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Measuring Tacit Knowledge | Peter Klein |The concept of tacit knowledge knowledge that is difficult or impossible to parameterize, or to express in words or numbers is central to organization theory, as well as philosophy (Polanyi) and social theory more generally (Hayek). Most of the research literature on tacit knowledge is conceptual and theoretical, such as Hayek s famous Use of Knowledge in Society (1945) or more recent pieces like Jensen and Meckling s Specific and General Knowledge, and Organizational Structure  (1992). Empirical studies of tacit knowledge are rare, which is not surprising given the idiosyncratic, personal, subjective, and often ephemeral nature of such knowledge.An interesting new NBER paper by David Chan estimates the effects of tacit knowledge using matched pairs of physician trainees with similar levels of explicit knowledge but different levels of experience and hence accumulated know-how. The hospital setting allows for some clever tricks, e.g., exogenous sorting into occupational roles by experience, rather than ability. Measuring outcomes via spending is problematic to me, though standard in the medical economics and management literatures. Check it out:Uncertainty, Tacit Knowledge, and Practice Variation: Evidence from Physicians in TrainingDavid C. Chan, JrNBER Working Paper No. 21855, January 2016Studying physicians in training, I investigate how uncertainty and tacit knowledge may give rise to significant practice variation. Consistent with tacit knowledge accruing only with experience, and empirically exploiting a discontinuity in the formation of teams, experience relative to a peer substantially increases the size of variation attributable to the physician trainees. Among the same physician trainees, convergence occurs for patients on services driven by specialists, where there is arguably more explicit knowledge, but not on the general medicine service. This difference is unexplained by formally coded patient information. In contrast, rich physician characteristics correlated with preferences and ability, and quasi-random assignments to high- or low-spending supervising physicians explain little if any variation.EmailPrintFacebookTumblrLinkedInTwitterReddit 2 February 2016 at 5:21 pm Peter G. Klein 2 comments Popular Economics Readings | Peter Klein |The Open Syllabus Project is a useful repository of course reading lists from almost every academic discipline. (Hey, we had the idea first!) A fun feature is the ability to browse by popularity, i.e., to see the most frequently assigned readings in a particular field. Of course, the sample consists of syllabi posted on public websites, so it may be biased toward particular kinds of courses or universities. Still, the findings are interesting. This article complains that The Communist Manifesto is near the top across all disciplines, but confusingly bounces back and forth between economics and other fields and doesn t distinguish among textbooks, research monographs, and research articles.I made my own list of most popular items under Economics, excluding textbooks and other non-research materials. The results are interesting:Coase, The Problem of Social Cost Smith, The Wealth of NationsKeyness, The General TheoryHardin, The Tragedy of the Commons Marx, CapitalPritchett, Divergence, Big Time Coase, The Nature of the Firm Tiebout, A Pure Theory of Local Expenditures Akerlof, The Market for Lemons Hayek, The Use of Knowledge in Society North, Institutions, Institutional Change, and Economic PerformanceFriedman, Capitalism and FreedomStiglitz, Globalization and Its DiscontentsFriedman, Monetary Policy Solow, A Contribution to the Theory of Economic Growth David, Clio and the Economics of QWERTY Spence, Job Market Signaling Marx, Communist ManifestoDornbusch, Expectations and Exchange Rate Dynamics Easterly, The Elusive Quest for GrowthFriedman, The Role of Monetary Policy Grossman and Helpman, Protection for Sale Diamond, Social Security Kremer, Population Growth and Technological Change: One Million B.C. to 1990 Stigler, The Theory of Economic Regulation Freeman, Are Your Wages Set in China? Duflo, Schooling and Labor Market Consequences of School Construction in Indonesia Arrow, Uncertainty and the Welfare Effects of Medical Care Rogoff, The Purchasing Power Parity Puzzle Barro, Are Government Bonds Net Worth? Pretty much all classics, and not surprising to see any on a reading list. But some surprising omissions. No Samuelson, Becker, Lucas, Krugman, Sargent, Kahneman, or Fama, just to mention a few Nobelists. No Shleifer, Tirole, Mankiw, Holmstrom, Simon, Jensen, Kreps, Alchian, Demsetz, and others with highly cited SSCI or RePEC papers. Of course, these are undergraduate as well as graduate syllabi, so highly technical articles assigned to PhD students are less likely to make the cut. Still, this might be a good Books and Articles Every Economist Should Know kind of list.EmailPrintFacebookTumblrLinkedInTwitterReddit 29 January 2016 at 3:41 pm Peter G. Klein 1 comment Is Terrorism aDisease? | Peter Klein |US Defense Secretary Ash Carter is making the rounds with a speech about ISIL being a cancer that must be cured with aggressive treatment. [L]ike all cancers, you can’t cure the disease just by cutting out the tumor. You have to eliminate it wherever it has spread, and stop it from coming back. . . . . [We have] three military objectives: