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January 31, 2006

Wal-Mart Is Front-line Soldier in Real War on Poverty


 

BALTIMORE -- In Big Labor's war against Wal-Mart, "collateral damage" -- in the form of lost jobs and income for the poor -- is starting to add up. Of course, since the unions and their legislative allies claim that their motive is to liberate people from exploitation by Wal-Mart, these unintended effects are often ignored.

Here in Maryland, however, that's getting hard to do. The consequences of our legislature's override of Republican Gov. Robert Ehrlich's veto of their "Fair Share Health Care Act" on Jan. 12 will be tragic for some of the state's neediest residents. The law will force companies that employ over 10,000 to spend at least 8% of their payroll on health care or kick any shortfall into a special state fund. Wal-Mart would be the only employer in the state to be affected.

Almost surely, therefore, the company will pull the plug on plans to build a distribution center that would have employed 800 in Somerset County, on Maryland's picturesque Eastern Shore. As a Wal-Mart spokesman has put it, "you have to take a step back and call into question how business-friendly is a state like Maryland when they pass a bill that . . . takes a swipe at one company that provides 15,000 jobs."

 . . .

. . . , legislators should be mindful that companies like Wal-Mart are not the enemy but rather front-line soldiers in a real war on poverty. The profit motive leads them to seek out areas where there is much idle labor and put it to work. Where they are prevented or discouraged from doing so, the alternative job prospect is rarely a cushy spot in the bureaucracy. Rather, it is continued idleness and hardship.

 

For the full commentary, see:

STEVE H. HANKE and STEPHEN J.K. WALTERS. "Cross Country; Hard Line State." The Wall Street Journal (Thurs., January 26, 2006): A11.

 




January 30, 2006

Using a T-shirt to Tell the Story of Progress



Source of image: Amazon.com


The protests occurred on ''a cold day in February 1999.'' Ms. Rivoli was watching as students gathered at the gothic centerpiece of Georgetown to demonstrate against the International Monetary Fund, the World Trade Organization, and other putative villains of international trade. The crowd, Ms. Rivoli noticed with characteristic acuity, had ''a moral certainty, a unity of purpose'' that permitted it to distinguish black from white and good from evil ''with perfect clarity.'' One woman seized the microphone and asked: ''Who made your T-shirt? Was it a child in Vietnam? Or a young girl from India earning 18 cents per hour? Did you know that she lives 12 to a room? That she shares her bed and has only gruel to eat?''

Ms. Rivoli did not know these things, and she wondered how the woman at the microphone knew. But she decided to find out. In the rest of her narrative, the author tells the story of ''her'' T-shirt, which she purchased for $5.99 by the exit of a Walgreen's in Fort Lauderdale, Fla. ''It was white and printed with a flamboyantly colored parrot, with the word 'Florida' scripted beneath.'' A company in Miami had engraved the front, after buying the shirt from a factory in China. The Chinese manufacturer had purchased the cotton used to make the shirt from Texas. Eventually it will end up as part of a large but little-known market for used clothing destined for resale in East African ports.

. . .

By looking across history to the shifting center of textile manufacturing from Manchester, England, to Lowell, Mass., to South Carolina to Japan and, finally, the developing nations of Asia, Ms. Rivoli discovers a universal truth. Without making light of the horrors experienced by workers, she asserts that their jobs were a little better than other available options (usually farm work) and, what's more, that textile factories led to advances in industrialization and, just as dependably, in living standards. It is not too much to say that she uses the T-shirt to tell the story of progress.


For the full commentary on Rivoli's book, see:

ROGER LOWENSTEIN. "OFF THE SHELF; Travels With My Florida Parrot T-Shirt." The New York Times, Section 3 (Sun., August 21, 2005): 7.


The book is:

Pietra Rivoli. The Travels of a T-Shirt in the Global Economy: An Economist Examines the Markets, Power, and Politics of World Trade. John Wiley & Sons, 2005. ISBN: 0471648493




January 29, 2006

Reagan "the man who championed creative destruction"


ReaganStatueLiberty.jpg Image source: http://www.nytstore.com/ProdDetail.aspx?prodId=2689


From Wooldridge's review of a book on Ronald Reagan:

Reeves argues that Reagan was a master of both imagination and delegation. He stuck firmly to a small number of clear goals - reducing the size of government, restoring America's power and pride, and facing down Communism - and then delegated implementation to the "fellas." He did not so much do things as persuade others to do them for him. But his preference for delegation should not be confused with passivity. He insisted on using the phrase "tear down this wall" against the advice of his underlings, for example.

Wooldridge describes Reagan as, in part:

. . . the man who championed "creative destruction" . . .


The review is:

ADRIAN WOOLDRIDGE. "The Great Delegator." The New York Times, Section 7 (Sunday, January 29, 2006): 11.


The book being reviewed is:

Richard Reeves. PRESIDENT REAGAN: The Triumph of Imagination. Simon & Schuster, 2005, 571 pp. $30. ISBN: 0743230221




January 28, 2006

Private Property Rights Would Help American Indians


(p. W11) The main problem with Indian reservations isn't, as some argue, that they were established on worthless tracts of grassland. Consider the case of Buffalo County, S.D., which Census data reveal to be America's poorest county. Some 2,000 people live there. More than 30% of the homes are headed by women without husbands. The median household income is less than $13,000. The unemployment rate is sky high.

Just to the east of Buffalo County lies Jerauld County, which is similar in size and population. Yet only 6% of its homes are headed by women without husbands, the median household income is more than $30,000, and the unemployment rate hovers around 3%. The fundamental difference between these two counties is that the Crow Creek Indian Reservation occupies much of Buffalo County. The place is a pocket of poverty in a land of plenty.

Maybe we should give land back to the rez-dwellers, so that they may own private property the way other Americans do. Currently, the inability to put up land as collateral for personal mortgages and loans is a major obstacle to economic development. This problem is complicated by the fact that not all reservations have adopted uniform commercial codes or created court systems that are independent branches of tribal government -- the sorts of devices and institutions that give confidence to investors who might have the means to fund the small businesses that are the engines of rural economies.

