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February 28, 2007

Listen to Ralph Raico on the Industrial Revolution

RaicoRalph.gif   Historian and libertarian Ralph Raico.  Source of photo:  http://en.wikipedia.org/wiki/Ralph_Raico


If you're looking for a wise, witty, erudite, and thought-provoking discussion of a variety of historical issues from a broadly libertarian perspective, then Ralph Raico is your man.  (The flavor of libertarianism is neo-Austrian, but not dogmatically so.)

Several of his lectures can be purchased on CD or cassette from the Ludwig von Mises Institute.  Or you can listen to streaming versions on your computer for free. 

I particularly like his lecture on "The Industrial Revolution" in which he persuasively argues that ordinary people benefited from the Industrial Revolution, and that the benefit would have been clearer sooner, had it not been for the coincidental costs being imposed on ordinary people by the Napoleonic wars and by the corn laws.    

The link for the free streaming version of the lecture is: 



February 27, 2007

Guns Deter Crime


Knoxville, Tenn.

IT’S a phenomenon that gives the term “gun control” a whole new meaning: community ordinances that encourage citizens to own guns.

Last month, Greenleaf, Idaho, adopted Ordinance 208, calling for its citizens to own guns and keep them ready in their homes in case of emergency. It’s not a response to high crime rates. As The Associated Press reported, “Greenleaf doesn’t really have crime ... the most violent offense reported in the past two years was a fist fight.” Rather, it’s a statement about preparedness in the event of an emergency, and an effort to promote a culture of self-reliance.

. . .  

Criminals, unsurprisingly, would rather break into a house where they aren’t at risk of being shot. As David Kopel noted in a 2001 article in The Arizona Law Review, burglars report that they try to avoid homes where armed residents are likely to be present. We see this phenomenon internationally, too, with the United States having a lower proportion of “hot” burglaries — break-ins where the burglars know the home to be occupied — than countries with restrictive gun laws.

Likewise, in the event of disasters that leave law enforcement overwhelmed, armed citizens can play an important role in stanching crime. Armed neighborhood watches deterred looting in parts of Houston and New Orleans in the aftermath of Hurricanes Katrina and Rita.


For the full commentary, see:

GLENN REYNOLDS.  "A Rifle in Every Pot."  The New York Times  (Tues., January 16, 2007):  A31.


Glenn Reynolds is a professor of law at the University of Tennessee, and is the blogger of Instapundit.com.  In 2006, he published:

Reynolds, Glenn. An Army of Davids: How Markets and Technology Empower Ordinary People to Beat Big Media, Big Government, and Other Goliaths. Nashville, TN: Nelson Current, 2006.


    Source of book image:  http://ec1.images-amazon.com/images/P/1595550542.01._SS500_SCLZZZZZZZ_V1136930360_.jpg


February 26, 2007

Labor is "Responsible for the Consequences of Their Choice"


An early free-market economist claims that in a free-market economy, a worker's happiness depends mainly on her own actions:


But whenever property is secure, industry free, and the public burdens moderate, the happiness or misery of the labouring classes depends almost wholly on themselves. Government has there done for them all that it should, and all in truth that it can do. It has given them security and freedom. But the use or abuse of these inestimable advantages is their own affair. They may be either provident or improvident, industrious or idle; and being free to choose, they are alone responsible for the consequences of their choice.


The passage was brought to my attention by an HES Posting from Michael Perelman.  The thread was continued by Torsten Schmidt, and the final information on the pages where the passage may be found, was added by Masazumi Wakatabe.


The reference for the source of the passage is:

McCulloch, J.R.  A Treatise on the Circumstances which Determine the Rate of Wages and the Condition of the Labouring Classes, second edition, corrected and improved, 1854, 16-17.


February 25, 2007

"Good to Great" is Good, but Not Quite Great

  Source of book image:  http://images.barnesandnoble.com/images/7770000/7775266.jpg


When Ameritrade founder Joe Ricketts spoke to my Executive MBA class a few years ago, I mentioned to him that I had heard from Bob Slezak that Ricketts was a fan of Clayton Christensen's The Innovator's Dilemma.  Ricketts said that was true, but that the recent business book that he was most enthused about was Jim Collin's Good to Great.

Ricketts is not alone.  Good to Great has become a business classic since it came out.  Recently I finally got around to reading it.

Well, I think it's good, but not quite great.  I like the empirical, inductive methodology mapped out at the beginning.  And some of the conclusions ring true.  For example the importance of facing the "brutal facts."  And the importance of developing a thought-out "hedgehog" concept.  And the importance of getting the right people on the bus.  And the importance of slowly, consistently building momentum.

But I've got some big bones to pick, too. 

Maybe the biggest "bone" is Collins' assumption that our goal should be the survival and greatness of a firm.  Instead of almost viewing firms as ends in themselves, why can't we view firms as vehicles for getting great things done? 

Maybe great things can be done through firms that last and are lastingly great.  Or maybe great things can be done by shooting star firms, that are glorious while they last, but don't last long.  Collins says it must be the former.  But either way works for me.

A smaller "bone" is the conclusion that "level 5" leaders tend to be modest.  Well maybe.  But some of that conclusion is derived from Collins' defining "great" in terms of high growth of stock value.  A modest leader will be unappreciated by Wall Street, and her company's stock value will show higher growth when she succeeds.  But has she thereby accomplished more than if she had built exactly the same company, but been more transparent and enthused about the company's future prospects, and hence generated more realistic expectations from Wall Street?  Remember, the value of a stock grows, not by the company doing well, but by it doing better than investors expected.  (On this issue, Collins should read the first couple of chapters of Christensen and Raynor's The Innovator's Solution.)

