| Peter Klein |

It’s the introduction to a special issue of the Review of Financial Studies:

The special issue features seven papers on corporate governance that were presented in a meeting of the NBER’s corporate governance project. Each of the papers represents state-of-the-art research in an important area of corporate governance research. For each of these areas, we discuss the importance of the area and the questions it focuses on, how the paper in the special issue makes a significant contribution to this area, and what we do and do not know about the area. We discuss in turn work on shareholders and shareholder activism, directors, executives and their compensation, controlling shareholders, comparative corporate governance, cross-border investments in global capital markets, and the political economy of corporate governance.

Here it is on the NBER site; I couldn’t find an ungated version.

| Peter Klein |

Found this posted on a classroom wall in our building. Not quite as witty as this one, but then again, we keep them heavily sedated:

On a more serious note, here’s a conference celebrating the 50th anniversary of Coase’s landmark 1959 and 1960 papers, with an all-star lineup.

I am a tiny angel
I’m smaller than your thumb:
I live in people’s pockets
That’s where I have my fun.

I don’t suppose you’ve seen me,
I’m too tiny to detect:
Though I’m with you all the time,
I doubt we’ve ever met.

Before I was an Angel…
I was a fairy in a flower:
God, Himself, hand-picked me,
And gave me Angel power.

Now God has many Angels
That He trains in Angel pools:
We become His eyes, and ears, and hands
We become His special tools.

And because God is so busy,
With way too much to do;
He said that my assignment is to
Keep close watch on you.

Then He tucked me in your Pocket,
Blessing you with Angel care;
Saying I must never leave you,
And I vowed to stay right there.

| Peter Klein |

In an oft-cited passage from The Mechanisms of Governance (1996), Williamson describes the research program of transaction cost economics this way:

Transaction cost economics (1) eschews intuitive notions of complexity and asks what the dimensions are on which transactions differ that present differential hazards. It further (2) asks what the attributes are on which governance structures differ that have hazard mitigation consequences. And it (3) asks what main purposes are served by economic organization. Because, moreover, contracting takes place over time, transaction cost economics (4) inquires into the intertemporal transformations that contracts and organization undergo. Also, in order to establish better why governance structures differ in discrete structural ways, it (5) asks why one form of organization (e.g., hierarchy) is unable to replicate the mechanisms found to be efficacious in another (e.g., the market). The object is to implement this microanalytic program, this interdisciplinary joinder of law, economics, and organization, in a “modest, slow, molecular, definitive” way.

A footnote explains the origins of the phrase “modest, slow, molecular, definitive,” tracing them to a (secondhand) quotation from Charles Péguy. Here’s the footnote:

The full quotation (source unknown) reads:

“The longer I live, citizen. . .” — this is the way the great passage in Peguy begins, words I once loved to say (I had them almost memorized) — “The longer I live, citizen, the less I believe in the efficiency of sudden illuminations that are not accompanied or supported by serious work, the less I believe in the efficiency of conversion, extraordinary, sudden and serious, in the efficiency of sudden passions, and the more I believe in the efficiency of modest, slow, molecular, definitive work. The longer I ive the less I believe in the efficiency of an extraordinary sudden social revolution, improvised, marvelous, with or without guns and impersonal dictatorship — and the more I believe in the efficiency of modest, slow, molecular, definitive work.”

Well, we are nothing if not pedantic here at O&M, and in that spirit, I share (with permission) a note from my colleague and former guest blogger Randy Westgren, written to Williamson in January 2007, explaining that the anonymous source has botched the Péguy quotation. Here’s Randy:

After a long search, I found the quote from Péguy that you cite in footnote nine of the Prologue of The Mechanisms of Governance and noted again in footnote eleven of the first chapter. I was not able to find the secondary quote that is printed in the footnote, but I did find the original passage from Péguy. I have been searching for this since The Mechanisms was published, because I could not fathom how Charles Péguy could have denounced sudden, wondrous conversion and sudden, extraordinary social revolution when he was (1) a famously devout Catholic;  a mystic whose poetry includes an exceptional hommage to Joan of Arc, and (2) a famously ardent socialist who believed strongly in the overthrow of the bourgeoisie. In fact, after giving up on the Catholicism of his youth while at the École Normale Supérieure, he returned to his faith in the middle of the first decade of the century, when he was in his early 30s. He was slain in the first battle of the Marne in 1914 at the age of 41.

