Organizational Economics Exam Questions

December 22, 2021
Here are the questions from the take-home final in my "Seminar in Organizational Economics."
Ennio Piano tells me they were "hard." ;)
Like the students, try your hand at four from the following eight.
  • Explain what Mises argued in the Socialist Calculation Debate. Then discuss how Hayek built on Mises' argument. Next, explain the contribution of Coase (1937). Is Coase's argument complementary to or incompatible with what the arguments of Mises and Hayek in the Socialist Calculation Debate? Defend your answer.
  • In this essay, answer the following questions. What are the three ways that transactions may be organized? Why are all real-world contracts incomplete? What are two solutions that transacting parties may use to overcome the problems posed by contractual incompleteness?
  • O. Williamson identifies two major “branches” within “transaction cost economics.” He writes (1985): “[There are] two branches of transaction cost economics: the governance branch and the measurement branch. The former is concerned mainly with organizing transactions in such a way as to facilitate efficient adaptations. The latter is concerned with the ways by which better to assure a closer correspondence between deeds and awards. To be sure, these are no independent. The difference in emphasis nevertheless real and needs to be highlighted.” Write an essay that answers the following questions. What explanation for vertical integration does each branch provide? Which branch have scholars suggested may be more important for explaining the organization of markets for consumer goods? Give one example of how consumer goods markets are organized to overcome a problem this branch identifies. A complete answer will make reference to seminal papers from each of these two “branches.”
  • Klein and Foss suggest (2005) that “the existence of the firm can thus be explained by a specific category of transaction costs, namely, those that close the market for entrepreneurial judgment.” Write an essay explaining what Klein and Foss mean by this sentence.
  • Keeping promises, both explicit and implicit, is crucial to appropriating gains from human interaction. Identify and describe three distinct mechanisms for securing commitment.
  • Our course took a “broad” view of organizational economics that allowed for exploration of many organizations beyond merely for-profit firms, including criminal organizations. Pick a real-world criminal organization and analyze one of the following questions. (a). How does it resolve disputes between its members in the absence of government courts? (b). How does it resolve disputes with other criminal organizations in the absence of government courts? (c.) Which party/parties own the organization’s assets and why? (d.) How are members of the organization compensated (piece rate, time rate, salary, profit-sharing, etc…) and why? (Note: This is likely the hardest question on the exam and I will grade it in light of that fact).
  • In this essay, describe the process of applied economic research on organizations. In your essay, answer the following questions: 1. What will a good research question ask? 2. On an Austrian approach, what, if anything in your paper may be empirically “tested”? 3. What is not subject to empirical verification / falsification (and why?) 4. When writing an applied paper, what do we mean by the words “exogenous” and “endogenous”?
  • Scholars like Demsetz and Alchian developed a nuanced understanding of how private property rights / ownership influence incentives. Hansmann agrees but adds an additional layer by arguing that who owns matters (in other words, transaction costs are positive). Why does it matter which party/parties own an organization? Provide an example of a real-world organization to support your argument. (Your example can be original or from a paper in class but be sure to cite any sources you use).