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November 30, 2008

Einstein on What Counts



"Everything that can be counted does not necessarily count; everything that counts cannot necessarily be counted."


Source:

Albert Einstein, as quoted in Koch, Charles G. The Science of Success: How Market-Based Management Built the World's Largest Private Company. Hoboken, NJ: Wiley & Sons, Inc., 2007.




November 29, 2008

The 10 Million Dollar Bookmark and the 35 Billion Dollar Egg



Zimbabwean100BillionDollarNote.jpg "A vendor arranges eggs on a new 100 billion Zimbabwean dollar note in Harare July 22, 2008. Zimbabwe's central bank introduced new higher-value 100 billion Zimbabwe dollar notes on Monday as part of a desperate fight against spiralling hyperinflation, the bank said. An egg now costs $35 billion." Source of caption and photo: http://www.daylife.com/photo/03ORa153k8bVA

(p. A1) Robert Mugabe has kept his embattled regime in Zimbabwe afloat on a sea of paper money. Now, he'll have to try to do it without the paper.

The Munich-based company that has supplied Zimbabwe with the special blank sheets to print its increasingly worthless dollar caved in to pressure on Tuesday from the German government for it to stop doing business with the African ruler.

Mr. Mugabe's regime relies on a steady supply of the paper -- fortified with watermarks and other antiforgery features -- to print the bank notes that allow it to pay the soldiers and other loyalists who enable him to stay in power. With an annual inflation rate estimated at well over 1 million percent, new notes with ever more zeros need to be printed every few weeks because the older ones lose their worth so quickly.

. . .

Zimbabwe's central bank stopped posting inflation figures in January, when it stood at a relatively modest 100,580%. A loaf of bread costs 30 billion Zimbabwean dollars.

. . .

Mr. Mangoma uses a 10 million Zimbabwe dollar bank note, worth 0.0008 of a U.S. cent, as a bookmark because he doesn't "care if I lose it."



For the full story, see:

MARCUS WALKER and ANDREW HIGGINS. "Zimbabwe Can't Paper Over Its Million-Percent Inflation Anymore; Under Pressure, German Company Cuts Off Shipments of Blank Bank Notes to Mugabe." The Wall Street Journal (Weds., JULY 2, 2008): A1 & A10.

(Note: ellipses added.)

ZimbabweBasketCash.jpg



"Harare produce seller Chipo Chivanze needs a basket of cash to make change because of Zimbabwe's battered currency." Source of caption: print version of the WSJ article quoted and cited above. Source of photo: online version of the WSJ article quoted and cited above.




November 28, 2008

Companies "Once as Strong as Dinosaurs But Now Just as Extinct"



From McCraw's discussion of Schumpeter's legacy:

(p. 496) No country, regardless of how long it has been prosperous, can take permanent affluence for granted. Nor can any company assume its continued existence---as names such as Digital Equipment, Pan American Airways, Pullman, Douglas Aircraft, and the Pennsylvania Railroad remind us. Each of these companies once epitomized the cutting edge not only of its own industry but of American business as a whole. And all are now in the dustbin of history, along with hundreds of thousands of other businesses of all sizes---once as strong as dinosaurs but now just as extinct.


Source:

McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.




November 27, 2008

Microsoft Still Risks Becoming "Road Kill on the Information Highway"



BallmerSteveNewEra.jpg



"Steve Ballmer is the second Microsoft chief executive to butt his head against the view that a new era in technology brings a new market leader." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 4) The Yahoo affair obscures the larger story: Microsoft's long, long struggle -- since 1993 -- to maintain its leadership position while the Internet grew ubiquitous. Mr. Ballmer, who joined Microsoft in 1980 as its 15th employee, and Bill Gates, his mentor who will retire next month as a full-time Microsoft employee, have certainly tried their best to avert the inevitable decline of the company's influence.

In 2000, Mr. Ballmer credited Mr. Gates for noting that no company in the computer business had ever stayed on top through what Mr. Gates called "a major paradigm shift." The two men wanted Microsoft to be the first company to achieve that goal. An interesting challenge, but some problems are of a size that dwarf the abilities of multibillionaire mortals.

In a 1995 internal memo, "The Internet Tidal Wave," Mr. Gates alerted company employees to the Internet's potential to be a disruptive force. This was two years before Clayton M. Christensen, the Harvard Business School professor, published "The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail" (1997). The professor presented what would become a widely noted framework to explain how seemingly well-managed companies could do most everything to prepare for the arrival of disruptive new technology but still lose market leadership.

It's Google, of course, that has developed the musculature to step forward and lay claim to being Microsoft's successor as industry leader in the Internet era. If there had been any way Microsoft could have prepared for this day, it had ample time to do so. In 1993, fully five years before Google's founding and two years before Mr. Gates's memo, Nathan P. Myhrvold, then Microsoft's chief technology officer, wrote his own memo, "Road Kill on the Information Highway." It spelled out in prescient detail how each of many industries would be flattened by the build-out of digital networks, and it said that the PC software business would be no exception.



For the full commentary, see:

RANDALL STROSS. "Digital Domain; The Computer Industry Comes With Built-In Term Limits." The New York Times, SundayBusiness Section (Sun., May 18, 2008): 4.




