Frank Knight and the Chicago School
| Peter Klein |
Frank Knight is generally regarded, along with Jacob Viner, as the founder of the Chicago school of economics. But Knight’s relationship to the later Chicago school of Friedman, Stigler, and Director is ambiguous. Knight’s theories of capital and competition were incorporated into the mainstream Chicago (and contemporary neoclassical) tradition but his account of profit and entrepreneurship, his quasi-Austrian methodology (inherited from his teacher Herbert J. Davenport), and his eclectic social and political theories were largely ignored or forgotten.
Ross Emmett has a new paper, “Did the Chicago School Reject Frank Knight? Assessing Frank Knight’s Place in the Chicago Economics Tradition,” exploring this in detail. The conclusion: “Without [Knight’s] initiation of eaching price theory and persistence in defending it, there ould be no Chicago tradition. Yet the methodological approach and research infrastructure which propelled the Chicago School to a central position in the economics profession owe little or nothing to him.”
(Incidentally, critics of economics often target a stylized version of Chicago economics circa 1970 (see here), but these critics often seem unaware that the Chicago school of economics no longer exists. While there is still a (top-notch) economics department at the University of Chicago, there is no longer a distinct Chicago approach. The economics taught at Chicago is the same as the economics taught at MIT, Harvard, Stanford, or any other top mainstream department.)
How is What is an Opportunity a Valuable Research Question?
| Chihmao Hsieh |
In introducing the April 2007 Special Issue of Small Business Economics, guest editors Jeffery McMullen and Lawrence Plummer, and Zoltan Acs ask “What is an Entrepreneurial Opportunity?” First, the abstract:
The nature and source of entrepreneurial opportunity are important issues for understanding how markets function and come into being. In addition to describing the forum held on the topic and summarizing the contributions of the articles that appear in the special issue, this article shares a number of lessons learned during the workshop and the editorial process. We explore three of the most important reasons for confusion about the opportunity construct: (1) the “objectivity” of opportunity, (2) the perceived importance of one particular individual in determining the direction of the social world and (3) what distinguishes the sub-class of “entrepreneurial” opportunity from the broader category of opportunity in general. Finally, we offer some directions for future research by illuminating important issues that emerged from the workshop but that remain largely unanswered by the papers of this special issue.
Needless to say, the authors courageously untangle some fundamental concepts (i.e. different types of ‘objectivity’ as it might relate to the notion of opportunity). Yet a sentence in the article’s second paragraph gave me pause: “…without a clear understanding of the nature of opportunity, formulating logically consistent prescriptions for both policy and practice is problematic because any theoretical basis of empirical results would be incomplete” (p. 273). (more…)
The Growth of Cities: A Formal Model
| Peter Klein |
Luís Bettencourt, José Lobo, Dirk Helbing, Christian Kühnert, and Geoffrey West’s paper “Growth, Innovation, Scaling, and the Pace of Life in Cities” (Proceedings of the National Academy of Sciences 104, no. 17, April 24, 2007) is getting a lot of attention, garnering plugs in Scientific American and Nature. They use data on innovation, employment, wages, GDP, consumption, crime, disease, housing, and infrastructure from US, European, and Chinese cities to estimate a “power law scaling function” linking demographic, socioeconomic, and behavioral indicators to city size. Such indicators, 
Findings:
Many diverse properties of cities from patent production and personal income to electrical cable length are shown to be power law functions of population size with scaling exponents,
that fall into distinct universality classes. Quantities reflecting wealth creation and innovation have
(increasing returns), whereas those accounting for infrastructure display
(economies of scale). We predict that the pace of social life in the city increases with population size, in quantitative agreement with data, and we discuss how cities are similar to, and differ from, biological organisms, for which
Finally, we explore possible consequences of these scaling relations by deriving growth equations, which quantify the dramatic difference between growth fueled by innovation versus that driven by economies of scale. This difference suggests that, as population grows, major innovation cycles must be generated at a continually accelerating rate to sustain growth and avoid stagnation or collapse.
For more on cities see these posts on Jane Jacobs and this one on clusters. Here is Ed Glaeser’s influential 1992 paper (with Hedi Kallal, Jose Scheinkman, and Andrei Shleifer) on growth in cities. Other important Glaeser papers on cities include this one with Jesse Shapiro, this one with Albert Saiz, and this one with Christopher Berry. Here is Glaeser’s review of Richard Florida’s Creative Class and here is Florida’s blog. And here is an interesting special issue of the Review of Austrian Economics on the new urbanism.
Update: Here is Florida’s take on the paper.
