Posts filed under ‘Recommended Reading’
Pomo Periscope XIX: Leiter on Foucault
| Nicolai Foss |
Here is a nice discussion of Foucault by UChicago Law School professor Brian Leiter. It is not a smashing per se, but rather a critical discussion that indicates a central flaw in Foucault’s philosophy. Leiter points to Foucault’s well known discussion of the “pretence” of the “human sciences,” something Foucault seems to explain on the basis of the “influence of economic, political, and moral considerations on their development” (Leiter, p. 16). As Leiter points out, however,
[I]t is now surely a familiar point in post-Kuhnian philosophy of science that the influence of social and historical factors might be compatible with the epistemically special standing of the sciences as long as we can show that epistemically reliable factors are still central to explaining the claims of those sciences. And that possibility is potentially fatal to Foucault‟s critique. For recall that central to Foucault‟s critique is the role that the epistemic pretensions of the sciences play in a structure of practical reasoning which leads agents concerned with their flourishing to become the agents of their own oppression. And the crucial bit of “pretense” is, as we noted earlier, that the human sciences illuminate the truth about how (normal) human beings flourish in virtue of adhering to the epistemic strictures and methodologies of the natural sciences. Recall also that Foucault, unlike Nietzsche, does not contest the practical authority of truth (i.e., the claim of the truth to determine what ought to be done); he rather denies that the claims in question are true or have the epistemic warrant that we would expect true claims to have. So the entire Foucauldian project of liberation turns on the epistemic status of the claims of the human sciences. And on this central point, Foucault has, surprisingly, almost nothing to say beyond raising “suspicion.”
Terence Hutchison Special Issue
| Nicolai Foss |
It is a sad fact that I spent a considerable part of my early 20s browsing the pages of the major economics journals of the interwar period. I was particularly interested in what was then called the “monetary theory of the trade cycle” and the role of expectations in the business cycle (Myrdal, Lindahl, Hawtrey, Robertson — and of course Hayek and his many followers and conversants, such as Lachman, Kaldor, and various UK Labour Party economists who until the advent of Keynes’ GT were surprisingly bent on Hayekian business cycle theory. (Here is one of the results of that work). My forays led to the “discovery” of Terence Hutchison’s 1937 paper, “Expectation and Rational Conduct,” in Zeitschrift für Nationalökonomie, a paper that, while over the top in a number of ways, is also an early anticipation of rational expectations and the problems of RE.
Hutchison (1912-2007) is nowadays best known as an economic methodologist, perhaps the first explicit proponent of logical positivism and later Popper’s falsificationism. His 1938 book, The Significance and Basic Postulates of Economic Theory, is often taken as a response to Lionel Robbins’ strongly Austrian-influenced Essay on the Nature and Significance of Economic Science(1932/1935). Hutchison later engaged in a debate with Fritz Machlup, and Hayek buffs will know that Hutchison coined the notion of “Hayek I” and “Hayek II” (based on Hayek’s acceptance of Misesian praxeology).
The latest issue of the always-interesting Journal of Economic Methodology features a special issue symposium on Hutchison. Among the highlights is the publication of a hitherto unpublished, semi-autobiographical essay by Hutchison, and the reproduction by Bruce Caldwell of some revealing letters by Hayek and Hutchison (Hayek did not agree with Hutchison’s interpretation of his changes in the 1930s).
Governing Firm-Specific Knowledge Assets
| Nicolai Foss |
In spite of book titles such as Competitive Advantage Through People, a whole subfield dedicated to linking human resources and firm-level performance outcomes (i.e., strategic HRM), and a general recognition that many knowledge-based competitive advantages are ultimately rooted in a web of complementary and firm-specific human capital, surprisingly little serious quantitative research exists that links firm-specific knowledge, employee governance mechanisms, and firm-level performance. In fact, there are few theoretical contributions that accomplish this. Work by Russ Coff as well as Gottschalg and Zollo come to mind (as well as this paper).
In “Firm-Specific Knowledge Resources and Competitive Advantage: The Roles of Economic- and Relationship-based Employee Governance Mechanisms,” in the December issue of the Strategic Management Journal (I received my copy October 28!), Heli Wang, Jinuy He, and former O&M guest blogger Joe Mahoney explore the economic- and relationship-based governance mechanisms that mitigate the latent underinvestment problem of employees making firm-specific human-capital investments. Overall, their results suggest that firms with more firm-specific knowledge resources are more likely to adopt those governance mechanisms that can reduce key employees’ concerns about potential hold-up.
