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June 17, 2014

Schulman Grants that Kochs "Have Sincere Political Views that Go Beyond Being Just a Cover for Their Companies' Interest"



KochBrothersWilliamCharlesDavidFrederick2014-05-28.jpg "The Koch brothers, from left: William, Charles, David and Frederick." Source of caption and photo: online version of the NYT review quoted and cited below.


(p. 12) "Sons of Wichita" may strike some readers as surprisingly pro-Koch.  . . . [Schulman] grants Charles and David two key concessions: They have sincere political views that go beyond being just a cover for their companies' interest in lower taxes and fewer regulations, and many of their political activities have been right out in the open, rather than lurking in the shadows. He seems to be almost in awe of Charles, the most mysterious of the brothers, who runs Koch Industries by a system he devised called Market-Based Management. Summarizing, but not dissenting from, the views of Charles's employees, Schulman calls him "a near-mythic figure, a man of preternatural intellect and economic prowess," adding: "He is unquestionably powerful, but unfailingly humble; elusive, but uncomplicated; cosmopolitan, yet thoroughly Kansan." It's noteworthy, Schulman argues, that for decades the Koch family was definitely not welcome in the Republican Party. That they came to stand for Republicanism, at least in the minds of liberals, in 2010 and 2012 is testament to their persistence, to the weakening of the traditional party structures and to their success in making libertarianism a mainstream rather than a fringe ideology. "It's a brilliant, extraordinary accomplishment," Schulman quotes Rob Stein of the liberal Democracy Alliance as saying about the Kochs' rise to influence.


. . .


Even the Tea Party movement is not entirely dependent on intravenous feeding from the Kochs or that other favorite liberal villain, Fox News. And elements of Koch-style libertarianism, connected to the interests of major donors, now live within the Democratic Party too -- not just on social issues like same-sex marriage, but on economic and regulatory ones too. "Sons of Wichita" reminds us that political outcomes depend far more on ideas and organization, and the energy and persistence devoted to them, than they do on the balance of power between good guys and bad guys.



For the full review, see:

NICHOLAS LEMANN. "Billionaire Boys Club." The New York Times Book Review (Sun., MAY 25, 2014): 12.

(Note: ellipses, and bracketed name, added.)

(Note: the online version of the review has the date MAY 23, 2014.)


The book under review is:

Schulman, Daniel. Sons of Wichita: How the Koch Brothers Became America's Most Powerful and Private Dynasty. New York: Grand Central Publishing, 2014.



SonsOfWichitaBK2014-05-28.jpg
















Source of book image: http://media.npr.org/assets/bakertaylor/covers/s/sons-of-wichita/9781455518739_custom-bd178f0c1a2667e448cf13ff7df2850774d77dd8-s6-c30.jpg






June 10, 2014

Phonograph Allowed Middle Class to Bring the Show to Their "Castle," Like Kings Already Could



(p. 218) Once Edison's marketers squarely addressed the urban middle class, they devised advertising that made prospective customers feel as entitled to enjoy the pleasures of recorded music as anyone. "When the (p. 219) King of England wants to see a show, they bring the show to the castle and he hears it alone in his private theater." So said an advertisement in 1906 for the Edison phonograph. It continued: "If you are a king, why don't you exercise your kingly privilege and have a show of your own in your own house."


Source:

Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.






May 8, 2014

Government Pushed Kiewit to Ignore Worker Safety



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Source of book image: http://d202m5krfqbpi5.cloudfront.net/books/1369819962l/17934699.jpg



(p. C9) Boston Harbor's filth is legendary. It was mock-celebrated in the 1966 song "Dirty Water." The city's water-treatment plants were hopelessly inadequate, and barely treated sewage had been pouring into the harbor for decades.


. . .


The Deer Island Sewage Treatment Plant was supposed to solve these problems. Begun in 1990, the $3.8 billion facility would process human and industrial waste on a small island in Boston Harbor and then send it through a 9.5-mile tunnel into the deep waters of the Atlantic. Fifty-five vertical pipes called risers spurred off the tunnel's final section to further diffuse waste before releasing it into the sea. Temporary safety plugs, likened to giant salad bowls, had been placed near the bottom of each riser to keep water from seeping in before construction was complete.

These plugs were a source of conflict between the tunnel's owner, the Massachusetts Water Resources Authority (MWRA), and the company they hired to build it, Kiewit, "the Omaha-based construction giant" that, Mr. Swidey notes, "had built more miles of the U.S. highway system than any other contractor." The director of MWRA, Doug MacDonald, had left a job as a partner in a Boston law firm to take over the authority, a behemoth of 1,700 employees and, at the peak of harbor cleanup, an additional 3,000 construction workers. Mr. MacDonald's job included mollifying various parties who disagreed about how the Deer Island project would reach completion: Kiewit; the tunnel's designers, mostly out of the picture by 1998; ICF Kaiser Engineers, hired by MWRA to protect its interests and act as Mr. MacDonald's eyes and ears; the union "sandhogs" who bored out 2.4 million tons of rock to create the tunnel; the Occupational Safety and Health Administration, ostensibly looking out for worker safety but seeming more interested in handing out fines; and, though federal funds for harbor cleanup had long since dried up, "a bow-tied federal judge who served as the cleanup project's robed referee, threatening stiff fines or worse if the deadlines he imposed were not met."


. . .


The problem weighed most heavily on Kiewit. The firm was contractually obligated to deliver on time, subject to late-fee penalties of $30,000 a day, and to cover cost overruns. More, Kiewit had fronted the construction costs and would only be paid by selling the tunnel, piece by piece, to MWRA. The contract further obligated Kiewit to provide "lighting and ventilation (or breathing apparatus) for the personnel" that pulled the plugs but, in what seemed a senseless conflict, mandated that the plugs "could be removed only after the tunnel was completed," writes Mr. Swidey, "meaning after the sandhogs had cleared out, taking their extensive ventilation, transportation, and electrical systems with them."

Kiewit protested that clearing the tunnel of its life-sustaining infrastructure would make "the risk of catastrophe [to the workers pulling the plugs] . . . exponentially higher !" They offered several sound alternatives. In response, ICF Kaiser accused them of just wanting their payday. After a "year-long memo war," Kiewit capitulated, cleared the tunnel and hired a commercial dive team to go into a pitch-black airless tube.



For the full review, see:

NANCY ROMMELMANN. "BOOKS; One Mile Down, Ten Miles Out; Their oxygen was starting to get thin. On the verge of passing out, Hoss radioed back to the Humvees. The reply was an expletive, and the line went dead." The Wall Street Journal (Sat.,March 15, 2014): C9.

(Note: ellipses between paragraphs, added; ellipsis inside last paragraph, in original.)

(Note: the online version of the review has the date March 14, 2014, and has the title "BOOKSHELF; Book Review: 'Trapped Under the Sea' by Neil Swidey; In 1999, five deep-sea welders had to traverse a tunnel beneath Boston Harbor with no breathable air, no light and no chance for rescue should things go horribly wrong." )


The book under review is:

Swidey, Neil. Trapped under the Sea: One Engineering Marvel, Five Men, and a Disaster Ten Miles into the Darkness. New York: Crown Publishers, 2014.






May 4, 2014

Gilder's Information Theory of Capitalism Will Boost Morale of Innovative Entrepreneurs



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







(p. A13) Individuals like Ford and Jobs are key figures in the economic paradigm that George Gilder lays out in "Knowledge and Power." He calls for an "information theory of capitalism" in which the economy is driven by a dynamic marketplace, with information widely (and freely) distributed. The most important feature of such an economy, Mr. Gilder writes, is the overthrow of "equilibrium," and the most important actors are inventors and entrepreneurs whose breakthrough ideas are responsible for "everything useful or interesting" in commercial life.


. . .


Aspiring owners shouldn't look to "Knowledge and Power" for practical advice on starting a company, but Mr. Gilder's case for the central role of entrepreneurship might boost their morale. Certainly his argument could not be more timely. Census Bureau data show that startups were responsible for nearly all new job creation from 1996 to 2009. Yet entrepreneurship itself (as measured by new business formation) has been stagnant for about two decades. Thus the important question for America's future may well be, as Mr. Gilder says, "how we treat our entrepreneurs." He persuasively shows that creating a more supportive climate for entrepreneurs--by clearing away burdensome regulations and freeing information from its current imprisonment--will result in a more prosperous and vigorous society, creating not only more jobs but more Jobs.



For the full review, see:

MATTHEW REES. "BOOKSHELF; The Real Market-Maters; Economists as far back as Adam Smith have undervalued entrepreneurs--the restless, inventive, job-creating engines of the economy." The Wall Street Journal (Tues., March 18, 2014): A13.

(Note: ellipsis added.)

(Note: the online version of the review has the date March 17, 2014, and has the title "BOOKSHELF; Book Review: 'Knowledge and Power' by George Gilder
Economists as far back as Adam Smith have undervalued entrepreneurs--the restless, inventive, job-creating engines of the economy.")


The book under review is:

Gilder, George. Knowledge and Power: The Information Theory of Capitalism and How It Is Revolutionizing Our World. Washington, D.C.: Regnery Publishing, Inc., 2013.






April 24, 2014

Little Estonia Prepares Defense Against Russia's Evil Empire



IlvesToomasEstoniaPresident2014-04-23.jpg










Toomis Hendrick Ilves, President of Estonia. Source of photo: online version of the WSJ article quoted and cited below.



(p. A13) Perched alone up in eastern Baltic are Lithuania, Latvia and Estonia. Their fear of Moscow propelled them to become the first and only former Soviet republics to seek the refuge of NATO. But now doubts are appearing. The West has responded tepidly to the Crimean aggression. Military budgets are at historic lows as a share of NATO economies. The alliance, which marked its 65th anniversary on Friday, has never faced the test of a hot conflict with Moscow.

In this new debate over European security, Mr. Ilves plays a role out of proportion to Estonia's size (1.3 million people) and his limited constitutional powers. A tall man who recently turned 60, he has the mouth of a New Jersey pol--he grew up in Leonia--and wears the bow ties of a lapsed academic. Americans may recall his Twitter TWTR -0.15% feud two years ago over Estonia's economy with economist Paul Krugman, whom Mr. Ilves called "smug, overbearing & patronizing."


. . .


Estonia managed on Thursday to get NATO's blessing to turn the brand-new Amari military airfield near Tallinn into the first NATO base in the country. This small Balt tends to be proactive. While European governments axed some $50 billion from military budgets in the last five year amid fiscal belt-tightening, Estonia is only one of four NATO allies to devote at least 2% of gross domestic product to defense, supposedly the bare minimum for security needs.

"It lessens your moral clout if you have not done what you have agreed to do," Mr. Ilves says of defense budgets. His barb hits directly at neighboring Lithuania and Latvia, which both spend less than 1% of GDP on their militaries.



For the full commentary, see:

MATTHEW KAMINSKI. "THE SATURDAY INTERVIEW; An American Ally in Putin's Line of Fire; Estonia's president, who was raised in New Jersey, on how Crimea has changed 'everything' and what NATO should do now." The Wall Street Journal (Sat., April 5, 2014): A13.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date April 4, 2014.)






April 18, 2014

In the Gilded Age Moguls Cleaned Up Their Own Mess and the Economy Was Not Hurt



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






(p. A13) Takeover wars seem to have lost their sizzle. What happened to the battles of corporate goliaths? Where have they gone, those swaggering deal makers? "Harriman vs. Hill" is a corporate dust-up that takes us back to the beginning of the 20th century, when tycoons who traveled by private rail merrily raided each other's empires while the world around them cringed.


. . .


Mr. Haeg conveys a vivid picture of the Gilded Age in splendor and in turmoil. Champagne still flowed in Peacock Alley in the Waldorf-Astoria, but fistfights erupted on the floor of the exchange, and a young trader named Bernard Baruch skirted disaster with the help of an inside tip, then perfectly legal. There were scant rules governing stock trading, the author reminds us--no taxes, either. "If you won in the market, you kept it all."

In that era, moguls were left to clean up their own mess.   . . .


. . .


Though hardly a cheerleader, Mr. Haeg is admiring of his cast, nostalgic for the laissez-faire world they inhabited. Observing that the economy wasn't upset by the stock market's mayhem, he concludes that, "in a perverse way, the market had worked."



For the full review, see:

ROGER LOWENSTEIN. "BOOKSHELF; When Titans Tie the Knot; Businessmen of a century ago didn't place 'competition' on a revered pedestal. Merger and monopoly were considered preferable." The Wall Street Journal (Fri., Feb. 14, 2014): A13.

(Note: ellipses added.)

(Note: the online version of the review has the date Feb. 13, 2014, and has the title "BOOKSHELF; Book Review: 'Harriman vs. Hill,' by Larry Haeg; Businessmen of a century ago didn't place 'competition' on a revered pedestal. Merger and monopoly were considered preferable.")


The book under review is:

Haeg, Larry. Harriman Vs. Hill: Wall Street's Great Railroad War. Minneapolis, MN: University of Minnesota Press, 2013.






March 31, 2014

Better Policies Explain Why Poland Prospers More than Ukraine



RushchyshynYaroslavUkraineEntrepreneur2014-03-30.jpg "Yaroslav Rushchyshyn, a garment manufacturer, wants to end penalties when his company reports a financial loss." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. B1) LVIV, Ukraine -- Every kind of business in this restless pro-European stronghold near the border with Poland has an idea about how to make Ukraine like its more prosperous neighbor.

For Yaroslav Rushchyshyn, founder of a garment manufacturer, it is abolishing bizarre regulations that have had inspectors threatening fines for his handling of fabric remnants and for reporting financial losses.

For Andrew Pavliv, who runs a technology company, it is modernizing a rigid education system to help nurture entrepreneurs.

For Natalia Smutok, an executive at a company that makes color charts for paint and cosmetics, it meant starting an antibribery campaign, even though she is 36 weeks pregnant.


. . .


(p. B10) Victor Halchynsky, a former journalist who is now a spokesman for the Ukrainian unit of a Polish bank, said the divergence of the two countries was a source of frustration.

"It's painful because we know it's only happened because of policy," he said, adding that while both countries had started the reform process, Poland "finished it."

Ukraine has been held back by a number of policies. Steep energy subsidies have kept consumption high and left the country dependent on Russian gas, draining state coffers. Mr. Pavliv said the state university system, which he called "pure, pure Soviet," was too inflexible to set up a training program for project managers, or to allow executives without specific certifications to teach courses. An agriculture industry once a Soviet breadbasket has been hurt by antiquated rules, including restrictions on land sales. Aggressive tax police have been used to shake down businesses.



For the full story, see:

DANNY HAKIM. "A Blueprint for Ukraine." The New York Times (Fri., MARCH 14, 2014): B1 & B10.

(Note: ellipsis added.)

(Note: the online version of the story has the date MARCH 13, 2014.)



PavlivAndrewTechEntrepreneur2014-03-30.jpg "Andrew Pavliv, who runs a technology company, wants to help turn Lviv into a little Ukrainian Silicon Valley." Source of caption and photo: online version of the NYT article quoted and cited above.






December 15, 2013

Amazon's User Reviews Increase Rationality of Consumer Choices



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Source of book image: http://2.bp.blogspot.com/-dNUZ_u-GWSk/UpqE0zmFQQI/AAAAAAAAAko/Z8uisfEjgRc/s1600/Absolute+Value+cover.png



(p. 3) You are no longer the sucker you used to be.

So suggests continuing research from the Stanford Graduate School of Business into the challenges marketers face in reaching consumers in the digital age. As you might suspect, the research shows that a wealth of online product information and user reviews is causing a fundamental shift in how consumers make decisions.

As consumers rely more on one another, the power of marketers is being undermined, said Itamar Simonson, a Stanford marketing professor and the lead researcher.


. . .


To get the full impact of the findings, you first have to know the conclusions of a similar experiment decades ago by Dr. Simonson, . . . .  . . .

The researchers found that when study subjects had only two choices, most chose the less expensive camera with fewer features. But when given three choices, most chose the middle one. Dr. Simonson called it "the compromise effect" -- the idea that consumers will gravitate to the middle of the options presented to them.


. . .


Flash forward to the new experiment. It was similar to the first, except that consumers could have a glimpse at Amazon. That made a huge difference. When given three camera options, consumers didn't gravitate en masse to the midprice version. Rather, the least expensive one kept its share and the middle one lost more to the most expensive one.

"The compromise effect was gone," said Dr. Simonson, or, rather, he nearly exclaimed the absence of the effect, underscoring his surprise at the findings. They are to be published next month in "Absolute Value," a book by Dr. Simonson and Emanuel Rosen.

Today, products are being evaluated more on their "absolute value, their quality," Dr. Simonson said. Brand names mean less.


For the full story, see:

MATT RICHTEL. "APPLIED SCIENCE; There's Power in All Those User Reviews." The New York Times, SundayBusiness Section (Sun., December 8, 2013): 3.

(Note: ellipses added.)

(Note: the online version of the article has the date December 7, 2013.)


The new research is reported in:

Simonson, Itamar, and Emanuel Rosen. Absolute Value: What Really Influences Customers in the Age of (Nearly) Perfect Information. New York: HarperBusiness, 2014.






December 11, 2013

Portland Government Stops Girl from Selling Mistletoe to Pay for Braces






In Portland, the government is stopping an 11 year old girl from selling mistletoe to raise money for her braces. Here is a link to the KATU local Portland ABC news station video report: http://www.katu.com/news/local/11-year-old-told-not-to-sell-mistletoe-but-begging-is-fine-234014261.html?tab=video&c=y It also has been posted to YouTube at: http://www.youtube.com/watch?v=Vj4caXi0wdw






November 9, 2013

Entrepreneurial Spirit Values "Voyaging into the Unknown"



PhelpsEdmundWinner2006NobelPrize2013-10-24.jpg











"Edmund Phelps, winner of the 2006 Nobel Prize for economics." Source of caption and photo: online version of the WSJ review quoted and cited below.



(p. C7) Edmund Phelps's "Mass Flourishing" could easily be retitled "Contra-Corporatism," for at its heart this fine book is an attack on that increasingly common "third way" between capitalism and socialism. Mr. Phelps cogently argues that America's current economic woes reflect a reduction in the innovative dynamism that generates economic success and personal satisfaction. He places little hope in the Democratic Party, which "voices a new corporatism well beyond Franklin Roosevelt's New Deal or Lyndon Johnson's Great Society," or in Republicans in the thrall of "traditional values," who see "the good economy as mercantile capitalism plus social protection and social insurance." He instead yearns for legislative solons who "could usefully ask of every bill and regulatory directive: How would it impact the dynamism of our economy?"


. . .


The book eloquently discusses the culture of innovation, which can refer to both an entrepreneurial mind-set and the cultural achievements during an age of change. He sees modern capitalism as profoundly humanist, imbued with "a spirit that views the prospect of unanticipated consequences that may come with voyaging into the unknown as a valued part of experience and not a drawback."


. . .


In . . . [the] new corporatism, the state protects both organized labor and politically connected companies. and the state has acquired a "panoply of new roles," from regulations "aimed at shielding companies or workforces from competition" to lawsuits that "add to the diversion of income from earners to those receiving compensation or indemnification." It is as if "every person in a society is a signatory to an implicit contract" in which "no person may be harmed by others without receiving compensation." But protection against all conceivable harm also means protection against almost all change--and this is the death knell of dynamism and innovation.


. . .


But what is to be done? The author wants governments that are "aware of the importance of the role played by dynamism in a modern-capitalist economy," and he disparages both current political camps. He has a number of thoughtful ideas about financial-sector reform. He is no libertarian and even proposes a "national bank specializing in extending credit or equity capital to start-up firms"--not my favorite idea.



For the full review, see:

EDWARD GLAESER. "How to Unleash the Economy." The Wall Street Journal (Sat., Oct. 19, 2013): C7.

(Note: ellipses, and bracketed word, added.)

(Note: the online version of the review has the date Oct. 18, 2013, and has the title "BOOKSHELF; Book Review: 'Mass Flourishing' by Edmund Phelps; Innovative dynamism is the key to economic success and personal satisfaction, a Nobel-winner argues.")



The book under review is:

Phelps, Edmund S. Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change. Princeton, New Jersey: Princeton University Press, 2013.




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Source of book image: http://blogs.reuters.com/great-debate/files/2013/08/Mass-Flourishing-cover.jpg









November 5, 2013

Entrepreneur Arik Achmon Stood Down Powerful Union to Keep His Company Alive



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Source of book image: http://www.seraphicpress.com/wp-content/uploads/2013/10/like-dreamers.jpg





(p. C2) Mr. Halevi, an American immigrant who has worked as a journalist and analyst in Jerusalem for 30 years, has created a textured, beautifully written narrative by focusing on seven men -- and they are all men -- . . . , who served in the paratroop brigade that conquered the Old City of Jerusalem in the 1967 war.


. . .


. . . , the men Mr. Halevi has chosen are compelling. One is Arik Achmon, a secular liberal from a kibbutz who helped transform Israel's failing statist economy into a thriving capitalist one. Mr. Achmon helped found the first private domestic airline in Israel. The story of how he stood down the once-powerful Histadrut trade union federation to keep his company alive illustrates the enormous changes that Israeli society has undergone in the past three decades.



For the full review, see:

ETHAN BRONNER. "BOOKS OF THE TIMES; 7 Paratroopers and Paths They Took Through an Israel at a Crossroads." The New York Times (Thurs., September 26, 2013): C2.

(Note: ellipses added.)

(Note: the online version of the review has the date September 25, 2013.)



The book under review is:

Halevi, Yossi Klein. Like Dreamers: The Story of the Israeli Paratroopers Who Reunited Jerusalem and Divided a Nation. New York: HarperCollins, 2013.



HaleviYossiKlein2013-10-24.jpg













"Yossi Klein Halevi." Source of caption and photo: online version of the NYT review quoted and cited above.







October 14, 2013

Brazilian Entrepreneur Inspired by "The Men Who Built America"



HangLucianoArrivesAtFlagshipHavanStoreInBrusque2013-09-29.jpgThe co-founder of the Havan chain, Luciano Hang, arrives at the chain's flagship store, which is in Brusque, Brazil. Source of photo: online version of the NYT article quoted and cited below.


(p. 6) "My philosophy is pro-capitalism, so of course the best symbols for this come from the United States," said Mr. Hang, who flies around Brazil on a Learjet to visit the nearly 60 stores in his chain, called Havan. "I tell people that we're about freedom: the freedom to stay open when we choose, the freedom to work for us and the freedom to shop," he added. "I know this can be controversial, but I think those who disagree with my approach are few and far between."


. . .


The son of textile factory workers, descended from German and Italian immigrants, Mr. Hang said he admired European culture but preferred the United States. He said he was inspired by a show on the History Channel, "The Men Who Built America," about industrial titans like John D. Rockefeller and Cornelius Vanderbilt.

"I couldn't sleep after I saw that program," he said.

His business model is partly based on Walmart, whose small-town origins he admires, as well as its method of turning economies of scale into low prices.



For the full story, see:

SIMON ROMERO. "Reshaping Brazil's Retail Scene, Inspired by Vegas and Vanderbilt." The New York Times, First Section (Sun., September 15, 2013): 6.

(Note: ellipsis added.)

(Note: the online version of the story has the date September 14, 2013.)






September 30, 2013

Among 1890s Wall Street Elite, "It Was Fashionable to Be Anti-Semitic"



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






(p. A11) J.P. Morgan may well have been the most powerful banker who ever lived. Certainly he was the most powerful American banker. But the banking world that he and his firm dominated was a short-lived one, lasting only from the 1890s to the Depression of the 1930s. Susie J. Pak explores Morgan's world, especially its social aspects, in "Gentlemen Bankers," and the exploration is very interesting indeed.


. . .


In Wall Street at the time, there were two groups of private banking firms; those with Jewish partners and those with gentile ones. And while they did business together, often forming syndicates to handle large underwritings, they led separate social lives. They belonged to different clubs, stayed at different hotels and resorts. They didn't attend the weddings of one another's children. The reason, of course, was anti-Semitism. But as Ms. Pak notes, it had nothing to do with the ancient, religiously motivated anti-Semitism typical in Europe. This latter-day anti-Semitism was essentially social in character: To be blunt, it was fashionable to be anti-Semitic.

