Monday, 20 April 2015

Kenneth Arrow talking about future directions of research in the Coasean tradition

This video is of the Nobel Prize winner Professor Kenneth Arrow talking on the topic of "Future Directions of Research in the Coasean Tradition". This discussion emphasises Coase's first famous paper "The Nature of the Firm".

To some, who see Arrow purely as a general equilibrium (GE) theorist, it may seem odd that he was asked to talk on research in the Coasean tradition. After all GE would be considered "blackboard economics" and thus largely uninteresting, by Coase. But Arrow's work is wider than just GE theory and aspects of it are relevant to the issue under consideration. For example, Arrow's has made contributions to the new institutional economics, which Coase's work founded. Such achievements are discussed in a paper by Oliver Williamson entitled, not too imaginatively, "Kenneth Arrow and the New Institutional Economics" (This paper appears in George Feiwel, ed., Arrow and the Foundations of the Theory of Economic Policy, New York, 1987, pp. 584-99). Thus Arrow's work makes him more suited to discussing the topic at hand than it may at first appear.

Sam Peltzman talking about future directions of research in the Coasean tradition

Thanks to Jim Rose at the Utopia - you are standing in it blog our attention is drawn to this video of Professor Sam Peltzman talking on the topic of "Future Directions of Research in the Coasean Tradition".

I should point out that the first editor of the Journal of Law and Economics was Milton Friedman's brother in law Aaron Director. Director died at the age of 102 while the second editor, Ronald Coase, also died at the age of 102. I conclude that to live long you need to be the editor of the journal!!

Sunday, 19 April 2015

From the comments: Surely this can't be right 2

Eric's response to my response to his response to me.
I'm going to disagree with a few points here.

First off, the way of making tv excludable is by using scrambled signals, like Sky does, not by bundling it with the physical TV. Bundling it with the TV is what yields things like the BBC TV tax.

Second, and again, the public good that's being debated is the improvements in policy you get with a more informed polity and the improvements in governance you get with more vigilance. Those effects are nonrivalrous and non-excludable.

How do you distinguish neighbourhood effects from public goods? I'd think of neighbourhood effects as being nonrivalrous and nonexcludable within a small area. The public good here in question apparently applies to the whole polity.

The better critique, I think, is that it's ambiguous whether some of this is public good or public bad - Campbell Live is responsible, in part, for wrecking the legal highs framework through populist drumbeating, for example.
As to point 2. To get the effects you note, people must have a tv. You can have as many transmissions as you like but they will have no effect, good or bad, if on one can view them. So the bundling of transmissions with a tv is important.

As to point 3, I'm thinking more along the lines of an externality. As Milton Friedman put in "Capitalism and Freedom":
[...] and from "neighorhood effects" - effects on third parties for which it is not feasible to charge or recompense them (p.14).

How the fed ended up fueling a subprime boom

Many people have argued that Fed fuelled the sub-prime boom by holding interest rates too low for too long after the dot-com crash. John Taylor, for example, has been saying "too low for too long" for a long time now. One question few, if anyone, has asked however is why the Fed did so.

Now George Selgin, David Beckworth and Berrak Bahadir have a paper in the Journal of Policy Modeling that offers an answer to this question. Fortunately George Selgin gives a brief discussion of their argument at the Alt-M blog. Selgin wites,
Our argument, in brief, is that the Fed blew it by treating the exceptionally high post-2001 productivity growth rate, not as warranting an upward revision of the Fed’s interest-rate target, as neoclassical theory would suggest, but as an opportunity to maintain a below-natural interest rate target without risking a corresponding increase in inflation.

We supply lots of evidence supporting our interpretation and, thereby, supporting the view that excessively easy Fed policy did indeed contribute substantially to the subprime boom. We also show how NGDP targeting would have prevented this outcome–and that it would have done so to an even greater extent than strict adherence to a Taylor Rule.

Readers familiar with my arguments favoring a “productivity norm,” as presented in Less Than Zero and elsewhere, will understand the claims made here here as a specific application of those more general arguments.
The "Less Than Zero" book referred to above is worth reading for its own sake not just because of its use in the above argument. The full tile is Less Than Zero: The Case for a Falling Price Level in a Growing Economy (pdf) and is written by George Selgin and published by the Institute for Economic Affairs in London. In it Selgin argues that
1. Most economists now accept that monetary policy should not aim at 'full employment': central banks should aim instead at limiting movements in the general price level.

2. Zero inflation is often viewed as an ideal. But there is a case for allowing the price level to vary so as to reflect changes in unit production costs.

