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October 14, 2009

Economist's View - 6 new articles

"Finding a Job Right Now is Extremely Difficult"

The ratio of the number of unemployed to the number of job openings suggests that the current weakness in labor markets is likely to persist:

A look at another job market number, Macroblog: ...At the end of August there were estimated to be fewer than 2.4 million job openings, equal to only 1.8 percent of the total filled and unfilled positions—a new record low. This is an especially significant issue given the large number of people who are looking for work. The ratio of the number of unemployed to the number of job openings was greater than 6 in August. In contrast, that ratio was under 1.5 in 2007 and previously peaked at 2.8 in mid-2003, suggesting that finding a job right now is extremely difficult...


The quit rate moved back down to its record low of 1.3 percent, as relatively few people want to leave a job voluntarily in the face of such a weak labor market. At the same time, the rate of involuntary separations moved up from 1.6 percent to 1.8 percent, not far below the peak of 1.9 percent in April.

The low probability of finding a job has also caused the average amount of time spent unemployed to rise substantially. ...

Labor markets need more help.

"Is Consumption the Grail for Inequality Skeptics?"

Lane Kenworthy responds to Will Wilkinson's Cato Unbound essay on inequality:

Is Consumption the Grail for Inequality Skeptics?, by Lane Kenworthy: ...Over [the 1979 to 2006 time] period the share of total income going to the top 1% of households jumped from 7% to 16%, while the share for the bottom three quintiles fell from 36% to 28%.[2] This is a substantial rise in income inequality. Very few social scientists deny its existence. The debate among them focuses on its characteristics, timing, magnitude, and causes.[3]
But there is far less consensus about whether, and if so to what extent, we should worry about this development. Inequality skeptics have offered a number of reasons for downplaying its significance: inequality is the product of free choices, what really matters is equality of opportunity, measures of income inequality ignore upward mobility, higher inequality boosts economic growth, focusing on a single country fetishizes national borders, and others.
Will Wilkinson emphasizes the distinction between income and consumption:
As far as I can tell, when most people are worried about economic inequality, they're usually worried about inequalities in ... the real material conditions of life. . . An individual's or household's standard of living is determined rather more directly by the level of consumption than by the level of income. . . Different datasets and analytical methods produce somewhat different results, but most stories of consumption inequality are stories of stability or a relatively mild rise.
Wilkinson makes other arguments in his piece, and additional ones in his earlier Cato essay. But I want to focus on this point. I don't find it compelling.
One reason is that existing analyses of consumption inequality suffer from a problem similar to that which, until recently, hindered the study of income inequality: limited data on those at the top. Consumption data come from the Consumer Expenditure Survey (CEX). ...[T]he CEX is not designed to effectively capture developments at the top end of the distribution. Since this is where a good bit of the rise in income inequality is centered, researchers may have underestimated the degree to which consumption inequality has increased.
Suppose, though, that the very rich have been consuming relatively little of their additional income. Should we then conclude that the economic inequality we care about hasn't risen much? No. The fact that income isn't spent doesn't render it irrelevant. If my income were to balloon to more than a million dollars, my household might not increase its consumption by much. But it's not as though the additional income would thereby disappear. I could cut back on teaching and devote more of my time to research, or take an unpaid sabbatical. My wife could quit her job and spend more time with our children or do more volunteer work. Or we could invest the money, which might produce considerable additional income in future years.[4] This could help ensure that, among other things, we'd be able to afford to send our kids to expensive private colleges. Or we could retire early. Or simply accumulate assets and pass them on when we die. None of these uses would show up as consumption in the survey data (except the college payments, though that would come some years down the road). But they surely would enhance our well-being.
The point is that income adds value even if it is not spent right away. ...
There also is the issue of how increased consumption among households at the low end and in the middle has been financed. Consumption smoothing over the life course — borrowing when young, repaying later when income is greater — is one thing. But if growth in consumption inequality among the bottom 99% has been suppressed by poor and middle-income Americans borrowing too heavily, this ought to be of concern.
I am not suggesting we shouldn't care about the distinction between income and consumption. It matters that huge income increases at the top helped propel a housing bubble... It matters that Wal-Mart and imports from China have reduced the prices of many consumer goods for low-income Americans. It matters that many people now have access to communication via e-mail and cell phones, information via the Internet, and entertainment via cable TV and iPods. And it helps when government services enhance material well-being — by reducing violent crime or expanding access to health insurance, for instance. Here's how I put this latter point in a recent comment:
Imagine an America in which high-quality public services raise the consumption floor to a high level: most citizens can put their kids in high-quality child care followed by good public schooling and affordable access to a good college; they have access to good health care throughout life; they can get to or near work on clean and efficient public transportation or roads with limited congestion; they enjoy clean and safe neighborhoods, parks, roads, museums, libraries, and other public spaces; they have low-cost access to information, communication, and entertainment via reliable high-speed broadband; they have four weeks of paid vacation each year, an additional week or so of paid sickness leave, and a year of paid family leave to care for a child or other needy relative. Even if the degree of income inequality were no less than today..., that society would be markedly less unequal than our current one.
I agree that we should pay attention to consumption in assessing changes in economic inequality. But we need better data on consumption at the top. And even if consumption inequality has increased only modestly, that by no means renders the large rise in income inequality moot [7]. ...

