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October 31, 2009

Google Does Good




BookArkCartoon2009-10-23.jpg Source of cartoon: online version of the NYT commentary quoted and cited below.


(p. A25) . . . the vast majority of books ever written are not accessible to anyone except the most tenacious researchers at premier academic libraries. Books written after 1923 quickly disappear into a literary black hole. With rare exceptions, one can buy them only for the small number of years they are in print. After that, they are found only in a vanishing number of libraries and used book stores. As the years pass, contracts get lost and forgotten, authors and publishers disappear, the rights holders become impossible to track down.

Inevitably, the few remaining copies of the books are left to deteriorate slowly or are lost to fires, floods and other disasters. While I was at Stanford in 1998, floods damaged or destroyed tens of thousands of books. Unfortunately, such events are not uncommon -- a similar flood happened at Stanford just 20 years prior. You could read about it in The Stanford-Lockheed Meyer Library Flood Report, published in 1980, but this book itself is no longer available.

Because books are such an important part of the world's collective knowledge and cultural heritage, Larry Page, the co-founder of Google, first proposed that we digitize all books a decade ago, when we were a fledgling startup. At the time, it was viewed as so ambitious and challenging a project that we were unable to attract anyone to work on it. But five years later, in 2004, Google Books (then called Google Print) was born, allowing users to search hundreds of thousands of books. Today, they number over 10 million and counting.


. . .


In the Insurance Year Book 1880-1881, which I found on Google Books, Cornelius Walford chronicles the destruction of dozens of libraries and millions of books, in the hope that such a record will "impress the necessity of something being done" to preserve them. The famous library at Alexandria burned three times, in 48 B.C., A.D. 273 and A.D. 640, as did the Library of Congress, where a fire in 1851 destroyed two-thirds of the collection.

I hope such destruction never happens again, but history would suggest otherwise. More important, even if our cultural heritage stays intact in the world's foremost libraries, it is effectively lost if no one can access it easily. Many companies, libraries and organizations will play a role in saving and making available the works of the 20th century. Together, authors, publishers and Google are taking just one step toward this goal, but it's an important step. Let's not miss this opportunity.



For the full commentary, see:

SERGEY BRIN. "A Library to Last Forever." The New York Times (Fri., October 9, 2009): A25.

(Note: ellipses added.)

(Note: the online version is dated October 8th.)





October 30, 2009

Samuel Johnson Saw Benefits of Free Markets




(p. A19) In "A Journey to the Western Islands of Scotland," an account of his travels with James Boswell through the Hebrides in 1773, Johnson vividly described the desolation of a feudal land, untouched by commercial exuberance. He was struck by the utter hopelessness in a country where money was largely unknown, and the lack of basic material improvements--the windows, he noticed, did not operate on hinges, but had to be held up by hand, making the houses unbearably stuffy.

He was even more struck by the contrast between places where markets thrived and those where they didn't. In Old Aberdeen, where "commerce was yet unstudied," Johnson found nothing but decay, whereas New Aberdeen, which "has all the bustle of prosperous trade," was beautiful, opulent, and promised to be "very lasting."

Johnson also understood that what Smith would later call the division of labor was instrumental for human happiness and progress. "The Adventurer 67," which he wrote in 1753 at the height of a commercial boom (and 23 years before Smith published "The Wealth of Nations"), delights in the sheer number of occupations available in a commercial capital like London.



For the full commentary, see:

ELIZA GRAY. "Samuel Johnson and the Virtue of Capitalism; The great 18th century writer on commerce and human happiness." The Wall Street Journal (Fri., Sept. 11, 2009): A19.





October 29, 2009

Federal "Stimulus" Money Delays Omaha Road Work




Omaha132ndStreet2009-10-09.jpg "Work has been put on hold for this stretch of 132nd Street between Blondo Street and West Maple Road. Omaha officials say the stimulus funds will be worth the wait, but some nearby residents are upset about the slowdown." Source of caption and photo: online version of the Omaha World-Herald article quoted and cited below.


We live near the still-two-lane stretch of 132nd pictured above, and were happy to read in the Omaha World-Herald early last spring that the city would be finishing the widening of 132nd, by widening the above stretch during the summer of 2009. As the summer progressed and widening did not, we became more and more puzzled.

Well, after you read the passages quoted below, you will 'know the rest of the story' as Paul Harvey used to say:


(p. 1A) The federal stimulus program, which was designed to accelerate roads projects around the country, instead put the brakes on widening a major Omaha thoroughfare.

The chance to grab $3.5 million in stimulus funds was worth delaying a widening project along 132nd Street between West Maple Road and Blondo Street, Omaha officials decided.

Work was supposed to begin last summer. Now the project between the Champions and Eagle Run golf courses won't begin until next spring.

Preliminary work was begun in March, when utility lines were moved out of the way. Part of the street was closed for that work.

Area residents expected more crews to start work during the summer.

When nothing happened for months, a handful of residents in the nearby Sunridge neighborhood called the city. They com-(p. A2)plained that digging from the utility work was causing mud and rainwater to pool near the subdivision's entrances off 132nd Street.

Resident Mary Ellen Pollard was surprised to find out that the widening work had been put on hold because of the stimulus program.

"I thought that stimulus package was for projects that were ready to go," she said Monday. "If it was ready to go, why didn't they proceed with it? . . . The barricades are up. Let's go get it done."

Plans change, public works officials said.

Meeting federal stimulus guidelines for environmental studies on the 132nd Street project, plus other planning and documentation requirements, took several months, City Engineer Charlie Krajicek said.

"We expected to have some work going this year, but it just didn't work out," he said.



For the full story, see:

Tom Shaw. "Stimulus slows 132nd St. work." Omaha World-Herald (Tuesday October 6, 2009): 1A-2A.

(Note: the online version of the article is dated Weds., October 7 and has the slightly expanded title: "Stimulus Watch: Program slows 132nd St. work.")

(Note: ellipsis in original.)


Omaha132ndStreetMap2009-10-09.jpg


















Source of map: online version of the Omaha World-Herald article quoted and cited above.






October 28, 2009

"A Man of Science Past Sixty Does More Harm than Good" (Unless His Name is "Avery")




(p. 421) . . . , in 1928, Fred Griffith in Britain published a striking and puzzling finding. Earlier Griffith had discovered that all known types of pneumococci could exist with or without capsules. Virulent pneumococci had capsules; pneumococci without capsules could be easily destroyed by the immune system. Now he found something much stranger. He killed virulent pneumococci, ones surrounded by capsules, and injected them into mice. Since the bacteria were dead, all the mice survived. He also injected living pneumococci that had no capsules, that were not virulent. Again the mice lived. Their immune systems devoured the unencapsulated pneumococci. But then he injected dead pneumococci surrounded by capsules and living pneumococci without capsules.