The paper is very neat and clear, and my personal candidate for the best research paper in SMJ in 2009. Here is the abstract:
The resource-based view of the firm emphasizes the role of firm-specific resources, especially firm-specific knowledge resources, in helping a firm to achieve sustainable competitive advantage. However, the deployment of firm-specific knowledge often requires key employees to make specialized human capital investments that are not easily redeployable to other settings. Thus, in the absence of effective safeguards and trust building devices, employees with foresight may be reluctant to make such specialized investments. This study explores both economic- and relationship-based governance mechanisms that might mitigate this underinvestment problem. Effective use of these governance mechanisms enables a firm to obtain greater performance from its efforts to deploy firm-specific knowledge resources. Empirical results further support these key arguments.
Economic Methodology in Erkenntnis
| Nicolai Foss |
Economic methodology, or, meta-theoretical discussion of (and in) economics, has gone significantly beyond with theme that many practicing economists associate with the field, namely the realism-of-assumptions theme prompted by Friedman’s famous 1953 essay, “The Methodology of Positive Economics.” Of course that theme is by no means unimportant, and it has, of course, resurfaced under the impact of the financial crisis.
However, the main themes of the current economic methodology discussion have shifted from the role of assumptions to economic models in their entirety. Two main perspectives are sometimes distinguished, namely the “isolationists” who literally see economic models as simplified redescriptions of the mechanisms and causal factors of the real world, and the “fictionalists” who, as the name indicate, ascribe much less realism to models and think of them as purely mental laboratories that may still, however, allow for certain inferences to the real world.
The January 2009 issue of Erkenntnis: An International Journal of Analytical Philosophy is a special issue, edited by Till Grüne-Yanoff, dedicated to exploring these two positions, and entitled “Economic Models as Credible Worlds or as Isolating Tools?” Among the heavyweight contributors are Robert Sugden, Uskali Mäki, and Nancy Cartwright. I particularly liked Mäki’s argument that the two positions are in actually very close rather than opposed. Highly recommended for those who want to acquaint themselves with frontier issues in economic methodology.
Internal Capital Market Activeness
| Lasse Lien |
In these Williamsonian times, here is a nice new working paper relevant to his internal capital market hypothesis. The paper measures, in various ways, how active a firm is in reallocating capital across its businesses. The paper finds that the more active a firm is, the lower the firm’s industry-adjusted profitability tends to be. This of course raises the question of whether active internal capital markets cause inferior performance, or whether inferior performance causes active internal capital markets. Using an impressive battery of robustness checks the authors conclude that internal capital markets are inefficient.
If the subject appeals to you, you have presumably already read this and this.
Management Miscellany
| Peter Klein |
1. We are not big on Jim Collins here at O&M but Toyota president Akio Toyoda is a fan, explaining his company’s woes in terms of Collins’s five stages of business decline. (Is “be headquartered in a country with an overvalued currency” one of the stages?)
2. Karen Ho’s Liquidated: An Ethnography of Wall Street (Duke, 2008) is reviewed by fellow anthropologist Gillian Tett in the FT. The key to understanding the financial crisis, we learn, is Bourdieu (why haven’t I read about this book on orgtheory.net?). “Massive corporate restructurings are not caused so much by abstract financial models as by the local, cultural habitus of investment bankers, the mission-driven narratives of shareholder value and the institutional culture of Wall Street.” Why didn’t I think of that?
3. I’ve been reading Yevgeny Zamyatin’s We, the first of great dystopian novels (in Natasha Randall’s new translation). I had head that Taylorism figures prominently in the novel, but didn’t know Taylor would be mentioned by name. “Yes, that Taylor was, without doubt, the most brilliant of the Ancients. True, he didn’t think everything through, didn’t extend his method throughout life, to each step, around the clock. He wasn’t able to integrate his system from an hour to all twenty-four. But all the same: how they could have written whole libraries about the likes of Kant — and not take notice of Taylor, a prophet, with the ability to see ten centuries ahead?” Of course, as we’ve noted before, there’s more to Taylor than meets the eye.
The Economist Going Austro-Demsetzian?
| Nicolai Foss |
Most observers of industrial organization will readily agree that so-called “predatory pricing” is a rare phenomenon. Nevertheless, it remains one of the most hotly debated topics in industrial organization theory and in practical competition policy, probably because it is a particularly conspicuous example of the “abuse of a dominant position” (to use EU competition policy lingo).
In its most recent issue, The Economist has a nice discussion of predatory pricing, prompted by the recent EU Intel case. The article opens by citing Coase, but in actuality its owes much more to Harold Demsetz (cf. this classic paper) as well as Austrian writers on industrial organization such as Dominick Armentano (cf. this paper). The article is excellent as a basis for discussion in classes on industrial organization.
