Methodology – Page 19 – artdiamondblog.com

Richard Langlois on Why Capitalism Needs the Entrepreneur

Source of book image: http://www.amazon.com/Dynamics-Industrial-Cpitalism-Schumpeter-Lectures/dp/0415771676/ref=sr_11_1?ie=UTF8&qid=1204828232&sr=11-1

Schumpeter is sometimes viewed as having predicted the obsolescence of the entrepreneur, although Langlois documents that Schumpeter was always of two minds on this issue.
Langlois discusses Schumpeter’s ambivalence and the broader issue of the roles of the entrepreneur and the corporation in his erudite and useful book on The Dynamics of Industrial Capitalism. He concludes that changing economic conditions will always require new industrial structures, and the entrepreneur will always be needed to get these new structures built.
(I have written a brief positive review of the book that has recently appeared online.)

Reference to Langlois’ book:
Langlois, Richard N. The Dynamics of Industrial Capitalism: Schumpeter, Chandler and the New Economy. London: Routledge, 2006.

Reference to my review of Langlois’ book:
Diamond, Arthur M., Jr. “Review of Richard N. Langlois, The Dynamics of Industrial Capitalism: Schumpeter, Chandler and the New Economy.” EH.Net Economic History Services, Aug 6 2009. URL: http://eh.net/bookreviews/library/1442

Apparently Langlois likes my review:
http://organizationsandmarkets.com/2009/08/07/another-nanosecond-of-fame/

“Richard N. Langlois.” Source of photo and caption: http://www.clas.uconn.edu/facultysnapshots/images/langlois.jpg

The Epistemological Implications of Wikipedia

Source of book image: online version of the WSJ review quoted and cited below.

I think the crucial feature of Wikipedia is in its being quick (what “wiki” means in Hawaiian), rather than in its current open source model. Academic knowledge arises in a slow, vetted process. Publication depends on refereeing and revision. On Wikipedia (and the web more generally) knowledge is posted first, and corrected later.
In the actual fact, Wikipedia’s coverage is vast, and its accuracy is high.
I speculate that Wikipedia provides clues to developing new, faster, more efficient knowledge generating institutions.
(Chris Anderson has a nice discussion of Wikipedia in The Long Tail, starting on p. 65.)

(p. A13) Until just a couple of years ago, the largest reference work ever published was something called the Yongle Encyclopedia. A vast project consisting of thousands of volumes, it brought together the knowledge of some 2,000 scholars and was published, in China, in 1408. Roughly 600 years later, Wikipedia surpassed its size and scope with fewer than 25 employees and no official editor.

In “The Wikipedia Revolution,” Andrew Lih, a new-media academic and former Wikipedia insider, tells the story of how a free, Web-based encyclopedia — edited by its user base and overseen by a small group of dedicated volunteers — came to be so large and so popular, to the point of overshadowing the Encyclopedia Britannica and many other classic reference works. As Mr. Lih makes clear, it wasn’t Wikipedia that finished off print encyclopedias; it was the proliferation of the personal computer itself.
. . .
By 2000, both Britannica and Microsoft had subscription-based online encyclopedias. But by then Jimmy Wales, a former options trader in Chicago, was already at work on what he called “Nupedia” — an “open source, collaborative encyclopedia, using volunteers on the Internet.” Mr. Wales hoped that his project, without subscribers, would generate its revenue by selling advertising. Nupedia was not an immediate success. What turned it around was its conversion from a conventionally edited document into a wiki (Hawaiian for “fast”) — that is, a site that allowed anyone browsing it to edit its pages or contribute to its content. Wikipedia was born.
The site grew quickly. By 2003, according to Mr. Lih, “the English edition had more than 100,000 articles, putting it on par with commercial online encyclopedias. It was clear Wikipedia had joined the big leagues.” Plans to sell advertising, though, fell through: The user community — Wikipedia’s core constituency — objected to the whole idea of the site being used for commercial purposes. Thus Wikipedia came to be run as a not-for-profit foundation, funded through donations.
. . .
It is clear by the end of “The Wikipedia Revolution” that the site, for all its faults, stands as an extraordinary demonstration of the power of the open-source content model and of the supremacy of search traffic. Mr. Lih observes that when “dominant encyclopedias” were still hiding behind “paid fire walls” — and some still are — Wikipedia was freely available and thus easily crawled by search engines. Not surprisingly, more than half of Wikipedia’s traffic comes from Google.