The mice died. Somehow the living pneumococci had acquired cap-(p. 422)sules. Somehow they had changed. And, when isolated from the mice, they continued to grow with the capsule--as if they had inherited it.

Griffith's report seemed to make meaningless years of Avery's work-- and life. The immune system was based on specificity. Avery believed that the capsule was key to that specificity. But if the pneumococcus could change, that seemed to undermine everything Avery believed and thought he had proved. For months he dismissed Griffith's work as unsound. But Avery's despair seemed overwhelming. He left the laboratory for six months, suffering from Graves' disease, a disease likely related to stress. By the time he returned, Michael Dawson, a junior colleague he had asked to check Griffith's results, had confirmed them. Avery had to accept them.


His work now turned in a different direction. He had to understand how one kind of pneumococcus was transformed into another. He was now almost sixty years old. Thomas Huxley said, "A man of science past sixty does more harm than good." But now, more than ever, Avery focused on his task.




Source:

Barry, John M. The Great Influenza: The Story of the Deadliest Pandemic in History. Revised ed. New York: Penguin Books, 2005.

(Note: ellipsis added.)

(Note: italics in original.)





October 27, 2009

Fossil Found of Much Earlier Human Ancestor




HominidGraphic2009-10-04.jpgSource of graphic: online version of the NYT article quoted and cited below.


(p. A1) Ardi, short for Ardipithecus ramidus, is the newest fossil skeleton out of Africa to take its place in the gallery of human origins. At an age of 4.4 million years, it lived well before and was much more primitive than the famous 3.2-million-year-old Lucy, of the species Australopithecus afarensis.

Since finding fragments of the older hominid in 1992, an international team of scientists has been searching for more specimens and on Thursday presented a fairly complete skeleton and their first full analysis. By replacing Lucy as the earliest known skeleton from the human branch of the primate family tree, the scientists said, Ardi opened a window to "the early evolutionary steps that our ancestors took after we diverged from our common ancestor with chimpanzees."


. . .


(p. A6) Scientists not involved in the new research hailed its importance, placing the Ardi skeleton on a pedestal alongside notable figures of hominid evolution like Lucy and the 1.6-million-year-old Turkana Boy from Kenya, an almost complete specimen of Homo erectus with anatomy remarkably similar to modern Homo sapiens.

David Pilbeam, a professor of human evolution at Harvard University who had no role in the discovery, said in an e-mail message that the Ardi skeleton represented "a genus plausibly ancestral to Australopithecus" and began "to fill in the temporal and structural 'space' between the apelike common ancestor and Australopithecus."

Andrew Hill, a paleoanthropologist at Yale University who was also not involved in the research, noted that Dr. White had kept "this skeleton in his closet for the last 15 years or so, but I think it has been worth the wait." In some ways the specimen's features are surprising, Dr. Hill added, "but it makes a very satisfactory animal for understanding the changes that have taken place along the human lineage."

The first comprehensive reports describing the skeleton and related findings, the result of 17 years of study, are being published Friday in the journal Science. Eleven papers by 47 authors from 10 countries describe the analysis of more than 110 Ardipithecus specimens from a minimum of 36 different individuals, including Ardi.

The paleoanthropologists wrote in one of the articles that Ardipithecus was "so rife with anatomical surprises that no one could have imagined it without direct fossil evidence."

A bounty of animal and plant material -- "every seed, every piece of fossil wood, every scrap of bone," Dr. White said -- was gathered to set the scene of the cooler, more humid woodland habitat in which these hominids had lived.

This was one of the first surprises, said Giday WoldeGabriel, a geologist at Los Alamos National Laboratory, because it upset the hypothesis that upright walking had evolved as an adaptation to life on grassy savanna.



For the full story, see:

JOHN NOBLE WILFORD. "Fossil Skeleton From Africa Predates Lucy." The New York Times (Fri., October 1, 2009): A1 & A6.

(Note: ellipsis added.)


ArdiFossil2009-10-04.jpg



















"A fairly complete skeleton of Ardipithecus ramidus, which replaced Lucy as the earliest known skeleton from the human branch of the primate family tree." Source of caption and photo: online version of the NYT article quoted and cited above.






October 26, 2009

Health Care Incentives and Information Improve When Patients Are Payers




Nobel Prize winning economist Vernon Smith sees that the current health care system is an incentive and information "nightmare." The third parties, who pay, have neither the incentive nor the information to reward the providers who do a good job. And patients, who have the information, do not have the power or incentives to reward those who do a good job. And since providers are not being rewarded for doing a good job, they will only avoid becoming cynical bureaucrats as long as they are mission-driven saints.

A better system, that goes a long way toward Smith's "solution," has been suggested by Susan Feigenbaum, who suggests that third parties provide payments directly to patients, who then may choose what services to buy from which providers.

Here is the core of Smith's analysis:


(p. A11) The health-care provider, A, is in the position of recommending to the patient, B, what B should buy from A. A third party--the insurance company or the government--is paying A for it.

This structure defines an incentive nightmare.


. . .

I don't know whether this problem has a solution. If it does, I think it requires us to find mechanisms whereby third-party payment is made to the patient, B, who in turn pays A, supplemented with any co-payment from B for services. Hence, from the moment B seeks services from A both know who is going to be paying A for what is delivered. A and B each has need for what the other brings to the table, and this structure carries the potential for nurturing the relationship between A and B. B is empowered to become better informed about the services recommended by various A's that he might choose among, and the A's might find it particularly important to build good reputations with B's.



For the full commentary, see:

VERNON L. SMITH. "The ABC Dilemma of Health Reform; Third-party payment creates a big incentive problem." The Wall Street Journal (Sat., OCTOBER 16, 2009): A11.

(Note: ellipsis added.)


Feigenbaum's prescient suggestion for reform can be found in:

Feigenbaum, Susan. "Body Shop' Economics: What's Good for Our Cars May Be Good for Our Health." Regulation 15, no. 4 (Fall 1992): 26-27.





October 25, 2009

Harvard Medical School Conference on the Quest for Eternal Life




SinclairWestphalStiris2009-10-04.jpg"AGE WELL. David Sinclair, left, and Christoph Westphal, co-founders of Sitris Pharmaceuticals, in Dr. Sinclair's laboratory in Cambrdge, Mass. The company develops drugs that mimic resveratrol, a chemical found in some red wines." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. D4) BOSTON -- Who would have thought it? The quest for eternal life, or at least prolonged youthfulness, has now migrated from the outer fringes of alternative medicine to the halls of Harvard Medical School.

At a conference on aging held here last week, the medical school's dean, Jeffrey Flier, was to be seen greeting participants who ranged from members of the 120 club (they intend to live at least that long) to devotees of very low calorie diets.


. . .