. . .

. . . the real tragedy is that reservations, as collectivist enclaves within a capitalist society, have beaten down their inhabitants with brute force rather than lifting them up with opportunity. As their economies have withered, other social pathologies have taken root: Indians are distressingly prone to crime, alcoholism and suicide. Families have suffered enormously. About 60% of Indian children are born out of wedlock. Although accurate statistics are hard to come by because so many arrangements are informal, Indian kids are perhaps five times as likely as white ones to live in some form of foster care. Their schools are depressingly bad.

Even if casino revenues were able to address these soul-crushing problems -- a doubtful proposition -- most reservations are too isolated geographically to profit from big-dollar gambling. Yet the rise of the casinos may help point the way forward: Their ability to flourish contradicts the tenured Marxists in ethnic-studies departments who claim that communitarian Indian cultures aren't compatible with market capitalism. After all, it takes entrepreneurship to run some of the world's biggest casinos.

What's more, this modern-day entrepreneurship is part of a long tradition: Meriwether Lewis (of Lewis & Clark fame) described the Chinooks as "great hagglers in trade." I once visited Poverty Point, a 3,000-year-old set of earthen mounds in Louisiana; the museum there displayed ancient artifacts found at the site, including copper from the Great Lakes and obsidian from the Rockies. These prehistoric Americans were budding globalizers, and there's no reason why their descendants should remain walled off from the world economy.



For the full story, see:

JOHN J. MILLER. "The Projects on the Prairie." The Wall Street Journal (Saturday, January 27, 2006): W11.(Note: ellipses added.)





January 27, 2006

"Dream big and dare to fail"


ANCHORAGE, Alaska (AP) - Norman Vaughan, a dog handler and driver in Adm. Richard Byrd's 1928 expedition to the South Pole, has died.

Vaughan died at Providence Alaska Medical Center just a few days after turning 100 years old.

He was well enough six days before his death to enjoy a birthday celebration at the hospital attended by more than 100 friends and hospital workers.

Vaughan's motto was "Dream big and dare to fail."

"Vaughan with Byrd at Pole." Omaha World-Herald (Sunday, January 8, 2006): 8A.




January 26, 2006

West Wing President Bartlet Endorses Creative Destruction


From Episode #519 of The West Wing, which was written by Eli Attie, directed by Richard Schiff, and first aired on NBC on Wednesday, April 21, 2004, during the fifth season:

Josh has negotiated a trade deal. The President is enthused about the agreement and he and Leo are looking now at getting it through Congress. But when C.J. asks what he is going to say to those who say the agreement is going to export jobs, Bartlet makes a joke about economists recommending filing for unemployment. So, Josh asks,
"Sir, have you read the talking points?"
"I'm an economist. Some would say half-decent. I don't need a primer on this."
"Due respect,sir," Charlie says as a lead-in to, "your answers on economics can be a bit---" When he hesitates for a fraction of a second, Bartlet offers a word.
"Polysyllabic?"
"Academic," C.J. counters.
"I was going to go with incomprehensible," says Leo.
"Hey listen: Any economic advancement involves what Schumpeter called 'creative destruction'."
"...Not a good answer," C.J. tells him. "...'Cause that word 'destruction will really mollify our critics...."
"Global economic forces are unstoppable just like technology itself," Bartlet insists.
But C.J. and Josh counter that the answers to everything must be, "Free trade produces better, higher paying jobs. It's got to be that simple."


The source of the transcription of the above dialogue is: http://westwing.bewarne.com/fifth/519points.html

(I appreciate Matt Hunter alerting me to this mention of Schumpeter, and providing me with the above link.)




January 25, 2006

The Good Old Days, When Coffee Smelled Like Wet Dogs





We tend to romanticize the country store, and to deride chain stores and name brands. But maybe coffee lovers should think twice.


 

(p. 116, footnote 1) "The air was thick with an all-embracing odor," wrote Gerald Carson in The Old Country Store, "an aroma composed of dry herbs and wet dogs, [of] strong tobacco, green hides and raw humanity."  Bulk roasted coffee absorbed all such smells.

 

Source: 

Pendergrast, Mark. Uncommon Grounds: The History of Coffee and How It Transformed Our World. New York: Basic Books, 2000.

 

(Note: the "of" in brackets in the Carson quote is the word Carson used in his book; Pendergrast mistakenly substitutes the word "or"; I have corrected Pendergrast's mistake.)






January 24, 2006

"Sachs Aid Model Has Financed Tyranny": More on Why Aftrica is Poor



Famine in Niger is no surprise -- desert wastes, locusts and decades of Marxist rule keep it second-to-last on the world poverty list. Famine in the fertile climes of southern and eastern Africa, however, seems more shocking. But there's a common thread: centralized state rule -- incompetent at best -- marked by corruption and sustained by aid. These are the shackles that keep Africans poor: It would be nice if EU and U.S. trade barriers were removed at trade talks in Hong Kong this week, but exports are a distant notion to the 75% of Africans who live off the land.

Niger is little-blessed by nature, but it has also spent its postcolonial era trying various forms of failed government, with Marxism reigning longest. A quarter of the population -- 2.5 million people -- faces starvation. Yet more temperate southern and eastern African countries are on the edge of famine, too, with 10 million affected in southern Africa alone. Again, we find the same economic profile: Zimbabwe, Malawi, Zambia, Mozambique, Swaziland and Lesotho all lack economic freedom and property rights; all have economies mismanaged by the state; all depend on aid. All these countries have a history of utopian schemes that failed to produce everlasting manna. State farms, marketing boards, land redistribution, price controls and huge regional tariffs left few incentives or opportunities for subsistence farmers to expand. Despite torrents of aid, these cruel social experiments could not turn sands verdant or prevent the granaries of southern and eastern Africa from rotting.

