Science, Technology, and Public Funding
| Peter Klein |
This piece by Matt Ridley builds on Terence Kealey’s critique of government science funding, and also echoes Nathan Rosenberg’s critique of the linear model of science and technology. We have pointed out similarly that arguments for public science funding are usually not very scientific.
When you examine the history of innovation, you find, again and again, that scientific breakthroughs are the effect, not the cause, of technological change. It is no accident that astronomy blossomed in the wake of the age of exploration. The steam engine owed almost nothing to the science of thermodynamics, but the science of thermodynamics owed almost everything to the steam engine. The discovery of the structure of DNA depended heavily on X-ray crystallography of biological molecules, a technique developed in the wool industry to try to improve textiles.
Technological advances are driven by practical men who tinkered until they had better machines; abstract scientific rumination is the last thing they do. As Adam Smith, looking around the factories of 18th-century Scotland, reported in “The Wealth of Nations”: “A great part of the machines made use in manufactures…were originally the inventions of common workmen,” and many improvements had been made “by the ingenuity of the makers of the machines.”
It follows that there is less need for government to fund science: Industry will do this itself. Having made innovations, it will then pay for research into the principles behind them. Having invented the steam engine, it will pay for thermodynamics.
I have argued repeatedly against the “laundry list” rationale for public funding, the listing of technologies and products that came out of government programs, as if that were justification for these programs. Ridley agrees:
Given that government has funded science munificently from its huge tax take, it would be odd if it had not found out something. This tells us nothing about what would have been discovered by alternative funding arrangements.
And we can never know what discoveries were not made because government funding crowded out philanthropic and commercial funding, which might have had different priorities.
Deaton’s Critique of Randomized Controlled Trials
| Peter Klein |
Because we’ve been somewhat skeptical of randomized-controlled trials — not the technique itself, but the way it is over-hyped by its proponents — you may enjoy Angus Deaton’s critique of RCTs in development economics. I learned of Deaton’s arguments from this excellent piece by Chris Blattman in Foreign Policy. Here is the key paper, Deaton’s 2008 Keynes Lecture at the British Academy.
Instruments of Development: Randomization in the Tropics, and the Search for the Elusive Keys to Economic Development
Angus Deaton
There is currently much debate about the effectiveness of foreign aid and about what kind of projects can engender economic development. There is skepticism about the ability of econometric analysis to resolve these issues, or of development agencies to learn from their own experience. In response, there is movement in development economics towards the use of randomized controlled trials (RCTs) to accumulate credible knowledge of what works, without over-reliance on questionable theory or statistical methods. When RCTs are not possible, this movement advocates quasi-randomization through instrumental variable (IV) techniques or natural experiments. I argue that many of these applications are unlikely to recover quantities that are useful for policy or understanding: two key issues are the misunderstanding of exogeneity, and the handling of heterogeneity. I illustrate from the literature on aid and growth. Actual randomization faces similar problems as quasi-randomization, notwithstanding rhetoric to the contrary. I argue that experiments have no special ability to produce more credible knowledge than other methods, and that actual experiments are frequently subject to practical problems that undermine any claims to statistical or epistemic superiority. I illustrate using prominent experiments in development. As with IV methods, RCT-based evaluation of projects is unlikely to lead to scientific progress in the understanding of economic development. I welcome recent trends in development experimentation away from the evaluation of projects and towards the evaluation of theoretical mechanisms.
Blattman says Deaton has a new paper that presents a more nuanced critique, but it is apparently not online. I’ll share more when I have it.
Angus Deaton and Modern Economics
| Peter Klein |
Angus Deaton has won the 2015 Nobel Prize for his work on measuring consumption and inequality. You can find lots of discussion in the usual places; Lynne has a nice summary here. I don’t know Deaton’s work well but he has been on the unofficial short list for the last several years and his work is important and influential for economic growth and development, poverty and health, and related areas.
I can’t help poking a little fun at the economics profession, however. You may have heard the joke that economists used to win the Nobel prize for explaining to the general public something that previously only economists understood, but now they win it for explaining to their fellow economists something that the general public has always known, e.g.:
- Politicians care about themselves (Buchanan).