One, destroy the ISIL parent tumor in Iraq and Syria by collapsing its two power centers in Mosul, Iraq and Raqqah, Syria. . . . Two, combat the emerging metastases of the ISIL tumor worldwide wherever it appears. . . . Terrorism, in other words, is a cancer metastasizing from the underlying tumor of Islamic fundamentalism.This language may rally the troops, but it is particularly unhelpful in understanding the nature, antecedents, consequences, and remedy for terrorism. As Robert Pape, Alan Krueger, and other social scientists have shown, terrorism is a tactic, a form of purposeful human action, and should be understood as such, not as a mindless, undirected biological phenomenon.Edith Penrose warned more than sixty years ago about the limits of biological analogies in understanding social issues. The chief danger of carrying sweeping analogies very far is that the problems they are designed to illuminate become framed in such a special way that significant matters are frequently inadvertently obscured. Biological analogies contribute little either to the theory of price or to the theory of growth and development of firms and in general tend to confuse the nature of the important issues. I have written before about the problem of treating gun violence as a disease, rather than a legal, social, and criminological issue. To understand why people shoot guns, on purpose or accidentally, we need to focus on their preferences, beliefs, and actions. (This does not imply some kind of straw-man rationality, by the way.) Likewise, if we want to reduce terrorist acts, we should treat terrorism as a military tactic, designed to achieve specific ends, rather than a disease or epidemic whose growth we have to stop.Update (27 Jan): From David Levine I learn of another example of a medical researcher trying to address a social science problem without apparently understanding the concept of selection bias (he samples on the dependent variable).EmailPrintFacebookTumblrLinkedInTwitterReddit 26 January 2016 at 12:06 pm Peter G. Klein Leave a comment SMACK-down of Evidence-BasedMedicine | Peter Klein |As a skeptic of the evidence-based management movement (championed by Pfeffer, Sutton, et al.) I was amused by a recent spoof article in the Journal of Evaluation in Clinical Practice, Maternal Kisses Are Not Effective in Alleviating Minor Childhood Injuries (Boo-Boos): A Randomized, Controlled, and Blinded Study, authored by the Study of Maternal and Child Kissing (SMACK) Working Group. Maternal kisses were associated with a positive and statistically significant increase in the Toddler Discomfort Index (TDI):Maternal kissing of boo-boos confers no benefit on children with minor traumatic injuries compared to both no intervention and sham kissing. In fact, children in the maternal kissing group were significantly more distressed at 5 minutes than were children in the no intervention group. The practice of maternal kissing of boo-boos is not supported by the evidence and we recommend a moratorium on the practice.The actual author, Mark Tonelli, is a prominent critic of evidence-based medicine, described by the journal s editor as a collapsing movement and in a recent British Journal of Medicine editorial as a  movement in crisis.  Most of the criticisms of evidence-based medicine will sound familiar to Austrian economists: overreliance on statistically significant, but clinically irrelevant, findings in large samples; failure to appreciate context and interpretation; lack of attention to underlying mechanisms rather than unexplained correlations; and a general disdain for tacit knowledge and understanding.My guess is that evidence-based management, which is modeled after evidence-based medicine, is in for a similarly rocky ride. Teppo had some interesting orgtheory posts on this a few years ago (e.g., here and here). Evidence-based management has been criticized, as you might expect, by critical theorists and other postmodernists who don t like the concept of evidence per se but the real problems are more mundane: what counts as evidence, and what conclusions can legitimately be drawn from this evidence, are far from obvious in most cases. Particularly in entrepreneurial settings, as we ve written often on these pages, intuition, Verstehen, or judgment may be more reliable guides than quantitative, analytical reasoning.Update: Thanks to Ivan Zupic for pointing me to a review and critique of EBM in the current issue of AMLE. EmailPrintFacebookTumblrLinkedInTwitterReddit 2 January 2016 at 5:06 pm Peter G. Klein Leave a comment Azoulay on StarScientists | Peter Klein |Pierre Azoulay has written a number of important and interesting papers on the economics and sociology of science: How does teamwork effect science? What are the relationships among scientists and students, collaborators, and rivals? A new paper with Christian Fons-Rosen, Joshua S. Graff Zivin looks at the unexpected death of a star scientist to identify the (exogenous) impact of the star s research on her field. The main result that stars matter is perhaps not surprising, but the magnitude of the effect is remarkable.Consistent with previous research, the flow of articles by collaborators into affected fields decreases precipitously after the death of a star scientist (relative to control fields). In contrast, we find that the flow of articles by non-collaborators increases by 8% on average. These additional contributions are disproportionately likely