The History of England and the Future of the Archive
| Dick Langlois |
I just received a newsletter from our Humanities Institute announcing (among other things) a graduate student conference at Yale in February on “The Past’s Digital Presence: Database, Archive, and Knowledge Work in the Humanities.” Here are some of the suggested possible topics:
- The Future of the History of the Book
- Public Humanities
- Determining Irrelevance in the Archive
- Defining the Key-Word
- The Material Object in Archival Research
- Local Knowledge, Global Access
- Digital Afterlives
- Foucault, Derrida, and the Archive
- Database Access Across the Profession
- Mapping and Map-Based Platforms
- Interactive Research
I draw your attention to the fourth from the bottom. It reminds my childhood, which I spent in Catholic schools through twelfth grade: no matter how secular the topic, there had to be at least a perfunctory mention of religion. (We were even encouraged to inscribe JMJ, for Jesus, Mary, and Joseph, at the top of our papers, though as I recall only the girls actually did this.) In the humanities, there has to be some obeisance to Postmodernism, however irrelevant to the topic.
The newsletter also mentioned, and rightly praised, a fascinating article in the Harvard alumni magazine called “Who Killed the Men of England?” My Scandinavian colleagues may want to take particular note.
Jack of All Trades and Master of . . . Administration?
| Nicolai Foss |
CEOs, leaders, and entrepreneurs are typically seen as generalists (e.g., here). They are confronted with the broadest decision domains and have the responsibility of making sometimes crucial decisions within those domains.
In “Congratulations or Condolences? The Role of Human Capital in the Cultivation of a University Administrator” (here; scroll down), John McDowell, Larry Singell, and Mark Stater argue that this also holds for universities. They develop and test a probit model of the decision between administration (from dept. head all the way to university pres.) and the pure academic career. The model is conditioned by training, career background, and (juicy!) academic performance. The data are drawn from the American Economic Association directories. Among the findings: economists with doctoral degrees from less prestigious universities are more likely to select into admin. Women and foreigners are less likely to become administrators. The experience level also positively influences the probability of getting into admin.
I am not convinced that the authors truly capture the specialized versus general human capital dimension. Some of their measures (e.g., whether the PhD degree was awarded by a top-35 PhD institution or not) are measures of quality rather than of the degree of specialization (in fact, this may be consistent with the view that many “pure” academics hold of admins!). Nevertheless, definitely worth a read and good ammo for harassing your local dean! (more…)
Bounded Rationality or Skilled Performance?
| Nicolai Foss |
In my 2003 contribution to the Festschrift for Richard Nelson and Sidney Winter (here), I argued that Nelson and Winter’s main oeuvre, their 1982 book, An Evolutionary Theory of Economic Change, is much more about tacit knowledge than about bounded rationality. The notion of routines is intended to capture the firm-specific and tacit character of productive knowledge rather than heuristics, satistificing search, and the like (these may not be opposed, though).
I am reading Great Minds in Management at the moment (highly recommended!). In his chapter, “Developing Evolutionary Theory for Economics and Management,” Sidney Winter seems to agree:
Skill provides a compelling model of effective behavior that is different, and deeply different, from what we are told either by theories of rational decision or by behavioral theories featuring ‘bounded rationality.’ As far as I can see, the latter theories do not lead one to expect that the word ‘awesome’ will ever be needed to describe human behavior” (p. 533).
Indeed, as my frequent co-author, Teppo Felin, argues, bounded rationality is almost always about people’s foolishness (notably the heuristics and biases literature), rather than about how and why people actually cope, sometimes quite successfully, with most of the decision situations they confront. It is about decision failure, rather than decision success (possibly premised on the implicit assumption that the standard model of rational decision is the only existing model of decision success). The problem with Winter’s alternative, namely that of behavior as skilled performance, is that it seems unclear what are the available models. Skilled performance seems as arbitrary as bounded rationality.
The Sociological Imagination
| Peter Klein |
That’s the name of a new sociology blog started by grad students Josh McCabe, David Pontoppidan, and Brian Pitt. I’m already enjoying the first few posts. These guys are influenced by economics (in particular, Austrian economics), so watch out.