- Don’t put all your eggs in one basket (Markowitz, Miller,and Sharpe).
- You can’t fool all of the people all of the time (Lucas).
- Some people know more than others (Akerlof, Spence, Stiglitz).
Deaton’s major insight: aggregate measures of consumption and inequality conceal important differences among individuals.
Hire, Fire, or Train: Innovation and Human Capital Responses to Recessions
| Lasse Lien |
This is admittedly a shameless attempt to increase my human capital — by promoting the paper with the title above. The paper is joint work with Eirik S. Knudsen, and it is recently out in SEJ.
Abstract: We examine how firms’ relative emphasis on exploration and exploitation influence their human capital responses to recessions. We hypothesize and find that the higher the focus on exploration, the more firms invest in training, the more likely they are to hire, and the more likely they are to lay off employees during a recession. Finally, we also find that exploration-oriented firms are more likely to combine the accumulation of human capital through training, with both hiring and firing. This indicates that firms focusing on exploration more actively pursue the opportunities created by increased labor market imperfections during recessions. These results contribute to the literature by highlighting how recessions affect firms’ flow of human capital investments, and subsequently stocks, depending on their strategic orientations.
The full paper can be found here.
I Agree with Larry Summers
| Peter Klein |
Justin Fox reports on a recent high-powered behavioral economics conference featuring Raj Chetty, David Laibson, Antoinette Schoar, Maya Shankar, and other important contributors to this growing research stream. But he refers also to the “Summers critique,” the idea that key findings in behavioral economics research sound like recycled wisdom from business practitioners.
Summers [in 2012] told a story about a college acquaintance who as a cruel prank signed up another classmate for 60 different subscriptions of the Book-of-the-Month-Club ilk. The way these clubs worked is that once you signed up, you got a book in the mail every month and were charged for it unless you (a) sent the book back within a certain period of time or (b) went through the hassle of extricating yourself from the club altogether. Customers had to opt out in order to not keep buying books, so they bought more books than they otherwise would have. Book marketers, Summers said, had figured out the power of defaults long before economists had.
More generally, Fox asks, “Have behavioral economists really discovered anything new, or have they simply replaced some wrong-headed notions of post-World War II economics with insights that people in business have understood for decades and maybe even centuries?”
I took exactly the Summers line in a 2010 post, observing that behavioral economics “often seems to restate common, obvious, well-known ideas as if they are really novel insights (e.g., that preferences aren’t stable and predictable over time). More novel propositions are questionable at best.” I used a Dan Ariely column on compensation policy as an example:
He claims as a unique insight of behavioral economics that when people are evaluated according to quantitative measures of performance, they tend to focus on the measures, not the underlying behavior being measured. Well, duh. This is pretty much a staple of introductory lectures on agency theory (and features prominently in Steve Kerr’s classic 1975 article). Ariely goes on to suggest that CEOs should be rewarded not on the basis of a single measure of performance, but multiple measures. Double-duh. Holmström (1979) called this the “informativeness principle” and it’s in all the standard textbooks on contract design and compensation structure (e.g., Milgrom and Roberts, Brickley et al., etc.) (Of course, agency theory also recognizes that gathering information is costly, and that additional metrics are valuable, on the margin, only if the benefits exceed the costs, a point unmentioned by Ariely.)
Maybe Larry and I should hang out.
More on the Linear Model of Science and Technology
| Peter Klein |
As Joel Mokyr notes, one of Nathan Rosenberg’s important contributions was to debunk the “linear model” in which basic science begets applied science, which begets useful technology.
Technology in his view is not the mechanical “application of science” to production; it is a field of knowledge by itself, quite different in its incentives, its modes of transmission, and its culture. It is affected by science, but in turn provides “pure research” with its instruments and much of its agenda. In many cases, [Rosenberg] noted, scientists were confronted by the fact that things they had previously declared to be impossible were actually carried out by engineers and mechanics and had to admit somewhat sheepishly that were possible after all.
