Economics: Unfit for Purpose

This paper is a shortened and revised version of the Closing Plenary given to the World Congress of the Association of Social Economics, and Cairncross Lecture, University of Glasgow, June 2012. Mainstream economics is seen as unfit for purpose because of deficiencies that have long been criticised by a marginalised heterodoxy. These include the taking out of the historical and social even if bringing them back in on the basis of a technical apparatus and architecture that is sorely inappropriate. These observations are illustrated in passing reference to social capital but are particularly appropriate for understanding the weakness of ethics within mainstream economics. An alternative is offered through taking various “entanglements” (such as facts and values) as critical point of departure, leading to the suggestion that ethical systems are subject to the 10 Cs—Constructed, Construed, Conforming, Commodified, Contextual, Contradictory, Closed, Contested, Collective and Chaotic.     

Liability Exposure Trends in Recruitment: An Assessment and Analysis of Retail Employment Applications

For many years interviews and written applications required the job applicant to provide answers to a wide range of questions. Initially the employer could and did ask questions on any subject in which he/she had an interest, including those of a personal nature. If the prospective employee refused to provide the information, the application was simply discarded without regard for any issues arising, involving discriminatory/disparate treatment or disparate impact on the job applicant. This article examines national and regional retail outlet employment applications. Our examination of these employment applications considers the information each application solicits, whether those questions seek information that would likely reveal an applicant's membership in a protected class, and thus to what degree retail employment applications create a discriminatory legal liability for the employer.     

Which institutions encourage entrepreneurial growth aspirations?

We develop entrepreneurship and institutional theory to explain entrepreneurial growth aspirations across individuals and institutional contexts. Our framework generates hypotheses at the national level about the negative impact of higher levels of corruption, weaker property rights and greater government activity on entrepreneurs' aspirations to increase employment. We further explore whether individual's social networks compensate for weaknesses in national institutions. We use the Global Entrepreneurship Monitor surveys in 42 countries for 2001–2006, applying a multilevel estimation framework to test our ideas. We find that the relationship between growth aspiring entrepreneurs and institutions is complex; they benefit simultaneously from strong government (in the sense of property rights enforcement), and smaller government, but are constrained by corruption. Social networks mediate some but not all institutional deficiencies.     

Institutions and entrepreneurship development in Russia: A comparative perspective

In this paper we use a comparative perspective to explore the ways in which institutions and networks have influenced entrepreneurial development in Russia. We utilize Global Entrepreneurship Monitor (GEM) data to study the effects of the weak institutional environment in Russia on entrepreneurship, comparing it first with all available GEM country samples and second, in more detail, with Brazil and Poland. Our results suggest that Russia's institutional environment is important in explaining its relatively low levels of entrepreneurship development, where the latter is measured in terms of both number of start-ups and of existing business owners. In addition, Russia's business environment and its consequences for the role of business networks contribute to the relative advantage of entrepreneurial insiders (those already in business) to entrepreneurial outsiders (newcomers) in terms of new business start-ups.     

Competition and Market Structure Reconsidered

A number of models of oligopoly in which long-run equilibrium is given by zero profit are extended to examine further the extent to which the number of firms increases indefinitely with market size. The limitations of the modelling framework are critically assessed with particular emphasis on the neglect of competition through vertically integrated economic processes. As an alternative, it is suggested that competition and industrial structure would be better studied by differentiating vertically between the different “systems of provision” through which particular goods are supplied, taking account of the integral connections between chains of economic activity, rather than generalizing across sectors and the competition within them.     

Long-run consequences of debt

Empirical evidence suggests that both public and private debt may have long-run detrimental effects on the economy. However, theoretical works have not provided a unique explanation to the issue. In this paper, therefore, we propose a framework that is able to describe the long-run effects of different kinds of debt. We introduce a stock-flow consistent dynamic model where the economy is represented as a network of trading relationships among agents. Debt contracts are one of such relationships. The model is characterized by a unique and stable steady-state and predicts that: (i) aggregate income is always limited from the above by the money supply; (ii) debts cause in the long-run a redistribution of borrowers’ wealth and income in favor of lenders; (iii) the redistribution is magnified by the level of the interest rate and (iv) by the degree of debt persistence. In the aggregate this may also lower the average marginal propensity to spend and nominal income, providing therefore a clear-cut explanation to the empirical evidence.     

Incentives and invention in universities

We show that universities in the United States that provide stronger royalty incentives to faculty scientists generate greater license income, controlling for university characteristics. We use pre‐sample data on university patenting to control for the potential endogeneity of royalty shares. Faculty responds to royalties both in the form of cash and research lab support, indicating both pecuniary and intrinsic research motivations. The impact of incentives is larger in private than in public universities, and we provide new survey evidence on the organization and objectives of university licensing offices to explain this difference. Royalty incentives work both by raising faculty effort and sorting scientists across universities. The primary impact of incentives is to increase the quality rather than the quantity of inventions.     

Is good character good enough? The effects of situational variables on the relationship between integrity and counterproductive work behaviors

The literature on integrity testing in personnel selection has reported impressive validities for predicting counterproductive work behaviors (CWB), but has seldom taken into consideration the possible influences of situational variables once job applicants are hired. This study examined the main effects and interaction effects of two situational variables, employee engagement and security control norms, on the relationship between integrity and CWB admissions. Based on data collected from a census sample of job incumbents from a large international retail company, all three variables were found to be moderately related to CWB, incrementally valid when aggregated, and together led to a lower rate of false positives than that yielded by integrity alone. In addition, employee engagement and security control norms each moderated the relationship between integrity and CWB when integrity was low, but did not influence CWB when integrity was high. The implications of these findings on personnel selection methods are discussed.     

Entry and barriers to entry in emerging markets

This note briefly introduces the symposium on entry and entry barriers in emerging markets edited by Nauro Campos and Saul Estrin. The symposium contains four inter-related case studies focusing in depth on the relationship between entry of new firms and institutional arrangements in four major emerging markets: Brazil, China, India and Russia. We find that entry rates are not necessarily low in emerging markets, and that institutional quality is a complex and “fuzzy” notion so that its impact on the entry process is not straightforward.