Thus, it was hard to understand a quote that twice alludes to advancing age and a personal and social apostasy that was written by a man who died in full flower as a religious mystic and as a champion for human rights and the left.

The quote in your text contains two red herrings. The first is, “this is the way the great passage in Peguy begins.” In fact, the quoted passage begins with the second clause of the fourth sentence of the twentieth paragraph of an essay presented as a dialogue. The second confusion is that the quote appears to be a single argument against sudden personal illuminations and sudden social revolutions. In fact, the passage is two distinct arguments in counterpoint. One party to the dialogue denies the value of sudden personal revelation and the other denies the value of sudden social revolution.

The young socialist atheist revolutionary (Péguy) consults a “citizen doctor: socialist, revolutionary, moralist, internationalist” as he has come down with the grippe while preparing for the Socialist Congress.

– … “And genius demands patience to work, doctor, and the longer I live, citizen, the less I believe in the effectiveness of sudden illuminations that are not accompanied by or supported by serious work, the less I believe in the effectiveness of sudden, wondrous, extraordinary conversions, the effectiveness of sudden passions, – and the more I believe in the effectiveness of modest, slow, molecular, definitive work.”

– “ The longer I live, responded the doctor gravely, the less I believe in the effectiveness of a sudden, extraordinary social revolution, wondrously improvised, with or without guns and impersonal dictatorship, – and the more I believe in the effectiveness of modest, slow, molecular, definitive, work for society.

(My translations.) (Péguy is also noted for involuted literary style, so amateur translation isn’t easy.)

The conversation continues around the doctor’s thesis that one cannot believe in the “big questions” when unable to believe in the personal-level issue of faith. This essay was, in fact, written when Péguy was 26 and before his return to the church. He had just launched a publishing venture in support of socialist causes in January 1900, called Cahiers de la quinzaine, (Fortnightly Journals). This was to be his pulpit as a polemicist until his death, as well as a place where like-minded individuals published before they became famous.

The citation should read:

Péguy, Charles. “Encore de la grippe”, Cahiers de la quinzaine, volume I, number 6, March 20, 1900.

My source was reprinted in

Péguy, Charles. Oeuvres en Prose Complètes, Volume 1, Robert Burac (ed), Editions Gallimard, 1987, pp. 416-444.

I am sure that’s way more than you wanted to know.

| Peter Klein |

Speaking of banks, here’s a very good survey of the entrepreneurship literature on financing constraints by William Kerr and  Ramana Nanda, just out from NBER. From the introduction:

The first research stream considers the impact of financial market development on entrepreneurship. These papers usually employ variations across regions to examine how differences in observable characteristics of financial sectors (e.g., the level of competition among banks, the depth of credit markets) relate to entrepreneurs’ access to finance and realized rates of firm formation. The second stream employs variations across individuals to examine how propensities to start new businesses relate to personal wealth or recent changes therein. The notion behind this second line of research is that an association of individual wealth and propensity for self-employment or firm creation should be observed only if financial constraints for entrepreneurship exist.

These two streams of research have remained mostly separate literatures within economics, driven in large part by the different levels of analysis. Historically their general results have been mostly complementary. More recently, however, empirical research using individual-level variation has questioned the extent to which financing constraints are important for entrepreneurship in advanced economies. This new work argues that the strong associations between the financial resources of individuals and entrepreneurship observed in previous studies are driven to large extents by unobserved heterogeneity rather than substantive financing constraints. These contrarian studies have led to renewed interest and debate in how financing environments impact entrepreneurship in product markets.

Det är väldigt många som är på mig om att börja blogga igen, och jag hade precis tänkt lägga ner den helt och hållet, men då kommer min brorsa och anser annat. Jag fick ny inspiration av honom, och jag kommer börja med lite inlägg igen!