Shop Class as Soulcraft
| Peter Klein |
After hearing Matthew Crawford interviewed this morning on the Diane Rehm show I’ve put his book, Shop Class as Soulcraft: An Inquiry Into the Value of Work, on my summer reading list. After earning a PhD in political philosophy at Chicago and doing a postdoc with the Committee on Social Thought, he worked for a while in a DC policy shop, then gave it up to start a motorcycle-repair business. Fixing bikes, he explains, involves complex analytical reasoning, application of scientific methods, Verstehen, and related cognitive skills far beyond those he used in his white-collar job. He also finds the work much more intellectually and emotionally satisfying than typical desk work. “The trades suffer from low prestige,” writes Crawford (see this excerpt published in last week’s Times), “and I believe this is based on a simple mistake. Because the work is dirty, many people assume it is also stupid. This is not my experience.” By contrast:
As in any learned profession, you just have to know a lot. If the motorcycle is 30 years old, from an obscure maker that went out of business 20 years ago, its tendencies are known mostly through lore. It would probably be impossible to do such work in isolation, without access to a collective historical memory; you have to be embedded in a community of mechanic-antiquarians. These relationships are maintained by telephone, in a network of reciprocal favors that spans the country. My most reliable source, Fred, has such an encyclopedic knowledge of obscure European motorcycles that all I have been able to offer him in exchange is deliveries of obscure European beer.
There is always a risk of introducing new complications when working on old motorcycles, and this enters the diagnostic logic. . . . The attractiveness of any hypothesis is determined in part by physical circumstances that have no logical connection to the diagnostic problem at hand. The mechanic’s proper response to the situation cannot be anticipated by a set of rules or algorithms.”
In the excerpt and in this 2006 essay, on which the book is based, Crawford draws out broader social, political, and personal implications of the joy of working with your hands, not all of which I necessarily buy. But I think I understand where he’s coming from. Personally, I don’t really know how to build stuff (unlike, say, Kevin Murphy), but I do enjoy cooking, and find that creating a wonderful meal is, in some ways, more satisfying than producing a wonderful journal article. (No wisecracks about the half-life of the meal versus the article, please.)
The Industrious Revolution
| Peter Klein |
Hans-Joachim Voth calls Jan de Vries’s new book on household behavior during the early modern period “staggeringly erudite, insightful, stimulating, and on all the main points, convincing.” The book, The Industrious Revolution: Consumer Behavior and the Household Economy, 1650 to the Present (Cambridge, 2008) builds on de Vries’s earlier concept of an Industrious Revolution, the two centuries before the Industrial Revolution in which consumers increased their production of marketable goods, largely at the expense of leisure time. “The industrious revolution was a household-level change with important demand-side features that preceded the Industrial Revolution, a supply-side phenomenon” (De Vries, 1994). Adds Voth:
The sheer amount of hard work that went into every aspect of these chapters is hard to convey. Surveying the rise of consumer items through the prism of probate inventories shows the author confidently mastering the abundant historical literature in four or five languages. De Vries’ reconstruction of Europeans’ increasing consumption of “colonial luxuries” — sugar, tea, and coffee — alone is going to be useful for all scholars working in the area.
This book may be of interest not only to economic and business historians, but also to management scholars in marketing and consumer behavior.
Pomo Periscope XVIII: “The French Don’t Care What You Actually Say as Long as You Pronounce It Correctly”
| Nicolai Foss |
This line from My Fair Lady seems to be an accurate summing-up of the emphasis on rhetorics, conversation etc., a branch of pomo, in certain quarters in economic methodology and related fields and disciplines. Or, so Robert Solow argues in a review in the latest issue of the always-interesting Journal of Economic Methodology of Arjo Klamer’s Speaking of Economics; How to Get Into the Conversation (here is a site dedicated to the book, and here is another review).
Essentially, Solow criticizes those who engage in the conversation talk for not adding any substantive insights on the level of meta-theory (whether positive or normative). “I have real doubts,” he says about the utility of describing the practice of academic economics as a ‘conversation’ or a bunch of simultaneous conversations. . . . My claim is that it does not advance the serious understanding of what academic economists are up to, and its relation to what the economy is up to” (p. 94). He sums up by saying that “In the end, I did not find find the proposed connection between postmodernism and contemporary economics convincing. Maybe theories with little or no application, theories about chaos and complex systems, and theories that leave practical people clueless about the economy (those are all Klamer’s words) have something to do with the architecture of Frank Gehry or the philosophy of Gilles Deleuze, but the connection needs work” (p. 95). It seems so.
More Economic Institutions of Strategy
| Nicolai Foss |
In his post of yesterday, Peter failed to mention that among the O&M bloggers not just Klein and Lien but also yours truly contributed to the Nickerson and Silverman 2009 edition of Advances in Strategic Management. Specifically, with Stieglitz (Nils — and with an “e”) I have written “Opportunities and New Business Models: Transaction Costs and Property Rights Perspectives on Entrepreneurship.” The paper can be downloaded from SSRN.