But don't get me wrong:  this is a very good book.  Those interested in how the capitalist system works, should read it, as should those who want to manage well.


The book is:

Collins, Jim. Good to Great: Why Some Companies Make the Leap. And Others Don't. New York: HarperCollins Publishers, Inc., 2001.


February 24, 2007

Paying for Congestion "with Time, Unreliability, Psychological Hell"

TrafficCostsGraph.gif   Source of graphic:  online version of the WSJ article cited below.


Congestion pricing "is a lot cheaper than the way we're paying now ... with time, unreliability, psychological hell," said Tyler Duvall, DOT's assistant secretary for policy.

. . .

Even a 5% reduction in traffic jams can increase traffic speeds by as much as 50%, says Mr. Duvall. DOT officials figure a typical big-city traffic jam can be cleared with tolls of as little as $2 to $2.50 a day, if all lanes on a big highway are charged. But on some Southern California highways where fees are charged only for the former high-occupancy lanes, prices at the peak of rush hour have reached $8.50.

Congestion pricing has already taken hold in Europe, and the success of a congestion pricing system for London's roads three years ago motivated U.S. officials and major businesses to consider the idea. Voters in Stockholm approved a similar plan in September, after a test run during the summer.


For the full story, see: 

JOHN D. MCKINNON.  "Bush Plays Traffic Cop in Budget Request; President Suggests 'Congestion' Tolls To Ease Rush Hour."  The Wall Street Journal  (Mon., February 5, 2007):  A6.

(Note:  the ellipsis in the Duvall quote was in the original; the other ellipsis was added.)



February 23, 2007

New Book on Wiki (Quick) Process

   Source of book image:  http://ec2.images-amazon.com/images/P/1591841380.01._SS500_SCLZZZZZZZ_V37439749_.jpg


A new book is out on the wiki ("quick") phenomenon.  Chris Anderson has some stimulating comments on this phenomenon in his The Long Tail.  The Wikinomics book appears to be less profound, but may still be of interest.  (It appears to be a quick-read, management guru-jargon type book.)

The wiki issue that interests me is how wiki collaboration processes might substitute for rigorous editing and peer-review, as a way to get a lot of high-quality information out there fast.  (This is what Anderson claims, and the more I use the Wikipedia, the more plausible I find the claim.)


The reference to the book is:

Tapscott, Don, and Anthony D. Williams. Wikinomics: How Mass Collaboration Changes Everything. Portfolio, 2006.


February 22, 2007

Pay Rebounds in Silicon Valley

   Source of graphic:  online version of the WSJ article cited below.


Silicon Valley's nascent economic recovery gathered steam last year, with the nation's technology capital adding more than 30,000 jobs and showing gains in areas such as average annual wages and household income.

That was the conclusion of an annual report from Joint Venture Silicon Valley, a nonprofit group representing businesses and government agencies in the San Francisco and San Jose, Calif., area.

"Silicon Valley is back and it's rebooting," said Russell Hancock, Joint Venture's president and chief executive. "This is familiar since the Valley has already done it five or six times over its history. It regroups, then reboots."

The report comes as Silicon Valley, which prospered during the dot-com frenzy in the late 1990s, has struggled to remake itself in the wake of the tech crash in 2000. In the years since, the region has experienced job losses and a slowdown in growth at many tech companies. The area began to turn the corner in 2005 when a net gain of 2,000 jobs was recorded, the first time since 2001 that there had been an overall increase in jobs. Start-up activity has also become widespread again, with Internet firms specializing in online video, social networking and "clean technology" springing up.


For the full story, see:

PUI-WING TAM.  "No Longer Down in Silicon Valley Jobs, Wages Show Gains As Bust Fades Further; Small Firms Fuel Rebound."  The Wall Street Journal  (Mon., January 29, 2007):  B5.


February 21, 2007

"Remarkable Entrepreneur" Bob Chitester


ChitesterBob.jpg   Bob Chitester.  Source of image:  online version of the WSJ article cited below.


I was in the audience for the discussion portion of a couple of the episodes of the original "Free to Choose."  On January 29, PBS broadcast a sort of coda to the series entitled "The Power of Choice:  The Life and Times of Milton Friedman."


As much as the show is a celebration of Friedman's life and work, it also showcases the remarkable entrepreneur who made it and "Free to Choose" possible. Bob Chitester produced the original series while serving as the only public-TV station manager in the country who didn't believe in government subsidies. A tireless promoter, he raised the equivalent of $8 million today for the series -- entirely from private sources, an achievement that delighted Friedman.

Mr. Chitester came to the project with an unusual background. In 1966, he became the general manager of the PBS station in Erie, Pa., at age 29. An opponent of the Vietnam War, he handed out literature for George McGovern in 1972 and admits he knew nothing about economics. Then, in 1976, he met with economist W. Allen Wallis, who gave him a copy of Friedman's "Capitalism and Freedom." Mr. Chitester soaked it up, became a believer in markets, and immediately began pursuing Friedman to do a series that would provide a counterpoint to one by liberal economist John Kenneth Galbraith that PBS was airing.

After all these years, Mr. Chitester is still surprised by how easily Friedman's cooperation came. "I was a bearded, leather-jacketed, small-town TV executive, yet he treated me as competent and honorable, as he did everyone he met, until you proved otherwise," he recalls.

Surprisingly, Friedman insisted on not writing a script in advance of filming. The points that would be made in each scene were discussed, but his commentary was extemporaneous. This resulted in such gems as the economist sitting in a sweatshop in New York's Chinatown, where he recalled the days when his mother worked in a similar environment. "Life was hard," Friedman noted, "but opportunity was real." He then transports the audience to a junk floating in the harbor of Hong Kong, "the freest market in the world," where Friedman discusses how the then-British colony's leaders refused to collect some economic statistics because they feared they would be used as an excuse for government intervention in the booming economy.