November 26, 2008

Science Fiction Writers Provide More Accurate Forecasts Than Economists



Robert Fogel, quoted below, is a Nobel-Prize-winning professor of economics at the University of Chicago:

(p. 13) I think I've largely covered how things looked after World War II, highlighting both what now seems to have been an unjustified pessimism and also the difficulties in forecasting the future. I close with an anecdote from Simon Kuznets. He used to give a one-year course in growth economics, both at Johns Hopkins and Harvard. One of the points he made was that if you wanted to find accurate forecasts of what happened in the past, don't look at what the economists said. The economists in 1850 wrote that the progress of the last decade had been so great that it could not possibly continue. And economists at the end of the nineteenth century wrote that the progress of the last half century had been so great that it could not possibly continue during the twentieth century. Kuznets said you would come closest to an accurate forecast if you read the writers of science fiction. But even the writers of science fiction were too pessimistic. Jules Verne recognized that we might eventually get to the moon, but he couldn't conceive of the technology that actually made the journey possible.

I was at a 2003 conference at Rockefeller University that brought together about 30 people from different disciplines (economics, biology, chemistry, and physics, as well as some industrial leaders) who put forward their views of what was likely to happen in the new millennium. And I must say that the noneconomists were far more bullish than most of the economists I know. So I suspect if we have another MussaFest in 2024, we'll all look back at how pessimistic we were in 2004.



Source:

Fogel, Robert W. "Reconsidering Expectations of Economic Growth after World War Ii from the Perspective of 2004." IMF Staff Papers 52 (Special Issue 2005): 6-14.





November 25, 2008

Oil Companies Often Drill Deep With No Payoff



DeepestOilWellMap.gif Source of map: online version of the WSJ article quoted and cited below.

(p. B1) McMoRan Exploration Co. is leading a renewed effort to find natural gas in a site known as one of the world's deepest dry holes.

Exxon Mobil Corp. walked away from the legendary Blackbeard prospect in the Gulf of Mexico in 2006 after drilling to more than 30,000 feet without a payoff. But high energy prices have emboldened the industry, stirring wildcatter passions and prompting companies to look anew at previously abandoned projects.

. . .

(p. B2) If industry reports, unconfirmed by Exxon, are correct, the company spent more than $200 million on the well, making it one of the most expensive dry holes ever drilled.

The industry is littered with expensive failures, but Blackbeard proved too tempting to let go, especially in today's record-price environment, where any reasonably promising prospect is worth a try. Indeed, there are more drilling rigs at work in the U.S. today than at any point since 1985, according to Baker Hughes Inc.

Mr. Moffett, the 69-year-old founder of McMoRan Exploration, is a geologist and inveterate risk taker. He discovered the giant Grasberg copper and gold mine in Indonesia, parlaying it into global mining giant Freeport-McMoRan Copper & Gold Inc. The oil-and-gas exploration company was spun off from the mining assets in 1994.

Last August, McMoRan paid $1.1 billion for a package of shallow Gulf of Mexico assets, including Blackbeard, from Newfield Exploration Co., Exxon's former partner on the well. Studying the geology, Mr. Moffett found it similar to successful wells drilled by other companies in the deeper parts of the Gulf.

He now says that if McMoRan decides to keep drilling to 35,000 feet, it will cost about $75 million.



For the full story, see:

RUSSELL GOLD "A Famed Dry Hole Gets a Second Shot." The Wall Street Journal (Mon., July 21, 2008): B1-B2.

(Note: ellipsis added.)

OilRigDrillingBlackbeard.jpgMoffettJames.jpg









Photo on left is "GorillaIV, the rig drilling Blackbeard." Image on right is the Co-Chairman of McMoRan. Source of photo, image, and caption on left photo: online version of the WSJ article quoted and cited above.




November 24, 2008

Founder of Experimental Science Received Prison as His Reward



(p. 53) Where men had once said, 'Credo ut intelligam' (understanding can come only through belief), they now said, 'Intelligo ut credam' (belief can come only through understanding). In 1277, Roger Bacon was imprisoned for an indefinite period for holding these opinions. Free and rational investigation of nature was to come hard in the clash between reason and faith which would echo down to our own time.


Source:

Burke, James. The Day the Universe Changed: How Galileo's Telescope Changed the Truth and Other Events in History That Dramatically Altered Our Understanding of the World. Back Bay Books, 1995.





November 23, 2008

Tears Flow for Delta Queen "All Because of a Stupid Law"



DeltaQueen.jpg Source: online version of the NYT article quoted and cited below.

(p. A16) CINCINNATI -- For more than a year now, fans of the Delta Queen, America's last original paddle-wheeled, steam-driven, overnight passenger boat, have done everything they could to keep it plying the country's rivers.

They have written letters, signed petitions and enlisted stars like the actor Hal Holbrook (who has played Mark Twain) to support their cause. They even tried to shame Congress into granting another exemption from a federal law that would normally ban the Delta Queen from operating because it is largely made of wood.

But as it pulled away from her dock here into the Ohio River on Tuesday night, tears flowed among passengers, crew members and some of the hundreds of onlookers.

That was because, to date, no exemption has been granted and the current exemption expires at the end of October. As a result, the 10-day cruise to Memphis could well be the Delta Queen's last commercial voyage.

. . .

"We're just here to say goodbye," said Dick Schroeder, 72, a lifelong Cincinnati resident who came to watch this potential last departure with his wife, Mary, and daughter, Patricia Fanning.

