The Org: The Underlying Logic of the Office by Ray Fisman and Tim Sullivan

By Professor Jeffery Atik

It feels odd to be composing this review of Ray Fisman and Tim Sullivan's The Org in the days following Ronald Coase's passing. Coase was an unusually creative and influential thinker - one who identified some basic truths of organizational life that had not been generally recognized: the kind of simple things that, once pointed out, cannot fail to be seen.

Coase and the work that followed Coase form much of the subject matter of The Org, a book-length meditation by Ray Fisman and Tim Sullivan on the science of the organization. Indeed, Fisman and Sullivan launch the book with the story behind Coase's posing of the grand question: "Why orgs?" Young Coase travels to Chicago, meets with managers, and reads the Chicago phone book. He is struck by the range of scale and activities pursued by the firms he finds. Why then, asks Coase (and ask Fisman and Sullivan), are some activities conducted within firms and others between firms (that is, via the market)? Coase's answer (transaction costs) may or may not be correct ('transaction costs' always seemed to me to be a convenient label for a still elusive explanation, almost a tautology); what is important is the question.

Organizations are mysterious. We fit them on like suits of clothing - and instinctively know how to push and pull their levers. Fisman and Sullivan focus on what happens within the firm - how organizations compel human agents (because that's what we are) to pursue organizational goals. The resort to organization is by and large a given. At this point, they collect the principal/agent mysteries that form much of the challenge to understanding how firms work. Fisman and Sullivan do not confine themselves to business organizations in The Org - indeed their best coverage involves organizations that are not business firms: the Baltimore police department, Methodist churches and the military.

The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being in Charge Isn't What it Used to Be by Moisés Naím

By Professor Jeffery Atik

Moisés Naím sees the decline of power across many institutions. He is at times wistful, at times celebratory in his reaction to power's decay. But he isn't entirely clear why we should care about the passing of power. The powerful do care; Naím has many powerful friends who lament power's loss of magic. Popes, pols and pundits just don't get the respect their predecessors received; their authority is more circumscribed, more readily challenged (the same decline is noted by law professors). But for the greater number of us, who are in more settings objects of the power of others than detainers of power, the end of power is not a self-evident cause for concern.

A decline in social organization is a cause for concern - and to the degree the phenomena described in The End of Power signal a loss of capacity for coordination, Naím's book is more than an indulgence of ambivalent nostalgia. Naím is careful with his definition of power: power is the ability of some few - the powerful - to direct the actions of others. And, he asserts, there are four means by which power is exerted: muscle (force), code (tradition), pitch (persuasion), and reward (incentive).

Naím is a superachiever who has spent his life at or close to the top. He was a prominent politician in Venezuela - and since has become a heralded writer in the United States. As such, his personal prescription, given toward the end of The End of Power, is quite surprising. Get off the elevator, Naím urges. And by this he calls for an abandonment of mindless ambition and more; elevator thinking is the focus on rank and hierarchy, which promotes power as an end in itself.

The Entrepreneurial State: Debunking Public vs. Private Myths by Mariana Mazzucato

By Professor Jeffery Atik

This review is cross-posted from Jeff Atik's blog, Attraverso.

From start to finish of this superb book, I want Mariana Mazzucato to be right. In The Entrepreneurial State, Mazzucato suggests that the state has had a much more powerful role in stimulating innovation that the dominant narrative admits. The state pushes the key breakthroughs; private firms enter the game quite late (though they often capture an inordinate amount of the social gains from innovation).

Mazzucato's book is timely (indeed, it has had a considerable impact in Brussels), as countries shift away from austerity policies and look towards Keynesian-style spending to get their economies moving. Keynes famously suggested burying a treasure in an abandoned mine as a make-work project (his point, of course, was not to endorse pointless exercise; rather, he meant to show that pure make-work could act as a stimulus). Mazzucato argues countries can improve on Keynes by spending on state entrepreneurship. In a best-case outcome, state-sponsored innovation will shock the economy back to expansion and will lead to frontier-shifting welfare gains.

And maybe it would - if the political class could be convinced by Mazzucato's account of the hidden state-centric nature of innovation. Her recent historic examples involve pharmaceuticals and information technologies. The private drug development narrative is deliberately cultivated by Big Pharma: bold firms undertake massive R&D in their laboratories, to be rewarded (in the event of success) by patent monopolies. Big Pharma asks to be 'left alone' by the State: no tort liability and quick market approvals are the best policies. In fact, Mazzucato observes, it is the state that undertakes the greatest risks in developing new approaches and active agents, through public funding (such as NIH grants in the United States) of medical research. Left to their own devices, Big Pharma would undertake little research; indeed, the current trend among large pharmaceutical firms is to reduce R&D expenditure and to look to smaller, research-oriented firms to do later-stage development work, then in-licensing or acquiring fairly proven projects. But without the substrate of state-funded science, even this system would grind to a half.