« March 2015 | Main | May 2015 »

April 30, 2015

Hamilton Fostered the Preconditions for Capitalism

(p. 345) In a nation of self-made people, Hamilton became an emblematic figure because he believed that government ought to promote self-fulfillment, self-improvement, and self-reliance. His own life offered an extraordinary object lesson in social mobility, and his unstinting energy illustrated his devout belief in the salutary power of work to develop people's minds and bodies. As treasury secretary, he wanted to make room for entrepreneurs, whom he regarded as the motive force of the economy. Like Franklin, he intuited America's special genius for business: "As to whatever may depend on enterprise, we need not fear to be outdone by any people on earth. It may almost be said that enterprise is our element."

Hamilton did not create America's market economy so much as foster the cultural and legal setting in which it flourished. A capitalist society requires certain preconditions. Among other things, it must establish a rule of law through enforceable contracts; respect private property; create a trustworthy bureaucracy to arbitrate legal disputes; and offer patents and other protections to promote invention. The abysmal failure of the Articles of Confederation to provide such an atmosphere was one of Hamilton's principal motives for promoting the Constitution. "It is known," he wrote, "that the relaxed conduct of the state governments in regard to property and credit was one of the most serious diseases under which the body politic laboured prior to the adoption of our present constitution and was a material cause of that state of public opinion which led to its adoption." He converted the new Constitution into a flexible instrument for creating the legal framework necessary for economic growth. He did this by activating three still amorphous clauses--the necessary-and-proper clause, the general-welfare clause, and the commerce clause--making them the basis for government activism in economics.


Chernow, Ron. Alexander Hamilton. New York: The Penguin Press, 2004.

April 29, 2015

Our Personal Projects Can Create Compelling Idiogenic Motives

Brian Little, the author of the book mentioned below, was persuasively praised in Quiet, a book I liked a lot. (I have not yet read Little's book.)

(p. 7) When we're in danger of exhausting ourselves by exercising free traits that go against the grain of our fixed traits, he recommends the use of "restorative niches" in which to recover. After a morning of acting as a pseudo-extrovert on the lecture stage, Little confides, he restores his introverted nature by spending time alone in the men's room. Alas, on one occasion an opposing personality came along to spoil his solitude. Little describes his biogenic fixed-trait response to the intruder: "I could feel my autonomic nervous system kicking in. He sat down in the cubicle next to me. I then heard various evacuatory noises -- very loud, utterly unmuffled. We introverts really don't do this; in fact, many of us flush during as well as after. Finally I heard a gruff, gravelly voice call out, 'Hey, is that Dr. Little?' He was an extravert -- he wanted to chat!"

. . .

"Me, Myself, and Us" is most insightful when Little goes beyond polarized divisions -- to explore, for example, the effects on our personalities of what he calls our "personal projects." "Beyond the influence of the biogenic and sociogenic sources of motivation, there is another compelling influence on our daily behavior that I call idiogenic motives. They represent the plans, aspirations, commitments and personal projects that we pursue in the course of daily life."

For the full review, see:

ANNIE MURPHY PAUL. "'Who Do You Think You Are?" The New York Times Book Review (Sun., DEC. 28, 2014): 7.

(Note: ellipsis added.)

(Note: the online version of the review has the date DEC. 26, 2014, and has the title "'Me, Myself, and Us,' by Brian R. Little.")

The book under review is:

Little, Brian R. Me, Myself, and Us: The Science of Personality and the Art of Well-Being. New York: PublicAffairs, 2014.

April 28, 2015

Creativity Was Permissionless on the Internet Before Obama Made It a Regulated Utility

(p. A15) Critics of President Obama's "net neutrality" plan call it ObamaCare for the Internet.

That's unfair to ObamaCare.

Both ObamaCare and "Obamanet" submit huge industries to complex regulations. Their supporters say the new rules had to be passed before anyone could read them. But at least ObamaCare claimed it would solve long-standing problems. Obamanet promises to fix an Internet that isn't broken.

. . .

Utility regulation was designed to maintain the status quo, and it succeeds. This is why the railroads, Ma Bell and the local water monopoly were never known for innovation. The Internet was different because its technologies, business models and creativity were permissionless.

This week Mr. Obama's bureaucrats will give him the regulated Internet he demands. Unless Congress or the courts block Obamanet, it will be the end of the Internet as we know it.

For the full commentary, see:

L. GORDON CROVITZ. "INFORMATION AGE; From Internet to Obamanet; BlackBerry and AT&T are already making moves that could exploit new 'utility' regulations." The Wall Street Journal (Mon., Feb. 23, 2015): A15.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Feb. 22, 2015,)

April 27, 2015

Penguin "Bellwether of Climate Change" Thriving in Antarctica

AdeilePenguinsThriving2015-03-16.jpg "Rather than declining as feared, the Adélie penguin population generally is on the rise, scientists say." Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A3) For the first time, researchers have counted all the world's Adélie penguins--a sprightly seabird considered a bellwether of climate change--and discovered that millions of them are thriving in and around Antarctica.

Rather than declining as feared due to warming temperatures that altered their habitats in some areas, the Adélie population generally is on the rise, the scientists said Thursday.

"What we found surprised everyone," said ecologist Heather Lynch at Stony Brook University in Stony Brook, N.Y., who led the penguin census. "We found a 53% increase in abundance globally."

Counting the birds by satellite, Dr. Lynch and imaging specialist Michelle LaRue at the University of Minnesota found that the Adélie penguin population now numbers 3.79 million breeding pairs--about 1.1 million more pairs than 20 years ago. In all, they identified 251 penguin colonies and surveyed 41 of them for the first time, including 17 apparently new colonies.

For the full story, see:

ROBERT LEE HOTZ. "Antarctic Penguins Thrive." The Wall Street Journal (Fri., July 11, 2014): A3.

(Note: the online version of the story has the date July 10, 2014, and has the title "Adélie Penguin Census Shows Seabirds Are Thriving.")