"I just don't know why it has to go, all because of a stupid law," Mr. Schroeder said.



For the full story, see:

SEAN D. HAMILL. " Paddle-Wheeler's Fans Seek a Reprieve." The New York Times (Weds., October 22, 2008): A16.

(Note: ellipsis added.)




November 22, 2008

"Three Generations from Overalls to Overalls"



(p. 156) Because it proceeds by competitively destroying old businesses and hence the existences dependent upon them, there always corresponds to it a process of decline, of loss of caste, of elimination. This fate also threatens the entrepreneur whose powers are declining, or his heirs who have inherited his wealth without his ability. This is not only because all individual profits dry up, the competitive mechanism tolerating no permanent surplus values, but rather annihilating them by means of just this stimulus of the striving for profits which is the mechanism's driving force; but also because in the normal case things so happen that entrepreneurial success embodies itself in the ownership of a business; and this business is usually carried on further by the heirs on what soon become traditional lines until new entrepreneurs supplant it. An American adage expresses it: three generations from overalls to overalls. And so it may be. Exceptions are rare, and are more than compensated for by cases in which the descent is still faster. Because there are always entrepreneurs and relatives and heirs of entrepreneurs, public opinion and also the phraseology of the social struggle readily overlook these facts. They constitute "the rich" a class of inheritors who are removed from life's battle. In fact, the upper strata of society are like hotels which are indeed always full of people, but people who are forever changing.


Source:

Schumpeter, Joseph A. The Theory of Economic Development: An Inquiry into Profits, Capital, Credit, Interest, and the Business Cycle. Translated by Redvers Opie. translation of 2nd German edition that appeared in 1926; translation first published by Harvard in 1934 ed. London: Oxford University Press, 1961.




November 21, 2008

Russia Expands Icebreaker Fleet to Exploit Benefits of Global Warming



HealyIceBreaker20080824.jpg "The Healy, shown in May 2007 in the Bering Sea, is an ice-breaking ship used mainly for science." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 6) A growing array of military leaders, Arctic experts and lawmakers say the United States is losing its ability to patrol and safeguard Arctic waters even as climate change and high energy prices have triggered a burst of shipping and oil and gas exploration in the thawing region.

The National Academy of Sciences, the Coast Guard and others have warned over the past several years that the United States' two 30-year-old heavy icebreakers, the Polar Sea and Polar Star, and one ice-breaking ship devoted mainly to science, the Healy, are grossly inadequate. Also, the Polar Star is out of service.

And this spring, the leaders of the Pentagon's Pacific Command, Northern Command and Transportation Command strongly recommended in a letter that the Joint Chiefs of Staff endorse a push by the Coast Guard to increase the country's ability to gain access to and control its Arctic waters.

In the meantime, a resurgent Russia has been busy expanding its fleet of large oceangoing icebreakers to around 14, launching a large conventional icebreaker in May and, last year, the world's largest icebreaker, named 50 Years of Victory, the newest of its seven nuclear-powered, pole-hardy ships.

Adm. Thad W. Allen, the commandant of the Coast Guard, who toured Alaska's Arctic shores two weeks ago with the homeland security secretary, Michael Chertoff, said that whatever mix of natural and human factors is causing the ice retreats, the Arctic is clearly opening to commerce -- and potential conflict and hazards -- like never before.



For the full story, see:

ANDREW C. REVKIN. "A Push to Increase Icebreakers in the Arctic." The New York Times, First Section (Sun., August 17, 2008): 6.




November 20, 2008

A Succinct Account of the Rise of Anti-Semitism



James Burke, writing of the ninth-century AD (the century of Charlemagne's death in 814 AD):

(p. 32) It was at this time too that anti-Semitism, previously rare, began to increase. Money-lending, which was forbidden by the Christian Church, was permitted under Jewish law, and the Jews, prevented from owning land, turned to the new business currency. Many of them grew rich and were resented.


Source:

Burke, James. The Day the Universe Changed: How Galileo's Telescope Changed the Truth and Other Events in History That Dramatically Altered Our Understanding of the World. Back Bay Books, 1995.




November 19, 2008

Company Graveyard Scene from Wattenberg's "In Search of the Real America"



EdselTombstone.JPG Source of image: screen capture downloaded on 9/3/08 from: http://cgi.ebay.com/PBS-TV-SERIES-IN-SEARCH-OF-THE-REAL-AMERICA-1977_W0QQitemZ330267803398QQihZ014QQcategoryZ63821QQssPageNameZWDVWQQrdZ1QQcmdZViewItem

For years I have been trying to find a copy of Ben Wattenberg's wonderful opening scene in the episode on big business of his 1970s series "In Search of the Real America." He stands in a spooky, foggy, graveyard next to several tombstones. When we see the tombstones more closely, they have the names of big business corporate failures.

InSearchOfTheRealAmericaOpeningSlide.JPG Source of image: screen capture downloaded on 9/3/08 from: http://cgi.ebay.com/PBS-TV-SERIES-IN-SEARCH-OF-THE-REAL-AMERICA-1977_W0QQitemZ330267803398QQihZ014QQcategoryZ63821QQssPageNameZWDVWQQrdZ1QQcmdZViewItem




November 18, 2008

Kronman Thinks It's Good that We Die (and Charles Murray Applauds)



Over the weekend of August 16-17, 2008, I caught a few minutes of an interview on one of the C-SPAN channels. Charles Murray was handing softball questions to an academic philosopher named Kronman. Kronman was pontificating that life could only be meaningful because there was death. He suggested that those pursuing longevity research were misguided.

