Value Competition

The Decline of Economic History

According to an American Historical Association survey described in the NYT, the percentage of American history departments with an economic historian has gone down from 55% to 32% from 1975 to 2005; diplomatic historians and intellectual historians are also less broadly represented than they once were. One question: Has the decline in economic history in history departments been made up for by an increase--in numbers if not in percentage representation--in economics or business departments?   My guess is that the large expansion of business education at the undergraduate and graduate level over the last generation has led to the hiring of more economic and business historians than in 1975; the counter hypothesis would be that business faculties have grown increasingly dominated by a scientific model of appropriate research, resulting in no increase or even a decrease in the hiring of economic and business historians by business programs. 

What's Next

Over the last several hundred years, many members of the cultural and economic elite in wealthy nations moved away from religious faith and a sense of themselves as part of a minority religious elect. The recession of religious belief did not lead to an elite devoid of fighting faith. Instead, it lwent along with the creation of an ideological elite divided into warring left and right camps, with each side fired by by us-them passion and feelings of being part of an elite elect.

Suppose that over the next several hundred years a waning of belief among the elite occurs for left andright political faith in its current form. If left and right faith becomes intellectually counter-cultural in the way that religious faith has, it is likely that those among the cultural and intellectual elite with a gift for us-them moral passion and moral differentiation will come up with a new vehicle for their skills. Three possibilities for what that future new thing might be: a) an opposition between a logic/calculation/science elite and an intuition/pattern-making/arts elite; b) an opposition between a pro-market, pro-growth, pro-meritocratic elite, pro-progress elite and an anti-market, pro-stability, anti-meritocracy, anti-progress elite; and c) an opposition between a pro-elite elite and an anti-elite elite, with the latter identifying itself as the tribune of the people in their struggle with the elite.

A Fourth Dichotomy?

In going through papers in management (especially papers in practitioner-oriented as opposed to academic management), I could pigeonhole many of them them according to their positions on the calculation/culture dichotomy.  (I could and did classify all of them according to their positions on the positive/normative dichotomy, but since that involves a forced choice, I don't think too much of that as a result.)  With papers on business ethics, calculation/culture didn't have such power, though it was quite salient.   To cover enough papers, as well as for other reasons, I added the self-other and left-right dichotomies.

Now I'm considering a similar analysis of history papers with Deirdre Collier, and wondering whether those three dichotomies will cover the waterfront pretty well, or whether a dimension relating to moral relativism/moral realism, or possibly something else, is called for.  My outsider's sense--perhaps overly influenced by the 1980s and the heyday of "theory"--is that the humanities have been roiled to a considerably greater degree than the social sciences or the applied disciplines by "what can we know" issues.   But I'm loath to add another dichotomy unless it fits into an overall theoretical scheme. 

One thought on how relativism/realism might connect with an overall value competition framework: To make the basic individual and political models of choice work, there need to be norms of varying intensity within people (at time A I'm mild-mannered on issue x, at time B I'm fierce on issue x) as well as across people.  The presence internally and externally of the relativism/realism pole could be modeled in terms of the optimality of norms varying not only by direction (altruism-egoism), mode of justification (calculation-culture), and status or class (left-right), but also by intensity.   Assuming varying intensities of norms within individuals as well as socially are called for, intensity-dampening "relativism" as well as intensity-enhancing "realism" could serve that purpose. 

Regulating AT&T in the 1920s and 1930s

Working away on an SCM paper for a Thursday deadline has made for light blogging recently...

The factual fackground and many of the ideas in the following semi-long post (but not any of the possible confusions on my part about accounting!) are indebted to my co-author Deirdre Collier, who's completing an accounting history Ph.D. thesis that focuses on AT&T and how the firm's strong espousal of a scientific approach to depreciation in the early twentieth century both coincided with and transcended the firm's immediate interests.

 

Any institutions in the NY/NJ area looking for an accounting professor--you should hire Deirdre, who can do a great job not only with history but also with numbers!--in addition to the topics touched on below, her thesis includes a very nice forensic accounting analysis of AT&T's accounting for storm damage--

 

So...Two possible approaches to 1920s/1930s regulation of AT&T and other utilities, and the incentives they produce:

 

1)  Regulators allow company a reasonable profit, with reasonable defined in terms of the percentage difference between annual income and expenses = incentive for company to overestimate expenses, including by accelerating depreciation

 

2)  Regulators allow company a reasonable profit, with reasonable defined in terms of the percentage annual income represents of the company’s capital = incentive for company to underestimate expenses, including by denying/delaying depreciation

 

Therefore it seems that regulators concerned with avoiding manipulative expensing/depreciation practices by companies should maintain ambiguity on whether they are using 1) or 2), or use a mixture of both 1) and 2).

 

AT&T with its skills in depreciation should prefer 1), the RRs and other utilities with their weaker skills and preference for replacement should prefer 2).

 

AT&T’s preference for a slower probabilistic version of depreciation as opposed to a faster accountants’ version works in terms of a smoothing story, with the company assuming that regulators in practice apply both 1) and 2).

 

Savvier regulators who are subject to legal demands to clearly explain themselves as using either 1) or 2) have a problem that less savvy or law-bound regulators don’t have.  Possible real-world regulatory issue: Effects on ICC and FCC from becoming both more sophisticated and more law-bound in the 1930s compared to the past.

 

AT&T’s value commitment to probability science: Makes sense in terms of a smoothing story, not so much in terms of gaming 1) or 2).

