Posts filed under ‘People’
Henry Manne, Academic Entrepreneur
| Peter Klein |
Henry Manne did as much as anyone to create the modern discipline of law and economics. I refer here not only to his scholarly contributions, particularly his work on the market for corporate control and on insider trading, but also his creation of institutions (such as the original Law and Economics Center at the University of Miami) to support the emerging field. So it’s nice to see this essay by Larry Ribstein, “Henry Manne: Intellectual Entrepreneur,” coming out in Pioneers of Law and Economics edited by LLoyd Cohen and Josh Wright. (Via Josh.)
Writing when there was a theory vacuum in legal academia, Manne breathed life into corporate law by using economic principles to formulate a sweeping new theory of the corporation. Then he took his show on the road with seminars, programs and ultimately a law school to create a market for his ideas. The Chapter shows that Manne was an entrepreneur not only in bringing people and ideas together, but also in the Schumpeterian sense Manne discussed in his work on insider trading — an active participant in the creative destruction of the existing paradigm rather than merely a manager of existing ideas. Manne’s career demonstrates that, under the right conditions, a single scholar can leave noticeable ripples in the stream of intellectual history. By demonstrating that corporations, and by inference other important institutions, are best analyzed in market terms, and by creating an intellectual market for these and other economic ideas, Manne changed the way scholars, judges, regulators and others think about the role of law in society.
See also this Manne essay on the emergence of the field. And these papers by my former student Alex Padilla on insider trading. (And these cool gowns worn by the examiners at Alex’s dissertation defense at l’Université d’Aix en Provence.)
Erin Anderson (1955-2007)
| Peter Klein |
Erin Anderson, John H. Loudon Chaired Professor of International Management at INSEAD and one of the pioneers of empirical research in transaction cost economics, died of an inoperable brain tumor this past November. Her papers “Integration of the Sales Force: An Empirical Examination” (Rand Journal of Economics, 1984, with David Schmittlein), “The Salesperson as Outside Agent or Employee: A Transaction Cost Analysis” (Marketing Science, 1985), and “The Multinational Corporation’s Degree of Control Over Foreign Subsidiaries: An Empirical Test of a Transaction Cost Explanation” (JLEO, 1988, with Hubert Gatignon) were extremely influential in the transaction-cost literature. They also showed, importantly, how TCE can be applied not only to backwards integration into component procurement, but also to forwards integration into marketing and distribution. She became one of the leading specialists in management and marketing on vertical integration and entry into foreign markets. Her chapter (with Gatignon) in the Handbook of New Institutional Economics, “Firms and the Creation of New Markets” (draft version here) provides an excellent overview of this work.
Erin was a warm, friendly, and helpful colleague and mentor as well as a fine scholar. Read the tributes at this INSEAD memorial page. I saw her last in April 2006 when she presented her paper “How Internal Transaction Costs Drive Compensation of Managers and Salespeople in Business-to-Business Field Sales” here at CORI. I never imagined it would be our last visit.
Deconstructing Bob and Jeff
| David Hoopes |
For better or worse the hard-hearted authors at O&M have hurt the feelings of our colleagues in other fields. In the spirit of being more specific about why the bloggers here are so harsh I’d like to take a look at an award-winning paper from the Academy of Management Review (Ferraro, F., Pfeffer, J., and Sutton, R.I., “Economics Language and Assumptions: How Theory Can Become Self-Fulfilling”). In this paper we are told how the language of economics (the assumptions that people are selfish cheats) encourages people to be selfish cheats. Aside: in my opinion sociologists have a much darker image of humankind than economists (if we must make careless generalizations).
As I note in an earlier post, the idea of self-interest is often grossly misrepresented. Perhaps economists can thank themselves for this. I don’t know. However, it is important to examine this component of price theory by looking at its roots. In developing public policy toward government intervention in the allocation of goods (mercantilists vs. free traders in Smith’s day) allowing people to make their own decisions is more efficient than having a handful of people making the decisions for everyone. And even if individuals focus on their own needs the result for society is better than having a few people guessing at what everyone else wants and imposing their guesses.
The starting point of the AMR critique is the ever-present complaint about the economics world telling us all that we need to be selfish and greedy (make decisions based on our own self-interest). From here, our friends in the org. theory camp state, “If people are relentless in the pursuit of their own self-interest and equally relentless in the their lack of concern for others’ interests. . . .” What? Where did that second part come in? A very important bridge theory has been added. If people pursue their own self-interest then they also cannot care about anyone else. Management scholars wonder why their (our) work is not used in public policy debates. Small wonder. (more…)
Demsetz, Coase, Postrel, and Williamson
| David Hoopes |
A recent post by Nicolai ponders Demsetz’s approach to transaction costs. My understanding (interpretation) of Demsetz’s “The Theory of the Firm Revisited” is quite different from Nicolai’s. Here’s how I remember that paper.