I sat there appalled, pondering how many wonderful, amazing projects we could get done, if only we had more time.

Some wise philosopher once said that you can only have useful dialogue with someone if the two of you have some shared assumptions. I don't expect to be dialoguing with Anthony Kronman anytime soon. And that is just as well, since life is way too short to waste much time worrying about the Anthony Kronman's of the world.

(In case you think I'm making this up, I quote below, from Kronman.)


(p. 229) The spiritual emptiness of our civilization has its source in the technology whose achievements we celebrate and on whose powers we all now depend.

Technology relaxes or abolishes the existing limits on our powers. There is no limit to this process itself. Indeed, every step forward is merely a provocation to go further. This might be called the (p. 230) technological "imperative." . . .

. . .

(p. 230) If we lived forever, our powers, however great, would have no significance. How could it possibly matter whether we exercised them one way or another, sooner rather than later? This can matter to us only within the framework of a lifetime, that is, within the boundaries of a mortal existence. That we sometimes imagine (or think we imagine) that we want to have and use limitless powers in a limitless life is an illusion that always depends on our covertly smug-(p. 231)gling into our imagined picture of such an existence some essential feature of the human mortality we can never escape. In reality, the idea of immortality is for us quite unimaginable. It remains an empty abstraction.



PS: The following sentence appears on the copyright page of Kronman's book: "The paper in this book meets the guidelines for permanence and durability of the Committee on Production Guidelines for Book Longevity of the Council on Library Resources."

So the longevity of books is pompously praised, while the longevity of humans is belittled?

Don't waste time on:

Kronman, Anthony T. Education's End: Why Our Colleges and Universities Have Given up on the Meaning of Life. New Haven, CT: Yale University Press, 2007.

(Note: ellipses added.)




November 17, 2008

"Nuclear Power Provides 77 Percent of France's Electricity"




FrenchNuclearReactorFlamanville20080824.jpg "France is constructing a nuclear reactor, its first in 10 years, in Flamanville, but the country already has 58 operating reactors." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 6) FLAMANVILLE, France -- It looks like an ordinary building site, but for the two massive, rounded concrete shells looming above the ocean, like dusty mushrooms.

Here on the Normandy coast, France is building its newest nuclear reactor, the first in 10 years, costing $5.1 billion. But already, President Nicolas Sarkozy has announced that France will build another like it.

. . .

Nuclear power provides 77 percent of France's electricity, according to the government, and relatively few public doubts are expressed in a country with little coal, oil or natural gas.

With the wildly fluctuating cost of oil, anxiety over global warming from burning fossil fuels and new concerns about the impact of biofuels on the price of food for the poor, nuclear energy is getting a second look in countries like the United States and Britain. Even Germany, committed to phasing out nuclear power by 2021, is debating whether to change its mind.



For the full story, see:

STEVEN ERLANGER. "France Reaffirms Its Faith in Future of Nuclear Power." The New York Times, First Section (Sun., August 17, 2008): 6. (Also on p. 6 of the NY edition)

(Note: ellipsis added.)

FranceNukeMap20080824.jpg





Source of map: online version of the NYT article quoted and cited above.





November 16, 2008

Shaw: "All Progress Depends on the Unreasonable Man"



The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.


attributed to George Bernard Shaw

Source:

Elkington, John, and Pamela Hartigan. The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World. Boston, MA: Harvard Business School Press, 2008.

(Note: Elkington and Hartigan cite Shaw's Man and Superman as the location of the Shaw quote.)




November 15, 2008

Leapfrog Competition in the Smartphone Industry



SmartphoneMarketShareGrasphic.gif











Source of graphic: online version of the NYT article quoted and cited below.

(p. C1) In recent years Palm lost its way. Its share of the smartphone market has been halved to about 16.9 percent over the last two years. First, Research in Motion found the sweet spot of business users with its BlackBerry. More recently, Apple grabbed consumers' fancy with the iPhone.

Palm has tried to innovate beyond the five-year-old Treo with little effect. It announced with great fanfare last year that it would build the Foleo, a cross between a smartphone and notebook computer, only to cancel the project three months later. While cellphone makers like Samsung, LG and R.I.M. brought out products to compete with the iPhone, Palm has told Treo loyalists and investors to be patient. They will need to be. Palm's stock price is down 90 percent since its high in March 2000.

Mr. Rubinstein, the executive chairman, said he is convinced he can bring Palm back. "Everyone is trying to make an iPhone killer," he said. "We are trying to make a killer Palm product."



For the full story, see:

LAURA M. HOLSON. "Palm, Once a Leader, Seeks Path in Smartphone Jungle." The New York Times (Weds., August 20, 2008): C1 & C5.


ColliganRubensteinPalmExecs.jpg "Ed Colligan, left, Palm's chief executive, and Jon Rubinstein, the executive chairman, who was hired to revive the company." Source of caption and photo: online version of the NYT article quoted and cited above.