Ethiopia's Prime Minister Meles Zenawi believes that allowing Ethiopians to own their land would make them sell out to multinationals. He seems to have overlooked a basic market principle: It demands a willing seller and a willing buyer at an agreed price. If that price is worth selling for, the farmer might have some money to reinvest elsewhere; if that price is worth buying for, the purchaser must have plans to make the land profitable. If there is no sale, owners might have an incentive to invest in their own land and future, having, at last, the collateral of the land on which to get a loan. After decades of socialism, Ethiopia's agricultural sector -- the mainstay of the economy -- is less productive per capita than 20 years ago when Band Aid tried to defeat famine. Although 60% of the country is arable, only 10% has been cultivated. Ethiopia is entirely dependent on donations; but instead of grasping reality, Mr. Zenawi, a member of Tony Blair's "Commission for Africa," is forcing resettlement on 2.2 million people.

In Zimbabwe, the murderous kleptocrats of Robert Mugabe's regime deny that land seizure has pushed their rich and fertile country into famine: Some three million people face starvation today.

. . .

African leaders must be pushed to reduce economic intervention, free financial markets, remove bureaucratic obstacles to setting up businesses, establish property rights and enforce contract law. These are the forces that release entrepreneurial energy. But the ruling cliques will do none of these unless forced to do so as a condition of aid. The Sachs aid model has financed tyranny and corruption for 40 years, leaving Africans destitute. The world trade meeting in Hong Kong will hear cries for "Trade Justice" for Africa, representing more protectionism and more state-run, aid-fueled schemes. What we really need is economic freedom and the rule of law at home: We are perfectly capable of improving our own lot if only allowed to do so.


For the full commentary, see:

FRANKLIN CUDJOE. "The Terms of Trade: Africa Needs Freer Markets -- and Fewer Tyrants." The Wall Street Journal (Weds., December 14, 2005): A20.

(Note: ellipses added.)

(Note: The WSJ identifies Mr. Cudjoe as "director of Imani, a policy think tank in Ghana.")




January 23, 2006

Good Rules Encourage Entrepreneurship, Resulting in Vibrant Economy




Some useful observations from the 2004 co-winner of the Nobel Prize in Economics, Edward Prescott:

Good tax rates, . . . , need be high enough to generate sufficient revenues, but not so high that they choke off growth and, perversely, decrease tax revenues.  This, of course, is the tricky part, and brings us to the task at hand:  Should Congress extend the 15% rate on capital gains and dividends?  Wrong question.  Should Congress make the 15% rate permanent?  Yes.  (This assumes that a lower rate is politically impossible.)

These taxes are particularly cumbersome because they hit a market economy right in its collective heart, which is its entrepreneurial and risk-taking spirit.  What makes this country's economy so vibrant is its participants' willingness to take chances, innovate, acquire financing, hire new people and break old molds.  Every increase in capital gains taxes and dividends is a direct tax on this vitality.

Americans aren't risk-takers by nature any more than Germans are intrinsically less willing to work than Americans.  The reason the U.S. economy is so much more vibrant than Germany's is that people in each country are playing by different rules.  But we shouldn't take our vibrancy for granted.  Tax rates matter.  A shift back to higher rates will have negative consequences.

And this isn't about giving tax breaks to the rich.  The Wall Street Journal recently published a piece by former Secretary of Commerce Don Evans, who noted that "nearly 60% of those paying capital gains taxes earn less than $50,000 a year, and 85% of capital gains taxpayers earn less than $100,000."  In addition, he wrote that lower tax rates on savings and investment benefited 24 million families to the tune of about $950 on their 2004 taxes.

Do wealthier citizens realize greater savings?  Of course -- this is true by definition.  But that doesn't make it wrong.  Let's look at two examples:    First, there are those entrepreneurs who have been working their tails off for years with little or no compensation and who, if they are lucky, finally realize a relatively big gain.  What kind of Scrooge would snatch away this entrepreneurial carrot?  As mentioned earlier, under a good system you have to provide for these rewards or you will discourage the risk taking that is the lifeblood of our economy.  Additionally, those entrepreneurs create huge social surpluses in the form of new jobs and spin-off businesses.   Entrepreneurs capture a small portion of the social surpluses that they create, but a small percentage of something big is, well, big.

Congratulations, I say.  Another group of wealthier individuals includes those who, for a variety of reasons, earn more money than the rest of us.  Again, I tip my hat.  Does it make sense to try to capture more of those folks' money by raising rates on everyone?  To persecute the few, should we punish the many?  We need to remember that many so-called wealthy families are those with two wage-earners who are doing nothing more than trying to raise their children and pursue their careers.  Research has shown that much of America's economic growth in recent decades is owing to this phenomenon -- we should encourage this dynamic, not squelch it.



For the full commentary, see:

EDWARD C. PRESCOTT. "'Stop Messing With Federal Tax Rates'." The Wall Street Journal (Tues., December 20, 2005): A14.





January 22, 2006

Leading Clinton Economist Advocates a Schumpeterian "Dynamism"




Source of book image: http://www.amazon.com/gp/product/product-description/0743237536/104-0088216-5679944

Today's review of the new Gene Sperling economic policy book in the New York Times Book Review, begins by emphasizing Sperling's importance in the Clinton administration:


(p. 16) If you were inclined to identify Clintonism with a single person other than the big man himself, that person might well be Gene Sperling - a top campaign adviser in 1992; a tireless advocate of fiscal discipline during the first term; an inveterate policy wonk throughout all eight years of the administration.  So it's little surprise that this book-length vision for a Democratic economic strategy can best be described as Clintonism 2.0.


NOAM SCHEIBER. "Clintonism 2.0." The New York Times Book Review, Section 7 (Sun., January 22, 2006): 16.


Here is the opening paragrpah of Sperling's chapter one, which is entitled " Growing Together in the Dynamism Economy."