Contronymns
| Peter Klein |
Re Chihmao’s post: English also has quite a few contronyms, words that are their own antonyms. Here is a list, including these that appear often in business administration and social-science research:
- consult — ask for advice, give advice
- custom — usual, special
- discursive — proceeding coherently from topic to topic, moving aimlessly from topic to topic
- enjoin — prescribe, prohibit
- first degree — most severe (e.g., murder), least severe (e.g., burn)
- handicap — advantage, disadvantage
- mean — average, excellent (e.g., “plays a mean game”)
- oversight — error, care
- rent — buy use of, sell use of
- transparent — invisible, obvious
HT: LRC.
Theoretical vs. Teórico vs. 理论: How the Precision of Foreign Language Relates to the Cost of Innovation
| Chihmao Hsieh |
Recently, bloggers Nicolai and Peter have highlighted the unfortunate confusions corresponding to the usage of the terms conceptual vs. theoretical, as well as usage of “method” vs. “methodology.”
A few inquiries could deserve some attention. First, is this confusion specific to those terms as they appear in the English language? For instance, perhaps other languages have their own labels indicating the concepts of “conceptual” and “theoretical” but the root words (e.g. concept, theory) involved are less substitutable. I’m also guessing that other languages have distinct labels for “method” and “methodology,” whereby less confusion emerges. (more…)
Media, Dummy Variables, Fame, Fathers of Sociology, and School Shootings
| Chihmao Hsieh |
By now, all readers of this blog are probably well-aware of the massacre at Virginia Tech that took 33 lives. (My own prayers go out to all those affected by the tragedy.)
Some controversies are bound to be re-visited during and after the investigation (e.g. gun control) but others are starting to reveal themselves as mainstream for the first time. Namely, the media itself may be promoting these types of shootings. (more…)
Athey on Organizational Complementarities
| Peter Klein |
Harvard’s Susan Athey has won the John Bates Clark medal. Commentators are hailing her age (one of the youngest Clark medalists at 36), gender (the first female winner), and reputation (profiled in the New York Times as a 24-year-old PhD candidate). Here I’ll offer a few remarks about one of her most important papers for organizational scholars, “An Empirical Framework for Testing Theories About Complementarity in Organizational Design” (with Scott Stern). (An NBER version of the paper is here; as far as I know it is still unpublished.)
I blogged recently about complementarities among organizational form, technology, and market conditions. Athey and Stern’s paper tackles the problem of measuring complementarities among organizational practices. If particular practices occur in clusters (as modeled, for example, by Holmstrom and Milgrom, 1994), it is difficult to estimate the marginal impact of adopting any particular practice. Moreover, the endogeneity of the decision to adopt individual practices makes it difficult to judge whether practices are in fact complementary (i.e., performance enhancing). Athey and Stern develop a method for identifying complementarities by constructing “activity-specific instruments” that control for unobserved heterogeneity. The proposed approach, which jointly estimates the adoption decision and the productivity effect of organizational practices, is becoming increasingly influential in the empirical literature on organizational design. (more…)
Does Your Neighborhood Really Need Traffic Signs?
| Chihmao Hsieh |
A month ago, I was traveling and spotted on a newsstand the then-current issue of US News & World Report, the one where the cover story addresses what societal lessons the USA could learn from the rest of the world. Being born and raised in the USA for 30 years, I found this to be one of the unusually humble headlines by a US publication, and picked a copy up.
The news article reports on 30 short accounts of societal behaviors or conditions elsewhere, which the US should envy. Major differences in sociocultural norms and regulatory policies are evidenced.
The first such account profiles recent policymaking in Ipswich, England, where that city’s traffic planner has removed all traffic signs (including traffic lights and even curbs!) in an effort to reduce traffic accidents. (more…)
Communication Channels, Asset Specificity, and Some Humor
| Chihmao Hsieh |
First off, I’d like to thank Nicolai and Peter for adding me on as a guest blogger at O&M. I have admired it from afar. Hopefully I can introduce other provocative topics universal to the esteemed readership, but also practice my more text-oriented sense of humor. Ergo, this opening post…
Last week I gave a lecture to my undergrad class that included remarks about the differential ability of communication channels in handling messages of varied complexity or “equivocality.”