November 14, 2008

A Schumpeterian Policy Program Promotes Innovation and Creative Destruction



McCraw on the nature of "a Schumpeterian program" :

(p. 169) Yet it is not difficult to identify a Schumpeterian program---at whatever level of analysis one chooses: the individual entrepreneur, the business firm, the industry, or even the country. At all levels, Schumpeter's litmus test is whether the players are pursuing innovation and bringing about creative destruction. If they are, then the program is Schumpeterian.


Source:

McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.




November 13, 2008

A Standing Ovation, and a Salute, for Colonel Jack Moelmann



MoelmannColonel20080823.jpg "Colonel Moelmann, a retired Air Force officer, sold seats for $50, but had to spend almost $120,000 of his own to perform." Source of caption and photo: online version of the NYT article quoted and cited below.

I do not share Colonel Moelmann's particular dream, but I do salute him for paying for his dream himself, rather than trying to force taxpayers to finance it, as so many do in pursuit of their dreams.

(p. A18) Col. Jack Moelmann, a retired Air Force officer from O'Fallon, Ill., blew $118,182.44 on a one-night stand in New York on Saturday. It was everything he had dreamed of, and more: three hours with the mightiest of the mighty Wurlitzers, the legendary pipe organ at Radio City Music Hall.

The experience left him sweaty and exhausted -- having your way with a mechanical marvel that contains more than a million parts is hard work -- and it reduced his net worth to "the mid-five figures," he said. But Colonel Moelmann had no regrets. He soldiered through tune after tune, from "The Trolley Song" from "Meet Me in St. Louis" to patriotic songs like "America the Beautiful," "My Country 'Tis of Thee" and "The Star-Spangled Banner."

Which, as he pointed out before he climbed onto the bench of the giant ebony console at the left-hand edge of the Rockettes' high-kicking home, guaranteed him a standing ovation.

. . .

"Not many people get their name on the marquee," he said.

Not many people spend a large chunk of their life savings to buy their way in, either.

The idea for a Radio City concert began with the president of the year-old Theater Organ Society International, the Rev. Gus L. Franklin, and Mr. Page, a member. "We turned our pockets inside out and said, 'It's not going to happen,' " Mr. Page said.

Colonel Moelmann, the society's secretary, decided to make it happen -- "I looked in the mirror and said: 'Jack, you have a dream. Go for it.' "-- even though, he said, it was a foregone conclusion that "we're going to lose money big time."

He and the organ society put the price of the tickets at $50 a seat, but the show was far from a sellout. Even with the three balconies closed, the orchestra level was about a third full.

Some in the audience were Moelmann fans from way back. Susan Conrad Wells, a law librarian from Granby, Mass., said she had met Colonel Moelmann through an organ club in 1967, when he was stationed in Massachusetts.

Colonel Moelmann said that playing at Radio City presented its own challenges. "You can't listen to what you're playing," he said. "If you listen note by note, once you've hit the note and you hear it, it's too late to say, 'Oops, I hit the wrong note.' "

In the end, he got his standing ovation.



For the full story, see:

JAMES BARRON. "Organist Rents Radio City to Play, Fulfilling Wish." The New York Times (Mon., August 11, 2008): A18. (B4 in NY edition)

(Note: ellipsis added.)

MoelmannColonelAtOrgan20080823.jpg "Jack Moelmann always wanted to play Radio City's pipe organ, above, even after playing at Westminster Abbey and the Pantheon." Source of caption and photo: online version of the NYT article quoted and cited above.





November 12, 2008

Schumpeter Learned from His Failures



McCraw (2007, p. 112) quotes from Schumpeter's diary:

Really, I don't quite regret any of my efforts and failures---every one of them taught me something about myself and life that uniform success would have hidden.


Source:

McCraw, Thomas K. Prophet of Innovation: Joseph Schumpeter and Creative Destruction. Cambridge, Mass.: Belknap Press, 2007.




November 11, 2008

Good Laws Protect the Innovator



James Burke writes well, and what he writes is often stimulating, and thought-provoking. On the other hand, some of what he writes is exasperating---he writes in sweeping generalities, and often his 'connections' are exaggerations, giving no weight (or even mention) to alternative, equally plausible accounts.

But on balance, I enjoy listening to him. Here is one of the bits I especially liked:

(p. 19) Because the rule of law exists, and above all because it encourages and protects acts of innovation with patent legislation, we in the modern world expect that tomorrow will be better than today. Our view of the universe is essentially optimistic because of the marriage between law and innovation. Law gives an individual the confidence to explore, to risk, to venture into the unknown, in the knowledge that he, as an innovator, will be protected by society.


Source:

Burke, James. The Day the Universe Changed: How Galileo's Telescope Changed the Truth and Other Events in History That Dramatically Altered Our Understanding of the World. Back Bay Books, 1995.




November 10, 2008

Emergency Room Waiting Time Continues to Increase



(p. D4) ATLANTA -- The average time that hospital emergency-room patients wait to see a doctor has grown to almost an hour from about 38 minutes over the past decade, according to new federal statistics released Wednesday.

The increase is due to supply and demand, said Dr. Stephen Pitts, the lead author of the report by the U.S. Centers for Disease Control and Prevention.

"There are more people arriving at the ERs. And there are fewer ERs," said Dr. Pitts, an associate professor of emergency medicine at Emory University.

The average time is based on a national survey of 362 hospital emergency departments.

Over all, about 119 million visits were made to U.S. emergency rooms in 2006, up from 90 million in 1996 -- a 32% increase.