. . .

This week's PBS special pays tribute to the many achievements of Milton Friedman. One that is often underappreciated is the extent to which he demonstrated how visual images could influence and shape public debate. As his most ardent electronic disciple, Bob Chitester deserves the free-market community's equivalent of an Oscar.


For the full commentary, see: 

JOHN H. FUND.  "TV's Evangelist for Capitalism."  The Wall Street Journal  (Weds., January 31, 2007):  D10.

(Note:  ellipsis added.)


February 20, 2007

Privatized Moscow Greenhouses Prosper

   Privatized Moscow greenhouses provide greens to grocery stores during the winter.  Source of the photo:  online version of the NYT article cited below.


Much of the country’s agricultural infrastructure is in disrepair, and across many rural regions farm production and labor are in disarray. The government has made reviving the agricultural sector one of its so-called national projects, a target for investment and recovery.

But the sights in Agrikombinat Moskovsky show that such problems are not universal. The business, now privatized, claims to have registered more than $75 million in sales in 2006. Its managers point to the crowded produce shelves in Moscow’s supermarkets and dare an unlikely boast.

“People remember when it was hard to find greens in Moscow, but today you can find them in every single decent supermarket,” said Yevgeny G. Sidorov, the general director. “Moscow has the freshest green plants in the world.”

That last claim, unverifiable, is nonetheless no longer absurd.

Moscow’s food stores, formerly famed for bare shelves and long lines, are now kept stocked with fresh champignons and greens — even in the freeze a year ago that almost paralyzed much of the capital, with temperatures from 6 below zero to 22 below for more than a week.


For the full story, see:

C. J. CHIVERS. "MOSCOW JOURNAL; A Soviet Agricultural Success: Vast Greenhouse Complex." The New York Times (Weds., January 31, 2007): A4.


    Oyster mushrooms being picked in one of the greenhouses in January.  Source of the photo:  online version of the NYT article cited above.


February 19, 2007

A Case Against "Network Neutrality"

Today there is much praise for YouTube, MySpace, blogs and all the other democratic digital technologies that are allowing you and me to transform media and commerce. But these infant Internet applications are at risk, thanks to the regulatory implications of "network neutrality." Proponents of this concept -- including Democratic Reps. John Dingell and John Conyers, and Sen. Daniel Inouye, who have ascended to key committee chairs -- are obsessed with divvying up the existing network, but oblivious to the need to build more capacity.

To understand, let's take a step back. In 1999, Yahoo acquired Broadcast.com for $5 billion. Broadcast.com had little revenue, and although its intent was to stream sports and entertainment video to consumers over the Internet, two-thirds of its sales at the time came from hosting corporate video conferences. Yahoo absorbed the start-up -- and little more was heard of Broadcast.com or Yahoo's video ambitions.

. . .

. . .   Broadcast.com failed precisely because the FCC's "neutral" telecom price controls and sharing mandates effectively prohibited investments in broadband networks and crashed thousands of Silicon Valley business plans and dot-com dreams. Hoping to create "competition" out of thin air, the Clinton-Gore FCC forced telecom providers to lease their wires and switches at below-market rates. By guaranteeing a negative rate of return on infrastructure investments, the FCC destroyed incentives to build new broadband networks -- the kind that might have allowed Broadcast.com to flourish.

. . .

Messrs. Lessig, Dingell and Conyers, and Google, now want to repeat all the investment-killing mistakes of the late 1990s, in the form of new legislation and FCC regulation to ensure "net neutrality." This ignores the experience of the recent past -- and worse, the needs of the future.

. . .

Without many tens of billions of dollars worth of new fiber optic networks, thousands of new business plans in communications, medicine, education, security, remote sensing, computing, the military and every mundane task that could soon move to the Internet will be frustrated. All the innovations on the edge will die. Only an explosion of risky network investment and new network technology can accommodate these millions of ideas.


For the full commentary, see: 

BRET SWANSON.  "COMMENTARY; The Coming Exaflood."  The Wall Street Journal (Sat., January 20, 2007):  A11.

(Note:  ellipses added.)

February 18, 2007

In Health Care the "Zeal to Treat and Spend May Actually Hurt Patients"

HeartAttackCostsBenefits.jpg   Source of graphic:  online version of the NYT article cited below.


EXPERTS have long been puzzled by the existence of large regional disparities in medical care in the United States. Even for diseases for which the appropriate treatment is widely accepted, doctors across the country take vastly different approaches, often leading to enormous expense without making any appreciable improvement in their patients’ health.

Consider heart attacks. Prescribing beta blockers immediately after a heart attack is a well-established, cheap and efficient treatment. In Iowa, nearly 80 percent of victims in 2000 received the drugs within 24 hours of a heart attack. In Alabama or Georgia, by contrast, fewer than 6 out of 10 patients received the drugs.

“What makes the lag in beta-blocker adoption puzzling is that the clinical benefits have been understood for years,” wrote Jonathan S. Skinner and Douglas O. Staiger, economists at Dartmouth, in a recent study about these regional patterns.

Congress has decided that some treatment decisions may be best taken out of doctors’ hands. In one of their last acts this year before adjourning, lawmakers passed a bill entitling doctors to a bonus from Medicare if they report data on the quality of their care, using criteria like whether they prescribe aspirin or beta blockers to heart attack victims. In the future, this data would permit Medicare to reward doctors who followed government guidelines.

. . .