to be highly cited. They are also more likely to be authored by scientists who were not previously active in the deceased superstar’s field. Overall, these results suggest that outsiders are reluctant to challenge leadership within a field when the star is alive and that a number of barriers may constrain entry even after she is gone.Read the whole thing, as well as related work by Toby Stuart, Joshua Graff Zivin, and others.Update: Here is a non-technical summary on Vox.com.EmailPrintFacebookTumblrLinkedInTwitterReddit 14 December 2015 at 12:14 pm Peter G. Klein 2 comments Can Junior Scholars Do RiskyResearch? | Peter Klein |The AOM s Entrepreneurship Division listserv has been featuring an interesting discussion on the incentives facing junior (and senior) scholars for doing high-risk research. To be sure, most early-career scholars focus on making incremental contributions to well-established research programs; after securing tenure, the argument goes, they can be bolder and more experimental. The problem is that, in many academic fields, junior scholars have the greatest capacity for novelty and creativity (in mathematics, for example, you may be past your prime at 35). I m not sure this true in the social sciences, which may place too much emphasis on clever technique over mature reasoning. But certainly many academics worry that the need to publish or perish makes it difficult for junior scholars to take chances, to the detriment of scientific progress.I really liked Jeff McMullen s comments on the problem, reproduced here with permission:Dean Shepherd and I wrote a paper about this issue several years ago, which grappled with some of these issues, especially what “risky research” means to tenure track researchers. Here’s the reference:McMullen, J. S., Shepherd, D. A. (2006). Encouraging Consensus‐Challenging Research in Universities. Journal of Management Studies, 43(8), 1643-1669.I wanted to write that paper because I was starting off my career and wanted to do consensus-challenging research, but I also wanted to understand the consequences of employing such a career strategy. Much of what Dean and I discovered in that research has only intensified over the years as competitive pressures have made institutional incentives that much more uniform.The challenge for me personally, however, is not the incentives and institutional pressures; instead, it is having the moral courage to conduct research that I believe is important and valuable even though I know the academy may not yet value it, at least not yet. Will I be able to meet the high productivity bar of my colleagues whose research or approach is more mainstream? Some of us are drawn to topics that are mainstream (count your blessings you lucky dogs), but some of us just have to let our freak flags fly. What is the cost of doing research we care about and do we have the courage to pay this price?Like other innovations, consensus-challenging research is uncertain. Just like routine must be the norm for innovation to mean anything, incremental, consensus building research has to be the norm for any notion of uncertain, consensus-challenging research to make sense. Sometimes uncertainty bearing pays off economically, but more often it does not. Therefore, uncertain payoffs are likely to be motivated by incentives that are not economic e.g., intrinsic motivation such as intellectual curiosity or feeling like we have said something original if that’s even possible. Perhaps, this is how it should be.So, the real question for me is and has been through much of my career: how much is it worth to me in terms of institutional status, job security, promotion, or raises to forgo incremental publications and the accolades that come with those to write papers I care about? What is the optimal blend that I might stay employed yet truly care deeply about what I write? Can I live with socio-emotional costs of not being as productive as my colleagues?For the most part, I have been blessed to be surrounded by colleagues who have valued me and what I do, but I also sought to work for institutions and with colleagues who I believed valued what I valued or at least had that capacity.Can the system be better? Absolutely, it could be more forgiving. We could lower the institutional costs of innovative research.  But, the system only has as much power as you and I choose to give it over our hearts and minds.  Great leaders throughout history ranging from Jesus to Gandhi to King to Mandela have confronted a similar choice between compliance and civil disobedience and have had the moral courage to choose civil disobedience despite consequences that dwarf what you and I face. Changing the system starts first with having the moral courage to make peace with the worst possible outcome and yet still having the conviction to advance what we believe in.So, let us ask what we might change “out there” to make science more inclusive, but let us not forget to ask what we need to change in ourselves. Like the entrepreneurs we study, meaningful work has a price, and may only be meaningful because it does.EmailPrintFacebookTumblrLinkedInTwitterReddit 4 December 2015 at 5:01 pm Peter G. Klein 2 comments Incentives, Ideology, and ClimateChange | Peter Klein |We ve written before on the institutions of scientific research which, like other human activities, involves expenditures of scarce resources, has benefits and costs that can be evaluated on the margin, and is