In the 1990s, a new economic era was created when a period of intense globalization collided with an information technology revolution.  Yet precisely defining a "new" economy is less important than understanding the nature of the change.  I believe a more descriptive label is the "dynamism" economy.  Of course, dynamic change in market economies is hardly new.  The mid-twentieth-century economist Joseph Schumpeter identified the process of "creative destruction," positing that a healthy market economy is continually moving forward, replacing old capital, old industries -- and existing jobs -- with more productive alternatives.  Yet, what feels most "new" for average citizens is the breakneck speed at which the increased globalization, rapid technological advance, and the explosion of the Internet are putting fierce competitive pressures on the economy and accelerating change not only in products and services, but also in entire job categories and industries.

Part of the first chapter is viewable at Amazon.com. The book citiation is: Sperling, Gene. The Pro-Growth Progressive: An Economic Strategy for Shared Prosperity. Simon & Schuster, 2005.


"Dynamism" as a descriptor for the good society also appeals to libertarian economics columnist Virginia Postrel, author of The Future and Its Enemies and webmaster of dynamist.com.






January 21, 2006

Land Next to Proposed Ethanol Plant Suddenly Declared "Blighted"



(p. 1A) ORD, Neb. - Carl and Charlene Schauer were upset and more than a little offended when the City Council declared their 50-acre cornfield "blighted and substandard."

Nothing is wrong with the cornfield, located almost five miles outside of town.

Nothing - except its proximity to the site of a proposed $75 million ethanol plant that local officials say will bring 34 jobs to the community of 2,300.

Invented to give cities the power to enlist private development in clearing slums, the "blighted and substandard" designation has become a critical tool for economic development projects across Nebraska.

It allows cities to use property taxes to help pay development costs on behalf of private enterprise, under a mechanism called tax increment financing. That allows increased property taxes generated by improvements of blighted property to be used to help fund the redevelopment.

Blighted land even can be condemned through eminent domain, then turned over to private developers. That practice was upheld by the U.S. Supreme Court last year.

Stunned by that ruling, several Nebraska lawmakers have introduced legislation to prevent local governments from using eminent domain to acquire private property that would be turned over to another private (p. 2A) owner for economic development.

Three bills (Legislative Bills 924, 910 and 799) specifically protect agricultural land, forbidding governments to declare it blighted. A fourth bill (LB 1252) would limit eminent domain to public projects like parks and roads.

And State Sen. Matt Connealy of Decatur proposes a constitutional amendment (LR 272 CA) to remove the requirement that land be designated as substandard and blighted before cities can use property taxes to help private developers pay project costs.

Connealy said it appears some smaller cities are pushing the boundaries of the blight definition.

The Ord ethanol project has been touted by Gov. Dave Heineman, the New York Times and others as an example of small-town hustle and progress.

Carl Schauer's son, Curt, and his wife, Susan, however, have gone to court to try to stop it.

They live directly across Nebraska Highway 11 from Carl Schauer's cornfield. Although not included in the proposed ethanol site, their home is less than 1,000 feet from where the plant would be built. They are worried about noise, smell, traffic and health hazards from the around-the-clock operation.

"I guess we're the sacrificial lambs in the name of economic development," said Susan Schauer, a licensed practical nurse.

A local official said the city does not want to take even the smallest part of Curt Schauer's property if he doesn't want to sell it.

"I don't think anybody in this community would ever do that," said Bethanne Kunz of the Valley County Economic Development Board.

After Schauer rejected an offer to buy a strip of his land for a railcar loading area, Kunz said, the ethanol site was reconfigured to leave out Schauer's property. The field was annexed by the city as part of a redevelopment zone under a Nebraska law that allows small towns and villages to acquire outlying land through "remote annexation."

The Schauer family still doesn't know why the field was declared blighted - and it's worried that the designation could spell trouble. Could their land be taken if another new factory wanted to locate in the area?

"I think it's wrong that government can take private property and turn it over to private enterprise," said State Sen. Tom Baker of Trenton.

Government already offers plenty of help - including grants and tax breaks - to business to encourage development, said State Sen. Deb Fischer of Valentine. "Does government have to give away the farm, too?"



Read the full story at:

REED, LESLIE. "'Blight' label raises concerns." Omaha World-Herald (Sunrise Edition, Saturday, January 21, 2006): A1 & A2.




January 20, 2006

Researchers Want PhDs, "We want development": More on Why Africa is Poor


Researcher asks Kenyans their reaction to a Western men's health magazine.   Image source: online version of article cited below.


(p. 1) LEWOGOSO LUKUMAI, Kenya - The rugged souls living in this remote desert enclave have been poked, pinched and plucked, all in the name of science.   It is not always easy, they say, to be the subject of a human experiment.

. . .

(p. 6) Over the years, the Ariaal have had hairs pulled not just from their heads, but also chins and chests.   They have spat into vials to provide saliva samples.  They have been quizzed about how often they urinate.  Sometimes the questioning has become even more intimate.

Mr. Garawale recalls a visiting anthropologist measuring his arms, back and stomach with an odd contraption and then asking him how often he got erections and whether his sex life was satisfactory. ''   It was so embarrassing,'' recalled the father of three, breaking out in giggles even years later.

Not all African tribes are as welcoming to researchers, even those with the necessary permits from government bureaucrats.   But the Ariaal have a reputation for cooperating -- in exchange, that is, for pocket money.

. . .

The Ariaal have no major gripes about the studies, although the local chief in Songa, Stephen Lesseren, who wore a Boston University T-shirt the other day, said he wished their work would lead to more tangible benefits for his people.

''We don't mind helping people get their Ph.D.'s,'' he said.  ''But once they get their Ph.D.'s, many of them go away. They don't send us their reports.  What have we achieved from the plucking of our hair?  We want feedback.  We want development.''


For the full story, see:

MARC LACEY. "Remote and Poked, Anthropology's Dream Tribe." The New York Times, Section 1 (Sun., December 18, 2005): 1 & 6.