3. Under such a 'productivity norm', monetary policy would allow 'permanent improvements in lower prices permanently' and adverse supply shocks (such as wars and failed harvests) to bring about temporary price increases. The overall result would be '... secular deflation interrupted by occasional negative supply shocks'.

4.United States consumer prices would have halved in the 30 years after the Second World War (instead of almost tripling), had a productivity norm policy been in operation.

5. In an economy with rising productivity a constant price level cannot be relied upon to avoid '..."unnatural" fluctuations in output and employment'.

6. A productivity norm should involve lower 'menu' costs of price adjustment, minimise 'monetary misperception' effects, achieve more efficient outcomes using fixed money contracts and keep the real money stock closer to its 'optimum'.

7. The theory supporting the productivity norm runs counter to conventional macro-economic wisdom. For example, it suggests that a falling price level is not synonymous with depression. The 'Great Depression' of 1873-1896 was actually a period of '... unprecedented advances in factor productivity'.

8. In practice, implementing a productivity norm would mean choosing between a labour productivity and a total factor productivity norm. Using the latter might be preferable and would involve setting the growth rate of nominal income equal to a weighted average of labour and capital input growth rates.

9. Achieving a predetermined growth rate of nominal income would be easier under a free banking regime which tends automatically to stabilise nominal income.

10. Many countries now have inflation rates not too far from zero. But zero inflation should be recognised not as the ideal but '... as the stepping-stone towards something even better'.
This argument makes the point that not all deflation is necessarily bad. It would be interesting to know what effect a productivity norm would have on New Zealand's inflation history given its somewhat dismal post-WW2 productivity experience.

Saturday, 18 April 2015

Chicago's best ideas: "contract law, transaction costs, and the boundary of the firm"

If you have an hour free this weekend one way to spend it would be to watch this video by Anup Malani, professor at the University of Chicago Law School, talking about "Contract Law, Transaction Costs, and the Boundary of the Firm".

[...] describes a number of surprising contract provisions that can be used to tackle the holdup problem, where a buyer and seller agree on a price for a future date, but the seller later demands a higher price. He also discusses how contract law can affect the scope and ownership of firms.

In 1937, Ronald Coase asked: if markets are so efficient at allocating resources, why are so many resources allocated within firms? His answer was that market allocation entailed transactions costs and, when these were very high, transactions will take place within firms.

Oliver Hart, with Sanford Grossman and John Moore, suggested the holdup problem could be overcome if the buyer owns a key asset of the seller or the seller's whole firm, which can prevent the seller from holding up the buyer. Hart, Grossman, and Moore transformed Coase's theory of how large firms were into a theory of who owns firms. Since then, there have been numerous efforts to demonstrate that asset ownership or integration is not necessary to overcome the holdup problem.

Friday, 17 April 2015

From the comments: Surely this can't be right

Eric Crampton left the following comment on the Surely this can not be right post:
I'm likely to credit or blame for that particular part. I'll walk it through more slowly.

1. Goods that are nonrivalrous in consumption may still be underconsumed relative to an unattainable blackboard optimum even if they are excludable.
2. The good in question here, the improved performance of the polity when there's better vigilance against rorts, corruption and the like, is non-rivalrous and is also non-excludable.
3. Journalism is one way of producing that vigilance.
4. Viewers of Campbell Live believe that his show is one of the more important sources of that watchdog role; others note that there are still many alternatives, and that the merits of this particular show are more debatable.
5. Where the high demanders for the programme each only count as one viewer under the current funding model that ties advertising to the provision of the non-rivalrous but potentially excludable tv programming, and where the high demanders aren't sufficiently valuable to advertisers relative to the viewership that might watch alternatives, the programme will fail absent alternative funding.
6. High demanders can and should use mechanisms like PledgeMe to fund the programme directly.
My response would be to deal with points 2 and 3 to argue that journalism as a useful consumable end product is not a public good - my point is the previous post. Let me use an example to make my point. Take a free-to-air television transmission. This you could argue is a public good but even if it is, its a pretty useless one without a tv on which to watch it. So to get a useful end product you need to bundle the transmission with a tv. TVs are private goods which effectively makes the transmission a private good.

I would argue the same for journalism in general. Whether journalism in conveyed to the public via tv or newspapers or radio or whatever, for the journalism to become a consumable good you need to bundle it with some other good, eg, a tv, a radio etc. These other goods are private goods and thus the need to bundle the journalism with these goods effectively makes the journalism a private good as well.