For the full review, see:
JEREMY PHILIPS. “Business Bookshelf; Everybody Knows Everything.” Wall Street Journal (Weds., March 18, 2009): A13.
(Note: ellipses added.)

The book being reviewed, is:
Lih, Andrew. The Wikipedia Revolution: How a Bunch of Nobodies Created the World’s Greatest Encyclopedia. New York: Hyperion, 2009.

RIP Marjorie Grene, Who Helped Polanyi with Personal Knowledge

“Marjorie Grene in 2003.” Source of photo and caption: online version of the NYT obituary quoted and cited below.

The NYT reported, in the obituary quoted below, that philosopher Marjorie Grene died on March 16, 2009, at the age of 93.
Although I studied philosophy at the University of Chicago, my time there did not overlap with Marjorie Grene’s and I don’t believe that I ever met her, or ever even heard her speak (though I did occasionally walk past her former husband David Grene, on my way to talk to Stephen Toulmin).
I am increasingly appreciating Michael Polanyi’s book Personal Knowledge in which he introduced his view of what he called “tacit knowledge.” In particular, I am coming to believe that tacit knowledge is very important in understanding the role and importance of the entrepreneur.
So if Marjorie Grene was crucial to Personal Knowledge, as is indicated in the obituary quoted below, then she is deserving of serious consideration, and high regard.

(p. 23) In Chicago, she had met Michael Polanyi, a distinguished physical chemist turned philosopher; she ended up helping him research and develop his important book “Personal Knowledge” (1958). The book proposed a far more nuanced, personal idea of knowledge, and directly addressed approaches to science.

“There is hardly a page that has not benefited from her criticism,” Dr. Polanyi wrote in his acknowledgments. “She has a share in anything I may have achieved here.”
. . .
Her sense of humor sparkled when she was asked about being the first woman to have an edition of the Library of Living Philosophers devoted to her — Volume 29 in 2002. Previous honorees included Bertrand Russell and Einstein. “I thought they must be looking desperately for a woman,” Dr. Grene said.

For the full obituary, see:
DOUGLAS MARTIN. “Marjorie Grene, a Leading Philosopher of Biology, Is Dead at 98.” The New York Times, First Section (Sun., March 29, 2009): 23.
(Note: ellipsis added.)

The reference for the Polanyi book, is:
Polanyi, Michael. Personal Knowledge: Towards a Post-Critical Philosophy. Chicago: University Of Chicago Press, 1958.

Bacon Died Experimenting and Hegel Died Contradicting Himself

(p. C32) The philosopher Francis Bacon, that great champion of the empirical method, died of his own philosophy: in an effort to observe the effects of refrigeration, on a freezing cold day he stuffed a chicken with snow and caught pneumonia.

As a philosopher dies, so he has lived and believed. And from the manner of his dying we can understand his thinking, or so the philosopher Simon Critchley seems to be saying in his cheekily titled “Book of Dead Philosophers.”
. . .
Mr. Critchley recounts that Voltaire, after decades of denouncing the Roman Catholic Church, announced on his deathbed that he wanted to die a Catholic. But the shocked parish priest kept asking him, “Do you believe in the divinity of Christ?” Voltaire begged, “In the name of God, Monsieur, don’t speak to me any more of that man and let me die in peace.”
Hegel, who, as much as any philosopher, Mr. Critchley says, saw philosophy as an abstraction, while he was dying of cholera, moaned, “Only one man ever understood me … and he didn’t understand me.”

For the full review, see:

DINITIA SMITH. “Books of The Times – Dying and Death: When You Sort It Out, What’s It All About, Diogenes?” The New York Times (Fri., January 30, 2009): C32.
(Note: ellipsis between paragraphs was added; ellipsis in Hegel quote was in original.)

The reference to Critchley’s book, is:
Critchley, Simon. The Book of Dead Philosophers. New York: Vintage Books, 2009.