January 19, 2006

Chinese Version of 'Eminent Domain": Villagers Die Protesting Theft of Their Land


"People here have tried everything you can think of to get the problem solved before this happened," said a resident who gave his name as Chen. "They talked to the village committee, the township and municipal governments. One of them even went to Beijing. But nothing is done - the village officials just simply ignore them."

Mr. Chen described the peak of the protests, on Saturday night, when the deaths occurred. "It was like a war, so real and so brutal," he said. "I did not see who started it, but I saw policemen were beating the villagers and the villagers were fighting back with stones and firecrackers."

Since then, villagers said, many residents are being forced to report each morning to the police, who detain them until late in the evening, when they are allowed to return home until the next morning.

As with so many recent rural protests, Panlong's problems began with land. Many villagers told stories of having been deceived by corrupt local officials who they said had enriched themselves by selling off rights to the villagers' farmland.

"Two years back, one day some villagers were asked to attend a routine meeting," said a 42-year-old farmer who gave his name as Fang. "They went and they paid 10 yuan for participation fees, and they signed in as usual. Later, when we discovered our land was being sold, we asked the village committee to explain what's going on, and they answered that we had signed the contract. Suddenly we remembered that meeting, and everyone understood that we had already been cheated."


For the full story, see:

FRENCH, HOWARD W. "Panlong Journal: Visit to Chinese Anytown Shows a Dark Side of Progress." The New York Times (Thurs., January 19, 2006): A4.




January 18, 2006

Thomas Sowell on Ben Rogge as Teacher


The classic small liberal arts college is more than a pleasant place where other people know you, though that is not a small consideration for a student living away from home for the first time—especially a shy student.  Academically, the learning process can be far more manageable where professors are teachers first and foremost.  One of the best taught introductory economics classes I ever saw was taught by the late Ben Rogge at Wabash College in Indiana.  Few students at Harvard would ever get such a good foundation in the subject.  Ben, rest his soul, had obviously thought through all the pitfalls of the subject and led the student safely around them.


Source: online version of Thomas Sowell. Choosing a College: A Guide for Students & Parents. 1989.
http://www.amatecon.com/etext/cac/cac-ch03.html




January 17, 2006

Ayn Rand Admirer Illarionov Pushed Russia Toward Free Market



Image source: WSJ article quoted and cited below.

Since the following interesting article, Andrei Illarionov has resigned. That's probably a bad sign for Russia, unless you argue that Illarionov can be more effective outside the government than inside it.

The article begins by quoting Al Breach, who is chief strategist at Brunswick UBS:

(p. A13) It's a one-party state, and if you're out, you're out," Mr. Breach says. "If he can help stop some of the bad things, it's worthwhile sticking around."

This year, however, things haven't gone his way, with state-owned oil and gas companies swallowing up independent oil producers, vastly expanding the state's presence in the economy. The result, says Mr. Illarionov, has been a fall in private investment in the oil industry and slowing oil-production growth--at a time when world crude prices are soaring. Meanwhile, state outfits have also bought stakes in private engineering companies and taken over the management of Russia's biggest car maker, AvtoVAZ.

It is all anathema to Mr. Illarionov, a St. Petersberg-trained economist and longtime admirer of Ayn Rand, the American writer who lauded unfettered capitalism. In the early 1990s he was an adviser to Yegor Gaidar, then- prime minister and architect of Russia's early market reforms. But he quit in 1994, criticizing the government for failing to curb inflation and for putting the brakes on overhaul (sic). He then became one of Russia's most respected independent analysts: He was the only prominent economist to call for a sharp devaluation of the ruble before the currency crashed in August 1998.

Mr. Putin hired him as an adviser in 2000, and he was a top (sic) force in drafting the liberal, modernizing agenda that the president pushed through in his first term. His ideology -- trimming state spending, slashing taxes, cutting red tape and deregulating Russia's gas, electricity and railway monopolies -- became official policy.

Mr. Illarionov was seen as one of the key drivers of crucial overhaul initiatives: a flat income-tax rate of 13%, a rainy-day Stabilization Fund for Russia's oil windfall, and the decision to dip into the fund to make early repayments on Russia's foreign debt.

But his reputation suffered in later years from a long, bruising fight over how to restructure the electricity industry, and a quixotic campaign against the Kyoto Protocol, both of which he largely lost. Russia ended up ratifying the climate-change pact last year.


For the full article, see:

GUY CHAZAN. "Putin Insider's Outsider Game; Adviser Illarionov Preaches Capitalism, but Who Is Listening?" THE WALL STREET JOURNAL (Fri., December 23, 2005): A13.

(Note: There are several differences (e.g., in the title, and in the reference to Ayn Rand) between the online version of this article, and the print version of this article.)




January 16, 2006

Do-Nothing Leaders Are Not Always Wrong




The source of the above image is:  http://www.edwardtufte.com/tufte/posters


Edward Tufte says that the graph/map above is the best graphic ever drawn.   His criterion is how much information is communicated per unit of ink.  (Sort of a signal to noise ratio?)

The tan line that starts thick on the left, and gets thinner toward the right, represents Napoleon's army as it enters and crosses Russia.  The width of the line is scaled to the remaining size of the army.   On the right hand side, the tan line ends in Moscow, where the army disasterously wintered.   The black line moving left shows the diminishing size of the army as Napoleon retreated.

When I was a student at Wabash College, I was a determined and vocal advocate of Ayn Rand's Atlas Shrugged.   My economics professor Ben Rogge, was not so enthused.  He thought there were better Russian novels to read, and on several occasions, suggested:  'Diamond, you should read War and Peace.'

I often did not take Rogge's advice quickly, but usually I took it eventually.  After leaving Wabash, I read War and Peace.   Parts of it, I found too much like a soap opera for my taste.  But I did find a part that resonated.

Part of Tolstoy's story is about the Russian general facing Napoleon, who would not fight, but who continued to retreat into the heart of Russia.  He was widely castigated as a do-nothing leader.   But as a result of the Russian general doing nothing, Napoleon ordered his army further and further into Russia.