In earlier decades of the 19th century, affluent Jews had mingled socially with their gentile neighbors. They had been among the founding members of such old-line clubs as the Union Club (est. 1836) and the Union League Club (1863). Jesse Seligman, a partner in the well-regarded Jewish banking firm of J. & W. Seligman, was vice president of the Union League Club in 1893. But when he put his son up for membership that year, he was rejected. "Those who voted against him," a biographer of the Seligman family wrote, "said they had nothing against him personally; they objected to his race." His stunned father resigned from the club. He died the next year, aged 66; some said the incident contributed to his death.



For the full review, see:

JOHN STEELE GORDON. "BOOKSHELF; Book Review: 'Gentlemen Bankers' by Susie J. Pak; In the age of J.P. Morgan, the sons of Jewish bankers attended Ivy League colleges, but were excluded from the myriad social and athletic organizations." The Wall Street Journal (Fri, August 30, 2013): A11.

(Note: ellipsis added.)

(Note: the online version of the review has the date August 29, 2013, and has the title "BOOKSHELF; Book Review: 'Gentlemen Bankers' by Susie J. Pak; In the age of J.P. Morgan, the sons of Jewish bankers attended Ivy League colleges, but were excluded from the myriad social and athletic organizations.")


The book under review, is:

Pak, Susie J. Gentlemen Bankers: The World of J.P. Morgan, Harvard Studies in Business History. Cambridge, MA: Harvard University Press, 2013.







August 29, 2013

Philosopher Herbert Spencer Defended Capitalism in America



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






Spencer was sometimes a much better philosopher than the modern caricature portrays, a caricature exemplified by the review quoted below and, perhaps, by the book reviewed. I would like to look at this book sometime, because there may be some interesting history in it---though I am not optimistic about the book's economic assumptions, or its account of Spencer's philosophy.


(p. A11) Herbert Spencer, the 19th-century British philosopher, is remembered today as the forbidding -- almost forbidden -- father of "Social Darwinism," a school of thought declaring that the fittest prosper in a free marketplace and the human race is gradually improved because only the strong survive. In Barry Werth's satisfying "Banquet at Delmonico's," Spencer is also a querulous 62-year-old celibate whose 1882 American tour culminates in a feast to which are invited the "mostly Republican men of science, religion, business, and government" who shared and spread the Spencerian creed.

Applying Darwinian insights about evolution to political, economic and social life -- though he did not himself use the term "Social Darwinism" -- Spencer concluded that vigorous competition and unfettered capitalism conduced to the betterment of society. He predicted that the American, raised in liberty, would evolve into "a finer type of man than has hitherto existed," dazzling the world with "the highest form of government" and "a civilization grander than any the world has known."


. . .


The public clamor over the visit of a dyspeptic foreign philosopher to these shores was partly due to the indefatigable promotion of Edward Livingston Youmans, Spencer's chief American proselytizer, who called his beau ideal the most original thinker in the history of mankind. Youmans is among the several critics and apostles of Spencer and Darwin whose profiles Mr. Werth skillfully interweaves in this Gilded Age tapestry.



For the full review, see:

BILL KAUFFMAN. "BOOKSHELF; Darwin in the New World; When the father of Social Darwinism came to America, the place where the fittest were supposed to thrive." The Wall Street Journal (Fri., January 9, 2009): A11.

(Note: ellipsis added; italics in original.)


The book under review is:

Werth, Barry. Banquet at Delmonico's: Great Minds, the Gilded Age, and the Triumph of Evolution in America. New York: Random House, 2009.


For a more balanced account of Spencer, see the first review below for the mostly good in Spencer, and the second review below for the mostly bad in Spencer:

Diamond, Arthur M., Jr. "Spencer's Tragedy: Review of Herbert Spencer's The Principles of Ethics." Modern Age 24, no. 4 (Fall 1980): 419-421.

Diamond, Arthur M., Jr. "The State of Spencer: Review of Herbert Spencer's The Man Versus the State." Modern Age 28, nos. 2-3 (Spring/Summer 1984): 286-288.






June 30, 2013

iPhone: "A Gleaming World of Innovation and Opportunity, of Capitalism Behaving Well"



SubwayIphoneUse2013-06-21.jpg "The theft of electronic devices like iPhones has fueled a rise in subway crime this year, the police say. In the past, New Yorkers were mugged, sometimes killed, for bomber jackets, Cazal glasses and Air Jordan sneakers." Source of caption: print version of the NYT article quoted and cited below. Source of photo: online version of the NYT article quoted and cited below.



(p.24) The current spate of iPhone thefts feels, if anything, more poignant than disruptive. Apple products have always read as cooler than their rivals' because their design suggests a gleaming world of innovation and opportunity, of capitalism behaving well -- a world that seems ever diminishing, ever less accessible to the struggling and young.

Unlike the sneakers and glasses that caused such a fury in the '80s and '90s, iPhones didn't originate in the celebrity system. They come with a democratic ethos (if not the analogous price tag); BlackBerrys are for suits, but even a child can work an iPhone. Wasn't everyone supposed to have a shot?



For the full story, see:

GINIA BELLAFANTE. "BIG CITY; Easy to Use and Easy to Steal, a Status Object Inches Out of Reach." The New York Times, First Section (Sun., October 30, 2011): 24.

(Note: the first paragraph quoted above is from the print version, rather than from the somewhat different online version. The second quoted paragraph is the same in both versions.)

(Note: the online version of the story has the date October 28, 2011, and has the slightly different title "BIG CITY; Easy to Use, or Steal, but Inching Out of Reach.")






June 15, 2013

Cuban Government Employees "Are Known for Surly Service, Inefficiency, Absenteeism and Pilfering"



(p. A10) However small, . . . , the private sector is changing the work culture on an island where state employees earn meager salaries and are known for surly service, inefficiency, absenteeism and pilfering.

Sergio Alba Marín, who for years managed the restaurants of a state-owned hotel and now owns a popular fast-food restaurant, said he was very strict with his employees and would not employ workers trained by the state.

"They have too many vices -- stealing, for one," said Mr. Alba, who was marching with his 25 employees and two large banners emblazoned with the name of his restaurant, La Pachanga. "You can't change that mentality."

"Even if you could, I don't have time," he added. "I have a business to run."



For the full story, see:

VICTORIA BURNETT. "HAVANA JOURNAL; Amid Fealty to Socialism, a Nod to Capitalism." The New York Times (Thurs., May 2, 2013): A6 & A10.

(Note: ellipsis added.)

(Note: the online version of the story has the date May 1, 2013.)






June 10, 2013

After Failing to Enslave Indians, Starving Jamestown Colonists Ate 14-Year-Old Girl



JamestownFourteenYearOldCannibalized2013-05-14.jpg








"A facial reconstruction of a 14-year-old girl whose skull shows signs that her remains were used for food after her death and burial." Source of caption and image: online version of the NYT article quoted and cited below.



Acemoglu and Robinson in the long, but thought-provoking, opening chapter of their Why Nations Fail book, discuss starvation at the Jamestown colony. Only they don't mainly attribute it to a harsh winter or a slow rescue from England, as does the article quoted below (it is from the New York Times, after all).

Economists Acemoglu and Robinson (p. 23) instead criticize the colony's initial plan to thrive by enslaving natives to bring them gold and food. Eventually John Smith made the bold suggestion that the colonists should try to work to produce something to eat or to trade. The rulers of the colony ignored Smith, resulting in starvation and cannibalism.



(p. A11) Archaeologists excavating a trash pit at the Jamestown colony site in Virginia have found the first physical evidence of cannibalism among the desperate population, corroborating written accounts left behind by witnesses. Cut marks on the skull and skeleton of a 14-year-old girl show that her flesh and brain were removed, presumably to be eaten by the starving colonists during the harsh winter of 1609.

The remains were excavated by archaeologists led by William Kelso of Preservation Virginia, a private nonprofit group, and analyzed by Douglas Owsley, a physical anthropologist at the National Museum of Natural History in Washington. The skull bears tentative cuts to the forehead, followed by four strikes to the back of the head, one of which split the skull open, according to an article in Smithsonian magazine, where the find was reported Wednesday.

It is unclear how the girl died, but she was almost certainly dead and buried before her remains were butchered. According to a letter written in 1625 by George Percy, president of Jamestown during the starvation period, the famine was so intense "thatt notheinge was Spared to mainteyne Lyfe and to doe those things which seame incredible, as to digge upp deade corpes outt of graves and to eate them."



For the full story, see:

NICHOLAS WADE. "Girl's Bones Bear Signs of Cannibalism by Starving Virginia Colonists." The New York Times (Thurs., May 2, 2013): A11.

(Note: ellipsis added.)

(Note: the online version of the story has the date May 1, 2013.)



The Acemoglu book mentioned above is:

Acemoglu, Daron, and James Robinson. Why Nations Fail: The Origins of Power, Prosperity, and Poverty. New York: Crown Business, 2012.



JamestownBonesShowCannibalism2013-05-14.jpg "Human remains from the Jamestown colony site in Virginia bearing evidence of cannibalism." Source of caption and photo: online version of the NYT article quoted and cited above.






May 8, 2013

You Can Buy a New Flint Knife or Stone Ax



(p. 55) Let's take the oldest technology of all: a flint knife or stone ax. Well, it turns out you can buy a brand-new flint knife, flaked by hand and carefully attached to an antler-horn handle by tightly wound leather straps. In every respect it is precisely the same technology as a flint knife made 30,000 years ago. It's yours for fifty dollars, available from more than one website. In the highlands of New Guinea, tribesmen were making stone axes for their own use until the 1960s. They still make stone axes the same way for tourists now. And stone-ax aficionados study them. There is an unbroken chain of knowledge that has kept this Stone Age technology alive. Today, in the United States alone, there are 5,000 amateurs who knap fresh arrowhead points by hand. They meet on weekends, exchange tips in flint-knapping clubs, and sell their points to souvenir brokers. John Whittaker, a professional archaeologist and flint knapper himself, has studied these amateurs and estimates that they produce over one million brand-new spear and arrow points per year. These new points are indistinguishable, even to experts like Whittaker, from authentic ancient ones.


Source:

Kelly, Kevin. What Technology Wants. New York: Viking Adult, 2010.






May 2, 2013

Cultural Impact of Industrial Design Is Greater than Cultural Impact of Fine Arts



(p. C3) Capitalism has its weaknesses. But it is capitalism that ended the stranglehold of the hereditary aristocracies, raised the standard of living for most of the world and enabled the emancipation of women. The routine defamation of capitalism by armchair leftists in academe and the mainstream media has cut young artists and thinkers off from the authentic cultural energies of our time.

Over the past century, industrial design has steadily gained on the fine arts and has now surpassed them in cultural impact. In the age of travel and speed that began just before World War I, machines became smaller and sleeker. Streamlining, developed for race cars, trains, airplanes and ocean liners, was extended in the 1920s to appliances like vacuum cleaners and washing machines. The smooth white towers of electric refrigerators (replacing clunky iceboxes) embodied the elegant new minimalism.

"Form ever follows function," said Louis Sullivan, the visionary Chicago architect who was a forefather of the Bauhaus. That maxim was a rubric for the boom in stylish interior décor, office machines and electronics following World War II: Olivetti typewriters, hi-fi amplifiers, portable transistor radios, space-age TVs, baby-blue Princess telephones. With the digital revolution came miniaturization. The Apple desktop computer bore no resemblance to the gigantic mainframes that once took up whole rooms. Hand-held cellphones became pocket-size.



For the full commentary, see:

Paglia, Camille. "How Capitalism Can Save Art; Camille Paglia on why a new generation has chosen iPhones and other glittering gadgets as its canvas." The Wall Street Journal (Sat., October 6, 2012): C3.

(Note: the online version of the commentary has the date October 5, 2012.)






April 29, 2013

David Kay Johnston Defends Entrepreneurial Capitalism Against Crony Capitalism



FinePrintBK2013-04-28.jpg

















Source of book image: http://media.npr.org/assets/bakertaylor/covers/manually-added/fineprint_custom-c26eb6a3f6c4d9bc09220769911f3cbeaa900b7f-s6-c10.jpg



I saw an informative C-SPAN interview with David Cay Johnston a while back. I had known from Johnston's previous books and reporting, that he was devoted to exposing the outrages of crony capitalism. What the interview revealed to me was that Johnston was not opposed to capitalism in general, and in fact viewed himself as friendly to entrepreneurial capitalism.

I believe that big companies are not bad when they got and stay big by honestly earning big profits from willing and delighted consumers. But big companies are bad when, as often happens, they use their size to get the government to suppress start-up competitors or to take money from taxpayers to subsidize their activities.

I have not yet read Johnston's latest book on the big and bad, but I expect it to present sad, but useful, examples.




Book discussed:

Johnston, David Cay. The Fine Print: How Big Companies Use "Plain English" to Rob You Blind. New York: Portfolio, 2012.






February 24, 2013

Entrepreneur Mackey Says Whole Foods Drops Prices as Larger Size Creates Economies of Scale



MackeyJohnWholeFoodsCEO2013-02-23.jpg











"John Mackey." Source of caption and photo: online version of the NYT article quoted and cited below.





(p. 16) In your new book, "Conscious Capitalism," you write that Whole Foods sees its customers as its "most important stakeholders" and that the company is obsessed with their happiness. The biggest complaint I hear about Whole Foods is how expensive it is. Why not drop prices to make your customers happier? People always complain about prices being too high. Whole Foods prices have dropped every year as we get to be larger and we have economies of scale. Also, people are not historically well informed about food prices. We're only spending about 7 percent of our disposable personal income on food. Fifty years ago, it was nearly 16 percent.


. . .


In 2009, some Whole Foods customers organized boycotts after you wrote an op-ed in The Wall Street Journal expressing opposition to Obama's health care proposals. Do you wish you hadn't written it?
No, I don't. I regret that a lot of people didn't actually read it and it got taken out of context. President Obama asked for ideas about health care reform, and I put my ideas out there. Whole Foods has a good health care plan. It's not a solution to America's health care problems, but it's part of the solution.

So did you vote for Romney?
I did.

I imagine a certain percentage of Whole Foods customers will also boycott because of this.
I don't know what to say except that I'm a capitalist, first. There are many things I don't like about Romney, but more things I don't like about Obama. This is America, and people disagree on things.



For the full interview, see:

Andrew Goldman, Interviewer. "TALK; The Kale King." The New York Times Magazine (Sun., January 20, 2013): 16.

(Note: ellipsis added; bold in original, indicating interviewer questions.)

(Note: the online version of the interview has the date January 18, 2013, and has the title "TALK; John Mackey, the Kale King.")


Mackey's book is:

Mackey, John, and Rajendra Sisodia. Conscious Capitalism: Liberating the Heroic Spirit of Business. Boston, MA: Harvard Business Review Press, 2013.






January 27, 2013

Is Economics Major Nuts to Have Left Investment Banking?



BravermanJeffreyAndFatherUncleCousinNutBusiness2013-01-12.jpg "Jeffrey Braverman, right, stepped away from Wall Street to join his father, uncle and cousin in the family's New Jersey nut business." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. B8) Ten years ago, Jeffrey Braverman was living the dream of many business school graduates. With a freshly minted bachelor's degree in economics, he landed a job in 2002 at the Blackstone Group, a Wall Street firm specializing in private equity and investment banking.

Less than a year later, however, Mr. Braverman stepped away from Wall Street and returned to his family's New Jersey nut business, the Newark Nut Company. It struck some as an odd choice: the family-owned company, which had been started by Mr. Braverman's grandfather, Sol Braverman (known as Poppy), and had once employed 30 people, was down to two employees and two family members, Mr. Braverman's father and his uncle.

Located in an indoor mall in a desolate part of Newark, the nut shop's retail sales were fading and its wholesale business was, at best, stagnant. But Mr. Braverman harbored entrepreneurial ambitions.

At the beginning, he agreed to work with his father and uncle for a salary tied directly to how much new business he attracted. He focused on Internet sales and before long, they began to dwarf the existing business.

Now based in Cranford, N.J., the company has grown to more than 80 employees with more than $20 million in revenue, 95 percent of it online. The following is a condensed version of a recent conversation.

Q. Who leaves investment banking to work at a struggling family nut company?

A. Only someone nuts, right? My dad and my uncle both thought I was crazy. I was making more than they were at the time.

Q. Then why?

A. Have you ever read the book "Monkey Business"? It's a fairly accurate profile of what it's like to be in investment banking, at least at a junior level. You know, there's this economic concept called deadweight loss, and I think a lot of investment banking is like that: it doesn't really add anything to the world, to the economy. I just wanted to do more.

Q. I assume your father and uncle made you take a pay cut.

A. The one thing I did was, I didn't want to take anything away from them. I structured it so that my compensation was 100 percent based on incremental profit improvement. So from their perspective, there wasn't very much risk. I also got a small piece of the business. But at the time the business was worth nothing, book value. No one would have bought it.

Q. Did you have any experience in Internet sales?

A. In 1999, I was a freshman in college and I started our Web site, Nutsonline.com. I spent my second semester of freshman year working on that thing four or five hours a day. It kind of just trickled along. In 1999, very few people were buying from Amazon, so they certainly weren't going to buy from Nutsonline. In 2000, I remember I set a goal: I wanted to do 10 orders a day.



For the full version of the condensed conversation, see:

IAN MOUNT. "Forsaking Investment Banking to Turn Around a Family Business." The New York Times (Thurs., April 19, 2012): B8.

(Note: bold in original.)

(Note: the online version of the conversation has the date April 18, 2012.)



BravermanSolNutBusinessEarly1930s2013-01-12.jpg "Sol Braverman, Jeffrey's grandfather, in the early 1930s." Source of caption and photo: online version of the NYT article quoted and cited above.






January 19, 2013

Capitalism Would Bring Economic Growth to Bitouga, and Thereby Save the Elephants



BurningIvoryInGabon2013-01-12.jpg "SEIZED AND DESTROYED; Gabon burned 10,000 pounds of ivory in June to show its commitment against poaching, but elephants are still being slaughtered." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. A5) But as the price of ivory keeps going up, hitting levels too high for many people to resist, Gabon's elephants are getting slaughtered by poachers from across the borders and within the rain forests, proof that just about nowhere in Africa are elephants safe.

In the past several years, 10,000 elephants in Gabon have been wiped out, some picked off by impoverished hunters creeping around the jungle with rusty shotguns and willing to be paid in sacks of salt, others mowed down en masse by criminal gangs that slice off the dead elephants' faces with chain saws. Gabon's jails are filling up with small-time poachers and ivory traffickers, destitute men and women like Therese Medza, a village hairdresser arrested a few months ago for selling 45 pounds of tusks.

"I had no idea it was illegal," Ms. Medza said, almost convincingly, from the central jail here in Oyem, in the north. "I was told the tusks were found in the forest."

She netted about $700, far more than she usually makes in a month, and the reason she did it was simple, she said. "I got seven kids."

It seems that Gabon's elephants are getting squeezed in a deadly vise between a seemingly insatiable lust for ivory in Asia, where some people pay as much as $1,000 a pound, and desperate hunters and traffickers in central Africa.


. . .


In June, Gabon's president, Ali Bongo, defiantly lighted a pyramid of 10,000 pounds of ivory on fire to make the point that the ivory trade was reprehensible, a public display of resolve that Kenya has put on in years past. It took three days for all the ivory to burn, and even after the last tusks were reduced to glowing embers, policemen vigilantly guarded the ashes. Ivory powder is valued in Asia for its purported medicinal powers, and the officers were worried someone might try to sweep up the ashes and sell them.

Some African countries, like Zimbabwe and Tanzania, are sitting on million-dollar stockpiles of ivory (usually from law enforcement seizures or elephants that died naturally) that someday may be legal to sell.


. . .


(p. A10) The growing resentment of the government is undermining conservation efforts, too, with villagers grumbling about not seeing a trace of the oil money and saying Mr. Bongo should not lecture them about poaching for a living.


. . .

The children here eat thumb-size caterpillars, cooked in enormous vats, because there is little else to eat. Many men have bloodshot eyes and spend their mornings sitting on the ground, staring into space, reeking of sour, fermented home-brew.


. . .


International law enforcement officials say the illicit ivory trade is dominated by Mafia-like gangs that buy off local officials and organize huge, secretive shipments to move tusks from the farthest reaches of Africa to workshops in Beijing, Bangkok and Manila, where they are carved into bookmarks, earrings and figurines.

But often the first link in that chain is a threadbare hunter, someone like Mannick Emane, a young man in Bitouga. Adept in the forest, he was trained nearly from birth to follow tracks and stalk game, and was puffing idly on a cigarette he had just lighted with a burning log.

He conceded he would kill elephants, "for the right price."

"Life is tough," he said. "So if someone is going to give us an opportunity for big money, we're going to take it."

Big money, he said, was about $50.

His friend Vincent Biyogo, also a hunter, nodded in agreement.

"When I was born," he said, "I dreamed of a better life, I dreamed of driving a car, going to school, living like a normal human being."

"Not this," he added quietly, staring at a pot of boiling caterpillars. "Not this."



For the full story, see:

JEFFREY GETTLEMAN. "In Gabon, Lure of Ivory Is Hard for Many to Resist." The New York Times (Thurs., December 27, 2012): A5 & A10.

(Note: ellipses added.)

(Note: the online version of the story has the date December 26, 2012.)



BitougaManResentsGovernment2013-01-12b.jpg "A man in Bitouga, where people live in extreme poverty and say they resent the government's telling them not to poach." Source of caption and photo: online version of the NYT story quoted and cited above.






December 15, 2012

Why Health Care Costs So Much in McAllen



(p. 235) Atul Gawande lays out "The Cost Conundrum: What a Texas town can teach us about health care." "It is spring in McAllen, Texas. The morning sun is warm. The streets are lined with palm trees and pickup trucks. McAllen is in Hidalgo County, which has the lowest household income in the country, but it's a border town, and a thriving foreign-trade zone has kept the unemployment rate below ten per cent. McAllen calls itself the Square Dance Capital of the World. 'Lonesome Dove' was set around here. McAllen has another distinction, too: it is one of the most expensive health-care markets in the country. Only Miami--which has much higher labor and living costs--spends more per person on health care. In 2006, Medicare spent fifteen thousand dollars per enrollee here, almost twice the national average. The income per capita is twelve thousand dollars. In other words, Medicare spends three thousand dollars more per person here than the average person earns."


Gawande as quoted in:

Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 24, no. 2 (Fall 2009): 231-38.


The full Gawande article can be viewed online at:

Gawande, Atul. "Annals of Medicine; the Cost Conundrum; What a Texas Town Can Teach Us About Health Care." The New Yorker 85, no. 16 (June 2009): 36-44.


A later Gawande article, that asks why the health care system cannot be run as well as The Cheesecake Factory, can be viewed online at the link below. (Spoiler alert: I haven't read this article yet, but I'm guessing it has something to do with the feedback and incentives provided by the free market.)

Gawande, Atul. "Annals of Health Care; Big Med; Restaurant Chains Have Managed to Combine Quality Control, Cost Control, and Innovation. Can Health Care?" The New Yorker 88, no. 24 (August 2012): 52-63.






November 27, 2012

Entrepreneurial Capitalism Offers the Best Chance "for a Life of Engagement and Personal Growth"



(p. 228) Edmund S. Phelps explores "Refounding Capitalism." "One has to conclude that 'generation of wealth' is not special to capitalism. Corporatist economies are quite good at that. . . . A merit of a well-functioning capitalism (again: I do not mean free-market policy: low tax rates, etc.) is the economic freedoms it offers entrepreneurs, managers, employees and consumers--freedoms that socialist, corporatist and statist systems do not provide. . . . Ordinary people, if they are to find intellectual growth and an engaging life, have to look outside the home: these (p. 229) things can be found only at work, if anywhere. And for these rewards to be available for large numbers of people, the economy must be modern. And as a practical matter, that requires that it be based predominantly on a well-functioning capitalist system. Thanks to the grassroots, bottom-up processes of innovation, capitalism at its best can deliver--far more broadly than Soviet communism, eastern European socialism, and western European corporatism can--chances for the mental stimulation, problem-solving, exploration and discovery required for a life of engagement and personal growth."


Nobel-Prize winner Edmund Phelps as quoted in:

Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 24, no. 2 (Spring 2010): 227-34.

(Note: ellipses in original.)


The original source of the Phelps quotes is:

Phelps, Edmund S. "Refounding Capitalism." Capitalism and Society 4, no. 3 (2009).






