Harvard University Faculty

"This paper analyzes the relations between knowledge, control and organizational structure both in the market system as a whole and in private organizations. Limitations on the mental capacity of the human mind and the costs of producing and transferring knowledge means that knowledge relevant to all decisions can never be collected in the mind of a single individual or a small body of experts. This means that if the knowledge valuable to a particular decision is to be used in making that decision, there must be a system for partitioning out decision rights to individuals who already have the relevant knowledge and abilities or who can acquire or produce them at the lowest cost. Self interest on the part of individual decision-makers means a control system is required to motivate individuals with the decision rights and the relevant knowledge to use those decision rights appropriately. This control problem is solved in a capitalist economy by a system of alienable property rights."

"The corporation as an organizational form is an enormously productive social invention. Partly because of its success it is under increasing attack from various quarters, often under the guise of “protecting” investors from self-interested managers. Some of these attacks are successful simply because the corporation is a poorly understood entity. This paper discusses what the corporation is, what it is not, and how certain misconceptions about the corporate form are fostered by its critics as part of their attack."

"A major social problem we face today is how to control the political process that is eroding the free enterprise market system. Although I am pessimistic that we will in fact ever resolve this problem completely, we will surely never solve it unless we develop a viable positive theory of the political process. Such a political theory will not be complete until we also have developed a theory that explains why we get the results we do out of the mass media."

"It is traditional in the theory of the firm to define the production opportunity set available to the firm in terms of its boundary -- the maximum attainable set of output quantities for various input quantities, given the state of technology and knowledge. This boundary is the production function of the firm. One of our purposes here is to point out the dependence of such production functions on the structure of property rights and contracting rights within which the firm exists. We redefine the production function in order to recognize the dependence of output on the structure of property and contracting rights. That expanded framework is then used to discuss a concrete set of problems surrounding the role of labor in the firm ranging from the 'labor-managed firm' system (in which tradable capital value residual claims [common stock] are legally prohibited), and the codetermination and industrial democracy movements (in which management participation by labor is required by law), to cooperatives and professional partnerships (i.e., quasi-labor-managed firms which arise out of the voluntary contracting process), and the capitalist corporation."

"Institutions are human behavior, and they are, therefore, to be explained by the characteristics of that behavior."

"1950: George Homans, The Human Group — advances small-group theory and research; attempts to extrapolate from a single group to understanding the social system."

"Until the 1950s, individuals were often conceptualized as being at the mercy of structures. The extreme version of this view of man is behaviorism in psychology. In the stimulus response (SR) approach, the goal is to find the proper stimulus; if the search is successful, the stimulus will invariably trigger the response (Skinner, 1953; Hull, 1952). In sociology, the most prominent representative of this view became George C. Homans, who postulated that all behavior is reducible to a few basic mechanisms. Homans was one of the first to present the 'methodological individualism' that later turned out to be the foundation for various versions of 'rational choice'... Homans can be considered an exception in the rigid theoretical frame of sociology."

"It is really intolerable that we can say only one thing at a time; for social behavior displays many features at the same time, and so in taking them up one by one we necessarily do outrage to its rich, dark, organic unity."

"In choosing between alternative actions, a person will choose that one for which, as perceived by him at the time, the value, V, of the result, multiplied by the probability, p, of getting the result, is the greater."

"Social behavior is an exchange of goods, material goods but also non-material ones, such as the symbols of approval or prestige. Persons that give much to others try to get much from them, and persons that get much from others are under pressure to give much to them. This process of influence tends to work out at equilibrium to a balance in the exchanges"

"To consider social behavior as an exchange of goods may clarify the relations among four bodies of theory: behavioral psychology, economics, propositions about the dynamics of influence, and propositions about the structure of small groups."

"If we wanted to establish the reality of a social system as a complex of mutually dependent elements, why not begin by studying a system small enough so that we could, so to speak, see all the way around it, small enough so that all the relevant observations could be made in detail and at first hand?"