. . . , much spending on health care provides enormous benefits. A study published this year by Mr. Skinner, Mr. Staiger and Dr. Elliott S. Fisher of Dartmouth Medical School found that Medicare spending on hospital care for heart attack victims surged two-thirds from 1986 to 1996, after accounting for inflation. But the percentage of victims who were alive a year after their attacks also increased, though by just 10 percentage points, to roughly 68 percent.

The relationship — rising costs bringing increased benefits — has broken down recently. From 1996 to 2002, Medicare spending on treatments for heart attack victims increased about 14 percent, after inflation. But there was virtually no improvement in survival rates.

There is mounting evidence that the zeal to treat and spend may actually hurt patients. The study by Mr. Skinner, Mr. Staiger and Dr. Fisher found that hospitals in regions where spending grew fastest from 1986 to 2002 had some of the worst practices, in terms of providing tried-and-true therapies, and recorded the smallest gains in survival rates.

Treatment of heart disease underscores the deeply idiosyncratic nature of many choices made by America’s doctors and hospitals. Coupled with a fee-for-service system that encourages aggressive treatment, these choices stimulate health spending that provides little benefit to patients. “A lot of the innovation and spending growth are going into gray areas that are not helping people that much,” Mr. Skinner said.


For the full commentary, see: 

EDUARDO PORTER.  "ECONOMIC VIEW; The More You Pay, the Better the Care? Think Twice."  The New York Times  (Sun., December 17, 2006):  5.

(Note:  ellipses are added.)



February 17, 2007

Union Decline Continues in United States

UnionDeclineGraph.gif   Source of graphic:  online version of the NYT article cited below.


Union membership dropped sharply last year in the United States, as the percentage of manufacturing workers in unions fell below the percentage of American workers in unions for the first time in modern history.

The Bureau of Labor Statistics reported Thursday that union membership fell by 326,000 in 2006, to 15.4 million workers, bringing the percentage of employees in unions to 12 percent, down from 12.5 percent in 2005. Those figures are down from 20 percent in 1983 and from 35 percent in the 1950s.

Work force experts said the decline in union membership was caused by large-scale layoffs and buyouts in the auto industry and other manufacturing industries, together with the labor movement’s difficulties in organizing nonunion workers fast enough to offset those losses.


For the full story, see: 

STEVEN GREENHOUSE.  "Sharp Decline in Union Members in ’06."  The New York Times (Fri., January 26, 2007):  A11.


February 16, 2007

Bertrand Russell: Think or Die

I heard a great Bertrand Russell quote, a couple of days ago.  (Sometime I'll try to verify it.)  It is:


"Some people would rather die, than think.  And they do."

 (attributed to Bertrand Russell)

February 15, 2007

House Hearing on Global Warming Canceled Due to Severe Winter Weather

BlitzerWolfSituationRoom.jpg  Wolf Blitzer, the host of CNN's "Situation Room" program.  Source of photo:  http://www.mediabistro.com/tvnewser/cnn/inside_the_situation_room_24403.asp


Yesterday afternoon (2/14/07) on CNN's "Situation Room" program, host Wolf Blitzer reported something close to the following:


'A House of Representatives hearing on global warming was canceled today, because of the severe winter weather.'


February 14, 2007

Fed Chairman Bernanke's Omaha Speech

     Bernanke in Omaha addressing the Chamber of Commerce (left) and after receiving a plaque officially appointing him as an "admiral" of the Nebraska Navy (right, ha, ha).  Source of the left photo:   http://www.omaha.com/neo-images/photos/large/ap-nenh10102061909.jpg   Source of the right photo:  online version of the NYT article cited below.


Last week, on 2/6/07, I attended a large Chamber of Commerce luncheon at which Federal Reserve Chair Ben Bernanke was the featured speaker.  The talk was subtle and restrained, but interesting.  Apparently it was one of the first speeches by Bernanke, since becoming chair, to address an economic issue broader than the macro policy issues that the fed usually addresses.  The headlines in the Omaha World-Herald and the Wall Street Journal missed the main point, I think.

The main point was not to criticize the inequality of the United States economy, but to praise its dynamism.  He pointed out the extent to which living standards have improved as a result of that dynamism.  And he wanted mainly to suggest that when we adopt policies aimed at reducing inequality, we be careful to be sure that the policies do not have the unintended consequence of reducing the dynamism. 

In particular, he suggested that much of the inequality was driven by an increasing skill premium, and that the most constructive way to reduce inequality would be to reduce the skill premium by increasing the supply of skilled labor.  This implies that individuals, and government, invest in increasing skills through increased access to community colleges, universities, online education, and the like.


For the full NYT article, see:

"Bernanke Suggests How to Narrow Wage Gap."  The New York Times   (Weds., February 7, 2007):  C13.

For the full WSJ article, see:

DAVID WESSEL.  "Fed Chief Warns of Widening Inequality; Bernanke Urges Steps That Avoid Harm to Economy."  The Wall Street Journal  (Weds., February 7, 2007):  A6.

For the full Omaha World-Herald article, see: 

STEVE JORDON.  "Fed chief says income gap poses problems."  Omaha World-Herald (Wednesday, February 7, 2007):   1D & 2D.

(Note:  the online version of the article had the slightly different title "Growing income gap poses problems, Fed chief says" and is dated 2/6/07.  The article may have first appeared in the paper's evening edition on 2/6/07.  My copy was the morning edition of 2/7/07.)

For the text of Bernanke's "The Level and Distrubution of Economic Well-Being" presentation, see:  http://www.federalreserve.gov/boarddocs/Speeches/2007/20070206/default.htm

   Source of graphic:  online version of the WSJ article cited above.




February 13, 2007

Investment Firms' Advice Biased Towards Over-Saving

   Graphic on optimal savings.  Source of graphic:  online version of the NYT article cited below.


Could it be possible that you are saving too much for your retirement?

