Schools of Thought in Behavioral Economics
| Peter Klein |
Gary Lynne sent me John Tomer’s paper from the June 2007 Journal of Socio-Economics, “What is Behavioral Economics?” Tomer summarizes the various strands of behavioral economics and scores each according to “narrowness,” “rigidity,” “intolerance,” “mechanicalness,” “separateness,” and “individualism.” Coverage includes the Carnegie tradition, Katona’s Michigan school, modern experimental economics, Akerlof’s behavioral macro, and more. Tomer defines the field more broadly than I would — he includes evolutionary economics à la Nelson and Winter, for example — but the commentary is insightful.
Thank You, David!
| Nicolai Foss |
Many thanks to David Hoopes for guest blogging at O&M. David has contributed some excellent blog posts which are among the most viewed ones on the site (particularly this one). We hope David will continue to visit O&M in the future and post comments. Thanks, David, for allowing us to benefit from your fertile mind.
“The Age of Temporary Advantage”
| Nicolai Foss ]
Rich D’Aveni, Gianbattista Dagnino and Ken Smith have just disseminated a call for papers for a special issue of the Strategic Management Journal on the above subject. The purpose of the special issue, they explain, is to “develop theory and empirical evidence about whether and why competitive advantages are becoming less sustainable, and how organizations can successfully compete using a series of temporary or dynamic competitive advantages. The primary goal is to ask: What would the field of strategy look like if the sustainability of competitive advantage was very rare or nonexistent?” (more…)
Kitchen Hierarchy
| Peter Klein |
Before Kitchen Confidential made him a celebrity, Anthony Bourdain was a real chef, working upscale New York kitchens at places like the Supper Club and Sullivan’s. Bourdain’s style is not to everyone’s taste, but he knows how to manage a restaurant crew. A chef, after all, is not primarily an artist, but a manager, facing the same set of organizational challenges — delegation, incentives, monitoring — as any administrator.
I mention this because I recently stumbled upon an interview with Bourdain in the July 2002 Harvard Business Review. Despite several attempts by interviewer Gardiner Morse to get Bourdain to endorse creativity, spontaneity, and empowerment in the kitchen, Bourdain remains an unreconstructed devotee of Escoffier’s “brigade system,” a sort of culinary Taylorism in which each member of the cooking staff has a fixed place in the production chain, a very narrow job description, and an obligation to obey his chef de partie (section leader) and the head chef without question. (more…)
Brain Flows
| Steve Phelan |
Further to my comments on the best and brightest entering the finance industry, David Wessell at the WSJ reports that 15% of male Harvard graduates from 1990 work in the finance industry compared with only 5% of 1970 graduates. Furthermore, those Harvard grads in the finance industry were earning 195% of the salary of those in other industries. The article later goes on to state that “some of the brainpower drawn to Wall Street would have been more productively employed elsewhere in the economy.” The question is whether all this is a free market outcome or is some sort of distortion misallocating resources?
Legal Entrepreneurship
| Steve Phelan |
I just had lunch with the general counsel of an internet retailer, which is headquartered here in Las Vegas. He was bemoaning the fact that the biggest headache in his job is patent infringments… (more…)
Reflections on LLSV
| Peter Klein |
I meant to blog on the newest LLSV paper (actually LLS, in this case) but never got around to it. LLSV, you’ll recall, inaugurated a stream of empirical research on the financial and economic effects of legal systems (focusing on the differences between common- and civil-law countries). The newest paper clarifies the argument and reflects on ten years of research, discussion, and debate on the role of legal origins.
Fortunately, Daniel Sokol has written some comments on the Conglomerate blog (one of my regular reads, by the way — keep up the good work, guys!). Daniel notes, wisely:
I believe that LLSV makes certain assumptions about history and political economy in legal origins that are not exactly supported by the underlying historical record. A number of scholars have attacked LLSV on these grounds. Nevertheless, I still find myself strangely attracted to LLSV. In many ways, the results are what you would intuitively expect if you were on your own to attempt to rank countries based on investor protection or other similar features. More importantly, a number of the variables that LLSV uses are a bit squishy but we have yet to come up with better cross country measurements. Indeed, as a result of the critiques, LLSV have gotten better as to how they measure shareholder protection. From a policy perspective, the key to change to various bottlenecks requires not merely a top down approach in the change of the legal system but a bottom up approach by the users of these legal systems to overcome various bottlenecks that are regulatory. This makes me believe that over time the common law/civil law distinction will be seen as a rather false one where instead you will find countries lumped into categories based on their ability to respond to local and changing conditions (even the United States, which in recent years may have created increased regulatory bottlenecks such as SOX). This evolutionary approach is what I believe holds the key to understanding how to think about law and institutions.
Podcast: Munger on Coase on the Firm
| Peter Klein |
The latest podcastin Russ Roberts’s EconTalk series features Duke’s Mike Munger on Coase and the nature of the firm.
Nicolai and I are big proponents of the Coasian framework, though it is important to realize that a lot of work has been done in this area since the 1970s (let alone 1937). See here and here for commentary.