One of Demsetz’s complaints about transaction costs economics is that a number of very different events are bundled together under the term “transaction.” Williamson’s take on transaction costs focuses largely on comparative governance costs. How does making sure a supplier doesn’t cheat you compare to making sure your employees don’t cheat you? Coase’s version of transaction costs is very different. Coase tends to talk about a variety of other frictions that can occur independently of governance costs. These are what Demsetz calls management costs. Demsetz thinks (quite correctly) that referring to these two types of costs using the same term is confusing. In his Nobel speech Coase notes how his beliefs were more consistent with Demsetz’s than with those emphasizing governance.
Steve Postrel and I (in disucssing capabilities in SMJ 1999) separate cooperation costs from coordination costs. I think of this as fitting the Williamson versus Demsetz and Coase types of transaction costs (or management costs as Harold says). Costs dedicated to aligning incentives are different from costs of making sure everyone has the same plan. Steve and I go on to differentiate the costs of sharing specialized knowledge from the costs of coordinating. (Notice how I moved from Coase and Demsetz to myself?!).
Back to Harold. Demsetz believes that you needn’t have oppourtunism to have organizations. Postrel (2003) in an earlier version compared knowledge and governance as theories of the firm. Where Demsetz believes firms economize on managerial costs (or Coasian transaction costs) Postrel believes that without opportunism the firm is unnecessary.
I’m more with Harold (at least in my own mind I’m not sure Harold really wants me tagging along).
A Truly Noble Nobel — Should Gore Really Have Gotten This Prize?
| David Hoopes |
So, my last use of the word noble was a typo, but I left it in case someone might think I’m clever.
Am I the only one who finds Vice President Gore’s prize to be a trifle disturbing?
Former guest blogger extrodinaire Steve Postrel’s post “Taxes al Carbon” raised a number of issues regarding common assumptions on the extent and causes of global warming.
Many people seem to concede (including Gore) that his movie is often incorrect. However, this is rationalized because the issue merits more attention than it gets.
Does anyone else wish the peace prize had more to do with peace?
More on the Noble Prize (or the Economics Prize in Memory of Nobel)
| David Hoopes |
Since the O&Mers have been so quiet about the N prize I guess I’ll ramble a bit. In a comment on one of Peter’s posts I mentioned Demsetz and Alchian. For some reason I had it in my head that A.A. had already won. That’s what I get for staying at UCLA for so long (Alchian had just quit teaching when I got there).
I don’t know why I thought Alchian had won it. “Production, Information costs and Economic Organization” (with Harold Demsetz), American Economic Review 62 (1972): 777-95 is a pretty amazing paper. And “Vertical Integration, Appropriable Rents, and the Competitive Contracting Process” (with Robert Crawford and Bejamin Klein), Journal of Law and Economics (1978) has been very influential. Though I think people think of Ben Klein for that paper. As noted above, Alchian is very well known for (and thought of because of ) “Uncertainty, Evolution and Economic Theory,” Journal of Political Economy 58 (1950): 211-21.
Having said all that, I think srp is correct in that Alchian’s best chance is going in with Nelson and Winter for evolutionary economics or Demsetz and Williamson or Oliver Hart for theory of the firm. It’s hard to imagine that evolutionary economics is that appreciated. I think Sid Winter is grossly underrated. His body of work in economics and strategy is pretty amazing.
As readers of my posts might guess, I am a pretty big fan of Demsetz. I don’t know that Harold is as productive or quantitative as most award givers might like. Stilger and Coase were pretty big fans. But, Hart and Williamson seem more likely award winners.
Over at orgtheory.net they’ve been discussing sociologists and management people who (in some alternate universe) might win. There are not too many Herb Simons out there.
Why Are Markets So Scary? Some Things (Liberal) Academics Get Wrong
| David Hoopes |
Many people make incorrect assumptions about capitalism. Some would have us believe that capitalism is based on greed, selfishness, and promotes behavior that is completely self-centered. This is a common interpretation of Smith’s advice to allow people to make decisions based on self-interest. Examples are easy to find in the many organization theory-based papers complaining about economics and economists.
Two very good papers can aid in a deeper understanding of the invisible hand. First is James Q. Wilson’s “Adam Smith on Business Ethics.” A central point Wilson makes is that Adam Smith assumed people will behave with a moral sense. Wilson, “A moral man is one whose sense of duty is shaped by conscience; that is, by that impartial spectator within our breast who evaluates our own actions as others would evaluate it.” By suggesting people be allowed to make decisions based on their own self interest Smith was not advocating selfishness and greed. What then was he advocating?
This leads to the second paper, Harold Demstez’s “The Theory of the Firm Revisited.” In the third paragraph Demsetz notes that the debate between mercantilists and free traders was over the role of the government in the economic affairs of the state. “Is central economic planning necessary to avoid chaotic economic conditions?” The great achievement of the perfect competition model, what Demsetz argues should be called perfect decentralization, is its abstraction from centralized control of the economy.