Meanwhile, the number of hospital emergency departments dropped to fewer than 4,600, from nearly 4,900, according to American Hospital Association statistics.

. . .

The amount of time a patient waited before seeing a physician in an ER has been rising steadily, from 38 minutes in 1997, to 47 minutes in 2004, to 56 minutes in 2006.

Dr. Pitts added that 56 minutes may be the average, but it's not typical: The average was skewed to nearly an hour because of some very long waits.

. . .

"Millions more people each year are seeking emergency care, but emergency departments are continuing to close, often because so much care goes uncompensated," Dr. Linda Lawrence, president of the American College of Emergency Physicians, said in a statement.

"This report is very troubling, because it shows that care is being delayed for everyone, including people in pain and with heart attacks."



For the full story, see:

ASSOCIATED PRESS. Average ER Waiting Time Jumps to Nearly an Hour." The Wall Street Journal (Thurs., August 7, 2008): D4.

(Note: eillipses added.)




November 9, 2008

Urgent Care Clinics Are Replacing Emergency Rooms



SolanticUrgentCare.jpg







"An urgent-care clinic in Atlantic Beach, Fla." "Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. D1) When a heavy metal door swung over her 14-year-old son's foot, ripping the nail almost completely off his big toe, Tina Mobley didn't want to take her chances in a crowded hospital emergency room or wait for an appointment at the pediatrician's office the next day. Instead, she drove to an urgent-care clinic inside a Wal-Mart in Yulee, Fla., near her rural home. Within minutes, the doctor on duty numbed the pain with an injection, removed the nail, and cleaned and bandaged the injury.

Patients who need immediate care for injuries and illness, be it a nail-gun puncture or a severe stomach bug, are increasingly turning to walk-in urgent-care clinics. These facilities aim to fill the gap between the growing shortage of primary-care doctors and a shrinking number of already-crowded hospital emergency departments, with no appointment necessary and extended evening and weekend hours. Urgent-care clinics are staffed by physicians, offer wait times as little as a few minutes and charge $60 to $200 depending on the procedure -- a fraction of the typical $1,000-plus emergency department visit. Some offer discounts and payment plans for the uninsured; for those with coverage, co-payments vary by insurance plan but may be less than half the amount of an ER visit, which can range from $50 to $200.

While the Yulee clinic that treated Ms. Mobley's son is one of three operated inside Wal-Mart stores by Jacksonville, Fla.-based Solantic, urgent-care centers aren't to be confused with the new crop of retail health clinics popping up in drugstores, which are run by nurse practitioners who prescribe medicine for minor illnesses and provide vaccinations. Urgent-care-center physicians and other medical staffers can put casts on broken bones, sew up lacerations, provide intravenous fluids for dehydrated patients, and deploy advanced life-support equipment for both adults and children. They often have equipment not available in physicians' offices, such as X-rays.



For the full story, see:

LAURA LANDRO. "THE INFORMED PATIENT; Options Expand For Avoiding Crowded ERs." The Wall Street Journal (Weds., August 6, 2008): D1-D2.




November 8, 2008

"The Value Conferred on Mankind by the Unknown Inventor of the Plough"




Who will attempt to calculate the value conferred on mankind by the unknown inventor of the plough?


Source:

Say, Jean-Baptiste. A Treatise on Political Economy. Philadelphia: Lippincott, Grambo & Co., 1855; translator C. R. Prinsep, ed. Clement C. Biddle. Fourth-fifth edition.
First published: 1803, in French.

The quotation is from BOOK I, CHAPTER VI "Of Operations Alike Common To All Branches of Industry."

Full text is posted at: http://www.econlib.org/library/Say/sayT.html

(Note: Say is one of the earliest economists to recognize the importance of entrepreneurs. Today he is best known for his Say's Law. He lived from 1767-1832.)






November 7, 2008

Michael Crichton's Scariest Story



CrichtonMichael2003.jpg






Michael Crichton speaking on environmentalism at the Fairmont Hotel on September 15, 2003. Source of photo: Bill Adams' posting at http://www.pbase.com/bill_adams/image/21439440


The papers announced yesterday (11/6/08) that Michael Crichton had died of cancer a couple of days earlier (11/4/08).

I had mixed feelings about his stories. On the one hand, they seemed mainly to stir up unrealistic fears about technology, which I see as mainly a benefit to humanity. On the other hand, they often involved intelligent heroes who struggled against danger, and won (or at least partly won).

Crichton's best story may have been one of his last, State of Fear. In that book, he took on the environmental movement, and showed in a powerful appendix, how some scientists and scientific institutions have failed us, by creating fear that is not grounded in the free exchange of ideas and evidence.

Crichton did not have to take on this issue---it earned him vituperative enemies, and probably lost him some readers. But in the end, he too was an intelligent hero who struggled against danger---the danger of politically correct closed minds.

Michael Crichton, Rest in Peace.

P.S.: Crichton had some scientific credentials. Here are a couple of interesting facts about his life:

(p. A27) At Harvard, after a professor criticized his writing style, the younger Mr. Crichton changed his major from English to anthropology and graduated summa cum laude in 1964. He then spent a year teaching anthropology on a fellowship at Cambridge University. In 1966 he entered Harvard Medical School and began writing on the side to help pay tuition.

. . .