This is not to say that journalism doesn't have neighbourhood effects, its just too say it isn't a public good.

For those of you who think Campbell Live should be saved take note of point 6.

Surely this can not be right

In an article "Helping journalism can harm it" in The New Zealand Initiative's Insights Newsletter (Insights 13: 17 April 2015) Jason Krupp writes,
Regardless, they may have a point. Journalism has public good aspects to it – the threat that an investigative journalist uncovers a rort or corruption helps to discipline politicians, which provides benefits even to those who do not help to pay for it by watching or reading. Many people might free-ride rather than contribute.
This can not be right. What Krupp is describing isn't a public good but a good with neighbourhood effects. That is, there are positive (in this case) externalities to journalism but this is not enough to make journalism a public good.

If journalism really is a public good then how is it that newspapers, for example, can generate income by selling their papers or putting material behind paywalls. Paywalls and selling papers mean that journalism is excludable. These things wouldn't generate income otherwise. The important point here is that the journalism and the newspaper/website are bundled, you need both to get a useful product and you can exclude by using the newspaper/website.

Natural disasters: insurance costs vs. deaths

In a posting with the above title at the Conversable Economist blog Timothy Taylor writes,
The natural disasters that cause the highest levels of insurance losses are only rarely the same as the natural disasters that cause the greatest loss of life. Why should that be?
This doesn't seem that odd to me. Insurance claims are large when you get a lot of expensive, well insured property being damaged. But one reason for things like buildings being expensive is that they are well built and can withstand, to a large enough degree, the effects of a disaster without killing the people inside them. Cheap poorly build buildings give rise to less expensive insurance claims but suffer greater damage in a disaster and thus kill a great number of people as a result.

Taylor then gives two lists:
The first list shows the 40 disasters that caused the highest insurance losses from 1970 to 2014 (where the size of losses has been adjusted for inflation and converted into 2014 US dollars). The top four items on the list are: Hurricane Katrina that hit the New Orleans area in 2005 (by far the largest in terms of insurance losses), the 2011 Japanese earthquake and tsunami; Hurricane Sandy that hit the New York City area in 2012; and Hurricane Andrew that blasted Florida in 1992. The fifth item is the only disaster on the list that wasn't natural: the terrorist attacks of September 11, 2001. 
The Christchurch quake comes in 8th on this list,

The second list is
[...] a list of the top 40 disasters over the same time period from 1970 to 2014, but this time they are ranked by the number of dead and missing victims. The top five on this list are the Bangladesh storm and flood of 1970 (300,000 dead and missing); China's 1976 earthquake (255,000 dead and missing), Haiti's 2010 earthquake (222,570 dead and missing), the 2004 earthquake and tsunami that hit Indonesia and Thailand (220,000 dead and missing), and the 2008 tropical cyclone Nargis that hit the area around Myanmar (138,300 dead and missing). 
Taylor notes that there is little overlap between the two lists.
Only two disasters make the top 40 on both lists: the 2011 Japanese earthquake and tsunami, and Japan's Great Hanshin earthquake of 1995.
His reasoning for the lack of overlap is a more sophisticated version of the argument I gave above.
[...] the effects of a given natural disaster on people and property will depend to a substantial extent on what happens before and after the event. Are most of the people living in structures that comply with an appropriate building code? Have civil engineers thought about issues like flood protection? Is there an early warning system so that people have as much advance warning of the disaster as possible? How resilient is the infrastucture for electricity, communications, and transportation in the face of the disaster? Was there an advance plan before the disaster on how support services would be mobilized?

In countries with high levels of per capita income, many of these investments are already in place, and so natural disasters have the highest costs in terms of property, but relatively lower costs in terms of life. In countries with low levels of per capita income, these investments in health and safety are often not in place, and much of the property that is in place is uninsured. Thus, a 7.0 earthquake hits Haiti in 2010, and 225,000 die. A 9.0 earthquake/tsunami combination hits Japan in 2011--and remember, earthquakes are measured on a base-10 exponential scale, so a 9.0 earthquake has 100 times the shaking power of a 7.0 quake--and less than one-tenth as many people die as in Haiti.
In other words being a high income country which can afford good building codes, resilient infrastructure and a quick and quality disaster response is big factor is reducing deaths from natural disasters. In short, being rich saves lives. Another plus for the effects of economic growth.