Dr. Gallagher said that unpublished tests in mice showed that another chemical mimic, SRT-1720, increased both health and lifespan; after two years, twice as many mice taking the drug were alive compared with the undosed animals. Resveratrol itself has not been shown to increase lifespan in normal mice, although it does so in obese mice, laboratory roundworms and flies.

Sirtris has so far been doubly fortunate. No severe side effects have yet emerged from the clinical trials. The company has also been lucky in having apparently picked the right horse, or at least a good one, in a fast-developing field.

Besides the sirtuins, several other proteins are now known to influence longevity, energy use and the response to caloric restriction. These include the receptors for insulin and for another hormone called IGF-1, and a protein of increasing interest called TOR ("target of rapamycin"). Rapamycin is an antimicrobial that was recently found to extend lifespan significantly, even when given to mice at an advanced age. Since TOR is involved in the response to caloric restriction, rapamycin may extend life through this pathway.


. . .

"In five or six or seven years," said Christoph Westphal, Sirtris's other co-founder, "there will be drugs that prolong longevity."

But neither Dr. Sinclair nor Dr. Westphal was the most optimistic person at the conference. That status belonged to the English gerontologist Aubrey de Grey, who sports a beard so luxuriant that it is hard to see if he is wearing a tie. His goal is "negligible senescence."


. . .

Sirtris's quest for longevity drugs is founded on solid and promising research. But most drugs fail at some stage during trials. So there is no guarantee that any of Sirtris's candidate compounds will work in people. The first result from a Phase 2 clinical trial is not expected until the end of next year at the earliest.

Meanwhile, it is a pleasant and not wholly unfounded thought that, just possibly, a single drug might combat every degenerative disease of Western civilization.



For the full story, see:

NICHOLAS WADE. "Quest for a Long Life Gains Scientific Respect." The New York Times (Tues., September 28, 2009): D4.

(Note: ellipses added.)





October 24, 2009

Rapid Mutation of RNA-Based Flu Virus Allows Rapid Adaptation to Immune System Response




I found the passage quoted below to be especially illuminating on how rapid mutation helps explain why the flu virus is so successful and dangerous. (An additional important factor is that the virus can survive in birds, without killing them.)

It occurs to me that something akin to rapid mutation (e.g., rapid experimentation) has also been advocated as a way to quickly advance science (Karl Popper), or enterprise (George Gilder).


(p. 105) Whenever an organism reproduces, its genes try to make exact copies of themselves. But sometimes mistakes--mutations--occur in this process.

This is true whether the genes belong to people, plants, or viruses. The more advanced the organism, however, the more mechanisms exist to prevent mutations. A person mutates at a much slower rate than bacteria, bacteria mutates at a much slower rate than a virus--and a DNA virus mutates at a much slower rate than an RNA virus.

DNA has a kind of built-in proofreading mechanism to cut down on copying mistakes. RNA has no proofreading mechanism whatsoever, no way to protect against mutation. So viruses that use RNA to carry their genetic information mutate much faster--from 10,000 to 1 million times faster--than any DNA virus.

Different RNA viruses mutate at different rates as well. A few mutate so rapidly that virologists consider them not so much a population of copies of the same virus as what they call a "quasi species" or a "mutant swarm."

These mutant swarms contain trillions and trillions of closely related but different viruses. Even the viruses produced from a single cell will include many different versions of themselves, and the swarm as a whole will routinely contain almost every possible permutation of its genetic code.

Most of these mutations interfere with the functioning of the virus and will either destroy the virus outright or destroy its ability to infect. But other mutations, sometimes in a single base, a single letter, in its genetic code will allow the virus to adapt rapidly to a new situation. It is this adaptability that explains why these quasi species, these mutant swarms, can move rapidly back and forth between different environments and also develop extraordinarily rapid drug resistance. As one investigator has observed, the rapid mutation "confers a certain randomness to the disease processes that accompany RNA [viral] infections."

Influenza is an RNA virus. So is HIV and the coronavirus. And of all RNA viruses, influenza and HIV are among those that mutate the fastest. The influenza virus mutates so fast that 99 percent of the 100,000 to 1 million new viruses that burst out of a cell in the reproduction process (p. 106) are too defective to infect another cell and reproduce again. But that still leaves between 1,000 and 10,000 viruses that can infect another cell.

Both influenza and HIV fit the concept of a quasi species, of a mutant swarm. In both, a drug-resistant mutation can emerge within days. And the influenza virus reproduces rapidly--far faster than HIV. Therefore it adapts rapidly as well, often too rapidly for the immune system to respond.




Source:

Barry, John M. The Great Influenza: The Story of the Deadliest Pandemic in History. Revised ed. New York: Penguin Books, 2005.

(Note: italics in original.)





October 23, 2009

Measuring High Level Entrepreneurship




DiamondArtFrazerContestEntry2009.jpg

The Measurement Center of the Fraser Institute held a contest on the theme of what most needed to be better measured. I entered the contest, arguing that high level entrepreneurs are crucial to economic growth and human progress, and yet are not often the subject of systematic (as contrasted with anecdotal) study.

It turns out that my one minute video submission was picked as one of four "runners-up" in the contest.



Details of the contest and the winners, can be found at:

http://www.fraserinstitute.org/programsandinitiatives/measurement_center.htm


My minute video can be viewed at:

http://www.fraserinstitute.org/files/videos/Motivation-characteristics-of-high-level-entrepreneurs.wmv





October 22, 2009

George Shultz Sceptical of War on Drugs




George Shultz has a distinguished résumé. He was Dean of the University of Chicago business school, Secretary of the Treasury under President Nixon, and Secretary of State under President Reagan. Along with the late Milton Friedman, he is sceptical about the War on Drugs, and is willing to express his scepticism:


(p. A17) He has long harbored skepticism about interdiction as a solution to drug abuse in the U.S. Those doubts were prescient.


. . .


Mr. Shultz recalls what happened shortly after he left government, when his view that interdiction is not the solution came up after a speech to a Stanford alumni group.

Then, as now, he believed that we need to look at the problem from an economic perspective and understand what happens when there is high demand for a prohibited substance. When his comment hit the press, he says he "was inundated with letters. Ninety-eight percent of them agreed with me and over half of those people said I'm glad you said it, but I wouldn't dare say it. The most poignant comment was from [a former member of the House of Representatives] who wrote and said I was glad to see your statement. I said that a few years ago and that's why I'm no longer a congressman!"



For the full commentary, see:

MARY ANASTASIA O'GRADY. "George Shultz on the Drug War; The former secretary of state has long doubted the wisdom of interdiction." The Wall Street Journal (Mon., OCTOBER 12, 2009): A17.

(Note: the online version of the article is dated Oct. 11, 2009.)

(Note: ellipsis added.)