It is very hard for leaders in government to do nothing.  They will be castigated.  But sometimes nothing is exactly the right thing for them to do.

Edward Tufte's wonderful book is:

Tufte, Edward R.   The Visual Display of Quantitative Information. 2nd ed.   Cheshire, CT:   Graphics Press, 2001.




January 15, 2006

Rockefeller's Money Conserved Land


The limestone buttes, granite steppes and near-permanent icecap that make up the urban expanse known as Rockefeller Center constitute the best-known landscape connected to the famous family's name. But those 12 acres in Midtown Manhattan are far from the only vista that owes its existence to Rockefeller philanthropy.

Over the last century, five generations of Rockefellers have used the family wealth to reshape the American horizon, creating a magnificent panorama of open spaces and more than 20 national parks from the rocky coast of Maine to the icecapped mountains of Wyoming.

These natural oases are not always linked to the Rockefeller name, but tonight they will be. As part of the yearlong celebration of its 100th anniversary, the National Audubon Society, one of the nation's largest and oldest conservation organizations, is honoring the family for a record of conservation that matches the society's century-long existence.

''Cumulatively, no other family in America has made the contribution to conservation that the Rockefeller family has made,'' said John Flicker, the society's president.

The towering Palisades that guard the west bank of the Hudson River were preserved with Rockefeller money. So was Colonial Williamsburg. The family created exquisite miniatures like Greenacre Park, tucked between two buildings on East 51st Street in Manhattan, and it donated 35,000 acres to help form Grand Teton National Park in Wyoming. Part of the family's Pocantico estate in Westchester County has become a beloved forest preserve, and an educational center known as the Stone Barns.

The Cloisters, Acadia National Park, Forest Hill Park, Greenpeace, the Nature Conservancy -- the list of the family's efforts to conserve and protect the environment goes on and on.

. . .

Many of the family's most spectacular conservation efforts began with a family camping trip. ''As Father traveled, if he saw things that needed to be done, he took steps and did something about them,'' David Rockefeller said.

He recalls accompanying his father to California in the 1920's to see the giant redwood trees. When the elder Rockefeller found out that the trees were in danger of being clear-cut by a timber company, he helped buy 9,400 acres that he then donated to the state. That grove of ancient redwoods, including one that is more than 2,000 years old, is considered the largest old-growth redwood forest in the world.

. . .

More than 30 members of the Rockefeller family -- ranging in age from 17 to 90 -- will be honored by the Audubon Society at tonight's ceremony, each one involved with the environment. Most times, though, the support is low key and the family tries to shun the spotlight.

''The important part for us is not having our name on it,'' said Gail O'Neill Caulkins, 52, a fifth-generation Rockefeller who is president of the Greenacre Foundation, which assists in the maintenance of city parks and supports dozens of community gardens, ''it's seeing that something gets done.''


For the full story, see:

ANTHONY DEPALMA. "Praising Rockefellers for Land They Saved." The New York Times (Tues., November 15, 2005): A25.

(The online version has a somewhat different title.)




January 14, 2006

Only 13% of Americans Want to Live in Dense Urban Places


(p. A8) Strict growth limits have driven population and job growth further out, in part by raising the price of land within the growth boundary, to communities across the Columbia River in Washington state and to distant places in Oregon. Suburbia has not been crushed, but simply pushed farther away. Portland's dispersing trend appears to have intensified since 2000: The city's population growth has slowed considerably, and 95% of regional population increase has taken place outside the city limits.

This experience may soon be repeated elsewhere as planners and self-proclaimed visionaries run up against people's aspirations for a single-family home and low-to-moderate-density environment. Such desires may constitute, as late Robert Moses once noted, "details too intimate" to merit the attention of the university-trained. Even around cities like Paris, London, Toronto and Tokyo -- all places with a strong tradition of central planning -- growth continues to follow the preference of citizens to look for lower-density communities. High energy prices and convenient transit have not stopped most of these cities from continuing to lose population to their ever-expanding suburban rings.

But nowhere is this commitment to low-density living greater than in the U.S. Roughly 51% of Americans, according to recent polls, prefer to live in the suburbs, while only 13% opt for life in a dense urban place. A third would go for an even more low-density existence in the countryside. The preference for suburban-style living continues to be particularly strong among younger families. Market trends parallel these opinions. Despite widespread media exposure about a massive "return to the city," demographic data suggest that the tide continues to go out toward suburbia, which now accounts for two-thirds of the population in our large metropolitan areas. Since 2000, suburbs have accounted for 85% of all growth in these areas. And much of the growth credited to "cities" has actually taken place in the totally suburb-like fringes of places like Phoenix, Orlando and Las Vegas.

. . .

It is time politicians recognized how their constituents actually want to live. If not, they will only hurt their communities, and force aspiring middle-class families to migrate ever further out to the periphery for the privacy, personal space and ownership that constitutes the basis of their common dreams.

For the full article, see:

JOEL KOTKIN. "The War Against Suburbia." The Wall Street Journal (Sat., January 14, 2006): A8.


For more of Kotkin's observations, it might be worth consulting his: The City: A Global History. Modern Library, 2005.




January 13, 2006

"Now we feel free"


The photos are by Ashley Gilberston, and the source was the online version of the article cited below.

The American invasion has been a bittersweet episode in the lives of many Iraqis here. In two afternoons of interviews in the parks this week, with both Shiites and Sunnis, mostly secular working people, they said the dangers that had shrunk their lives in certain ways had come along with new advantages.

Hind Jabr, a 16-year-old in a head scarf with bangles on her wrists, spoke proudly of the red Toyota her parents bought used two years ago. The salaries of her mother, a teacher, and her father, a police officer, have jumped since 2003. "We were suffering under Saddam," said Ms. Jabr, sitting on a stone ledge that overlooked the lake. "It was safer, but we couldn't get things."

. . .

For Mr. Sadiq, there was a lesson in the day's serenity. "Don't focus on these bombs - they will end definitely," he said. "What's most important now is that Iraqis feel comfortable inside themselves. Now we feel free."