April 26, 2015

Hamilton "Was the Clear-Eyed Apostle of America's Economic Future"

(p. 344) The American Revolution and its aftermath coincided with two great transformations in the late eighteenth century. In the political sphere, there had been a repudiation of royal rule, fired by a new respect for individual freedom, majority rule, and limited government. If Hamilton made distinguished contributions in this sphere, so did Franklin, Adams, Jefferson, and Madison. In contrast, when it came to the parallel economic upheavals of the period--the industrial revolution, the expansion of global trade, the growth of banks and stock exchanges--Hamilton was an American prophet without peer. No other founding father straddled both of these revolutions--only Franklin even came close--and therein lay Hamilton's novelty and greatness. He was the clear-eyed apostle of America's economic future, setting forth a vision that many found enthralling, others unsettling, but that would ultimately prevail. He stood squarely on the modern side of a historical divide that seemed to separate him from other founders. Small wonder he aroused such fear and confusion.


Chernow, Ron. Alexander Hamilton. New York: The Penguin Press, 2004.

April 25, 2015

Lincoln Defended Innovative Rail Against Incumbent Steam

(p. A15) "Lincoln's Greatest Case" convincingly shows that 1857 was a watershed year for the moral and political questions surrounding slavery's expansion to the west, something that Jefferson Davis's preferred railroad route would have facilitated. Mr. McGinty's discussion of Lincoln's philosophy and the career-making speeches he would develop in the late 1850s allows us to see the transportation disputes in light of the political and cultural dynamics that would lead to the Civil War. The book is also a case study of discomfort with new technology--and the futility of using a tort suit to prevent the adoption of inevitable innovation.

The book ends on an elegiac note, with steamboats making their inevitable passage into the mists of history. The rails, which could operate year-round through paths determined by man, not nature, would reign supreme, thanks in part to the efforts of a technophile future president.

For the full review, see:

MARGARET A. LITTLE. "BOOKSHELF; When Steam Was King; A dispute over a fiery collision pitted steamboats against railroads and the North against the South. Lincoln defended the rail." The Wall Street Journal (Mon., Feb. 23, 2015): A15.

(Note: the online version of the review has the date Feb. 22, 2015, and has the title "BOOKSHELF; Technology's Great Liberator; A dispute over a fiery collision pitted steamboats against railroads and the North against the South. Lincoln defended the rail.")

The book under review is:

McGinty, Brian. Lincoln's Greatest Case: The River, the Bridge, and the Making of America. New York: Liveright Publishing Corp., 2015.

April 24, 2015

Remaining Airline Regulations Increase Fares and Reduce Services

(p. 256) Kenneth Button makes the case for "Really Opening Up the American Skies." "The deregulation of the 1970s, by removing entry quantitative controls, led to a considerable increase in services. It also increased the capability of individuals to access a wider range of destinations from their homes via the hub-and-spoke system of routings that emerged. This pattern has been reversed since 2007. The largest 29 airports in the United States lost 8.8 percent of their scheduled flights between 2007 and 2012, but medium-sized airports lost 26 percent and small airports lost 21.3 percent. . . . In sum, the 1978 Airline Deregulation Act only partially liberalized the U.S. domestic airline market. One important restriction that remains is the lack of domestic competition from foreign carriers. The U.S. air traveler benefited from the country being the first mover in deregulation, and this provided lower fares and consumer-driven service attributes some 15-20 years before they were enjoyed in other markets; the analogous reforms in Europe only fully materialized after 1997. But the world has changed, and so have the demands of consumers and the business models adopted by the airlines. . . . But remaining regulations still limit the amount of competition in the market and, with this, the ability of travelers to enjoy even lower fares and a wider range of services." Regulation, Spring 2014, pp. 40-45 http://object.cato.org/sites/cato.org/files/serials/files/regulation/2014/4/regulation-v37n1-8.pdf.


Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 28, no. 3 (Summer 2014): 249-56.

(Note: ellipses in original.)

The article quoted by Taylor is:

Button, Kenneth. "Really Opening up the American Skies." Regulation 37, no. 1 (Spring 2014): 40-45.

April 23, 2015

Climate Skeptic Vilified by Mainstream Establishment

ChristyJohnClimateSkeptic2015-03-15.jpg"John Christy, a professor of atmospheric science at the University of Alabama, Huntsville, with the weather data he recorded daily while growing up in Fresno, Calif., in the 1960s." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A14) "I detest words like 'contrarian' and 'denier,' " he said. "I'm a data-driven climate scientist. Every time I hear that phrase, 'The science is settled,' I say I can easily demonstrate that that is false, because this is the climate -- right here. The science is not settled."

Dr. Christy was pointing to a chart comparing seven computer projections of global atmospheric temperatures based on measurements taken by satellites and weather balloons. The projections traced a sharp upward slope; the actual measurements, however, ticked up only slightly.

Such charts -- there are others, sometimes less dramatic but more or less accepted by the large majority of climate scientists -- are the essence of the divide between that group on one side and Dr. Christy and a handful of other respected scientists on the other.

"Almost anyone would say the temperature rise seen over the last 35 years is less than the latest round of models suggests should have happened," said Carl Mears, the senior research scientist at Remote Sensing Systems, a California firm that analyzes satellite climate readings.

"Where the disagreement comes is that Dr. Christy says the climate models are worthless and that there must be something wrong with the basic model, whereas there are actually a lot of other possibilities," Dr. Mears said. Among them, he said, are natural variations in the climate and rising trade winds that have helped funnel atmospheric heat into the ocean.

. . .

. . . , Dr. Christy argues that reining in carbon emissions is both futile and unnecessary, and that money is better spent adapting to what he says will be moderately higher temperatures.

. . .

. . . while his work has been widely published, he has often been vilified by his peers.

. . .

He says he worries that his climate stances are affecting his chances of publishing future research and winning grants. The largest of them, a four-year Department of Energy stipend to investigate discrepancies between climate models and real-world data, expires in September.

"There's a climate establishment," Dr. Christy said. "And I'm not in it."