The same issue is raised in Margaret Jacob’s book The First Knowledge Economy: Human Capital and the European Economy, 1750-1850 (Cambridge University Press, 2014), which “argues persuasively for the critical importance of knowledge in Europe’s economic transformation during the period from 1750 to 1850, first in Britain and then in selected parts of northern and western Europe.” In other words, as noted by Erik Hornung:
She especially focusses on the marriage between theoretical sciences and applied mechanical knowledge which helped creating many technological innovations during the Industrial Revolution. She, thus, aims at rectifying the prevalent hypothesis that technological progress resulted from tinkering of skilled but science-ignorant engineers. An impressive set of new archival sources supports her argument that English engineers were, indeed, well aware of and heavily influenced by recent advances in natural sciences.
Mokyr on Rosenberg
| Peter Klein |
Further to Dick’s post on Nathan Rosenberg, here is an obituary from Joel Mokyr, who with Rosenberg’s passing is probably the most eminent living historian of innovation and technology. The review appeared on EH.Net.
The economic history profession has lost one of its most original, creative, and wide-ranging minds in the passing of Nathan Rosenberg on Aug. 24, 2015. Rosenberg was one of the founding fathers of Cliometrics, a member of the first group of Cliometricians that with coining the term “congregated at Purdue University in the late 1960s, and which included other luminaries among them Lance Davis, Jonathan Hughes, and Stanley Reiter (who is widely credited Cliometrics”). By 1970, this group had moved away from West Lafayette and dispersed to institutions such as Northwestern and CalTech. Rosenberg was hired by the University of Wisconsin, and was a member of a different group of influential and distinguished economic historians in Madison, including at one time or another Jeffrey Williamson, Peter Lindert, Morton Rothstein, Rondo Cameron, and Claudia Goldin. While at Wisconsin, Rosenberg was the editor of the Journal of Economic History and instrumental in its growing focus on the new economic history that was theoretically informed by economics and quantitatively more sophisticated — the very essence of the Cliometric Revolution.
In 1974, Rosenberg moved to Stanford, where he taught for more than a quarter century until his retirement in 2002. As department chair at Stanford between 1983and 1986 he helped build the department and maintain its position as one of the top economics departments in the country. Moreover, his leadership guaranteed that economic history remained an integral part of the undergraduate and Ph.D. programs and includes some of its most distinguished practitioners such as Gavin Wright and Avner Greif, as well as younger and promising scholars. Today, thanks to Rosenberg’s initiative and entrepreneurship, the Stanford department is housed in a gorgeous building named after Ralph Landau, whose support for research and teaching in economics was first stimulated by a fortuitous meeting with Rosenberg. The partnership with Landau, a chemical engineer and entrepreneur fascinated by economics, led to a fruitful scholarly collaboration between him and Rosenberg, especially in two well-regarded collections they edited together. Thanks in large part to Rosenberg’s resourcefulness, the graduate program at Stanford has thrived and produced many distinguished members of the economic history profession and applied economists working on innovation. While not all of them worked with him directly, his influence on the flourishing of economic history at Stanford was undeniable. Many of the former graduate students he trained and inspired co-authored and co-edited papers and books with him, such as David Mowery with whom he wrote Technology and the Pursuit of Economic Growth (Cambridge University Press, 1989). Without exception these young economists admired and adored him; two of them, Scott Stern and Shane Greenstein, were my former colleagues, and the three of us were instrumental in Northwestern awarding him an honorary doctorate in 2006, in the same class of honorary degrees as the then little-known junior senator from Illinois. If ever there was an academic conspiracy that can be called a true labor of love, this was it. (more…)
Nathan Rosenberg (1927-2015)
| Dick Langlois |
I just learned that Nathan Rosenberg has passed away at 87. Nate was unarguably one of the most important economic historians and students of technological change of our era. He was also a one of the most important influences on my work.
