The Zen (or Feng Shui) of Copyright
| Dick Langlois |
Peter blogged some time ago about intellectual property rights in comedy. Turnabout is fair play; and here, in a kind of post-modernist twist, is a comedic take on intellectual property rights — from the Onion.
Intellectual Property Rights as Fleeting as the Scent of Jasmine, Mayfly’s Wing
BEIJING — Settling not on the industrious sons of China, nor on their ware-covered blankets, ownership rights of intellectual property fluttered silently by, unseen, on Monday, as does the gentle mayfly on a warm harvest-time breeze. “Is this a pirated DVD of Transformers 2 dreaming it is an original? Or is it an original Transformers 2 dreaming of an adventurous life as a pirate?” a sidewalk merchant in Tiananmen Square whispered to a moment already gone, as his hands clutched some worldly illusion of the Michael Bay film. “Eight dollars. Plays anywhere in the world.” In their great wisdom, the merchants also carried forth the ancient teachings of Zhuangzi — who spoke of how time is a riddle answered by eternity — to the equally fleeting earthly conceits of trademarked wristwatches, electronics, clothing items, Starbucks, and automobiles.
The piece is part of a new online issue whose conceit is that the Onion has been sold to Chinese interests. It’s quite good — the Onion is at its best when it has an overarching theme, as in the Our Dumb Century book. Of course, one of the multiple layers of meaning in the joke may have to do with the fact that the real magazine actually is apparently up for sale.
More on Wall Street
| Peter Klein |
Further to my recent Wall Street post, see Jeff Tucker’s take, “Capitalism as Drama”:
In the same way that the Godfather movies shaped the culture of organized crime, Wall Street continues to influence the way traders and high-flying capitalists understand themselves.
And it’s no wonder. The impression one is left with is all about the courage, the thrill of the fight, the riskiness of entrepreneurship, that struggle to obtain vast wealth, and the striving for the status of “master of the universe.” It pictures commerce as a gladiator fight, a magnificent and relentless struggle for progress, an epoch and massively important terrain in which the fate of civilization is determined. (more…)
Scandals and Financial Panics in Historical Perspective
| Peter Klein |
The Spring 2009 issue of Business History Review focuses on scandals and panics. Here’s the TOC. Follow the link for abstracts and ordering information.
A SPECIAL ISSUE ON SCANDALS AND PANICS
With an introduction by guest-editor Per H. HansenNaomi R. Lamoreaux: “Scylla or Charybdis? Historical Reflections on Two Basic Problems of Corporate Governance”
Thomas Max Safley: “Business Failure and Civil Scandal in Early Modern Europe”
Richard Sylla, Robert E. Wright, and David J. Cowen: “Alexander Hamilton, Central Banker: Crisis Management during the U.S. Financial Panic of 1792”
Eric Hilt: “Rogue Finance: The Life and Fire Insurance Company and the Panic of 1826”
Edward J. Balleisen: “Private Cops on the Fraud Beat: The Limits of American Business Self-Regulation, 1895-1932”
Federal Reserve “Independence”
| Peter Klein |
I was invited to sign the Open Letter in support of Fed independence but, like Jerry O’Driscoll, Bob Higgs, and Larry White, I don’t support the cause. Follow the links above for detailed arguments. For my part:
1. The Open Letter focuses exclusively on monetary policy, as if the Fed’s Congressional critics like Ron Paul just want to know how the Federal Funds Rate is set. But the Fed conducts not only monetary policy, but fiscal policy as well, especially during the last 18 months. If the Fed can buy and hold any assets it likes, if it works hand-in-hand with the White House and the Treasury to coordinate trillion-dollar bailouts, isn’t it reasonable to have some oversight? (And don’t forget bank supervision. Even the Fed’s defenders recognize a need to separate its monetary-policy and bank-supervision roles. But as long as the Fed continues as a bank regulator, shouldn’t someone should be watching the watchmen?)
2. The Open Letter itself is poorly crafted, full of unsubstantiated assertions and misleading statements. There’s no argument there, as Higgs emphasizes. Actually, neither the time-series or cross-sectional evidence suggests any correlation between central-bank independence (whatever that means) and economic performance.