October 18, 2012

Capitalism Is Justified Because It Is an "Engine for Generating Creative Workplaces"



(p. 121) Phelps: . . . Since 2002, I've been trying to develop a new justification for capitalism, at least I think it's new, in which I say that if we're going to have any possibility of intellectual development we're going to have to have jobs offering stimulating and challenging opportunities for problem solving, discovery, exploration, and so on. And capitalism, like it or not, has so far been an extraordinary engine for generating creative workplaces in which that sort of personal growth and personal development is possible; perhaps not for everybody but for an appreciable number of people, so if you think that it's a human right to have that kind of a life, then you have on the face of it a justification for capitalism. There has to be something pretty powerful to overturn or override that.


For the full interview, from which the above is quoted, see:

Vane, Howard R., and Chris Mulhearn, interviewers. "Interview with Edmund S. Phelps." Journal of Economic Perspectives 23, no. 3 (Summer 2009): 109-24.

(Note: ellipsis added.)






September 6, 2012

Macaulay Argues that a Limited Government that Protects Property Will Promote Economic Growth



Our rulers will best promote the improvement of the nation by strictly confining themselves to their own legitimate duties, by leaving capital to find its most lucrative course, commodities their fair price, industry and intelligence their natural reward, idleness and folly their natural punishment, by maintaining peace, by defending property, by diminishing the price of law, and by observing strict economy in every department of the state. Let the Government do this: the People will assuredly do the rest.


Source:

Macaulay, Thomas Babington, Lord. "Review of: Robert Southey's "Sir Thomas More; or, Colloquies on the Progress and Prospects of Society"." In Critical and Historical Essays Contributed to the Edinburgh Review. London: Longman, Green, Longman, and Roberts, 1830.

(Note: the quote above appeared on the back cover of The Cato Journal 30, no. 1 (Winter 2010); Macaulay's full review, including the quote, can be viewed online at: http://www.econlib.org/library/Essays/macS1.html )

(Note: the online version does not give page numbers, but gives what I think are "screen" numbers. The passage quoted is all of "SC.96" which appears at the very end of the essay.)





September 5, 2012

Renaissance Florence: "A Really Vibrant, Flexible, and Free-Market City"



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Source of book image: http://covers.booktopia.com.au/big/9781421400594/the-economy-of-renaissance-florence.jpg



(p. 176) Chapters 4 and 5 deal with manufacturing, by far the main source of employment in the city. The Florentine textile industry had developed thanks to the Arno River, which provided water and power, and had become a market leader in Europe for high-quality products. Production was based, as everywhere in Europe, on a putting-out system--but strictly confined to the city. The author describes the organization and its changes over time, stressing, as for international banking, the flexibility of firms and their high turnover. Workers were organized in guilds, but the author stresses their nature as political associations rather than their economic role. Florentine guilds did not restrict the access to profession nor stifle innovation. Chapter 6 describes the banks catering for urban market--including local branches of international banks as well as smaller local firms, plus pawnbrokers, both Catholic and Jews. Local banks appeared thoroughly modern in their business and the resort to banking services was quite widespread. Artisans and workers were routinely paid with checks and had bank accounts. And the whole system worked well with almost no state intervention, at least until the late sixteenth century.


. . .


. . . , the author argues that Florentine society was very upwardly mobile, at least for the standard of the time and that the distribution of wealth by household according to the 1427 Catasto was fairly equal (although inequality increased in the next century).

(p. 177) As a whole, at the end of the book one has the impression of a really vibrant, flexible, and free-market city. The standard of living was undoubtedly high and not only for the wealthy, as witnessed by the art treasures of the city, but also for the working class. Literacy and numeracy was very common, and the majority of children attended a primary school.



For the full review, see:

Federico, Giovanni. "Review of: The Economy of Renaissance Florence." Journal of Economic Literature 48, no. 1 (2010): 175-77.


Book under review:

Goldthwaite, Richard A. The Economy of Renaissance Florence. Baltimore, MD: The Johns Hopkins University Press, 2009.





July 24, 2012

People "Enmeshed in Modern Commerce" Are More Generous



(p. C4) A few years ago, Joe Henrich of the University of British Columbia and his colleagues did a series of experiments in small-scale societies in the Amazon, New Guinea and Africa. They asked people to play the "ultimatum game," in which a player must decide how much of a windfall he needs to share with another player to prevent the other player from exercising his right to veto the whole deal. The more the small-scale society is enmeshed in modern commerce, the more generous the offers people make. This may shock those who believe in Rousseau's idea of the "noble savage," but not those who believe in the virtues of what Montesquieu called "sweet commerce."


. . .


. . . , though human beings do kind things unrewarded for their neighbors, for reward they also do kind things for strangers: They hand more cash to merchants than they do to beggars.



For the full commentary, see:

MATT RIDLEY. "MIND & MATTER; Which Makes Us Nicer, Team Spirit or Trade?" The Wall Street Journal (Sat., August 27, 2011): C4.

(Note: ellipses added.)


Page 76 of the Henrich et al article has the key result that Ridley summarizes:

Henrich, Joseph, Robert Boyd, Samuel Bowles, Colin F. Camerer, Ernst Fehr, Herbert Gintis, and Richard McElreath. "In Search of Homo Economicus: Behavioral Experiments in 15 Small-Scale Societies." American Economic Review 91, no. 2 (May 2001): 73-78.






July 1, 2012

Behavioral Economics Does Not Undermine Capitalism



thinkingfastandslowBK2012-06-21.jpg












Source of book image: http://www.brainpickings.org/wp-content/uploads/2011/10/thinkingfastandslow.jpg





Daniel Kahneman first gained fame in economics through research with Tversky in which they showed that some of economists' assumptions about human rationality do not always hold true.

Kahneman, whose discipline is psychology, went on to win the Nobel Prize in economics, sharing the prize with Vernon Smith. (Since the Prize is not normally awarded posthumously, Tversky was not a candidate.)

I have always thought that ultimately there should be only one unified science of human behavior---not claims that are "true" in economics and other claims that are "true" in psychology. (I even thought of minoring in psychology in college, before I realized that the price of minoring included taking time-intensive lab courses where you watched rats run through mazes.)

But I don't think the implications of current work in behavioral economics are as clear as has often been asserted.

Some important results in economics do not depend on strong claims of rationality. For instance, the most important "law" in economics is the law of demand, and that law is due to human constraints more than to human rationality. Gary Becker, early in his career, wrote an interesting paper in which he showed that the law of demand could also be derived from habitual and random behavior. (I remember in conversation, George Stigler saying that he did not like this paper by Becker, because it did not hone closely to the rationality assumption that Stigler and Becker defended in their "De Gustibus" article.)

The latest book by Kahneman is rich and stimulating. It mainly consists of cataloging the names of, and evidence for, a host of biases and errors that humans make in thinking. But that does not mean we cannot choose to be more rational when it matters. Kahneman believes that there is a conscious System 2 that can over-ride the unconscious System 1. In fact, part of his motive for cataloging bias and irrationality is precisely so that we can be aware, and over-ride when it matters.

Sometimes it is claimed, as for instance in a Nova episode on PBS, that bias and irrationality were the main reasons for the financial crisis of 2008. I believe the more important causes were policy mistakes, like Clinton and Congress pressuring Fannie Mae and Freddie Mac to make home loans to those who did not have the resources to repay them; and past government bailouts encouraging finance firms to take greater risks. And the length and depth of the crisis were increased by government stimulus and bailout programs. If instead, long-term cuts had been made in taxes, entrepreneurs would have had more of the resources they need to create start-ups that would have stimulated growth and reduced unemployment.

More broadly, aspects of behavioral economics mentioned, but not emphasized, by Kahneman, can actually strengthen the underpinnings for the case in favor of entrepreneurial capitalism. Entrepreneurs may be more successful when they are allowed to make use of informal knowledge that would not be classified as "rational" in the usual sense. (I discuss this some in my forthcoming paper, "The Epistemology of Entrepreneurship.")

Still, there are some useful and important examples and discussions in Kahneman's book. In the next several weeks, I will be quoting some of these.


Book discussed:

Kahneman, Daniel. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux, 2011.


The Becker article mentioned above is:

Becker, Gary S. "Irrational Behavior and Economic Theory." Journal of Political Economy 70, no. 1 (Feb. 1962): 1-13.


The Stigler-Becker article mentioned above is:

Stigler, George J., and Gary S. Becker. "De Gustibus Non Est Disputandum." American Economic Review 67, no. 2 (March 1977): 76-90.





June 10, 2012

If Milken's Bonds Are "Junk" then Yunis' Microloans Are "Junk" Too



(p. 167) The world owes a debt of gratitude to Mike Milken and his creative team. Did some people go too far? Yes. Did some of them take advantage of the freer flow of capital and end up doing more damage than good? Sure. But markets are messy. Major shifts in the flow of capital often lead to periods of excess before the pendulum swings back and equilibrium is restored. Mike Milken and his team made a major contribution to today's market atmosphere of high liquidity, which in turn has also helped lift the world's poor out of poverty. Today the Grameen Bank in Bangladesh has created microloans for mothers living on $2 a day. And that won Grameen the Nobel Prize. The Nobel Committee didn't call microloans "junk" debt.


Source:

Wyly, Sam. 1,000 Dollars and an Idea: Entrepreneur to Billionaire. New York: Newmarket Press, 2008.





June 6, 2012

Michael Milken Provided "Access to Capital for Growing Companies"



(p. 163) Although [high yield] . . . bonds eventually became known as a favored tool for leveraged--buyout specialists in the 1980s, Mike's original goal was different. He wanted to provide access to capital for growing companies that needed financing to expand and create jobs. Most of these companies lacked the investment grade" bond ratings required before the big financial institutions would back them. Mike knew that non-investment-grade (a k a "junk") companies create virtually all new jobs, and he believed that helping these companies grow strengthened the American economy and created good jobs for American workers.

It was by studying credit history at Berkeley in the 1960s that Mike developed his first great insight. He found that while there could be significant risk in any one high-yield bond, a carefully constructed portfolio of these assets produced a consistently better return over the long run than supposedly "safe" investment-grade debt. This was proved during the two decades of the 1970s and '80s when returns on high-yield bonds topped all other asset classes. Mike saw a great opportunity when he realized that the perception of default risk far exceeded the reality. In fact, these bonds had a surprisingly low-risk profile when adjusted for the potential returns.

After twenty years of superior gains, the high-yield bond market finally fell in 1990. Actually, it didn't fall--it was pushed by unwise government regulation that forced institutions to sell their bonds. The dip only lasted a year, however, with the market roaring back 46 percent in 1991.

Mike's competitors--Goldman Sachs, Morgan Stanley, and Credit Suisse First Boston, the old oligopolies of the syndication (p. 164) business--labeled them "junk bonds" to disparage Mike's brainchild. He was not a member of their white-shoe club and they were not going to take his act lying down.



Source:

Wyly, Sam. 1,000 Dollars and an Idea: Entrepreneur to Billionaire. New York: Newmarket Press, 2008.

(Note: bracketed words and ellipsis added.)





June 1, 2012

Lucasfilm Will Build Somewhere "That Sees Us as a Creative Asset, Not as an Evil Empire"



LucasValleyMarinCounty2012-05-30.jpg "Lucas Valley in Marin County, Calif., where residents' objections led George Lucas to abandon a bid to expand operations at a new site near Skywalker Ranch." Source of caption and photo: online version of the NYT article quoted and cited below.



(p. A13) SAN RAFAEL, Calif. -- In 1978, a year after "Star Wars" was released, George Lucas began building his movie production company far from Hollywood, in the quiet hills and valley of Marin County here just north of San Francisco. Starting with Skywalker Ranch, the various pieces of Lucasfilm came together over the decades behind the large trees on his 6,100-acre property, invisible from the single two-lane road that snakes through the area.

And even as his fame grew, Mr. Lucas earned his neighbors' respect through his discretion. Marin, one of America's richest counties, liked it that way.

But after spending years and millions of dollars, Mr. Lucas abruptly canceled plans recently for the third, and most likely last, major expansion, citing community opposition. An emotional statement posted online said Lucasfilm would build instead in a place "that sees us as a creative asset, not as an evil empire."

If the announcement took Marin by surprise, it was nothing compared with what came next. Mr. Lucas said he would sell the land to a developer to bring "low income housing" here.


. . .


Whatever Mr. Lucas's intentions, his announcement has unsettled a county whose famously liberal politics often sits uncomfortably with the issue of low-cost housing and where battles have been fought over such construction before. His proposal has pitted neighbor against neighbor, who, after failed peacemaking efforts over local artisanal cheese and wine, traded accusations in the local newspaper.

The staunchest opponents of Lucasfilm's expansion are now being accused of driving away the filmmaker and opening the door to a low-income housing development. That has created an atmosphere that one opponent, who asked not to be identified, saying she feared for her safety, described as "sheer terror" and likened to "Syria."

Carl Fricke, a board member of the Lucas Valley Estates Homeowners Association, which represents houses nearest to the Lucas property, said: "We got letters saying, 'You guys are going to get what you deserve. You're going to bring drug dealers, all this crime and lowlife in here.' "



For the full story, see:

NORIMITSU ONISHI. "A Pyrrhic Victory for Foes of a New Lucasfilm Project; In Lieu of digital Studio, Plan for Low-Income Homes." The New York Times (Tues., May 22, 2012): A13 & A19.

(Note: ellipsis added.)

(Note: the online version of the story is dated May 21, 2012 and has the title "Lucas and Rich Neighbors Agree to Disagree: Part II.")



LucasGeorge2012-05-30.jpg "Mr. Lucas said Marin needs affordable housing. A resident called his plan "class warfare."" Source of caption and photo: online version of the NYT article quoted and cited above.






May 22, 2012

Entrepreneur Krupp Was Paternalistically "Benevolent" and Was Skeptical of Capitalism



KrupBK2012-05-17.jpg











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








(p. A13) Harold James, professor of history and international affairs at Princeton University, portrays a vastly different organization in "Krupp," a painstaking chronicle of a company that traces its roots to a steel foundry in Essen in 1810. Mr. James's Krupp is a company for which the manufacturing of war matériel was always of secondary interest to that of civilian production. The company might have preferred to concentrate on manufacturing railroad equipment and consumer goods, but in the developing and expansionist German empire of the 19th century, state requirements for the tools of power dovetailed with Krupp's desire for regular long-term contracts. The result for Krupp was a practical, if not deliberate, focus on armaments.

From the manufacturer's perspective, the emphasis on war matériel did not consign Krupp to the ranks of belligerent militarists; it was just smart business. "The purpose of work should be the common good," founder Alfred Krupp once said, or at least that quote graces a statue the company erected after his death in 1887. All through the 19th century, Mr. James says, the pursuit of profit was less central to the Krupp mission than building a solid enterprise within a framework of social responsibility. As early as 1836, Krupp established a voluntary health-insurance program for its workers. By the middle of the century, life-insurance and pension plans had been instituted. Workers' hostels and company hospitals were constructed. In exchange for this paternalistic benevolence, Krupp expected complete loyalty from its work force and vehemently opposed the slightest hint of union organization or political activity among its employees.

"Alfred Krupp perfectly fits the mold of the heroic entrepreneur," Mr. James writes. "Profoundly skeptical of joint-stock companies, banks, and capitalism in general, but also of big-scale science and modern research methods, he was a genius at extending to its utmost limits the possibilities of the craft entrepreneur."



For the full review, see:

JENNIFER SIEGEL. "BOOKSHELF; Heavy Industry, Burdened Past; The company's 19th-century founder said it was devoted to the "common good." In World War II, it worked hard for the Third Reich." The Wall Street Journal (Tues., April 17, 2012): A13.

(Note: the online version of the interview is dated April 16, 2012.)






May 9, 2012

Capitalism More about Creating New Markets than about Competing to Dominate Old Ones



(p. A21) As a young man, Peter Thiel competed to get into Stanford. Then he competed to get into Stanford Law School. Then he competed to become a clerk for a federal judge. Thiel won all those competitions. But then he competed to get a Supreme Court clerkship.

Thiel lost that one. So instead of being a clerk, he went out and founded PayPal. Then he became an early investor in Facebook and many other celebrated technology firms. Somebody later asked him. "So, aren't you glad you didn't get that Supreme Court clerkship?"

The question got Thiel thinking. His thoughts are now incorporated into a course he is teaching in the Stanford Computer Science Department. (A student named Blake Masters posted outstanding notes online, and Thiel has confirmed their accuracy.)

One of his core points is that we tend to confuse capitalism with competition. We tend to think that whoever competes best comes out ahead. In the race to be more competitive, we sometimes confuse what is hard with what is valuable. The intensity of competition becomes a proxy for value.

In fact, Thiel argues, we often shouldn't seek to be really good competitors. We should seek to be really good monopolists. Instead of being slightly better than everybody else in a crowded and established field, it's often more valuable to create a new market and totally dominate it. The profit margins are much bigger, and the value to society is often bigger, too.

Now to be clear: When Thiel is talking about a "monopoly," he isn't talking about the illegal eliminate-your-rivals kind. He's talking about doing something so creative that you establish a distinct market, niche and identity. You've established a creative monopoly and everybody has to come to you if they want that service, at least for a time.



For the full commentary, see:

DAVID BROOKS. "The Creative Monopoly." The Wall Street Journal (Tues., April 24, 2012): A21.

(Note: the online version of the article is dated April 23, 2012.)


The online Peter Thiel notes are at:

http://blakemasters.tumblr.com/post/21169325300/peter-thiels-cs183-startup-class-4-notes-essay





February 19, 2012

Economic Freedom and Growth Depend on Protecting the Right to Rise



(p. A19) Congressman Paul Ryan recently coined a smart phrase to describe the core concept of economic freedom: "The right to rise."

Think about it. We talk about the right to free speech, the right to bear arms, the right to assembly. The right to rise doesn't seem like something we should have to protect.

But we do. We have to make it easier for people to do the things that allow them to rise. We have to let them compete. We need to let people fight for business. We need to let people take risks. We need to let people fail. We need to let people suffer the consequences of bad decisions. And we need to let people enjoy the fruits of good decisions, even good luck.

That is what economic freedom looks like. Freedom to succeed as well as to fail, freedom to do something or nothing. . . .


. . .


But when it comes to economic freedom, we are less forgiving of the cycles of growth and loss, of trial and error, and of failure and success that are part of the realities of the marketplace and life itself.


. . .


. . . , we must choose between the straight line promised by the statists and the jagged line of economic freedom. The straight line of gradual and controlled growth is what the statists promise but can never deliver. The jagged line offers no guarantees but has a powerful record of delivering the most prosperity and the most opportunity to the most people. We cannot possibly know in advance what freedom promises for 312 million individuals. But unless we are willing to explore the jagged line of freedom, we will be stuck with the straight line. And the straight line, it turns out, is a flat line.



For the full commentary, see:

JEB BUSH. "OPINION; Capitalism and the Right to Rise; In freedom lies the risk of failure. But in statism lies the certainty of stagnation." The Wall Street Journal (Mon., December 19, 2011): A19.

(Note: ellipses added.)







December 20, 2011

A&P Sold Consumers Better and Lower-Priced Food



GreatA&Pbk.jpg














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








(p. A15) Mr. Levinson's history centers on the two Hartford sons who followed their father into the business. They would spend their entire working lives at the company being known simply as "Mr. George" and "Mr. John." Thoughtful and studious, Mr. George's idea of excitement was a good jigsaw puzzle; Mr. John, somewhat more outgoing, liked the horses but also a daily lunch of milk and crackers. Together the brothers, neither of whom had finished high school, built what would be, for 40 years, the largest retail outlet in the world.

The brothers' business philosophy was simple, writes Mr. Levinson: "If the company keeps its costs down and prices low, more shoppers would come through its doors, producing more profits than if it kept prices high." The more stores they could open, the greater the take.

But the Hartfords had a public-relations problem. Since the nation's earliest days, small family stores had served as community anchors. There were thousands across the country. Mom and pop knew every customer who came through their door; they extended credit to families down on their luck. If low-priced chains drove out such stores, what would happen to small-town America?

In fact, many mom-and-pop operations were inefficiently and incompetently run. A&P might be coldly corporate by comparison, but it offered consumers far more variety and fresher, better-quality goods at less cost to the family budget.



For the full review, see:

PATRICK COOKE. "BOOKSHELF; How a Grocer Bagged Profits; At its peak, the chain had nearly 16,000 stores. Critics charged it with competing unfairly by offering too-low prices." The Wall Street Journal (Mon., AUGUST 29, 2011): A15.

(Note: ellipsis added.)



The book under review is:

Levinson, Marc. The Great A&P and the Struggle for Small Business in America. New York: Hill and Wang, 2011.





October 26, 2011

Arabic Numerals Enabled Better Accounting Systems



ManOfNumbersBK2011-08-08.jpg













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






(p. A13) Humans have been recording counts for at least 35,000 years, if the notches in a Paleolithic-era baboon's fibula are an indicator.


. . .


Before the 13th century, European businessmen recorded figures in Roman numerals and computed with their fingers or a counting board. But these creaky accounting systems began to buckle under the growing complexity of regional and international finance. In 1202, Leonardo of Pisa--better known by his family name, Fibonacci--published the "Liber Abbaci," or "Book of Calculation," a 600-page tome detailing the rules of Hindu-Arabic arithmetic and algebra. Fibonacci's volume was directed not to scholars but to merchants, the first work in the West to demonstrate the commercial utility of Eastern mathematics. The book was an instant success and propelled the Pisan maestro d'abbaco to fame.

The "Liber Abbaci" inspired a flood of regionally produced (and lesser) primers on the subject. Arithmetic schools sprang up throughout Italy and would eventually count among their pupils da Vinci and Machiavelli. German merchants flocked to Venice during the 1300s to learn the new accounting practices. In "The Man of Numbers," mathematician Keith Devlin makes the case that Fibonacci's book spearheaded the decline and fall of the Roman numeral and transformed scientific, technological and commercial calculation in the West.

At age 15, Fibonacci accompanied his father, a Pisan trade representative, to the North African port of Bugia (now Bejaia, in Algeria). In the preface to "Liber Abbaci," Fibonacci writes of his early introduction to the "art of the nine Indian figures" and their computational power. After more than a decade of his own studies and tutelage under Arabic mathematicians across North Africa, he returned to Pisa to write his masterwork. Such was the acclaim that Fibonacci appeared before Emperor Frederick II--a colorful intellectual who referred to himself as Stupor mundi or Wonder of the World--and vanquished the emperor's court mathematician in an arithmetic duel.


. . .


. . . as Mr. Devlin reminds us, even something as prosaic as a sequence of 10 numbers can remake an entire world.



For the full review, see:

ALAN HIRSHFELD. "BOOKSHELF; Counting On Progress; Roman numerals were fine for adding and subtracting. Fibonacci saw that complex math required a better system." The Wall Street Journal (Thurs., JULY 7, 2011): A13.

(Note: ellipses added; italics in original.)


Book under review:

Devlin, Keith. The Man of Numbers: Fibonacci's Arithmetic Revolution. New York: Walker & Company, 2011.





October 6, 2011

"Insanely Great" Entrepreneur Steve Jobs Wanted "a Chance to Change the World"



Steve Jobs died yesterday (Weds., October 5, 2011).

Jobs was an innovator of my favorite kind, what I call a "project entrepreneur." He showed us what excitement and progress is possible if we preserve the institutions that allow entrepreneurial capitalism to exist.

When he was recruiting John Sculley to leave Pepsi and join Apple, Jobs asked him: "Do you want to spend the rest of your life selling sugared water or do you want a chance to change the world?" (p. 90).

Steve Jobs wanted to change the world. He got the job done.


Source of quote of Jobs' question to Sculley:

Sculley, John, and John A. Byrne. Odyssey: Pepsi to Apple. paperback ed. New York: HarperCollins, 1988.






October 3, 2011

"Coolidge Helped Americans Prosper by Letting Them Be Free"



(p. A15) Ronald Reagan, who grew up during the Coolidge presidency, admired "Silent Cal," even going so far as to read a biography of the 30th president as he recovered from a surgery in 1985 and to praise him in letters to his constituents. To Reagan, Coolidge wasn't silent, but was silenced by New Deal supporters, whose intellectual heirs control much of Washington today.


. . .


Unlike President Obama, President Coolidge didn't want to "spread the wealth around," but to grow it. He didn't call for "shared sacrifice"--Americans had sacrificed enough during the great war--but for good character.

There "is no surer road to destruction than prosperity without character," he said in a speech at the University of Pennsylvania in 1921. And from the White House lawn in 1924 he said, "I want the people of America to be able to work less for the Government and more for themselves. I want them to have the rewards of their own industry. That is the chief meaning of freedom."


. . .


