Academics From The United States

"Adaptation is a crucial challenge for organizations, and an important theme in the strategy and organization theory literature. We still have much to learn, however, about the strategic processes by which adaptation is achieved. In this paper we focus on a basic element in the adaptation process, i.e. flexibility within the strategic decision-making process. We concentrate on strategic decisions because these choices are the most important adaptations the firm makes. We suggest that the core of all organizational adaptation is a decision-making process. Unless the decision-making process itself is flexible, it is unlikely the organization can be flexible enough to adapt."

"This study examines two alternative views—universal and contingency—of the human resources (HR)-performance relationship in manufacturing settings. Results from a survey of 97 plants primarily support a contingency approach to human resource management (HRM). An HR system focused on human capital enhancement was directly related to multiple dimensions of operational performance (i.e., employee productivity, machine efficiency, and customer alignment), but subsequent analysis revealed that this main effect was predominately the result of linking human-capital-enhancing HR systems with a quality manufacturing strategy. Other manufacturing strategies also moderated the HR-performance relationship."

"For well over a century business cycles have run an unceasing round. They have persisted through vast economic and social changes; they have withstood countless experiments in industry, agriculture, banking, industrial relations, and public policy; they have confounded forecasters without number, belied repeated prophecies of a "new era of prosperity" and outlived repeated forebodings of "chronic depression.""

"When public spending in the form of transfer payments makes various services and benefits free of charge, work is discouraged. Yet it is precisely Social Security that legislators fear to cut"

"What theory can we use to get us out of the impending slump quickly and reliably? To use the 'new classical' theory of fluctuations begun at Chicago in the 1970s – the theory in which the "risk management" models are embedded – is unthinkable, since it is precisely the theory falsified by the asset price collapse. The thoughts of some have turned to John Maynard Keynes. His insights into uncertainty and speculation were deep. Yet his employment theory was problematic and the 'Keynesian' policy solutions are questionable at best....At the end of his life Keynes wrote of 'modernist stuff, gone wrong and turned sour and silly'. He told his friend Friedrich Hayek he intended to re-examine his theory in his next book. He would have moved on. The admiration we all have for Keynes's fabulous contributions should not sway us from moving on."

"The stampede toward “rational expectations” — widely thought to be a “revolution,” though it was only a generalization of the neoclassical idea of equilibrium—derailed the expectations-driven model building that had just left the station. In the end, this way of modeling has not illuminated how the world economy works."

"Nowhere have REH’s epistemological flaws and empirical disappointments been more apparent than in efforts to model financial market outcomes, which are largely driven by participants’ expectations. Beginning with Robert Shiller’s (1981) pathbreaking paper, research has shown that REH models are unable to explain the basic features of fluctuations and risk in stock markets. Likewise, in their magisterial work on the current state of international macroeconomics, Maurice Obstfeld and Kenneth Rogoff (1996: 625) concluded that “the undeniable difficulties that international economists encounter in empirically explaining nominal exchangerate movements are an embarrassment, but one shared with virtually any other field that attempts to explain asset price data.” The failures of REH explanations of aggregate outcomes gave rise to alternative approaches, most notably behavioral finance models. However, sober assessments even by the likes of Obstfeld and Rogoff did not dispel the faith of most economists that REH models would one day be able to explain financial market outcomes and macroeconomic performance."

"Early critics pointed out REH’s fundamental epistemological flaws. … They argued that REH, even if viewed as a bold abstraction or approximation, is grossly inadequate for representing how even minimally reasonable profit seeking participants forecast the future in real-world markets. Nevertheless, … an overwhelming majority of economists has embraced REH as the way to represent how rational individuals think about the future."

"In the early 1970s,... economists began to embrace the Rational Expectations Hypothesis (REH), according to which market participants’ expectations are “essentially the same as the predictions of the relevant economic theory” (Muth 1961: 316). What has been largely overlooked is that, … REH theorists presume that the role of market participants’ expectations in driving outcomes is not autonomous from the other components of the model. … Because REH models, by design, rule out an autonomous role for expectations, they are best viewed as derailing, rather than developing, the microfoundations approach."