"Success in the sociologists' aim might lead, in T. S. Eliot's phrase, to "systems so perfect that no one would need to be good." This view forgets that men long ago committed themselves to the endeavor to control their own collective behavior, not only in the ways sanctioned by the churches but in others, by making it to men's interest to do good. And they have increasingly based the endeavor on an understanding of natural laws of human behavior, those of economics, for example. So that the question is not: Shall this kind of control be undertaken? but: Where shall it stop? A sociologist might also argue that his religious critics have more faith in him than in their own doctrine, the doctrine that man is infinitely tough and resourceful and is not easily cheated of his freedom to sin. What God has given no man can take away, certainly no sociologist. More seriously, he might argue that the social sciences are not in train to eliminate morality but to make greater demands of it. A sociology that shows us unsuspected or not hitherto understood ways in which men are bound up with one another invites more refined answers to the question: "Am I my brother's keeper?""

"Shared cultural meaning, as it is institutionalised in public policies and state structures, influences the pragmatic solutions groups envision to such instrumental problems as economic growth."

"If you peruse the table of contents of a textbook on organizational theory or search the web for courses in organizational sociology, you cannot help but notice how many of the key contributors to the field spent time at Stanford between 1970 and 2000, as faculty members, post-docs, or graduate students... Of the five most influential macro-organizational paradigms in play today — institutional theory, network theory, organizational culture, population ecology, and resource dependence theory (in alphabetical order) – Stanford served as an important pillar, if not the entire foundation, for all but network theory. By the 1990s, it became an important site for network theory as well."

"Modern institutions are transparently purposive and that we are in the midst of an evolutionary progression toward more efficient forms."

"The fact that each nation came to believe in the virtue of whatever policy happened to be in effect when recovery began supports [the] argument that haphazard economic vacillations play an important role in determining which policy strategies become constructed as economically efficacious. This also tends to undermine the realist/utilitarian view, which suggests that policy improves over time as rational policymakers learn more about universal economic laws from experience, because wildly inconsistent policies won favor in different contexts."

"The current emphasis on price policy, as against price, as a proper object of study represents recent economic reflection on the significance of expectations, uncertainties, market control, and the position of price as one among many selling terms. Policy implies some degree of control over the course of events and, at the same time, the use of judgment as to the probable consequences of alternative lines of action. In perfect markets, whether monopolistic or competitive, price is hardly a matter of judgment and where there is no judgment there is no policy. The area of price policy, then, embraces the deliberative action of buyers and sellers able to influence price; that is to say, it covers practically the whole field of industrial prices."

"In the late 1930s, E.S. Mason wrote a series of papers which established the research programme which became industrial organisation. Many of these papers discussed the lessons for antitrust policy from the Robinson/ Chamberlin revolution. Although these papers made some proposals for a strengthening of antimonopoly measures, it is clear that there is a decisive break between the emerging Harvard school the old J.B. Clark/ Marshallian preoccupation with freedom and openness of competition, which Mason refers to as "antiquated and inadequate.""

"In recent years economists and historians have increasingly turned their attention to modern economic institutions. Economists such as Edward S. Mason, A. D. H. Kaplan, John Kenneth Galbraith, Oliver E. Williamson, William J. Baumol, Robin L. Marris, Edith T. Penrose, Robert T. Averitt, and R. Joseph Monsen, following the pioneering work of Adolph A. Berle, Jr., and Gardiner C. Means, have studied the operations and actions of modern business enterprise. They have not attempted, however, to examine its historical development, nor has their work yet had a major impact on economic theory. The firm remains essentially a unit of production, and the theory of the firm a theory of production."

"The size of a firm influences its competitive policies in a number of ways. In the first place the scale of its purchases and sales relative to the total volume of transactions in the firm's market is one indication of the extent of its market control. Taken in conjunction with other data it may throw a good deal of light on price and production policies. Certain authorities, on the other hand, brush aside figures on the relative size of firms as irrelevant and emphasize the decisive importance of the elasticity of the firm's demand curve. 3 It would no doubt be extremely convenient if economists knew the shape of individual demand and cost curves and could proceed forthwith, by comparisons of price and marginal cost, to conclusions regarding the existing degree of monopoly power. The extent to which the monopoly theorists, however, refrain from an empirical application of their formulae is rather striking."