More Accurate Measurements Reveal Previously Undetected Anomalies

(p. 69) This is a standard pattern in the history of science: when tools for measuring increase their precision by orders of magnitude, new paradigms often emerge, because the newfound accuracy reveals anomalies that had gone undetected. One of the crucial benefits of increasing the accuracy of scales is that it suddenly became possible to measure things that had almost no weight. Black’s discovery of fixed air, and its perplexing mixture with common air, would have been impossible without the state-of-the-art scales he employed in his experiments. The whole inquiry had begun when Black heated a quantity of white magnesia, and discovered that it lost a minuscule amount of weight in the process–a difference that would have been imperceptible using older scales. The shift in weight suggested that something was escaping from the magnesia into the air. By then running comparable experiments, heating a wide array of substances, Black was able to accurately determine the weight of carbon dioxide, and consequently prove the existence of the gas. It weighs, therefore it is.

Source:
Johnson, Steven. The Invention of Air: A Story of Science, Faith, Revolution, and the Birth of America. New York: Riverhead Books, 2008.

Magdeburg Sphere Let Scientists “See” the Vacuum

(p. 68) When we think of technological advances powering scientific discovery, the image that conventionally comes to mind is a specifically visual one: tools that expand the range of our vision, that let us literally see the object of study with new clarity, or peer into new levels of the very distant, the very small. Think of the impact that the telescope had on early physics, or the microscope on bacteriology. But new ways of seeing are not always crucial to discovery. The air pump didn’t allow you to see the vacuum, because of course there was nothing to see: but it did allow you to see it indirectly, in the force that held the Magdeburg Sphere together despite all that horsepower.

Source:
Johnson, Steven. The Invention of Air: A Story of Science, Faith, Revolution, and the Birth of America. New York: Riverhead Books, 2008.

Frazer Institute Seeks Better Measures of Policy Variables

George Gilder emphasizes that the importance of entrepreneurship to economic growth has been missed by many economists, in part because of the difficulty of measuring both the inputs of entrepreneurship (e.g., courage, persistence, creativity, etc.) and the outputs of entrepreneurship (e.g., happiness from more challenging work, greater variety of products, etc.).
Unfortunately this is not just an academic problem, because economists’ policy advice is based on their models, and their models focus on what they can measure. If they can’t measure entrepreneurship, then policies to encourage entrepreneurship are neglected.
Now the Frazer Institute, is seeking proposals to improve the measurement of important poorly measured policy-relevant variables. This initiative is in the spirit of the good work that the Frazer Institute has done in correlating measures of economic freedom with measures of economic growth.
I have been asked to publicize this initiative, and am pleased to do so:

Dear Art Diamond,

The Fraser Institute is launching a new contest to identify economic and public policy issues which still require proper measurement in order to facilitate meaningful analysis and public discourse. We hope you can help promote this contest by posting it on your weblog, artdiamondblog.
The Essay Contest for Excellence in the Pursuit of Measurement is an opportunity for the public to comment on an economic or public policy issue that they feel is important and deserves to be properly measured.
A top prize of $1,000 and other cash prizes can be won by identifying a vital issue that is either not being measured, or is being measured inappropriately. Acceptable entry formats include a short 500-600 word essay, or a short one-minute video essay.
Complete details and a promotional flyer are available at: http://www.fraserinstitute.org/programsandinitiatives/measurement_center.htm.
Entry deadline is Friday, May 15th, 2009.
Sponsored by the R.J. Addington Center for the Study of Measurement.

Enquiries may be directed to:
Courtenay Vermeulen
Education Programs Assistant
The Fraser Institute
Direct: 604.714.4533
courtenay.vermeulen@fraserinstitute.org

The Fraser Institute is an independent international research and educational organization with offices in Canada and the United States and active research ties with similar independent organizations in more than 70 countries around the world. Our vision is a free and prosperous world where individuals benefit from greater choice, competitive markets, and personal responsibility. Our mission is to measure, study, and communicate the impact of competitive markets and government interventions on the welfare of individuals.

An important source of Gilder’s views, obliquely referred to in my comments above, is:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

An Intellectual Collaboration Beyond the Grave

There is something touchingly noble in this:

(p. 11) There is no direct evidence in the historical record, but it is entirely probable that it was the waterspout sighting that sent Priestley off on his quest to measure the temperature of the sea, trying to marshal supporting evidence for a passing conjecture his friend had made a decade before. Franklin had been dead for nearly four years, but their intellectual collaboration continued, undeterred by war, distance, even death.