As Coolidge saw things in 1924, "A government which lays taxes on the people not required by urgent public necessity and sound public policy is not a protector of liberty, but an instrument of tyranny. It condemns the citizen to servitude." Coolidge helped Americans prosper by letting them be free.



For the full commentary, see:

CHARLES C. JOHNSON. "How Silent Cal Beat a Recession; The late president inherited a bad economy, and he cut taxes and slashed spending to spur growth." The Wall Street Journal (Thurs., August 4, 2011): A15.

(Note: ellipses added.)





September 28, 2011

We Tend to Ignore Information that Contradicts Our Beliefs



BelievingBrainBK2011-08-09.jpg












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






We learn the most when our priors are contradicted. But the dissonance between evidence and beliefs is painful. So we often do not see, or soon forget, evidence that does not fit with our beliefs.

The innovative entrepreneur is often a person who sees and forces herself to remember, the dissonant fact, storing it away to make sense of, or make use of, later. At the start, she may be alone in what she sees and what she remembers. So if we are to benefit from her ability and willingness to bear the pain of dissonance, she must have the freedom to differ, and she must have the financial wherewith-all to support herself until her vision is more widely shared, better understood, and more fruitfully applied.


(p. A13) Beliefs come first; reasons second. That's the insightful message of "The Believing Brain," by Michael Shermer, the founder of Skeptic magazine. In the book, he brilliantly lays out what modern cognitive research has to tell us about his subject--namely, that our brains are "belief engines" that naturally "look for and find patterns" and then infuse them with meaning. These meaningful patterns form beliefs that shape our understanding of reality. Our brains tend to seek out information that confirms our beliefs, ignoring information that contradicts them. Mr. Shermer calls this "belief-dependent reality." The well-worn phrase "seeing is believing" has it backward: Our believing dictates what we're seeing.


. . .


One of the book's most enjoyable discussions concerns the politics of belief. Mr. Shermer takes an entertaining look at academic research claiming to prove that conservative beliefs largely result from psychopathologies. He drolly cites survey results showing that 80% of professors in the humanities and social sciences describe themselves as liberals. Could these findings about psychopathological conservative political beliefs possibly be the result of the researchers' confirmation bias?

As for his own political bias, Mr. Shermer says that he's "a fiscally conservative civil libertarian." He is a fan of old-style liberalism, as in liberality of outlook, and cites "The Science of Liberty" author Timothy Ferris's splendid formulation: "Liberalism and science are methods, not ideologies." The "scientific solution to the political problem of oppressive governments," Mr. Shermer says, "is the tried-and-true method of spreading liberal democracy and market capitalism through the open exchange of information, products, and services across porous economic borders."

But it is science itself that Mr. Shermer most heartily embraces. "The Believing Brain" ends with an engaging history of astronomy that illustrates how the scientific method developed as the only reliable way for us to discover true patterns and true agents at work. Seeing through a telescope, it seems, is believing of the best kind.



For the full review, see:

RONALD BAILEY. "A Trick Of the Mind; Looking for patterns in life and then infusing them with meaning, from alien intervention to federal conspiracy." The Wall Street Journal (Weds., July 27, 2011): A13.

(Note: ellipsis added.)


Book reviewed:

Shermer, Michael. The Believing Brain: From Ghosts and Gods to Politics and Conspiracies---How We Construct Beliefs and Reinforce Them as Truths. New York: Times Books, 2011.





September 25, 2011

Lunar Entrepreneurs



(p. A1) Now that the last space shuttle has landed back on Earth, a new generation of space entrepreneurs would like to whip up excitement about the prospect of returning to the Moon.


. . .


(p. A3) "It's probably the biggest wealth creation opportunity in modern history," said Barney Pell, a former NASA computer scientist turned entrepreneur and now a co-founder of Moon Express. While Moon Express might initially make money by sending small payloads, the big fortune would come from bringing back platinum and other rare metals, Dr. Pell said.

"Long term, the market is massive, no doubt," he said. "This is not a question of if. It's a question of who and when. We hope it's us and soon."

Like the aviation prizes that jump-started airplane technology a century ago, the Google Lunar X Prize is meant to rally technologists and entrepreneurs. It is administered by the X Prize Foundation, which handed out $10 million in 2004 to the first private team to build a spacecraft that could carry people 60 miles above the Earth's surface. (The winner, SpaceShipOne, was built by the aerospace designer Burt Rutan with backing from Paul Allen, the software magnate.)



For the full story, see:

KENNETH CHANG. "In a Private Race to the Moon, Flights of Fancy Are in the Air." The New York Times (Fri., July 22, 2011): A1 & A3.

(Note: the online version of the story is dated July 21, 2011 and has the title "Race to the Moon Heats Up for Private Firms.")





September 20, 2011

"Mystified by an American Disdain for Its Own Business Culture"



HollandAndDavisProducersSomethingVentured2011-05-17.jpg "Paul Holland and Molly Davis, producers of a new documentary, "Something Ventured," that gives an admiring look at innovators and investors from the past." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. B3) The film, "Something Ventured," is a frankly admiring look at those who went out on a limb to back upstarts like Atari, Cisco Systems, Genentech and Apple.


. . .


But the film's beating heart is captured by Tom Perkins, whose Kleiner Perkins Caufield & Byers company backed the gene-splicing technology of Genentech, among other things. "It's great if you can make money and change the world for the better at the same time," said Mr. Perkins, . . .

Other stars of "Something Ventured" include Nolan Bushnell of Atari; Sandy Lerner of Cisco; Jimmy Treybig of Tandem Computers; and a string of venture capitalists, among them Don Valentine, Dick Kramlich, and Arthur Rock.

Many who appear joined dozens of other business people to finance the picture's roughly $700,000 cost with contributions of a few thousand dollars each, Mr. Holland said.

In becoming involved, several participants said they wanted to rekindle an entrepreneurial spirit that had either waned or changed since the rough-and-tumble years when, by the film's telling, Atari was started with $250 but needed capital to push Pong, and Mr. Bushnell passed up a chance to own a third of Apple, started by his employee Steve Jobs, for $50,000.


. . .


Mr. Valentine, . . . , said entrepreneurship had not ended -- his company was a force behind Google -- but it is less often coming from those born in the United States.

"You don't understand what you have here" is a constant refrain, he said, from Southeast Asian and Indian innovators who are sometimes mystified by an American disdain for its own business culture.



For the full story, see:

MICHAEL CIEPLY . "A Film About Capitalism, and (Surprise) It's a Love Story." The New York Times, Week in Review Section (Sun., March 8, 2011): 8.

(Note: ellipses added.)

(Note: the online version of the story is dated March 7, 2011.)





August 6, 2011

Entrepreneur Frederic Tudor Spent Family Fortune to Make Ice Obsession a Business Success



(p. 71) Lake ice was a marvelous product. It created itself at no cost to the producer, was clean, renewable, and infinite in supply. The only drawbacks were that there was no infrastructure to produce and store it, and no market to sell it to. In order to make the ice industry exist, it was necessary to work out ways to cut and lift ice on a large scale, build storehouses, secure trading rights, and engage a reliable chain of shippers and agents (p. 72) and, above all, create a demand for ice in places where ice had seldom or never been seen, and was most assuredly not something anyone was predisposed to pay for. The man who did all this was a Bostonian of good birth and challenging disposition named Frederic Tudor. Making ice a commercial proposition became his overweening obsession.

The notion of shipping ice from New England to distant ports was considered completely mad - 'the vagary of a disordered brain', in the words of one of his contemporaries. The first shipment of ice to Britain so puzzled customs officials as to how to classify it that all 300 tons of it melted away before it could be moved off the docks. Shipowners were highly reluctant to accept it as cargo. They didn't relish the humiliation of arriving in a port with a holdful of useless water, but they were also wary of the very real danger of tons of shifting ice and sloshing melt-water making their ships unstable. These were men, after all, whose nautical instincts were based entirely on the idea of keeping water outside the ship, so they were loath to take on such an eccentric risk when there wasn't even a certain market at the end of it all.

Tudor was a strange and difficult man - 'imperious, vain, contemptuous of competitors and implacable to enemies', in the estimation of Daniel J. Boorstin. He alienated all his closest friends and betrayed the trust of colleagues, almost as if that were his life's ambition. Nearly all the technological innovations that made the ice trade possible were actually the work of his retiring, compliant, long-suffering associate Nathaniel Wyeth. It cost Tudor years of frustrated endeavour, and all of his family fortune, to get the ice business up and running, but gradually it caught on and eventually it made him and many others rich. For several decades, ice was America's second biggest crop, measured by weight. If securely insulated, ice could last a surprisingly long while. It could even survive the 16,000-mile, 130-day trip from Boston to Bombay - or at least about two-thirds of it could, enough to make the long trip profitable. Ice went to the furthest corners of South America and from New England to California via Cape Horn. Sawdust, a product previously without any value at all, proved to be an excellent insulator, providing useful extra income for Maine lumber mills.



Source:

Bryson, Bill. At Home: A Short History of Private Life. New York: Doubleday, 2010.





August 1, 2011

Ralph Nader Blasts Cisco for NOT Maximizing Shareholder Value



(p. C1) Ralph Nader, the scourge of American business and onetime presidential candidate, has found his next corporate demon: Cisco Systems Inc.

Mr. Nader isn't calling for a router recall or claiming the company's networks are unsafe at any speed. Instead, he wants the tech company to pay a bigger dividend to boost its shares.

The consumer advocate's motives are far from altruistic. He is a longtime disgruntled Cisco investor who called the company's share performance "appalling." In a private letter to Cisco Chief Executive John Chambers sent June 13, Mr. Nader blasted the CEO for not doing enough to lift shares of the technology company and said "it is time for a long overdue Cisco shareholder revolt against a management that is oblivious to building or even maintaining shareholder value," according to the letter.


. . .


The 77-year-old Mr. Nader, who rose to fame in the 1960s on his claims that American automobiles were unsafe, admitted the letter is a departure from his typical antibusiness stance. He said he has been an "adversary of corporate capitalism," but he is a believer in capitalism, so long as shareholders have a voice. He wrote the letter to Mr. Chambers, he said, because he objects to the "powerlessness of owner shareholders."



For the full story, see:

SUSAN PULLIAM. "Nader Kindles Fires of Revolt." The Wall Street Journal (Fri., JUNE 24, 2011): C1-C2.

(Note: ellipsis added.)






July 30, 2011

Capitalism Was Not Inevitable



RelentlessRevolutionBK.jpg













Source of book image:
http://ecx.images-amazon.com/images/I/519PfT2oUtL.jpg




(p. 15) What is the nature of capitalism? For Joseph Schumpeter, the Austrian-born economist whose writings have acquired a special relevance in the past year or two, this most modern of economic systems "incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one." Capitalism, Schumpeter proclaimed, cannot stand still; it is a system driven by waves of entrepreneurial innovation, or what he memorably described as a "perennial gale of creative destruction."

Schumpeter died in 1950, but his ghost looms large over Joyce Appleby's splendid new account of the "relentless revolution" unleashed by capitalism from the 16th century onward. Appleby, a distinguished historian who has dedicated her career to studying the origins of capitalism in the Anglo-American world, here broadens her scope to take in the global history of capitalism in all its creative -- and destructive -- glory.

She begins "The Relentless Revolution" by noting that the rise of the economic system we call capitalism was in many ways improbable. It was, she rightly observes, "a startling departure from the norms that had prevailed for 4,000 years," signaling the arrival of a new mentality, one that permitted private investors to pursue profits at the expense of older values and customs.

In viewing capitalism as an extension of a culture unique to a particular time and place, Appleby is understandably contemptuous of those who posit, in the spirit of Adam Smith, that capitalism was a natural outgrowth of human nature. She is equally scornful of those who believe that its emergence was in any way inevitable or inexorable.


. . .


. . . , she captures how a new generation of now forgotten economic writers active long before Adam Smith built a case "that the elements in any economy were negotiable and fluid, the exact opposite of the stasis so long desired." This was a revolution of the mind, not machines, and it ushered in profound changes in how people viewed everything from usury to joint stock companies. As she bluntly concludes, "there can be no capitalism . . . without a culture of capitalism."


. . .


The individual entrepreneur is at the center of her analysis, and her book offers thumbnail sketches of British innovators from James Watt to Josiah Wedgwood. She continues on to the United States and Germany, giving readers a whirlwind tour of the lives and achievements of a host of men whom she calls "industrial leviathans" -- Vanderbilt, Rockefeller and Carnegie in the United States; Thyssen, Siemens and Zeiss in Germany. All created new industries while destroying old ones.



For the full review, see:

STEPHEN MIHM. "Capitalist Chameleon." The New York Times Book Review (Sun., January 24, 2010): 15.

(Note: ellipses added except for the one in the "there can be no capitalism . . . without a culture of capitalism" quote.)

(Note: the online version of the review is dated January 22, 2010.)


Book under review:

Appleby, Joyce. The Relentless Revolution: A History of Capitalism. New York: W. W. Norton & Company, 2010.





July 24, 2011

Bricks-and-Mortar Restaurants Use Police (Instead of Better Food) to Beat Food Trucks



KimImaAndKennyLaoFoodTruck2011-07-16.jpg "Kim Ima and Kenny Lao parked their food trucks on Front Street in Dumbo." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. D4) FOOD trucks, those rolling symbols of New York City's infatuation with haute casual food, are suddenly being chased from Midtown Manhattan. In the last 10 days, the Treats Truck, which has sold cookies and brownies for four years during lunchtime at West 45th Street near Avenue of the Americas, has been told by police officers that it is no longer welcome there, nor at its late-afternoon 38th Street and Fifth Avenue location. The Rickshaw Dumpling truck, a presence for three years at West 45th Street near the Treats Truck, has been shooed away as well.

The police "have told us they no longer want food trucks in Midtown," said Kim Ima, the owner of the Treats Truck, a pioneer of the city's new-wave food-truck movement, who began cultivating customers on West 45th Street in 2007.


. . .


Mr. Lao and other food-truck operators said they suspect that the police are responding to complaints by brick-and-mortar businesses that resent competition. Such was the case last year, when store merchants on the Upper East Side complained about Patty's Taco Truck, which sold tortas, tacos de lengua and cemitas on Lexington Avenue. The truck was towed several times and the operator arrested, prompting the Street Vendor Project, an advocate for vendors based at the Urban Justice Center, to file the lawsuit that resulted in Judge Wright's ruling, which said food is merchandise that can be regulated.



For the full story, see:

GLENN COLLINS. "Food Trucks Shooed From Midtown." The New York Times (Weds., June 29, 2011): D4.

(Note: ellipsis added.)

(Note: the online version of the story is dated June 28, 2011.)






July 1, 2011

500 Kinds of Hammers: Even Marx Knew that Capitalism Produces Variety



HammerDiversityBasallaPage4.jpg



















The diversity of hammers, part 1. Source of graphic: page 4 of the Basalla book quoted and cited aways down below.




(p. 21 of Bryson) Suddenly, for the first time In history, there was in most people's lives a lot of everything. Karl Marx, living in London, noted with a tone of wonder, and just a hint of helpless admiration, that it was possible to buy five hundred kinds of hammer In Britain. Everywhere was activity, Modern Londoners live in a great Victorian city; the Victorians lived through It, so to speak. In twelve years eight railway termini opened In London. The scale of disruption--the trenches, the tunnels, the muddy excavations, the congestion of wagons and other vehicles, the smoke, the din, the clutter--that came from filling the city with railways, bridges, sewers, pumping stations, power stations, subway lines, and all the rest meant that Victorian London was not just the biggest city in the world but the noisiest, foulest, muddiest, busiest, most choked and dug-over place the world had ever seen.

The 1851 census also showed that more people in Britain now lived in cities than in the countryside--the first time that this had happened anywhere in the world--and the most visible consequence of this was crowds on a scale never before experienced. People now worked en masse, traveled en masse, were schooled, imprisoned, and hospitalized en masse. When they went out to enjoy themselves, they did that en masse, and nowhere did they go with greater enthusiasm and rapture than to the Crystal Palace.



Source:

Bryson, Bill. At Home: A Short History of Private Life. New York: Doubleday, 2010.



On Marx and hammers, Bryson references p. 156 of Petroski:

Petroski, Henry. The Evolution of Useful Things: How Everyday Artifacts--from Forks and Pins to Paper Clips and Zippers--Came to Be as They Are. New York: A. Knopf, 1992.


Actually, Petroski's source on Marx on hammers clearly is Basalla who he quotes on pp. 23-24:

(p. 23 of Petroski) George Basalla, in The Evolution of Technology, suggests the great "diversity of things made by human hands" over the past two hundred years by pointing out that five million patents have been issued in America alone. . . . (p. 24) He then introduces the fundamental questions of his study:

The variety of made things is every bit as astonishing as that of living things. Consider the range that extends from stone tools to microchips, from waterwheels to spacecraft, from thumb-tacks to skyscrapers. In 1867 Karl Marx was surprised to learn . . . that five hundred different kinds of hammers were produced in Birmingham, England, each one adapted to a specific function in industry or the crafts. What forces led to the proliferation of so many variations of this ancient and common tool? Or more generally, why are there so many different kinds of things?

Basalla dismisses the "traditional wisdom" that attributes technological diversity to necessity and utility, and looks for other explanations, "especially ones that can incorporate the most general assumptions about the meaning and goals of life."


(Note: italics in original; first ellipsis added; second ellipsis in original.)


Petroski then again mentions Marx on hammers on the p. 156 that is referenced by Bryson:

(p. 156 of Petroski) In spite of Marx's astonishment that five hundred different kinds of hammers were made in Birmingham in the 1860s, this was no capitalist plot. Indeed, if there were a plot, it was to not make more. The proliferation of hammer types occurred because there were then, as now, many specialized uses of hammers, and each user wished to possess a tool that was suited as ideally as possible to the tasks he performed perhaps thousands of times each day, but seldom if ever in a formal social context. I have often reflected on the value of special hammers while using the two ordinary ones from my tool chest: a familiar carpenter's hammer with a claw, and a smaller version that fits in places the larger one does not. The tasks I've applied them to have included driving and removing nails, of course, but also opening and closing paint cans, pounding on chisels, tacking down carpets, straightening dented bicycle fenders, breaking bricks, driving wooden stakes, and on and on.



The Basalla book is:

Basalla, George. The Evolution of Technology, Cambridge Studies in the History of Science. Cambridge, UK: Cambridge University Press, 1988.


On p. 2 of Basalla, he writes:

(p. 2 of Basalla) The variety of made things is every bit as astonishing as that of living things. Consider the range that extends from stone tools to microchips, from waterwheels to spacecraft, from thumbtacks to skyscrapers. In 1867 Karl Marx was surprised to learn, as well he might have been, that five hundred different kinds of hammers were produced in Birmingham, England, each one adapted to a specific function in industry or the crafts . . .

(Note: ellipsis added.)


In Basalla's notes to this chapter, the only Marx he mentions is the first volume of Capital. Searching volume one of Capital in Google Books for "hammer," one discovers the relevant passage on p. 375:

(p. 374 of Marx) Manufacture is characterized by the differentiation of (p. 375) the instruments of labour--a differentiation whereby implements of a given sort acquire fixed shapes, adapted to each particular application, and by the specialisation (sic) of those instruments, giving to each special instrument its full play only in the hands of a specific detail labourer. In Birmingham alone 500 varieties of hammers are produced, and not only is each adapted to one particular process, but several varieties often serve exclusively for the different operations in one and the same process. The manufacturing period simplifies, improves, and multiplies the implements of labour, by adapting them to the exclusively special functions of each detail labourer.


The Marx book is:

Marx, Karl. Capital: A Critique of Political Economy, Vol. 1. New York: Modern Library, 1906 [first German edition in 1867].




HammerDiversityBasallaPage5.jpg



















The diversity of hammers, part 2. Source of graphic: page 5 of the Basalla book quoted and cited somewhere above.






May 24, 2011

Crushed Under Eurostar in a Desparate Dash to a Better Life



(p. 280) In recent years, police have practically barricaded the marshalling yard in Calais, France,where the elegant Eurostar train must slow down before it enters the Channel Tunnel to England. Today the Calais marshalling yard for the Channel Tunnel looks like what the military might erect around a flying-saucer wreckage--barbed wire, electric fences, armed guards, and police dogs everywhere. Yet each night as darkness falls desperate men from the developing world, Africans and Pakistanis and Afghans and others, hide throughout the marshalling yard, sprint toward the Eurostar as it slows for the tunnel, and try to cling to its side as it accelerates again. They hope to survive until the train bears (p. 281) them into the United Kingdom, for French law treats illegal immigrants harshly, while England is more liberal. Numerous indigent developing-world men have been killed when they have slipped off the sides or the couplers of Eurostar, then fallen beneath its wheels; the stylish passengers aboard the train may feel a slight bump. Yet the men keep trying, though most must know there is hardly anything on this aerodynamically sleek train to grab hold of. Many are arrested as they dash toward the train and the favored life it represents. If released, they return to dash again. If deported, they try to sneak back into the country and dash again.


Source:

Easterbrook, Gregg. The Progress Paradox: How Life Gets Better While People Feel Worse. Paperback ed. New York: Random House, 2004.





May 20, 2011

Garbage Landfill Is Home to 80,000 in Payatas



(p. 281) Perhaps you've heard of Smoky Mountain, the town-sized garbage landfill in Payatas, outside Manila in the Philippines, that is home to an estimated eighty thousand desperately poor Filipinos who eke out a miserable existence scavenging what others throw away. Eighty thousand people is more than the population of Utica, New York. Entire families have been born at the Smoky Mountain landfill and lived their lives there, amidst squalor, stench, and constant smoke of smoldering trash. In July 2000, about two hundred residents of the Payatas landfill died when a large hill of trash collapsed, burying them under a garbage avalanche.


Source:

Easterbrook, Gregg. The Progress Paradox: How Life Gets Better While People Feel Worse. Paperback ed. New York: Random House, 2004.





May 12, 2011

"The Frozen Body of Someone Desperate to Enter the United States"



(p. 279) In August 2001, as an American Airlines 777 jetliner arriving from overseas descended toward John F. Kennedy International Airport in New York and lowered its landing gear, the frozen body of a man fell into a marsh beneath the field's approach lanes. The body, believed to be that of a young Nigerian, was buried in a plain wooden casket in City Cemetery, the resting place of New York indigents popularly known as Potter's Field. No one will ever know for certain, but it appears the young man, who carried no identification, had hidden in the wheel well of the jet, hoping to steal into the United States. If, as police speculated, he was from an African village, he might not have known that the air outside a jetliner at cruise altitude may be minus-80 degrees Fahrenheit, and that wheel wells are unheated; they are also not pressurized, rendering breathing almost impossible at a jetliner's cruise altitude. Or the victim might have known these things and climbed into the wheel well anyway because he was desperate. The unknown man's death (p. 280) marked the third time since 1997 that the frozen body of someone desperate to enter the United States had fallen from the wheel wells as a jetliner from overseas lowered its landing gear on descent toward JFK. In the man's pockets were a few minor personal effects and a street-vendor's map of Manhattan.

Contemplating this tragedy I thought, first, of the horror the man must have experienced as the plane's mindless hydraulic mechanisms drew the landing struts and wheels up to crush him. Somehow he avoided being crushed--only to realize as the air craft ascended that it was getting very cold and the air was getting very thin, and he was going to die gasping and shaking. Then I contemplated what the man's final thoughts might have been. Fear, of course; regret. Perhaps, at the last, dread that his own death might consign the rest of his family in his village to a life of suffering: for the desperation of many trying to reach the West from the developing world is motivated by their desire to work extremely hard and to live on the edge here, sending part of their incomes back home to those even worse off.



Source:

Easterbrook, Gregg. The Progress Paradox: How Life Gets Better While People Feel Worse. Paperback ed. New York: Random House, 2004.





May 4, 2011

Limits to "Sprawl" Add to House Prices Which Benefits the "Already Entrenched"



(p. 130) If 50 percent more Americans are on the way that means there must be 50 percent more suburban subdivisions, 50 percent more malls, 50 percent more of everything--unless anyone thinks it is fair to deny to newcomers the physical space and comfort that current Americans enjoy.

Sprawl may he managed well or poorly, and "smart growth" is better than dumb growth. But when people object to development per se, what they almost always mean is that they have achieved a nice lifestyle and now wish to pull up the ladders against others--and, not coincidentally, to make their own properties more valuable by artificially limiting supply. California real estate prices in particular have shot up in the last decade because slow-growth ordinances and no-growth judicial rulings have artificially restricted housing supply. Opposing sprawl can be a financial boon to anyone who's already entrenched.