3. More generally, the Fed is a central planning agency, and it performs about as well as every central planning agency in history. Have we learned nothing from the huge literature on comparative economic systems? “Independence,” in this context, simply means the absence of external constraint. There are no performance incentives and no monitoring or governance. There is no feedback or selection mechanism. There is no outside evaluation (outside the blogosphere). Why on earth would we expect an organization operating in that environment to improve social welfare? Is this institution run by men, or gods?
Rizzo on “Methodological Exclusivism”
| Peter Klein |
Great anecdotes on contemporary social-science methodology in Mario Rizzo’s post, “The Failure of Macroeconomics” (including the comments). Young economist to senior scholar: “All that is in Adam Smith.” Senior scholar: “Maybe — but until my theory it was not science.” Deepak Lal asks distinguished colleague what should be done about the current crisis. Reply: “I do not consider that an intellectually respectable question.” My own beloved dissertation adviser indulged my quirkier interests, but stated plainly: “Methodology is a swamp.” And of course there’s the famous Ed Leamer analogy.
Here’s Mario’s take:
This is the great problem with economics today: methodological exclusivism (or in my more intemperate moments I call it “methodological fascism”).A young person goes to graduate school. He or she is filled with the excitement of ideas. Today, in particular, some may come with a great desire to understand what has happened in the real world of the bailouts, recessions, stimulus, and so forth. And then academic reality hits.
Formal modeling, axiomatic foundations, tractability, technical power, and topological studies. Shall I get an MA in mathematics? Do I need to take a third semester of macro-econometrics? . . .
It seems pretty clear that what we have is a collective insecurity. If we open the floodgates to methodological inquiry, or even worse, to methodological pluralism, we shall become like political science, or God forefend, like sociology. So let’s keep those with disruptive instincts out of the profession. If this is not possible, then let’s at least keep them out of the good schools.
If you’re feeling subversive, you can browse our methodology/theory of science archive for more forbidden thoughts. (more…)
The Organization of Firms Across Countries
| Peter Klein |
Interesting new NBER paper by Nicholas Bloom, Raffaella Sadun, and John Van Reenen, “The Organization of Firms Across Countries” (ungated version here, may be older):
We argue that social capital as proxied by regional trust and the Rule of Law can improve aggregate productivity through facilitating greater firm decentralization. We collect original data on the decentralization of investment, hiring, production and sales decisions from Corporate Head Quarters to local plant managers in almost 4,000 firms in the US, Europe and Asia. We find Anglo-Saxon and Northern European firms are much more decentralized than those from Southern Europe and Asia. Trust and the Rule of Law appear to facilitate delegation by improving co-operation, even when we examine “bilateral trust” between the country of origin and location for affiliates of multinational firms. We show that areas with higher trust and stronger rule of law specialize in industries that rely on decentralization and allow more efficient firms to grow in scale. Furthermore, even for firms of a given size and industry, trust and rule of law are associated with more decentralization which fosters higher returns from information technology (we find IT is complementary with decentralization). Finally, we find that non-hierarchical religions and product market competition are also associated with more decentralization. Together these cultural, legal and economic factors account for four fifths of the cross-country variation in the decentralization of power within firms.
The emphasis on institutional determinants of organizational form makes this a welcome addition to the (slim) set of papers relating institutional arrangements to the institutional environment. (more…)
Social Media Venn Diagram
| Peter Klein |
In case you haven’t seen it (via Randy):
From the good folks at Despair, Inc. Don’t miss their new bailout-themed tees here and here. And here’s a good one for Facebook users.
Videos from Entrepreneurship Research Exemplars Conference
| Peter Klein |
Dick blogged previously about the Entrepreneurship Research Exemplars Conference held at UConn in May. The conference organizers have uploaded videos of the keynote speeches by Howard Aldrich, Jay Barney, Mike Hitt, Duane Ireland, Patricia McDougall, and Venkat Venkataraman. You can also watch the editor/author panel sessions in which editors of AMJ, AMR, ET&P, JAP, JBV, JOM, JMS, Org Science, SEJ, and SMJ discuss publication strategies and authors of recently published papers talk about their experiences with writing and revision (Fabio, direct ’em here!). I especially like the SEJ session featuring Yasemin Kor’s discussion of this excellent paper, which I’m told is the most-downloaded paper on the SEJ website. Go figure.