October 21, 2009

Small Evidence Kills Big Theory




Raptorex_Trex2009-09-27.jpg














Big Tyrannosaurus rex and much smaller Raptorex kriegsteini. Source of image: http://scienceblogs.com/notrocketscience/upload/2009/09/raptorex_tiny_king_of_thieves_shows_how_tyrannosaurus_body_p/Raptorex_Trex.jpg



(p. A5) Paleontologists said Thursday that they had discovered what amounted to a miniature prototype of Tyrannosaurus rex, complete with the oversize head, powerful jaws, long legs -- and, as every schoolchild knows, puny arms -- that were hallmarks of the king of the dinosaurs.

But this scaled-down version, which was about nine feet long and weighed only 150 pounds, lived 125 million years ago, about 35 million years before giant Tyrannosaurs roamed the earth. So the discovery calls into question theories about the evolution of T. rex, which was about five times longer and almost 100 times heavier.

"The thought was these signature Tyrannosaur features evolved as a consequence of large body size," Stephen L. Brusatte of the American Museum of National History, an author of a paper describing the dinosaur published online by the journal Science, said at a news conference. "They needed to modify their entire skeleton so they could function as a predator at such colossal size."

The new dinosaur, named Raptorex kriegsteini, "really throws a wrench into this observed pattern," Mr. Brusatte said.



For the full story, see:

HENRY FOUNTAIN. "Fossil Discovery Challenges Theories on T. Rex Evolution." The New York Times (Fri., September 18, 2009): A5.

(Note: the online version is dated Sept. 17th and has the slightly different title: "Fossil Find Challenges Theories on T. Rex" but the body of the article seems the same as the print version.)





October 20, 2009

Scientist Huxley: "The Great End of Life is Not Knowledge But Action"




John Barry calls our attention to the views of Thomas Huxley who gave the keynote address at the founding of the Johns Hopkins University:


(p. 13) A brilliant scientist, later president of the Royal Society, he advised investigators, "Sit down before a fact as a little child, be prepared to give up every preconceived notion. Follow humbly wherever and to whatever abysses nature leads, or you shall learn nothing." He also believed that learning had purpose, stating, "The great end of life is not knowledge but action."



Source:

Barry, John M. The Great Influenza: The Story of the Deadliest Pandemic in History. Revised ed. New York: Penguin Books, 2005.

(Note: from the context in Barry, I am not certain whether the Huxley quotes are from the keynote address, or from elsewhere in Huxley's writings.)





October 19, 2009

"Recent Temperature Plateau" May Undermine Case for Global Warming




GlobalWarmingPlateauGraph2009-09-27.jpgSource of graph: online version of the NYT article quoted and cited below.


(p. A10) The world leaders who met at the United Nations to discuss climate change on Tuesday are faced with an intricate challenge: building momentum for an international climate treaty at a time when global temperatures have been relatively stable for a decade and may even drop in the next few years.

The plateau in temperatures has been seized upon by skeptics as evidence that the threat of global warming is overblown. And some climate experts worry that it could hamper treaty negotiations and slow the progress of legislation to curb carbon dioxide emissions in the United States.


. . .

Underscoring just how little clarity there is on short-term temperature fluctuations, researchers from Britain's climate change office, in a paper published in August, projected "an end to this period of relative stability," with half the years between now and 2015 exceeding the record-setting global temperatures of 1998.

Whatever the next decade may hold, critics of global warming have lost no time in using the current temperature plateau to build their case.

"I think it supports the arguments of those who've said, 'What's the rush for policy on this issue?' " said Patrick J. Michaels, a climatologist affiliated with George Mason University and the Cato Institute, a group opposing most regulatory solutions to environmental problems.


. . .

A clearer view of whether the recent temperature plateau undermines arguments for dangerous climate change in the long run should come in a few years, as the predictions made by the British climate researchers are tested. Their paper appeared in a supplement to an August issue of The Bulletin of the American Meteorological Society.

While the authors concluded that there was a 1 in 8 chance of having a decade-long pause in warming like the current plateau, even with rising concentrations of greenhouse gases, the odds of a 15-year pause, they wrote, are only 5 in 100. As a result, the next few years of observations could tip the balance toward further concern or greater optimism.

Meanwhile, social scientists who study the way people understand and respond to environmental problems say it is not surprising that the current temperature stability has created confusion and apathy.



For the full story, see:

ANDREW C. REVKIN. "Plateau in Temperatures Adds Difficulty to Task of Reaching a Solution." The New York Times (Weds., Sept. 23, 2009): A10.

(Note: the online version lists a date of September 21 and has the title as "Momentum on Climate Pact Is Elusive", but the body of the article seems to be the same as the print version.)

(Note: ellipses added.)





October 18, 2009

Feds Spent $850,000 to "Green" Buildings, and then Tore Them Down




(p. 4A) WASHINGTON -- The four drafty buildings had been fix­tures of the Energy Depart­ment complex in Oak Ridge, Tenn., for more than half a cen­tury. They burned energy like 1950s sedans.


The buildings seemed like perfect candidates for a federal conservation retrofit program that relies on private contrac­tors that receive a percentage of the money they save. A deal was struck in 2001. The con­tractor reworked lighting and heating systems, among other things, and began collecting payments.


The project was count­ed among the department's "green" successes -- until auditors discovered that the buildings had been torn down several years ago, and the gov­ernment had paid $850,000 for energy savings at facilities that no longer existed.


The audit findings show the potential for waste and abuse at a time when the department is poised to launch billions of dollars more in stimulus spend­ing on an unprecedented welter of green projects across the country.


. . .


The problems are not exclu­sive to Oak Ridge. The audi­tors, from the department's inspector general's office, also determined that $565,000 had been paid over six years un­der the same arrangement to a contractor in Texas for a high­efficiency laundry that was no longer in use.


The department also paid out $3.4 million on another project without checking whether the conservation measures worked -- and $160,000 for measure­ments that were never taken.



For the full story, see:

THE WASHINGTON POST. "Audit finds 'green' projects resulted in waste, abuse; The findings point to a need for oversight as the government readies stimulus projects." Omaha World-Herald (Sun., Sept. 27, 2009): 4A.

(Note: ellipsis added.)





October 17, 2009

Happy Entrepreneur: "Even When Things Get Tough, I'm Still in Control"




PeugeotRogerHappyPlumber2009-09-27.jpg "'Roger the Plumber' owns his own business and is excited to go to work every day." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. D1) By economic yardsticks, Roger the Plumber should be feeling pretty low. Roger Peugeot, owner of the 14-employee Overland Park, Kan., plumbing company that bears his name, is part of a sector hit hard by shrunken credit and slumping sales. He has been forced to reduce staff and is battling new competition from other plumbers fleeing the construction industry.

So why is Mr. Peugeot so happy? He genuinely likes fixing plumbing messes, for one thing, and despite the worst recession he has seen, "I'm still excited to get up and go to work every day," he says. He relishes running into people at the local hardware store whom he has helped in the past. And in hard times, he says, his fate is in his own hands, rather than those of a manager. "Even when things get tough, I'm still in control," he says.