I still regret that, out of ignorance, I didn’t take full advantage of all the resources available to me when I was a graduate student at Stanford. But Nate was a partial exception. I sat in on his course on history of economic thought; and when it came time to choose a thesis committee, he was kind enough to agree to be a member. I remember having a number of long conversations with him in his office in Encina Hall, although his greatest influence on me was through his writings. Nate had an eye for looking into — and theorizing about in a non-formal way — the micro structure of technology and innovation. I have always thought that his early work with Ed Ames is wonderful and greatly underappreciated. His work on the machine-tool industry in the United States is a progenitor of the economics of general-purpose technologies and one of the beginnings of what I like to think of as the Stanford School of technology-focused economic history.
I think Nate’s influence shows through on the range of my own work, including that with Paul Robertson. (It turns out that Nate was an associate advisor on Paul’s dissertation committee at Wisconsin before he was a member of mine at Stanford.) I was also fortunate to become part of the invisible college of technology economics of which Nate (along with Dick Nelson and others) was a dean, and I was fortunate to collaborate with other fellow Rosenberg students like David Mowery and Ed Steinmueller on policy-focused industry histories, another Rosenberg specialty.
Woodward on Alchian
| Peter Klein |
Alchian and me, circa 2000.
Armen Alchian’s friend and colleague Susan Woodward has a nice piece in a forthcoming Journal of Corporate Finance special issue on Alchian. Here are a few passages that may be of special interest to O&Mers:
Orley Ashenfelter asked Armen to write a book review of Oliver Williamson’s The Economic Institutions of Capitalism (such a brilliant title!). I got enlisted for that project too (Alchian and Woodward (1988)). Armen began writing, but I went back to reread Institutions of Capitalism. Armen gave me what he had written, and I was baffled. “Armen, this stuff isn’t in Williamson.” He asked, “Well, did he get it wrong?” I said, “No, it’s not that he got it wrong. These issues just aren’t there at all. You attribute these ideas to him, but they really come from our other paper.” And he said “Oh, well, don’t worry about that. Some historian will sort it out later. It’s a good place to promote these ideas, and they’ll get the right story eventually.” So, dear reader, now you know.
This from someone who spent his life discussing the efficiencies of private property and property rights—to basically give ideas away in order to promote them? It was a good lesson.
Of course, the book review also had a brilliant title: “The Firm is Dead: Long Live the Firm!” It also introduced the term “plasticity” as a not-quite-substitute for asset specificity. (I still prefer the more precise term relationship-specific investment.) And this:
Armen had no use for formal models that did not teach us to look somewhere new in the known world, nor had he any patience for findings that relied on fancy econometrics. What was Armen’s idea of econometrics? Merton Miller told me. We were chatting about limited liability. Merton asked about evidence. Well, all public firms with transferable shares now have limited liability. But in private, closely-held firms, loans nearly always explicitly specify which of the owner’s personal assets are pledged against bank loans. “How do you know?” “From conversations with bankers.” Merton said said, “Ah, this sounds like UCLA econometrics! You go to Armen Alchian and you ask, ‘Armen, is this number about right?’ And Armen says, ‘Yeah, that sounds right.’ So you use that number.”
Foss Wins Best Article Award
| Peter Klein |
Nicolai is far too modest to mention it (and no, he did not make me do this), but he has won Sloan Management Review’s best article prize:
The editors of MIT Sloan Management Review are pleased to announce the winners of this year’s Richard Beckhard Memorial Prize, awarded to the authors of the most outstanding MIT SMR article on planned change and organizational development published between fall 2013 and summer 2014.
This year’s Richard Beckhard Memorial Prize goes to the spring 2014 MIT SMR article by Julian Birkinshaw, Nicolai J. Foss, and Siegwart Lindenberg, entitled “Combining Purpose With Profits.”
In this article, the authors examine a familiar and important question for managers: How can the tension between purpose and profits be best managed? The authors explore the kinds of structures companies need to put in place to provide clarity and direction for employees while also serving to both motivate individuals and draw people together in a common pursuit.