The Five-Minute University
| Peter Klein |
This clip is making the rounds. How many of you Old Timers remember Father Guido Sarducci? Both economics and business get mentioned.
Lamoreaux and Sokoloff’s Financing Innovation in the United States
| Peter Klein |
Nice EH.Net review by Charles Calomiris of Naomi Lamoreaux and Sokoloff’s edited volume Financing Innovation in the United States: 1870 to the Present (MIT Press, 2007).
Anyone interested in the organization of innovation, and the nexus between finance and the organization and process of innovation, must read this book. All of the chapters are original, scholarly, and packed with insightful gems (truly a font of inspiration for Ph.D. students), and the analysis manages to be both sophisticated (theoretically and statistically) and accessible to a broad audience. While the volume is too rich to boil down to a single theme, the editors’ introduction does point to a common thread that runs through many of the essays: “… perhaps the most striking aspect of the record of innovation over American economic history is the flexibility that technologically creative entrepreneurs have exhibited in adjusting their business and career plans so as to obtain financing for, and extract returns from, their projects.”
Goldman Sachs, Best in the Business
| Peter Klein |
The business of political capitalism, that is. Like Enron, Goldman operates primarily in the nebulous world of public-private interaction. It is the US’s most politically powerful financial firm, skilled at navigating the byzantine regulations governing the virtually nationalized US financial sector. Goldman’s eye-popping $3.4 billion second-quarter earnings shouldn’t surprise anyone; as Craig Pirrong notes, these earnings reflect good old-fashioned moral hazard, with Goldman exploiting its too-big-to-fail status by taking on huge amounts of risk:
Goldman knows it is too big to fail. How does it know this? Well, the government bailed out AIG not so much for AIG’s sake, but for the sake of big AIG counterparties — most notably Goldman. Moreover, given the conventional wisdom that the government’s primary error in the financial crisis was its failure to bail out Lehman — a piker compared to Goldman — it doesn’t take a rocket scientist to figure out that it won’t repeat that mistake in the future, and let Goldman go down. So Goldman knows it can get bigger, and take more risk. It is the classic heads Goldman wins, tails the sucker taxpayer eats the loss gambit. If nobody steps in to rein in the firm, it will continue to add risk, thereby enhancing the value of the Treasury put hiding in the equity entry on its balance sheet.
Somebody should be stepping in — but nobody is. Why not? Partly, no doubt, it is Goldman’s political heft. It is likely too that important policy makers don’t want to crack down on a major source of risk capital to the markets in the fear that this would impede a recovery. Even though in reality, that risk capital is your money and mine, with the exception that we have no chance of capturing the upside, and are left with a good chunk of the downside. This is a piece with the hair-of-the-dog strategy being pursued by Treasury and the Fed.
Teaching Generation Me
| Peter Klein |
Thanks to Maria Rodriguez for passing along this gem: Jean M. Twenge, “Generational Changes and their Impact in the Classroom: Teaching Generation Me,” Medical Education 43(5): 398-405. From the abstract:
Methods: This paper reviews findings from a number of studies, most of which rely on over-time meta-analyses of students’ (primarily undergraduates’) responses to psychological questionnaires measuring IQ, personality traits, attitudes, reading preferences and expectations. Others are time-lag studies of nationally representative samples of high school students.
Results: Today’s students (Generation Me) score higher on assertiveness, self-liking, narcissistic traits, high expectations, and some measures of stress, anxiety and poor mental health, and lower on self-reliance. Most of these changes are linear; thus the year in which someone was born is more relevant than a broad generational label.
In the immortal words the Bette Midler character from Beaches: “But enough about me, let’s talk about you. . . . What do you think of me?”
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.
Kline Mystery Solved
| Peter Klein |
Thanks to Maureen Kline for solving the Peter Kline mystery:
Hi, just came across this post although it’s over a year old and you have surely solved the mystery by now; the “real” Peter Kline is my father, who currently lives in the Washington DC area (Silver Spring, MD). He started out as an English and Drama teacher in Washington area private schools, and co-founded Thornton Friends School in the 1970s. The school had a very innovative approach and great success, particularly in turning around “problem students.” Eventually he and his then-wife Nancy turned the school over to others to pursue other projects, and Dad has been “free-lancing” ever since, mainly training teachers in various school systems around the country, writing the books you mentioned, and doing extensive training within companies (Kodak, IDC and others).