The research cited (Lengel and Daft, 1988) during the lecture categorizes communication channels into 3 groups: email, fax, voice mail; telephone and video conferencing; and face-to-face interaction. I independently argued that these 3 categories distinctly varied in terms of their relation to asset specificity: excepting underdeveloped countries, email, fax, and voice mail each involve investments low in asset specificity (no need for shared location, no need for shared timing); (more…)
Introducing Guest Blogger Chihmao Hsieh
| Peter Klein |
It is a pleasure to welcome Chihmao Hsieh as our newest guest blogger. Chihmao is an assistant professor in the Department of Business Administration at the University of Missouri-Rolla. He received his PhD in strategy from Washington University, St. Louis, where he worked with O&M favorites Jackson Nickerson and Todd Zenger. (A sample of their joint work is here.) Chihmao’s research applies entrepreneurship to R&D, organizational economics, cognitive psychology and instructional science, and informetrics. He has been a regular participant in the comment threads at O&M and we’re pleased to add him to the line-up.
The Division of Labor in Artistic Production
| Peter Klein |
Delegation, agency, team production, monitoring, group entrepreneurship — these issues and more suffuse David Galenson’s new paper on the division of labor in artistic production, “Painting By Proxy: The Conceptual Artist as Manufacturer.”
In 1958, the French philosopher Etienne Gilson observed that painters are related to manual laborers by a deep-rooted affinity that nothing can eliminate, because painting was the one art in which the person who conceives the work is also necessarily the person who executes it. Conceptual innovators promptly proved Gilson wrong, however, by eliminating the touch of the artist from their paintings: in 1960 the French artist Yves Klein began using living brushes — nude models covered with paint — to execute his paintings, and in 1963 Andy Warhol began having his assistant Gerard Malanga silkscreen his canvases. Today many leading artists do not touch their own paintings, and some never see them. This paper traces the innovations that allowed a complete separation between the conception and execution of paintings. The foundation of this separation was laid long before the 20th century, by conceptual Old Masters including Raphael and Rubens, who employed teams of assistants to produce their paintings, but artists began exploring its logical limits during the conceptual revolution of the 1960s and beyond. Thus by the end of the twentieth century Jeff Koons explained that he did not participate in the work of painting his canvases because he believed it would interfere with his growth as an artist, and Damien Hirst defended his practice of having his paintings made by assistants on the grounds that their paintings were better than his. Eliminating the touch of the artist from painting is yet another way in which conceptual innovators transformed art in the twentieth century.
The paper is gated for NBER subscribers here.
Things You Shouldn’t Say at Your Dissertation Defense
| Peter Klein |
Kerry Soper’s classic from the July 7, 2000 Chronicle of Higher Education (click the image for the whole thing). Sent to me by Matt Elliott.
And of course there’s Matt Groening’s classic “Grad School” edition of his “Life in Hell” series.
New Paper by Hart and Moore
| Peter Klein |
I blogged previously about Oliver Hart’s work (with John Moore) on “partial contracts.” The paper has been revised and retitled “Contracts as Reference Points” and is available for NBER subscribers here. Abstract:
We argue that a contract provides a reference point for a trading relationship: more precisely, for parties’ feelings of entitlement. A party’s ex post performance depends on whether he gets what he is entitled to relative to outcomes permitted by the contract. A party who is shortchanged shades on performance. A flexible contract allows parties to adjust their outcome to uncertainty, but causes inefficient shading. Our analysis provides a basis for long-term contracts in the absence of noncontractible investments, and elucidates why “employment” contracts, which fix wage in advance and allow the employer to choose the task, can be optimal.
Unintended Consequences and the Social Sciences
| Nicolai Foss |
According to a prominent tradition in economics and classical liberal thought, the social sciences (particularly economics) are primarily concerned with explaining unintended phenomena, whether more temporary outcomes, such as market phenomena, or more permanent ones, such as institutions, in terms of the intentional actions of multiple interacting agents. In contrast, the social sciences are not really taken up with explaining individual action per se.
This is an understanding, or perhaps even doctrine, that is perhaps most famously associated with Hayek, but it has also been echoed by Ludwig Lachmann (among Hayek’s contemporaries) and by many modern Austrians, as well as by philosophers, notably Karl Popper, Michael Polanyi, and Edna Ullman-Margalitt, and (non-Austrian) economists such as Andrew Schotter (in his 1981 book on institutions). (Of course, the notion of unintended consequences itself is by no means unique to classical liberal economists but can be found in the thought of most major thinkers on social science and political philosophy).
However, there are several problems with the doctrine that the social sciences are mainly about unintended consequences. Here are two that seem to have not been previously noticed: (more…)
The As-Is Journal Review Process
| Peter Klein |
Eric Tsang and Bruno Frey urge editors to dump the revise-and-resubmit option, using “as-is” reviews instead. (Published version here, SSRN version here.)