For the full story, see:

MICHAEL WINES. "Though Scorned by Colleagues, a Climate-Change Skeptic Is Unbowed." The New York Times (Weds., JULY 16, 2014): A14.

(Note: ellipses added.)

(Note: the online version of the story has the date JULY 15, 2014.)

April 22, 2015

Today Is 15th Anniversary of Our Betrayal of Elián González

GonzalezElianSeizedOn2000-04-22.jpg"In this April 22, 2000 file photo, Elian Gonzalez is held in a closet by Donato Dalrymple, one of the two men who rescued the boy from the ocean, right, as government officials search the home of Lazaro Gonzalez, early Saturday morning, April 22, 2000, in Miami. Armed federal agents seized Elian Gonzalez from the home of his Miami relatives before dawn Saturday, firing tear gas into an angry crowd as they left the scene with the weeping 6-year-old boy." Source of caption and photo: online version of JENNIFER KAY and MATT SEDENSKY. "10 years later, few stirred by Elian Gonzalez saga." Omaha World-Herald (Thurs., April 22, 2010): 7A. (Note: the online version of the article is dated April 21, 2010 and has the title "10 years after Elian, US players mum or moving on.")

Today (April 22, 2015) is the 15th anniversary of the day when the Clinton Administration seized a six year old child in order to force him back into the slavery that his mother had died trying to escape.

April 21, 2015

Homer Spoke from a "Vengeful, Frighteningly Violent Time"

(p. 17) The Homeric epics are long, contradictory, repetitive, composite works, riddled with anachronisms, archaic vocabulary, metric filler and exceedingly graphic brutality. Over the millenniums, Nicolson asserts, they have been cleaned, scrubbed and sanitized by generations of translators, editors, librarians and scholars, in order to protect readers from the dangers of the atavistic world lurking just below the surface of the words. He writes that everyone from the editors at the Ptolemaic library in Alexandria to the great 18th-century poet Alexander Pope wished to civilize or tame the poems, "wanted to make Homer proper, to pasteurize him and transform him into something acceptable for a well-­governed city." Part of Nicolson's objective is to follow the poems back to the vengeful, frighteningly violent time and culture from which they came, and to restore some of their rawness.

For the full review, see:

BRYAN DOERRIES. "Songs of the Sirens." The New York Times Book Review (Sun., DEC. 28, 2014): 17.

(Note: ellipses added.)

(Note: the online version of the review has the date DEC. 26, 2014, and has the title "'Why Homer Matters,' by Adam Nicolson.")

The book under review is:

Nicolson, Adam. Why Homer Matters. New York: Henry Holt and Co., 2014.

April 20, 2015

International Evidence that Young Firms Create Most Jobs

(p. 252) Chiara Criscuolo, Peter N. Gal, and Carlo Menon compile empirical evidence concerning "The Dynamics of Employment Growth: New Evidence from 18 Countries." "[N]ot all small businesses are net job creators, showing that only young businesses--predominantly small--create a disproportionate number of jobs, confirming recent evidence for the United States. When disentangling the role of entry from the role of expansion of incumbent young firms, the data clearly shows that entry explains most of the contribution to job creation, followed by startups (i.e., firms that are less than three year old). While this remains true even during the recent great recession, the data shows a sharp decline in the contribution of entry and young firms to aggregate employment growth during the recession. More generally, the findings point to a decline in start-up rates over the past decade across all countries considered, which gives cause for concern, given their strong contribution to job creation." OECD Science, Technology and Industry Policy Papers No. 14, May 21, 2014. http://www.oecd-ilibrary.org/science-and-technology/the-dynamics-of-employment-growth_5jz417hj6hg6-en.


Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 28, no. 3 (Summer 2014): 249-56.

(Note: bracketed letter in original.)

April 19, 2015

Successful Billionaire Mathematician Would Have Lost Math Contests, But Was Good at Slow Pondering

(p. D1) James H. Simons likes to play against type. He is a billionaire star of mathematics and private investment who often wins praise for his financial gifts to scientific research and programs to get children hooked on math.

But in his Manhattan office, high atop a Fifth Avenue building in the Flatiron district, he's quick to tell of his career failings.

He was forgetful. He was demoted. He found out the hard way that he was terrible at programming computers. "I'd keep forgetting the notation," Dr. Simons said. "I couldn't write programs to save my life."

After that, he was fired.

His message is clearly aimed at young people: If I can do it, so can you.

. . .

(p. D2) "I wasn't the fastest guy in the world," Dr. Simons said of his youthful math enthusiasms. "I wouldn't have done well in an Olympiad or a math contest. But I like to ponder. And pondering things, just sort of thinking about it and thinking about it, turns out to be a pretty good approach."

For the full story, see:

WILLIAM J. BROAD. "Seeker, Doer, Giver, Ponderer; A Billionaire Mathematician's Life of Ferocious Curiosity." The New York Times (Tues., JULY 8, 2014): D3.

(Note: ellipsis added.)

(Note: the online version of the story has the date JULY 7, 2014.)

April 18, 2015

In American Political System "It Will Be far More Difficult to Undo than to Do"

(p. 330) Jefferson traced the formation of the two main parties--to be known as Republicans and Federalists--to Hamilton's victory over assumption. For Jefferson, this event split Congress into pure, virtuous republicans and a "mercenary phalanx," "monarchists in principle," who "adhered to Hamilton of course as their leader in that principle."

Why did Jefferson retrospectively try to downplay his part in passing Hamilton's assumption scheme? While he understood the plan at the time better than he admitted, he probably did not see as clearly as Hamilton that the scheme created an unshakable foundation for federal power in America. The federal government had captured forever the bulk of American taxing power. In comparison, the location of the national capital seemed a secondary matter. It wasn't that Jefferson had been duped by Hamilton; Hamilton had explained his views at dizzying length. It was simply that he had been outsmarted by Hamilton, who had embedded an enduring political system in the details of the funding scheme. In an unsigned newspaper article that September, entitled "Address to the Public Creditors," Hamilton gave away the secret of his statecraft that so infuriated Jefferson: "Whoever considers the nature of our government with discernment will see that though obstacles and delays will frequently stand in the way of the adoption of good measures, yet when once adopted, they are likely to be stable and permanent. It will be far more difficult to undo than to do."