Paul Harris & Obernik – The Take (EDX’s Acapulco At Night Redub Mix) 320HQ [HR013X] 2009-11-05 Sample! // Progressive House
En av mina favoritproducenter EDX släppte i början av sommmaren en låt som spelats sönder totalt, och för ca 2 veckor sen släpptes en ReDub av hans egen remix på beatport, som enligt mig är ännu bättre än hans första remix! 4/5 toasts

DJ Tatana feat. Luciana di Nardo – Anymore (Chris Reece To Late Remix) 320HQ [SIRKNM8201] 2009-06-15 Sample! // Progressive House
Nästa låt är en låt som släppts på EDX’s egna skivbolag PinkStar Records, en låt som remixats av hans polare Chris Reece och som är så satans skön! Vocalsen av Luciana Di Nardo passar så bra med musiken gjord av DJ Tatana! 3/5 toasts

Norman Doray – Tobita (Original Mix) 320HQ [ITC2172] 2009-11-16 Sample! // Progressive House
Fransosen Norman Doray har släppt en verklig bomb som jag diggar stenhårt, släppt på Cr2 Records! Om det varit sköna vocals på låten hade det troligtvis varit en 5a i betyg… 4/5 toasts

Henrik B – Billingen (Original Mix) 320HQ [Not.Released.On.Beatport.Yet] // Progressive House
Polaren till Eric Prydz, nämligen Henrik B, har gjort en ny progressiv dänga, precis så bra som dem alltid är när han producerar låtar! Synd att den läckte så tidigt, gillar egentligen inte att lägga upp låtar som inte släppts än… 4/5

Steve Angello – Monday (Mescal Kid Vocal Edit) 320HQ [Not.Released.On.Beatport.Yet] // Progressive House
House-intresserade kan absolut inte ha missat Steve Angellos senaste släpp Monday… Enligt mig en av hans bättre låtar han producerat själv, och det finns ett flertal bra remixer på den. Den bästa är dock den han själv gjort en remix på under hans alias Mescal Kid med vocals. Klar 5a!

EDIT: Efter att ha hört runt en del så är denna låt en remake på den han själv spelat under sommaren/hösten. Det är helt enkelt Steve Angello – Monday (Original Mix) w/ (med) acapellan från Julie McKnight – Finally… Den kommer enligt Steve själv släppas som Steve Angello – Monday (Mescal Kid Vocal Edit), men den som ligger ute på nätet nu, och den som jag länkat är en remake av en “okänd” person. Oavsett, låten är sjukt bra, och jag lovar att lägga upp den officiella versionen när den släpps! Håll till godo bara! 3/5 toasts

Sebastien Drums & Avicii – Pastis (Original Mix) 320HQ [Not.Released.On.Beatport.Yet] // Progressive House
Som flera gånger tidigare har Drums & Avicii tillsammans producerat ytterligare ett mästerverk, Pastis! Jag kan inte riktigt sätta fingrarna på vart vocalsen kommer, men jag känner igen texten… Bra som satan är den iaf! Läckte för någon vecka sen… 5/5 toasts

Dabruck & Klein feat. Michael Feiner – The Feeling (Tocadisco Remix) 320HQ [Not.Released.On.Beatport.Yet] // Progressive House
Det här är den låten som jag spelar allra mest just nu, jag kan inte få nog av Tocadisco’s untz untz remix med vocals av svensken Michael Feiner, passar så satans bra ihop! Denna måste ni ha! 5/5 toasts

Dinka – Elements (Original Mix) och Dinka – Never Cheat On Strangers (Original Mix) 320HQ [HR013X] 2009-11-05 Sample! // Progressive House
Chris Reece har under sitt alias Dinka gjort en ny låt kallad Elements, grym! Precis lika hög stil och klass som vanligt, denna ska ni ha! Med på samma EP, som släppts på skivbolaget Unreleased Digital, är också låten “Never Cheat On Strangers”, vilket också är sjukt bra! 4/5 toasts

Eftersom jag inte skrivit många inlägg på ett bra tag tänker jag bjuda på några gamla favoriter:

Arno Cost & Arias – Magenta (Eric Prydz Unreleased Chariots Of Fire Vocal Mix) 320HQ [Not.Released.On.Beatport] // Progressive House
Dra hem den å njut, låten från 2007 som ännu ej släppts och som säkert aldrig kommer släppas! 6/5 toasts

Avicii & Sebastien Benett – From Paris To Stockholm (Original Mix) 320HQ [Not.Released.On.Beatport] // Progressive House
Avicii’s sammarbete från 2008 med Benett som heller ej släppts är också ren njutning! Enjoy! 5/5 toasts

Jag ser verkligen fram emot Eric Prydz album som kommer snart, enligt han själv är den snart helt färdigställd för att släppas! Kanske kommer den till Jul? Det vore grymt i så fall!