[A] manuscript should be reviewed on an “as is” basis. Similar to developmental review, the process is double-blind and referees are encouraged to provide constructive comments on a manuscript. In contrast with developmental review, referees are given only two options when advising the editor regarding whether the manuscript should be published: accept or reject. The option of (minor or major) revision and resubmission is ruled out. Based on the referees’ recommendations, and his or her own reading of the manuscript, the editor makes the decision to accept or reject the manuscript. If the editor accepts the manuscript (subject to normal copy editing), he or she will inform the authors accordingly, enclosing the editorial comments and comments made by the referees. It is up to the authors to decide whether, and to what extent, they would like to incorporate these comments when they work on their revision for eventual publication. As a condition of acceptance, the authors are required to write a point-by-point response to the comments. If they refuse to accept a comment, they have to clearly state the reasons. The editor will pass on the response to the referees. In sum, the fate of a submitted manuscript is determined by one round of review, and authors of an accepted manuscript are required to make one round of revision.
Tsang and Frey identify four potential advantages to as-is reviewing: (1) authors don’t have to incorporate silly reviewer suggestions; (2) published papers reflect more closely the views of their authors, reducing “intellectual prostitution”; (3) the review process proceeds more quickly; and (4) authors are more likely to provide frank feedback to reviewers, improving the quality of the dialogue between peers. (Certainly this would eliminate the gratuitous “Thank you so much for your insightful comments” that begins every author response to referees.) There are drawbacks too, of course, but Tsang and Frey make a strong argument that the advantages outweigh the disadvantages. What do readers think?
The Excuse Doctrine in Contract Law: Country and Western Edition
| Peter Klein |
Tom Bell entertains his contract law class with a country-and-western song illustrating the excuse doctrine. Tom says he performs the song every year wearing cowboy boots and a bolo tie, then makes the students take a not-so-fun quiz to make sure they got the point. Not at the level of the Glenn Hubbard music video, but still pretty good for a stodgy law professor.
Promises, promises, I made to you,
And you, Darlin’, promised right back at me, too.
But my commitment is over. I’m cuttin’ you loose.
I owe you nothin’! Here’s my excuse:(refrain 1:)
Mistake, frustration, impratiCAbility:
Thanks to these reasons, I am now are free.
Mistake, frustration, impratiCAbility!
The whole deal is OFF, between you and me.
Org Bloggers Peace Summit
| Peter Klein |
Helsinki, 1969. Camp David, 1978. Oslo, 1993. To this list of historic summits we can add “Columbia, Missouri, 2007.” That’s the year my home institution, the University of Missouri, hosted orgtheory.net bloggers Brayden King, Fabio Rojas, and Teppo Felin, as well as my co-blogger Nicolai Foss. Well, not all at the same time. But still: Brayden presented his paper on “Contracts as Organizations” at last week’s CORI seminar series, and today Fabio discussed his work on Black Studies programs in a seminar jointly sponsored by the Division of Applied Social Sciences and McCEL. Teppo will visit McCEL in May to present his paper “The Political Economy of Entrepreneuring.” And Nicolai will be here in May as well. Who says economists and sociologists can’t work together for a better world?
Interview with Bill Starbuck
| Peter Klein |
The March 2007 Academy of Management Learning & Education features Michael Barnett’s interview with William H. Starbuck, recently retired as ITT Professor of Creative Management at NYU. (SSRN version of the interview here.) Topics: statistical significance versus “substantive importance” (à la McCloskey — but see Siegler and Hoover 2005); complex versus simple forecasting techniques; keys to organizational learning (and “unlearning”); organizational design as process, not outcome; the relationship between management research and social issues more broadly; and more. A good read.
Managerial Economics: A Problem-Solving Approach
| Peter Klein |
I just received a copy of Luke Froeb and Brian McCann’s new MBA textbook, Managerial Economics: A Problem-Solving Approach (South-Western, 2007). I’m impressed. It looks and feels very different from the established managerial economics texts. First, it’s slim — 400 pages of decent-sized type (the latest edition of the Brickley, Smith, and Zimmerman text I’ve been using weighs in at 752 pages). Second, like Lee and McKenzie’s Microeconomics for MBAs, it’s light on graphs and equations. “Theory based but not theory emphasized,” says an editorial blurb. The book “includes less math and technical models, as well as fewer graphs and figures, than traditional managerial economics books. It teaches students to solve problems rather than learn models.” Third, it comes with endorsements from Bob Litan and P. J. O’Rourke. Any text approved by O’Rourke is certainly worth a serious look.
Perhaps most impressive, the authors are readers of O&M, which shows they have discriminating tastes.
Life After Death By PowerPoint
| Peter Klein |
Comedian Don McMillan demonstrates how not to use PowerPoint (via Volokh).
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