For the full article, see:

SABRINA TAVERNISE. "In a City of Mayhem, a Respite in the Park." THE NEW YORK TIMES (Fri., January 13, 2006): A4.




January 12, 2006

Nebraska's Ban on Corporate Farming May be History (Three Cheers)


(1A) Initiative 300 generally bans corporations and certain other business entities from owning farmland or engaging in agricultural activity in Nebraska, although there are a number of exceptions geared toward family-based organizations.

It was added to the Nebraska Constitution through a petition drive and vote of the people.

Since receiving 57 percent of the vote in 1982, Initiative 300 has survived several state and federal court challenges, a petition drive to repeal it and attempts by state lawmakers to circumvent it.

The ban was promoted as a way to protect family farms in Nebraska from large corporations.

But Camp ruled that the effort to protect Nebraska farmers violated the U.S. Constitution's commerce clause because it discriminated against out-of-state interests.

"There is considerable evidence to support the premise that Initiative 300 was conceived and born in a protectionist fervor," the judge said.

Camp acknowledged that the ban might promote legitimate state interests, such as conservation of natural resources and rural economic development. But she said the state had not shown that the ban was the only (p. 2A) way to reach those goals.

In the lawsuit, Jones said the result of the ban has been a loss of income because he cannot contract with out-of-state corporations for raising and feeding livestock. The ban also reduces the value of his land and his stock in the family farm corporation by barring potential purchasers.

Other plaintiffs said the ban has prevented them from transferring their farm and ranchland as they wished and has interfered with their ability to compete in a national market.

In addition, the judge agreed with two of the plaintiffs who said the ban violated the Americans with Disabilities Act, because it says the person holding a majority of a farm must supply a majority of the day-to-day labor on the farm.

One was Shad Dahlgren of Lincoln, who was paralyzed as a teenager and uses a wheelchair. The other is Todd Ehler, an Elkhorn man who also is disabled.

Both said they are limited in their ability to own farms, since they cannot provide the day-to-day labor required under Initiative 300.


Governments do not know, and usually do not seek, the most efficient market structure. When they try to impose one, as in the Nebraska ban on corporate farming, their actions almost always end up reducing efficiency, and increasing prices for consumers.

For the full article, see:

Stoddard, Martha and Bill Hord. "Ruling Hits Corporate Fram Ban: Initiative 300 Unconstitutional, Judge Says." Omaha World-Herald (Sunrise Edition, Friday, December 16, 2005): 1A & 2A.

(The online version is, I believe, the version printed in the evening edition of Thurs., Dec. 15, 2005, which I believe is the same, except for the headline.)




January 11, 2006

Ben Rogge on Bread, Capitalism and Free Choice



'I believe that capitalism is the system that produces the wholesome bread, and socialism is the system that produces the moldy bread,' Ben Rogge used to tell us. 'But,' he would continue, 'even if I was wrong, and if it was the other way around, and it was capitalism that produced the moldy bread, and socialism that produced the wholesome bread, I would still choose capitalism. I would choose it because capitalism is the system of free choice.'

But most of us are not like Ben Rogge. Most of us are more like Deng Xiaoping, whose most famous saying is 'It does not matter whether a cat is black, or white, as long as it catches mice.' Contra Rogge, he cared only about which economic system produces the goods.

Personally, I believe Rogge was right. But I also believe that if capitalism is to survive, it will only be by continuing to convince the far more numerous Deng Xiaopings of the world.





January 10, 2006

Theory Uncomplemented by History, "Is Worse than no Theory at All"


I have been primarily a theorist all my life and feel quite uncomfortable in having to preach the historian's faith. Yet I have arrived at the conclusion that theoretical equipment, if uncomplemented by a thorough grounding in the history of the economic process, is worse than no theory at all.

Excerpted from a letter from Schumpeter to Miss Edna Lonegan, dated February 16, 1942, stored in the Schumpeter archives at Harvard, and reprinted in:

Swedberg, Richard. Schumpeter: A Biography. Princeton, NJ: Princeton University Press, 1991, pp. 229-230.




January 9, 2006

Beware of the "Sparkling Error"


PixarFish.jpg


Schumpeter once wrote that "We all of us like a sparkling error better than a trivial truth."

This image reminds me of the prudence of adopting a healthy scepticism toward the "sparkling error."


I believe that the image from Finding Nemo is by computer graphics artist Randy Berrett. The source of the image is the online version of Joe Morgenstern. "MORGENSTERN ON MOVIES: Finding Pixar; A new exhibit examines a studio that can't stop examining itself." The Wall Street Journal (Sun., January 7, 2006): P11.

The "sparkling error" Schumpeter quote is from Schumpeter's diary, and is quoted in: Swedberg, Richard. Schumpeter: A Biography. Princeton, NJ: Princeton University Press, 1991, aphorism 86, on page 205.





January 8, 2006

Ben Rogge on Consistency, Smith and Ricardo


Some would argue that consistency is not always a good thing. Ben Rogge's favorite quote from Emerson was:

A foolish consistency is the hobgoblin of little minds, adored by little statesman and philosophers and divines.

Rogge used to mention this quote when he defended Adam Smith against the charge of inconsistency. He would say that Smith's errors on one page would not keep him from writing an important (albeit inconsistent) truth on the next page. In this regard, he contrasted Smith with Ricardo. Ricardo was consistent, and since he was wrong at the start, he was consistently wrong throughout.


Source for the Emerson quote:

Bartlett, John. Familiar Quotations. Boston: Little, Brown and Company, 1955, p. 501, column b. Bartlett gives the source as Emerson's essay "Self-Reliance."




January 7, 2006

"How Great Thou Art"


(p. 1A) SAGO, W.Va.--Twelve coal miners who were trapped underground for more than 41 hours after an explosion were found alive late Tuesday night, triggering a joyous celebration among relatives here.

"Oh, my God, oh, my God," gasped Anna McCloy, a 25-year-old mother of two whose husband, Randal, 26, was among the missing.