In the broadest, most-comprehensive survey yet of how occupation affects happiness, business owners outrank 10 other occupational groups in overall well-being, based on the landmark survey of 100,826 working adults set for release today. Defined as self-employed store or factory owners, plumbers and so on, business owners surpassed 10 other occupational groups on a composite measure of six criteria of contentment, including emotional and physical health, job satisfaction, healthy behavior, access to basic needs and self-reports of overall life quality.

This puts Roger the Plumber well ahead of movers and shakers typically regarded as the top of the heap in society--professionals such as doctors or lawyers, who ranked second, and executives and managers in corporations or government, who came in third--according to the Gallup-Healthways Well-Being Index, a collaboration between Gallup and Healthways, a Franklin, Tenn., health-management concern. This is despite business owners ranking below those more-prestigious occupations in physical health and access to basic needs, such as health care.


. . .


"Despite the recession, it still pays to be your own boss," says Frank Newport, editor in chief of the Gallup Poll. The survey, adds John Howard, director of the National Institute for Occupational Safety and Health, "reaffirms my view that the more control you have over your work, the happier you are."



For the full story, see:

SUE SHELLENBARGER. "Plumbing for Joy? Be Your Own Boss." The Wall Street Journal (Weds., SEPTEMBER 15, 2009): D1-D2.

(Note: ellipsis added.)





October 16, 2009

How Wilson and the Feds Turned "Only Influenza" into "The Great Influenza"




Here is the core of John Barry's account of how President Woodrow Wilson, and his administration, turned what might have been an ordinary flu, into what, by some measures, was the worst pandemic in human history:


(p. 396) . . . , whoever held power, whether a city government or some private gathering of the locals, they generally failed to keep the community together. They failed because they lost trust. They lost trust because they lied. (San Francisco was a rare exception; its leaders told the truth, and the city responded heroically.) And they lied for the war effort, for the propaganda machine that Wilson had created.

It is impossible to quantify how many deaths the lies caused. It is impossible to quantify how many young men died because the army refused to follow the advice of its own surgeon general. But while those in authority were reassuring people that this was influenza, only influenza, nothing different from ordinary "la grippe,' at least some people must have believed them, at least some people must have exposed themselves to the virus in ways they would not have otherwise, and at least some of these people must have died who would otherwise have lived. And fear really did kill people. It killed them because those who feared would not care for many of those who needed but could not find care, those who needed only hydration, food, and rest to survive.



Source:

Barry, John M. The Great Influenza: The Story of the Deadliest Pandemic in History. Revised ed. New York: Penguin Books, 2005.

(Note: ellipsis added.)





October 15, 2009

How Government Universal Health Care Works in India




JahanAmirIndianWeaver2009-09-26.jpg "Amir Jahan found her health insurance wouldn't pay for all of her $200 stomach surgery; she continues to work with an untreated tumor." Source of caption: print version of the WSJ article quoted and cited below. Source of photo: online version of the WSJ article quoted and cited below.


(p. A14) PANIPAT, India -- Amir Jahan can spin thick, white thread into magnificent cloth, but the 46-year-old weaver has been unable to unravel her health plan to pay for stomach surgery.

Under a health-insurance program introduced a few years ago, the Indian government has provided health-insurance coverage for the country's hand-loom weavers, a group of 6.5 million workers, 60% of them female, who are mostly illiterate and invariably poor. Yet holding an insurance card hasn't helped Ms. Jahan, who says the coverage only pays for minor ailments and not for major problems, such as the removal of a stomach tumor.

"The health care is all a sham," Ms. Jahan says angrily. "I was refused treatment on grounds of huge expense. I won't ever go to be humiliated again."

Ms. Jahan's health-care issues represent the problems that come with trying to provide insurance to India's poor. Access to quality care remains a distant dream for many in this country of 1.1 billion.

Last year, the Indian government launched the National Health Insurance Program on (sic) promised health coverage of $700 per person for families earning less than $100 a year.

Holders of health cards have to register in their home states to access benefits, thereby precluding a large population of migrant laborers. Those who can get past the complex state-identification and qualification process often can't cope with hospital bureaucracies.



For the full story, see:

VIBHUTI AGARWAL. "Indian Weavers Shun Health Plan." The Wall Street Journal (Sat., Sept., 2009): A14.





October 14, 2009

Gallup Finds Highest Doubts of Government in Decades




(p. A23) If you want to know why Americans are so fearful of a government takeover of the health-care system, take a look at the results of a new Gallup poll on government waste released Sept. 15. One question posed was: "Of every tax dollar that goes to Washington, D.C., how many cents of each dollar would you say is wasted?" Gallup found that the mean response was 50 cents. With Uncle Sam spending just shy of $4 trillion this year, that means the public believes that $2 trillion is wasted.

In a separate poll released on Monday, Gallup found that nearly twice as many Americans believe that there is "too much government regulation of business and industry" as believe there is "too little" (45% to 24%).

Perhaps most significantly, in both of these polls Gallup found that skepticism about government's effectiveness is the highest it's been in decades. "Perceptions of federal waste were significantly lower 30 years ago than today," say the Gallup researchers. Even when Ronald Reagan was elected president in 1980 with the help of the antigovernment revolt of that era, Americans believed only 40 cents of every dollar was wasted, according to Gallup.


. . .


Over the last decade, the federal government has become bloated and inefficient. Voters are on to the scam. Mr. Obama keeps calling federal spending an "investment," but Americans apparently feel this is the worst investment they've ever made. They've come to regard Washington as a $2 trillion Bridge to Nowhere. They are right.



For the full commentary, see:

STEPHEN MOORE. "Our $2 Trillion Bridge to Nowhere; Americans believe Washington squanders half of every tax dollar." The Wall Street Journal (Weds., SEPTEMBER 23, 2009): A23.

(Note: ellipsis added.)





October 13, 2009

Government Actions Helped Spread 1918 Influenza




GreatInfluenzaBK.jpg















Source of book image: http://www.virology.ws/wp-content/uploads/2009/08/great-influenza.jpg



I like John Barry's The Great Influenza very much, although not entirely for the reasons that I had expected to like it. I wanted to learn more of the details of the worst flu pandemic in history, and the book delivers those details.

But I had not expected that there would be substantial discussion of the epistemology of science and medicine, and of the political and global context that preceded and affected the 1918 H1N1 influenza pandemic.

As an added bonus, the book gives substantial coverage to the life and work of one of my heroes, Oswald Avery. As a result of his research related to the pandemic, he discovered that DNA was the genetic material---a huge milestone in the history of medicine. But he never received the Nobel Prize because the Nobel Committee didn't want to be seen endorsing controversial work that had not stood the test of time.