Is history is more or less bunk? 3

I ended the post Is history is more or less bunk? 2 with two questions to do with why Gary Becker's argument that competitive labour markets would force employers to keep their prejudices out of their business decisions does not work in this case and what social mechanisms could be at work to perpetuate the discrimination we see in the labour markets. I emailed these questions to the author of the paper, Cornelius Christian, and he has kindly given his permission for me to reproduce his answers below:
Gary Becker's model, I think, is only part of the story. I am quoting from Gavin Wright's Sharing the Prize (p. 76-77), which is about the Civil Rights movement:

"segregation in such facilities as lunch counters, restaurants, and hotels was rarely required by law, and when statutes or municipal ordinances did exist, enforcement was generally at the discretion of proprietors... Businessmen feared that serving blacks, particularly in socially sensitive activities such as eating and sleeping, would result in the loss of white customers."

In the conclusion of the chapter, Wright says the following:

"The interpretation advanced in this chapter is that southern businessmen were locked into a low-level equilibrium, the stability of which was bolstered by the fact that they did not see it that way themselves. Both as firms and as downtown collectivities, businesses balanced the loss of black consumer spending against anticipated losses of white patronage."

Now, regarding present-day labour market outcomes, there is possibly a similar mechanism operating.

Regarding your question on a social mechanism, I am currently in the process of developing a model, and then subjecting it to empirical tests. I hope to have that done very soon!

Thursday, 16 April 2015

In which I agree with Paul Krugman

No, seriously!

I have in the past argued that the benefits that flow from trade are not due to what we export but rather from what we import. I have argued, for example, that Imports good; exports bad and have asked Looking for new tools to help exporters: Why? and have noted that Protectionists are to economics what astrologers are to astrophysics, and so on. This, it seems, is not a view shared by many commentators. How often do we see calls to do things to help exports but not things to help importers? When the exchange rate is "high" we are told something must be done since it hurts our exports. No mention is made of help it gives to those of us who import.

Now thanks to Jim Rose at the Utopia – You Are Standing In It! blog I see I am not the only economist who thinks like this. It turns out that Paul Krugman, of all people, takes the same view.

The following comes from Krugman's paper "What Do Undergrads Need to Know About Trade?", 'The American Economic Review', Vol. 83, No. 2, Papers and Proceedings of the Hundred and Fifth Annual Meeting of the American Economic Association, (May, 1993), pp. 23-26:
Even more fundamentally, we should be able to teach students that imports, not exports, are the purpose of trade. That is, what a country gains from trade is the ability to import things it wants. Exports are not an objective in and of themselves: the need to export is a burden that a country must bear because its import suppliers are crass enough to demand payment. (p. 24)
We need to be able to teach this seemingly simple point not only to students but also the likes of commentators, journalists and politicians etc.

Is history is more or less bunk? 2

Further to my previous post I have now found a copy of the paper The Economist was talking about, “Lynchings, Labour and Cotton in the US South” (pdf) by Cornelius Christian.

In the paper Christian notes that in the short term the advantage of lynchings to whites was via the labour market. The evidence presented by Christian demonstrates that lynchings prevented black workers from fully participating in the labour market to the advantage of white workers. Lynchings cause blacks to migrate away, not too surprising, lowering labour supply and increasing wages for white labourers.
Using the fact that world cotton prices are exogenous from a single county’s perspective, I find that cotton price shocks strongly predict lynchings. More precisely, one standard deviation decrease in the world cotton price results in a 0.095 to 0.16 standard deviation increase in lynchings within a cotton-producing county. The findings are robust to the inclusion of controls, and to the use of tests with white-on-white lynchings and California lynchings. Cotton price shocks also do not predict legal executions of blacks, suggesting motives for lynching were different. These ffects are more pronounced in counties that had railroads in 1890, suggesting that links to world markets and greater local labour demand had an impact on lynchings. Disenfranchisement attempts such as the poll tax and literacy tests do not strengthen this effect, suggesting the substitutability of informal violence with formal institutions as a way to control workers. All this is indicative that greater numbers of lynchings served, at least in part, as a way of controlling black workers.