Anything that runs up housing prices is of particular concern to educational equality, since today, in many parts of the United States, the housing market in effect regulates access to the best public schools. Buyers pay significant premiums for homes in the districts of high-quality public schools; in the Washington, D.C., suburbs, a home in the excellent Fairfax County or Montgomery County school systems may sell for $200,000 more than an identical dwelling from which children would attend the troubled schools of Prince George's County or Arlington County. In turn, SAT scores rise in tandem with family income--each $10,000 increment of increase in family income adds twenty to thirty points to a child's total SAT scores, studies show. Why does family income raise SAT scores? Partly because a high income enables parents to give children extra advantages, partly because low income parents or parents in broken families may shirk their responsibility for helping children succeed in school, but mostly (p. 131) because the higher a family's income the better a school district it can buy into, via the housing market. Since education is closely linked to success in later life, the nation has an interest in preventing exclusionary housing prices. That means there must be more sprawl and more growth to increase the housing supply and thereby reduce prices.



Source:

Easterbrook, Gregg. The Progress Paradox: How Life Gets Better While People Feel Worse. Paperback ed. New York: Random House, 2004.





April 18, 2011

"Elites Like Bad News"



(p. 101) Many elites love writers such as Jean-Paul Sartre, who viewed all human action as meaningless, or Thomas Pynchon, whose novels, such as Gravity's Rainbow purport to present hard-science arguments that ours is a pointless universe doomed to meaningless demise. Pynchon's grasp of physics is debatable; what matters is that when he claimed to have found scientific proof the universe is pointless, many of a certain ilk were eager to believe him. Eighty years ago, elites of the United Stares and Europe gushed in praise over the social historian Oswald Spen-(p. 102)gler's work The Decline of the West, which argued not only that American and European civilization "one day will lie in fragments, forgotten" but that the downfall of Western civilization was imminently at hand. Similarly, William Butler Yeats in the early twentieth century was praised by Western intellectuals for predicting pending social disintegration through his famed phrase, "Things fall apart; the centre cannot hold." Spengler even maintained that the collapse of Western civilization would be a beneficial development, because America and Europe were contemptible. Eight decades later, the West is far stronger, richer, more secure, more diverse, and more free than when Spengler declared it a decaying relic about to vanish. Nevertheless, his work and similar predictions of impending Western collapse are still spoken of reverentially among intellectual elites, a portion of whom delight to hear anything American and European called bad.

If elites like bad news, then the eagerness of intellectuals, artists, and tastemakers to embrace claims of ecological doomsday, population crash, coming global plagues, economic down fall, cultural wars, or the end of this or that become, at least, comprehensible.



Source:

Easterbrook, Gregg. The Progress Paradox: How Life Gets Better While People Feel Worse. Paperback ed. New York: Random House, 2004.

(Note: italics in original.)





April 14, 2011

U.S. Citizens Choose Cars for 99% of Trips



(p. 92) America is a car culture and has been for almost a century, the phrase "traffic jam" dating to 1910, meaning we're stuck with car culture for the time being. In the United States, the number of trips taken on public transportation has since 1998 been rising more rapidly than trips taken in cars. But public transportation nevertheless cannot be a cure-all for traffic congestion, since only a total of 1 percent of all U.S. trips occur on public transit. Double the share, which would require notable effort and capital expense, and it's still only 2 percent. A car culture with a rising population and rising prosperity has little choice but to keep investing in roads and parking.


Source:

Easterbrook, Gregg. The Progress Paradox: How Life Gets Better While People Feel Worse. Paperback ed. New York: Random House, 2004.





April 11, 2011

For Rand Money Was a Reward and a Noble Means, But Her Vision Was the End



AynRandAndTheWorldSheMadeBKb2011-03-11.jpg












Source of book image:
http://2.bp.blogspot.com/_ZnmbvrcWaFQ/TQDZppbZS6I/AAAAAAAAAoM/CjtOtOuGYAM/s1600/ayn-rand-and-the-world-she-made.jpg






For Rand, adopting the dollar sign as a symbol was an ironic gesture--an elegant and graceful way of thumbing her nose at those who attacked the innovation and creativity of capitalism. They criticized a caricatured version of capitalism, and she threw the caricature back at them.

But at her most serious, money was never an end-in-itself for her, but rather a reward for achieving creative innovation, and a means for accomplishing even more ambitious creative innovation.

Remember that in Rand's pure and lyrical Anthem, the hero is willing to give his invention away, and even be killed, as long as the Council agrees to allow the light he invented to keep shining.

In that wonderful moment with Bennett Cerf, Ayn Rand lived up to the hero she had created:


(p. 8) When Bennett Cerf, a head of Random House, begged her to cut Galt's speech, Rand replied with what Heller calls "a comment that became publishing legend": "Would you cut the Bible?" One can imagine what Cerf thought -- he had already told Rand plainly, "I find your political philosophy abhorrent" -- but the strange thing is that Rand's grandiosity turned out to be perfectly justified.

In fact, any editor certainly would cut the Bible, if an agent submitted it as a new work of fiction. But Cerf offered Rand an alternative: if she gave up 7 cents per copy in royalties, she could have the extra paper needed to print Galt's oration. That she agreed is a sign of the great contradiction that haunts her writing and especially her life.


. . .


Yet while Rand took to wearing a dollar-sign pin to advertise her love of capitalism, Heller makes clear that the author had no real affection for dollars themselves. Giving up her royalties to preserve her vision is something that no genuine capitalist, and few popular novelists, would have done.



For the full review, see:

ADAM KIRSCH. "Capitalist With a $." The New York Times Book Review (Sun., November 1, 2009): 1 & 8.

(Note: ellipsis added.)

(Note: the online version of the review is dated October 29, 2009 and has the title "Ayn Rand's Revenge.")


Book reviewed:

Heller, Anne C. Ayn Rand and the World She Made. New York: Nan A. Talese/Doubleday, 2009.


Here is what the hero says in the key passage of Anthem:

"Our brothers! Your are right. Let the will of the Council be done upon our body. We do not care. But the light? What will you do with the light?" (p. 72)


Source:

Rand, Ayn. Anthem. Caldwell, Idaho: The Caxton Printers, Ltd., 1946.





April 10, 2011

Cars Increase Our "Personal Area"



(p. 89) Cars are the primary reason for the ever increasing "personal area" of Western life. As Jesse Ausubel of Rockefeller University has shown, "personal area"--the volume of territory through which someone moves in a typical day--has risen tenfold in the West since 1950, mainly because "personal speed" has tripled. Before general ownership of cars, most people were limited on most days to destinations to which the could walk, or that were close to bus or streetcar lines. Now most people head to whatever destination they wish, so long as traffic jams don't intervene. Ausubel has found that the "personal speed" of typical Americans has been rising at about 2.7 percent per annum for a generation; at that rate, the "personal area" the typical individual covers per day doubles every twenty-five years. Racing around from one destination to the next--job, school, stores, gym, restaurant, church--may be stressful. But the fact that people are increasingly able to choose where they want to be, and choose when they want to be there, ¡s an addition to personal (p. 90) freedom. Cars are what make "personal speed" and "personal area" possible, and we wouldn't love them so much were they not so damn convenient in this regard.

Aspects of car culture are unsettling, however. Speed and convenience in transit, for example, don't necessarily translate into a more pleasing life. "The mobility of the private car has the paradoxical effect of lengthening how far people go rather than saving them time," Alan Durning has written.



Source:

Easterbrook, Gregg. The Progress Paradox: How Life Gets Better While People Feel Worse. Paperback ed. New York: Random House, 2004.





April 6, 2011

"Would You Exchange Places with a Typical Person Living in Any Year Before Your Birth?"



(p. 80) Consider a thought experiment. If the means existed, would you exchange places with a typical person living in any year before your birth? Exchange places permanently--not, say observe the Battle of Hastings and then rematerialize in the present. You could pick the year and place in the past, but could not specify trading places with someone specific like Catherine the Great or Leonardo da Vinci, and you could not specify that you would he a lord or lady or hold some similar advantage. In this deal you'd he transported back to the year and society of your choosing to live out the rest of your life as an ordinary person.

A good guess is that hardly anyone in the United States or the European Union today would accept a one-way ticket to the everyday life of the past. The physical beauty of the world would be greater then, before the mixed blessing of development. And most moments in the past would be quieter than ours, though not necessarily less stressful--the lives of pioneer farmers for whom a crop loss meant destitution, or of seamstresses working fourteen-hour days in early industrial-era sweatshops and unable to afford more than tea and bread, were hardly (p. 81) serene. Nor was the quiet, small-town atmosphere of the past, which many today idealize, necessarily ideal. Everyone knew your name, but everyone also knew your secrets; men and especially women enjoyed much less personal freedom in small-town life of the past than is typical today.

For essentially all of human history until the last few generations, the typical person's lot has been unceasing toil, meager living circumstances, uncertainty about food, rudimentary health care, limited education, little travel or entertainment; all followed by early death. (Keep in mind these remain the conditions under which more than a billion people live in the developing world today.) Even if you could somehow carry the benefits of modern medicine with you into the past--health care alone would make almost everyone decline the one-way ticket backward--the toil, low living standards, and isolated lives of past generations would seem awful to us compared to the sorts of things we complain about today.



Source:

Easterbrook, Gregg. The Progress Paradox: How Life Gets Better While People Feel Worse. Paperback ed. New York: Random House, 2004.





April 5, 2011

Affluence Has Made America More Libertarian



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Source of book image: http://images.bookbyte.com/isbn.aspx?isbn=9780060747664




(p. 16) Various scolds and worrywarts have exclaimed, with Wordsworth, that "getting and spending, we lay waste our powers." To such Jeremiahs, Lindsey provides an essentially cheerful, although not altogether so, counterpoint: affluence has made America a more libertarian, and hence a nicer, place.

First came material improvement. Until very recently, he notes, when people prayed for their daily bread, they often were praying for just that. Not so long ago, many ordinary lives of quiet desperation ended especially dismally: about 10 percent of burials in New York City in 1889 were in potter's fields. In 1900, 1.75 million children between the ages of 10 and 15 -- almost one-fifth of all children in that age cohort -- were in the work force. Children provided one-fourth to one-third of the incomes for working-class families, which spent more than 90 percent of their household earnings on food, shelter and clothing. In 1900, Americans spent nearly twice as much on funerals as on medicine, and less than 2 percent of Americans took vacations.


. . .


Affluence, Lindsey writes, has provided "a mad proliferation of choices -- and what, in the end, is freedom but the ability to choose?"



For the full review, see:

GEORGE F. WILL. "Land of Plenty." The New York Times Book Review (Sun., June 10, 2007): 16-17.

(Note: ellipsis added.)


Book reviewed:

Lindsey, Brink. The Age of Abundance: How Prosperity Transformed America's Politics and Culture. New York: HarperCollins, 2007.





April 3, 2011

U.S. Holds "Edge in Its Openness to Innovation"



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Source of book image: http://www.tower.com/tycoons-how-andrew-carnegie-john-d-rockefeller-jay-charles-r-morris-paperback/wapi/100346776?download=true&type=1



(p. 24) Judging by Charles R. Morris's new book, "The Tycoons," it takes about 100 years for maligned monopolists and "robber barons" to morph into admirable innovators.

Morris skillfully assembles a great deal of academic and anecdotal research to demonstrate that Andrew Carnegie, John D. Rockefeller, Jay Gould and J. P. Morgan did not amass their fortunes by trampling on the downtrodden or ripping off consumers - . . .


. . .


Though Morris only hints at it, the truth is that the real heroes of the American industrial revolution were not his four featured tycoons, but the American people themselves. I don't mean this to sound like a corny burst of patriotism. In the 19th century, the United States was still young. Most families had either been booted out of Europe or fled it, and they didn't care about tradition or the Old Guard. With little to lose, they were willing to bet on a roll of the dice, even if it was they who occasionally got rolled. Europe was encrusted with guilds, unions and unbendable rules. Britons took half a day to make a rifle stock, because 40 different tradesmen poked their noses into the huddle. American companies polished off new rifle stocks in 22 minutes.

The United States still holds an edge in its openness to innovation. In 1982, French farmers literally chased the French agriculture minister, Edith Cresson, off their fields with pitchforks because she suggested reform. By contrast, back in the late 1850's, Abraham Lincoln was a hot after-dinner speaker. Was he discussing slavery? No. The title of his talk was "Discoveries and Inventions." The real root of economic growth is not natural resources or weather or individual genius. It's attitude, not latitude. The Austrian economist Joseph Schumpeter called innovations gales of "creative destruction." Americans, not Europeans, had the gall to stare into those gales - with optimism.



For the full review, see:

TODD G. BUCHHOLZ . "'The Tycoons': Benefactors of Great Wealth." The New York Times Book Review (Sun., October 2, 2005): 24.

(Note: ellipses added.)

(Note: the online version of the review has the title "'The Tycoons': Benefactors of Great Wealth.")


Book under review:

Morris, Charles R. The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould, and J. P. Morgan Invented the American Supereconomy. New York: Times Books, 2005.





April 2, 2011

Middle-Class Today Live Better than 99.4% of Humans Who Ever Lived



(p. 80) In his extraordinary book Mapping Human History, the science writer Steve Olson estimates that 80 billion "modern" humans--from the first beings recognizable as our forebears to the advent of Homo sapiens sapiens, our official name--have walked the earth down through the millennia. Supposing this number is correct, the men and women at middle-class standards or above in the United States and the European Union now live better than 99.4 percent of the human beings who have ever existed.


Source:

Easterbrook, Gregg. The Progress Paradox: How Life Gets Better While People Feel Worse. Paperback ed. New York: Random House, 2004.


The Olson book mentioned is:

Olson, Steve. Mapping Human History: Discovering the Past through Our Genes. New York: Houghton Mifflin Company, 2002.

(Note: italics in original.)






March 29, 2011

Cars Bring Convenience, Freedom, and Personal Security



(p. 16) Two generations ago in the United States,most families lacked a car; by our parents' generation, most families had one car while the two-car lifestyle was a much-sought ideal; today a third of America's families own three cars or more. The United States now contains just shy of one automobile per licensed driver, and is on track to having more cars than licensed drivers. Cars are a mixed blessing, as a future chapter will detail: But there is no doubt they represent convenience, freedom, and, for women, personal security, when compared to standing on street corners waiting for buses or lingering on dark subway platforms. Cars would not he so infuriatingly popular if the did not make our lives easier. Today all but the bottom-most fraction of the impoverished in the United States do most of their routine traveling by car: 100 auto trips in the United States for every one trip on a bus or the subway, according to the American Public Transit Association. The portion of routine trips made in private cars is rising toward overwhelming in the European Union, too. Two generations ago, people dreamed of possessing their own cars. Now almost everyone in the Western world who desires a car has one--and vehicles that are more comfortable, better-equipped, lower-polluting, and much safer than those available only a short time ago.


Source:

Easterbrook, Gregg. The Progress Paradox: How Life Gets Better While People Feel Worse. Paperback ed. New York: Random House, 2004.





March 24, 2011

The Progress Paradox Documents How Life Is Better Here and Now



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Source of book image: http://grigr.com/




Greg Easterbrook's book has been out for several years, but I am a slow reader and have a long "to read" list. I enjoyed the first half or so of the book very much, and also enjoyed some parts of the second half. Roughly speaking, the first half is devoted to illustrating how much better life is now than before, and here (the West) than there (the less-developed countries). Roughly speaking, the second half of the book asks why we aren't happier, and complains about areas of life where Easterbrook sees room for improvement.

Some of the part I like has now been updated, or written with better argument or more panache, by Matt Ridley in The Rational Optimist. But even so, Easterbrook often gives examples, or arguments, that complement Ridley's case.

And even though Ridley is on average more eloquent than Easterbrook, the latter is eloquent plenty often enough to be worth reading. (And maybe my judgment about eloquence is colored by my agreeing with Ridley 90% of the time, and only agreeing with Easterbrook 75% of the time.)

On the less-satisfying second half of the book: worthwhile questions are often asked, but the answers are few and not very satisfying.

In the next few weeks, I'll occasionally be quoting a few of the more illuminating or edifying passages in the Easterbrook book.



Easterbrook's book:

Easterbrook, Gregg. The Progress Paradox: How Life Gets Better While People Feel Worse. Paperback ed. New York: Random House, 2004.


The Ridley book that I mention:

Ridley, Matt. The Rational Optimist: How Prosperity Evolves. New York: Harper, 2010.





March 23, 2011

Estonia Re-Elects "Government that Continued to Embrace Laissez-Faire Capitalism"



(p. A5) MOSCOW -- Early results in Estonia's parliamentary election on Sunday showed the ruling coalition headed for a victory, in a remarkable show of support for a government that has imposed harsh austerity measures to lift the country out of recession.


. . .


The vote reflects approval for a government that continued to embrace laissez-faire capitalism during the painful months after the global downturn. After Estonia's economy shrank nearly 15 percent, the state reduced its budget by the equivalent of 9 percent of gross domestic product. Demand fell steeply, and unemployment crept up, early in 2010, to 19.8 percent.

But in contrast to their neighbors in Latvia, where economic troubles led to riots and the government's collapse, Estonians stoically absorbed the suffering. These sacrifices allowed Estonia to join the euro zone in January, a move its leaders hailed as a sign that the country was on its way to achieving Western European standards of living. Meanwhile, the economy has been projected to grow by 4 percent this year, and unemployment has dropped to around 10 percent, according to the Estonian Unemployment Insurance Fund.



For the full story, see:

ELLEN BARRY. "After Cuts, Voters Back Ruling Bloc in Estonia." The New York Times (Mon., March 7, 2011): A5.

(Note: ellipsis added.)

(Note: the online version of the article is dated March 6, 2011.)





March 17, 2011

Koch Does Not Run with the Antelope



If you were standing amongst a herd of antelope when a dangerous predator arrived, you would not see the antelope defending themselves against the predator. What you would see would be their white rear ends disappearing in the distance.

Last July in Wichita I heard some executives from Koch Industries talking about Market-Based Management. A couple of them mentioned Koch's stands in defense of the free market. As a result of these efforts, Koch Industries has become the target of many agencies of the government and of groups opposed to the free market. Once or twice I heard an executive say something like: 'it would have been a lot easier if we had just painted our butts white and run with the antelope.'

Schumpeter thought that those in business would not defend the fortress of capitalism (CSD, p. 142). And the evidence suggests that Schumpeter was mainly right. But we can hope that there are enough exceptions, in unpretentious places like Wichita, to keep the fortress standing.


(p.A15) Years of tremendous overspending by federal, state and local governments have brought us face-to-face with an economic crisis. Federal spending will total at least $3.8 trillion this year--double what it was 10 years ago. And unlike in 2001, when there was a small federal surplus, this year's projected budget deficit is more than $1.6 trillion.

Several trillions more in debt have been accumulated by state and local governments. States are looking at a combined total of more than $130 billion in budget shortfalls this year. Next year, they will be in even worse shape as most so-called stimulus payments end.

For many years, I, my family and our company have contributed to a variety of intellectual and political causes working to solve these problems. Because of our activism, we've been vilified by various groups. Despite this criticism, we're determined to keep contributing and standing up for those politicians, like Wisconsin Gov. Scott Walker, who are taking these challenges seriously.



For the full commentary, see:

CHARLES G. KOCH. "Why Koch Industries Is Speaking Out; Crony capitalism and bloated government prevent entrepreneurs from producing the products and services that make people's lives better." The Wall Street Journal (Tues., MARCH 1, 2011): A15.


Koch's book is:

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





January 20, 2011

Economic Importance of Inarticulate Knowledge Undermines Case for Central Planning



(p. 78) . . . the intelligence of humans, though immensely strengthened by articulation, nonetheless contains a large component of tacit understanding by individuals who know more than they can say. If this is also true with respect to the sorts of knowledge relevant to our economic activities, then no comprehensive planning agency could obtain the sort of knowledge necessary for economic planning, for it would lie buried deep in the minds of millions of persons.


Source:

Lavoie, Don. National Economic Planning: What Is Left? Washington, DC: Cato Institute, 1985.

(Note: ellipsis added.)






January 11, 2011

The Fragility of China's Red Capitalism



RedCapitalismBK2011-01-04.jpg













Source of book image: http://media.wiley.com/product_data/coverImage300/63/04708258/0470825863.jpg




Red Capitalism is scheduled for release on February 15, 2011. I have not read it, but from early reports it would appear to be a credible account that updates and supports concerns about China's economy expressed by David Smick (The World Is Curved) and others.


The reference is:

Walter, Carl E., and Fraser J. T. Howie. Red Capitalism: The Fragile Financial Foundation of China's Extraordinary Rise. Hoboken, NJ: Wiley, 2011.


The Smick book mentioned, is:

Smick, David M. The World Is Curved: Hidden Dangers to the Global Economy. New York: Portfolio Hardcover, 2008.





December 12, 2010

Rockefeller Is Vilified Despite His Entrepreneurial Genius and His Philanthropic Generosity



AmericasMedicisBK2010-12-08.jpg















Source of book image: http://ecx.images-amazon.com/images/I/512M5Z648JL.jpg




(p. C7) . . . as Suzanne Loebl rightly emphasizes in "America's Medicis," the Rockefellers' patronage has been notable not only for its generosity but also for its deliberativeness. By founding such diverse institutions as MoMA, Colonial Williamsburg, the Cloisters, Riverside Church and the Asia Society--as well as by commissioning the distinguished artworks that enliven the office complex at Rockefeller Center--various members of the family have been guided by a perception that a moral responsibility comes with the possession of great wealth.

John D. Rockefeller, Sr. (1839-1937), the founder and chairman of Standard Oil, was routinely vilified in the press as a ruthless monopolist who crushed competition the way a giant might crush a bug.     . . .     . . . yet he was not the cold-hearted miser that some supposed. A devout Baptist, he donated substantial sums every year to one or more of the congregations he attended, as well as to associated causes, such as the American Baptist Education Society, which founded the University of Chicago with his support in 1890.


. . .


Unfortunately, not everyone behaved well in the face of Rockefeller munificence. The Mexican painter Diego Rivera, commissioned to create a sprawling mural for the lobby of Rockefeller Center, chose to deviate from his preparatory drawings and place an enormous portrait of Lenin at the center of the finished composition. Refusing to amend this egregious provocation, Rivera was paid in full for his work, which was then duly destroyed. A predictable uproar ensued, garnering the artist abundant publicity, which may have been his objective all along.


. . .


Ms. Loebl's account is well grounded both in the existing literature and in original archival research. She has striven to be comprehensive and done a good job of incorporating lesser-known Rockefeller projects, for example the charming Wendell Gilley Museum of carved birds, in Maine, funded by Nelson's son Steven. But several worthy undertakings, such as Junior's restoration of the châteaux of Versailles and Fontainebleau, receive scant attention--as do Laurance Rockefeller's extensive gifts for the purpose of creating and expanding our national parks.



For the full review, see:

JONATHAN LOPEZ. "BOOKSHELF; The Splendid Spoils of Standard Oil; The Rockefeller family's vast cultural legacy resulted from a sense of civic duty and a love of beautiful things." The Wall Street Journal (Sat., NOVEMBER 20, 2010): C7.

(Note: ellipses added.)


The book being reviewed, is:

Loebl, Suzanne. America's Medicis: The Rockefellers and Their Astonishing Cultural Legacy. New York: HarperCollins, 2010.





November 26, 2010

First Writing Grew from Commerce



CunneiformSumerianClayTablet3200BC.jpg













"A Sumerian clay tablet from around 3200 B.C. is inscribed in wedgelike cuneiform with a list of professions." Source of caption and photo: online version of the NYT article quoted and cited below.




(p. C5) CHICAGO -- One of the stars of the Oriental Institute's new show, "Visible Language: Inventions of Writing in the Ancient Middle East and Beyond," is a clay tablet that dates from around 3200 B.C. On it, written in cuneiform, the script language of ancient Sumer in Mesopotamia, is a list of professions, described in small, repetitive impressed characters that look more like wedge-shape footprints than what we recognize as writing.

In fact "it is among the earliest examples of writings that we know of so far," according to the institute's director, Gil J. Stein, and it provides insights into the life of one of the world's oldest cultures.

The new exhibition by the institute, part of the University of Chicago, is the first in the United States in 26 years to focus on comparative writing. It relies on advances in archaeologists' knowledge to shed new light on the invention of scripted language and its subsequent evolution.