Chernow, Ron. Alexander Hamilton. New York: The Penguin Press, 2004.

(Note: italics in original.)

April 17, 2015

Disclosure Regulations Often Have Unintended Consequences

(p. B5) . . . , some disclosure works. Professor Levitin cites two examples. The first is an olfactory disclosure. Methane doesn't have any scent, but a foul smell is added to alert people to a gas leak. The second is A.T.M. fees. A study in Australia showed that once fees were disclosed, people avoided the high-fee machines and took out more when they had to go to them.

But to Omri Ben-Shahar, co-author of a recent book, "More Than You Wanted To Know: The Failure of Mandated Disclosure," these are cherry-picked examples in a world awash in useless disclosures. Of course, information is valuable. But disclosure as a regulatory mechanism doesn't work nearly well enough, he argues.

First, it really works only when things are simple. As soon as transactions become complex, disclosure starts to stumble. Buying a car, for instance, turns out to be several transactions: the purchase itself, the financing, maybe the trade-in of old car and various insurance and warranty decisions. These are all subject to various disclosure rules, but making the choices clear and useful has proved nigh impossible.

In complex transactions, we then must rely on intermediaries to give us advice. Because they are often conflicted, they, too, become subject to disclosure obligations. Ah, even more boilerplate to puzzle over!

And then there's the harm. Over the years, banks that sold complex securities often stuck impossible-to-understand clauses deep in prospectuses that "disclosed" what was really going on. When the securities blew up, as they often did, banks then fended off lawsuits by arguing they had done everything the law required and were therefore not liable.

"That's the harm of disclosure," Professor Ben-Shahar said. "It provides a safe harbor for practices that smell bad. It sanitizes every bad practice."

For the full review, see:

JESSE EISINGER. "In an Era of Disclosure, an Excess of Sunshine but a Paucity of Rules." The New York Times (Thurs., FEBRUARY 12, 2015): B5.

(Note: ellipsis added.)

(Note: the online version of the review has the date FEBRUARY 11, 2015.)

The book under review is:

Ben-Shahar, Omri, and Carl E. Schneider. More Than You Wanted to Know: The Failure of Mandated Disclosure. Princeton, NJ: Princeton University Press, 2014.

April 16, 2015

Occupational Licensing Creates Cartels

(p. 251) Aaron Edlin and Rebecca Haw discuss "Cartels by Another Name: Should Licensed Occupations Face Antitrust Scrutiny?" "Once limited to a few learned professions, licensing is now required for over 800 occupations. And once limited to minimum educational requirements and entry exams, licensing board restrictions are now a vast, complex web of anticompetitive rules and regulations. . . . State-level occupational licensing is on the rise. In fact, it has eclipsed unionization as the dominant organizing force of the U.S. labor market. While unions once claimed 30% of the country's working population, that figure has since shrunk to below 15%. Over the same period of time, the number of workers subject to state-level licensing requirements has doubled; today, 29% of the U.S. workforce is licensed and 6% is certified by the government. The trend has important ramifications. Conservative estimates suggest that licensing raises consumer prices by 15%. There is also evidence that professional licensing increases the wealth gap; it tends to raise the wages of those already in high-income occupations while harming low-income consumers who cannot afford the inflated prices." "We contend that the state action doctrine should not prevent antitrust suits against state licensing boards that are comprised of private competitors deputized to regulate and to outright exclude their own competition, often with the threat of criminal sanction." University of Pennsylvania Law Review, April 2014, pp. 1093-1164. http://www.pennlawreview.com/print/162-U-Pa-L-Rev-1093.pdf.


Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 28, no. 3 (Summer 2014): 249-56.

(Note: ellipsis in original.)

April 15, 2015

New Evidence on the Antikythera Mechanism

The Antikythera Mechanism was recovered in about 1901 and is believed to date from about 200 BC. Its complicated gear mechanism is believed to have been used to generate calendars or predict astronomical events. The technology never spread to benefit ordinary people. It was forgotten and mechanical gears had to be re-invented.

The Antikythera Mechanism raises a question: how is it that technologies with the potential to benefit humankind can fail to be adopted? This issue of the causes of technology adoption is an important issue for economic growth.

(p. D3) A riddle for the ages may be a small step closer to a solution: Who made the famed Antikythera Mechanism, the astronomical calculator that was raised from an ancient shipwreck near Crete in 1901?

. . .

. . . a new analysis of the dial used to predict eclipses, which is set on the back of the mechanism, provides . . . another clue to one of history's most intriguing puzzles. Christián C. Carman, a science historian at the National University of Quilmes in Argentina, and James Evans, a physicist at the University of Puget Sound in Washington, suggest that the calendar of the mysterious device began in 205 B.C., just seven years after Archimedes died.

. . .

Starting with the ways the device's eclipse patterns fit Babylonian eclipse records, the two scientists used a process of elimination to reach a conclusion that the "epoch date," or starting point, of the Antikythera Mechanism's calendar was 50 years to a century earlier than had been generally believed.

. . .

. . . Archimedes was killed by a Roman soldier in 212 B.C., while the commercial grain ship carrying the mechanism is believed to have sunk sometime between 85 and 60 B.C. The new finding suggests the device may have been old at the time of the shipwreck, but the connection to Archimedes now seems even less likely.

An inscription on a small dial used to date the Olympic Games refers to an athletic competition that was held in Rhodes, according to research by Paul Iversen, a Greek scholar at Case Western Reserve University.

"If we were all taking bets about where it was made, I think I would bet what most people would bet, in Rhodes," said Alexander Jones, a specialist in the history of ancient mathematical sciences at New York University.

For the full story, see:

JOHN MARKOFF. "On the Trail of an Ancient Mystery." The New York Times (Tues., NOV. 25, 2014): D3.

(Note: ellipses added.)

(Note: the online version of the story has the date NOV. 24, 2014.)