On the other hand, the Nobel Committee had no such compunctions about giving the Nobel Peace Prize to President Woodrow Wilson. Barry's book indicts Wilson for having major responsibility for the severity of the pandemic. His administration drafted huge numbers of young men to fight in WWI, bringing them into close contact in shoddy, incomplete training camps. Some of these young men already had the flu, and they quickly spread it to many of their fellow soldiers. The Wilson administration continued to move these soldiers around the country and to Europe, vastly speeding the spread of the disease.

Barry also documents that the Wilson administration, in the name of patriotism and morale, punished those who told the truth about the severity of the pandemic. The results extended far beyond the trampling of civil liberties. For example, there was a huge parade in Philadelphia to sell war bonds, a parade that could easily have been canceled, but was not---igniting the rapid spread of the disease in that hard-hit city. If the newspapers had been allowed to print the truth about the pandemic, then there probably would have been sufficient outcry to cancel the parade; or at the very least, many better-informed citizens would have avoided the parade, and saved their lives, and the lives of their family members.

There is also a lot in book about the biology of the disease that is of interest, and about the suffering of those who experienced it.

But what I found eye-opening was the extent to which the severity of the disease was due to avoidable actions by Woodrow Wilson and his administration.



Source of book discussed above:

Barry, John M. The Great Influenza: The Story of the Deadliest Pandemic in History. Revised ed: New York: Penguin Books, 2005.



For another eye-opening account about Woodrow Wilson and WWI, see:

Raico, Ralph. The Spanish-American War and World War I, Parts 1 & 2: Knowledge Products, 2006.



For a neat little paper on Oswald Avery, see:

Diamond, Arthur M., Jr. "Avery's 'Neurotic Reluctance'." Perspectives in Biology and Medicine 26, no. 1 (Autumn 1982): 132-36.





October 12, 2009

Tax Cuts Better Than Stimulus Spending for Raising GDP




(p. A23) The global recession and financial crisis have refocused attention on government stimulus packages. These packages typically emphasize spending, predicated on the view that the expenditure "multipliers" are greater than one--so that gross domestic product expands by more than government spending itself. Stimulus packages typically also feature tax reductions, designed partly to boost consumer demand (by raising disposable income) and partly to stimulate work effort, production and investment (by lowering rates).

The existing empirical evidence on the response of real gross domestic product to added government spending and tax changes is thin. In ongoing research, we use long-term U.S. macroeconomic data to contribute to the evidence. The results mostly favor tax rate reductions over increases in government spending as a means to increase GDP.


. . .


The bottom line is this: The available empirical evidence does not support the idea that spending multipliers typically exceed one, and thus spending stimulus programs will likely raise GDP by less than the increase in government spending. Defense-spending multipliers exceeding one likely apply only at very high unemployment rates, and nondefense multipliers are probably smaller. However, there is empirical support for the proposition that tax rate reductions will increase real GDP.



For the full commentary, see:

ROBERT J. BARRO AND CHARLES J. REDLICK. "Stimulus Spending Doesn't Work; Our new research shows no evidence of a Keynesian 'multiplier' effect. There is evidence that tax cuts boost growth." The Wall Street Journal (Thurs., OCTOBER 1, 2009): A23.

(Note: ellipsis added.)



A longer and much more detailed account of Barro and Redlick's recent research on this topic can be found in:

Barro, Robert J., and Charles J. Redlick. "Macroeconomic Effects from Government Purchases and Taxes." NBER Working Paper # w15369, Sept. 2009.





October 11, 2009

Dutch Were Too Busy Trading to Build a Church




NewAmsterdamPrint2009-09-26.jpg "Print of New Amsterdam by Joost Hartgers, 1626." Source of caption and image: online version of the WSJ article quoted and cited below.


(p. A15) The financial collapse of 2008 and the Great Recession have had, not surprisingly, a major adverse impact on the economy of the country's financial center, New York City. There have been over 40,000 job losses in the financial community alone and both city and state budgets are deeply dependent on tax revenues from this one industry. There has been much talk that New York might take years to recover--if, indeed, it ever can.

But if one looks at the history of New York there is reason for much optimism. The city's whole raison d'être since its earliest days explains why.

The Puritans in New England, the Quakers in Pennsylvania, and the Catholics in Maryland first and foremost came to what would be the United States to find the freedom to worship God as they saw fit. The Dutch--who invented many aspects of modern capitalism and became immensely rich in the process--came to Manhattan to make money. And they didn't much care who else came to do the same. Indeed, they were so busy trading beaver pelts they didn't even get around to building a church for 17 years.

Twenty years after the Dutch arrived, the settlement at the end of Manhattan had only about a thousand inhabitants. But it was already so cosmopolitan that a French priest heard no fewer than 18 languages being spoken on its streets.


. . .


Deep within the heart of this vast metropolis--like the child within the adult--there is still to be found that little hustly-bustly, live-and-let-live, let's-make-a-deal Dutch village. And the creation of wealth is still the city's dearest love.



For the full commentary, see:

JOHN STEELE GORDON. "Opinion; Don't Bet Against New York; The financial crisis has been devastating, but the city has reinvented itself many times before.." The Wall Street Journal (Sat., Sept. 19, 2009): A15.

(Note: ellipsis added.)





October 10, 2009

Voting With Feet Is "Most Compelling Evidence"




(p. 45) The most compelling evidence that freedom promotes happiness comes from the fact that migration is almost always toward more freedom.



Source:

Lee, Dwight R. "Happiness and Liberty." Intercollegiate Review 42, no. 2 (Fall 2007): 41-48.

(Note: italics in original.)






October 9, 2009

Doctors Seek to Regulate Retail Health Clinic Competitors




NursePractitioner2009-09-26.jpg"A nurse practitioner with a patient at a retail clinic in Wilmington, Del." Source of caption and photo: online version of the WSJ article quoted and cited below.


Clayton Christensen, in a chapter of Seeing What's Next, and at greater length in The Innovator's Prescription, has persuasively advocated the evolution of nurse practitioners and retail health clinics as disruptive innovations that have the potential to improve the quality and reduce the costs of health care.

An obstacle to the realization of Christensen's vision would be government regulation demanded by health care incumbents who would rather not have to compete with nurse practitioners and retail health clinics. See below for more:


(p. B1) Retail health clinics are adding treatments for chronic diseases such as asthma to their repertoire, hoping to find steadier revenue, but putting the clinics into greater competition with doctors' groups and hospitals.

Walgreen Co.'s Take Care retail clinic recently started a pilot program in Tampa and Orlando offering injected and infused drugs for asthma and osteoporosis to Medicare patients. At some MinuteClinics run by CVS Caremark Corp., nurse practitioners now counsel teenagers about acne, recommend over-the-counter products and sometimes prescribe antibiotics.


. . .


As part of their efforts to halt losses at the clinics, the chains are lobbying for more insurance coverage, and angling for a place in pending health-care reform legislation, while trying to temper calls for regulations.


