By Paul Walker 22/01/2018

At the Marginal Revolution blog Tyler Cowen writes on the new biography of economist Edith Penrose, No Ordinary Woman: The Life of Edith Penrose, by Angela Penrose. Cowen writes,

What a dramatic and eventful book. Edith Penrose (1914-1996) is a not so well-known but highly underrated economist, with her major contributions coming in the theory of the firm and industrial organization. As a girl, she survived only because her father shot a rattlesnake about to kill her. Later, her first husband was murdered, right before their first child was born. She and her second husband, working in Switzerland, helped Jews escape from Germany, and she later did food planning during the war in England. In 1948 the couple lost one of their three children, right before his third birthday. Later she received a doctorate in economics from Johns Hopkins, studying under Fritz Machlup. Machlup at one point wrote a ten-page letter to her, with the top proclaiming: “I implore you to shut off your hypersensitivity and to overlook it if I sound condescending, arrogant or otherwise unpleasant. I just want to be helpful.”

She headed the Owen Lattimore Defense Fund. Later, she did not feel entirely comfortable teaching at Johns Hopkins (she was treated badly and not tenured) and so she ended up teaching in Baghdad and Beirut and was also an important early faculty member at INSEAD, perhaps their first world class hire. She became an expert on energy economics and multinationals, traveling and advising around the world more or less without stopping. Drawing on her doctoral work, she also published on IP problems for developing economies, an area where she was well ahead of her time.

She enjoyed writing poems and limericks for her own pleasure. She also was known for her “direct questions” and her “disconcerting remarks.”

Cowen makes a couple of other comments which for me are interesting. He says,

I would describe her work as halfway between economics and the business school tradition, broadly in the Austrian school but more descriptive and without the political slant of Mises and Hayek.


Edith Penrose.

She was the founding thinker behind “resource-based” theories of the firm, whereby firms are best understood in terms of what resources they have access to, rather than their products. This was a dominant approach from the 1980s onward, though she received only marginal credit for her seminal role. She also focused on which were the slack resources of a firm or not, as a means of ascertaining where the firm was headed, and ran all this analysis through a lens of expectations and perceptions, reflecting her studies with Machlup. She thought in terms of what a firm’s “moat” might be, as you might expect from a contemporary Silicon Valley analyst.

These comments for interesting since an anonymous referee for my upcoming book, A brief prehistory of the theory of the firm, wrote,

Third, I’m a bit befuddled by the fact that Penrose’s work isn’t covered as part of the history. Her work has been very influential and fits neatly in the history of the theory of the firm (as is noted in the manuscript). But she also fits in the overall development of ideas, as one of two branches following the work of Robinson (the other is Coase, as noted by Jacobsen (2008; 2011)).

This gave me purse to think more about why I hadn’t included Penrose in the book. I replied to the referee by saying,

I was in two minds about Penrose since her work is pre-1970 [and thus in the time period covered by my book] but is, like Bylund and Winter, more heterodox than mainstream. Penrose is properly more well known in management than economics. The economics mainstream hasn’t taken up Penrose’s ideas to any great degree.

and, in a latter email,

Thinking more about Penrose, I would place her work more in the heterodox category than in the mainstream. Penrose’s influence is felt more in strategic management, largely via the resource-based view, than in the mainstream of economics. Rightly, or more likely wrongly, standard economics has not put much effort into developing Penrose’s ideas.

And I think I’m right in saying that Penrose has been more influential in management than economics. This related to Cowen’s point about Penrose being “halfway between economics and the business school tradition”. It is the management, business school, scholars who have developed Penrose’s ideas, in the “resource-based theories of the firm”, rather than the economists who have followed Ronald Coase, and to a lesser degree Frank Knight.

Cowen is likely right when he says Penrose,

is a not so well-known but highly underrated economist

At least as far as economics is concerned.