April 14, 2015

"The Most Celebrated Meal in American History"

(p. 328) If we are to credit Jefferson's story, the dinner held at his lodgings on Maiden Lane on June 20, 1790, fixed the future site of the capital. It is perhaps the most celebrated meal in American history, the guests including Jefferson, Madison, Hamilton, and perhaps one or two others. For more than a month, Jefferson had been bedeviled by a migraine headache, yet he presided with commendable civility. Despite his dislike of assumption, he knew that the stalemate over the funding scheme could shatter the union, and, as secretary of state, he also feared the repercussions for American credit abroad.

Madison restated his familiar argument that assumption punished Virginia and other states that had duly settled their debts. But he agreed to support assumption--or at least not oppose it--if something was granted in exchange. Jefferson recalled, "It was observed... that as the pill would be a bitter one to the southern states, something should be done to soothe them." The sedative measure was that Philadelphia would be the temporary capital for ten years, followed by a permanent move to a Potomac site. In a lucrative concession for his home state, Madison also seems to have extracted favorable treatment for Virginia in a final debt settlement with the central government. In return, Hamilton agreed to exert his utmost efforts (p. 329) to get the Pennsylvania congressional delegation to accept Philadelphia as the provisional capital and a Potomac site as its permanent successor.

The dinner consecrated a deal that was probably already close to achievement. The sad irony was that Hamilton, the quintessential New Yorker, bargained away the city's chance to be another London or Paris, the political as well as financial and cultural capital of the country. His difficult compromise testified to the transcendent value he placed on assumption. The decision did not sit well with many New Yorkers. Senator Rufus King was enraged when Hamilton told him that he "had made up his mind" to jettison the capital to save his funding system. For King, Hamilton's move had been high-handed and secretive, and he ranted privately that "great and good schemes ought to succeed not by intrigue or the establishment of bad measures."


Chernow, Ron. Alexander Hamilton. New York: The Penguin Press, 2004.

(Note: ellipsis in original.)

April 13, 2015

Italian Traditional Family Stunts Individual Enterprise

(p. 15) Hooper's book, both sweeping in scope and generous with detail, makes persuasive arguments for how geography, history and tradition have shaped Italy and its citizens, for better and sometimes for worse. Roman Catholicism, for example, has indelibly conditioned Italian society, even as the Vatican's restrictions are widely ignored. Catholicism's great allowance for human frailty has translated into a great propensity for forgiveness, as evinced in the Italian justice system, but also resistance to the notion of accountability. It's a word, Hooper adds, that has no counterpart in the Italian language.

. . .

There's . . . mammismo, the propensity of young Italians to remain too closely tied to the maternal apron strings. But while "the traditional family has been at the root of much of what Italy has achieved," Hooper writes, dependence on the family can infantilize, and lack of individual enterprise has held the country back. Indeed, various sections of Hooper's book return to Italy's economic decline and its underlying causes.

He notes that the paperwork and formalities of Italy's cumbersome bureaucracy rob the average Italian of 20 days a year. And he wonders what other country could ever have had a Minister for Simplification to deal with its plethora of often conflicting laws and regulations.

Circumventing some of that bureaucracy partly answers another common question: Why is Italy so prone to corruption? After all, Italians are masters at sidestepping regulations, or, as the saying goes, "Fatta la legge, trovato l'inganno" ("Make the law, then find a way around it"). It's no wonder foreign investment in Italy is so low.

For the full review, see:

LISABETTA POVOLEDO. "Under the Italian Sun." The New York Times Book Review (Sun., March 1, 2015): 15.

(Note: ellipses added; italics in original.)

(Note: the online version of the review has the date FEB. 27, 2015, and has the title "'The Italians,' by John Hooper.")

The book under review is:

Hooper, John. The Italians. New York: Viking, 2015.

April 12, 2015

For Some, Apprenticeships Could Be Less Expensive Path to Good Jobs

(p. 250) Melissa S. Kearney and Benjamin H. Harris have edited an e-book, Policies to Address Poverty in America, with 14 short essays on specific policies. As one example, Robert I. Lerman advocates "Expanding Apprenticeship Opportunities in the United States." "Today apprentices make up only 0.2 percent of the U.S. labor force, far less than in Canada (2.2 percent), Britain (2.7 percent), and Australia and Germany
(3.7 percent). . . . While total annual government funding for apprenticeship in the United States is only about $100 to $400 per apprentice, federal, state, and local annual government spending per participant for two-year public colleges is approximately $11,400. Not only are government outlays sharply higher, but the cost differentials are even greater after accounting for the higher earnings (and associated taxes) of apprentices compared to college students." "Stimulating a sufficient increase in apprenticeship slots is the most important challenge. Although it is easy to cite examples of employer reluctance to train, the evidence from South Carolina and Britain suggests that a sustained, business-oriented marketing effort can persuade a large number of employers to participate in apprenticeship training. Both programs (p. 251) were able to more than quadruple apprenticeship offers over about five to six years." Hamilton Project, Brookings Institution. 2014, http://www.brookings.edu/~/media/research/files/papers/2014/06/19_hamilton_policies_addressing_poverty/policies_address_poverty_in_america_full_book.


Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 28, no. 3 (Summer 2014): 249-56.

(Note: ellipsis in original.)

April 11, 2015

Perceptual Diversity Puzzle: Is It White-and-Gold or Blue-and-Black?


"The dress in a photo from Caitlin McNeill's Tumblr site." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B1) The mother of the bride wore white and gold. Or was it blue and black?

From a photograph of the dress the bride posted online, there was broad disagreement. A few days after the wedding last weekend on the Scottish island of Colonsay, a member of the wedding band was so frustrated by the lack of consensus that she posted a picture of the dress on Tumblr, and asked her followers for feedback.

"I was just looking for an answer because it was messing with my head," said Caitlin McNeill, a 21-year-old singer and guitarist.

. . .

Less than a half-hour after Ms. McNeil's original Tumblr post, Buzzfeed posted a poll: "What Colors Are This Dress?" As of Friday afternoon, it had (p. B5) been viewed more than 28 million times. (White and gold was winning handily.)