In 1969, after earning his medical degree, Mr. Crichton moved to the La Jolla section of San Diego and spent a year as a postdoctoral fellow at the Salk Institute for Biological Studies. Already inclining toward a writing career, he tilted decisively with "The Andromeda Strain," a medical thriller about a group of scientists racing against time to stop the spread of a lethal organism from outer space code-named Andromeda.



For the full obituary, see:

WILLIAM GRIMES. "Michael Crichton, Author of Thrillers, Dies at 66." The New York Times (Thurs., November 5, 2008): A27.

(Note: ellipsis added.)

CrichtonMichaelHarvard2002.jpg Michael Crichton during an April 11, 2002 lecture at the Harvard Medical School (from which he graduated). Source of photo: http://www.hno.harvard.edu/gazette/2002/04.18/11-crichton.html




November 6, 2008

Chatwani Vies for "Worst Timing Ever Award"



ChatwaniAmit.jpg "Amit Chatwani, writer of Leveragedsellout.com and a book, "Damn It Feels Good to Be a Banker."" Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A28) Happy hour in the financial district has its own taxonomy. The other night amid the several sidewalk tables on Stone Street, Amit Chatwani, the 26-year-old behind the satirical Wall Street blog Leveragedsellout.com, broke down the scene within seconds of his arrival.

The young woman carrying a canvas "deal bag" with the Goldman Sachs logo was most likely a bank associate, he surmised. The younger-looking man reading the so-counterintuitive-it's-intuitive business book "The Black Swan" was an analyst with big-picture dreams. And the rest of the tables were filled with tech-support and human-resources staff, he figured.

"They have to be back-office, because it's too early for bankers to be out," Mr. Chatwani said. "They could be traders, I suppose. Or compliance and risk management, which is basically middle-office that's treated as back-office."

But Mr. Chatwani would be the first to admit that his assessments of the culture of Wall Street are not, at the moment, holding their value. His book, written under the name Leveraged Sell-Out and entitled "Damn It Feels Good to Be a Banker," was published by Hyperion in August, giving it a fair claim to some kind of Worst Timing Ever Award.



For the full story, see:

ERIC KONIGSBERG. "Attn, Satirist of the Spoiled of Wall Street: Bad Timing, Dude." The New York Times (Thurs., October 16, 2008): A28.

The reference for The Black Swan book mentioned above, is:

Taleb, Nassim Nicholas. The Black Swan: The Impact of the Highly Improbable. New York: Random House, 2007.

A marvelous review of The Black Swan, is:
Diamond, Arthur M., Jr. "Review of The Black Swan: The Impact of the Highly Improbable." Journal of Scientific Exploration 22, no. 3 (Fall 2008): 419-22.




November 5, 2008

Boris Yeltsin's "Laissez-Faire Populism"



YeltsinBK.jpg








Source of book image: online version of the NYT review quoted and cited below.


(p. E1) Yeltsin's grievance against the Communists began before he was born, in an all-too-common history of family heartbreak that Mr. Colton pieces together with a good deal of original reporting. The Yeltsins were dispossessed for the bourgeois crime of having built a farm, mill and blacksmithing business. Yeltsin's grandfather died a broken man. His father was charged with the catch-all crime of "anti-Soviet agitation and propaganda" for grousing at his job on a construction site, and sent to a forced-labor camp for three years.

When Yeltsin joined the Communist Party, it was not out of devotion to the professed ideals but because a party card was a requirement for promotion to chief engineer in the construction industry. And when he moved into the hierarchy, he was already a man who chafed at party orthodoxy. No radical, he "nibbled at the edges of what was admissible," Mr. Colton writes, pushing for market prices in the local farm bazaars, encouraging entrepreneurial initiative in the workplace, complaining that the top-down system smothered self-reliance.



For the full review, see:

BILL KELLER. "Books of The Times; The Making of Yeltsin, His Boldness and Flaws." The New York Times (Weds., May 7, 2008): E1.


(p. 222) For Yeltsin's contemporaries, deliverance from Marxist scripture and Soviet srtuctures took many forms. For him, it was an ease with the market and recoil against the overbearing state. Mikhail Fridman, who became one of Russia's first billionaires as a banker and oilman, makes the point well:

Yeltsin as an individual who had inner freedom . . . instinctively moved toward the market as the end. That is because . . . as my namesake Milton Friedman says, "Capitalism is freedom." . . . [Yeltsin thought] it was necessary to give people freedom and they would make out well. How exactly to do that he did not know. [But he did know] that it was necessary to free people from control: We were squeezing them dry. He thought that if we let them go they could move heaven and earth. . . . This is the level on which he thought about it. . . . He took a dim view of all these [Soviet] controls. [He felt that] the controllers had long since believed in nothing.

. . .

(p. 525) Stewart, working as a photojournalist, taped Yeltsin's remarks on August 24, 1990, in Dolinsk. She calls them "laissez-faire populism."



Source:

Colton, Timothy J. Yeltsin: A Life. New York: Basic Books, 2008.

(Note: ellipses and bracked words in Fridman (sic) quote were made by Colton; other ellipses were added by me.)

(Note: the quote from p. 525 is from endnote number 38.)




November 4, 2008

When the Ship Is Sinking, Schumpeter Suggests: "Rush to the Pumps"




Wabash economics professor Ben Rogge's best lecture focused on a question made famous by Schumpeter: "Can Capitalism Survive?" In some ways, Ben's message was a pessimistic one.