. . .


(p. B2) But such moves are raising the ire of physicians' groups that see the in-store clinics as inappropriate venues for treating complex illnesses. In May, the Massachusetts Medical Society urged its members to press insurance companies on co-payments to eliminate any financial incentive to use retail clinics.


. . .


The clinics are helping alter the practice of medicine. Doctors are expanding office hours to evenings and weekends. Hospitals are opening more urgent-care centers to treat relatively minor health problems.



For the full story, see:

AMY MERRICK. "Retail Health Clinics Move to Treat Complex Illnesses, Rankling Doctors." The Wall Street Journal (Thurs., SEPTEMBER 10, 2009): B1-B2.

(Note: ellipses added.)


A brief commentary by Christensen (and Hwang) on these issues, can be found at:

CLAYTON CHRISTENSEN and JASON HWANG. "How CEOs Can Help Fix Health Care." The New York Times (Tues., July 28, 2009).



For the full account, see:

Christensen, Clayton M., Jerome H. Grossman, and Jason Hwang. The Innovator's Prescription: A Disruptive Solution for Health Care. New York: NY: McGraw-Hill, 2008.


RetailHealthClinicGraph2009-09-26.gif












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






October 8, 2009

Adaptation Greatly Reduces Negative Effects from Global Warming




One of the advantages of flexible economic systems, such as capitalism, is that they can adapt to unexpected or exogenous changes in the environment (e.g., changes in the weather). In the empirical analysis quoted from below, the primary finding is that roughly half of the short-term negative effects on income from rising temperatures, "are offset in the long run through adaptation."

Almost all of the countries in the sample of 12 deviate substantially from the ideal of entrepreneurial capitalism. So the reduction by half is probably a much smaller amount of adaptation than would occur in a sample of countries that had adopted policies that allowed a flourishing of entrepreneurship.


(p. 203) Using subnational data from 12 countries in the Americas, we show that the negative crosssectional relationship between temperature and income exists within countries, as well as across countries. We then provide a theoretical framework for reconciling the substantial, negative association between temperature and income in cross section with the even stronger short-run effects of temperature shown in panel models. The theoretical framework suggests that half of the negative short-term effects of temperature are offset in the long run through adaptation.



Source:

Dell, Melissa, Benjamin F. Jones, and Benjamin A. Olken. "Temperature and Income: Reconciling New Cross-Sectional and Panel Estimates." American Economic Review 99, no. 2 (May 2009): 198-204.





October 7, 2009

Global Warming Creates Benefit of Arctic Shipping Shortcut




GermanShipArtcticPassage.jpg "A German ship, following a Russian icebreaker, is about to complete a shipment from Asia to Europe via Arctic waters." Source of caption and photo: online version of the NYT article quoted and cited below.



(p. A1) MOSCOW -- For hundreds of years, mariners have dreamed of an Arctic shortcut that would allow them to speed trade between Asia and the West. Two German ships are poised to complete that transit for the first time, aided by the retreat of Arctic ice that scientists have linked to global warming.

The ships started their voyage in South Korea in late July and will begin the last leg of the trip this week, leaving a Siberian port for Rotterdam in the Netherlands carrying 3,500 tons of construction materials.

Russian ships have long moved goods along the country's sprawling Arctic coastline. And two tankers, one Finnish and the other Latvian, hauled fuel between Russian ports using the route, which is variously called the Northern Sea Route or the Northeast Passage.

But the Russians hope that the transit of the German ships will inaugurate the passage as a reliable shipping route, and that the combination of the melting ice and the economic benefits of the shortcut -- it is thousands of miles shorter than various southerly routes -- will eventually make the Arctic passage a summer competitor with the Suez Canal.

"It is global warming that enables us to think about using that route," Verena Beckhusen, a spokeswoman for the shipping company, the Beluga Group of Bremen, Germany, said in a telephone interview.



For the full story, see:

ANDREW E. KRAMER and ANDREW C. REVKIN. "Arctic Shortcut Beckons Shippers as Ice Thaws." The New York Times (Fri., September 10, 2009): A1 & A3.




NortheastPassageMap2009-09-26.jpg "A Shortcut Across the Top of the World." Source of caption and map: online version of the NYT article quoted and cited above.





October 6, 2009

Economic Understanding of the Great Depression is Still "Fragmentary"




In the last few decades the accepted opinion among most economists was that the profession understood what caused the Great Depression sufficiently so that we could be confident that we know how to avoid another Great Depression in the future.

Now the accepted opinion is becoming less accepted. I quote below the last sentence of Harold Cole's review of a 2007 book that surveys current views of the Great Depression by distinguished economists:


(p. 418) I came away from the book struck by the fragmentary state of the science with respect to the Great Depression and the challenges that we still face in terms of developing a truly satisfactory quantitative theory of what happened.



Source:

Cole, Harold. "Review of Parker's "the Economics of the Great Depression"." Journal of Economic Literature 46, no. 2 (June 2008): 415-18.

The book under review is:

Parker, Randall E. The Economics of the Great Depression: A Twenty-First Century Look Back at the Economics of the Interwar Era. Cheltenham, U.K. and Northampton, Mass.: Elgar, 2007.





October 5, 2009

The Economist Starts a Column Named "Schumpeter"




SchumpeterAirplaneGraphic.jpg











Source of Schumpeter stairway to innovation graphic (my name for it): http://media.economist.com/images/20090919/D3809WB0.jpg


Thanks to Shane Eloe for alerting me that in their Sept. 19th issue, The Economist started a column named "Schumpeter." Here are a couple of paragraphs from their first installment:


(p. 78) Joseph Schumpeter was one of the few intellectuals who saw business straight. He regarded business people as unsung heroes: men and women who create new enterprises through the sheer force of their wills and imaginations, and, in so doing, are responsible for the most benign development in human history, the spread of mass affluence. "Queen Elizabeth [I] owned silk stockings," he once observed. "The capitalist achievement does not typically consist in providing more silk stockings for queens but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort...The capitalist process, not by coincidence but by virtue of its mechanism, progressively raises the standard of life of the masses." But Schumpeter knew far too much about the history of business to be a cheerleader. He recognised that business people are often ruthless monomaniacs, obsessed by their dreams of building "private kingdoms" and willing to do anything to crush their rivals.

Schumpeter's ability to see business straight would be reason enough to name our new business column after him. But this ability rested on a broader philosophy of capitalism. He argued that innovation is at the heart of economic progress. It gives new businesses a chance to replace old ones, but it also dooms those new businesses to fail unless they can keep on innovating (or find a powerful government patron). In his most famous phrase he likened capitalism to a "perennial gale of creative destruction".




For the full commentary, see:

"Schumpeter; Taking flight; This week we launch a new column on business and management. Why call it Schumpeter?" The Economist (Sat., Sept. 19, 2009): 78.