Ps. Skriv gärna kommentarer om låtarna eller om bloggen, jag vill gärna veta vad ni tycker! Ds.

Smackar upp ett kort inlägg för er som inte kan få nog av HOUSE!
Ett kanske lite ogenomtänkt inlägg, med en blandad kompott av olika
tracks. Jag kan speciellt rekommendera Romain Curtis mix på “Javalaan”
Jag erbjuder även en bra SetRip på Johan Wedel’s grymma East Air som
en del av er nog vill- och borde lägga vantarna på
Droppa gärna en comment & och joina gärna fb-groupen,
vi har snart 1000 members

Dabruck & Klein feat. Michael Feiner – The Feeling (Jean Elan Remix)
Dabruck And Klein Feat. Michael Feiner – The Feeling (Tocadisco Remix)
Laidback Luke & Gregor Salto – Step by step feat Mavis Acquah (Original Mix)
Janet – Make Me (Dave Aude Club Mix)
Frederic Van Hooft – Cembalo (Original Mix)
Filthy Rich, Romain Curtis – Javalaan (Filthy Rich Mix)
Filthy Rich, Romain Curtis – Javalaan (Romain Curtis Mix)
Austin Leeds feat. Steve Bertrand – Staring At The Sun (Original Mix)
Avicii, Austin Leeds – In The Air (Austin’s Remix)
Tim Berg aka. Avicii – Alcoholic (John Dahlback Remix)
Johan Wedel – East Air (Original Mix) (SETRIP)

Peace/William 

auch kleine dinge können uns entzücken

auch kleine dinge können uns entzücken,
auch kleine dinge können teuer sein.
bedenkt, wie gern wir uns mit perlen schmücken;
sie werden schwer bezahlt und sind nur klein.
bedenkt, wie klein ist die olivenfrucht,
und wird um ihre güte doch gesucht.
denkt an die rose nur, wie klein sie ist,
und duftet doch so lieblich, wie ihr wißt.

paul heyse, aus “italienisches liederbuch”, 1860

eben!

La copertina de L'Espresso in edicola

L’Espresso oggi in edicola dedica un reportage sullo stato del clima mondiale (“Che brutto clima” è il titolo). Sedici pagine dedicate al vertice Onu, uno scritto di Naomi Klein e la descrizione di Copenhagen, città ecologica per eccellenza.

Spooky! Scary! You know how I know you’re a ghost…?

It took us a while to weed through all the awesome submissions, but here it is: the next in the Allan Hyde/Hadley Klein You know how I know you’re a... video series.

You picked the topic and really stepped up to the plate with some incredible videos… we’re only sorry we couldn’t use them all. But please submit again for the next topic!

If you haven’t already done so, make sure to check out the previous zombie and robot videos too…

von wegen, jungs seien nicht neugierig …

was der da wohl sucht?

nette boxers

| Peter Klein |

Useful information for undergraduate instructors, provided by students, from the Chronicle (via Ross Emmett). Sample:

There is no need to put those “just for fun” optional readings on the syllabus. We will never read them. If I even see the word “optional” my eyes glaze over and I will go back to thinking of something pointless, like how many grapes I can possibly stick in my mouth without suffocating. There’s a better chance of me shimmying into class followed by a conga line of maroon pandas than actually reading your optional paper.