"The OPEC oil-price hike caused inflation to shoot up in the USA. The stock markets took a real hit, causing considerable nervousness, while there was some serious supply and demand confusion within American industry. However, there was no collapse of the stock markets or the currency or the banking system. Under the chairmanship of Arthur Burns from 1970 to 1978, the Federal Reserve, which followed aggressive deflationary policies, proved robust and, although demand remained lower for a while, manufacturing had improved by mid-1974."

"The only disagreement among economists is whether Burns fully understood the mistakes he was making, or was so wedded to incorrect Keynesian theories that he didn't realize what he was doing. The only alternative is that he was under irresistible political pressure from Nixon and had no choice. Neither explanation is very favorable to Burns. Economists now recognize the Nixon era as Exhibit A in how the adoption of bad economic policies in pursuit of short-term political gain eventually turns out to be bad politics as well."

"Clearly, the broad effect of economic evolution until about 1920 was to increase the concentration of jobs in the cyclically volatile industries, and this was a major force tending to intensify declines of employment during business contractions. Since then, the continued progress of technology, the very factor which originally was mainly responsible for the concentration in the cyclical industries, has served to arrest this tendency. The upward trend of production in manufacturing and the other highly cyclical industries has remained rapid in recent decades."

"This sensitivity to the phenomena of recession and inflation is a symptom of an increased public awareness of both the need for and the attainability of economic progress. It is precisely because so much of current industrial and governmental practice can be better in the future that our meetings this year are focused on the broad problem of improving the performance of the American economy. However, as we go about the task of appraisal and criticism, it will be well to discipline our impatience for reform. In the measure that we avoid exaggerating our nation's failures or understating its successes, we shall make it easier for ourselves as well as for economists in other countries to see current needs and developments in a just perspective."

"THE AMERICAN people have of late been more conscious of the business cycle, more sensitive to every wrinkle of economic curves, more alert to the possible need for contra-cyclical action on the part of government, than ever before in our history. Minor changes of employment or of productivity or of the price level, which in an earlier generation would have gone unnoticed, are nowadays followed closely by laymen as well as experts."

"Business cycles are a type of fluctuation found in the aggregate activity of nations that organize their work mainly in business enterprises: a cycle consists of expansions occurring at about the same time in many economic activities, followed by similarly general recessions, contractions, and revivals which merge into the expansion phase of the next cycle; this sequence of changes is recurrent but not periodic; in duration business cycles vary from more than one year to ten or twelve years; they are not divisible into shorter cycles of similar character with amplitudes approximating their own."

"This theme of mismeasurement interacts with the designation of the one hundred years between 1870 and 1970 as the “special century.” Measurement errors are greatest in the early years, both in the scope of the standard of living and in the extent of price index bias. Clearly the welfare benefits to consumers in the categories of life entirely omitted from GDP were greatest long ago: the transition from the scrub board to the automatic washing machine was a more important contributor to consumer welfare than the shift from manual to electronic washing machine controls or from a twelve-pound tub to an eighteen pound tub. The most important unmeasured benefit of all, the extension of life expectancy, occurred much more rapidly from 1890 to 1950 than afterward."

"The century of revolution in the United States after the Civil War was economic, not political, freeing households from an unremitting daily grind of painful manual labor, household drudgery, darkness, isolation, and early death. Only one hundred years later, daily life had changed beyond recognition. Manual outdoor jobs were replaced by work in air-conditioned environments, housework was increasingly performed by electric appliances, darkness was replaced by light, and isolation was replaced not just by travel, but also by color television images bringing the world into the living room. Most important, a newborn infant could expect to live not to age forty-five, but to age seventy-two. The economic revolution of 1870 to 1970 was unique in human history, unrepeatable because so many of its achievements could happen only once."

