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May 31, 2009

Entrepreneurs, Not MITI, Decided Japan Outcomes in '60s, '70s and '80s




(p. 164) Ishibashi's regime was followed in the early 1960s by the "income-doubling campaign" of his associate Hayato Ikeda, who assumed power in 1961 and continued the supply-side thrust. The result was a steady upsurge of domestic growth, with firms and industries rapidly gaining experience in intense rivalries at home before entering the global arena as low-cost producers, and with government cutting taxes and increasing revenues and savings.

It is from this domestic crucible of intense competition with normal rates of bankruptcy far above those in the United States, with scores of rivals in every field, that the great Japanese companies have emerged. At various times during the last three decades, for example, there have been 58 integrated steel firms, 50 motorbike companies, 12 auto firms, 42 makers of hand-held calculators, 13 makers of facsimile machines, and 250 producers of robots. Overlooking this welter are always the crested bureaucrats of MITI, sometimes offering useful aid and guidance--but at the center, deciding outcomes, have always been the entrepreneurs.



Source:

Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.





May 30, 2009

Honest Indian Economist Wins (Charisma is Not Always What Matters Most)




SinghManmohanAndGandhi.jpg "India's Prime Minister Manmohan Singh, left, and Rahul Gandhi wave to supporters during an election campaign rally in the northern Indian city of Amritsar May 11." Source of photo and caption: online version of the WSJ article quoted and cited below.


(p. A12) "Manmohan Singh will be our prime minister," said Sonia Gandhi, president of the Congress party, at a televised news conference with Mr. Singh. Mr. Singh, in typically low-key fashion, spoke at the same conference in such a quiet voice that his two minutes of remarks were inaudible over the din of the press corps, and he was forced to return to the microphone to repeat them. "The public has expressed faith in Congress," he mumbled.


. . .


Mr. Singh, who earned honors from Cambridge University in economics and a doctorate from Oxford, was an architect of India's economic reforms in 1991 that are credited with setting the nation on course for the economic boom it has had over the past few years but that is now slowing. He is widely seen as honest in a system where bribery of politicians and voters is commonplace and more than 1,000 political candidates in the national elections faced various criminal charges.

The election "is an endorsement of the programs and policies initiated by Manmohan Singh," said Sanjay Kumar, fellow at the Centre for the Study of Developing Societies in New Delhi.




For the full commentary, see:

PAUL BECKETT and VIBHUTI AGARWAL. "Voters Give Singh New Political Life -- and a Mandate; Decisive Re-Election Presents New Opportunity to Indian Prime Minister; Reaching Out to Rahul Gandhi, and Youth." Wall Street Journal (Mon., MAY 18, 2009): A12.

(Note: ellipsis added.)

(Note: the second and third paragraphs quoted above were somewhat different in the print and online versions; the online version is quoted here. The first paragraph is the same in both versions.)





May 29, 2009

"The American Experiment Was, Literally, an Experiment"




(p. 199) This is politics seen through the eyes of an Enlightened rationalist. The American experiment was, literally, an experiment, like one of Priestley's elaborate concoctions in the Fair Hill lab: a system of causes and effects, checks and balances, that could only be truly tested by running the experiment with live subjects. The political order was to be celebrated not because it had the force of law, or divine right, or a standing army behind it. Its strength came from its internal balance, or homeostasis, its ability to rein in and subdue efforts to destabilize it.


Source:

Johnson, Steven. The Invention of Air: A Story of Science, Faith, Revolution, and the Birth of America. New York: Riverhead Books, 2008.





May 28, 2009

High State Taxes "Repel Jobs and Businesses"




StatesTaxingRichCartoon.jpg







Source of cartoon: online version of the WSJ commentary quoted and cited below.


(p. A17) . . . the evidence that we discovered in our new study for the American Legislative Exchange Council, "Rich States, Poor States," published in March, shows that Americans are more sensitive to high taxes than ever before. The tax differential between low-tax and high-tax states is widening, meaning that a relocation from high-tax California or Ohio, to no-income tax Texas or Tennessee, is all the more financially profitable both in terms of lower tax bills and more job opportunities.

Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.

Did the greater prosperity in low-tax states happen by chance? Is it coincidence that the two highest tax-rate states in the nation, California and New York, have the biggest fiscal holes to repair? No. Dozens of academic studies -- old and new -- have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses.

. . .

. . . , Barry W. Poulson of the University of Colorado last year examined many factors that explain why some states grew richer than others from 1964 to 2004 and found "a significant negative impact of higher marginal tax rates on state economic growth." In other words, soaking the rich doesn't work. To the contrary, middle-class workers end up taking the hit.




For the full commentary, see:

ARTHUR LAFFER and STEPHEN MOORE. "Soak the Rich, Lose the Rich Americans know how to use the moving van to escape high taxes." Wall Street Journal (Mon., MAY 18, 2009): A17.

(Note: ellipses added.)





May 27, 2009

"Dynamism Has Been Leached From Our System," But Not from Our Brains or Our Hearts




Sometimes one of Peggy Noonan's columns reminds us that she was once one of Ronald Reagan's best speech writers:


(p. A11) I heard a man named Nathan Myhrvold speak of a thing called Microsoft. I saw a young man named Steve Jobs prowl a New York stage and unveil a computer that then we thought tiny and today we'd call huge. A man named Steve Wozniak became a household god as my son reported his visionary ways. It was a time so full of genius and dynamism that it went beyond words like "breakthrough" and summoned words like "revolution." If you were paying attention, if you understood you were witnessing something great, the invention of a new age, the computer age, it caught at your throat. It was like hearing great music. People literally said what had been said in the age of Thomas Edison: "What will they think of next?" What a buoyant era.