Source:
Johnson, Steven. The Invention of Air: A Story of Science, Faith, Revolution, and the Birth of America. New York: Riverhead Books, 2008.

Steven Johnson’s The Invention of Air

Source of book image: http://stevenberlinjohnson.typepad.com/photos/uncategorized/2008/09/10/invention_final_81908.jpg

Steven Johnson’s The Ghost Map, about the determined entrepreneurial detective work that uncovered the cause of cholera, is one of my all-time favorite books, so I am now in the mode of reading everything else that Steven Johnson has written, or will write.
The most recent book, The Invention of Air, is not as spectacular as The Ghost Map, but is well-written on a thought-provoking topic. It focuses on Joseph Priestley’s role in the American Revolution. Priestley is best known as an early chemist, but Johnson paints him as a poly-math whose science was of a piece with his philosophy, politics and his religion.
Johnson’s broader point is that for many of the founding fathers, science was not a compartment of their lives, but part of the whole cloth (hey, it’s my blog, so I can mix as many metaphors as I want to).
And the neat bottom line is that Priestley’s method of science (and polity) is the same broadly empirical/experimental/entrepreneurial method that usually leads to truth and progress.
Along the way, Johnson makes many amusing and thought-provoking observations, such as the paragraphs devoted to his coffee-house theory of the enlightenment. (You see, coffee makes for clearer thinking than beer.)

The book:
Johnson, Steven. The Invention of Air: A Story of Science, Faith, Revolution, and the Birth of America. New York: Riverhead Books, 2008.

Financial Crisis Is “A Coming-Out Party” for Taleb and Behavioral Economists

(p. A23) My sense is that this financial crisis is going to amount to a coming-out party for behavioral economists and others who are bringing sophisticated psychology to the realm of public policy. At least these folks have plausible explanations for why so many people could have been so gigantically wrong about the risks they were taking.

Nassim Nicholas Taleb has been deeply influenced by this stream of research. Taleb not only has an explanation for what’s happening, he saw it coming. His popular books “Fooled by Randomness” and “The Black Swan” were broadsides at the risk-management models used in the financial world and beyond.

In “The Black Swan,” Taleb wrote, “The government-sponsored institution Fannie Mae, when I look at its risks, seems to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup.” Globalization, he noted, “creates interlocking fragility.” He warned that while the growth of giant banks gives the appearance of stability, in reality, it raises the risk of a systemic collapse — “when one fails, they all fail.”

Taleb believes that our brains evolved to suit a world much simpler than the one we now face. His writing is idiosyncratic, but he does touch on many of the perceptual biases that distort our thinking: our tendency to see data that confirm our prejudices more vividly than data that contradict them; our tendency to overvalue recent events when anticipating future possibilities; our tendency to spin concurring facts into a single causal narrative; our tendency to applaud our own supposed skill in circumstances when we’ve actually benefited from dumb luck.

And looking at the financial crisis, it is easy to see dozens of errors of perception. Traders misperceived the possibility of rare events. They got caught in social contagions and reinforced each other’s risk assessments. They failed to perceive how tightly linked global networks can transform small events into big disasters.

Taleb is characteristically vituperative about the quantitative risk models, which try to model something that defies modelization. He subscribes to what he calls the tragic vision of humankind, which “believes in the existence of inherent limitations and flaws in the way we think and act and requires an acknowledgement of this fact as a basis for any individual and collective action.” If recent events don’t underline this worldview, nothing will.

For the full commentary, see:
DAVID BROOKS. “The Behavioral Revolution.” The New York Times (Tues., October 28, 2008): A31.

The reference to Taleb’s Black Swan book is:
Taleb, Nassim Nicholas. The Black Swan: The Impact of the Highly Improbable. New York: Random House, 2007.

Another review of Taleb’s book is:
Diamond, Arthur M., Jr. “Review of: Taleb, Nassim Nicholas. The Black Swan.” Journal of Scientific Exploration 22, no. 3 (Fall 2008): 419-422.