"The term monopoly as used in the law is not a tool of analysis but a standard of evaluation. Not all trusts are held monopolistic but only" bad" trusts; not all restraints of trade are to be condemned but only" unreasonable" restraints."

"If people in the organization don't understand how a company is supposed to be different, how it creates value compared to its rivals, then how can they possibly make all of the myriad choices they have to make? Every salesman has to know the strategy — otherwise, he won't know who to call on. Every engineer has to understand it, or she won't know what to build."

"When you read what’s in the World Economic Forum Competitiveness Yearbooks, you think this is just sort simplistic, arbitrary and vague. Nevertheless, these are also comfort blankets for high-level executives, it gives them what they need, hence commanding such fees. So if I am a bit scornful it is only because people like Michael Porter are manifestly and deliberately in the business of over-simplification. He did it for Ronald Regan in the mid-80s, he’s been doing it for corporations since the 70s, and he’s been doing it ever since. He produces methodological tools through which the world gets governed... Whereas Hayek sought to remind us that the world cannot be easily reduced to a set of simple facts, Porter has built his career on seeking to demonstrate precisely the opposite."

"Business strategy probably predates Michael Porter. Probably. But today, it is hard to imagine confronting the discipline without reckoning with the Harvard Business School professor, perhaps the world's best-known business academic. His first book, Competitive Strategy: Techniques for Analyzing Industries and Competitors (Free Press, 1980), is in its 53rd printing and has been translated into 17 languages. For years, excerpts from that and other Porter works have been required reading in "Competition and Strategy," the first-year course that every Harvard MBA student must take. Porter's strategy frameworks have suffered some ambivalence over the years in academic circles — yet they have proved wildly compelling among business leaders around the world."

"The success of a strategy depends on doing many things well – not just a few – and integrating among them."

"There's a fundamental distinction between strategy and operational effectiveness. Strategy is about making choices, trade-offs; it's about deliberately choosing to be different. Operational effectiveness is about things that you really shouldn't have to make choices on; it's about what's good for everybody and about what every business should be doing."

"The essence of strategy is choosing what not to do."

"The essential complement to the path-breaking book Competitive Strategy, Michael E. Porter’s Competitive Advantage explores the underpinnings of competitive advantage in the individual firm. Competitive Advantage introduces a whole new way of understanding what a firm does. Porter’s groundbreaking concept of the value chain disaggregates a company into “activities,” or the discrete functions or processes that represent the elemental building blocks of competitive advantage."

"Quasi-integration is to use debt or equity investments and other means to create alliances between vertically related firms without full ownership."

"Early entry is appropriate when the following general circumstances hold:"

"The grandfather of concepts for predicting the probable course of industry evolution is the familiar ."

"The firm achieving focus may also potentially earn above-average returns for its industry. Its focus means that the firm either has a low cost position with its strategic target, high differentiation, or both."

"Low cost relative to competitors becomes the theme running through the entire strategy, though quality, service and other areas cannot be ignored."

"The essence of formulating strategy is relating a company to its environment."

"The best CEOs I know are teachers, and at the core of what they teach is strategy."

"Librarians need to focus not on individual, physical libraries but on the larger networks–physical and digital–of which their libraries are part."

"To put things in perspective, recall that all the great libraries of antiquity–including the libraries of Alexandria and Pergamum–have disappeared completely. However, the world did not lose the knowledge they contained when they disappeared. Some of what was held in those libraries had been moved to other locations, either to be copied or because it was stolen. Even the fate of the libraries of antiquity shows that preservation relies not on the persistence of specific institutions, but on proper functioning of a system that includes redundancy and the sharing of knowledge across institutions. There is a great deal more progress to be made in this respect during this transition to the digital age, but the importance of doing so is unmistakable."

"Libraries, as spaces, need to continue to inspire the public to dream big and to think great thoughts. Cities, towns, and academic communities of all shapes and sizes need the free, open public spaces that libraries–and only libraries–provide."