. . .

. . . , a small band of economists from universities, research institutions and the government are clearly expressing the blasphemy that many Americans could be saving less than they are being told to by the financial services industry — and spending more — while they are younger. The negative savings rate, they say, is wildly distorted.

According to them, the financial industry, with its ostensibly objective online calculators, overstates how much money someone will need in retirement. Some, in fact, contend that financial firms have a pointed interest in persuading people to save much more than they need because the companies earn fees on managing that money.

The more realistic amount could be as little as half the typical recommendation made by Fidelity, Vanguard or any number of other financial institutions.

For a middle-income couple, that could mean trading $400,000 in retirement money for about $3,000 a year more during prime working years to spend on education or home improvement. “For a middle-class household, that’s a lot of money,” said Laurence J. Kotlikoff, a Boston University economics professor, who is on the forefront of this research into spending and savings, and is selling his own retirement calculator.

. . .

Nevertheless, the loose confederation of well-regarded economists, who have not been working in concert, say their research points to the startling conclusion that many Americans are saving too much, not too little. Indeed, their studies of the savings and spending habits of the generation born between 1931 and 1941 revealed that at least 80 percent had accumulated more than enough wealth for retirement. While they have not studied the baby boom generation as closely, they believe that the greater wealth of that generation should also leave those retirees secure.

A study last October by another group of economists, including two working for the Federal Reserve Board, found 88 percent of retirees age 51 and older had adequate wealth.

“Even the most casual reading of the popular press will have you convinced that Americans are heading like lemmings over a cliff,” said John Karl Scholz, an economics professor at the University of Wisconsin at Madison. “Going into this, I had no idea that we’d find any results anything like this.”

. . .

Mr. Scholz said he and his co-authors of a study, “Are Americans Saving ‘Optimally’ for Retirement?” found oversaving across all economic and education levels and most ethnic or racial groups as well. (It found that Hispanics tended to save less.) Those who were not saving enough were usually missing their target by only a small amount.

The one exception to this optimism involves people who enter retirement single, either because their spouse died early, they divorced, or they never married. The studies found this group did not save enough.


For the full story, see:

DAMON DARLIN. "Your Money; A Contrarian View: Save Less and Still Retire With Enough." The New York Times (Sat., January 27, 2007):  ??.

(Note:  ellipses added.)


February 12, 2007

Al Gore Freezes

   Al Gore.  Source of image:  http://drinkingliberally.org/blogs/louisville/archives/2006/01/


For the past couple of weeks, much of the country has been suffering from non-stop frigid weather.  So on "Weekend Update" on NBC's Saturday Night Live (2/10/07), something close to the following was reported:


'And in an ironic note:  this week while lecturing on global warming, Al Gore froze to death.'


February 11, 2007

Toy Boats, Johnny Astro, and the Free Market

   Screen capture from eBay's "Toy Boat" ad.

A few years ago, eBay created a wonderful ad in which a young boy is at the beach playing with his toy boat.  His mother tells him that it's time to go; he leaves the beach forgetting his boat; the boat washes out to sea and sinks in a huge storm.  A fisherman hauls up the boat in his fishing net.  He brushes it off and puts it up for sale on eBay.  The next scene is of a 20-something young man looking stunned at a computer screen, with a picture in the background of himself as a boy with the toy boat.  On his PC screen is the eBay page with the boat for sale.

The point is how wonderful free markets can be when they help consumers find and obtain what consumers desperately want.

Of course this is just an ad.  But it rings true.  See the story excerpted below: 


My husband, for example, still hankers for a certain flying toy he played with as a child.

For years, I have heard stories about this lost talisman of youth, an almost mythical toy that had an inflated balloon that could be launched into the air and propelled through a room by a whirring fan.

But my husband could never remember its name — until the other day.

“I FOUND IT! I FINALLY FOUND IT!” he wrote in an instant message that popped up on my computer.

. . .


Johnny Astro. With a name like that, a name that evokes rocket ships, moon walks and the glory of the technological future hurtling our way, you can see why such a toy would linger in the memory of a boy who grew up in the 1960s.


How could I refuse?

. . .

I turned to eBay. A set was for sale with seven bidders so far, with a high bid of $76. An hour before the auction closed, I placed a bid authorizing eBay to go as high as $207 on my behalf. (I calculated I would get the set for a much lower price, however, given Ms. Grant’s price range.)

In the last minutes of the auction, the number of bids climbed to 21. But in the end I got the set — for $204.49.

My husband acted shocked.

“You paid how much?” he asked.

“You said you wanted it for your birthday,” I said.

He thought about it for a minute.

“If I got two,” he said, “we could fly them together and exchange balloons in the air.”


For the full story, see: 

MICHELLE SLATALLA.  "ONLINE SHOPPER; A Toy That Sends Grown Men Into Orbit."  The New York Times  (Thurs., January 25, 2007):  E6.  


The link for the Toy Boat ad is:  http://www.thepowerofallofus.com/flash.html   (click "TV Spots" and then "Toy Boat")


JohnnyAstroToy.jpg   Drawing of Johnny Astro toy.  Source of drawing:  online version of the NYT article cited above.


February 10, 2007

Milton Friedman's School Vouchers Pass Utah Senate

I received an email mailing yesterday (2/9/07) from Robert Fanger, who is the Communications Director of the Milton and Rose Friedman Foundation.  He wrote:  "By a vote of 19 to 10, the Utah Senate passed the universal school voucher bill this afternoon."

On Wednesday, the Wall Street Journal ran an editorial on the issue that is excerpted below:


Proving that the best reforms often pass by the slimmest of margins, Utah's house voted 38-37 late last week to create a state-wide voucher program that will allow students to escape failing public schools.