The show demonstrates that, contrary to the long-held belief that writing spread from east to west, Sumerian cuneiform and its derivatives and Egyptian hieroglyphics evolved separately from each another. And those writing systems were but two of the ancient forms of writing that evolved independently. Over a span of two millenniums, two other powerful civilizations -- the Chinese and Mayans -- also identified and met a need for written communication. Writing came to China as early as around 1200 B.C. and to the Maya in Mesoamerica long before A.D. 500.


. . .


The Oriental Institute, which opened in 1919, was heavily financed by John D. Rockefeller Jr., who had been greatly influenced by James Henry Breasted, a passionate archaeologist.


. . .


Experts are still struggling to understand just how writing evolved, but one theory, laid out at the Oriental Institute's exhibition, places the final prewriting stage at 3400 B.C., when the Sumerians first began using small clay envelopes like the ones in the show. Some of the envelopes had tiny clay balls sealed within. Archaeologists theorize that they were sent along with goods being delivered; recipients would open them and ensure that the number of receivables matched the number of clay tokens. The tokens, examples of which are also are in the show , transmitted information, a key function of writing.



For the full story, see:

GERALDINE FABRIKANT. "Hunting for the Dawn of Writing, When Prehistory Became History." The New York Times (Weds., October 20, 2010): C5.

(Note: ellipses added.)

(Note: the online version of the article is dated October 19, 2010.)





November 9, 2010

If You Think Life Was Better in the Past, "Say One Single Word: Dentistry"



(p. 2) In general, life is better than it ever has been, and if you think that, in the past, there was some golden age of pleasure and plenty to which you would, if you were able, transport yourself, let me say one single word: "dentistry."


Source:

O'Rourke, P. J. All the Trouble in the World: The Lighter Side of Overpopulation, Famine, Ecological Disaster, Ethnic Hatred, Plague, and Poverty. paperback ed. New York: Atlantic Monthly Press, 1994.






November 2, 2010

William Rosen's "The Most Powerful Idea in the World"



Most-Powerful-Idea-in-the-WorldBK2010-10-24.jpg














Source of book image: http://ffbsccn.files.wordpress.com/2010/07/the-most-powerful-idea-in-the-world.jpg




The range of William Rosen's fascinating and useful book is very broad indeed. He is interested in THE question: why did the singular improvement in living standards known as the industrial revolution happen where and when it did?

The question is not just of historical interest---if we can figure out what caused the improvement then and there, we have a better shot at continuing to improve in the here and now.

I especially enjoyed and learned from William Rosen's discussion, examples and quotations on the difficult issue of whether patents are on balance a good or bad institution.

Deirdre McCloskey taught me that the most important part of a sentence is the last word, and the most important part of a paragraph is the last sentence, and the most important part of a chapter is the last paragraph.

Here are the last couple of sentences of Rosen's book:


(p. 324) Incised in the stone over the Herbert C. Hoover Building's north entrance is the legend that, with Lincoln's characteristic brevity, sums up the single most important idea in the world:

THE PATENT SYSTEM ADDED

THE FUEL OF INTEREST

TO THE FIRE OF GENIUS



In the next few weeks I will occasionally quote a few of the more illuminating passages from Rosen's well-written account.


Book discussed:

Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.





October 18, 2010

Charlie Munger: Capitalist Ventures Do Good, While Philanthropies Are a Source of "So Much Folly and Stupidity"




We'd all be better off if Warren Buffett listened a little more to his old friend Charlie Munger, and a little less to his new friend, Bill Gates.


(p. 6A) Charlie Munger, the business partner of billionaire philanthropist Warren Buffett, said private investment may advance society more than charity.

"I believe Costco does more for civilization than the Rockefeller Foundation," Munger, 86, told students in a discussion at the University of Michigan on Tuesday, according to a video posted on the Internet. "I think it's a better place. You get a bunch of very intelligent people sitting around trying to do good, I immediately get kind of suspicious and squirm in my seat."

Munger is a director at Costco Wholesale Corp., the largest U.S. warehouse-club chain, and has served as vice chairman of Buffett's Berkshire Hathaway Inc. for more than three decades. Munger's stake in Omaha-based Berkshire's Class A shares is valued at more than $1.6 billion.


. . .


"I've seen so much folly and stupidity on the part of our major philanthropic groups, including the World Bank," Munger said. "I really have more confidence in building up the more capitalistic ventures like Costco."




For the full story, see:

Bloomberg News. "Costco beats charity, Munger Says." Omaha World-Herald (Sat., September 16, 2010): 6A-7A.

(Note: ellipsis added.)

(Note: the online version of the article has the title "Munger: Costco beats charity.")

Munger's comments can be viewed online at: http://rossmedia.bus.umich.edu/rossmedia/SilverlightPlayer/Default.aspx?peid=4d215177cbe44b1e8e94d0dd68f5058f





August 26, 2010

Air Conditioning as "the Antithesis of Passive Resignation"



In the passage quoted below, Severgnini captures something of the truth. Americans, at their best, have sought to control nature in order to make life longer and happier.

But Severgnini does not see that there is a difference between seeking to control nature and seeking to control other people. At its best, America excels at the former, and refrains from the latter.


(p. W9) A few years ago, Italian journalist Beppe Severgnini recounted his adventures in the U.S. in the book "Ciao, America!" in which he offered up humorous musings on many of the standard European complaints about the American way of living. Mr. Severgnini allows that he rather admires the Yankee "urge to control the outside world," whether that means sending planes off an aircraft carrier or sending out technicians from Carrier.

He notes that the refusal to suffer the sweaty indignity of equatorial heat is "the antithesis of passive resignation," and thus a perfect expression of the can-do American character. "In America, air-conditioning is not simply a way of cooling down a room," Mr. Severgnini writes. "It is an affirmation of supremacy."



For the full commentary, see:

ERIC FELTEN. "DE GUSTIBUS; The Big Chill: Giving AC the Cold Shoulder." The Wall Street Journal (Fri., July 23, 2010): W9.






August 25, 2010

Lux et Veritas




japan_korea_lights2010-08-05.jpgSource of photo: http://earthobservatory.nasa.gov/Features/EarthPerspectives/


What is the extended island-country on the right side of the photo above?

OK, if you got that one, here's a harder question: What is the smaller island-country to the left of the extended island-country?

Stumped? Well it's a trick question. The island-country to the left is South Korea.

But, you say, South Korea is no island.

You are right. (But then ponder why it looks like an island.)



Credits:

I first saw a version of the above photo, and heard a version of the above interpretation, in a wonderful presentation by Tony Woodlief at the MBM University at Wichita in July 2010.

The photo is a satellite composite from NASA.

"Lux et Veritas" is the motto of Yale University and is Latin for "Light and Truth." (Three years of high school Latin pay off again---thank you Miss Noble and Miss Rohrer!)





July 30, 2010

Capitalism is Not a Zero-Sum Game



WielLosesIniestaWins2010-07-12.jpg



















The Wall Street Journal on 7/12/2010 ran the above photo on the top of its front page and referred to articles inside on the final game of the 2010 World Cup. Their caption was: "120 minutes, a record 13 yellow cards and a single goal: Andrés Iniesta, right, celebrates scoring to beat the Netherlands in the World Cup; Dutch player Gergory van der Wiel, left, buries his face." Source of photo: http://www.zumapress.com/images/SIGMA/IMAGES312/20100711_zaf_d20_347.pre (sic)



What a beautiful picture for illustrating a zero-sum game. Football (or soccer) is a zero-sum game---Spain can only win, if the Netherlands lose.

Capitalism is sometimes compared to sports, because both involve competition. In the short-run competition of capitalism, sometimes one "team" wins and another "team" loses. But in the longer run, the essential fact about capitalism is not competition, but innovation. And in the longer run triumph of innovation, all can win.

When Ghiberti and Brunelleschi competed to build the Gates of Paradise, Ghiberti ended up building the doors. But it would be a mistake to see him as the winner and Brunelleschi as the loser. Brunelleschi moved on to build the Duomo, and everyone won.





July 10, 2010

Former French Student Protest Leader: "We've Decided that We Can't Expect Everything from the State"



DynamismEuropeAndUnitedStatesGraph.gif
















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




(p. A16) "The euro was supposed to achieve higher productivity and growth by bringing about a deeper integration between economies," says Simon Tilford, chief economist at the Centre for European Reform, a London think tank. "Instead, integration is slowing. The lack of flexibility in labor and product markets raises serious questions about the likelihood of the euro delivering on its potential."

Structural changes are the last great hope in part because euro zone members have few other levers for lifting their economies. Individual members can't tweak interest rates to encourage lending, because those policies are set by the zone's central bank. The shared euro means countries don't have a sovereign currency to devalue, a move that would make exports cheaper and boost receipts abroad.

The remaining prescription, many economists say: chip away at the cherished "social model." That means limiting pensions and benefits to those who really need them, ensuring the able-bodied are working rather than living off the state, and eliminating business and labor laws that deter entrepreneurship and job creation.

That path suits Carlos Bock. The business-studies graduate from Bavaria spent months navigating Germany's dense bureaucracy in order to open a computer store and Internet café in 2004. Before he could offer a Web-surfing customer a mug of filter coffee, he said, he had to obtain a license to run a "gastronomic enterprise." One of its 38 requirements compelled Mr. Bock to attend a course on the hygienic handling of mincemeat.

Mr. Bock closed his store in 2008. Germany's strict regulations and social protections favor established businesses and workers over young ones, he said. He also struggled against German consumers' reluctance to spend, a problem economists blame in part on steep payroll taxes that cut into workers' takehome pay, and on high savings rates among Germans who are worried the country's pension system is unsustainable.

"If markets were freer, there might be chaos to begin with," Mr. Bock said. "But over time we'd reach a better economic level."

Even in France, some erstwhile opponents of reforms are changing their tune. Julie Coudry became a French household name four years ago when she helped organize huge student protests against a law introducing short-term contracts for young workers, a move the government believed would put unemployed youths to work.

With her blonde locks and signature beret, Ms. Coudry gave fiery speeches on television, arguing that young people deserved the cradle-to-grave contracts that older employees enjoy at most French companies. Critics in France and abroad saw the protests as a shocking sign that twentysomethings were among the strongest opponents of efforts to modernize the European economy. The measure was eventually repealed.

Today, the now 31-year-old Ms. Coudry runs a nonprofit organization that encourages French corporations to hire more university graduates. Ms. Coudry, while not repudiating her activism, says she realizes that past job protections are untenable.

"The state has huge debt, 25% of young people are jobless, and so I am part of a new generation that has decided to take matters into our own hands," she says. "We've decided that we can't expect everything from the state."




For the full story, see:

MARCUS WALKER And ALESSANDRA GALLONI. "Europe's Choice: Growth or Safety Net." The Wall Street Journal (Thurs., MARCH 25, 2010): A1 & A16.





April 19, 2010

Underwater Power Cables Maximize Profits and Improve Environment



TransBayCableSanFrancisco2010-04-17.jpg"Laying line in San Francisco for the Trans Bay Cable project, which submerged 33 miles of cable." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. B1) Generating 20 percent of America's electricity with wind, as recent studies proposed, would require building up to 22,000 miles of new high-voltage transmission lines. But the huge towers and unsightly tree-cutting that these projects require have provoked intense public opposition.

Recently, though, some companies are finding a remarkably simple answer to that political problem. They are putting power lines under water, in a string of projects that has so far provoked only token opposition from environmentalists and virtually no reaction from the larger public.


. . .


(p. B7) . . . , the underwater approach solves some intractable problems. In San Francisco, for example, old power plants that burn natural gas are about to be retired because a new transmission company has succeeded in running a line 33 miles across the San Francisco Bay.

Mr. Stern said his company's Neptune Cable, which runs from Sayreville, N.J., to Levittown, N.Y., on Long Island, now carries 22 percent of Long Island's electricity. His company is trying to complete a deal for a cable that would run from Ridgefield, N.J., to a Consolidated Edison substation on West 49th Street in Manhattan.

Those two cables were not motivated primarily by environmental goals -- they are meant to connect cheap generation to areas where power prices are high. Mr. Stern's company, PowerBridge, is now considering two renewable energy projects, however. One cable would connect proposed wind farms on the Hawaiian islands of Molokai and Lanai to the urban center on Oahu, and another would bring wind power from Maine along the Atlantic coast to Boston.




For the full story, see:

MATTHEW L. WALD. "A Power Line Runs Through It; Underwater Cable an Alternative to Electrical Towers." The New York Times (Weds., March 17, 2010): B1 & B7.

(Note: ellipses added.)

(Note: the online version is dated March 16, 2010 and has the shorter title "Underwater Cable an Alternative to Electrical Towers.")





March 28, 2010

Entrepreneur Pleases Dwarfs; Critics Are Appalled



DwarfAngels2010-03-16.JPG"Yang Jinlu, 18, left, and Zhang Yinghua, 37." Source of caption and photo: online version of the NYT article quoted and cited below.



(p. A10) KUNMING, China -- Chen Mingjing's entrepreneurial instincts vaulted him from a peasant upbringing to undreamed-of wealth, acquired in ventures ranging from making electric meters to investing in real estate. But when he was 44, the allure of making money for money's sake began to wane. He wanted to run a business that accomplished some good.

And so last September, Mr. Chen did what any socially aware entrepreneur might do: He opened a theme park of dwarfs, charging tourists about $9 a head to watch dozens of dwarfs in pink tutus perform a slapstick version of "Swan Lake" along with other skits.

Mr. Chen has big plans for his Kingdom of the Little People. Imagine a $115 million universe in miniature, set amid 13,000 acres of rolling hills and peaceful lakes in southern China's Yunnan Province, with tiny dogs, tiny fruit trees, a 230-foot-high performance hall that looks like the stump of a prehistoric tree and standard-size guest cabins.

Also, a black BMW modified to resemble a flying saucer, from which dwarfs will spill forth to begin their performances.

"It will be like a fairy tale," Mr. Chen said. "Everything here I have designed myself."


. . .


Critics say displaying dwarfs is at best misguided and at worst immoral, a throwback to times when freak shows pandered to people's morbid curiosity.

"Are they just going there to look at curious objects?" asked Yu Haibo, who leads a volunteer organization for the disabled in Jilin Province in the northeast.

"I think it is horrible," said Gary Arnold, the spokesman for Little People of America Inc., a dwarfism support group based in California. "What is the difference between it and a zoo?" Even the term "dwarf" is offensive to some; his organization prefers "person of short stature."


. . .


But there is another view, and Mr. Chen and some of his short-statured workers present it forcefully. One hundred permanently employed dwarfs, they contend, is better than 100 dwarfs scrounging for odd jobs. They insist that the audiences who see the dwarfs sing, dance and perform comic routines leave impressed by their skills and courage.

Many performers said they enjoyed being part of a community where everyone shares the same challenges, like the height of a sink. "Before, when we were at home, we didn't know anyone our size. When we hang out together with normal-size people, we can not really do the same things," said Wu Zhihong, 20. "So I really felt lonely sometimes."


. . .


Supporters and critics agree on one point: the fact that the park is awash in job applications shows the disturbing dearth of opportunities for the disabled in China. Cao Yu, Mr. Chen's assistant, says she receives three or four job inquiries a week.

"Under the current social situation in China, they really will not be able to find a better employment situation," she said.


. . .


Mr. Chen said his employees had gained self-respect and self-sufficiency. "It doesn't really matter to me what other people say," he said. "The question is whether meeting me has changed their lives."



For the full story, see:

SHARON LaFRANIERE. "Kunming Journal; A Miniature World Magnifies Dwarf Life." The New York Times (Thurs., March 4, 2010): A10.

(Note: ellipses added.)

(Note: the online version of the article is dated March 3, 2010.)



DwarfsRelax2010-03-16.JPG "Workers relaxed in the dormitories." Source of caption and photo: online version of the NYT article quoted and cited above.






February 28, 2010

Chamber's Donohue Promotes Free Enterprise



DonohueTomChamberPresident2010-01-27.jpg




Chamber of Commerce President Tom Donohoe. Source of caricature: online version of the WSJ article quoted and cited below.




(p. A13) The White House's war on the Chamber has come just as the group is launching a new $100 million campaign promoting free enterprise.

"We want to encourage and promote and educate and get a bunch of enthusiasm behind . . . the free enterprise system with free capital markets and free trade and the ability to fail and fall right on your ass and get up and do it again!" he says.

The belief in that system, Mr. Donohue says, has been eroded by the recession and subsequent criticism of the free market. "The purpose of this is to get out of the doldrums! Quit sulking and worrying." He hopes the campaign will remind Americans that "We created 20 million jobs in the '90s, we can do it again. We don't have to do it exactly like that--Adam Smith didn't have a BlackBerry--but we ought to pay attention to what made it work."



For the full interview, see:

KIMBERLEY A. STRASSEL. "OPINION: THE WEEKEND INTERVIEW with Tom Donohue; Business Fights Back; His organization under attack by the White House, the president of the Chamber of Commerce stands by his defense of free enterprise." The Wall Street Journal (Sat., October 24, 2009): A13.

(Note: the online version of the article has the date October 23, 2009.)

(Note: ellipsis in original.)





January 15, 2010

The Decline of Motive Power in Socialist Venezuela



VenezuelaEnergy2010-01-10.jpg"In Venezuela, which faces power shortages, blackouts have spurred protests like this demonstration in Caracas." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. A11) CARACAS -- Venezuela, a country with vast reserves of oil and natural gas, as well as massive rushing waterways that cut through its immense rain forests, strangely finds itself teetering on the verge of an energy crisis.


. . .


The government has forced draconian electricity rationing on certain sectors, which could make matters worse for an economy already racked by recession. Critics say the socialist government is trying to snuff out capitalist-driven sectors with the rationing, while allowing government-favored industries in good standing to continue with business as usual.

Shopping malls, which analysts say use less than 1% of the power consumed in Venezuela, have nonetheless been a main focus for the government.

Malls have been told most stores can only be open between 11 a.m. and 9 p.m.

"In a certain way, Chávez is attacking capitalism with the orders on shopping malls," said Emilio Grateron, mayor of Caracas's Chacao municipality, a bastion of those opposed to Mr. Chávez. "By limiting the hours we can go to malls, he is trying to slowly take away liberties, to create absolute control over things such as shopping."

In Venezuela, whose capital Caracas is consistently ranked among the world's most dangerous cities, residents see shopping malls as one of few havens in the country.

The government's rationing efforts are also hitting metal producers. Their production has already been cut as much as 40%. Mr. Rodriguez, the electricity minister, said they may have to be completely closed to save more electricity.




For the full story, see:

DAN MOLINSKI. "Energy-Rich Venezuela Faces Power Crisis." The Wall Street Journal (Fri., JANUARY 8, 2009): A11.

(Note: ellipsis added.)





January 2, 2010

Entrepreneurial Innovation Comes from Diverse Outsiders Rather than Establishments



(p. 113) Firms that win by the curve of mind often abandon it when they establish themselves in the world of matter. They fight to preserve the value of their material investments in plant and equipment that embody the ideas and experience of their early years of success. They begin to exalt expertise and old knowledge, rights and reputation, over the constant learning and experience of innovative capitalism. They get fat.

A fat cat drifting off the curve, however, is a sitting duck for new nations and companies getting on it. The curve of mind thus tends to favor outsiders over establishments of all kinds. At the capitalist ball, the blood is seldom blue or the money rarely seasoned. Microcosmic technologies are no exception. Capitalism's most lavish display, the microcosm, is no respecter of persons.

The United States did not enter the microcosm through the portals of the Ivy League, with Brooks Brothers suits, gentleman Cs, and warbling society wives. Few people who think they are in already can summon the energies to break in. From immigrants and outcasts, street toughs and science wonks, nerds and boffins, the bearded and the beer-bellied, the tacky and uptight, and sometimes weird, the born again and born yesterday, with Adam's apples bobbing, psyches (p. 114) throbbing, and acne galore, the fraternity of the pizza breakfast, the Ferrari dream, the silicon truth, the midnight modem, and the seventy-hour week, from dirt farms and redneck shanties, trailer parks and Levittowns, in a rainbow parade of all colors and wavelengths, of the hyperneat and the sty high, the crewcut and khaki, the pony-tailed and punk, accented from Britain and Madras, from Israel and Malaya, from Paris and Parris Island, from Iowa and Havana, from Brooklyn and Boise and Belgrade and Vienna and Vietnam, from the coarse fanaticism and desperation, ambition and hunger, genius and sweat of the outsider, the downtrodden, the banished, and the bullied come most of the progress in the world and in Silicon Valley.





Source:

Gilder, George. Microcosm: The Quantum Revolution in Economics and Technology. Paperback ed. New York: Touchstone, 1990.





December 30, 2009

"When the Sons of the Communists Themselves Wanted to Become Capitalists and Entrepreneurs"



JanicekJosefPlasticPeople2009-12-19.jpg"Josef Janicek, 61, was on the keyboard for a concert in Prague last week by the band Plastic People of the Universe." Source of caption and photo: online version of the NYT article quoted and cited below.



(p. A10) PRAGUE -- It has been called the Velvet Revolution, a revolution so velvety that not a single bullet was fired.

But the largely peaceful overthrow of four decades of Communism in Czechoslovakia that kicked off on Nov. 17, 1989, can also be linked decades earlier to a Velvet Underground-inspired rock band called the Plastic People of the Universe. Band members donned satin togas, painted their faces with lurid colors and wrote wild, sometimes angry, incendiary songs.

It was their refusal to cut their long, dank hair; their willingness to brave prison cells rather than alter their darkly subversive lyrics ("peace, peace, peace, just like toilet paper!"); and their talent for tapping into a generation's collective despair that helped change the future direction of a nation.

"We were unwilling heroes who just wanted to play rock 'n' roll," said Josef Janicek, 61, the band's doughy-faced keyboard player, who bears a striking resemblance to John Lennon and still sports the grungy look that once helped get him arrested. "The Bolsheviks understood that culture and music has a strong influence on people, and our refusal to compromise drove them insane."


. . .


In 1970, the Communist government revoked the license for the Plastics to perform in public, forcing the band to go underground. In February 1976, the Plastic People organized a music festival in the small town of Bojanovice -- dubbed "Magor's Wedding" -- featuring 13 other bands. One month later, the police set out to silence the musical rebels, arresting dozens. Mr. Janicek was jailed for six months; Mr. Jirous and other band members got longer sentences.

Mr. Havel, already a leading dissident, was irate. The trial of the Plastic People that soon followed became a cause célèbre.

Looking back on the Velvet Revolution they helped inspire, however indirectly, Mr. Janicek recalled that on Nov. 17, 1989, the day of mass demonstrations, he was in a pub nursing a beer. He argued that the revolution had been an evolution, fomented by the loosening of Communism's grip under Mikhail Gorbachev and the overwhelming frustration of ordinary people with their grim, everyday lives. "The Bolsheviks knew the game was up," he said, "when the sons of the Communists themselves wanted to become capitalists and entrepreneurs."




For the full story, see:

DAN BILEFSKY. "Czechs' Velvet Revolution Paved by Plastic People." The New York Times (Mon., November 16, 2009): A10.

(Note: the online version of the article is dated November 15, 2009.)

(Note: ellipsis added.)





December 8, 2009

"Market Wu" Annoys Maoists and Corrupt Bureaucrats



WuJinnglian2009-10-24.jpg "Wu Jinglian helped to create China's market economy, and now he is defending it against conservative hardliners in the Communist Party." Source of caption and photo: online version of the NYT article quoted and cited below.


(p. 1) AT 79, Wu Jinglian is considered China's most famous economist.

In the 1980s and '90s, he was an adviser to China's leaders, including Deng Xiaoping. He helped push through some of this country's earliest market reforms, paving the way for China's spectacular rise and earning him the nickname "Market Wu."

Last year, China's state-controlled media slapped him with a new moniker: spy.

Mr. Wu has not been interrogated, charged or imprisoned. But the fact that a state newspaper, The People's Daily, among others, was allowed to publish Internet rumors alleging that he had been detained on suspicions of being a spy for the United States hints that he is annoying some very important people in the government.

He denied the allegations, and soon after they were published, China's cabinet denied that an investigation was under way.

But in a country that often jails critics, Mr. Wu seems to be testing the limits of what Beijing deems permissible. While many economists argue that China's growth model is flawed, rarely does a prominent Chinese figure, in the government or out, speak with such candor about flaws he sees in China's leadership.