"New-classical economics has been undeniably influential, but not in the way that its three prominent creators originally imagined. Its most important contribution to macroeconomics, the assumption of rational expectations, was stolen almost immediately, and applied more fruitfully, by the new Keynesians."

"Part of the downfall came early and on theoretical grounds, with the realization that real-world information lags for aggregate variables like the price level and money supply were much too short to rationalize the persistent multiyear deviations from equilibrium that seemed to characterize business cycles in most industrialized countries. The second dubious assumption, continuous market clearing, was viewed more critically once it was recognized that it was not an inextricable concomitant of rational expectations, especially when Stanley Fischer (1977) and Edmund Phelps and John Taylor (1977) showed that rational expectations could be embedded in a model containing real-world institutional features like multiperiod wage and price contracts to generate nonmarket-clearing behavior. Once Fischer and Phelps-Taylor had shown that rational expectations by itself was a necessary but not a sufficient condition to validate new-classical policy conclusions, the race was on to develop the new-Keynesian theory based on rational expectations and one or another institutional impediment to continuous market clearing."

"The original Lucas version of the new-classical macroeconomics combined the undeniable appeal of rational expectations with two more dubious assumptions inherited from Friedman (1968), that is, continuous market clearing and imperfect information, to form the foundation of the famous “Lucas supply function” (more justly, the Friedman-Lucas supply function). Soon Sargent and Wallace (1975) extracted from Lucas’s model its implication for monetary policy, the famous “policy-ineffectiveness proposition.” The demonstration by Barro (1977) that one could interpret historical U.S. data to be consistent with the proposition and the theory brought new-classical economics to its shortlived period of peak influence."

"During the relatively brief period in the late 1960s when economists were pondering the possible obsolescence of business cycles, the scholarly discipline of macroeconomics showed signs of becoming fragmented into speciality areas devoted to components of the then popular large-scale econometric models-for example, consumption, investment, money demand, and the Phillips curve. But more recently the revival of severe real world business cycles, together with the revolutions associated with Milton Friedman's monetarism and Lucas's classical equilibrium models, has brought about a revival of interest in economic analysis that focuses on a few broad aggregates summarizing activity in the economy as a whole-nominal and real income, the inflation rate, and the unemployment rate."

"But business cycles as a subject for study have enjoyed a revival for at least a decade now, stimulated in part by the severity of the 1974-75 and 1981-82 recessions and in part by the intellectual ferment surrounding the development of the "equilibrium business cycle model" and the attention paid to the seminal work of Robert E. Lucas, Jr., contained in his book Studies in Business Cycle Theory (1981). Indeed, there is no longer any need to lament the passing of economics courses explicitly carrying the title "Business Cycles," since the topic of business cycle behavior and analysis has so infiltrated courses carrying the title "Macroeconomics" that the two subjects have become almost interchangeable. 2 In this light it is fitting that the major research program of the NBER in this area is called "Economic Fluctuations" rather than "Macroeconomics.""

"The postwar era has not surprised Arthur Burns, for business cycles have continued their "unceasing round." although the United States recession of 1981-82 was the eighth since World War II and the deepest postwar slump by almost any measure, the 1983-84 recovery displayed an upward momentum sufficient to befuddle forecasters and delight incumbent politicians. Nor would a reincarnated Joseph Schumpeter be disappointed in the current status of business cycle research in the economics profession. To be sure, interest in business cycles decayed during the prosperity of the 1960s, as symbolized in the 1969 conference volume, Is the Business Cycle Obsolete? and in Paul Samuelson's remark the same year that the National Bureau of Economic Research "has worked itself out of one of its first jobs, namely, the business cycle.""

"There are four headwinds that are just hitting the American economy in the face. They're demographics, education, debt and inequality. They're powerful enough to cut growth in half. So we need a lot of innovation to offset this decline. And here's my theme: Because of the headwinds, if innovation continues to be as powerful as it has been in the last 150 years, growth is cut in half. If innovation is less powerful, invents less great, wonderful things, then growth is going to be even lower than half of history."