 

Social value of AT&T’s commitment to probability science: Useful both in terms of egoistic values—AT&T mgrs working harder than otherwise to advance co. interests—and altruistic values—AT&T mgrs in some cases taking positions that were different from co. interests.

 

Value competition?   Unclear on 1920s value rival inside or outside firm to AT&T’s commitment to science.  One possibility: Commitment to a human-oriented, interest-based, incentive-based, countervailing/cooperating-forces approach to regulation.  Possible emergence of that competing approach in the 1930s, both in government and in AT&T?  One straw in the wind: AT&T exec Chester Barnard’s human-centered approach to management was articulated in 1938 in Functions of the Executive…

 

The Moral Basis of a Backward Society

In his 1958 ethnography of life in "Montegrano," an impoverished village in the South of Italy, Edward Banfield contended that peasants and others in the village were "amoral familists" who acted to benefit the short-term interests of their nuclear families, assumed that others would do likewise, and avoided civic commitments.  Banfield suggested that enlightened self-interest (or what in value competition terms would be called egoistic values) on the part of villagers could help the situation, and made proposals for monitored local government and expansion of education, while expressing pessimism about the prospects for such measures being tried: 

http://www.amazon.com/Moral-Backward-Society-Edward-Banfield/dp/0029015103

Assuming the basic accuracy of Banfield's portrayal of uncooperative, often unhappy villagers in Montegrano in the mid-1950s--though there has been a dispute about whether he underrated community networks in the village and by extension in Southern Italy in general http://www.arts.mun.ca/congrips/newsletter/44%20-%20Fall%201995.pdf --there is a question as to whether his portrayal of social dysfunction applies to traditional societies in general.  I'm doubtful that it does; the uncooperativeness, miseria,and strong if inchoate group antagonisms between the peasants and the gentry in Montegrano that Banfield describes seem closely connected to the village being a lagging part of a more or less modern Italian state.

Shareholding in the Long Parliament

"Shares, Coalition Formation, and Political Development," by Saumitra Jha of Stanford Business School, concludes that members of the 1640-1660 Long Parliament who owned shares were more likely to be on the anti-royalist, pro-reform side than other members, and that the effect persists when factors such as religion, occupation, region, and time of share purchase (members who came of age in the glow of Drake's successful voyage were more likely to buy shares) are controlled for:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=934943

Jha's theoretical framework, which stresses the role of shareholding in creating a broad coalition of members with an interest in ending royal control over overseas trade, derives in fair part from Douglass North, Robert Thomas, and other economic historians who treat the development of growth-oriented institutions within a society as a matter of contingent social and political factors.  Overall, the framework is highly compatible with value competition, which treats the development of agents--including politicians, managers, and individuals--aligned with social welfare as a similarly contingent social and political phenomenon. 

Two value competition observations: a) Much as the English Civil War should be understood as a victory for growth-oriented institutions, it also needs to be understood as a political failure.  Competing religious values that cross-cut instead of reinforcing the economic cleavage between the crown and its opponents might have slowed the victory of pro-growth institutions, but might at the same time have saved the lives of the 190,000 people Jha tells us died as the result of the Civil War.  b) Shareholding without more is compatible with an anti-growth culture of shareholders exerting political power to repress competition and to avoid funding public goods such as the Royal Navy.  The economic and political rise of England from a value competition perspective is not simply a matter of newly powerful shareholders, corporations, and merchants but of the rise and coexistence within these groups of both pro-market, pro-competition values and pro-government, pro-public goods values. 

Waking Giant

Waking Giant: America in the Age of Jackson, by David S. Reynolds  http://web.cuny.edu/academics/oaa/distinguished/view_profLast=Reynolds&profFirst=David.html , aims at the broad American audience that purchases biographies and narrative histories on the Revolutionary and Civil War eras.  Compared to Ellis, McCullough, McPherson, and other popular historians of those eras, Reynolds concentrates more on religion, art, and social movements, appropriately so given the less martial and revolutionary nature of the 1815-1848 period.

Narrative history is a genre conducive to a value competition approach that examines how internal and social clashes of values may be conducive either to social progress or to undesirable group polarization.   Compared to Sean Wilentz and Arthur Schlesinger, whose politically-oriented accounts of Jacksonian America laud the rise of the democratic principle, Reynolds tells a story about cultural diversity and progress that is more balanced in its allocation of credit between the populism of Jackson's Democratic Party and the comparative elitism of the Whigs and other anti-Jacksonians.  In particular, he describes artistically successful American writers of the period like Hawthorne, Melville, and Poe as drawing from both a popular culture of melodramatic fiction and an elite, Europeanized literary culture; his nice portrayals of them strike me as entirely consistent with a value competition framework that focuses on productive value tensions within individuals. 

In his wistful remarks on how James K. Polk might have helped stem the political wrangling that led to the Civil War by taking a moral stand against the spread of slavery to new territories, I suspect that Reynolds underestimates the counterproductive regional polarization that was built into the Jacksonian party system in the form of the Democrats' commitment to the South and slavery.  (I'm much more inclined to think that things could have worked out differently if Jackson, as opposed to the comparatively minor Polk, had had a different attitude toward slavery.)  But I strongly agree with him to the extent he is implying that the regional polarization that culminated in the Civil War was not foreordained and was fostered by contingent factors in the party system and in the psyches of individual leaders like Jackson and Polk.