Saturday, January 25, 2003

Kieran Healy's blog has some nice discussion, here, here and here of how transaction cost economics doesn't really explain the way firms work in the real world. He's the latest in a line of economic sociologists who have been trying to bang this point into the thick skulls of economists for years, so far without obvious success. The interesting thing is that there are good reasons within economic theory itself to suggest that transaction cost economics doesn't work. The latest work on the theory of infinitely iterated games provides an alternative way of looking at institutions and firms, which tends to confirm the arguments of sociologists. Jack Knight has an excellent monograph which uses simple game theory to come to the (intuitively obvious to non-economists) conclusion that self-interested rational actors aren't very likely to end up creating institutions that are optimal and efficient for everyone. Gary Miller has written a book which demonstrates convincingly (a) that when economists argue that firms are (or even should be) efficient bundles of incentive compatible mechanisms they ignore some of the basic results of economic theory itself, and (b) that sociologists have a much better grasp on what goes on within firm hierarchies. He's also co-written a nice paper showing that profit maximizing in firms is actually economically inefficient.


Update - Kieran has an embarrassingly nice and encouraging post about the uncanny similarities in our career paths and interests -he's an economic sociologist and I'm a political scientist but we are basically engaged in the same set of academic conversations.


Update - full disclosure - I have co-written a piece with Jack Knight which touches on some of the topics above; it's forthcoming in Politics and Society, which is one of my favourite journals - a nice mix of left wing theory and empirical evidence.

Friday, January 24, 2003

There's been a lot of hype about John Poindexter's Total Information Awareness proposal, now likely to be blocked by the Senate. This project seemed straight out of conspiracy theory central casting - weird Illuminati-style logo, grand but vaguely stated aims, run by an ex-Irangate indicted conspirator and his assorted Evil Henchmen. All of this made for a proposal that was easy for both gun-toting libertarians and lefties to mobilize against. Unfortunately, the real problem isn't a cartoon villain, whom slashdotters can harass to distraction. It's an ever growing set of vaguely defined - but troubling - relationships between law enforcement, intelligence agencies and private actors (ISPs, telcos). For example, the US is pressuring the European Union into requiring ISPs to retain traffic data that can then be hoovered up by intelligence agencies and fed on to US authorities as appropriate. Because this involves dry, technical sounding issues, the public by and large doesn't understand the implications of the precedents that are being set here - and their implications for accountability and responsibility over the longer run.
After lurking in the blogger undergrowth for the last several months, furtively posting responses to other people's blogs, I've decided to start my own. Full disclosure ... Nationality - Irish. Job - assistant prof at the University of Toronto. Status - untenured. Teaching - IPE (International Political Economy). Academic interests - e-commerce, privacy, theories of trust and cooperation, and the EU. Political opinions - standard academic leftie. Personal obsessions - weird sf, weirder electronic music.