"They're alive. I can't believe it. They're alive."

Around her, townspeople were singing the hymn "How Great Thou Art."

The elusive miracle was credited to God. Later, when the real tragedy was learned, the same people who credited God with the miracle, inconsistently blamed human beings for the tragedy.


Good luck finding the article quoted above--as far as I can tell, the Omaha World-Herald has deleted this article from their online archive. The Omaha World-Herald credits the source of the article as having been The Washington Post. The citation to the hard copy of the Omaha World-Herald version is:

"A Miracle: 12 Miners Found Alive." Omaha World-Herald (sunrise edition, Weds., Jan. 4, 2006): 1A & 2A.




January 6, 2006

Schumpeter: "let us begin"


David Rockefeller remembers Schumpeter's arrival to teach a graduate level class:

(p. 79) Arriving in class with an air of being in a great hurry, he would throw his overcoat on a chair, whip his handkerchief' from his pocket, flip it out toward the room, then fold it and carefully mop his brow and the top of his balding head before saying, in his heavy German accent, "Ladies and gentlemen, let us begin."

Rockefeller, David. Memoirs. New York: Random House, 2002.




January 5, 2006

Ethiopian Comparative Advantage Squandered through Graft and Corruption: More on Why Africa is Poor


   The source for the image of the book is: http://nasw.org/users/markp/grounds.html

 

One theory of how countries acquire a comparative advantage in a commodity ties the comparative advantage to some natural resource, climate or other "endowment" advantage the country has. This partially 'explains' some comparative advantages, but leaves many others unexplained (like why Japan has a comparative advantage in cars).

But even on the endowment theory's own terms, it would seem that an initial comparative advantage can be squandered. Consider Ethiopia, which is the country in which coffee beans were first discovered, many centuries ago.

(p. 153) . . . Ethiopia, the birthplace of coffee, now exported a negligible amount of the bean, largely due to graft and corruption extending from King Menelik down to the country's customs agents, . . .

(King Menelek II ruled Ethiopia from 1889 until his death in 1911.)

 

The quotation is from:

Pendergrast, Mark. Uncommon Grounds: The History of Coffee and How It Transformed Our World. New York: Basic Books, 2000.

 




January 4, 2006

Economic Growth Achieved by Entrepreneurs Taking Prudent Risks


(p. 489) Nor should anyone feel guilty about taking prudent risks.This is a fundamental truth that I learned from Joseph Schumpeter, who believed that without entrepreneurs willing to bring new products and ideas to the market and investors ready to finance them, it would be impossible to achieve real economic growth.The alternative, as we have learned to our sorrow in the twentieth century, is government control of the factors of production with results that can be seen in the devastated landscapes and abandoned factories of Russia and Eastern Europe, and the scarred lives of billions of human beings throughout Asia. South America, and Africa.

Rockefeller, David. Memoirs. New York: Random House, 2002.




January 3, 2006

Freedom in Pulsating, Vibrant Hong Kong



Source of book image: http://www.holtzbrinckpublishers.com/stmartins/Search/SearchBookDisplayLarge.asp?BookKey=3008997


Here is an excerpt from a review of a posthumously published memoir, by a well-known British author, recounting three years of childhood in the Hong Kong of the early 1950s:

(p. B12) He has written an extraordinarily happy book, filled with hilarious set-pieces and pulsating with Hong Kong's vibrant street life. Unlike monochrome Britain, with its dull diet and pinched economy, Hong Kong offered color, variety and adventure.

. . .

Most of Mr. Booth's encounters were curious rather than dramatic, like the incident of the plink-plonk man, a street musician with a monkey outfitted like a mandarin from the Ming dynasty. One day, as Martin watched, the monkey managed to bite through his leather leash. In a flash, he was up a tree, where, ignoring his master's pleading and cursing, he carefully disrobed and flung his costume to the street below. Then, in one magnificent act of repudiation, he sent a perfectly aimed stream of urine down on the man's upturned face, to the delight of the crowd that had gathered. Where in England could you see that?



WILLIAM GRIMES. "Books of The Times: Hong Kong Is Fantasy Land for a Young Adventurer." The New York Times (Weds., December 21, 2005): B12.

(Note: ellipsis added.)


Information on the book reviewed:

Martin Booth. Golden Boy: Memories of a Hong Kong Childhood. St. Martin's Press, 2005. (342 pages. $25.95.)






January 2, 2006

Thanks to DDT Ban and Recycling: Bedbugs Are Back



Bedbug.jpg Image source: http://www.suburbanchicagonews.com/heraldnews/top/4_1_JO02_BEDBUGS_S1.htm

(p. 1) . . . bedbugs, stealthy and fast-moving nocturnal creatures that were all but eradicated by DDT after World War II, have recently been found in hospital maternity wards, private schools and even a plastic surgeon's waiting room.

Bedbugs are back and spreading through New York City like a swarm of locusts on a lush field of wheat.

. . .

In the bedbug resurgence, entomologists and exterminators blame increased immigration from the developing world, the advent of cheap international travel and the recent banning of powerful pesticides. Other culprits include the recycled mattress industry and those thrifty New Yorkers who revel in the discovery of a free sofa on the sidewalk.



For the full story, see:

ANDREW JACOBS . "Just Try to Sleep Tight. The Bedbugs Are Back." The New York Times Section 1 (Sun., November 27, 2005): 1 & 31.

(Note: ellipses added.)




January 1, 2006

Free to Choose in Education


Here is the text of my brief letter-to-the-editor that was published several months ago. "OPS" stands for Omaha Public Schools.

Competing school districts within the Omaha area permit parents some freedom of choice in the education of their children.

If OPS succeeds in ending that freedom, the Legislature should restore freedom of choice by adopting Milton Friedman’s proposal to issue vouchers to parents, to be spent at the public or private school of their choice.


Art Diamond. "Try Vouchers." Omaha World-Herald (Thurs., June 16, 2005): 6B.




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