(Note: the online version was dated Thurs., Sept. 17th)

(Note: ellipsis in original.)





October 4, 2009

55% of Nebraskans Favor School Vouchers




The Friedman Foundation mentioned in the passage below, was founded by Nobel Prize winning economist Milton Friedman who is often credited with creating the idea of education vouchers in his classic book Capitalism and Freedom.

Capitalism and Freedom was based on a series of lectures that Friedman delivered at Wabash College at the invitation of my much-missed mentor Ben Rogge. (Before teaching me economics in Indiana, Rogge was a native Nebraskan who earned his bachelor's degree from Hastings College.)


(p. 4B) A majority of Nebraskans are open to school-choice reforms such as school vouchers and tax­-credit scholarships, according to a survey made public Thurs­day by a national school-choice group.

"It really appears Nebraska is ready to start talking about school-choice reform options," said Paul DiPerna, director of partner services for the Fried­man Foundation for Educational Choice, which commissioned the survey.

The group partnered with the Nebraska Catholic Conference and other state and national groups to conduct the telephone survey of 1,200 likely voters.

Fifty-five percent of those sur­veyed said they favored school vouchers and supported a tax­-credit scholarship system, which would give tax credits to indi­viduals and businesses that con­tribute money to nonprofit orga­nizations that distribute private school scholarships.



For the full story, see:

Dejka, Joe. "Support for school choice tax plan seen; An Indianapolis organization says its survey shows Nebraskans would back a pending bill." Omaha World-Herald (Fri., Sept. 18, 2009): 4B.





October 3, 2009

"Stimulus" Did Not Stimulate




IncomeAndConsumptionGraph2009-09-17.gif












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



(p. A23) The nearby chart reviews income and consumption through July, the latest month this data is available for the U.S. economy as a whole.

Consider first the part of the chart pertaining to the spring of this year and observe that disposable personal income (DPI)--the total amount of income people have left to spend after they pay taxes and receive transfers from the government--jumped. The increase is due to the transfer and rebate payments in the 2009 stimulus package. However, as the chart also shows, there was no noticeable impact on personal consumption expenditures. Because the boost to income is temporary, at best only a very small fraction was consumed.

This is exactly what one would expect from "permanent income" or "life-cycle" theories of consumption, which argue that temporary changes in income have little effect on consumption. These theories were developed by Milton Friedman and Franco Modigliani 50 years ago, and have been empirically tested many times. They are much more accurate than simple Keynesian theories of consumption, so the lack of an impact should not be surprising.


. . .


Incoming data will reveal more in coming months, but the data available so far tell us that the government transfers and rebates have not stimulated consumption at all, and that the resilience of the private sector following the fall 2008 panic--not the fiscal stimulus program--deserves the lion's share of the credit for the impressive growth improvement from the first to the second quarter. As the economic recovery takes hold, it is important to continue assessing the role played by the stimulus package and other factors. These assessments can be a valuable guide to future policy makers in designing effective policy responses to economic downturns.



For the full commentary, see:

JOHN F. COGAN, JOHN B. TAYLOR AND VOLKER WIELAND. "The Stimulus Didn't Work; The data show government transfers and rebates have not increased consumption at all." The Wall Street Journal (Thurs., SEPTEMBER 17, 2009): A23.

(Note: ellipsis added.)





October 2, 2009

Obama Should Remember that a Tariff War Helped Create the Great Depression




As an economics graduate student at Harvard, David Rockefeller was a student of Joseph Schumpeter.

After Schumpeter died, his wife spent the last few years of her life working to pull together the disorganized, but nearly completed, manuscript of Schumpeter's magnificent History of Economic Analysis. In her preface, Mrs. Schumpeter writes: "It seems appropriate at this point to acknowledge gratefully a gift from David Rockefeller and a grant from the Rockefeller Foundation which made possible much of the secretarial and editorial assistance outlined above." (p. x)

Below I quote a few passages from David Rockefeller's reaction to Obama's imposition of tariffs on Chinese automobile tires:


(p. A21) AS if he needed another policy concern to distract him from the health care debate, President Obama now finds himself embroiled in a quarrel with China over his imposition of a steep tariff on automobile tires from that country that is to take effect this week. The Chinese have responded by threatening to impose higher tariffs on American chicken. This may seem like a petty dispute, but the controversy could endanger the global economic recovery if the underlying issue -- the rise in protectionism --is not resolved quickly and forcefully. Perhaps Washington has justification for increasing tariffs in this particular case, but in general it sets a bad precedent.

President Obama should resist the desire to accommodate the forces of protectionism from unions, environmentalists and cable television pundits alike. Giving in to their demands may be politically astute, but it would send the wrong message to our trading partners and, more important, inflict damage on the already weakened American economy. Despite the recent rally in the stock market, the next two or three years could still be very painful.

I lived through the stock market crash of 1929 and the Great Depression that followed it, and I saw that there was no direct cause and effect relationship. Rather, there were specific governmental actions and equally important failures to act, often driven by political expediency, that brought on the Depression and determined its severity and longevity.

One critical mistake was America's retreat from international trade. This not only helped to turn the 1929 stock market decline into a depression, it also chipped away at trust between nations, paving the way for World War II.



For the full commentary, see:

DAVID ROCKEFELLER. "Present at the Trade Wars." The New York Times (Mon., September 21, 2009): A21.

(Note: the online version of the commentary is dated Sun., Sept. 20.)





October 1, 2009

Free-Market German Aristocrat Receives Ovation for Opposing Bailout




(p. A7) BERLIN -- Could the heir apparent to Chancellor Angela Merkel be a wealthy, handsome 37-year-old baron who loves rock 'n' roll?

The baron, Karl-Theodor zu Guttenberg, vaulted to prominence this year when he took over the often dull job of economics minister in the midst of the financial crisis. His independent stand on a thorny economic matter earned him the respect of voters.


. . .

It was his independent streak that earned him the respect of voters, rather than just their curiosity. Mr. Guttenberg broke ranks with Mrs. Merkel over how to handle the troubled German automaker Opel. Mrs. Merkel supported a consortium led by Magna International, a Canadian auto parts maker, and Sberbank, a Russian bank. Mr. Guttenberg favored bankruptcy, and even offered to resign just months into his tenure.

He lost the battle, but gained credibility with voters -- an important commodity with a disenchanted electorate that has largely ignored the coming vote. At the big kickoff campaign rally in Düsseldorf for Mrs. Merkel's conservative Christian Democratic Union, Mr. Guttenberg was the only politician to receive a spontaneous ovation from the crowd of 9,000.



For the full story, see:

NICHOLAS KULISH and JUDY DEMPSEY. "Aristocrat's Rise Shakes German Doldrums." The New York Times (Weds., September 22, 2009): A7.

(Note: ellipsis added.)





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