"Since the late 1960s macroeconomic debates in the United States have centered on the competing interpretations of the new classical and new Keynesian macroeconomics. The initial new classical model developed in the early 1970s by Robert E. Lucas, Jr., combined market-clearing, imperfect information, and rational expectations. After much testing, it was eventually rejected in the late 1970s for failing to explain why business cycles lasted on average four years while information delays lasted only a few weeks. It was soon replaced by a second new classical approach, the Real Business Cycle (RBC) model, which was also based on continuous market clearing and competitive equilibrium, but now generated the business cycle through serially correlated procyclical technology shocks."

"Much time was wasted and ink spilled in the late 1960s and early 1970s trying to interpret the lagged effect of prices on wages as reflecting adaptive lags in the formation of expectations. But if we have learned anything from the new Keynesian economics of Fischer, Taylor, Blanchard, and their younger followers, it is that price and wage inertia is compatible with rational expectations."

"Although the Gordon and Howell report noted the diversity of approaches to the study of management, it was Harold Koontz who delineated the differences and applied the catchy label ‘‘management theory jungle.’’"

"Already before World War II he had turned his attention to what would become a life-long preoccupation; business cycle theory and policy, with special emphasis on man-power problems and unemployment. His books on The Dynamics of Economic Activity (1947) and Business Fluctuations (1952) were for many years standard reading at American universities, and it was an obvious choice when in the early sixties the American Economic Association asked him to co-edit (with Lawrence Klein) its second volume on Readings in Business Cycles (1965), his most outstanding contributions in this field. His last book in this field was Economic Growth and Instability (1974). His primary interest, however, was in the more narrow field of unemployment, which he saw as his country's most serious."

"Robert Aaron Gordon [was] an economist and an international authority on business cycles and manpower policy... Dr. Gordon, a professor emeritus at the University of California at Berkeley, had been consultant to the President's Council of Economic Advisers under Presidents Eisenhower, Kennedy and Johnson. In 1975, he served as the president of the American Economic Association. Dr. Gordon, who was a strong critic of the current computer techniques used on economics, helped to design today's unemployment statistics when he was the bead of a Presidential commission that bore his Warne in the early 1960's."

"Business-cycle theorists concerned themselves with why the economy naturally generated fluctuations in employment and output, [while the rest of the profession] continued to operate on the assumption that full employment was the natural, equilibrium position for the economy."

"The real revolution (in property rights) has already largely taken place; the great majority of stockholders have been deprived of control of their property through the diffusion of ownership and the growth in the power of management."

"Merely professionalizing the board of directors is not enough to achieve competent business leadership and at the same time the necessary independent check on executives."

"The more active working directors become, the more closely involved they resemble the executives now responsible for providing business leadership. A full-time working director is merely another official who is also a director. Wide adoption of the proposal for professional directors, particularly if management is able to select the directors itself, may merely make general the situation now found in some companies in which only the executive group is represented on the board."

"Except for specialists such as market analysts and the like, economists as a professional group have had surprisingly little influence on businessman."

"Corporation executives, particularly the more prominent ones, and wealthy individuals generally decry the fact that the "New Deal" has fostered a feeling of class-consciousness among workers and low-income groups. Class-consciousness, however, is not new in this country, and it is most pronounced among those groups who decry it while not recognizing the phenomenon themselves. Common social backgrounds, common business interests, and common fears, prejudices, and loyalties create among those who possess wealth and economic power a strong and clear-cut feeling of membership in an economic and social class."

"Production management courses are often the repository for some of the most inappropriate and intellectually stultifying materials to be found in the business curriculum... many faculty members have little respect for such courses... and students complained more strongly to us about the pointlessness of the production requirement than of any other."

"Speak... of the separation of ownership and active leadership. Ordinarily the problem is stated in terms of the divorce between ownership and "control". This last word is badly overused, and it needs to be precisely defined... Our procedure... will be to study the ownership of officers and directors and then to ascertain the extent to which non-management stockholdings are sufficiently concentrated to permit through ownership the wielding of considerable power and influence (control?) over management by an individual, group or another corporation."

