I only met Ronald Coase once, and quite by accident. But it was one of those memories that sticks with you.
I was working in the reading room of the Special Collection Research Center at the University of Chicago’s Regenstein Library. It was probably the summer of 1996, and I was of course working on Frank Knight’s materials. Mid-afternoon, an elderly gentleman came in and sat down at the table next to mine. A number of people were working in the reading room, so I didn’t particularly take notice of this man. I only noticed, out of the corner of my eye, that he was reading a book, rather than looking at archived papers.
At some point I looked around me and realized that the man reading beside me was none other than Ronald Coase. Of course, I tried to see (without staring!) what he was reading, but the book was resting on the foam book supports the Research Center provides for those reading rare books to protect the bindings. I kept looking over from time to time to see if I could read the title, but never did.
I took a break around 3 pm, and went outside to enjoy the sunshine for a few moments. As I walked back in, Professor Coase was walking down the hallway leading out of the Research Center. I introduced myself, figuring that our mutual interest in Frank Knight would allow such an introduction, and asked him what he had been reading. In his soft unassuming voice, he said,
“I was just checking to make sure I had a quotation from the first edition of Pigou’s The Economics of Welfare correct.”
As he walked away, I couldn’t decide which surprised me more: that he didn’t own a first edition of Pigou’s famous book himself (I do!), or that he would even check to see if he had the quote right!
What is liberty? What does it mean to be free? How do we assure a free society?
On Wednesday, November 16th, I open a series of talks at James Madison College on Liberty. Here is the information. My talk will be on Liberty in Classical Liberalism.
The James Madison College Student Senate and MSU’s Young Americans for Liberty are pleased to invite you to a speaker series defending the importance of freedom, however it may be conceived. From communism to anarchy, be prepared for a lively discussion on the meaning of liberty.
Come hear Professor Ross Emmett open the series with a conversation on the meaning of classical liberalism in modern society.
6:30pm on Wednesday the 16th of November in room 331 Case Hall.
I am quoted in this article from the Lansing State Journal on grade inflation.
Michigan State sees ample “A’s” in recent years, by Matt Miller, which appeared today, September 11, 2011.
A companion article also appeared: MSU’s school of music, education lead the pack with most 4.0s
A useful addition to this discussion is Rachel Penn’s and my article on grade inflation at James Madison College.
Jeanne Hoffman interviews me about my book.
The following was posted on the SHOE email list earlier today.
Warren Samuels passed away yesterday at his home in Gainesville, Florida. Warren was an eminent historian of economic thought, whose work ranged across the field’s breadth. His first published works in the field were a pair of articles on the physiocratic system (published in the Quarterly Journal of Economics) that served to reshape thinking about the physiocratic view of the economic role of the state. On the other end of the time spectrum, he was a pioneer in doing and encouraging work on the history of post-war economics. This breadth of scholarship is exemplified nicely in the book that he completed not long before his death, Erasing the Invisible Hand: Essays on an Elusive and Misguided Concept in Economics, which was brought to completion with the assistance of Marianne Johnson and will be released by Cambridge University Press in September. We’ve suffered a great loss as an intellectual community in his passing.
Many of you knew Warren well, so there is no need to rehearse at length his publications or his forays into many other areas of economics. Warren was one of the first historians of economics to treat the history of economics as a branch of intellectual history. This was, for him, a part of the larger intellectual conversation about the role of governments and markets in modern society that was his lifelong pursuit. His well-known studies of policy in classical economics (The Classical Theory of Economic Policy) and in Pareto (Pareto on Policy) were major contributions to that discussion. His perspective had a significant effect on the students who studied with him over the years, and on those of us who were the recipients of his comments and advice at conferences and via correspondence.
From the outset of his career, Warren recognized the importance to the intellectual historian of correspondence, course notes, unpublished manuscripts, public lectures, etc. What we now collectively refer to as archival materials. Not only did he promote the use of these materials in historical research, but he also amassed an extensive personal collection of these materials, which he began to publish in 1989 in archival supplements to Research in the History of Economic Thought & Methodology. The very first supplement contained the notes he had obtained from economist Robert L. Hale and Sinologist Homer H. Dubs of John Dewey’s course on Moral and Political Philosophy at Columbia University. The second supplement contains the only authorized publication of Frank Knight’s infamous lecture on “The Case for Communism.” Warren and George Stigler went back and forth for some time regarding the publication of that piece! Dewey and Knight were, perhaps not surprisingly, two of Warren’s intellectual heroes. The materials he amassed will continue to be published in the research annual for many years to come. His collection of photographs of economists is already available online from the Center for the History of Political Economy at Duke University.