. . .


And for a moment, as I sent and received my first airborne Wi-Fi emails, I was back there. And I was moved because I realized how much I missed it, how much we all do, that "There are no walls" feeling. "Think different." "On January 24th, Apple Computer will introduce Macintosh. And you'll see why 1984 won't be like '1984.' " That was 25 years ago. The world was on fire.

It has cooled. And the essential problem with the crash we're in is no one can imagine quite feeling that way again. People can remember it, but they can't quite resummon it.


. . .


I end with a hunch that is not an unhappy one. Dynamism has been leached from our system for now, but not from the human brain or heart. Just as our political regeneration will happen locally, in counties and states that learn how to control themselves and demonstrate how to govern effectively in a time of limits, so will our economic regeneration. That will begin in someone's garage, somebody's kitchen, as it did in the case of Messrs. Jobs and Wozniak. The comeback will be from the ground up and will start with innovation. No one trusts big anymore. In the future everything will be local. That's where the magic will be. And no amount of pessimism will stop it once it starts.




For the full commentary, see:

PEGGY NOONAN. "Remembering the Dawn of the Age of Abundance; Times are hard, but dynamism isn't dead." Wall Street Journal (Sat., Feb. 21, 2009): A11.

(Note: ellipses added.)





May 26, 2009

Gladwell Misses His Own Central Message: Long Hard Work Matters Most




OutliersBK.jpg















Source of book image: http://bharatkhetan.com/akanksha/?p=19



Malcolm Gladwell is on a roll. His three recent books have been best-sellers: The Tipping Point, Blink, and now Outliers. All three books are well-written, and deal with important issues.

I suspect that sometimes Gladwell over-simplifies and over-generalizes. But he often makes plausible, thought-provoking claims, and he presents academic research in a clear, painless way.

In the Outliers book, I enjoyed his examples: the NHL hockey players who are overwhelmingly born in the same three months, the entrepreneurial immigrant Jews entering the clothing business, silicon valley superstars having access to computers at an early age.

To Gladwell, the main point of the book is that over-achievers owe their success to lucky circumstances. But to me, the main point was a different one: in case after case, the successful put in a huge number of hours (about 10,000) of practice to achieve the mastery of their activities.

To use the memorable analogy from Collins' Good to Great: hour after hour, day after day, year after year, they all kept "pushing the flywheel" to reach the threshold of excellence.


The reference for Outliers is:

Gladwell, Malcolm. Outliers: The Story of Success. New York, NY: Little, Brown, and Co., 2008.


The reference for Collins' book is:

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





May 25, 2009

In the United States "Innovation" Became a Positive Word




(p. 198) "All advances in science were proscribed as innovations." Jefferson is using the older, negative sense of the word "innovation" here: a new development that threatened the existing order in a detrimental way. (The change in the valence of the word over the next century is one measure of society's shifting relationship to progress.) But that regressive age was now over, and Priestley--the most forward-thinking mind of his generation--could now consider himself fully at home:

Our countrymen have recovered from the alarm into which art and industry had thrown them: science and honesty are replaced on their high ground, and you, my dear Sir, as their great apostle, are on its pinnacle. It is with heartfelt satisfaction that in the first moments of my public action, I can hail you with welcome to our land, tender to you the homage of its respect and esteem, cover you under the protection of those laws which were made for the wise and good like you, and disdain the legitimacy of that libel on legislation which under the form of a law was for some time placed among them.


Perhaps inspired by the legendary optimism of Priestley himself, Jefferson then added some of the most stirringly hopeful words that he ever put to paper:

(p. 199) As the storm is now subsiding, and the horizon becoming serene, it is pleasant to consider the phenomenon with attention. We can no longer say there is nothing new under the sun. For this whole chapter in the history of man is new. The great extent of our Republic is new. Its sparse habitation is new. The mighty wave of public opinion which has rolled over it is new. But the most pleasing novelty is, it's so quietly subsiding over such an extent of surface to its true level again. The order and good sense displayed in this recovery from delusion, and in the momentous crisis which lately arose, really bespeak a strength of character in our nation which augurs well for the duration of our Republic; and I am much better satisfied now of it's stability than I was before it was tried.


Source:

Johnson, Steven. The Invention of Air: A Story of Science, Faith, Revolution, and the Birth of America. New York: Riverhead Books, 2008.





May 24, 2009

Global Warming Environmentalists Propose to Tax Sheep Emissions




SheepBurp1.jpg













". . . , researchers rustle up sheep behind the lab in Palmerston North, New Zealand, . . . " Source of photo and caption: online version of the WSJ article quoted and cited below.



(p. A1) PALMERSTON NORTH, New Zealand -- On a typical day, researchers in this college town coax hungry sheep into metal carts. They wheel the fluffy beasts into sealed chambers and feed them grass, then wait for them to burp.

The exercise is part of a global effort to keep sheep, deer, cows and other livestock from belching methane when they eat and regurgitate grass. Methane is among the most potent greenhouse gases, and researchers now believe livestock industries are a major contributor to climate change, responsible for more greenhouse-gas emissions than cars are, according to the United Nations.

Plenty of people, including farmers, think the problem of sheep burps is so much hot air. But governments are coming under pressure to put a cork in it, and many farmers fear that new livestock regulations could follow. They worry that environmentalists will someday persuade the U.S. Environmental Protection Agency to seek to tax bovine belches. Some activists are urging consumers to stop buying meat and thus slow climate change.