Using these observations as a guide, I claim that lynchings had labour market effects that benefitted white workers. During years of low cotton prices, wages are low. When whites lynch blacks, this causes other blacks to migrate out of a county, thus reducing labour supply and increasing wages. I show in my data that lynchings predict greater black out-migration, and higher state-level agricultural wages. A one standard deviation increase in lynchings within a county leads to 6.5 to 8 % more black out-migration, and a 1.2 % increase in state-level wages.
Given these short-run effects what are the long-run outcomes?
I then turn to the long-term effects of lynchings, starting with the Civil Rights era. Although lynchings became very rare in the 1930s, discrimination against blacks continued. I focus on the 1964 Mississippi Summer project, a campaign to register African Americans to vote - the campaign’s organisers encountered violence and discrimination throughout the summer. I show that Mississippi counties with more 1964 violence also had more lynchings in the past. Using datafrom the 2008-2012 American Community Survey, I also show that lynchings in the past predict white-black wage and income gaps today. This is robust to the inclusion of various controls and state fixed effects. Furthermore, I test the sensitivity of the coefficient estimates to control variables using Altonji, Elder, and Taber (2005) statistics. My results are shown to be robust to these tests, strongly suggesting that labour market discrimination has persisted from lynchings to the present day.
The modern-day and Mississippi Summer results suggest that the effects of lynchings persist up until the present day. This is consistent with a mechanism in which discrimination continues to affect African Americans. Such prejudice starts with lynchings of African Americans, and subsequently manifests in violence when Civil Rights community organisers went to Mississippi in 1964. It continues to affect contemporary black incomes, relative to their white neighbours.
If labour market discrimination today, driven by prejudice from the past,  is the cause of the income gap between blacks and whites then there are a couple of questions to ask. First is there some social mechanism at work to perpetuate the discrimination? and second what is preventing Becker type effects from reducing the gap? Gary Becker pointed out many years ago a competitive labour market provides strong incentives to keep our prejudices out of our business decisions. The force of competition will make even the most racist/sexist/homophobic/ employer see that by hiring only heterosexual men of Anglo-Saxon descent, they limit the talent pool accessible to them, which is not good business. What market imperfections are preventing such competitive forces working in the South?

An interesting paper which shows history is not bunk and has relevance even today.

Oliver Hart - reference points and the theory of the firm

This series of videos, from sabanciuniversity, cover a talk given by Oliver Hart (Andrew E. Furer Professor of Economics at Harvard University) on the topic of "Reference Points and the Theory of the Firm". If you're into the theory of the firm - and lets face it, who isn't? - then these videos are well worth the time to watch. Each one is around 12-13 minutes long.

Wednesday, 15 April 2015

Shares in companies are an old idea

It turns out that shares are more than 700 years old, at least. From the BBC website comes this picture of what is the oldest known share in a company. In 1288, Stora Enso issued this share giving a bishop an eighth of a copper mountain.

Is history is more or less bunk?

The Economist magazine reports on a paper given at the recent Economic History Society's annual conference in the U.K. This work suggests history matters and matters for a long time. The paper looks at the effect of lynchings before 1930 in the U.S. on income distribution today.
The first, by Cornelius Christian of Oxford University, looks at the consequences of the lynching of black Americans between 1882 and 1930. Mr Christian found that this history of racial violence still echoes down the decades. He also found that the higher an area’s lynching rate before 1930, the wider the income gap between blacks and whites remained in 2008-12, even when adjusted for factors such as the education and employment levels of a local area. A high rate of lynching widens this gap by as much as 15% in some cases.
While an interesting empirical result, the question this raises is What is the mechanism that brings this effect about? Just how can something like lynchings 80-120 years ago be affecting income distribution today? It is not obvious what the link is. We need a theory to explain the data.

Why would a firm want to become a multinational?

A question asked at the Federal Reserve Bank of St. Louis. Another way to think about the question is to ask why is it worthwhile to carryout a cross border transaction within the boundaries of a firm rather than by using the market? Three reasons are given:
Ownership Advantage

Multinational firms usually develop and own proprietary technology (the Coca-Cola formula is patented and kept extremely secret) or widely recognized brands (such as Ferrari) that other competitors cannot use. Multinationals often are technological leaders and invest heavily in developing new products, processes and brands, while usually keeping them confidential and protected by intellectual property rights. Maintaining stronger protection of these elements helps firms enjoy greater profits from innovation.

Localization Advantage

Multinationals usually try to build facilities that produce and sell their products in locations near the consumer (the Polish consumers of Coke in our example). This helps reduce transportation costs or helps the company fit in better with local tastes and needs. Proximity to demand also helps firms adapt their products and services to different markets. At the same time, they also may take advantage of lower production costs (for example, labor costs, energy, sometimes even lower environmental standards) or more abundant production factors, such as expert engineering or greater raw materials). For example, the Polish affiliate of Coca-Cola also owns bottling plants in the Beskidy Mountains region of Poland, which is rich in mineral water for making other beverages.