"The improved understanding of the equations of hydrodynamics is general in nature; it applies to all quantum field theories, including those like quantum chromodynamics that are of interest to real world experiments. I think this is a good (though minor) example of the impact of string theory on experiments. At our current stage of understanding of string theory, we can effectively do calculations only in particularly simple — particularly symmetric — theories. But we are able to analyse these theories very completely; do the calculations completely correctly. We can then use these calculations to test various general predictions about the behaviour of all quantum field theories. These expectations sometimes turn out to be incorrect. With the string calculations to guide you can then correct these predictions. The corrected general expectations then apply to all quantum field theories, not just those very symmetric ones that string theory is able to analyse in detail."

"String theory work done in India is pretty good. … There’s no other country with a GDP per capita comparable to India’s whose string theoretic output is anywhere as good. In fact, the output is better than any country in the European Union, but at the same time not comparable to the EU’s as a whole. So you get an idea of the scale: reasonably good, not fantastic. The striking weakness of research in India is that research happens by and large only in a few elite institutions. But in the last five years, it has been broadening out a bit. TIFR and the Harish-Chandra Research Institute (HRI) have good research groups; there are some reasonably good young groups in Indian Institute of Science (IIS), Bengaluru; Institute of Mathematical Sciences, Chennai; some small groups in the Chennai Mathematical Institute, IIT-Madras, IIT-Bombay, IIT-Kanpur, all growing in strength, The Indian Institute of Science Education and Research (IISER), Pune, has also made good hires in string theory."

"Although previously the monoamine systems were considered to be responsible for the development of major depressive disorder (MDD), the available evidence to date does not support a direct causal relationship with MDD. There is no simple direct correlation of serotonin or norepinephrine levels in the brain and mood. In other words, after a half-century of research, the chemical-imbalance hypothesis as promulgated by the drug companies that manufacture SSRIs and other antidepressants is not only without clear and consistent support, but has been disproved by experimental evidence."

"One does not have to have experience raising children through school, dealing with family tragedies, and so forth, to be able to find three numbers whose fourth powers add up to another one."

"Noam is unlike anyone we've ever had."

"Among students and faculty alike, any mention of his name is usually accompanied by a quick glance around, a devious smile, and hunched-over, half-whispered anecdotes about the man."

"Indeed, Elkies admits he can improvise fugues, "at least on reasonable themes in a slow enough tempo.""

"One of the things about math and chess is that we’re better at doing it than philosophizing about it."

"In general the claim can be supported that a view of classical political economy as committed to extreme laissez-faire or unmitigated economic individualism misrepresents or at the very least analytically overgeneralizes their circumscribed theoretical and practical aims. In general then, with regard to both political and economic liberty, the classical political economists might be seen to be united in their efforts to theorize and systematize the productive and allocating functions of the mechanism of the market as the most efficient means to engender the growth of wealth. At the same time, classicals such as Smith, Malthus, Ricardo, and Mill recognized that the market, of necessity, operated in a larger context of restriction – not only legal, but equally as important, within political, religious, moral, and conventional restrictions – which could not be readily or in some cases even desirably overcome."

"The heart of Rousseau's thinking, as Arthur Melzer and others have shown, is to honor modern individualism but at the same time to subject it to a devastating critique."

"To say that Rousseau's contemporaries were aware of the paradoxes in his writing would be putting it mildly. It was the constant theme of reviewers, from his first publications in the early 1750s to his posthumous works, which came out in the 1780s. The usual line was that his compelling prose style veiled the hollowness of his paradoxes and that other writers, notably Voltaire, were much deeper thinkers. Rousseau himself was well aware of these criticisms, but the impulse behind all of his work was a determination to confront the contradictions that seem inseparable from our experience. It is easy to think up theories that get rid of contradictions, but not so easy to get rid of the contradictions themselves. Since his time, two centuries of further reflection have of course brought new ways of answering his questions. As Jean Starobinski has said, "It took Kant to think Rousseau's thoughts, and Freud to think Rousseau's feelings." But the questions remain as important as ever, and Freud himself stands directly in the line that leads from Rousseau. As for Voltaire, it seems obvious today that he was a witty and prolific popularizer whose ideas were largely derivative. It was Rousseau who was the most original genius of his age—so original that most people at the time could not begin to appreciate how powerful his thinking was."