All of which is breathing new life into the study of sheep stomachs. Researchers have tried just about everything, from changing the animals' diets to breeding new sheep they hope will be less gassy. They've concocted (p. A9) cocktails of clover, garlic and cottonseed oil to try to curb methane. They have even tried feeding the animals chloroform, which can stymie the production of gas if it doesn't kill the animal.

But sure as grass grows, livestock keep producing methane.

. . .

. . . , roughly 48% of New Zealand's greenhouse gases come from agriculture, compared with less than 10% in such large, developed economies as the U.S. Agricultural leaders fear their livestock-heavy economy could be at risk if there's an international move to tighten rules on animal emissions.

Kiwis tried to get a leg up on the problem in 2003, when politicians proposed an emissions tax on livestock. Farmers thought they were getting fleeced and attacked what they called a "fart tax." The idea was tabled.




For the full story, see:

PATRICK BARTA. "Silencing the Lambs: Scientists Target Sheep Belching to Cut Methane; Reducing Gas in Livestock Could Help World Breathe Sigh of Relief Over Global Warming." Wall Street Journal (Thurs., FEBRUARY 26, 2009): A1 & A9.

(Note: ellipses added.)


SheepBurp2.jpgSheepBurp3.jpg







[Researchers place sheep] "in a cart to be wheeled into sealed chambers to measure levels of the greenhouse gas methane the animals burp up."






Source of photos and caption: online version of the WSJ article quoted and cited above.





May 23, 2009

Government's Terrible Track Record Running Businesses




John Steele Gordon, the author of the sagacious commentary below, has also written a wonderful book called A Thread Across the Atlantic, which tells the story of how entrepreneur Cyrus Field persevered in his attempts to lay telegraphic cable across the Atlantic Ocean.


(p. A17) The Obama administration is bent on becoming a major player in -- if not taking over entirely -- America's health-care, automobile and banking industries. Before that happens, it might be a good idea to look at the government's track record in running economic enterprises. It is terrible.

In 1913, for instance, thinking it was being overcharged by the steel companies for armor plate for warships, the federal government decided to build its own plant. It estimated that a plant with a 10,000-ton annual capacity could produce armor plate for only 70% of what the steel companies charged.

When the plant was finally finished, however -- three years after World War I had ended -- it was millions over budget and able to produce armor plate only at twice what the steel companies charged. It produced one batch and then shut down, never to reopen.

Or take Medicare. Other than the source of its premiums, Medicare is no different, economically, than a regular health-insurance company. But unlike, say, UnitedHealthcare, it is a bureaucracy-beclotted nightmare, riven with waste and fraud. Last year the Government Accountability Office estimated that no less than one-third of all Medicare disbursements for durable medical equipment, such as wheelchairs and hospital beds, were improper or fraudulent. Medicare was so lax in its oversight that it was approving orthopedic shoes for amputees.

. . .

It is government's job to make and enforce the rules that allow a civilized society to flourish. But it has a dismal record of regulating itself. Imagine, for instance, if a corporation, seeking to make its bottom line look better, transferred employee contributions from the company pension fund to its own accounts, replaced the money with general obligation corporate bonds, and called the money it expropriated income. We all know what would happen: The company accountants would refuse to certify the books and management would likely -- and rightly -- end up in jail.

But that is exactly what the federal government (which, unlike corporations, decides how to keep its own books) does with Social Security. In the late 1990s, the government was running what it -- and a largely unquestioning Washington press corps -- called budget "surpluses." But the national debt still increased in every single one of those years because the government was borrowing money to create the "surpluses."

Capitalism isn't perfect. Indeed, to paraphrase Winston Churchill's famous description of democracy, it's the worst economic system except for all the others. But the inescapable fact is that only the profit motive and competition keep enterprises lean, efficient, innovative and customer-oriented.



For the full commentary, see:

JOHN STEELE GORDON. "Why Government Can't Run a Business; Politicians need headlines. Executives need profits." Wall Street Journal (Weds., MAY 21, 2009): A17.

(Note: ellipsis added.)



The wonderful book, I mentioned, is:

Gordon, John Steele. A Thread across the Ocean: The Heroic Story of the Transatlantic Cable. New York: Walker & Co., 2002.





May 22, 2009

OSHA Did Not Make the Workplace Safer




OSHAgraphViscusi1992c.gif Source of image of graph: http://www.econ.canterbury.ac.nz/personal_pages/bob_reed/econ3003/book/chap26a.gif (Original source of graph: Viscusi, W. Kip, John M. Vernon, and Joseph E. Harrington, Jr. Economics of Regulation and Antitrust. 2nd ed. Lexington, MA: D.C. Heath and Company, 1992, page 714.)


The graph above, from a leading textbook on the economics of regulation, strikingly shows that OSHA had no discernible effect on reducing workplace accidents.

(Note: I am grateful to Susan Dudley who mentioned this graph in one of the Association of Private Enterprise Education sessions in Guatemala City, and who graciously elaborated the source in conversation afterwards.)





May 21, 2009

Mary Priestley Praises the Middle Class




(p. 86) Joseph and Mary had not exactly entered English high society, but for the first time in their lives, they were down the hall from it. Mary was largely unimpressed by her firsthand view of the upper classes. One story has Shelburne arriving to welcome them at their new house in Calne, and finding Mary on a ladder, industriously papering the walls. Joseph apologized for their not providing a more gracious welcome, but Mary quickly dismissed her husband's proprieties. "Lord Shelburne is a statesman," she said, "and knows that people are best employed in doing their duty." Later she would observe candidly to (p. 87) Shelburne, "I find the conduct of the upper so exactly like that of the lower classes that I am thankful I was born in the middle."