New Foss Sell-Out (?) Paper
| Nicolai Foss |
With Siegwart Lindenberg, Professor of Cognitive Sociology at the University of Groningen, I have written “Why Firms Work? A Goal-Framing Theory of the Firm.” Colleagues already refer to it as the “Foss sell-out paper” (but wait until I blog on that recent sell-out paper on entrepreneurship and the government by a certain O&M blogger . . . ).
Whatever that is, the paper starts from the familiar and long-standing debate between organizational economists and proponents of the knowledge-based view, and the many interesting recent attempts to merge key insights from TCE with ideas on learning and capabilities (Argyres, Nickerson, Mayer, Leiblein, Zenger, Hoettker, and others). The underlying idea is that additional explanatory leverage, for example, with respect to understanding the boundaries of the firm, will emerge from an integration of the two (clusters of) theories. (more…)
Ben Jones on the Burden of Knowledge
| Peter Klein |
Ben Jones, who does very interesting work on innovation and economic growth, has a new paper on the “burden of knowledge,” the idea that as an economy’s knowledge base increases, the amount of education necessary to be an effective innovator increases as well, mitigating the effects of knowledge accumulation on growth. Abstract:
This paper investigates a possibly fundamental aspect of technological progress. If knowledge accumulates as technology advances, then successive generations of innovators may face an increasing educational burden. Innovators can compensate through lengthening educational phases and narrowing expertise, but these responses come at the cost of reducing individual innovative capacities, with implications for the organization of innovative activity – a greater reliance on teamwork – and negative implications for growth. Building on this burden of knowledge mechanism, this paper first presents six facts about innovator behaviour. I show that age at first invention, specialization, and teamwork increase over time in a large micro-data set of inventors. Furthermore, in cross-section, specialization and teamwork appear greater in deeper areas of knowledge, while, surprisingly, age at first invention shows little variation across fields. A model then demonstrates how these facts can emerge in tandem. The theory further develops explicit implications for economic growth, providing an explanation for why productivity growth rates did not accelerate through the 20th century despite an enormous expansion in collective research effort. Upward trends in academic collaboration and lengthening doctorates, which have been noted in other research, can also be explained in this framework. The knowledge burden mechanism suggests that the nature of innovation is changing, with negative implications for long-run economic growth.
Case Studies and Causal Inference
| Nicolai Foss |
Can case studies — in the extreme: a study of a single case — play any systematic role in causal inference? If so, how? These are the questions posed in a paper by brilliant LSE mathematical sociologist, Peter Abell, forthcoming in the European Sociological Review. The paper is essentially a summary of Abell’s work over more than two decades with building stronger foundations for “qualitative” or “case study” research (a more comprehensive statement can be found in the “A Case for Cases” paper on Abell’s site).
Of course, in the standard statistical interpretation of causal inference, N should be large, and certainly not equal to 1. And most social scientists believe there is no explanation without generalization (an issue discussed at length by Popper, Dray, Collingwood, and others in the philosophy of history as well as by more recent social scientists such as Ragin and Goldthorpe — and James March (here)), so causal inference is predicated on generalization and comparative method. (more…)
Copula Functions and the Current Crisis
| Nicolai Foss |
Forget about effective demand failures, malinvestments caused by expansionary monetary policy, or even political regulation of the US housing market: The true bete noire in the current meltdown is a specific copula function (here is the Wiki on copulas), or more precisely David Li’s application of it to the modeling of default correlation (here). Or, so Wired claims. Writer Felix Salmon is pretty explicit in his condemnation of Li’s approach:
It was a brilliant simplification of an intractable problem. And Li didn’t just radically dumb down the difficulty of working out correlations; he decided not to even bother trying to map and calculate all the nearly infinite relationships between the various loans that made up a pool. What happens when the number of pool members increases or when you mix negative correlations with positive ones? Never mind all that, he said. The only thing that matters is the final correlation number — one clean, simple, all-sufficient figure that sums up everything.
Apparently, major finance academics — like Darrell Duffie — had warned against the application of Li’s work.
I am by no means competent to pass any judgment on Salmon’s story. I merely recommend it as a highly interesting read — and wonder how long it will take before the performativity-in-financial-markets-crowd picks it up. Actually, it may rather support the Felin & Foss argument that false social constructions are eventually weeded out (here).
Signs of Getting Older
| Nicolai Foss |
My hair is thinning, I can still run those 4 kms in 18 mins or less, but no so easily anymore, I find myself reading obituarities — and here are my selected papers, fresh from the press, on Knowledge, Economic Organization, and Property Rights. I take solace in the fact that these are only selected rather than collected papers. (more…)
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