More here.

"How the Servant Became a Predator: Finance's Five Fatal Flaws"

I am not as negative about banking and financial intermediation as William Black, I think intermediaries perform essential functions that, for example, pools risk across individuals, pools deposits over time (i.e. allows long-term loans with short-term deposits), pools small deposits to allow large loans, they help to overcome adverse selection and moral hazard problems by providing monitoring of loans and expertise on the ability of buyers to repay loans that individuals do not have. By providing pooling functions, solving asymmetric information problems, and so on, financial intermediaries allow productive activity to take place that wouldn't occur otherwise, and we are better off because of it.

So, for instance, on point one below that "The financial sector harms the real economy," I would state it differently. I would say that the net effect of the financial sector is unambiguously positive, without it there would be far fewer loans and a corresponding reduction in output and employment, but some parts of it have detracted from the overall good (significantly recently), and those parts do need to be fixed. But I cannot sign on to a general statement that the financial sector is harmful. Even given the large problems it has caused recently and in the past, we would not be better off if it didn't exist at all. I think this is implicit in the points made below, e.g. there is a call to return to the simple banking of the past, but we differ on the value of developments since that time. I don't see all complex financial products as bad or harmful, some provide essential functions. The trick is to weed out the bad parts, the bad incentives, etc., but save the good, and there are a lot of good parts to the system. I have been one of the stronger proponents of regulating the financial system and reining in the excesses, but it is possible to go too far:

How the Servant Became a Predator: Finance's Five Fatal Flaws, by Bill Black: What exactly is the function of the financial sector in our society? Simply this: Its sole function is supplying capital efficiently to aid the real economy. The financial sector is a tool to help those that make real tools, not an end in itself. But five fatal flaws in the financial sector's current structure have created a monster that drains the real economy, promotes fraud and corruption, threatens democracy, and causes recurrent, intensifying crises.
1. The financial sector harms the real economy.
Even when not in crisis, the financial sector harms the real economy. First, it is vastly too large. The finance sector is an intermediary — essentially a "middleman". Like all middlemen, it should be as small as possible, while still being capable of accomplishing its mission. Otherwise it is inherently parasitical. Unfortunately, it is now vastly larger than necessary, dwarfing the real economy it is supposed to serve. Forty years ago, our real economy grew better with a financial sector that received one-twentieth as large a percentage of total profits (2%) than does the current financial sector (40%). The minimum measure of how much damage the bloated, grossly over-compensated finance sector causes to the real economy is this massive increase in the share of total national income wasted through the finance sector's parasitism.
Second, the finance sector is worse than parasitic. In the title of his recent book, The Predator State, James Galbraith aptly names the problem. The financial sector functions as the sharp canines that the predator state uses to rend the nation. In addition to siphoning off capital for its own benefit, the finance sector misallocates the remaining capital in ways that harm the real economy in order to reward already-rich financial elites harming the nation. The facts are alarming:
• Corporate stock repurchases and grants of stock to officers have exceeded new capital raised by the U.S. capital markets this decade. That means that the capital markets decapitalize the real economy. Too often, they do so in order to enrich corrupt corporate insiders through accounting fraud or backdated stock options.
• The U.S. real economy suffers from critical shortages of employees with strong mathematical, engineering, and scientific backgrounds. Graduates in these three fields all too frequently choose careers in finance rather than the real economy because the financial sector provides far greater executive compensation. Individuals with these quantitative backgrounds work overwhelmingly in devising the kinds of financial models that were important contributors to the financial crisis. We take people that could be conducting the research & development work essential to the success of our real economy (including its success in becoming sustainable) and put them instead in financial sector activities where, because of that sector's perverse incentives, they further damage both the financial sector and the real economy. Michael Moore makes this point in his latest film, Capitalism: A Love Story.
• The financial sector's fixation on accounting earnings leads it to pressure U.S manufacturing and service firms to export jobs abroad, to deny capital to firms that are unionized, and to encourage firms to use foreign tax havens to evade paying U.S. taxes.
• It misallocates capital by creating recurrent financial bubbles. Instead of flowing to the places where it will be most useful to the real economy, capital gets directed to the investments that create the greatest fraudulent accounting gains. The financial sector is particularly prone to providing exceptional amounts of funds to what I call accounting "control frauds". Control frauds are seemingly-legitimate entities used by the people that control them as a fraud "weapons." In the financial sector, accounting frauds are the weapons of choice. Accounting control frauds are so attractive to lenders and investors because they produce record, guaranteed short-term accounting "profits." They optimize by growing rapidly like other Ponzi schemes, making loans to borrowers unlikely to be able to repay them (once the bubble bursts), and engaging in extreme leverage. Unless there is effective regulation and prosecution, this misallocation creates an epidemic of accounting control fraud that hyper-inflates financial bubbles. The FBI began warning of an "epidemic" of mortgage fraud in its congressional testimony in September 2004. It also reports that 80% of mortgage fraud losses come when lender personnel are involved in the fraud. (The other 20% of the fraud would have been impossible had these fraudulent lenders not suborned their underwriting systems and their internal and external controls in order to maximize their growth of bad loans.)
• Because the financial sector cares almost exclusively about high accounting yields and "profits", it misallocates capital away from firms and entrepreneurs that could best improve the real economy (e.g., by reducing short-term profits through funding the expensive research & development that can produce innovative goods and superior sustainability) and could best reduce poverty and inequality (e.g., through microcredit finance that would put the "Payday lenders" and predatory mortgage lenders out of business).
• It misallocates capital by securing enormous governmental subsidies for financial firms, particularly those that have the greatest political power and would otherwise fail due to incompetence and fraud.
2. The financial sector produces recurrent, intensifying economic crises here and abroad.