Source:

Johnson, Steven. The Invention of Air: A Story of Science, Faith, Revolution, and the Birth of America. New York: Riverhead Books, 2008.





May 20, 2009

Economic Freedom Map




EconomicFreedomPoster.JPG Source of image: http://divisionoflabour.com/archives/EFWposter.JPG


I heard a useful presentation by John Morton on the Fraser Institute's Economic Freedom Map at the April 2009 Association of Private Enterprise Education meetings in Guatemala City. Using data developed by Jim Gwartney, Robert Lawson, and their associates, the map provides striking visual evidence of the relationship between economic freedom and economic growth.

For additional information, and to purchase a copy of the map, visit: http://www.freetheworld.com/ef_map.html





May 19, 2009

Bacon Died Experimenting and Hegel Died Contradicting Himself




(p. C32) The philosopher Francis Bacon, that great champion of the empirical method, died of his own philosophy: in an effort to observe the effects of refrigeration, on a freezing cold day he stuffed a chicken with snow and caught pneumonia.

As a philosopher dies, so he has lived and believed. And from the manner of his dying we can understand his thinking, or so the philosopher Simon Critchley seems to be saying in his cheekily titled "Book of Dead Philosophers."

. . .

Mr. Critchley recounts that Voltaire, after decades of denouncing the Roman Catholic Church, announced on his deathbed that he wanted to die a Catholic. But the shocked parish priest kept asking him, "Do you believe in the divinity of Christ?" Voltaire begged, "In the name of God, Monsieur, don't speak to me any more of that man and let me die in peace."

Hegel, who, as much as any philosopher, Mr. Critchley says, saw philosophy as an abstraction, while he was dying of cholera, moaned, "Only one man ever understood me ... and he didn't understand me."




For the full review, see:

DINITIA SMITH. "Books of The Times - Dying and Death: When You Sort It Out, What's It All About, Diogenes?" The New York Times (Fri., January 30, 2009): C32.

(Note: ellipsis between paragraphs was added; ellipsis in Hegel quote was in original.)


The reference to Critchley's book, is:

Critchley, Simon. The Book of Dead Philosophers. New York: Vintage Books, 2009.





May 18, 2009

Greenmarket Rules Are "Cumbersome, Confusing and Contradictory"




HesseDanteGreenmarket.jpg "Dante Hesse, . . . , of Milk Thistle Farm, thinks Greenmarket rules are too hard on dairies." Source of caption and photo: online version of the NYT article quoted and cited below. (Note: ellipsis in caption added.)


(p. D4) The basic aim of the producer-only rules is to ensure that all foods sold at market originate entirely or mostly on family farms within a half day's drive from New York City. The 10-page document detailing these rules, however, is anything but clear.

"Cumbersome, confusing and contradictory," was the assessment of Michael Hurwitz, the director of Greenmarket, which operates 45 markets in the five boroughs.

Pickle makers can sell preserved foods such as peppers in vinegar, but not processed foods such as hot sauce. Farmers, on the other hand, can sell processed hot sauce if it is made with their peppers. Dairies may purchase a higher percentage of their milk for cheese if the cheese is made from one type of milk rather than two milks, such as cow and sheep. Cider makers can buy 40 percent of the apples they press from local farmers, whereas wheatgrass juice sellers must grow all their wheatgrass.



For the full story, see:

INDRANI SEN. "Greenmarket Sellers Debate Maze of Producer-Only Rules." The New York Times (Weds., August 6, 2008): D4.





May 17, 2009

Joe Biden's "First Principle of Life": "Get Up!"




(p. xxii) To me this is the first principle of life, the foundational principle, and a lesson you can't learn at the feet of any wise man: Get up! The art of living is simply getting up after you've been knocked down. It's a lesson taught by example and learned in the doing. I got that lesson every day while growing up in a nondescript split-level house in the suburbs of Wilmington, Delaware. My dad, Joseph Robinette Biden Sr., was a man of few words. What I learned from him. I learned from watching. He'd been knocked down hard as a young man, lost something he knew he could never get back. But he never stopped trying. He was the first one up in our house every morning, clean-shaven, elegantly dressed, putting on the coffee, getting ready to go to the car dealership, to a job he never really liked. My brother Jim said most mornings he could hear our dad singing in the kitchen. My dad had grace. He never, ever gave up, and he never complained. The world doesn't owe you a living, Joey," he used to say, but without rancor. He had no time for self-pity. He didn't judge a man by how many times he got knocked down but by how fast he got up.

Get up! That was his phrase, and it has echoed through my life. The world dropped you on your head? My dad would say, Get up! You're lying in bed feeling sorry for yourself? Get up! You got knocked on your ass on the football field? Get up! Bad grade? Get up! The girl's parents won't let her go out with a Catholic boy? Get up!



Source:

Biden, Joe. Promises to Keep: On Life and Politics. New York: Random House, 2007.

(Note: the italics in the quoted passage are in the original.)





May 16, 2009

"Every Organization Has Too Many Meetings"




HastieReidMeetings2009-05-15.jpg"Reid Hastie, a professor at the University of Chicago, contends that "every organization has too many meetings, and far too many poorly designed ones." " Source of photo and caption: online version of the NYT article quoted and cited below.



The author of the following wise words is a Professor of Behavioral Science at the School of Business at the University of Chicago. One of the main points of the commentary, in the language of economics, is that meeting planners often fail to consider the opportunity cost of attendees' time:


(p. 2) As a general rule, meetings make individuals perform below their capacity and skill levels.