Union opponents can be expected to mount a furious assault in the state senate, and then head to court. But the senate is likely to pass the reform supported by GOP Governor Jon Huntsman Jr., so Utah may soon become the first state with a universal school choice plan. It would offer students who attend private K-12 schools from $500 to $3,000 in tuition reimbursement based on family income.

Meanwhile, South Carolina could be next. Legislation is now being drafted to allow nearly 200,000 poor students to opt out of failing public schools by giving them up to $4,500 a year to spend on private school tuition. Middle class parents would be eligible for a $1,000 tax credit.


Reference for editorial:

"Choice Advances."  The Wall Street Journal  (Weds., February 7, 2007):  A14.


February 9, 2007

Real-Time Pricing Results in More Efficient Electricity Generation

   Real-time electricity meters in a building in Central Park West behind resident Peter Funk, Jr.  Source of photo:  online version of the NYT article cited below.


The article excerpted below gets some of the story right.  It should emphasize more that the main benefit from real-time pricing would be that it would reduce the peak load.  Generation plants need to be built to handle peak-load.  The last generating plants to go on line are the least efficient.  if the need for such inefficient, peak-load, plants can be reduced, the costs of generating electricity can be enormously reduced.

There is talk of market competition in the states that have deregulated their electric utility industries.  But it should be remembered that even where most deregulated, the result is a long way from a paradigmatic free market.  The main point is hinted at in the article below.  The ultimate suppliers of electricity to the home remain government-protected monopolies. 

If we wanted a truly free market, maybe we should actually allow multple companies to connect to homes, the way we allow multiple television and internet companies to connect their cables to the home.  Then some low-cost Wal-Mart of electricty would arise, and blow the stick-in-the-muds away.


(p A1)  Ten times last year, Judi Kinch, a geologist, got e-mail messages telling her that the next afternoon any electricity used at her Chicago apartment would be particularly expensive because hot, steamy weather was increasing demand for power.

Each time, she and her husband would turn down the air-conditioners — sometimes shutting one of them off — and let the dinner dishes sit in the washer until prices fell back late at night.

Most people are not aware that electricity prices fluctuate widely throughout the day, let alone exactly how much they pay at the moment they flip a switch. But Ms. Kinch and her husband are among the 1,100 Chicago residents who belong to the Community Energy Cooperative, a pilot project to encourage energy conservation, and this puts them among the rare few who are able to save money by shifting their use of power.

Just as cellphone customers delay personal calls until they become free at night and on weekends, and just as millions of people fly at less popular times because air fares are lower, people who know the price of electricity at any given moment can cut back when prices are high and use more when prices are low. Partici-(p. A14)pants in the Community Energy Cooperative program, for example, can check a Web site that tells them, hour by hour, how much their electricity costs; they get e-mail alerts when the price is set to rise above 20 cents a kilowatt-hour.

If just a fraction of all Americans had this information and could adjust their power use accordingly, the savings would be huge. Consumers would save nearly $23 billion a year if they shifted just 7 percent of their usage during peak periods to less costly times, research at Carnegie Mellon University indicates. That is the equivalent of the entire nation getting a free month of power every year.

. . .

Under either the traditional system of utility regulation, with prices set by government, or in the competitive business now in half the states, companies that generate and distribute power have little or no incentive to supply customers with hourly meters, which can cut into their profits.

Meters that encourage people to reduce demand at peak hours will translate to less need for power plants — particularly ones that are only called into service during streaks of hot or cold weather.

In states where rates are still regulated, utilities earn a virtually guaranteed profit on their generating stations. Even if a power plant runs only one hour a year, the utility earns a healthy return on its cost.

In a competitive market, it is the spikes in demand that cause prices to soar for brief periods. Flattening out the peaks would be disastrous for some power plant owners, which could go bankrupt if the profit they get from peak prices were to ebb significantly.

. . .

The smart metering programs are not new, but their continued rarity speaks in part to the success of power-generating companies in protecting their profit models. Some utilities did install meters in a small number of homes as early as three decades ago, pushed by the environmental movement and a spike in energy prices.


For the full story, see: 

DAVID CAY JOHNSTON.  "Taking Control Of Electric Bill, Hour by Hour."  The New York Times  (Mon., January 8, 2007):  A1 & A14. 

(Note:  ellipses added.)


PowerRateGraphic.jpg   Graph showing the range of variation in hourly electricity rates in different months.  Source of graphic:  online version of the NYT article cited above.

February 8, 2007

Plastic Pipes Need Less Labor, So Unions Oppose

PipeResidentialPlastic.jpg Residential plastic pipe. Source of photo: http://www.omaha.com/index.php?u_pg=46


(p. D1)  The City of Omaha is considering allowing an alternative to copper pipes in residential plumbing, a move the local builders association says could keep new home prices from rising so fast.

. . .

(p.  D2)  "Omaha is kind of unique in not allowing plastic. It's kind of an isolated pocket," said Blas Hernandez, Papillion's chief building official, who also has worked in the Kansas City, Denver, upstate New York and central Nebraska areas.

Mike Lipke, western regional manager for FlowGuard Gold CPVC pipes, agreed. He said Omaha and Chicago stand out among Midwestern cities for not allowing plastic water pipes.

Several people with long tenure in the building industry said they believe Omaha has lagged in adoption of plastics because the material is less labor-intensive to install and organized labor has fought to protect work for its members.

Stephen Andersen, business manager for the 470-member Omaha Plumbers Local 16, said he doesn't think it's necessarily faster to install plastic pipes, and he personally favors copper "because it's such a good product, a proven product."

. . .

With the housing market slowed and copper prices still high, now may be the time to make affordability the most important consideration, said Paul Frazier, president of the Frazier Co. and a member of the Metro Omaha Builders Association's board.