Combining Transaction Cost Economics and the Property Rights Approach
| Peter Klein |
The transaction cost framework associated with Ben Klein and Oliver Williamson and the property-rights approach of Grossman, Hart, and Moore have a complicated relationship, as Bob Gibbons has explained. Clearly, property-rights theory is not simply a formalization of TCE, as is sometimes believed (see Williamson, Whinston, and Whinston again on the differences). One key difference, emphasized by Williamson and by Gibbons, is that the PRT focuses on the alignment of incentives ex ante, assuming efficient bargaining ex post, while TCE emphasizes ex post hazards.
A recent paper by Patrick Schmitz, “Information Gathering, Transaction Costs, and the Property Rights Approach” (AER, March 2006) tries to reconcile the two perspectives by creating a GHM-style incomplete-contracting model in which parties can obtain private information about their ex post benefit, resulting in inefficient rent-seeking over the realized gains from trade. Under certain circumstances, the PRT conclusions are reversed — i.e., the party with the most important relationship-specific investment should not necessarily own the other party’s investment, as the PRT implies. Worth a read.
Call for Papers: Honoring the Life and Works of Alfred Chandler
| Peter Klein |
Shawn Carraher and John Humphreys are editing a special issue of the Journal of Management History devoted to the life and work of the late Alfred D. Chandler, Jr. (1918-2007). Submissions are due 7 April 2008. Details below the fold. (more…)
Why Business Ignores the Business Schools
| Peter Klein |
That’s the title of Michael Skapinker’s essay in the Financial Times (via Kenneth Amaeshi), which focuses on academic research in business administration (not teaching). Unlike their counterparts in law, medicine, and engineering, Skapinker argues, B-school professors focus almost exclusively on impressing their peers, leading to work that is too abstract, jargon-filled, and theoretical to interest practitioners. He blames not only the usual publish-or-perish incentives, but also the fact that “[w]ithin the university world, business schools suffer from a long-standing inferiority complex.” B-school faculty “prefer to adorn their work with scholarly tables, statistics and jargon because it makes them feel like real academics.” Ouch.
Interesting discussion fodder, and Skapinker is surely right that some research in management suffers from scientistic pretensions (perhaps less so in finance and accounting). I do think Skapinker overstates the close relationship between research and practice in medicine. (Try asking your family physician about something you read in the New England Journal of Medicine, or ask for a confidence interval on the point estimate you’re given about the likelihood drug X will cure your condition Y.)
The End of an Academic
| Nicolai Foss |
Three clear signs:
- Edward Elgar has asked me to edit a collection of my papers. It will be published later this year under the title Organization, Property Rights, and Knowledge: Selected Papers of Nicolai J Foss.
-
I got back a review report that condemned my submission with the following words: “It lacks the freshness of the early Foss papers.”
-
And, now, the decisive sign, I received a mail with the following content (here anonymized):
“Dear Professor Foss,
I am contacting you from a London based executive search firm called the NN Partnership. We are currently working with UU University to find them a Dean of their Business School. I would be delighted to speak to you about this and wondered if there is a convenient time to call and indeed the best number on which to reach you.
I look forward to hearing from you. With kind regards and many thanks,
JJ, the NN partnership”
I suppose all that is left for me now is to gracefully retire to my front porch where I can spend the time reading Human Action, smoking my old pipe, and yelling at the neighborhood kids. :-(
Prediction markets
| Steve Phelan |
One of the memes rattling round the blogosphere today is the failure of prediction markets to predict Hillary Clinton’s win in New Hampshire – in fact, to radically write off her prospects after the Iowa outcome. Paul Krugman goes so far as to entitle his blog on the subject “nobody knows anything” (as opposed to Surowiecki’s wisdom of crowds).
Surowiecki argues that wise crowds need: a) diversity of opinion, b) independence, c) decentralization (i.e. local knowledge), and d) a mechanism to aggregate private judgments. Which leads me to ask: What is the missing element in prediction markets? To the degree that investors in prediction markets are receiving their information from common national media sources then it would seem that diversity, independence, and decentralization are missing.
Economists on Interdisciplinarity
| Peter Klein |
I missed the ASSA/AEA session “What Should Be the Core of Graduate Economics?” featuring Susan Athey, Ed Gleaser, Bo Honoré, Blake Lebaron, Derek Neal, and Michael Woodford but there is a write-up in the Chronicle (gated, though a free version is temporarily available here). Gleaser offers perhaps the most interesting comment for the O&M crowd:
“We actually shouldn’t be thinking narrowly in terms of first-year economics.” . . . “We should be thinking about first-year social science. The whole division between economics, sociology, and political science feels like a hangover from the 19th century. So many of the people in our profession are working on problems that have traditionally been seen as part of sociology or political science.
“We should probably be rethinking from the ground up all of the social sciences,” Mr. Glaeser continued. “A more attractive model might be a first-year course sequence that trains a social scientist to work on anything, rather than having separate first-year economics, sociology, and political science course work. But maybe that’s a discussion for a different panel.”