This doesn't mean we should always avoid face-to-face meetings -- but it is certain that every organization has too many meetings, and far too many poorly designed ones.

The main reason we don't make meetings more productive is that we don't value our time properly. The people who call meetings and those who attend them are not thinking about time as their most valuable resource.


. . .


Probably most important, we are blind to lost time opportunities. When we choose where to invest our time, as opposed to where to invest money, we are more likely to neglect what else we could have done with it.



For the full commentary, see:

REID HASTIE. "Preoccupations - Meetings Are a Matter of Precious Time." The New York Times, SundayBusiness Section (Sun., January 18, 2009): 2.

(Note: ellipsis added.)





May 15, 2009

An Environment Where Long-Term Hunches Could Thrive




An environment in which long-term hunches can be pursued, is important not just to science and invention. I speculate that it is also important to entrepreneurship.


(p. 74) If great ideas usually arrive in fragments, a partial cluster of neurons, then part of the secret to having great ideas lies in creating a working environment where those fragments are nurtured and sustained over time. This obviously poses some difficulty in modern work environments, with deadlines and quarterly reports and annual job reviews. (The typical middle manager doesn't respond favorably to news that an employee has a hunch about something that probably won't see results for twenty years.) But Priestley had created an environment for himself where those long-term hunches could thrive with almost no pressure, and his habit of simultaneously writing multiple documents (on multiple topics) kept the fragments alive in his mind over the decades. In the final pages of his memoirs, he mentions a lifelong habit of writing down "as soon as possible, every thing I wish not to forget."


Source:

Johnson, Steven. The Invention of Air: A Story of Science, Faith, Revolution, and the Birth of America. New York: Riverhead Books, 2008.





May 14, 2009

Global Warming Makes Arctic Less Hostile




StatoilHydroLNGplant2009-05-16.jpg "Statoilhydro's pioneering liquefied natural gas plant on an island off Hammerfest in Norway has encountered an array of problems." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. B1) HAMMERFEST, Norway -- A Norwegian oil company has gone to the ends of the earth -- almost literally -- to get at some of the world's last untapped energy resources.

StatoilHydro ASA operates a pioneering venture deep inside the Arctic Circle, energy's final frontier. The company pumps natural gas from under the freezing waters of the Barents Sea, cools it into a liquid and exports it to Europe and the U.S.

The project, called Snoehvit, has taken StatoilHydro and the entire oil and gas industry into uncharted territory. Before, no one had ever produced liquefied natural gas in the Arctic -- or in Europe, for that matter.

. . .


The oil companies are being aided by climate change. Lashed by storms and strewn with icebergs, the Arctic is one of the most hostile environments on earth. But global warming is melting the polar ice cap, opening up new shipping routes and unlocking once-inaccessible mineral deposits.

. . .


(p. B4) StatoilHydro, . . . , is upbeat. The plant is currently running at 80% to 90% of capacity, up from around 60% last year, company officials say. Outages are typical for the run-in period of a big LNG project, and flaring will soon be a thing of the past. Sure, they say, the start-up period has been troubled, but this is a field with a production life of up to 40 years.



For the full story, see:

GUY CHAZAN. "Norwegian Oil Firm Goes to Energy's Last Frontier." Wall Street Journal (Fri., FEBRUARY 13, 2009): B1 & B4.

(Note: ellipses added.)

(Note: LNG in the quotes is the abbreviation for liquefied natural gas.)


ArcticOilReserves2009-02-16.gif Source of graphic: online version of the WSJ article quoted and cited above.





May 13, 2009

How Democratic Presidents Save Us




Andrew Jackson was the first in a long line of populist Democratic presidents:


(p. 24) He relished the roles of protector and savior. Just after dusk on a cold March day in 1791, when Jackson was practicing law on the circuit around Jonesborough, Tennessee, he and his friend John Overton were traveling with a small group through dangerous territory. Reaching the banks of the Emory River in the mountains, the lawyers spotted a potentially hostile Indian party. "The light of their fires showed that they were numerous," Overton recalled to Henry Lee, and "that they were painted and equipped for war." Under Jackson's leadership (Overton credited him with a "saving spirit and elastic mind"), the travelers scrambled into the hills on horseback, riding roughly parallel to the river--which they had to cross to make it home. Pursued by the Indians, Jackson, Overton, and two others pressed on through the night, coming to a place where the water looked smooth enough to allow a hastily constructed raft and the horses to make it to the other side. Jackson look charge of the raft piled high with saddles and clothes. Overton would follow with the horses.

There was immediate trouble. The waters were not as smooth as they had appeared; a powerful undercurrent swept the boat--and Jackson-- downstream, toward a steep waterfall. "Overton and his companion instantly cried out and implored Jackson to pull back," Lee wrote. But he either not being so sensible of the danger, or being unwilling to yield to it, (p. 25) continued to push vigorously forward." Jackson struggled with his oars; disaster was at hand. He and the saddles could he lost, and the Indians were still on their trail. "Finding himself just on the brink of the awful precipice," Lee recounted, Jackson extended his oar to Overton, who "laid hold of it and pulled the raft ashore, just as it was entering the suck of the torrent." Catching their breath on the bank of the river, Overton and Jackson looked at each other.

"You were within an ace, Sir, of being dashed to pieces," Overton told him. Jackson waved him off, replying, "A miss is as good as a mile; it only shows how close I can graze danger. But we have no time to lose--follow me and I'll save you yet." They eluded the Indians, arriving home exhausted but safe.


