and discovery research on more interesting topics. We conclude from our review of TAR that after mostly publishing research about accounting practices for the first 40 years, a sweeping change in editorial policy occurred in the 1960s and 1970s that narrowly defined scholarly research in accounting as that which employs accountics.
This is from a working paper by Jean Heck and Robert Jensen. One consequence of the focus on accountics, they argue, is that accounting researchers know less and less about accounting (e.g., accounting standards, practices, history, policy). Of course, the same criticism is often directed against contemporary research in business economics, management, and other disciplines. Scholars know much about formal modeling and quantitative methods, but little about the economy or the firm. (more…)
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