Update: PK himself checks in with a comment to the original post.
Peter: If you get any of my letters from the Nobel Committee, will you please pass them on?
Will Macroeconomists Solve the Crisis?
| Benito Arruñada |
One may doubt it after observing that Ben Bernanke was one of those believing in the Great Moderation — the claim that macroeconomic volatility had been reduced. Macroeconomic policymaking seems to be as unsafe as firefighting: extinguishing small fires creates the conditions for hell. Shouldn’t macroeconomists learn something from forest management? (For a start: “Fire Must Be Ally in Forest Management.”) Of course, if coupled with an acid-suppressing pill, they could even dare to read Hayek’s “Pretence of Knowledge.”
Ken Lay as Political Capitalist
| Peter Klein |
This blog has taken a special interest in Ken Lay, not just because of his local connections but also because he typifies the modern CEO of a regulated industry, more lobbyist and PR man than manager. Lay, a long-time energy regulator before becoming Enron CEO, was skilled in the ways of Washington — making his reputation as poster-boy for “unbridled capitalism” all the more ironic.
Here is Rob Bradley, quoting from his book Political Capitalism, on Lay and Enron:
Who was Ken Lay, the architect and chairman of Enron from its formation in the mid-1980s until its bankruptcy? The once-celebrated visionary of the energy industry was not an engineer, as were most leaders in the energy sector. Lay did not possess an accounting or finance background, as did some senior executives. He never clawed his way up the corporate ladder in various operational divisions, much less built a company from scratch. No, Enron’s leader was a Ph.D. economist, interested in the big picture and the ways of political power. His résumé was top-heavy with Washington experience, acquired at three federal jobs, the last two regulating the energy industry. . . .
Government favor propelled Enron’s profit-centers in domestic power plants, natural gas and electricity marketing, wind and solar power, infrastructure in underdeveloped countries, and unconventional natural gas production. Enron was all about complex federal laws and administrative regulations, such as special provisions within the Natural Gas Policy Act of 1978, Public Utility Regulatory Policies Act of 1978, Omnibus Budget Reconciliation Act of 1990, and Energy Policy Act of 1992 — or FERC rulings such as Regulation of Natural Gas Pipelines after Partial Wellhead Decontrol (FERC Order No. 436: 1985), Pipeline Service Obligations and Revisions to Regulations Governing Self-Implementing Transportation Under Part 284 of the Commission’s Regulations (FERC Order No. 636: 1992), and Promoting Wholesale Competition Through Open Access Non-discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities (FERC Order 888: 1996). The arcane was pure gold to Enron.
Corrected Winter Quote
| Peter Klein |
I misquoted Sid Winter in this post. Here’s what he actually said:
“High standards for statistical techniques are tending to crowd out high standards for performance on the central scientific task, causal explanation.”
I was going from memory, then later found the exact wording in my notes. The meaning is the same, but I wanted to correct this for the historical record.
Department of They Just Don’t Get It
| Peter Klein |
Paul Ehrlich, author (with Anne Ehrlich) of The Population Bomb (1968), one of the biggest, um, bombs of the last several decades, is unrepentant. Ehrlich’s main thesis was that the world was running out of natural resources, and population growth was expanding exponentially, leading to an inevitable decline in living standards. Needless to say, none of the three predictions came true, and Bomb became one of those books that cultural anthropologists study for its train-wreck value. Now, apparently for laughs, the Electronic Journal of Sustainable Development has invited the Ehrlichs to write “The Population Bomb Revisited” for a forthcoming symposium. After all these years, the Ehrlichs are no closer to grasping the Econ 101 concept of “resources,” namely means used by human actors to achieve desired ends — not physical stocks of raw materials, but raw materials interacted with human knowledge and purpose. (more…)
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.
New Directions for SSRN
| Peter Klein |
I see that registered users of SSRN can now post comments on other people’s papers. Maybe this feature has been around for some time but I just noticed it. Is this a small step toward open-source peer review? Or a move toward social networking? (What’s next, the SSRN status update or Super Poke?)
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