Arnold Kling  

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In Defense of Cato... Should Libertarians Oppose "Ca...

Nicholas Bloom and John Van Reenen write


management practices vary tremendously across firms and countries. Most of the difference in the average management score of a country is due to the size of the "long tail" of very badly managed firms. For example, relatively few U.S. firms are very badly managed, while Brazil and India have many firms in that category...

strong product market competition appears to boost average management practices through a combination of eliminating the tail of badly managed fifi rms and pushing incumbents to improve their practices.

I recommend the whole paper. "Management practices" are an example of an intangible factor that affects productivity. The role of competition, entry, and exit is something that I stressed is critical for dynamic efficiency in my talk at Cato. Our book emphasizes intangible factors and dynamic efficiency.



COMMENTS (1 to date)
Les Cargill writes:

I note that they mention the classic "Yes, Minister", which I have heard was actually *designed* around public choice theory.

As to the authors' mention of performance reviews, there are many, many, many extremely destructive shibboleths in that arena. Bad actors have every incentive to hijack this process. Since most employees these days add to firm organizational capital rather than knock out quantities of widgets, you can almost hear a firm deciding to off itself through this. Been there, done that, got the coffee cup....

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