The current crisis is only the latest in a long list of economic crises caused by the financial sector. When it is not regulated and policed effectively, the financial sector produces and hyper-inflates bubbles that cause severe economic crises. The current crisis, absent massive, global governmental bailouts, would have caused the catastrophic failure of the global economy. The financial sector has become far more unstable since this crisis began and its members used their lobbying power to convince Congress to gimmick the accounting rules to hide their massive losses. Secretary Geithner has exacerbated the problem by declaring that the largest financial institutions are exempt from receivership regardless of their insolvency. These factors greatly increase the likelihood that these systemically dangerous institutions (SDIs) will cause a global financial crisis.
3. The financial sector's predation is so extraordinary that it now drives the upper one percent of our nation's income distribution and has driven much of the increase in our grotesque income inequality.
4. The financial sector's predation and its leading role in committing and aiding and abetting accounting control fraud combine to:
• Corrupt financial elites and professionals, and
• Spur a rise in Social Darwinism in an attempt to justify the elites' power and wealth. Accounting control frauds suborn accountants, attorneys, and appraisers and create what is known as a "Gresham's dynamic" — a system in which bad money drives out good. When this dynamic occurs, honest professionals are pushed out and cheaters are allowed to prosper. Executive compensation has become so massive, so divorced from performance, and so perverse that it, too, creates a Gresham's dynamic that encourages widespread accounting fraud by both financial firms and firms in the real economy.
As financial sector elites became obscenely wealthy through predation and fraud, their psychological incentives to embrace unhealthy, anti-democratic Social Darwinism surged. While they were, by any objective measure, the worst elements of the public, their sycophants in the media and the recipients of their political and charitable contributions worshiped them as heroic. Finance CEOs adopted and spread the myth that they were smarter, harder working, and more innovative than the rest of us. They repeated the story of how they rose to the top entirely through their own brilliance and willingness to embrace risk. All of their employees weren't simply above average, they told us, but exceptional. They hated collectivism and adored Ayn Rand.
5. The CEO's of the largest financial firms are so powerful that they pose a critical risk to the financial sector, the real economy, and our democracy.
The CEOs can directly, through the firm, and by "bundling" contributions of its officers and employees, easily make enormous political contributions and use their PR firms and lobbyists to manipulate the media and public officials. The ability of the financial sector to block meaningful reform after bringing the world to the brink of a second great depression proves how exceptional its powers are to corrupt nearly every critical sector of American public and economic life. The five largest U.S. banks control roughly half of all bank assets. They use their political and financial power to provide themselves with competitive advantages that allow them to dominate smaller banks.
This excessive power was a major contributor to the ongoing crisis. Effective financial and securities regulation was anathema to the CEOs' ideology (and the greatest danger to their frauds, wealth, and power) and they successfully set out to destroy it. That produced what criminologists refer to as a "criminogenic environment" (an atmosphere that breeds criminal activity) that prompted the epidemic of accounting control fraud that hyper-inflated the housing bubble.
The financial industry's power and progressive corruption combined to produce the perfect white-collar crimes. They successfully lobbied politicians, for example, to legalize the obscenity of "dead peasants' insurance"(in which an employer secretly takes out insurance on an employee and receives a windfall in the event of that person's untimely death) that Michael Moore exposes in chilling detail. State legislatures changed the law to allow a pure tax scam to subsidize large corporations at the expense of their taxpayers.
Caution: Never Forget the Need to Fix the Real Economy
Economic reform efforts are focused almost entirely on fixing finance because the finance sector is so badly broken that it produces recurrent, intensifying crises. The latest crisis brought us to the point of global catastrophe, so the focus on finance is obviously rational. But the focus on finance carries a grave risk. Remember, the sole purpose of finance is to aid the real economy. Our ultimate focus needs to be on the real economy, which creates goods and services, our jobs, and our incomes. The real economy came off the rails at least three decades ago for the great majority of Americans.
We need to commit to fixing the real economy by guaranteeing that everyone willing to work can work and making the real economy sustainable rather than recurrently causing global environmental crises. We must not spend virtually all of our reform efforts on the finance sector and assume that if we solve its defects we will have solved the other fundamental reasons why the real economy has remained so dysfunctional for decades. We need to be work simultaneously to fix finance and the real economy.