. . .

Politicians were eager to stake out their positions. "I know three things," wrote Senator Christopher Murphy, a Connecticut Democrat, on Twitter. "1) the ACA works; 2) climate change is real; 3) that dress is gold and white."

Sorry, senator. The dress, as we all now know, is blue and black. It goes for 50 pounds at Roman Originals, a British retailer.

. . .

Various theories were floated about why the dress looks different to different people. (No, if you see the darker hues of blue and black it doesn't mean that you are depressed.)

Duje Tadin, associate professor for brain and cognitive sciences at the University of Rochester, says it may be because of variations in the number of photoreceptors called cones in the retina that perceive the color blue. The human eye has about six million cones that are sensitive to green, red or blue. Signals from the cones go to the brain, which interprets them as color.

"It's puzzling," conceded Dr. Tadin. "When it comes to color, blue is always the weird one. We have the fewest number of blue cones." He added, "If you don't have very many blue cones, you may see it as white, or if you have plenty of blue cones, you may see more blue."

. . .

The one thing scientists could agree on was that this is a very unusual illusion. People who see the dress one way do not eventually begin to see it the other way, as is common with many optical illusions. "This clearly has to do with individual differences in how we perceive the world," said Dr. Tadin. "There's something about this particular image that just captures those differences in a remarkable way.

For the full story, see:

JONATHAN MAHLER. "The Dress That Melted the Internet." The New York Times (Sat., FEB. 28, 2015): B1 & B5.

(Note: ellipses added.)

(Note: the online version of the story has the date FEB. 27, 2015, and has the title "The White and Gold (No, Blue and Black!) Dress That Melted the Internet.")

April 10, 2015

In Hamilton's Financial System the "Cogs and Wheels Meshed Perfectly Together"

(p. 302) Much later, Daniel Webster rhapsodized about Hamilton's report as follows: "The fabled birth of Minerva from the brain of Jove was hardly more sudden or more perfect than the financial system of the United States as it burst forth from the conception of Alexander Hamilton." This was the long view of history and of many contemporaries, but detractors were immediately vocal. They were befuddled by the complexity of Hamilton's plan and its array of options for creditors. Opponents sensed that he was moving too fast, on too many fronts, for them to grasp all his intentions. He had devised his economic machinery so cunningly that its cogs and wheels meshed perfectly together. One could not tamper with the parts without destroying the whole. Hamilton later said of this ingenious structure, "Credit is an entire thing. Every part of it has the nicest sympathy with every other part. Wound one limb and the whole tree shrinks and decays."


Chernow, Ron. Alexander Hamilton. New York: The Penguin Press, 2004.

(Note: italics in original.)

April 9, 2015

Federal Government Main Cause of 2008 Financial Crisis

(p. A11) How much did the federal government contribute to the financial crisis? The question is quantitative, and the answer requires the kind of number crunching and careful thinking than cannot fit into an op-ed or television interview. Peter J. Wallison 's "Hidden in Plain Sight," is the book that answers the question most meticulously of any written since 2008.

At this point, seven years on, most readers of this newspaper will recognize that the federal government's role has been to force American taxpayers to subsidize trillions of dollars of risky lending. But each reader of Mr. Wallison's book will come away a bit embarrassed at having neglected or forgot about one or more of Washington's many contributions to the financial crisis.

. . .

In my opinion, a financial crisis is not only a likely consequence of implicit subsidies for risky lending but a necessary one because that is when implicit guarantees ultimately become real-life bailouts and trigger the taxpayer payments necessary to fund Washington's longstanding lending goals. Mr. Wallison gives taxpayers the inside story of how housing policy was like a siphon hidden inside their wallets--and why it hurt so much.

For the full review, see:

CASEY B. MULLIGAN. "BOOKSHELF; Capitol Hill Pickpockets; Risky loans made by Fannie and Freddie were the biggest factor that led to the financial crisis--and the direct result of federal policy." The Wall Street Journal (Weds., Feb. 25, 2015): A11.

(Note: ellipsis added.)

(Note: the online version of the review has the date Feb. 24, 2015.)

The book under review is:

Wallison, Peter J. Hidden in Plain Sight: What Really Caused the World's Worst Financial Crisis and Why It Could Happen Again. New York: Encounter Books, 2015.

April 8, 2015

Annual Benefits of NAFTA: Canada $50 Billion, United States $127 Billion, Mexico $170 Billion

(p. 249) Gary Clyde Hufbauer, Cathleen Cimino, and Tyler Moran evaluate "NAFTA at 20: Misleading Charges and Positive Achievements." . . . "Ample econometric evidence documents the substantial payoff from expanded two-way trade in goods and services. Through multiple channels, benefits flow both from larger exports and larger imports. . . . The (p. 250) channels include more efficient use of resources through the workings of comparative advantage, higher average productivity of surviving firms through 'sifting and sorting,' and greater variety of industrial inputs and household goods. . . . As a rough rule of thumb, for advanced nations, like Canada and the United States, an agreement that promotes an additional $1 billion of two-way trade increases GDP by $200 million. For an emerging country, like Mexico, the payoff ratio is higher: An additional $1 billion of two-way trade probably increases GDP by $500 million. Based on these rules of thumb, the United States is $127 billion richer each year thanks to 'extra' trade growth, Canada is $50 billion richer, and Mexico is $170 billion richer. For the United States, with a population of 320 million, the pure economic payoff is almost $400 per person." Peterson Institute for International Economics, May 2014, Number PB14-13. http://www.piie.com/publications/pb/pb14-13.pdf.


Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 28, no. 3 (Summer 2014): 249-56.

(Note: first ellipsis added; other ellipses in original.)

April 7, 2015

"Red Tape Is Good for the Government but Not for Us Chinese People"

(p. A8) China's seven million public servants have long been a target of scorn by citizens who accuse them of endemic laziness and corruption. Last year, a municipal water official in Hebei Province with a history of turning off the taps of customers who refused to pay kickbacks -- including an entire village -- was detained after investigators found $20 million hidden in his home.