"MOBA is fully behind" the proposed change, President Rocky Goodwin said. Frazier represented MOBA in discussions with the Omaha Plumbing Board.

"We're long overdue for this," Frazier said. "Anything that holds costs down while doing as good or better job is a good thing.

. . .

Lipke, who sells CPVC, said all the model codes and all 50 states approve the use of plastic and plastic has captured two-thirds of the market.

. . .

"People might try it because it's less money, but they won't keep using it if it doesn't work," Lipke said. "It's a good product, and it certainly shouldn't be banned the way it is in Omaha."


For the full story, see: 

DEBORAH SHANAHAN.  "Omaha may lift ban on residential plastic pipe."  Omaha World-Herald (Wednesday, January 24, 2007):  D1 & D2. 

(Note:  ellipses added.)


[Joseph Schumpeter was born on February 8, 1883.]


February 7, 2007

Hope for Film Version of Atlas Shrugged

  Rand, Ruddy, Wallace, and Jolie.  Source of photos: http://ustimes.us/ayn_rand_no_longer_has_script_approval.htm


(p. 9)  BACK in the 1970s Albert S. Ruddy, the producer of ''The Godfather,'' first approached Ayn Rand to make a movie of her novel ''Atlas Shrugged.'' But Rand, who had fled the Soviet Union and gone on to inspire capitalists and egoists everywhere, worried aloud, apparently in all seriousness, that the Soviets might try to take over Paramount to block the project.

''I told her, 'The Russians aren't that desperate to wreck your book,' '' Mr. Ruddy recalled in a recent interview.

Rand's paranoia, as Mr. Ruddy remembers it, seems laughable. But perhaps it was merely misplaced. For so many people have tried and failed to turn the book she considered her masterpiece into a movie that it could easily strike a suspicious person as evidence of a nefarious collectivist conspiracy. Or at least of Hollywood's mediocrity.

Of course Rand herself had a hand in blocking some of those attempts before she died in 1982. Her heirs in the Objectivist school of thought helped sink some others. And plans for at least a couple of television mini-series fell to the vicissitudes of network politics and media mergers.

But Rand's grand polemical novel keeps selling, and her admirers in Hollywood keep trying, and the latest effort involves a lineup of heavy hitters, starting with Angelina Jolie. Randall Wallace, who wrote ''Braveheart'' and ''We Were Soldiers,'' is working on compressing the nearly 1,200-page book into a conventional two-hour screenplay. Howard and Karen Baldwin, the husband-and-wife producers of ''Ray,'' are overseeing the project, and Lions Gate Entertainment is footing the bill.

Whether Ms. Jolie, who has called herself something of a Rand fan, will bring the novel's heroine, Dagny Taggart, to life on screen, or merely wind up on a list with other actresses who sought or were sought for the role -- including Barbara Stanwyck, Faye Dunaway, Raquel Welch, Farrah Fawcett and Sharon Stone -- remains to be seen. Until now, at least, no one in Hollywood has figured out a formula that promises both to sell popcorn and to do justice to the original text, let alone to the philosophy that it hammers home endlessly, at times in lengthy speeches. (The final one is 60 pages long.)

But Mr. Baldwin said he believed that Mr. Wallace and the rest of their team were up to the task. ''We all believe in the book, and will be true to the book,'' he said.


For the full story, see: 

KIMBERLY BROWN.  "FILM; Ayn Rand No Longer Has Script Approval."  The New York Times, Section 2  (Sun., January 14, 2007):  9 & 14.


    A 1957 photo of Rand in New York.  Source of photo:  http://www.iht.com/articles/2007/01/11/news/atlas.php


February 6, 2007

"Bitter Cold Grips the Nation": Evidence for Global Cooling?

   Screen capture from the MSN web site whose link is given below.


Several weeks ago, when much of the nation was experiencing above-average temperatures, network reports intoned how the warmth was a sign of global warming.  So using consistent reasoning, should they not now intone that the bitter cold is a sign of global cooling?  

Note that there is no mention of global warming (or cooling) in the Today Show report mentioned below.


On one of the NBC web sites, the Today Show report was described this way:  "Deep freeze Feb. 5: Midwest and Northeast residents hunker down for a deep freeze expected to last most of the week. NBC's Kevin Tibbles reports."

Here is the link to the report: 



February 5, 2007

Good Intentions Are Not Enough


Another lesson from an intriguing book by Steven Johnson, is that Edwin Chadwick's good intentions were not enough to beat the cholera epidemic in London.  Johnson tells of Chadwick's two catastrophic illusions:


The first was his belief that, since the mephitic odors of private cesspools posed such a clear and present danger to health, sewage ought instead to be discharged down public drains into the Thames, from which most Londoners took their drinking water. As the great builder Thomas Cubitt remarked: "The Thames is now made a great cesspool instead of each person having one of his own."

The consequences of this well-intentioned blunder were worse even than those of the decision of the Lord Mayor during the Great Plague of 1665-66 to exterminate all the city's dogs and cats because of the false rumor that they were spreading the plague, thus allowing an exponential increase in the population of the rats who were the real transmitters.

Having contaminated a large part of the population he was trying to protect, Chadwick committed his second mistake, sternly setting his face against the simple explanation that would bring about a cure. To his dying day -- which did not come until 1890 -- Chadwick remained an unrepentant miasmatist, as proponents of the airborne explanation for cholera were known. So was Florence Nightingale. The Lancet, the leading medical journal, venomously denounced the waterborne theory and its dogged proponent, John Snow.