"Reviewing the Recession: Was Monetary Policy to Blame?"

David Altig says "it is yet far from clear that the financial crisis can be explained by a misstep in the setting of the federal funds rate" due to a failure to base monetary policy rules on models that include a well developed credit channel:

Reviewing the recession: Was monetary policy to blame?, by David Altig: In a recent speech given at the University of South Alabama, Federal Reserve Bank of Atlanta President Dennis Lockhart added his voice to what is now the general consensus: "I agree with all who are declaring that a technical recovery is under way."
There is still much work to be done, of course, not least the continuing examination of just what led to the recession and how a repeat performance can be avoided. One theme of this examination appeared in last week's Financial Times:
"It is certainly true that the most recent bubble, its bursting and the Fed's actions in the aftermath have inspired existing critics and recruited new ones. The first charge is that interest rates under Alan Greenspan, [current Fed Chairman Ben] Bernanke's predecessor, were kept too low for too long, contributing to a bubble of easy credit."
Here is an exercise that that I find intriguing. Suppose we try to estimate, as closely as we can, the actual interest rate decisions of the Federal Open Market Committee (FOMC) over the period spanning the beginning of Greenspan's tenure to the present. It turns out that by using an approach based not only on measures of inflation and actual output relative to potential but also on the lagged fed funds rate, you can actually get pretty darn close to statistically describing what the FOMC did:
I'm going to resist the temptation to call this approach a "Taylor rule." The estimating "rule" used here does in fact include realizations of inflation and a measure of the output gap (that is, a measure of how different gross domestic product is from its potential). These are the essential ingredients of the Taylor rule, but not the source of the close fit evident in the chart above. Over the period covered by the chart, you could have done a pretty good job mimicking the actual federal funds rate outcomes in any given month using knowledge of the previous month's rate. (If you are interested in the details of the estimating rule, you can find them here.)
The interpretation of the tendency for today's federal funds rate to generally follow yesterday's rate—sometimes referred to as interest rate smoothing—is controversial. Glenn Rudebusch (from the Federal Reserve Bank of San Francisco) explains:
"Many interpret estimated monetary policy rules as suggesting that central banks conduct very sluggish partial adjustment of short-term policy interest rates. In contrast, others argue that this appearance of policy inertia is an illusion and simply reflects the spurious omission of important persistent influences on the actual setting of policy."
Rudebusch is decidedly in the second camp, but for our purposes here the exact interpretation may not be that important. Though I am glossing over some not insignificant caveats—such as the difference between final data and the information the FOMC had to react to in real time—the chart above suggests that whatever the underlying structure of policy decisions, after the fact the FOMC appears to have behaved in an extraordinarily consistent way over the period extending from the late 1980s. This observation, in turn, suggests to me that there was nothing all that unusual about monetary policy in 2003 once you account for the state of the economy.
Which leads me to my main point on the chart above: If you are of the opinion that interest rate policy was good through the late 1980s and 1990s, then there seems to be a good case the FOMC was just sticking with "proven" success as it set interest rates through the dawning of the new millennium.
There is, of course, the possibility that the pattern of the funds rate depicted in the chart above was incomplete all along in the sense that whatever variables are explicit and implicit in the estimated rule, they did not include information to which the FOMC should have responded. In calmer times, the story would go, not including potentially pertinent information was not much of a problem. Eventually the missing-data chickens could come home to roost. The prime omitted variable suspect would, of course, be some sort of asset prices.
Scratch any gathering of macroeconomists these days and out will bleed a steady stream directed at incorporating credit and financial market activity into thinking about the aggregate economy. The necessity of proceeding with that work was emphasized by no less an authority than Don Kohn, vice chairman of the Federal Reserve Board of Governors, speaking at just such a gathering of macroeconomists last week:
"It is fair to say, however, that the core macroeconomic modeling framework used at the Federal Reserve and other central banks around the world has included, at best, only a limited role for the balance sheets of households and firms, credit provision, and financial intermediation. The features suggested by the literature on the role of credit in the transmission of policy have not yet become prominent ingredients in models used at central banks or in much academic research."
I will admit that economists were not exactly ahead of the curve with this agenda, but prior to 2007 it was not at all clear that detailed descriptions of how funds moved from lenders to borrowers or how short-term interest rates are transmitted to longer-term interest rates and capital accumulation decisions were crucial to getting monetary policy right. Models without such detail tended to deliver policy decisions not far from the sort depicted above, and, as I noted, they seemed to be working quite well in terms of macroeconomic outcomes.
Thus far, one of the lessons from models in which financial intermediation is taken seriously is that interest rate spreads or stock prices or other asset prices do become part of the policy rate recipe. Your response might well be something along the lines of "duh." You are entitled to that opinion, and I won't push back too hard. But it is yet far from clear that the financial crisis can be explained by a misstep in the setting of the federal funds rate caused by the failure to make whatever adjustments might have been indicated by the inclusion of pertinent financial variables in implicit rate-setting rules of thumb. Furthermore, early versions of research I have seen that combines capital regulation policy and interest rate policy suggest that the macroeconomic consequences of getting the former wrong may be much greater than the consequences of getting the latter wrong. To me, that conclusion has the ring of truth.

I have advocated targeting a price index that includes asset prices as part of the policy rule, but I share the view that this likely would not have been enough by itself to stop the crisis from occurring. Targeting a broader price index might have tempered the downturn some, or even quite a bit -- it sounds like I am more optimistic than David along about how well this might work -- but changes in regulation must be an essential component of reform if we are going to prevent problems from reoccurring in the future.

However, I think that not having models with detailed descriptions of the credit transmission mechanism was costly. The New Keynesian model that is used to inform monetary policy decisions relies upon wage and price rigidities to explain how changes in monetary policy and/or financial market conditions are transmitted to the broader economy. Thus, the price/wage rigidity transmission channels must serve as a proxy for the effects that work through credit (or other) channels, and it is not evident to me that they are adequate proxies for this task (e.g. what would a government spending multiplier look like within a model that had a richer set of connections between financial markets and the real economy?). Whether or not having such models would have prevented the crisis is an open question, and I won't push back too hard against David's view of this, but not having such models once this crisis hit did, I think, make it more difficult for us to evaluate the appropriate policy response. Not having the models we needed led to uncertainty from policymakers that showed up in the seemingly, if not actual ad hoc and trial and error nature of many of the policy responses.