As the judges for the prize pointed out, the tension between purpose and profit is well-known, and many companies claiming to have “pro-social goals” have difficulty backing up their claims. However, the judges were impressed with the examples the authors presented of companies that have actually been able to balance purpose and profit. Some were familiar (such as Whole Foods Market and Tata Group), but others were less so (such as the Swedish bank Svenska Handelsbanken and HCL Technologies, an India-based IT-services company).
The pro-social goals the companies emphasize — for example, putting employees first or investing in local communities — are hardly elaborate or surprising. What is important is that companies put systems in place to meet these goals. For instance, at Tata, where the pro-social goal is “to improve the quality of life in the communities we serve,” the supporting systems include charitable trusts that own the majority of the equity capital of the Tata Sons holding company. Pro-social goals require what the authors call a “counterweight,” such as an employee council or a measuring system, to ensure that the pro-social goals continue to have influence.
The judges thought the article was well aligned with the beliefs of Richard Beckhard, who insisted that what truly motivates employees is the sense that what they do matters and serves a purpose that goes beyond organizational profitability or personal gain. As the judges observed, “What engages people is the broader, value-centered question of why we do what we do — precisely what the three authors of this year’s winning article make evident.”
This year’s panel of judges consisted of distinguished members of the MIT Sloan School faculty: Schussel Family Professor and chairman of the MIT Sloan Management Review managing board Erik Brynjolfsson, retired senior lecturer Cyrus Gibson, and Erwin H. Schell Professor of Management John Van Maanen.
Nicolai, you can do great things, when you pick the right coauthors….
M is for Multidivisional Structure
| Dick Langlois |
As a student of Alfred Chandler, I was excited to see Google’s conversion into Alphabet – which is essentially a multidivisional conglomerate. Chandler chronicled the development of the M-Form structure in the days of the Second Industrial Revolution, beginning with DuPont, and it remains an interesting question whether the same pattern will eventually take shape among the dominant firms of the Third Industrial Revolution.
Generally speaking, a move to the M-Form reflects a maturing of a technology and an industry, when information flows and incentives within a specialized unit – a module, if you wish – become more important than widespread and more flexible information flows within a functional organization. The more radically innovative the company, the more important these widespread information flows. Apple is organized in a functional form, and Microsoft famously returned to a functional form after a few years as an M-Form precisely in order to become more radically innovative in the face of declining revenues from Windows. Of course, Google remains as a functional entity within the Alphabet conglomerate, and the technologies in Alphabet’s other divisions are arguably less related to one another than in, say, the divisions into which Microsoft was once divided. Moreover, Alphabet will keep the two-tiered structure of stockholding that gives considerable power to the three founders, which makes Alphabet less like a vanilla conglomerate and more like the kind of widely diversified pyramidal holding company common around the world but essentially illegal in the United States.
The Myth of the Patent Anti-Commmons
| Dick Langlois |
Just ran across the abstract of a fascinating paper called “The Anti-Commons Revisited” by Jonathan Barnett at USC, which is forthcoming in the Harvard Journal of Law and Technology. Here’s the abstract.
Intellectual property scholars and policymakers often assert that technology and creative markets suffer from “anti-commons” (“AC”) effects that restrain innovation within a web of conflicting intellectual property claims. A minority view asserts that market players have incentives and capacities to correct for AC effects through transactional solutions. To assess the relative merits of each side of this debate, I review a large and diverse body of empirical evidence relating to AC effects in contemporary and historical markets. I independently replicate the most controversial empirical findings, supplement additional research on selected markets, and provide a survey of all documented IP-pooling arrangements in U.S. markets since 1900. The weight of the evidence strongly favors the minority view. Evidence for AC effects is scarce while evidence that markets correct for AC effects is abundant. AC effects are typically preempted or mitigated through cooperative arrangements among small numbers of IP holders or transactional solutions devised by entrepreneurial intermediaries for large numbers of IP holders. This pattern recurs over a diverse array of markets and periods, including automobiles, petroleum refining, aircraft, and radio communications in the early to mid-20th century, and information and communications technology markets from the late 20th century through the present. Contrary to standard assumptions, there is little evidence that these markets experienced reduced or delayed innovation or output despite intensive levels of patent issuance and litigation.