Mr. Wu -- who still holds a research post at an institute affiliated with the State Council, China's cabinet -- has white hair and an amiable face, and he appears frail. But his assessments are often harsh. In books, speeches, interviews and television appearances, he warns that conservative hardliners in the Communist Party have gained influence in the government and are trying to dismantle the market reforms he helped formulate.

He complains that business tycoons and corrupt officials have hijacked the economy and manipulated it for their own ends, a system he calls crony capitalism. He has even called on Beijing to establish a British-style democracy, arguing that political reform is inevitable.

Provocative statements have made him a kind of dissident economist here, and revealed the sharp debates behind the scenes, at the highest levels of the Communist Party, about the direction of China's half-market, half-socialist economy.

In many ways, it is a continuation of the debate that has been raging for three decades: What role should the government play in China's hybrid economy?

Mr. Wu says the spy rumors were "dirty tricks" employed by his critics to discredit him.

"I have two enemies," he said in a recent interview. "The crony capitalists and the Maoists. They will use any means to attack me."


. . .


(p. 7) In interviews, Mr. Wu says he feels compelled to speak out because conservatives and "old-style Maoists" have been gaining influence in the government since 2004. These groups, he said, are pressing for a return to central planning and placing blame for corruption and social inequality on the very market reforms he championed.

At the same time, Mr. Wu says, corrupt bureaucrats are pushing for the state to take a larger economic role so they can cash in on their positions through payoffs and bribes, as well as by steering business to allies.

"I'm not optimistic about the future," Mr. Wu said. "The Maoists want to go back to central planning and the cronies want to get richer."



For the full story, see:

DAVID BARBOZA. "China's Mr. Wu Keeps Talking." The New York Times, SundayBusiness Section (Sun., September 26, 2009): 1 & 7.

(Note: ellipsis added.)


WuChinaTimeline2009-10-24.jpgSource of timeline graphic: online version of the NYT article quoted and cited above.





November 28, 2009

Nationalizing Health Care: Communists Seized Pharmacy Owned By Ayn Rand's Father



AynRandBooksBK.jpgSource of book images: online version of the NYT review quoted and cited below.



(p. C6) Ayn Rand poses theatrically in her signature cape and gold dollar-sign pin on the cover of a groundbreaking new biography. Rand also poses theatrically in this same Halloween-ready costume (Rand impersonators have been known to wear it) on the cover of another groundbreaking new biography. The two books are being published a week apart. And both have gray covers that make them look even more interchangeable. Yet Rand, whose Objectivist philosophy is enjoying one of its periodic resurgences, loathed the very idea of grayness. She preferred dichotomies that were strictly black and white.


. . .


Ms. Heller's book is worth its $35 price, which is not the kind of detail that Rand herself would have been shy about trumpeting. When Russian Bolshevik soldiers commandeered and closed the St. Petersburg pharmacy run by Zinovy Rosenbaum, they made a lifelong capitalist of his 12-year-old daughter, Alissa, who would wind up fusing the subversive power of the Russian political novel with glittering Hollywood-fueled visions of the American dream.


. . .


Crucially, both authors understand the reasons that Rand's popularity has endured, not only among college students dazzled (and thronged into packs) by her triumphant individualism but also by entrepreneurs. From the young Ted Turner, who rented billboards to promote the "Who is John Galt?" slogan from "Atlas Shrugged," to the founders of Craigslist and Wikipedia, who have found self-contradictory new ways to mix populism with individual enterprise, it is clear that (in Ms. Burns's words) "reports of Ayn Rand's death are greatly exaggerated."



For the full review, see:

JANET MASLIN. "Books of The Times; Twin Biographies of a Singular Woman, Ayn Rand." The New York Times (Thurs., October 21, 2009): C6.

(Note: ellipses added.)





November 19, 2009

Legitimacy of Capitalism Rests on Rich Earning their Wealth



ZingalesLuigi2009-11-08.jpg











Luigi Zingales, Robert C. McCormack Professor of Entrepreneurship and Finance at the University of Chicago. Source of photo and information in caption: http://faculty.chicagobooth.edu/luigi.zingales/research/date.html.



(p. A21) Luigi Zingales points out that the legitimacy of American capitalism has rested on the fact that many people, like Warren Buffett and Bill Gates, got rich on the basis of what they did, not on the basis of government connections. But over the years, business and government have become more intertwined. The results have been bad for both capitalism and government. The banks' growing political clout led to the rule changes that helped create the financial crisis.



For the full commentary, see:

DAVID BROOKS. "The Bloody Crossroads." The New York Times (Tues., September 8, 2009): A21.

(Note: the online version of the commentary is dated Sept. 7.)


The reference for the Zingales article is:

Zingales, Luigi. "Capitalism after the Crisis." National Affairs, no. 1 (Fall 2009): 22-35.





November 10, 2009

John Mackey: "I Believe in the Dynamic Creativity of Capitalism"



MackeyJohn2009-10-28.jpg Whole Foods CEO John Mackey. Source of the caricature: online version of the WSJ interview quoted and cited below.



(p. A11) "I honestly don't know why the article became such a lightning rod," says John Mackey, CEO and founder of Whole Foods Market Inc., as he tries to explain the firestorm caused by his August op-ed on these pages opposing government-run health care.


. . .


. . . his now famous op-ed incited a boycott of Whole Foods by some of his left-wing customers. His piece advised that "the last thing our country needs is a massive new health-care entitlement that will create hundreds of billions of dollars of new unfunded deficits and move us closer to a complete government takeover of our health-care system." Free-market groups retaliated with a "buy-cott," encouraging people to purchase more groceries at Whole Foods.


. . .


What Mr. Mackey is proposing is more or less what he has already implemented at his company--a plan that would allow more health savings accounts (HSAs), more low-premium, high-deductible plans, more incentives for wellness, and medical malpractice reform. None of these initiatives are in any of the Democratic bills winding their way through Congress. In fact, the Democrats want to kill HSAs and high-deductible plans and mandate coverage options that would inflate health insurance costs.


. . .


Mr. Mackey's latest crusade involves traveling to college campuses across the country, trying to persuade young people that business, profits and capitalism aren't forces of evil. He calls his concept "conscious capitalism."

What is that? "It means that business has the potential to have a deeper purpose. I mean, Whole Foods has a deeper purpose," he says, now sounding very much like a philosopher. "Most of the companies I most admire in the world I think have a deeper purpose." He continues, "I've met a lot of successful entrepreneurs. They all started their businesses not to maximize shareholder value or money but because they were pursuing a dream."

Mr. Mackey tells me he is trying to save capitalism: "I think that business has a noble purpose. It's not that there's anything wrong with making money. It's one of the important things that business contributes to society. But it's not the sole reason that businesses exist."

What does he mean by a "noble purpose"? "It means that just like every other profession, business serves society. They produce goods and services that make people's lives better. Doctors heal the sick. Teachers educate people. Architects design buildings. Lawyers promote justice. Whole Foods puts food on people's tables and we improve people's health."

Then he adds: "And we provide jobs. And we provide capital through profits that spur improvements in the world.


. . .


"I don't think anybody's too big to fail," he says. "If a business fails, what happens is, there are still assets, and those assets get reorganized. Either new management comes in or it's sold off to another business or it's bid on and the good assets are retained and the bad assets are eliminated. I believe in the dynamic creativity of capitalism, and it's self-correcting, if you just allow it to self-correct."

That's something Washington won't let happen these days, which helps explain why Mr. Mackey felt compelled to write that the Whole Foods health-insurance program is smarter and cheaper than the latest government proposals.



For the full interview, see:

STEPHEN MOORE. "The Conscience of a Capitalist; The Whole Foods founder talks about his Journal health-care op-ed that spawned a boycott, how he deals with unions, and why he thinks CEOs are overpaid." The Wall Street Journal (Sat., OCTOBER 3, 2009): A11.

(Note: ellipses added.)





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.





September 5, 2009

America's "Wealth Culture" is Democratic, Diverse, and Resilient



RichBK.jpg












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





(p. W6) . . . "Rich" contains an interesting argument, if only one can find it. Mr. Samuel contends that the 20th century has seen the creation of a distinctly American "wealth culture" that is more democratic and more diverse than anything the world has seen before, and consequently more resilient.


. . .


The Reagan revolution, thanks to its lowered taxes and deregulated economy, ­produced a flood of new ­millionaires; it also removed some of the guilt that had come to cling to wealth. ­(President ­Reagan said that he wanted America to remain a country in which people could dare to be rich.) More than the ­Reaganauts, though, it was the computer geeks of Silicon ­Valley who both stimulated and legitimized wealth- ­creation. They not only ­pioneered a productivity ­miracle, they also embodied the "American" values of ­meritocracy and democracy, earning big rewards for big ­innovations and scattering stock options among their ­employees. America Online, Mr. Samuel ­observes, created 2,000 ­millionaires during the 1990s.

The road from the top-­hatted John D. Rockefeller to the be-chinoed Bill Gates is undoubtedly a long one, and yet, remarkably, much of the landscape of American wealth remains the same. The U.S. has a genius for producing entrepreneurs who can turn the latest technology into piles of gold. Less than 10% of today's rich inherited their wealth, for example, and many are ­"instapreneurs," transformed in an instant from ­penury to prosperity.



For the full review, see:

ADRIAN WOOLDRIDGE. "Review; The Evolution of Wealth; Discerning a distinctly American style of affluence." The Wall Street Journal (Fri., July 31, 2009): W6.

(Note: ellipses added.)



Reference to the reviewed book:

Samuel, Larry. Rich: The Rise and Fall of American Wealth Culture. New York: AMACOM, 2009.





June 28, 2009

"Don't Kill the Goose"



(p. A11) I think there are two major but not fully formed or fully articulated fears among thinking Americans right now, and the deliberate obscurity of official language only intensifies those fears.

The first is that Mr. Obama's government, in all its flurry of activism, may kill the goose that laid the golden egg. This is as dreadful and obvious a cliché as they come, but too bad, it's what people fear. They see the spending plans and tax plans, the regulation and reform hunger, the energy proposals and health-care ambitions, and they--we--wonder if the men and women doing all this, working in their separate and discrete areas, are being overseen by anyone saying, "By the way, don't kill the goose."

The goose of course is the big, messy, spirited, inspiring, and sometimes in some respects damaging but on the whole brilliant and productive wealth-generator known as the free-market capitalist system. People do want things cleaned up and needed regulations instituted, and they don't mind at all if the very wealthy are more heavily taxed, but they greatly fear a goose killing. Economic freedom in all its chaos and disorder has kept us rich for 200 years, and allowed us as a nation to be generous and strong at home and in the world. But the goose can be killed--by carelessness, hostility, incrementalism, paralysis, and by no one saying, "Don't kill the goose."



For the full commentary, see:

PEGGY NOONAN. "What's Elevated, Health-Care Provider? Economy of language would be good for the economy." Wall Street Journal (Sat., MAY 15, 2009): A11.






June 25, 2009

Environmentalists Lay Guilt on Rafael for His New Set of Legos



BatkerRafaelLegos2009-06-10.jpg"David Batker with his son Rafael de la Torre Batker, 9, who worried it might hurt the environment if he bought a new set of Legos." Source of photo and caption: online version of the NYT article quoted and cited below.


(p. A1) The thick-lined drawings of the Earth, a factory and a house, meant to convey the cycle of human consumption, are straightforward and child-friendly. So are the pictures of dark puffs of factory smoke and an outlined skull and crossbones, representing polluting chemicals floating in the air.

Which is one reason "The Story of Stuff," a 20-minute video about the effects of human consumption, has become a sleeper hit in classrooms across the nation.


. . .


. . . many children who watch it take it to heart: riding in the car one day with his parents in Tacoma, Wash., Rafael de la Torre Batker, 9, was worried about whether it would be bad for the planet if he got a new set of Legos.

"When driving by a big-box store, you could see he was struggling with it," his father, David Batker, said. But then Rafael said, "It's O.K. if I have Legos because I'm going to keep them for a very long time," Mr. Batker recalled.


. . .


(p. A12) "There was not one positive thing about capitalism in the whole thing," Mr. Zuber said.

Corporations, for example, are portrayed as a bloated person sporting a top hat and with a dollar sign etched on its front.



For the full story, see:

LESLIE KAUFMAN. " In Schools, a Cautionary Video About America and Its 'Stuff'." The New York Times (Mon., May 11, 2009): A1 & A12.

(Note: ellipses added; the online version of the title is: "A Cautionary Video About America's 'Stuff'.")



EnvironmentalistVideoCapture.jpg"A section of the video on toxic chemicals and production." Source of image and caption: online version of the NYT article quoted and cited above.





June 16, 2009

Entrepreneur's Dresses "Would Save Mothers Endless Work"



Schumpeter would have loved the passage quoted below---it is a wonderful example for his argument that capitalism mainly benefits ordinary people of modest means.


(p. 147) Listen to how Borgenicht describes his decision to expand beyond aprons:


From my study of the market I knew that only three men were making children's dresses in 1890. One was an East Side tailor near me, who made only to order, while the other two turned out an expensive product with which I had no desire at all to compete. I wanted to make "popular price" stuff--wash dresses, silks, and woolens. It was my goal to produce dresses that the great mass of the people could afford, dresses that would--from the business angle--sell equally well to both large and small, city and country stores. With Regina's help--she always had excellent taste, and judgment--I made up a line of samples. Displaying them to all my "old" customers and friends, I hammered home every point--my dresses would save mothers endless work, the materials and sewing were as good and probably better than anything that could be done at home, the price was right for quick disposal.



Source:

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





May 23, 2009

Government's Terrible Track Record Running Businesses



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


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

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

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

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

. . .

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

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

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



For the full commentary, see:

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

(Note: ellipsis added.)



The wonderful book, I mentioned, is:

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





May 10, 2009

Philanthro-Capitalism Is Inefficient, and Betrays Shareholders



CreativeCapitalismBK.jpg













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




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

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

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

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



For the full review, see:

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



The book under review is:

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





May 8, 2009

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



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


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

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

. . .


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

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



For the full review, see:

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

(Note: ellipses added.)





May 5, 2009

System of Capitalism without Capitalists Is Failing in Europe



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


Source:

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





April 29, 2009

World Astonished that an American Tradesman Tamed Lightning



(p. 24) Within five years of his speculative note to Collinson, lightning rods had become a common sight on church steeples throughout Europe and America. Franklin's biographer Carl Van Doren aptly describes the astonishment that greeted these events around the world: "A man in Philadelphia in America, bred a tradesman, remote from the learned world, had hit upon a secret which enabled him, and other men, to catch and tame the lightning, so dread that it was still mythological."


Source:

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





April 9, 2009

How Ayn Rand Matters Today


(p. A7) Ayn Rand died more than a quarter of a century ago, yet her name appears regularly in discussions of our current economic turmoil. Pundits including Rush Limbaugh and Rick Santelli urge listeners to read her books, and her magnum opus, "Atlas Shrugged," is selling at a faster rate today than at any time during its 51-year history.


. . .


Rand . . . noted that only an ethic of rational selfishness can justify the pursuit of profit that is the basis of capitalism -- and that so long as self-interest is tainted by moral suspicion, the profit motive will continue to take the rap for every imaginable (or imagined) social ill and economic disaster. Just look how our present crisis has been attributed to the free market instead of government intervention -- and how proposed solutions inevitably involve yet more government intervention to rein in the pursuit of self-interest.

Rand offered us a way out -- to fight for a morality of rational self-interest, and for capitalism, the system which is its expression. And that is the source of her relevance today.



For the full commentary, see:

YARON BROOK. "Is Rand Relevant?" Wall Street Journal (Sat., MARCH 14, 2009): A7.

(Note: ellipses added.)





April 7, 2009

Entrepreneurs Are the Main Source of Economic Growth


(p. 144) The reason the system of capitalism without capitalists is failing throughout most of Europe is that it misconceives the essential nature of growth. Poring over huge aggregations of economic data, economists see the rise to wealth as a slow upward climb achieved through the marginal productivity gains of millions of workers, through the slow accumulation of plant and machinery, and through the continued improvement of "human capital" by advances in education, training, and health. But, in fact, all these sources of growth are dwarfed by the role of entrepreneurs launching new companies based on new concepts or technologies. These gains generate the wealth that finances the welfare state, that makes possible the long-term investments in human capital that are often seen as the primary source of growth.


Source:

Gilder, George. The Spirit of Enterprise. 1 ed. New York: Simon and Schuster, 1984.





April 3, 2009

"Capitalism without Capitalists"


(p. 131) . . . suffusing all the most visionary and idealistic prose of leftist economics is the same essential dream of the same static and technocratic destiny: capitalism without capitalists. Wealth without the rich, choice without too many things to choose, political and intellectual freedom without a vulgarian welter of individual money and goods, a social revolution every week or so without all this disruptive enterprise.


Source:

Gilder, George. The Spirit of Enterprise. 1 ed. New York: Simon and Schuster, 1984.

(Note: ellipsis added.)





March 28, 2009

"Government Interventions Only Prolonged the Crisis"


The comments of Maart Laar, former prime minister of Estonia, are worth considering:

(p.A13) It is said that the only thing that people learn from history is that people learn nothing from history. Looking at how the world is handling the current economic crisis, this aphorism appears sadly true.

World leaders have forgotten how the collapse of Wall Street in 1929 developed into a world-wide depression. It happened not thanks to market failures but as a result of mistakes made by governments which tried to protect their national economies and markets. The market was not allowed to make its corrections. Government interventions only prolonged the crisis.

We may hope that, even as we see several bad signs of neo-interventionist attitude, all the mistakes of the 1930s will not be repeated. But it is clear that the tide has turned again. Capitalism has been declared dead, Marx is honored, and the invisible hand of the market is blamed for all failures. This is not fair. Actually it is not markets that have failed but governments, which did not fulfill their role of the "visible hand" -- creating and guaranteeing market rules. Weak regulation of the banking sector and extensive lending, encouraged by governments, are examples of this failure.



For the full commentary, see:

MART LAAR. "Economic Freedom Is Still the Best Policy." Wall Street Journal (Fri., FEBRUARY 13, 2009): A13.





March 7, 2009

Bailouts Damage "System Based on the Premise that Risk Can Bring Failure, as Well as Rewards"


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

(p. A8) William O. Perkins III says he turned a $1.25 million profit trading Goldman Sachs Group Inc. stock last week.

You would think that would count as a pretty good paycheck for the Houston energy trader. Instead, the experience left him so angry about the demise of capitalism that he says he has decided to spend his profits on advertisements attacking President George W. Bush's planned $700 billion Wall Street bailout.

. . .

So he says he bought Goldman Sachs at $129 a share. The stock fell, so he bought more at $100 a share. It fell again, and he bought at $90. The next day it rallied and he sold out at an average price of $130 a share, for a net gain of about $1.25 million over three days of trading, he said.

Trouble was, the stock didn't rally because of the fundamental strength of the company, Mr. Perkins said. It rallied because the federal government announced that it would rescue Wall Street from its own subprime follies, he said.

"The stock did OK because the government came in and said, 'No one can fail,'" he said. "It's capitalism on the way up and communism on the way down."

His success left him furious, and he decided that someone had to speak out about the damage such a plan would cause to a system based on the premise that risk can bring failure, as well as rewards.



For the full story, see:

MICHAEL M. PHILLIPS. "Trader Makes a Quick $1.25 Million on Rescue, Then Slams It." The Wall Street Journal (Weds., SEPTEMBER 24, 2008): A10.

(Note: ellipsis added.)




February 8, 2009

A Toast to Schumpeter on His Birthday (February 8, 1883)


ForbesKeynesSchumpeterCover1983-05-23edited.jpg








Source: scan (and crop) of the cover of the May 23, 1983 issue of Forbes .


In the May 23, 1983 issue of Forbes there appeared a now-famous essay by the late and great management guru Peter Drucker in which he pointed out that 1983 was the centennial of the birth of both John Maynard Keynes and Joseph A. Schumpeter. He noted that in the decades since the great economists' passing, the academic and policy worlds worshiped at the feet of Keynes, and all but ignored Schumpeter (hence the many candles in front of the Keynes portrait on the cover, and the single, small candle in front of the Schumpeter portrait).

But Drucker argued that the world had gotten it wrong. Schumpeter was more important because he had understood a crucial truth: the process of creative destruction is indeed the essential fact about capitalism.


The reference for the original Drucker essay is:

Drucker, Peter F. "Modern Prophets: Schumpeter or Keynes?" Forbes, May 23, 1983, 124-28.

The reference to the reprint of the Drucker essay is:

Drucker, Peter F. "Modern Prophets: Schumpeter or Keynes?" In The Frontiers of Management New York: Penguin Putnam, Inc., 1999, 104-15.

A typo-laden version of the essay has been posted on the web at:

http://www.peterdrucker.at/en/texts/proph_01.html

(Note: I thank Aaron Brown for alerting me to the neat cover that appears at the top of this entry).




February 2, 2009

"The Whole Point of Camp is to Dethrone the Serious"


(p. W1) The 2000 film "Billy Elliot" was a surprise hit. It's an absorbing drama about personal transformation and the power of art to ennoble the human spirit. "Billy Elliot: The Musical" -- the noise is supplied by Sir Elton John -- is a depressing spectacle about partisan politics and the ephemeral power of schlock.

. . .

The musical, a campy, anticapitalist confection, is just one of the latest prepackaged exercises in "transgression." Maybe it's "Corpus Christi," Terrence McNally's play about a gay Jesus Christ. Maybe it's "The Goat," Edward Albee's play celebrating bestiality, or a production (p. W4) of "The Flying Dutchman" in which the heroine sports posters of Che Guevara and Martin Luther King on her bedroom wall. The point about these unpleasant offerings is not how outrageous but how common they are.

. . .

In the film, there was one extended reference to Margaret Thatcher. Mrs. Wilkinson's middle-class drink-sodden husband (tellingly made "redundant" -- that is, laid off) praises the prime minister for showing down the miners. He is hardly a sympathetic figure, but he had a point: If it costs more money to get the coal out of the ground then you make from selling it, why keep the pit open?

If there were truth in advertising, the musical would have been called "Billy Elliot, The Musical, Featuring Margaret Thatcher as the Incarnation of Evil." She is roundly abused by several characters in the opening scenes, is the object of casual calumny throughout the show, and features in a Christmas children's song -- replete with gigantic scary Thatcher masks and puppets -- whose refrain is "Merry Christmas, Maggie Thatcher. We all celebrate today because it's one day closer to your death." Nice stuff, eh?

In one sense, "Billy Elliot: The Musical" represents a growth enterprise. Everywhere you turn these days, you are met not only with celebrations of the vulgar but also entertainments that pretend to be brave, challenging "interrogations" of established taste which in fact are simply reflections of established taste. The little sermons about Thatcher and capitalism and bigotry are presented as if they were fresh thoughts designed to disturb the dogmatic slumbers of the audience. In fact, they simply reinforce the left-liberal clichés audiences everywhere internalized decades ago. It's an odd phenomenon. In theaters and museums across the Western world you find audiences applauding sentiments that, were they translated into the real world, would spell their demise.

Perhaps it's an instance of what Lenin was talking about when he said that the bourgeoisie was so rotten that it would sell the rope with which it was to be hanged. The matinee I attended was packed to the last emergency exit with a cheery crowd of nice, middle-class folks who cheered and clapped and whistled and bravoed.

. . .

The impressive thing about "Billy Elliot" the film is its dramatic enactment of serious questions. "Billy Elliot: The Musical" spoofs and sentimentalizes those questions, replacing them with a series of political sermons and distracting gymnastic exhibitions. In 1964, Susan Sontag famously said that the "ultimate Camp statement" was "It's good because it's awful." Sontag wrote as an enthusiast for Camp. I have no doubt that she would have emerged happy from "Billy Elliot: The Musical." "The whole point of Camp," she wrote, "is to dethrone the serious."



For the full commentary, see:

ROGER KIMBALL. "Culture; A Clumsy Mix of Art and Politics; Broadway turns subtle themes into simplistic fare in shows like 'Billy Elliot'." Wall Street Journal (Sat., DECEMBER 13, 2008): W1 & W4.

(Note: ellipses added.)




January 24, 2009

Capitalism's Defenseless Fortress



FortressDefended.JPGPhotograph by Art Diamond.

(p. 143) . . . capitalism creates a critical frame of mind which, after having destroyed the moral authority of so many other institutions, in the end turns against its own; the bourgeois finds to his amazement that the rationalist attitude does not stop at the credentials of kings and popes but goes on to attack private property and the whole scheme of bourgeois values.