Source:

Meacham, Jon. American Lion: Andrew Jackson in the White House. New York: Random House, 2008.

(Note: the semi-colons in the above passage were hard to distinguish, in the online version, from colons. I judged them to be semi-colons from context, but I could be wrong.)





May 12, 2009

Life Thrived When Earth Was Far Warmer than Now




SnakeLargest2009-02-16.jpg "An artist's rendering of the prehistoric snake Titanoboa cerrejonensis, which was 42 feet long and lived 60 million years ago." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. A7) Some 60 million years ago, well after the demise of the dinosaurs, a giant relative of today's boa constrictors, weighing more than a ton and measuring 42 feet long, hunted crocodiles in rain-washed tropical forests in northern South America, according to a new fossil discovery.


. . .


But the existence of such a large snake may also help clarify how hot the tropics became during an era when the planet, as a whole, was far warmer than it is now, and also how well moist tropical ecosystems can tolerate a much warmer global climate.

That last question is important in assessments of how human-driven global warming might affect the tropics.


. . .


The team examined how warm it had to be for a snake species to be that large by considering conditions favoring the largest living similar tropical snake, the green anaconda, said Jason J. Head, the lead author of the paper and a paleontologist at the University of Toronto. They concluded that Titanoboa could have thrived only if temperatures ranged from 86 to 93 degrees.



For the full story, see:

ANDREW C. REVKIN. "Fossils of Largest Snake Give Hint of Hot Earth." The New York Times (Thurs., February 4, 2009): A7.

(Note: ellipses added.)





May 11, 2009

More Accurate Measurements Reveal Previously Undetected Anomalies




(p. 69) This is a standard pattern in the history of science: when tools for measuring increase their precision by orders of magnitude, new paradigms often emerge, because the newfound accuracy reveals anomalies that had gone undetected. One of the crucial benefits of increasing the accuracy of scales is that it suddenly became possible to measure things that had almost no weight. Black's discovery of fixed air, and its perplexing mixture with common air, would have been impossible without the state-of-the-art scales he employed in his experiments. The whole inquiry had begun when Black heated a quantity of white magnesia, and discovered that it lost a minuscule amount of weight in the process--a difference that would have been imperceptible using older scales. The shift in weight suggested that something was escaping from the magnesia into the air. By then running comparable experiments, heating a wide array of substances, Black was able to accurately determine the weight of carbon dioxide, and consequently prove the existence of the gas. It weighs, therefore it is.


Source:

Johnson, Steven. The Invention of Air: A Story of Science, Faith, Revolution, and the Birth of America. New York: Riverhead Books, 2008.





May 10, 2009

Philanthro-Capitalism Is Inefficient, and Betrays Shareholders




CreativeCapitalismBK.jpg













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




(p. A13) One of the more interesting ideas found in this somewhat rambling book contends that "philanthropic" business activity is in fact at odds with what is best about capitalism itself and thus counterproductive.

Lawrence Summers, the former Harvard president and former Treasury secretary, states the difficulty succinctly: "It is hard in this world to do well. It is hard to do good. When I hear a claim that an institution is going to do both, I reach for my wallet. You should too." He offers as an example Fannie Mae and Freddie Mac, government-created corporations that were supposed to achieve a social goal -- affordable housing -- while operating as businesses. They did neither well, eventually leaving their catastrophic debts for taxpayers to pay.

U.S. Circuit Court Judge Richard Posner, along with other contributors, notes that companies often suffer losses when they set out to address a social problem. If they could really make a profit by doing good works, the argument goes, they would no doubt already be hard at it. But if they do good works at the expense of profit, they will become less efficient, making themselves more vulnerable to competitors. Economist Steven Landsburg suggests that companies sacrificing profit to accomplish philanthropic goals end up betraying their shareholders, who rightly expect the best return on investment. Sometimes acting philanthropically will result in an indirect business benefit, such as improving worker skills. In that case, philanthro-capitalism might be in a company's interest -- but Judge Posner and others of like mind suspect that such instances are rare.

Their skepticism echoes Milton Friedman's objections to "corporate social responsibility," expressed in a 1970 article that is usefully reprinted in the book's appendix.



For the full review, see:

LESLIE LENKOWSKY. "Bookshelf; The Do-Good Marketplace; Reducing poverty, improving lives - maybe 'philanthro-capitalism' is just another name for capitalism." Wall Street Journal (Fri., JANUARY 2, 2009): A13.



The book under review is:

Kinsley, Michael, and Conor Clarke, eds. Creative Capitalism. New York: Simon & Schuster, 2008.





May 9, 2009

Stagnation Caused by "Depriving Creative Individuals of Financial Power"




(p. 164) The key to growth is quite simple: creative men with money. The cause of stagnation is similarly clear: depriving creative individuals of financial power. To revive the slumping nations of social democracy, the prime need is to reverse the policies of entrepreneurial euthanasia. Individuals must be allowed to accumulate disposable savings and wield them in the economies of the West. The crux is individual, not corporate or collective, wealth.


Source:

Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.





May 8, 2009

A Person's Bad Decisions Can't Be Blamed on Capitalism




LeeThomas2009-05-15.jpg "Thomas Lee, one of the men featured in the documentary "A Father's Promise," watching a video of himself from 1996." Source of caption and photo: online version of the NYT review quoted and cited below.


(p. C11) The program, with Al Roker as host, follows up a "Dateline NBC" report from 1996 that recorded several births among black women at a Newark hospital and interviewed the unmarried fathers of the children as they earnestly vowed to be there as their babies grew up. The piece was an attempt to look at the alarming rate of fatherless households among blacks.