Cecil
| Peter Klein |
No doubt you’ve heard about Walter Palmer, the American dentist who shot the lion, “Cecil,” in Zimbabwe, pushing aside Sir Tim Hunt as the Internet’s Most Hated Person. (Aside from calling Palmer cruel and depraved — even wishing his death by bow and arrow — some are labeling him a sociopath, which makes me wonder, are lions now considered members of society? Orgheads?)
I don’t hunt and have no particular emotional attachment to lions, so I find the outrage level bewildering. However, I think this can be a teachable moment. Specifically, there are lessons here about trophy hunting and endangered species. Not surprisingly to anyone who has studied property-rights economics, there is evidence that allowing trophy hunting is a good means of protecting endangered species. This is a version of the general argument that defining and enforcing property rights in scarce resources, including wildlife, provides incentives for individuals to protect and maintain those resources. (You’ve probably heard the quip that the world isn’t running out of chickens and dairy cattle.) Groups like PERC have produce dozens of studies on endangered species and private conservation more generally and there are plenty of nerdier papers too. If Cecil’s unfortunate end helps stimulate thoughtful discussion on how to avoid the tragedy of the commons, then he will not have died in vain.
Masahiko Aoki
| Dick Langlois |
I was saddened to learn that Masa Aoki passed away on July 15. He was only 77. Masa was a towering figure in the economics of institutions and organizations, and a true gentleman.
Piece Rates and Multitasking
| Peter Klein |
A canonical result of multitask agency theory is that, when agents are assigned to multiple activities and some are more easily measured than others, piece-rate incentive schemes encourage agents to focus on the measurable activities while shirking the others. Professors at research universities, for example tend to focus on research at the expense of teaching — not because they don’t care about teaching, but because research output is easy to measure, while teaching quality isn’t, so administrators wishing to reward good performance tend to base their evaluations on research productivity. Or so I’ve heard (ahem). The implication is that, to encourage balanced effort and performance across activities, supervisors should rely at least partly on subjective, holistic evaluation criteria, and not just objective, quantitative measures of employee performance, or even do away with incentive compensation altogether.
An interesting paper in the January 2015 Southern Economic Journal offers a different theory, and some experimental evidence to back it up, suggesting that piece rates may actually be better than other schemes under multitasking. The idea is that agents may be uncertain about the principal’s monitoring ability, and the choice of a piece-rate scheme signals that the principal is a good monitor. This signaling effect can, under certain conditions, overcome the standard distortionary effect described above. Put differently, relying on subjective, holistic evaluation criteria, or abandoning performance measurement altogether (Alfie Kohn cheers!), may signal a sophisticated, experienced principal, but may also signal a principal who is too lazy to pay attention to employee behavior at all.
The paper is by Omar Al-Ubaydli, Steffen Andersen, Uri Gneezy, and John List and is cleverly titled “Carrots That Look Like Sticks: Toward an Understanding of Multitasking Incentive Schemes.” (Yes, it is part of the List Project on which we have mixed opinions.) Here is more on multitasking.
ICC Special Issue on Steve Klepper
| Dick Langlois |
The new issue of Industrial and Corporate Change is a special issue devoted to the legacy of Steve Klepper, who died a couple of years ago at age 64. The editors provide a good survey of Steve’s work, and there are a number of interesting papers in the issue, including one by David Mowery comparing Klepper with Alfred Chandler.
Entrepreneurial Opportunity: The Oxygen or Phlogiston of Entrepreneurship Research?
| Peter Klein |
Don’t miss this PDW at the upcoming Academy of Management conference in Vancouver. From organizer Per Davidssson:
I just wanted to bring your attention to a PDW I am organizing for the upcoming AoM meeting, where we will engage in frank and in-depth discussions about the problems and merits of the popular notion of “entrepreneurial opportunity”. We have been fortunate to gather a collection of very strong scholars and independent thinkers as presenters and discussants in this PDW: Richard J. Arend, Dimo Dimov, Denis Grégoire, Peter G. Klein, Moren Lévesque, Saras Sarasvathy, and Matthew Wood. . This illustrious group of colleagues will make sure the deliberations do not focus on a “beauty contest” between “discovery” and “creation” views but instead reach beyond limitations of both.