"In the infinitely complex economic system on which we rely for our daily bread, no productive function is more important than that of our business leaders. These men are charged with the responsibility of giving direction and unity to the efforts of the many who participate in economic activity. It is their job to make the plans and decisions which will transform economic effort into the particular goods and services wanted by a myriad of consumers. Conversely, it is their job also to translate consumers' needs into employment opportunities for labor and other economic resources"

"This pioneer work, written for both the professional economist and the businessman, has become a classic in its field. It is a detailed examination of the structure of the large business corporation in relation to its actual economic functioning. Because Gordon views the corporation not as an external institution but as organized human activity, his emphasis is on the personal and volitional elements in leadership, or how businessmen actually shape their practices. His analysis is based on a formidable mass of case material and statistical data"

"A study of business education in the United States was recently conducted by Professors Robert A. Gordon of the University of California (Berkeley) and John E. Howell of Stanford University. Their book, Higher Education for Business, has been published by Columbia University Press. Among their major recommendations are:"

"The majority of students studying for the master's degree in business are enrolled in makeshift programs which are generally unsatisfactory... Business administration gets a much larger portion of poor students and a smaller percentage of the best students than do the traditional professional fields."

"It is obvious that the problem of human behavior with which we are dealing can not be understood in terms of psychology or any one of the social sciences alone. Is it not possible, therefore, that in attempting to follow the problem wherever it leads us, and employing whatever concepts and research techniques are relevant, we shall be able to define the problem in such a way and develop concepts and a theoretical framework of such a nature that a major contribution will be made to the foundation for an integrated social and psychological science? Whether or not this result appears possible or attractive to present scholars in these fields, we who are studying industrial relations are forced to work in this direction. It is not a case of choice alone, but of necessity, for we can not get results satisfactory to ourselves and applicable to the solution of practical problems by employing the concepts, theories, and methods of any one science."

"Bob Tannenbaum’s intellectual work described organizational systems not as machines with interchangeable human parts, but as living communities that can be designed to enable people to grow and learn while achieving business goals. His writings, as well as his teaching and consulting, reflected the value he placed on people, and his belief that, to a great extent, leadership effectiveness derives from awareness of one’s own basic assumptions about human nature and the testing out and revision of those assumptions."

"Leadership is interpersonal influence, exercised in a situation, and directed, through the communication process, toward the attainment of a specified goal or goals."

"[The human relations movement ] will bring to bear existing and newly developed theories, methods, and techniques of the relevant social sciences upon the study of inter- and intrapersonal phenomena, ranging fully from the personality dynamics of individuals at one extreme to the relations of cultures at the other."

"The term "human relations" is being used to denote a field of inquiry - one which cuts across the jurisdictional boundaries of traditional social sciences in an effort to avoid fragmented, compartmentalized, or partial approaches to human problems."

"Human relations today has its iconoclasts and believers, critics and supporters, detractors and zealots. This is not surprising; for during the past twenty years, numerous research groups have burgeoned, and many individual investigators have become most active in the field. There has been a fantastic outpouring of professional and popular books and articles, untold new or revised college and university offerings, a plethora of in-plant training courses, a growing number of training laboratories and seminars, and a seemingly ever-increasing schedule of meetings and speeches—all concerned, in whole or in part, with "human relations.""

"In recent years the areas of leadership, training, and organization have increasingly challenged theorists, researchers, and practitioners. Evidence of this has been a growing literature from many disciplines and approaches. Without self-consciously determining the long-range directions of our work, we have found ourselves challenged by these issues and contributing to this literature."

"If they can see them as forces that consciously or unconsciously influence their behavior, they can better understand what makes them prefer to act in a given way. And understanding this, they can often make themselves more effective."

"Each type of action is related to the degree of authority used by the boss and to the amount of freedom available to subordinates in reaching decisions. The actions seen on the extreme left characterize managers who maintain a high degree of control while those seen on the extreme right characterize managers who release a high degree of control."