And this: “seeing you in a place outside of the academic setting is one of the most awkward moments ever. When you’re done with class everyday we like to think that you disappear, surfacing at random moments to check your email, and then slinking back into oblivion.” When you live in a small college town, as I do, and occasionally do crazy stuff like go out to eat or go to the movies, this can be a problem.

| Peter Klein |

Speaking of Peters, the McKinsey Quarterly site has a video interview with the late Peter Bernstein on risk. Bernstein was a deep thinker and an excellent writer. I once found myself on a plane next to an investment banker who was reading Bernstein’s Against the Gods. I mentioned that I too was a fan, and he told me he re-read the book at least once each year, out of professional obligation.

| Peter Klein |

A reader objected to my recent portrayal of Keynes as a crank, as a man who never really studied economics or took it very seriously. Note that I never denied Keynes’s intellect, his great skill as a rhetorician, or his personal charm. But Keynesian economics is, in a sense, non-economics or even anti-economics, in that it ignores or contradicts many basic lessons about the allocation of scarce resources among competing ends. Mario Rizzo feels the same way:

Keynesianism is not concerned with the allocation of resources and related niceties. One can see this is the policy prescriptions of the stimulators. Just get people back to work. If a market is depressed: Prop it up. Labor, other resource-owners and entrepreneurs need to stop worrying about searching for the appropriate use of resources. Bankers have to stop fretting about to whom they should lend. They should abandon their ultra-restraint. Those who are holding money should invest; they should buy bonds. No need to worry about inflation because the potential output of “stuff” (however it is allocated across industries) is above the actual less-than-full-employment output.

Where did my microeconomics go?

Keynes and his followers proudly trumpeted his framework as a re-do of standard economics (what he called “classical,” though Keynes was not well versed in the history of economic thought). Standard economics is OK during periods of “full employment” (another aggregate concept, of course), but not in the “general” case, in which case the Keynesian magic comes into play. Credit expansion, according  to Keynes, performs the “miracle . . . of turning a stone into bread.” As Mises noted, “Great Britain has indeed traveled a long way to this statement from Hume’s and Mill’s views on miracles.”

| Peter Klein |

Geoff Manne to me and others: “The Intel-AMD settlement, over an alleged Sherman Act Section 2 violation, seems to violate Section 1 of the same act. I’ve written an informed and thoughtful blog post on this. What do you think?”

Me: “This is further evidence that antitrust law is inherently contradictory, that the enforcement system is irretrievably broken, and that antitrust laws should be ditched entirely. Is that flippant?”

Geoff: “Just because it’s flippant doesn’t mean it isn’t true!”

| Peter Klein |

Peter Drucker, that is. The great management guru died in 2005 — and even then, he didn’t blog, unlike some other guys named Peter. If Drucker were alive today, what would he say about the financial crisis, health-care reform, climate change, and the other Big Issues of our day? Rosabeth Moss Kanter asks in the current issue of HBR, and thinks Drucker’s writings have important lessons for today’s problems. E.g.:

• Drucker would not have been surprised that incentives to take excessive risks contributed to the recent global financial meltdown. Back in the mid-1980s, he warned about a public outcry over executive compensation — a main theme on the U.S. government’s agenda following the fall of banks in 2008.
• Years ago, he warned of troubles ahead if GM executives remained stuck in memories of previous successes and failed to ask his famous “what to stop doing” question. GM was an iconic example of failure to see the need for significant innovation; its structure had become ossified, and its top management couldn’t consider a change.
• He focused on how organizations could best achieve their purpose, not on business per se or on profit as the main indicator of success. He championed a robust civil society of voluntary nonprofit organizations as an essential foundation on which business could thrive and people could prosper, because this sector plays a vital role in promoting health, education, and well-being. The role of government is fuzzier in Drucker’s writings, although it is clear that he mistrusted centralization of power and saw bureaucracy as a source of rigidity rather than innovation.

I hadn’t known before that Drucker’s father was friends with Schumpeter, often described as a major influence on Drucker’s thinking. “Regular guests of the Druckers included the economists Schumpeter, Hayek and Mises, with whom Drucker’s father had business relations in his function as director of the K.& K. trade museum,” according to Drucker’s official biography. Unfortunately the young Drucker was more attracted to Othmar Spann, described by Mises as an “anti-economist.”

Ich kann meinen Blick nicht abwenden und meinen Mund nicht schliessen.