"Transaction Cost Economics"

Why do firms exist? Why is it sometimes beneficial to, say, produce a part needed in the production process yourself, and why is it better to contract with an outside firm at other times? Where are the boundaries between what will be performed internally, and what will be performed externally? How should firms be organized? Robert Salomon explains the contributions of Oliver Williamson to the field of Transaction Cost Economics, and he reacts to some of the reactions to the announcement of the award:

Oliver Williamson, Nobel Honoree, by Robert Salomon: I was delighted to hear that Oliver Williamson was awarded the Nobel Prize in Economics (shared with Elinor Ostrom). Oliver Williamson is recognized for his contribution to the field of Transaction Cost Economics, building on the path-breaking work of scholars like Ronald Coase.
Transaction Cost Economics is a central theory in the field of Strategy. It addresses questions about why firms exist in the first place (i.e., to minimize transaction costs), how firms define their boundaries, and how they ought to govern operations.
In Transaction Cost Economics, the starting point is the individual transaction (the synapse between the buyer and the seller). The question then becomes: Why are some transactions performed within firms rather than in the market, as the neoclassical view prescribes.
The answer, not surprisingly, is because markets break down.
As a consequence of human cognitive limitations, coupled with the costs associated with transacting, the basic assumptions associated with efficient markets (e.g., anonymous actors, atomistic actors, rational actors, perfect information, homogeneous goods, the absence of liquidity constraints) fail to hold. For these reasons it is often more advantageous to structure transactions within firms. And this is why firms are not just ubiquitous in our society, but also worthy of study in their own right. This contrasts with the typical view of firms in neoclassical economic theory as, at worst, a market aberration that ought not exist, and at best, a black box production function.
Williamson's contributions to the field of Transaction Cost Economics complement, and extend, those of Coase. First, Williamson started with an explicitly behavioral assumption of human behavior (bounded rationality). Second, he recognized that transacting parties sometimes behave opportunistically and take advantage of their counterparties. Finally, he identified features of transactions (e.g., specificity, uncertainty, frequency) that cause markets to fail; and hence, are likely to lead certain transactions to be organized within firms (hierarchies) rather than markets.
I was pleased to see Oliver Williamson recognized not just because of my inherent intellectual bias — my research has drawn on, and contributed to, the field of Transaction Cost Economics and I have worked with students of Williamson (see my research page for details) — but also because of what his selection implies for the broader field of economics. It implies that the field is moving in the direction of greater inclusion of economic perspectives that are based more on behavioral theories (see Krugman on the Future of Economics).
It was also fun to watch establishment economists make sense of the selection (see the Economists View post for some perspective). For example, Steven Leavitt writes:
When I was a graduate student at MIT back in the early 1990's, there was a Nobel Prize betting pool every year. Three years in a row, Oliver Williamson was my choice. At the time, his research was viewed as a hip, iconoclastic contribution to economics — something that was talked about by economists, but that students were not actually trying to emulate (and probably would have been actively discouraged from had they tried to do so). What's interesting is that in the ensuing 15 years, it seems to me that economists have talked less and less about Williamson's research, at least in the circles in which I run.
My comment: I think Leavitt underestimates the impact of Williamson's work because he is neither a Strategy scholar, nor is he in a Strategy or Management department. Go to any Strategy or Management department and you will find oodles of researchers (and doctoral students) working on Transaction Cost problems. It is a dominant paradigm.
Paul Krugman (in his post An Institutional Economics Prize) writes:
The way to think about this prize is that it's an award for institutional economics, or maybe more specifically New Institutional Economics.
Neoclassical economics basically assumes that the units of economic decision-making are a given, and focuses on how they interact in markets. It's not much good at explaining the creation of these units — at explaining, in particular, why some activities are carried out by large corporations, while others aren't. That's obviously an interesting question, and in many cases an important one.
…Oliver Williamson's work underlies a tremendous amount of modern economic thinking; I know it because of the attempts to model multinational corporations, almost all of which rely to some degree on his ideas.
My comment: Krugman gets it partially right, but he does a lot of handwaving with respect to Williamson's specific contributions. But with all due respect, he certainly makes no claim to be a Strategy scholar. He is right in the sense that the award speaks volumes about New Institutional Economics, broadly defined. However, in the case of Williamson, the specific contribution is to the field of Transaction Cost Economics. Moreover, the contributions of Williamson's work extend far beyond the field of international business (or international strategy), but I agree that Transaction Cost Economics has been influential in those fields as well.
Nevertheless, my congratulations to Oliver Williamson, and to his students (many of whom I know well), who have long carried the torch for this important, yet underappreciated, branch of economics.

links for 2009-10-13

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