It is, of course, a problem that has not gone away since 1996, and Mr. Roker's program tracks down three of those newborns and the fathers who promised to stand by them. That none did -- jail, joblessness, depression and general irresponsibility intervened -- somehow isn't surprising.

. . .


. . . the Rev. Eugene F. Rivers of Azusa Community Church in Boston explains in very personal terms why he discounts the easy economic explanations that so often get the blame for fatherless households.

"I had a child out of wedlock," he says. "That was a bad decision. I can't say capitalism did it to me."



For the full review, see:

NEIL GENZLINGER. "Television Review; 'A Father's Promise'; Old Pledges Are Broken, Young Hope Stays Intact." The New York Times (Sat., February 7, 2009): C11.

(Note: ellipses added.)





May 7, 2009

Magdeburg Sphere Let Scientists "See" the Vacuum




(p. 68) When we think of technological advances powering scientific discovery, the image that conventionally comes to mind is a specifically visual one: tools that expand the range of our vision, that let us literally see the object of study with new clarity, or peer into new levels of the very distant, the very small. Think of the impact that the telescope had on early physics, or the microscope on bacteriology. But new ways of seeing are not always crucial to discovery. The air pump didn't allow you to see the vacuum, because of course there was nothing to see: but it did allow you to see it indirectly, in the force that held the Magdeburg Sphere together despite all that horsepower.


Source:

Johnson, Steven. The Invention of Air: A Story of Science, Faith, Revolution, and the Birth of America. New York: Riverhead Books, 2008.





May 6, 2009

When Experts Picked California Wine Over French Wine




RickmanAlanBottleShock.jpg "Alan Rickman portrays Steven Spurrier, the British wine dealer who organized a famous blind wine tasting near Paris in 1976, in Randall Miller's "Bottle Shock."" Source of the caption and photo: online version of the WSJ article quoted and cited below.


Cultural pretension and conspicuous consumption are among the less admirable aspects of human behavior. So the blind wine tasting where California beat France, has always had appeal.

This, plus the inimitable Alan Rickman (aka Snape), put this movie on my "to see" list.


(p. B7) "Bottle Shock," an easygoing little movie, made with more affection than skill, takes us back to the days when men wore loud plaid suits and people who were serious about wine sneered at the very mention of California. Sticking reasonably close to the historical record, the director, Randall Miller (who wrote the screenplay with his wife, Jody Savin, and Ross Schwartz), reconstructs a watershed moment in the wine world's acceptance of the Golden State and, eventually, of many other non-French viticultural regions.

In 1976, at a gathering near Paris, a panel of experts conducted a blind tasting at which two California wines emerged victorious over their more pedigreed French competitors. That tasting provides the climax to "Bottle Shock," and even if the potential surprise of its outcome were not already spoiled by history, the movie's adherence to the clich├ęs of the triumph-of-the-underdog narrative would be enough to remove any doubt.

There are, indeed, at least two underdogs hungering for triumph. The first is Steven Spurrier, played by Alan Rickman, whose parched low voice and air of beleaguered pomposity are never unwelcome.



For the full review, see:

A. O. SCOTT. "Plaid Suits, Prize Grapes and the Rise of Napa." The New York Times (Weds., August 6, 2008): B7.





May 5, 2009

System of Capitalism without Capitalists Is Failing in Europe




(p. 164) The reason the system of capitalism without capitalists is failing throughout most of Europe is that it misconceives the essential nature of growth. Poring over huge aggregations of economic data, economists see the rise to wealth as a slow upward climb achieved through the marginal productivity gains of millions of workers, through the slow accumulation of plant and machinery, and through the continued improvement of "human capital" by advances in education, training, and health. But, in fact, all these sources of growth are dwarfed by the role of entrepreneurs launching new companies based on new concepts or technologies. These gains generate the wealth that finances the welfare state, that makes possible the long-term investments in human capital that are often seen as the primary source of growth.


Source:

Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.





May 4, 2009

Do Recessions Sometimes Encourage Creative Destruction?




DesktopPCbroken2009-02-15.jpg Source of image: online version of the NYT article quoted and cited below.


(p. B1) The dot-com bust earlier in the decade dragged down high-fliers like Sun Microsystems and America Online but set the stage for a new generation of Web powerhouses like Google and other innovative Internet software companies like Salesforce.com, founded on disrupting the status quo.

The recession of the early 1990s sent I.B.M., then the dominant force in technology, into a five-year tailspin. But it also propelled Microsoft and Compaq, later acquired by Hewlett-Packard, and Dell to the forefront of computing.

Indeed, Silicon Valley may be one of the few places where businesses are still aware of the ideas of Joseph Schumpeter, an Austrian economist who wrote about business cycles during the first half of the last century. He said the lifeblood of capitalism was "creative destruction." Companies rising and falling would unleash innovation and in (p. B4) the end make the economy stronger.

Recessions "can cause people to think more about the effective use of their assets," said Craig R. Barrett, the retiring chairman of Intel, who has seen 10 such downturns in his long career. "In the good times, you can get a bit careless or not focused as much on efficiency. In bad times, you're forced to see if there is a technology" that will help.

So who's up, who's down and who's out this time around? Microsoft's valuable Windows franchise appears vulnerable after two decades of dominance. Revenue for the company's Windows operating system fell for the first time in history in the last quarter of 2008. The popularity of Linux, a free operating system installed on many netbooks instead of Windows, forced Microsoft to lower the prices on its operating system to compete.