I encourage you to join us for this session, and to make absolutely sure I won’t send you to the wrong place at the right time I have copied the details straight from the online program:
Title: Entrepreneurial Opportunity: The Oxygen or Phlogiston of Entrepreneurship Research? (session #365)
Date & Time: Saturday, August 08, 2015, 12:30:00 PM – 3:00:00 PM
Hotel & Room: Vancouver Convention Centre, Room 012
Further elaboration follows below. Heartily welcome!
ISNIE is now SIOE
| Peter Klein |
I’ve long been involved with the International Society for New Institutional Economics (ISNIE). (In fact, I first met the esteemed Professor Foss at the inaugural ISNIE conference in St. Louis in 1997.) ISNIE was established as an global academic society promoting the study of institutions within the broad tradition established by the organization’s co-founders Ronald Coase, Oliver Williamson, and Douglass North. ISNIE has been a great success, holding annual conferences in the US and Europe, sponsoring an important working-paper series, and boasting thousands of members from all over the world.
Times change, and over the last two decades the study of institutions has moved from the periphery towards the center of economic, social, political, and legal analysis. The statement, “institutions matter,” which might have been controversial in social science in the 1990s, seems trite today. As such, some of ISNIE’s leaders and members saw a need to reposition and rebrand the society to reflect the current academic and policy climate. Last year ISNIE’s members voted, and this year the board approved, a name change. The organization is now SIOE, the Society for Institutional and Organizational Economics. Along with the change is a new website, featuring news, information, a blog, and many other features. The site is a work in progress and editors Bruno Chaves and Jens Prüfer would be happy to receive comments and suggestions.
I’m looking forward to the next twenty years with SIOE!
Henry Manne Quote of the Day
| Peter Klein |
This is actually Richard Epstein writing about Henry Manne, but Richard nicely captures the essence of Henry’s thinking:
The combination of law and economics is a major discipline in … modern law schools, but I do not think that it was always presented to Henry’s liking. In his view, the student’s purpose was to show the power of markets to overcome key problems of information and coordination, not to run a set of exhaustive empirical studies to show that corporate boards would function better if they increased their number of independent directors by 5 percent.
Other Manne items on O&M are here. As I noted in another post, Manne was expert in specific technical areas of law (most obviously, insider trading and corporate takeovers) but very much a generalist in his overall outlook. As Manne once recalled about a 1962 seminar led by Armen Alchian, “All of a sudden, everything that I had done intellectually for thirteen years came together, with this one idea of Alchian’s about the real nature of property rights and the Misesian notion of people making choices, with every choice being a tradeoff,” In other words, a simple and powerful theoretical framework goes a long way in analyzing a broad range of issues — much different from today’s emphasis on behavioral quirks, clever experiments, and similar minutiae.
Casson on Methodological Individualism
| Peter Klein |
Thanks to Andrew for the pointer to this weekend’s Reading-UNCTAD International Business Conference featuring Mark Casson, Tim Devinney, Marcus Larsen, and many others. Mark’s talk (not yet online) focused on the need for methodological individualism in international business research. “Firms don’t take decisions, individuals do. When you say that a firm pursued an international strategy, you really mean that that the CEO persuaded the individuals on the board to go along with his or her strategy.” As Andrew summarizes:
Casson spoke at great length about the need for research that focuses on named individuals, is based on the extensive study of primary sources in archives, takes social and political context into account, and which looks at case studies of entrepreneurs in different time periods. In effect, he was calling for the re-integration of Business History into International Business research.
And a renewed emphasis on entrepreneurship, not as a standalone subject dealing with startups or self-employment, but as central to the study of organizations — a theme heartily endorsed on this blog.
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