But near the end of his lecture, Rogge included the following quote from Schumpeter's Capitalism, Socialism and Democracy:

(p. xi) This leads to the charge of "defeatism." I deny entirely that this term is applicable to a piece of analysis. Defeatism denotes a certain psychic state that has meaning only in relation to action. Facts in themselves and inference from them can never be defeatist or the opposite whatever that might be. The report that a given ship is sinking is not defeatist. Only the spirit in which this report is received can be defeatist: The crew can sit down and drink. But it can also rush to the pumps.


Source of quote:

Schumpeter, Joseph A. Capitalism, Socialism and Democracy. 3rd ed. New York: Harper and Row, 1950.


Reference to Rogge's collection of essays that includes the title essay mentioned above:

Rogge, Benjamin A. Can Capitalism Survive? Indianapolis: Liberty Fund, Inc., 1979.






November 3, 2008

"We Will Stay a Laissez-Faire Economy"



AnsipAndrusEstonianPrimeMinister.jpg








"Andrus Ansip, leader of Estonia, an ex-Soviet Republic." Source of caption and photo: online version of the NYT article quoted and cited below.

An earlier entry suggested that Estonian Prime Minister Andrus Ansip's support for Steve Forbes' flat tax, had helped Estonia achieve a high rate of growth.

Apparently there is some sentiment in Estonia to stay the course:

(p. B6) TALLINN, Estonia -- For nearly two decades, Estonia embraced capitalism with such gusto that it seemed to be channeling the laissez-faire philosophy of Milton Friedman. From its policies meant to attract foreign investors to its flat tax and freewheeling business culture, it stood out as the former Soviet republic most adept at turning post-Communist chaos into a thriving market economy.

Now Estonians, and some of their Baltic neighbors, are slogging through their first serious economic downturn since liberation from the Soviet grip in the early 1990s.

. . .

Whatever happens, government officials say there will be no betrayal of Friedman's philosophy. "We will stay a laissez-faire economy," said Juhan Parts, Estonia's minister of the economy.

. . .

"I'm an optimist," said Marje Josing, director of the Estonian Institute for Economic Research. "Fifteen years ago things looked bad, but they managed. A little real-life pressure won't hurt."

Indeed, so far the downturn has done little to discourage Estonia's ambitious entrepreneurs. If anything, it has made them look more avidly elsewhere for growth.

"Estonia may be a small country," Tarmo Prikk, chief executive of Thulema, an office furniture maker, said with a laugh. "But my ego is bigger."



For the full story, see:

CARTER DOUGHERTY. "Estonia's Let-It-Be Economy Is Rattled by Worldwide Distress." The New York Times (Fri., October 10, 2008): B6.

(Note: ellipses added.)




November 2, 2008

Obama's Tax Policies Would Be "a Significant Step Towards" Another "Great Depression"



Lee Ohanian is the co-author of a much-cited article in the highly-ranked Journal of Political Economy on the economics of the Great Depression. Below is a paragraph from his recent analysis of our current situation:


(p. A17) I am particularly concerned about bad policies because significantly higher taxes have been proposed by Barack Obama. His plan would raise the marginal tax rate on the most productive workers more than 10 percentage points -- an increase that would bring us near Western European levels. His plan would also raise capital income taxes, taxing capital gains and dividends at 20%, compared to a 15% rate under Sen. John McCain's plan. A five percentage-point difference might strike you as small, but it is not. I have calculated that a five percentage-point difference in overall capital income taxation over the long haul is equal to a difference in the nation's capital stock of about 18%. This means a 6% difference in GDP and a 6% difference in the average wage rate. This means that real GDP and the average wage would fall, gradually but persistently declining about 6% after 25 years. That's not quite a Great Depression, but a significant step towards one.


For the full commentary, see:

LEE E. OHANIAN. "Good Policies Can Save the Economy; Why we need lower tax rates and more skilled immigrants." The Wall Street Journal (Weds., OCTOBER 8, 2008): A17.

The academic article co-authored by Ohanian is:

Cole, Harold L., and Lee E. Ohanian. "New Deal Policies and the Persistence of the Great Depression: A General Equilibrium Analysis." Journal of Political Economy 112, no. 4 (August 2004): 779-816.




November 1, 2008

Obama Plans Big Increases in Many Taxes



TaxPlanComparisonTable.gif






Source of table: online version of the WSJ article quoted and cited below.


(p. A13) When it comes to taxes, the difference between Barack Obama and John McCain is arguably as wide as it's been in a presidential race since Ronald Reagan and Walter Mondale battled in 1984. Sen. Obama is proposing to raise taxes more than any recent candidate, while Sen. McCain wants to cut them substantially.

. . .

In sum, Mr. Obama is proposing to use the tax code to substantially redistribute income -- raising tax rates on a minority of taxpayers to finance tax credits and direct income supplements to millions of others. How much revenue his higher rates would raise depends on how much less those high-earners would work, or how much they would change their practices to shelter their income from those higher rates.

By contrast, Mr. McCain is proposing some kind of tax reduction for most Americans who pay taxes. He says he would finance those cuts by reducing the rate of growth in federal spending.



For the full commentary, see:

Brian M. Carney. "The Election Choice: Taxes." The Wall Street Journal (Sat., OCTOBER 25, 2008): A13.

(Note: ellipsis added.)




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