affected by the preferences, beliefs, and incentives of scientific personnel (1, 2, 3). This sounds trite, but the view persists, especially among mainstream journalists, that science is fundamentally different, that scientists are disinterested truth-seekers immune from institutional and organizational constraints. This is the default assumption about scientists working within the general consensus of their discipline. By contrast, critics of the consensus position, whether inside our outside the core discipline, are presumed to be motivated by ideology or private interest.You don t need to be Thomas Kuhn, Imre Lakatos, or any modern historian or philosopher of science to find this asymmetry puzzling. But it is the usual assumption in particular areas, most notably climate science. A good example is this recent New York Times piece by Justin Gillis, Short Answers to Hard Questions About Climate Change. In response to the question, Why do people question climate change? Gillis gives us ideology and private interests.Most of the attacks on climate science are coming from libertarians and other political conservatives who do not like the policies that have been proposed to fight global warming. Instead of negotiating over those policies and trying to make them more subject to free-market principles, they have taken the approach of blocking them by trying to undermine the science.This ideological position has been propped up by money from fossil-fuel interests, which have paid to create organizations, fund conferences and the like. The scientific arguments made by these groups usually involve cherry-picking data, such as focusing on short-term blips in the temperature record or in sea ice, while ignoring the long-term trends.Ignore the saucy rhetoric (critics of the consensus view don t just question the theory or evidence, they attack climate science ), and note that for Gillis, opposition to the mainstream view is a puzzle to be explained, and the most likely candidates are ideology and special interests. Honest disagreement is ruled out (though earlier in the piece he recognizes the vast uncertainties involved in climate research). Why so many scientists, private and public organizations, firms, etc. support the mainstream position is not, in Gillis s opinion, worth exploring. It s Because Science. The fact that billions of dollars are flowing into climate research a flow that would slow to a trickle if policymakers believed that man-made carbon emissions are not contributing to global warming apparently has no effect on scientific practice. The fact that many climate-change proponents are, in general, ideologically predisposed to policies that impose greater government control over markets, that reduce industrial activity, that favor particular technologies and products over others is, again irrelevant.Of course, I m not claiming that climate scientists in or outside the mainstream consensus are fanatics or money-grubbers. I m saying you can t have it both ways. If ideology and private interests are relevant on one side of a debate, they re relevant on the other side as well. Perhaps the ideology and private interests of New York Times writers blind them to this simple point.EmailPrintFacebookTumblrLinkedInTwitterReddit 2 December 2015 at 5:45 pm Peter G. Klein 1 comment Yoram Barzel s Tribute to DougNorth A guest post by Yoram Barzel.Doug North, Some Reminiscences| By Yoram Barzel |By the time I arrived at the University of Washington in 1961, Doug had been there for a decade, and he stayed for two more. Moving from one Washington (the University of Washington in Seattle) to another Washington (Washington University in St. Louis) is confusing. Most people associate Doug’s career with Washington University in St. Louis, but it was in Seattle that he did the bulk of the work for which he won the Nobel Prize. His work is well known, and I focus on other aspects of his career and on personal memories.Doug got his PhD from Berkeley, and he was the first to admit that he hadn’t learned much there. Throughout his time in Seattle, when he needed advice when it came to economic analysis, he asked for it with great humility. Doug had a keen sense regarding which individuals to listen to, and it seems to me that this ability was a major contributor to his productiveness.The most prominent colleague to provide that advice was the late Don Gordon. Don is not well known, but he was great economist and the intellectual leader of the department. He cherished Doug’s great wisdom. Don persuaded Doug that the right way to do economic research was by testing hypotheses based on sound economic reasoning, and suggested to Doug to apply these in his economic history research; an almost revolutionary approach at the time. Equally revolutionary was Doug s requirement of his doctoral students to acquire these tools. Doug and Don became close colleagues and intellectual allies and remained lifetime friends.The tools that Don recommended weren’t in great supply at the UW economics department at that time, and Doug and Don fought hard in an essentially hostile environment to ensure that new hires would possess these skills. By the late 1950s they won the fight, most likely because Doug was an extremely skilled fighter. (more )EmailPrintFacebookTumblrLinkedInTwitterReddit 29 November 2015 at 11:54 pm Peter G. Klein 3 comments John Nye Remembers DougNorth A guest post by John V. C. Nye. A related version appears at Reason.