Intel's high-power processors are also under assault: revenue tumbled by 23 percent last quarter, marking the steepest decline since 1985.

Meanwhile, more experimental but lower-cost technologies like netbooks, Internet-based software services (called cloud computing) and virtualization, which lets companies run more software on each physical server, are on the rise.



For the full story, see:

BRAD STONE and ASHLEE VANCE. "$200 Laptops Break a Business Model." The New York Times (Mon., January 25, 2009): B1 & B4.






May 3, 2009

Most Great Inventors Were Blessed with Leisure Time




(p. 49) With his wife running the household and tending to their four-year-old daughter, Sally, Priestley simply had more time on his hands to explore, invent, and write. Priestley was retracing a pattern that Franklin had originally carved two decades before, when he handed over day-to-day operation of his printing business to his foreman, David Hall, in 1748 and then spent the next three years transforming the science of electricity. Necessity may be the mother of invention, but most of the great inventors were blessed with something else: leisure time.


Source:

Johnson, Steven. The Invention of Air: A Story of Science, Faith, Revolution, and the Birth of America. New York: Riverhead Books, 2008.





May 2, 2009

GM's Saturn Shows Problems With Incumbent Firms Disrupting Themselves




SaturnFirstCarSpringHill1990.jpg "In July 1990, the first Saturn rolled off the Spring Hill, Tenn., assembly line, with Roger Smith of General Motors holding the key." Source of the caption and the photo: online version of the NYT article quoted and cited below.


Clayton Christensen has shown that incumbent firms find it extremely difficult to adopt disruptive innovations that would leapfrog their current dominant business model. GM's abandonment of its Saturn experiment would seem to be an apt illustration of the point:

(p. A29) "I'm absolutely convinced that the Saturn way could have worked," said Michael Bennett, the original U.A.W. leader at Saturn. "But what we had was never embraced or adopted."

Mr. Bennett, like many others, can point fingers to explain why Saturn fell short of its promise.

Mr. Bennett blamed a lack of interest by G.M. executives who succeeded Roger Smith, who as chief executive in the 1980s committed $5 billion to begin Saturn.

But those who followed him -- including John F. Smith Jr., who became chief executive in 1992, and G.M.'s current chief executive, Rick Wagoner, who ran its North American operations in the 1990s -- had bigger worries.

They had to lead the company through the financial turbulence at G.M. in the early 1990s. And with managers at G.M.'s other, older brands begging for investment, G.M. executives declared Saturn would have to prove it deserved more support, even though its small cars were accomplishing their main goal of winning buyers from imports.

Despite G.M.'s pledge that Saturn would be run as a separate company, with its own car development and purchasing operations, it was folded into G.M.'s small-car operations in 1994, and its lineup did not receive any new models for the next five years.



For the full story, see:

MICHELINE MAYNARD. "With Saturn, G.M. Failed a Makeover." The New York Times (Thurs., December 3, 2008): A1 & A29.

Christensen's fullest complete expression of his views can be found in:

Christensen, Clayton M., and Michael E. Raynor. The Innovator's Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.


SaturnLastCarSpringHill2007.jpg "The final Saturn built at the plant in March 2007." Source of the caption and the photo: online version of the NYT article quoted and cited above.





May 1, 2009

Frazer Institute Seeks Better Measures of Policy Variables




George Gilder emphasizes that the importance of entrepreneurship to economic growth has been missed by many economists, in part because of the difficulty of measuring both the inputs of entrepreneurship (e.g., courage, persistence, creativity, etc.) and the outputs of entrepreneurship (e.g., happiness from more challenging work, greater variety of products, etc.).

Unfortunately this is not just an academic problem, because economists' policy advice is based on their models, and their models focus on what they can measure. If they can't measure entrepreneurship, then policies to encourage entrepreneurship are neglected.

Now the Frazer Institute, is seeking proposals to improve the measurement of important poorly measured policy-relevant variables. This initiative is in the spirit of the good work that the Frazer Institute has done in correlating measures of economic freedom with measures of economic growth.

I have been asked to publicize this initiative, and am pleased to do so:


Dear Art Diamond,

The Fraser Institute is launching a new contest to identify economic and public policy issues which still require proper measurement in order to facilitate meaningful analysis and public discourse. We hope you can help promote this contest by posting it on your weblog, artdiamondblog.

The Essay Contest for Excellence in the Pursuit of Measurement is an opportunity for the public to comment on an economic or public policy issue that they feel is important and deserves to be properly measured.

A top prize of $1,000 and other cash prizes can be won by identifying a vital issue that is either not being measured, or is being measured inappropriately. Acceptable entry formats include a short 500-600 word essay, or a short one-minute video essay.

Complete details and a promotional flyer are available at: http://www.fraserinstitute.org/programsandinitiatives/measurement_center.htm.

Entry deadline is Friday, May 15th, 2009.

Sponsored by the R.J. Addington Center for the Study of Measurement.

Enquiries may be directed to:

Courtenay Vermeulen
Education Programs Assistant
The Fraser Institute
Direct: 604.714.4533
courtenay.vermeulen@fraserinstitute.org



The Fraser Institute is an independent international research and educational organization with offices in Canada and the United States and active research ties with similar independent organizations in more than 70 countries around the world. Our vision is a free and prosperous world where individuals benefit from greater choice, competitive markets, and personal responsibility. Our mission is to measure, study, and communicate the impact of competitive markets and government interventions on the welfare of individuals.



An important source of Gilder's views, obliquely referred to in my comments above, is:

Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.





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