My guess is that such a first-year sequence would have two much economics-based sociology, economics-based political science, and the like to satisfy our friends at orgtheory.net. But it is an intriguing possibility. (more…)
Why Study the Humanities?
| Peter Klein |
Stanley Fish (not one of my favorites) channels G. H. Hardy:
To the question “of what use are the humanities?”, the only honest answer is none whatsoever. And it is an answer that brings honor to its subject. Justification, after all, confers value on an activity from a perspective outside its performance. An activity that cannot be justified is an activity that refuses to regard itself as instrumental to some larger good. The humanities are their own good.
What about the social sciences? Certainly they purport to be”useful,” in a way that the humanities do not. Scholars of business administration hope their research improves business practice. Economists maintain that sound public policy requires the economist’s unique understanding of complex social phenomena. (more…)
Econo-Bloggers and the Public Good
| Peter Klein |
An interesting result from Aaron Schiff’s survey of econo-bloggers (I was a respondent):
There [was] a series of questions asking respondents to rate factors according to their importance as motivations for blogging on a scale of 1 to 5. “Fun or entertainment,” “To raise my profile,” “Contribute to policy/political debates,” “To educate the public or disseminate research.” and “As a way of recording thoughts or ideas” were rated highest, all with a median score of 4. “Contribute to academic debates” had a median of 3, “To get reader feedback from comments” and “To improve writing skills” both scored 2, while “Actual or potential direct income” and “Actual or potential indirect income” both had a median of 1.
Economists’ desire to educate the public and to disseminate research, for the public good, is generally underrated, especially among non-economists. However, the pecuniary motives from blogging may be stronger than Aaron’s analysis suggests; the immediate rewards are few, but raising one’s profile has obvious long-term career benefits (as in the open-source case).
NB: Contrary to common belief, academic bloggers don’t think about blogging 24/7. A few times during the ASSA meeting I’d pull out my laptop during a session, to take notes or to work on my own presentation, and a panelist would ask me afterwards: “Were you blogging about me?”
O&M for the High-Time-Preference Reader
| Peter Klein |
Want to know the instant a new post or comment appears on O&M? Sign up for Pingie and have our main or comments feed — or any RSS feed — sent to your mobile phone via SMS.
ASSA 2008 Papers on Organizations
| Peter Klein |
Some interesting papers from the ASSA Meeting in New Orleans, where I’ll be spending the next couple of days. (I don’t have links, so you’ll have to do your own Googling to find the texts.)
ROBERT GIBBONS and REBECCA HENDERSON, Massachusetts Institute of Technology — What Do Managers Do? Suggestive Evidence and Potential Theories about Building and Managing Relational Contracts
CLAUDE MENARD, ATOM – University of Paris Pantheon-Sorbonne — The Governance of Interfirm Agreements: A Relational Contract Perspective
RICARD GIL, University California-Santa Cruz, and JEAN-MICHEL OUDOT, ATOM – University Paris Pantheon-Sorbonne — Contractual Completeness and Ex-post Efficiency: Trade-Offs between Ex-Ante and Ex-Post Costs in Contract Design
LUIS GARICANO and PAUL HEATON, University of Chicago — Information Technology, Organization, and Productivity in the Public Sector: Evidence from Police Departments
DANIEL SPULBER, Northwestern University — Entrepreneurs in the Theory of the Firm (more…)
Best Dissertation Title I Read Today
| Peter Klein |
“Pimps and Ferrets: Copyright and Culture in the United States, 1831-1891,” by Eric Anderson (Bowling Green State University, American Culture Studies/History, 2007). Abstract:
How did people think about copyright in the nineteenth century? What did they think it was? What was it for? Was it property? Or something else? How did it function? Who could it benefit? Who might it harm? Pimps and Ferrets: Copyright and Culture in the United States, 1831-1891 addresses questions like these, unpacking the ideas and popular ideologies connected to copyright in the United States during the nineteenth-century.
This era was rife with copyright-related controversy and excitement, including international squabbling, celebrity grandstanding, new technology, corporate exploitation, and ferocious arguments about piracy, reprinting, and the effects of copyright law. Then, as now, copyright was very important to a small group of people (authors and publishers), and slightly important to a much larger group (consumers and readers). However, as this dissertation demonstrates, these larger groups did have definite ideas about copyright, its function, and its purpose, in ways not obvious to the denizens of the legal and authorial realms.
This project draws on methods from both social and cultural history. Primary sources include a broad swath of magazine and newspaper articles, letters, and editorials about various copyright-related controversies. Examining these sources — both mainstream and obscure — illustrates the diversity of thinking about copyright issues during the nineteenth century, and suggests alternative frameworks for considering copyright in other times.
Via Bill Stepp, who says the “study fills a yawning gap in copyright history, and offers a radically different focus on the development of this institution from the dominant legal perspective.” You’ll have to download the searchable PDF to find the meaning of the title.
Organizations and Markets 
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