Thus, the central element to capitalism is that decision making is pushed down as far as possible. (more…)
What Is a Capability and What Does It Matter?
| David Hoopes |
I am often surprised when I present or submit papers because audience members and reviewers find my construct definitions problematic. Often, people find my definitions are too narrow. Also, sometimes others don’t find the scholars whose work I would like to develop merit the attention I give them. This attention sometimes comes in the form of using their definition. Case in point: Sid Winter and capabilities. In a couple of papers I’m working on my co-authors and I have based our definition of capabilities on one Sid Winter has used in an SMJ paper and a book he edited. Tammy Madsen and I have stuck with Sid’s definition. Steve Postrel and I have taken Sid’s definition and made it more specific to our work. Some readers and listeners have had a hard time with this (and given me a hard time). Now, there’s one “school,” that generally does not like definitions or theoretical constructs to be very narrow. Thus, “can’t X, Y, or Z also be a capability?” “Well, it could be. Just not in this paper.” “Aren’t capabilities just resources?” “Sure. So and So big shot thinks so. We just think of resource and capabilities as being two different things.” Another “school” doesn’t understand why we should care about Sid’s opinion. “Shouldn’t you use Other Big Shot’s definition?” “Well, I don’t really understand her definition. Sid has been doing this capability thing for a while.” “Isn’t it the same as Selznick?” “I don’t think so. Sid doesn’t think so” (see Intro to edited volume with Dosi).
I don’t mind that people prefer other definitions. Yet, I am surprised by how agitated people get. I get agitated by definitions when 1) There aren’t any; 2) I don’t understand what the author/presenter is saying; 3) The definition includes everything and the kitchen sink (presumably because that’s the way life is, “complex”).
So, I stumble along with my narrow definitions and hope not to get yelled at too much.
Columbia Dean Considers a Discussion With Hitler
| David Hoopes |
In today’s WSJ, Bret Stephens observes, “John Coatsworth, acting dean of Columbia University’s School of International and Public Affairs, made the remark that “if Hitler were in the United States and . . . if he were willing to engage in a debate and a discussion to be challenged by Columbia students and faculty, we would certainly invite him.” This was by way of defending the university’s decision to host a speech yesterday by Iranian President Mahmoud Ahmadinejad.” My own alma mater, Grinnell College, had Angela Davis speak at last year’s commencement to the chagrin of a few alumni. Granted A. D. is pretty small change compared to Ahmadinejad. Twenty years ago, students at Grinnell shouted down Jack Kemp because they disagreed with his perspective. I doubt A.D. got shouted down. I find it disturbing that it is considered progressive to listen to Dr. Davis but to shout down Mr. Kemp. Ahmadinejad got a rude welcome outside the U.N. But, it’s strange to think that Columbia’s faculty would probably treat George W. (hardly a perfect president) a lot worse than they treated this man who has called for and spent a great deal of money on the destruction of Israel (among other things).
Mental Illness in the Academy: Elyn Saks’ Brave New World
| David Hoopes |
Monday’s LA Times had an amazing story about a USC law professor who has managed to attend Oxford, Yale Law School, and become Dean of Research at the USC law school while battling schizophrenia. Many O&M readers have probably read the book or seen the movie, “A Beautiful Mind,” the incredible story of mathematician John Nash. Like Nash, Elyn Saks suffered hallucinations, delusions, and a litany of other terrible effects of her disease. I probably should not use the past tense because I don’t believe medicine can remove these things. However, they can be tempered. Saks recently published a memior, “The Center Cannot Hold: My Journey Through Madness.” Thus, in addition to the direct suffering of the disease, Saks is now willing to take on the problems of social stigma, no small thing.
I wish I could think of some profound comment or lesson. There are many among us who suffer from a variety of mental illnesses. For better or worse, more jokes about academics come to mind than profundities. Here’s to the day when the social stigma associated with mental illness is much smaller. I’ve always thought I’d wait until I got tenure to open up any of my (much more minor) nightmares.
David Laidler
| Nicolai Foss |
I have been shocked to realize that the young modern macro-economists I’m acquainted with have no knowledge of the work of David Laidler. There was a time when Laidler was seen as primary spokesman for monetarism, as one of the world’s pre-eminent monetary theorists, and as an eminent historian of monetary thought. Laidler was one of my early influences; in particular, I remember being impressed by his excellent 1981 Economic Journal article, “Monetarism: an Interpretation and an Assessment.” Anyway, Laidler (b. 1938) is still very active, and his work is very much worth looking at if you entertain an interest in the theory and history of money, and the doctrinal history of monetary theory. Here is Laidler’s homepage at the University of Western Ontario. And here is the Wiki.
Christian Asmussen Receives the Haynes Prize
| Nicolai Foss |
My colleague at CBS’s Center for Strategic Management and Globalization, Dr. Christian Geisler Asmussen, received the highly prestigious Haynes Prize, awarded to “Most Promising Scholar” at this year’s Academy of International Business Meetings, for his paper “Local, Regional or Global? Quantifying MNC Geographic Scope”. The Committee was chaired by Peter Buckley and the selection was made among 700 papers.
Christian started work at the Center as an Assistant Professor 2 months ago. With already 2 accepted articles in Journal of International Business Studies, and a string of book chapters and papers, Christian is unusually talented, a nice guy, and we are most lucky and happy to have him here at CBS-SMG. (Pls, no US offers ;-)).
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