Internalizing Benefits

Finally, multinationals want to internalize the benefits from owning a particular technology, brand, expertise or patents that they find too risky or unprofitable to rent or license to other firms. Enforcing international contracts can be costly or ineffective in countries in which the rule of law is weak and court procedures are long and inefficient. In these cases, the company also may risk losing its ownership advantage, which it has created at a substantial cost.
In house production can lower the cost of the transaction and lessen the likelihood of hold-up that could occur when using another firm. When a transaction can be specified clearly enough to be written into a contract so that any possible problems can be dealt with via court proceedings then an outside contractor or firm can be utilised. But where, say quality is hard to control via contract since the nature of "high quality" can not be specified precisely enough to make a contract enforceable in court, then in house production is more likely.

Tuesday, 14 April 2015

How long do firms live?

Many commentators, even today, argue that the economy and the nation are controlled by powerful, large, very long lived corporations. John Kenneth Galbraith is perhaps the most (in)famous economist who argued along these lines. He argued that in the industrial sectors of the economy, which are composed of the largest corporations - think S&P 500 companies, the principal function of market relations is, not to constrain the power of the corporate behemoths, but to serve as an instrument for the implementation of their power. Moreover, the power of these corporations extends into commercial culture and politics, allowing them to exercise considerable influence upon popular social attitudes and value judgements. That this power is exercised in the shortsighted interest of expanding commodity production and the status of the few - the 1% - is, in Galbraith's view, both inconsistent with democracy and a barrier to achieving the quality of life that the "new industrial state" with its affluence could provide to the many. Galbraith argued that we find ourselves living in a structured state controlled by these large and all powerful corporations. Control over demand and consumers is exercised via the use of advertising which creates a never ending consumer "need" for products, where no such "need" had existed before. In addition, as Princeton University Press said in its advertising for a new edition of Galbraith's "The New Industrial State",
The goal of these companies is not the betterment of society, but immortality through an uninterrupted stream of earnings.
I have always thought that an implication of these ideas is that large firms, e.g. those in the S&P 500, would be very long lived. After all given the amount of control that these firms apparently have over their markets and the economy at large its hard to see how they could ever go bankrupt or be taken over. They are, after all, able to ensure "immortality through an uninterrupted stream of earnings." Thus these firms would have a long life.

Given this I was interested to see this comment by Bourlee Lam at The Atlantic:
[...] Richard Foster, a lecturer at the Yale School of Management, has found that the average lifespan of an S&P company dropped from 67 years in the 1920s to 15 years today. Foster also found that on average an S&P company is now being replaced every two weeks, and estimates that 75 percent of the S&P 500 firms will be replaced by new firms by 2027.
I just don't see how a 15 year (or even a 67 year) life span is in anyway consistent with the story that Galbraith tried to tell. Such a short life time looks more like support for a Schumpeter like "creative destruction" interpretation of the life cycle of business firms.

Just to show how short a life span 15, or even 67 years, is note:
Cho and Ahn (2009: 160-1) state “The oldest company in the world is known to be a Japanese construction company, Kongo Gumi, which was founded in 578 and thus existed for 1431 years. [However a footnote at this point states “Kongo Gumi went bankrupt in 2006 and was acquired by Takamatsu group, thus depending on the definition of corporate death it may be excluded from a long-lived company” According to Wikipedia (, “As of December 2006, Kong Gumi continues to operate as a wholly owned subsidiary of Takamatsu”.] There are also several other companies which are reported to have existed over 1000 years such as Houshi Ryokan (Japan, Innkeeping, founded in 717), Stiftskeller St. Peter (Austria, restaurant, founded in 803), Chateau de Goulaine (France, vineyard, founded in 1000) and Fonderia Pontificia Marinelli (Italy, bell foundry, founded in 1000)”.
  • Cho, Dong-Sung and Se-Yeon Ahn (2009). ‘Exploring the Characteristics of the Founder and CEO Succession as Causes of Corporate Longevity: Findings from Korean Long-Lived Companies’, Journal of International Business and Economy, 10(2) Fall: 157-87.

EconTalk this week

Phil Rosenzweig, professor of strategy and international business at IMD in Switzerland and author of the book Left Brain, Right Stuff: How Leaders Make Winning Decisions talks with EconTalk host Russ Roberts about his book. The focus of the conversation is on the lessons from behavioral economics--when do those lessons inform and when do they mislead when applied to real-world business decisions. Topics discussed include overconfidence, transparency, the winner's curse, evaluating leaders, and the role of experimental findings in thinking about decision-making.

A direct link to the audio is available here.