Warren was also a tireless editor of volumes that touched upon almost any aspect of his wider interests. I have lined up on my bookshelf over 80 volumes that he edited on the history of economics, economic methodology, or recent economic thought. Mine is probably not a complete set! All of these were undertaken to encourage scholarship in areas that interested him (and, by extension, which he thought would interest others). Many of them are also the means by which he encouraged the work of young scholars.
Many of us experienced his generosity to students, young scholars and anyone else who wanted to join the great conversation. His goal and passion was to broaden and enrich that conversation, and he was as happy to engage in conversation with a young scholar as he was with a Nobel laureate. To that end, he and Sylvia made a substantial contribution to the History of Economics Society to endow its Young Scholars program.
Among the many professional societies to which he belonged, the History of Economics Society was always the one closest to Warren’s heart. He was a founding member of the Society, and served as its 8th President. The Society honored him in 1997 with its Distinguished Fellow award; two years earlier he was the recipient of the Association for Evolutionary Economics Veblen-Commons Award. He was the long-time editor of the Journal of Economic Issues and the founding editor of Research in the History of Economic Thought & Methodology.
I wish to acknowledge the helpful advice I received from Jeff Biddle, Marianne Johnson and Steve Medema.
I’ve been reading Edward Glaeser’s Triumph of the City (Penguin, 2011): an excellent read and quite accessible for general audiences.
Glaeser makes three claims I’d like to discuss. The first is in his subtitle: the city is “our greatest invention.” The second is that cities are central to human flourishing; and the third, which he tells us lies behind both of the first two claims, is that “ideas spread easily in dense environments” (ironically, this core claim only appears in Glaeser’s acknowledgements, so those interested in the thinking behind his book may miss it!).
I disagree with Glaeser’s first claim, and largely agree with the other two, although the nature of my disagreement with the first claim will modify both of the other claims. Let me explain.
Humanity’s greatest invention is language. Glaeser may, of course, simply respond by saying that language is natural to humans, while he is concerned with that which is human-created. But it is that natural-artificial divide that led Rousseau to identify cities as “the abyss of the human species” (a quote Glaeser uses) because they are artificial, and also to argue that language must have begun as an expression of human emotion (a raw, natural act, like a song from a song-bird) rather than as product of human rationality. Clearly, Glaeser doesn’t want to join Rousseau, so perhaps he’ll have to agree with me. In any case, his discussions of place and the evolution of cities sound a lot like discussions of the evolution of language and of its diversity across the human race.
Without language, humans would be reduced to managing the various relationships of existence via reciprocity—the highest form of social collaboration commonly found among other animals. Reciprocal relationships—I’ll scratch your back if you scratch mine—can be quite complex, but because they involve exchanging A for A, cannot take us far toward either exchanging complex ideas or creating “dense environments.” Cities, certainly, don’t appear from reciprocity. For that, we’d need to take relationships beyond reciprocity; and language is the key to the “beyond.” And since both Glaeser and I are economists, I can add that reciprocity is different than economic exchange—trading A for X (getting into why trade is not reciprocity would take us too far away from our topic, but I can illustrate the issues by merely pointing out that X need not only be a different good than A, it may not even be a good, and it may not be in the same place, or at the same time). Trade, as Adam Smith realized long ago, is deeply connected to language and both are fundamental to making humanity, as Robert Malthus once said, “a peculiar animal.” In short, no language or trade, no cities.
The fact that Glaeser takes language for granted is signaled by his third claim: dense environments promote the spread of ideas. He might as well say, lots of talk promotes the spread of ideas. Density is only possible because humans can talk, and greater density enables even more talk. As long as we assume that ideas spread via talk, then density facilitates the spread of ideas.
It was this argument that led me to pick up Glaeser’s book in the first place. I thought he could help me understand better how cities function as “hubs,” “hotspots,” or “incubators” for innovation. And he does: he makes a persuasive case that because cities create a dense network, good ideas for all kinds of things that add value to our lives are more likely to appear and have a chance to succeed. This is how cities make us, as his sub-title says, “richer, smarter, greener, healthier, and happier.”
But as I read, I realized that Glaeser never really explains how “density” converts more ideas into good ideas that add value. After all, a dense human environment is as conducive to cheap talk as it is to good talk. And Frank Knight’s first law of talk may apply: “Talk is cheap and it drives out talk that is less cheap.” Flattery, sophistry, cajolery, publicity, huckstering, lobbying, deception, and the like are often associated with city life. Welcome to the Emerald City!
Glaeser never really addresses the problem of cheap talk. Instead, his analysis of cities implies that density, and the diversity of ideas it provides, serves a winnowing function for ideas: lots of ideas are tried out, those that succeed survive. Perhaps this is a heritage of his Chicago School training: markets always produce improvements, as long as we understand improvement to mean better satisfaction of what it is that people want. And I’m sympathetic to that argument.