In the southwestern province of Yunnan, officials at a local land reclamation bureau often leave for lunch around 10:30 a.m., returning after 3 p.m. "It simply gets too hot to do any work," Pan Yuwen, an agricultural adviser, said one rainy day last month when the temperature was a less-than-sultry 60 degrees Fahrenheit.

But more than lackadaisical bureaucrats, it is the head-spinning tangle of regulations that infuriates many ordinary Chinese. At the heart of their ire is the hukou, or family registration, an onerous system akin to an internal passport that often tethers services like public education, subsidized health care and pensions to a Chinese citizen's parents' birthplace -- even if he or she never lived there.

. . .

One recent afternoon, Li Ying, 39, sat in a fluorescent-lit Beijing government office, waiting for her number to be called so she could apply for a temporary residence permit that would allow her 6-year-old son to enroll in school.

Although Ms. Li moved to Beijing with her parents as a child in 1981, her hukou is registered in a distant town, meaning her son will be shut out of the city's public schools without the permit.

Among the 14 required documents, Ms. Li must provide her hukou certificate, proof of residence, a diploma, a job contract, a marriage license, her husband's identity card, his hukou, a certificate proving that she has only one child and a company document detailing her work performance and tax payments.

"What a headache," she said, a pile of paperwork balanced on her lap. "Red tape is good for the government but not for us Chinese people."

For the full story, see:

DAN LEVIN. "China's Middle Class Chafes Against Maze of Red Tape." The New York Times (Sat., MARCH 14, 2015): A4 & A8.

(Note: ellipsis added.)

(Note: the online version of the story has the date MARCH 13, 2015.)

April 6, 2015

"He Used the Rich for a Purpose that Was Greater than Their Riches"

(p. 299) Hamilton's interest was not in enriching creditors or cultivating the privileged class so much as in insuring the government's stability and survival. Walter Lippmann later said of Hamilton, "He used the rich for a purpose that was greater than their riches."


Chernow, Ron. Alexander Hamilton. New York: The Penguin Press, 2004.

April 5, 2015

Railroad Regulation Helped Kill Passenger Service

(p. 1179) By 1970, passenger service was a not only losing money, but had deteriorated to such an extent that it was no more the elegant transportation mode as it once was. No more were the Hollywood stars long distance rail passengers. No more movies like "North by Northwest," which featured the New York Central's Twentieth Century Limited service from New York to Chicago. The book highlights the factors causing the decline of private rail passenger service and the creation of AMTRAK. The authors cite ICC regulation, the growth in alternative modes, which were heavily subsidized, the mix of freight and passenger service on the same lines, and public policy, which favored the airline industry.

. . .

One public policy that government got right is deregulation. This started with the 3R Act, then the 4R Act and then the Staggers Rail Act of 1980, which had a massive impact on the industry. Deregulation culminated in the ICC Elimination Act, in which the ICC was replaced by the Surface Transportation Board--or STB--with substantially diminished regulatory power. Gallamore worked in government when much of this legislation was passed and gives a firsthand account of the debates that took place in Congressional (p. 1180) hearings and the discussions in and out of government on the merits of deregulation.

In the concluding chapter of the over 500-page book, entitled "Decline and Renaissance of American Railroads in the Twentieth Century" the authors provide a summary of the history of the railroads and the lessons for public policy in the future. This chapter is such a great summary, that the reader may be best off starting with it, before reading the book. But don't forget the afterword, which provides the authors' recommendations for future U.S. policies for the railroads. It is a very insightful chapter.

. . .

American Railroads should be on the reading list of economists interested in transportation and logistics, economic historians, government officials, and rail fans who would like to know more about the history of the railroads in the twentieth century, and are interested in understanding the economics of the industry and the problems of government regulation. Gallamore and Meyer, at the end of the book, sum up why it should be read:

This book's authors love railroads because they have a great history, fascinating operations, intriguing technology and untold opportunity for the future, but we also love them because no other enterprises illustrate elegant economic principles quite so well (p. 435).

For the full review, see:

Pagano, Anthony M. "American Railroads: Decline and Renaissance in the Twentieth Century." Journal of Economic Literature 52, no. 4 (Dec. 2014): 1178-80.

(Note: ellipses added.)

The book under review is:

Gallamore, Robert E., and John R. Meyer. American Railroads: Decline and Renaissance in the Twentieth Century. Cambridge, MA: Harvard University Press, 2014.

April 4, 2015

Heckman Thinks that Economists Who Are Only Economists May Be Dangerous

The Journal of Political Economy, edited by the University of Chicago economics department, is one of the three or four most prestigious journals in the economics profession. For the last 20 years or so (if memory serves) the back cover of each issue has had a funny quote or interesting or unusual anecdote, related to some aspect of economics.

I was surprised to see that the quote from the October 2014 issue as "suggested by James J. Heckman." Heckman is a Nobel-Prize-winner who is known mainly for developing new econometric techniques in the area of labor economics. When I was a graduate student at Chicago, his graduate students tended to be among those who were most oriented to formalism and technique. So I was surprised to see that he had suggested the following quote from neo-Austrian economist and fellow Nobel-Prize-winner F.A. Hayek:

(p. 463) But nobody can be a great economist who is only an economist---and I am even tempted to add that the economist who is only an economist is likely to become a nuisance if not a positive danger.


Hayek, F. A. "The Dilemma of Specialization." In The State of the Social Sciences, edited by Leonard D. White. Chicago: University of Chicago Press, 1956.

(Note: I do not have the book, and cannot find the page range of Hayek's article in the book.)

April 3, 2015

Chinese Communists Crush Innovative Entrepreneurs by Banning Open Internet

(p. A1) BEIJING -- Jing Yuechen, the founder of an Internet start-up here in the Chinese capital, has no interest in overthrowing the Communist Party. But these days she finds herself cursing the nation's smothering cyberpolice as she tries -- and fails -- to browse photo-sharing websites like Flickr and struggles to stay in touch with the Facebook friends she has made during trips to France, India and Singapore.