| John Nye |Douglass Cecil North passed away at the age of 95 on Nov. 23, 2015 at his home in Michigan.  Joint recipient of the 1993 Alfred Nobel Memorial Prize in Economics, he will be remembered for his path breaking contributions to the field of economic history and his central role in creating the New Institutional Economics.  He spent most of his academic career at two institutions the University of Washington in Seattle, and Washington University in St. Louis.  For much of the last two decades, he also maintained an association with the Hoover Institution at Stanford University.Doug will be remembered for many things and others can go through his list of honors, awards, and accomplishments.  But for me, two things will always stand out his devotion to his students and his personal role in my life as mentor, colleague, and friend.On the first point, one could note the large number of great scholars who emerged under his supervision in both Seattle and St. Louis or those who were simply inspired by his teaching to pursue careers in academia.  But perhaps it is sufficient to observe that when the Jonathan Hughes Memorial Prize in teaching was instituted by the Economic History Society, North was the first recipient and an overwhelming favorite not least of which because Jon Hughes had been one of Douglass’s first graduate students.  On the day North received the Nobel prize, he cut off his interviewers to teach his regular courses, and reporters got a first-hand look at North the teacher. (more )EmailPrintFacebookTumblrLinkedInTwitterReddit 25 November 2015 at 10:29 am Peter G. Klein 2 comments Douglass C. North(1920-2015) | Peter Klein |I m sorry to report that Doug North passed away yesterday at the age of 95. North was a key figure in the cliometrics revolution which sought to apply neoclassical economic theory and quantitative methods to the study of economic history, for which he received a Nobel Prize. He was also a founder, along with Ronald Coase and Oliver Williamson, of the New Institutional Economics. His work on economic growth, the role of institutions on national and international economic performance, the relationship between economic and political institutions, and many other fields has been extremely influential.I don t yet see many obituaries online but they will appear soon in the usual places. Here are some previous O M posts on North. Here s his Wikipedia entry. We ll add some detailed commentaries soon.I met North at the inaugural ISNIE conference in St. Louis in 1997, and saw him occasionally after that. He was friendly and approachable and interested in the work of younger scholars. North was an interdisciplinary thinker but always considered himself an economist first and foremost. I remember a small-group dinner at which he revealed an interesting conversation among the founders of International Society for New Institutional Economics (now SIOE). Coase had proposed calling the new organization the International Society for New Institutional Social Science. North reported that he replied, Ronald, if you call it that, I will wish you well, but I won t ever attend! Here is a nice reminiscence from Mike Sykuta.Update: Here are obits in the NYT and WaPo. The former describes North in a way that makes economic history sound pretty interesting: a diminutive, effervescent bon vivant [who] indulged his interests in haute cuisine, photography, fast cars, flying his own plane, hunting, fishing, tennis, hiking and swimming, pursuing some of them into advanced age. (There is a story, perhaps apocryphal, about Washington University agreeing to pay North s moving expenses when he took a professorship in St. Louis, then finding out later that transporting his wine collection required a refrigerated truck costing tens of thousands of dollars.)Update 2: Here is Barry Weingast s reminiscence, which appeared originally at EH.Net.EmailPrintFacebookTumblrLinkedInTwitterReddit 24 November 2015 at 4:20 pm Peter G. Klein Leave a comment Patents for InstitutionalInnovation | Dick Langlois |I was fascinated to learn about the recent ballot proposal in Ohio to legalize marijuana by constitutional amendment. The unusual aspect of the proposal was that it would have come with a grant of a monopoly in commercial marijuana production to specific investors who owned suitable land. Because they stood to gain considerably from passing the proposal, these investors devoted resources to getting it passed, including professional canvassers, political strategists, and even a mascot with a head shaped like a marijuana bud. Basic Public Choice teaches that legislation benefiting many diffuse constituents is hard to pass because of transaction costs. In effect, the monopoly aspect of the Ohio proposal would have granted a patent to the investors, thus giving them the incentive to overcome the transaction costs of collective action. The proposal failed, and at the same time Ohio voters passed an amendment forbidding the use of ballot initiatives for personal gain. It is interesting nonetheless to think about the economics of such patents for institutional innovation.EmailPrintFacebookTumblrLinkedInTwitterReddit 4 November 2015 at 3:22 pm Dick Langlois 1 comment Privacy Cookies: This site uses cookies. By continuing to use this website, you agree to their use. To find out more, including how to control cookies, see here: Cookie Policy

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