Quelle: Ervin Olaf

Bleu.

| Peter Klein |

The man indeed has a unique talent, as described here by the witty and clever Steve Landsburg:

It’s always impressive to see one person excel in two widely disparate activities: a first-rate mathematician who’s also a world class mountaineer, or a titan of industry who conducts symphony orchestras on the side. But sometimes I think Paul Krugman is out to top them all, by excelling in two activities that are not just disparate but diametrically opposed: economics (for which he was awarded a well-deserved Nobel Prize) and obliviousness to the lessons of economics (for which he’s been awarded a column at the New York Times).

It’s a dazzling performance. Time after time, Krugman leaves me wide-eyed with wonder at how much economics he has to forget to write those columns.

The subject is Krugman’s latest proposal to combat unemployment, namely laws making it harder to fire workers, which of course increases the cost of labor, leading firms to hire less of it, increasing unemployment.

| Peter Klein |

I’ve written before on Fed “independence” and why I don’t support it. The vast majority of economists, especially the more prominent ones, are strongly in favor of independence and against Congressional attempts to limit the Fed’s discretion in monetary and regulatory policy. The standard argument is that a “politicized” — i.e., accountable — central bank will be more expansionary than an unaccountable central bank, assuming that credit expansion affects output first and prices (inflation) second. Last week’s piece by Kashyap and Mishkin follows this script. On the face of it, this seems absurd, as — to take only the most obvious example — the Greenspan-Bernanke “independent” Fed has been the most expansionist in modern history, with a ballooning money supply throughout the 2000s and near-zero interest rates and injections of giggledysquillions of dollars into the banking sector in the last 18 months. The independence crowd cites cross-country studies finding a negative correlation between central-bank independence and inflation, but these studies are controversial (many problems with reverse causation, omitted variables, sample size, etc.).

My question today is different: Where, in those arguments, is the comparative institutional analysis? After all, in policy analysis, we are always comparing imperfect alternatives. We try to avoid the Nirvana fallacy. Craig does this in his post below, asking if a centralized financial regulator would be less bad than the competing regulatory bodies we have today.

But the macroeconomists entirely ignore this problem. Consider Mark Thoma’s defense of independence:

The hope is that an independent Fed can overcome the temptation to use monetary policy to influence elections, and also overcome the temptation to  monetize the debt, and that it will do what’s best for the economy in the long-run rather than adopting the policy that maximizes the chances of politicians being reelected.

This naive wish is simply that, a hope. Where is the argument or evidence that a wholly unaccountable Fed would, in fact, “do what’s best for the economy in the long-run”? What are the Fed officials’ incentives to do that? What monitoring and governance mechanisms assure that Fed officials will pursue the public interest? What if they have private interests? Maybe they’re motivated by ideology. Suppose they make systematic errors. Maybe they’ve been captured by special-interest groups like, oh, I don’t know, the banking industry (duh). To make a case for independence, it is not enough to demonstrate the potential hazards of political oversight. You have to show that these hazards exceed the hazards of an unaccountable, unrestricted, ungoverned central bank. The mainstream economists totally ignore this question, choosing to put a naive faith in the wisdom of central bankers to do what’s right. Guys, have you never heard of public-choice theory?

0001 Am anfang des nichts.

Am anfang war das nichts ein spiegel aus fantasie, und dieser spiegel bildete sich ein … bildete sich ein, bildete sich überhaupt nichts ein, bildete sich ein nicht zu sein, nicht zu sein, nichts zu sein, nichts, nichts, nichts zu sein.
…. doch je länger sich mein spiegel das nichts einbildete, einbildete nichts nicht nicht zu sein,
und je älter das nichts nichts nichts nichts nichts nichts nichts und immer älter wurde das nichts, … desto grösser wurde seine einbildung, und desto gewaltiger seine fantasie. … so gewaltig und so enorm, dass sich das nichts, dass sich mein spiegel schliesslich das unmöglich vorstellbare sich vorzustellen, sich mich einzubilden begann. …. Mich, den tod.
So stellte sich das nichts meinen spiegel vor, meinen spiegel so klein so winzig und so klein das nichts sich darin spiegelte gar nichts.

003