Gmail has become almost impossible to use here, and in recent weeks the authorities have gummed up Astrill, the software Ms. Jing and countless others depended on to circumvent the Internet restrictions that Western security analysts refer to as the Great Firewall.

By interfering with Astrill and several other popular virtual private networks, or V.P.N.s, the government has complicated the lives of Chinese astronomers seeking the latest scientific data from abroad, graphic designers shopping for clip art on Shutterstock and students submitting online applications to American universities.

If it was legal to protest and throw rotten eggs on the street, I'd definitely be up for that," Ms. Jing, 25, said.

China has long had some of the world's most onerous Internet restrictions. But until now, the authorities had effectively tolerated the proliferation of V.P.N.s as a lifeline for millions of people, from archaeologists to foreign investors, who rely heavily on less-fettered access to the Internet.

But earlier this week, after a number of V.P.N. companies, including StrongVPN and Golden Frog, complained that the Chi-(p. A6)nese government had disrupted their services with unprecedented sophistication, a senior official for the first time acknowledged its hand in the attacks and implicitly promised more of the same.

The move to disable some of the most widely used V.P.N.s has provoked a torrent of outrage among video artists, entrepreneurs and professors who complain that in its quest for so-called cybersovereignty -- Beijing's euphemism for online filtering -- the Communist Party is stifling the innovation and productivity needed to revive the Chinese economy at a time of slowing growth.

"I need to stay tuned into the rest of the world," said Henry Yang, 25, the international news editor of a state-owned media company who uses Facebook to follow American broadcasters. "I feel like we're like frogs being slowly boiled in a pot."

. . .

The vast majority of Chinese Internet users, especially those not fluent in English and other foreign languages, have little interest in vaulting the digital firewall. But those who require access to an unfiltered Internet are the very people Beijing has been counting on to transform the nation's low-end manufacturing economy into one fueled by entrepreneurial innovation.

. . .

Avery Goldstein, a professor of contemporary Chinese studies at the University of Pennsylvania, said the growing online constraints would not only dissuade expatriates from relocating here, but could also compel ambitious young Chinese studying abroad to look elsewhere for jobs.

"If they aren't able to get the information to do their jobs, the best of the best might simply decide not to go home," he said.

For those who have already returned to China and who crave membership in an increasingly globalized world, the prospect of making do with a circumscribed Internet is dispiriting. Coupled with the unrelenting air pollution and the crackdown on political dissent, a number of Chinese said the blocking of V.P.N.s could push them over the edge.

"It's as if we're shutting down half our brains," said Chin-Chin Wu, an artist who spent almost a decade in Paris and who promotes her work online. "I think that the day that information from the outside world becomes completely inaccessible in China, a lot of people will choose to leave."

For the full story, see:

ANDREW JACOBS. "China Further Tightens Grip on the Internet." The New York Times (Fri., JAN. 30, 2015): A1 & A12.

(Note: ellipses added.)

(Note: the online version of the story has the date JAN. 29, 2015.)

April 2, 2015

Hamilton Thought "Contracts Formed the Basis of Public and Private Morality"

(p. 297) Hamilton argued that the security of liberty and property were inseparable and that governments should honor their debts because contracts formed the basis of public and private morality: "States, like individuals, who observe their engagements are respected and trusted, while the reverse is the fate of those who pursue an opposite conduct." The proper handling of government debt would permit America to borrow at affordable interest rates and would also act as a tonic to the economy. Used as loan collateral, government bonds could function as money--and it was the scarcity of money, Hamilton observed, that had crippled the economy and resulted in severe deflation in the value of land. America was a young country rich in opportunity. It lacked only liquid capital, and government debt could supply that gaping deficiency.

The secret of managing government debt was to fund it properly by setting aside revenues at regular intervals to service interest and pay off principal. Hamilton refuted charges that his funding scheme would feed speculation. Quite the contrary: if investors knew for sure that government bonds would be paid off, the prices would not fluctuate wildly, depriving speculators of opportunities to exploit. What mattered was that people trusted the government to make good on repayment: "In nothing are appearances of greater moment than in whatever regards credit. Opinion is the soul of it and this is affected by appearances as well as realities." Hamilton intuited that public relations and confidence building were to be the special burdens of every future treasury secretary.


Chernow, Ron. Alexander Hamilton. New York: The Penguin Press, 2004.

April 1, 2015

Is There "a Fortune to Be Made" in Selling to the Poor?

(p. B1) For years, multinational companies had little interest in lower-end consumers, figuring no money was to be made. Now, they are increasingly attractive to all types of industries, from consumer product makers to technology businesses. Google just announced plans to sell a stripped-down, cheaper version of its Android phone in India.

A decade ago, C. K. Prahalad, a University of Michigan business professor, in his book "The Fortune at the Bottom of the Pyramid," detailed the potential, contending that such households were every bit as discriminating and aspirational as their counterparts at the other end of the income spectrum.

Mr. Prahalad, now dead, estimated there were four billion such consumers in a market worth $13 trillion. "People were saying, 'There's a fortune to be made. Let's go,' " said Mark B. Milstein, director of the Cen-(p. B6)ter for Sustainable Global Enterprise at Cornell University.

But many of the first efforts failed. "There was not much thinking about what those consumers needed or wanted or how they might be different from consumers with more disposable income," Mr. Milstein said.

For the full story, see:

STEPHANIE STROM. "Billions of Buyers." The New York Times (Thurs., Sept. 18, 2014): B1 & B6.

(Note: the online version of the story has the date SEPT. 17, 2014, and has the title "Multinational Companies Court Lower-Income Consumers.")

The book highlighted in the passage quoted is:

Prahalad, C. K. Fortune at the Bottom of the Pyramid Eradicating Poverty through Profits. Revised ed. Philadelphia, PA: Wharton School Publishing, 2009.


The StatCounter number above reports the number of "page loads" since the counter was installed late on 2/26/08. Page loads are defined on the site as "The number of times your page has been visited."

View My Stats