But what if we want to improve the means by which people voluntarily find new and better wants? Isn’t that part of the reason we create cities? Can I be confident that increasing the density of cities will necessarily improve the quality of our social interactions? I have come to the point where I expect it will, but not only from market interactions. I don’t see in Glaeser a reason for me to be confident in my expectation. For this, we’re probably better off turning to Elinor Ostrom and Deirdre McCloskey. They at least have arguments for how talk, and especially cheap talk, plays a role in improving the outcomes of centrally uncoordinated human action. Ostrom’s Nobel lecture provides the basics of her argument; McCloskey’s “Bourgeois Era” series is building her case. Both contradict Knight, although perhaps in different ways.
For my own purposes, consideration of the importance of talk to innovation helps us understand why certain institutional features of a society – its appreciation for freedom of expression and association, its willingness to design around human action rather than direct action through design, etc. – as well non-institutional features, such as a society’s norms and common morality, play such an important role in making some societies innovative, and others not. More on that topic to come!
On Monday, April 4, 2011, I gave a lecture at James Madison College on Schumpeter’s notion of “creative destruction.” The lecture was sponsored by the MC Student Senate, whom I thank for the opportunity. The lecture was streamed live via ustream.
President Obama wants firms, labor unions and community colleges to work together to put students to work. His grand idea is that firms will tell community colleges what skills they need in new workers, government will fund community college expansion of skill education, and labor unions will cooperate in allowing firms to expand hiring. Several firms have already leapt onboard this plan: McDonalds and Gap, for example, although neither has a unionized workforce. The Gates Foundation is also involved, along with several other liberal education-oriented foundations.
A central problem with Obama’s grand idea is the simple fact that new jobs are usually created by new firms, not established ones. An NBER research paper issued in August 2010 by John C. Haltiwanger, Ron S. Jarmin, Javier Miranda showed that the prevailing wisdom among policy-makers that small firms create the most jobs is misleading. But it is also wrong to say that big firms create the most jobs. The authors argue that strongest indicator of new job creation is whether the firm is young, regardless of whether it is small or big.
Obama’s biggest challenge, then, is one he is not seeking to address: how can we connect college students to young firms?
That question was one the students in the Michigan Futures Seminar identified back in 2009 as a key issue for fostering a more entrepreneurial, innovative Michigan. The students in that seminar created Spotlight Michigan, which began to search for ways to connect students to young firms.
A couple of insights from the 2009 and 2010 versions of the Seminar, both of which developed ideas under the Spotlight Michigan theme, are relevant to President Obama’s idea. Both, however, suggest that throwing federal dollars at the problem will not particularly help.
Insight 1: New firms are not active student recruiters.
This does not mean they will not hire students, but instead that when they look for new employees, they tend to want to hire someone who has both a specific set of skills and the willingness to work in the “new firm” environment. They want a specific set of mechanical or IT skills, of course, which is why the President’s plan is aimed at community college education. But they also want someone who understands that new firms do not have the luxury of hiring you to do only one thing: you’re as likely to participate in a strategy session as you are to spend the day programming. And you may well have to put the coffee on and work long hours alongside owners and other employees from a wide age range.
Such an environment is exciting for some students, scary for others. The fact that 80% of new firms fail within less than 5 years also means that the student hires may well be looking for work again, soon.
Insight 2: Students do not know how to look for jobs with new firms
Ask a student to name a “new” firm, and they’re likely to name Facebook. In other words, most students have no idea what new firms look like, and they don’t know where or how to find those firms. Given insight 1 (new firms are not likely to be sitting between the US Army and IBM at the local career fair), and students’ general inexperience with the business world (having been in the classroom since they were 6), it is no wonder that students don’t consider working with new firms.
Spotlight Michigan has tried a number of ways of bridging the Great Divide between new firms and students. The lessons I take away from their experiences are twofold:
1) the most important thing we can do to link students with new firms is to make a personal connection between an entrepreneur and a student; and
2) encourage students to join young professional or entrepreneurial groups that informally kick around new ideas and spin companies and non-profits out, because that’s where they will meet the entrepreneurs starting new firms.
Neither of these lessons particularly needs the millions President Obama wants to throw at community colleges. Colleges are not really very good at either of these things anyway. And labor unions are not involved at all (why would they be? – they work to protect existing jobs at older firms, not create new jobs at new firms!). What it takes is local involvement of students, entrepreneurs and individuals who are willing to invest time and energy to link the two. In other words, it takes a community to raise entrepreneurial firms.