For the full review, see: 

FERDINAND MOUNT.  "BOOKS; Lost in a Time of Cholera; How a doctor's search solved the mystery of an epidemic in Victorian London."  The Wall Street Journal   (Sat., October 21, 2006):  P8.


The reference to the book is:

Johnson, Steven. The Ghost Map: The Story of London's Most Terrifying Epidemic - and How It Changed Science, Cities, and the Modern World. New York: Riverhead Books, 2006.  299 pages, $26.95


February 4, 2007

Middendorf "Studied Under Joseph Schumpeter"

GloriousDisasterBK.jpg   Source of book image:  http://basicbooks.com/perseus/book_detail.jsp?isbn=0465045731


William Middendorf was important in the Goldwater campaign for president.  Here is a brief excerpt from his recent book about the campaign:


(p. 8)  . . ., I became a disciple of the Austrian libertarian school of economics, having studied under Joseph Schumpeter (an odd-man-out at Harvard, later named by the Wall Street Journal as the most important economist of the twentieth century) and Ludwig Von Mises (at New York University).  Schumpeter and Von Mises saw entrepreneurship as a major driving force in economic development, considered private property---protected by an independent judiciary---essential to the efficient use of resources, and held that government intereference in market processes was usually counterproductive.


The reference to the book is: 

Middendorf, J. William, II. Glorious Disaster: Barry Goldwater's Presidential Campaign and the Origins of the Conservative Movement. New York: Basic Books, 2006.


February 3, 2007

To Help Poor: "Allow Entrepreneurs to Flourish"


Of the three "views" discussed in Wessel's original commentary, the following excerpt just includes the one that I share:


With the billions of dollars they are spending, Bill Gates, Warren Buffett, Bill Clinton and Bono are likely to make progress in their quest to prevent treatable diseases from killing millions of people.  Nearly all of these people live or will live in poor countries.

That worries economist Simon Johnson.  He doesn't doubt the moral imperative to fight disease.  Still, he wonders:  "Do we really know how to help the poor people -- the increasing number of poor people?  Do we really know how to help them out of poverty?"

Such questions haunt academics, governments, international institutions and global do-gooders.  They are impressed with China's rapid modernization, though puzzled that it has done so well without following standard precepts.  They are disappointed and puzzled that Latin America nations haven't done better, especially because so many did take the advice of the experts.  They are depressed and puzzled by the continued widespread misery in Africa.

With intellectual humility, Mr. Johnson, a professor at Massachusetts Institute of Technology's Sloan School of Management, faced a roomful of peers at the annual meeting of the American Economics Association last weekend and said, "Public health had the germ theory of disease.  Economics has made great progress, but it's still waiting for its 'germ theory of disease.'"  That probably overstates the challenges remaining to public-health warriors -- avian flu, AIDS/HIV, malaria and all -- but not the shortcomings of economic understanding of what poor countries should do to achieve sustained growth.

. . .

A third view is that earlier economists focused on the wrong thing.  Mr. Johnson, among others, argues that what really matters is having solid political, legal and economic institutions -- courts, central banks, honest bureaucrats, private-property rights -- that allow entrepreneurs to flourish.  Imposing what seem to be sound economic policies on corrupt, incompetent or myopic governments is doomed.  Building strong institutions is a necessary prerequisite.  In this camp, there is a running side argument about which comes first:  the institutions or the educated people who create them.  Was the Constitution key to U.S. success, or was it Jefferson, Madison and Hamilton?


For the full commentary, see:

DAVID WESSEL.  "CAPITAL; Why Economists Are Still Grasping For Cure to Global Poverty."  The Wall Streeet Journal  (Thurs.,  January 11, 2007):  A7.


February 2, 2007

Americans Believe "Individuals Are Responsible for their Own Success"

BrooksDavid.jpg   David Brooks.  Source of photo:  online version of the NYT commentary cited below.


David Brooks wrote some useful reflections on some of the work of sociologist Seymour Martin Lipsett, who died on New Year's Eve at the end of 2006:


Lipset was relentlessly empirical, and rested his conclusions on data as well as history and philosophy. He found that Americans have for centuries embraced individualistic, meritocratic, antistatist values, even at times when income inequality was greater than it is today.

Large majorities of Americans have always believed that individuals are responsible for their own success, Lipset reported, while people in other countries are much more likely to point to forces beyond individual control. Sixty-five percent of Americans believe hard work is the key to success; only 12 percent think luck plays a major role.

In his “American Exceptionalism” (1996), Lipset pointed out that 78 percent of Americans endorse the view that “the strength of this country today is mostly based on the success of American business.” Fewer than a third of all Americans believe the state has a responsibility to reduce income disparities, compared with 82 percent of Italians. Over 70 percent of Americans believe “individuals should take more responsibility for providing for themselves” whereas most Japanese believe “the state should take more responsibility to ensure everyone is provided for.”

America, he concluded, is an outlier, an exceptional nation.


For the full commentary, see:

DAVID BROOKS.  "The American Way of Equality."  The New York Times, Section 4 (Sun., January 14, 2007):  12.


February 1, 2007

The Difference Between Being a University President and Being a Cabinet Officer


At a dinner last week to announce the winner of the business book of the year award, Lawrence H. Summers, the former Treasury secretary, poked fun at his tenure as the president of Harvard.  . . .

Specifically, he said he was woefully naïve when he had been first asked to describe the difference between being a university president and being a cabinet officer. ''I guess I didn't get it right in the answer I gave in my first year or two,'' he said, ''because I used to say, 'Well, in Washington, it's so political; there's organized opposition to everything.' ''


For the full story, see: 

JANE L. LEVERE.  "OPENERS: SUITS; HARVARD EDUCATION."  The New York Times, Section 3 (Sun., October 29, 2006):  2.

(Note:  ellipsis added.)



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