The bourgeois fortress thus becomes politically defenseless. Defenseless fortresses invite aggression especially if there is rich booty in them. Aggressors will work themselves up into a state of rationalizing hostility---aggressors always do.



Source:

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


FortressDefenseless.JPGPhotograph by Art Diamond.





January 18, 2009

"Money Buys Freedom"



FarmFriendsBK.jpg





Source of book image: http://ecx.images-amazon.com/images/I/51rILrqBegL._SS500_.jpg



(p. A17) . . . other farm alumni make no pretense to continuing the revolution but instead engage in the boomer habit of replacing youthful extremism with a middle-aged version: "We used to think money was the least important thing. Now I can see that it's the most important," says one former commune member, sounding like a budding Randian. "Money buys freedom."

Few of the farm friends are terribly likable or sympathetic -- with the notable exception of Tim, an "alienated citizen" of the farm while he lived there. Tim found the commune's group dynamics stifling. He wanted time to himself and was promised that he could build his own room and work space in the barn, but the objections of others to his solitary plans thwarted him at nearly every turn.

Of the farm's whole New Age mission, Tim remarks: "The error was, I think, imagining that there was somewhere new to go, someone new to be. It became increasingly clear that a closed system of myth did not jibe with the world as it really was." Looking later at the outside world, Tim saw "a system formed less from malice than from a kind of natural order, less from inordinate greed than from longings much like our own for privacy, comfort, individual freedom, and one's familiar or chosen way of life." Unfortunately, "Farm Friends" spends too little time with Tim.



For the full commentary, see:

PAUL BESTON. "Bookshelf; A Look Back at the New Age." Wall Street Journal (Tues., July 22, 2008): A17.

(Note: ellipsis added.)




January 17, 2009

Since Wire Rope Had Not Been Tried, Entrepreneur Roebling Had to Self-Finance His Innovation


(p. 178) It was a bridge across the Niagara that would change life for the nail and wire makers. In 1831 a German engineer had emigrated from Mühlhausen in Saxony to America, where he founded the city (p. 179) of Saxonburg, Pennsylvania (having refused to settle in the American South because of his views on slavery). He then worked as a farmer, as a surveyor on the Pennsylvania Canal and finally as a railway engineer. His name was John Roebling, and he had a strange obsession with wire ropes. Since nobody in America had ever tried to make that kind of rope, the idea was not easy to promote. After failing to interest the firm of Washburn & Company, in Worcester, Massachusetts (we will return to this form in our story), in 1848 Roebling moved to Trenton, New Jersey, and set up on his own.

After practicing his technique on a number of small bridges in Pennsylvania and Delaware, Roebling finally got a contract for the 3,640 wires into a compact, uniformly tensioned wire cable. Then, using a kite to get the cable to the other side of the river, he went on to finish the first-ever wire suspension bridge, 821 feet in length and strong enough to take the full weight of a train. The bridge opened to rail traffic on March 16, 1855.

Because of his success at Niagara, Roebling's cable-spinning technique soon became standard on all suspension bridges. He put his name in the history books with his next job: the Brooklyn Bridge.



Source:

Burke, James. The Pinball Effect: How Renaissance Water Gardens Made the Carburetor Possible - and Other Journeys. Boston: Back Bay Books, 1997.

(Note: ellipsis added.)




January 12, 2009

"Commerce in Goods Brought with it Commerce in Entertainment, Music, Ideas, Gods and Cults"


TerraCottaVessel.jpg






"This terra-cotta vessel, from the Hittite site in Turkey, looks strikingly modern." Source of photo and caption: online version of the WSJ article quoted and cited below.


(p. D7) The show whisks us along on complementary interlocking narratives that take the visitor down a spaghetti junction of cultural confluences. We learn that in the 1950s a prominent Turkish archaeologist excavated a site known locally as Kultepe. It yielded a vast hoard of cuneiform tablets that record in detail the town's trade in copper and numerous aspects of its domestic life, including letters home -- many of which are on display. As a result, we know that Assyrian merchants in the copper trade moved en masse to Central Anatolia and founded the town, and many like it, to feed the burgeoning trade in what Ms. Aruz calls "the luxury goods of the time." She adds that "potentates competed to possess artifacts like these -- the more distant and exotic their origins, the more desirable because their possession denoted power and prestige."

Visitors should, in particular, feast their eyes on the smoothly burnished terra-cotta spouted vessels from Kultepe and Hittite sites in Turkey. Outlandishly geometric and eerily modern, futuristic even, they alone are worth the price of admission.

In following the visual motif of bull-leaping acrobats from Crete to Anatolia to Egypt on everything from Minoan vases to cylinder seals and carved boxes, the show makes the point that commerce in goods brought with it commerce in entertainment, music, ideas, gods and cults. Suddenly images of Sphinxes and Gryphons pop up all over the 15th-century B.C. geosphere, as do toys and board games and educational institutions.



For the full story, see:

SARAH E. NEEDLEMAN. "Doing the Math to Find the Good Jobs; Mathematicians Land Top Spot in New Ranking of Best and Worst Occupations in the U.S." The Wall Street Journal (Tues., Jan. 6, 2008): D2.

For the case for the complementarity between capitalism and culture, see:

Cowen, Tyler. Creative Destruction: How Globalization Is Changing the World's Cultures. Princeton, NJ: Princeton University Press, 2002.


AmagiCuneiform.gif "The cuneiform inscription . . . is the earliest-known written appearance of the word "freedom" (amagi), or "liberty." It is taken from a clay document written about 2300 B.C. in the Sumerian city-state of Lagash." Source of the cuneiform and the caption: http://www.libertyfund.org/aboutlogo.htm

(Note: ellipsis added.)




December 18, 2008

Deaths in 'Natural' Disasters Caused by Absence of Economic Growth


We are often made to feel guilty for the suffering of other countries in "natural" disasters. But the deaths are more due to the lack of infrastructure, sound buildings and the like, which in turn are due to the countries' lack of economic growth, which in turn is due to their rejection of the process of capitalist creative destruction.

(p. 90) The simple truth is that money matters more than anything else in most disasters. Which is another way of saying that where and how we live matters more than Mother Nature. Developed nations experience just as many natural disasters as undeveloped nations. The difference is in the death toll. Of all the people who dies from natural disasters on the planet from 1985 to 1999, 65 percent came from nations with incomes below $760 per capita, according to the Intergovernmental Panel on Climate Change. The 1994 Northridge earthquake in California, for example, was similar in magnitude and depth to the 2005 earthquake in Pakistan. But the Northridge earthquake killed only sixty-three people. The Pakistan earthquake killed about a hundred thousand.

People need roofs, roads, and health care before quibbles like personality and risk perception count for much. And the effect is geometric. If a large nation raises its GNP from $2,000 to $14,000 per person, it can expect to save 530 lives a a year in natural disasters, according to a study by Matthew Kahn at Tufts University. And for those who survive, money is a form of liquid resilience: it can bring treatment, stability, and recovery.



Source:

Ripley, Amanda. The Unthinkable: Who Survives When Disaster Strikes - and Why. New York: Crown Publishers, 2008.




December 11, 2008

"The Authorities Were Shocked" at Private Airport Success



DomodedovoAirportMoscow.jpg "Investors renovated a terminal at Domodedovo and oversaw construction of a train line to Moscow." Source of caption and photo: online version of the WSJ article quoted and cited below.


(p. B9) MOSCOW -- A heated battle for passengers between the Russian capital's main airports offers an unlikely model of competition for the aviation industry.

In most cities, airports are monopolies. Even in cities that have more than one, including New York, Paris and Tokyo, airports are usually owned by the same operator. That means airlines can rarely make the kind of choices passengers take for granted, such as choosing an airport for its efficiency, shopping or lounges.

Not so in Moscow, where two international airports, Domodedovo and Sheremetyevo, owned by rival organizations, battle for business. The result is lower fees, better service and fast-improving facilities all around.

Domodedovo Airport, for example, recently convinced several top airlines to make it their Russian base, thanks to a major modernization that added more than 20 new restaurants, jewelry boutiques and a shop where passengers can rent DVDs to watch in booths.

Sheremetyevo Airport responded by building a fast rail link to Moscow, complete with a Starbucks at the airport station.

Moscow's airport rivalry highlights a paradox of the global aviation industry: Airlines compete fiercely with each other for customers, but they face many monopolist suppliers, such as air-traffic control systems, fuel distributors and airports. Resulting costs and poor services get passed on to travelers.


. . .


During Russia's privatization drive of the 1990s, local investors bought Domodedovo, which was previously Moscow's airport serving Soviet Central Asia. The investors, grouped into an upstart charter-airline operator, East Line Group, renovated a terminal at Domodedovo and oversaw construction of a train line to Moscow.

East Line charged airlines landing and operating fees that undercut Sheremetyevo by around 30%. For passengers, Domodedovo's rail link guaranteed a 40-minute trip to downtown Moscow. Private Russian carriers, largely frozen out of Aeroflot's base at Sheremetyevo, expanded quickly at the spacious Domodedovo.

East Line's big break came in 2003, when British Airways announced it would switch from Sheremetyevo to Domodedovo.

"The authorities were shocked that a major airline would leave the government airport," recalls Daniel Burkard, BA's former country manager for Russia.



For the full story, see:

DANIEL MICHAELS. "Moscow Points the Way With Airport Competition; While Most Nations Sport Monopolies, Rivalry Between Two Russian Gateways Ushers in Improvements for Carriers, Travelers." The Wall Street Journal (Mon., DECEMBER 1, 2008): B9.

(Note: ellipsis added.)


MoscowAirportTrafficGraph.gif
















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








November 4, 2008

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



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

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

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


Source of quote:

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


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

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






November 3, 2008

"We Will Stay a Laissez-Faire Economy"


AnsipAndrusEstonianPrimeMinister.jpg








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

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

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

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

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

. . .

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

. . .

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

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

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



For the full story, see:

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

(Note: ellipses added.)




August 24, 2008

Schumpeter on How Amphibial State Capitalism Lacks "Motive Power"


From McCraw's summary of a brief Schumpeter essay published in 1943 in Seymour Harris' Postwar Economic Problems:

(p. 424) Schumpeter went on to argue that both in the United States and in capitalist countries abroad, a high rate of public spending during the postwar period would likely evolve into total government control of investment.   . . .    Some industries might be nationalized, and if the government "should try to run the nationalized industries according to the principles of business rationality, Guided Capitalism would shade off into State Capitalism, . . . "

. . .

The overall result would likely be "an amphibial state for the calculable future." The amphibial state might well generate frictions among business, labor, and government and would not benefit from the "motive power" of either capitalism or socialism.



Source:

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

(Note: ellipses added.)




November 12, 2007

Strong Global Support for Free Markets

 

FreeMarketsPositiveViewTable.gif   Source of table:  "World Publics Welcome Global Trade -- But Not Immigration." Pew Global Attitudes Project, a project of the PewResearchCenter. Released: 10.04.07 dowloaded from: http://pewglobal.org/reports/display.php?ReportID=258

 

(p. A10) WASHINGTON, Oct. 4 — Buoyed and battered by globalization, people around the world strongly view international trade as a good thing but harbor growing concerns about its side effects: threats to their cultures, damage to the environment and the challenges posed by immigration, a new survey indicates.

In the Pew Global Attitudes Project survey of people in 46 countries and the Palestinian territories, large majorities everywhere said that trade was a good thing. In countries like Argentina, which recently experienced trade-based growth, the attitude toward trade has become more positive.

But support for trade has decreased in recent years in advanced Western countries, including Germany, Britain, France and Italy — and most sharply in the United States. The number of Americans saying trade is good for the country has dropped by 19 percentage points since 2002, to 59 percent.

“G.D.P. growth hasn’t been as dramatic in these places as in Latin America or Eastern Europe,” said Andrew Kohut, president of the Pew Research Center, referring to gross domestic product, the total value of the goods and services produced in a country. “But worldwide, even though some people are rich and some are poor, support for the basic tenet of capitalism is pretty strong.”

 

For the full story, see: 

BRIAN KNOWLTON. "Globalization, According to the World, Is a Good Thing. Sort Of."  The New York Times   (Fri., October 5, 2007):  A10. 

 




July 20, 2007

Kirkcaldy's Current Native-Son Would Do Well to Remember Kirkcaldy's 18th Century Native Son


 

In Kirckcaldy, Gordon Brown, the man on the right, tries to persuade the natives to vote for the Labor Party.  Source of the photo:  online version of the NYT article cited below.

 

Many years ago, we took the train from Edinburgh to spend a few hours in Kirkcaldy, the birthplace of Adam Smith.  I was surprised at how little there was to honor Smith in the town where he was born and raised.  There was a small cafe/theatre named after Smith.  A small crystal shop sold some shot glasses with Smith's image engraved on them.  And there was a small plaque, above a no-parking sign, on the main street, at the spot where Smith's family home had been. 

I remember asking a very polite young father with two or three small children in tow, why there was so little of Smith in Kirckaldy?  With a twinge of something like regret, he said that everyone in that part of Scotland supported Labor, and they saw Smith as supporting capitalism, and so did not like him much.

It was a crowded Saturday shopping day when Jeanette took my picture in front of the small plaque.  Incredulous passers-by turned and glanced in my direction, probably wondering why the crazy American wanted his picture taken next to a no-parking sign.  

For the sake of Kirkcaldy, and Britain, let us hope that Gordon Brown has read a bit of the work of his fellow Kirkcaldy native son:

 

(p. A10) KIRKCALDY, Scotland, April 30 — Gordon Brown, Britain’s presumed prime minister-to-be, is usually associated with a somewhat dour manner and a mastery of statistics. But here, he displays other skills — a bolt-on smile and a ready handshake to work sparse crowds between the discount stores on the High Street, asking parents with strollers whether their new babies are keeping them awake at night, and inquiring whether the men support the local Raith Rovers soccer team.

. . .

“This is a big choice on Thursday, between those who want to break up Britain and those who want to build up Scotland,” Mr. Brown, currently Britain’s chancellor of the exchequer, told students at Adam Smith College, named for the 18th-century economist who was born here.

. . .

Mr. Brown, who is not standing in these elections, came to town, alongside the choppy waters of the Firth of Forth, to support the Scottish Labor campaign and resist the nationalists.

“I do not think the Scottish people want to see the breakup of the union” that makes up Britain, he said here in Kirkcaldy (pronounced kerr-CUDDY).

But advocates of independence say it would propel Scotland to a bright future, as viable as any other small European state.

 

For the full story, see: 

ALAN COWELL.  "Elections in Britain Reveal a Scottish Line in the Sand."  The New York Times  (Weds., May 2, 2007):  A10.

(Note:  ellipses  added.)

 

 KirkcaldyScotlandMap.jpg   Source of the map:  online version of the NYT article cited above.

 

   Art Diamond in Kirkcaldy in 1994 at location (I think on High Street) where  Adam Smith's boyhood home used to be.  (Photo by Jeanette Diamond.)

 




July 8, 2007

Dubai Is "Turbo-Charged Free-Market Capitalism"

 

DubaiCamel.jpg   Dubai skyline.  Source of photo:  online version of the WSJ commentary quoted and cited below.

 

(p. A9) Dubai, which is part of the United Arab Emirates, represents turbo-charged free-market capitalism at its purest -- sometimes crass, often over-the-top, and always in motion. Home to more than 1.2 million people, more than 80% of whom are resident aliens, Dubai is as much a multicultural melting pot as New York City was in its late 19th century heyday. And like New York then, Dubai teems with winners and losers, the rich and not-so-rich, and immigrants who often find that life in the glittering metropolis is cold, hard and unfair. But the government maintains order, spends billions on infrastructure and is dedicated to establishing the city-state as a global capital of, well, capital.

. . .

Seeing Dubai as an economic model for other parts of the Arab world is admittedly a challenge: Like Singapore, it has the virtues of a small ruling class, a tiny population and not much territory, and that is not something Egypt or Syria could emulate. But as a cultural model, or an attitude, it does offer an alternate vision of the future, one with its own excesses and vices for sure, but still free of the divisiveness and religious conflict that has become the assumed status quo in other parts of the Middle East.

Dubai should not be written off as little more than an Arab Las Vegas. It deeply challenges the assumption that Muslims, Christians and Jews cannot find common ground and work together to construct a shared future. Dubai is proof, not perfect, but real, that they can.

 

For the full commentary, see: 

ZACHARY KARABELL. "City of Dreams." The Wall Street Journal  (Sat., March 17, 2007):  A9.

(Note:  ellipsis added.)

 




May 23, 2007

Private Money Can Top Government Money in Space, as in IT

 

Lots of people are building new IT companies. You can start a company and sell it to Yahoo! or Google in a couple of years. But so can anyone else. Aerospace is different. To paraphrase John F. Kennedy in 1962: We choose to go to the moon not because it's easy, but because it's hard.

That's why, as a long-time investor in IT and Internet start-ups, I'm now spending more and more time on private aviation and commercial space start-ups. I'm trailing an illustrius crew of IT pioneers: Elon Musk (Space-X, rockets, formerly with PayPal), Vern Raburn (Eclipse Aviation, very light jets, formerly at Microsoft, Symantec and Lotus), Jeff Bezos (Blue Origin, rockets, and still at Amazon, too!), Jeff Greason (XCOR, rockets and formerly with Intel) and Ed Iacobucci (DayJet, air taxi operator, and founder of Citrix).

. . .

On the space side, there's a . . . strong parallel with the world of IT. The establishment in "space" is the government and especially the military, just as it once was (along with academia) for the Internet. I remember the days when commerce on the Internet was considered sleazy—but look at the innovations and productivity it unleashed.

In the same way, the current priests of space are dismayed by the privately funded space start-ups—unsafe, sleazy, frivolous. Imagine: Ads on the side of a rocket ship! Well, why not, if it helps pay for the fuel... and the R&D that designed the thing?

 

For the full commentary, see: 

ESTHER DYSON  "New Horizons for the Intrepid VC."  The Wall Street Journal  (Tues., March 20, 2007):  A19.

(Note:  ellipses added, except for the ellipsis following the word "fuel" which was in the original.)

 




November 4, 2006

Hong Kong's Growth Was Due to Cowperthwaite's "Positive Noninterventionism"


In Free to Choose, Milton Friedman compared Hong Kong's free market, with India's state control of the economy.  The dynamism and growth of Hong Kong was a stark contrast to the inertia and stagnation of India.  In the decades since Free to Choose, India has become more free and, alas, Hong Kong less free:   


(p. A14) . . . it was sadly unsurprising to see Hong Kong's current leader, Donald Tsang, last month declare the death of the policy on which the territory's prosperity was built.

The really amazing phenomenon is that, for half a century, his predecessors resisted the temptation to tax and meddle.  Though a colony of socialist Britain, Hong Kong followed a laissez-faire capitalist policy, thanks largely to a British civil servant, John Cowperthwaite.  Assigned to handle Hong Kong's financial affairs in 1945, he rose through the ranks to become the territory's financial secretary from 1961-71.  Cowperthwaite, who died on Jan. 21 this year, was so famously laissez-faire that he refused to collect economic statistics for fear this would only give government officials an excuse for more meddling.  His successor, Sir Philip Haddon-Cave, coined the term "positive noninterventionism" to describe Cowperthwaite's approach.

The results of his policy were remarkable.  At the end of World War II, Hong Kong was a dirt-poor island with a per-capita income about one-quarter that of Britain's.  By 1997, when sovereignty was transferred to China, its per-capita income was roughly equal to that of the departing colonial power, even though Britain had experienced sizable growth over the same period.  That was a striking demonstration of the productivity of freedom, of what people can do when they are left free to pursue their own interests.

 

For the full commentary, see: 

MILTON FRIEDMAN.  "Hong Kong Wrong."  Wall Street Journal  (Fri., October 6, 2006):  A14.

(Note:  ellipsis added.)

 






January 28, 2006

Private Property Rights Would Help American Indians

(p. W11) The main problem with Indian reservations isn't, as some argue, that they were established on worthless tracts of grassland. Consider the case of Buffalo County, S.D., which Census data reveal to be America's poorest county. Some 2,000 people live there. More than 30% of the homes are headed by women without husbands. The median household income is less than $13,000. The unemployment rate is sky high.

Just to the east of Buffalo County lies Jerauld County, which is similar in size and population. Yet only 6% of its homes are headed by women without husbands, the median household income is more than $30,000, and the unemployment rate hovers around 3%. The fundamental difference between these two counties is that the Crow Creek Indian Reservation occupies much of Buffalo County. The place is a pocket of poverty in a land of plenty.

Maybe we should give land back to the rez-dwellers, so that they may own private property the way other Americans do. Currently, the inability to put up land as collateral for personal mortgages and loans is a major obstacle to economic development. This problem is complicated by the fact that not all reservations have adopted uniform commercial codes or created court systems that are independent branches of tribal government -- the sorts of devices and institutions that give confidence to investors who might have the means to fund the small businesses that are the engines of rural economies.

. . .

. . . the real tragedy is that reservations, as collectivist enclaves within a capitalist society, have beaten down their inhabitants with brute force rather than lifting them up with opportunity. As their economies have withered, other social pathologies have taken root: Indians are distressingly prone to crime, alcoholism and suicide. Families have suffered enormously. About 60% of Indian children are born out of wedlock. Although accurate statistics are hard to come by because so many arrangements are informal, Indian kids are perhaps five times as likely as white ones to live in some form of foster care. Their schools are depressingly bad.

Even if casino revenues were able to address these soul-crushing problems -- a doubtful proposition -- most reservations are too isolated geographically to profit from big-dollar gambling. Yet the rise of the casinos may help point the way forward: Their ability to flourish contradicts the tenured Marxists in ethnic-studies departments who claim that communitarian Indian cultures aren't compatible with market capitalism. After all, it takes entrepreneurship to run some of the world's biggest casinos.

What's more, this modern-day entrepreneurship is part of a long tradition: Meriwether Lewis (of Lewis & Clark fame) described the Chinooks as "great hagglers in trade." I once visited Poverty Point, a 3,000-year-old set of earthen mounds in Louisiana; the museum there displayed ancient artifacts found at the site, including copper from the Great Lakes and obsidian from the Rockies. These prehistoric Americans were budding globalizers, and there's no reason why their descendants should remain walled off from the world economy.



For the full story, see:

JOHN J. MILLER. "The Projects on the Prairie." The Wall Street Journal (Saturday, January 27, 2006): W11.(Note: ellipses added.)





December 11, 2005

Industrial Giants Succeeded in Philanthropy in the Same Way They Succeeded in Business

(p. 3) . . . the Gateses were not the first to see that money could sometimes move mountains in public health. They are following in the footsteps of the industrial giants of the late-19th century, said Dr. Howard Markel, director of the University of Michigan's Center for the History of Medicine.

These men also brought their fortunes to bear on social problems, and believed that they could succeed in philanthropy in much the way they had succeeded in business.

The donors of the robber-baron years started their philanthropy while still alive - a novel idea then. Andrew Carnegie, for example, gave away hundreds of millions of dollars to build libraries long before his death.

The largest bequest in American history prior to Carnegie's time was from Johns Hopkins, a Baltimore merchant, who left $7 million to found the eponymous university and hospital in 1873 - after he died.

But the closest parallel to the Gates approach to philanthropy is that of John D. Rockefeller, said Dr. Markel and Robert E. Kohler, a medical historian from the University of Pennsylvania.

Rockefeller built Standard Oil. Like Mr. Gates, he was the richest man of his time, and like him he was reviled as a greedy monopolist.

Rockefeller, like Mr. Gates, hired a professional to run his charities. And he, like Mr. Gates, used his money systematically to identify and attack important public health problems.

Rockefeller hired Frederick T. Gates, a former minister (and no relation to the Microsoft co-founder) as his philanthropic executive. Mr. Gates read an 1892 medical textbook that convinced him that diseases had causes, like germs and worms, that could be fought by science - not a universally accepted idea at the time.

The most famous health campaign he started with Rockefeller money was the drive, begun in 1907, to rid the rural American South of hookworm. Called "the germ of laziness" because it caused anemia and made victims lethargic and dull-witted, hookworm afflicted up to a third of Southerners.

The foundation set up clinics that administered purgatives and - because the worm is shed in feces and picked up by bare feet - taught people to dig deep privies and wear shoes. More Rockefeller money underwrote some of the 20th century's great public health drives, many using research done at Rockefeller University. Clinics were built in 50 other countries to eliminate hookworm worldwide. The effort failed because the worm can survive in soil and reinfect people; but the problem diminished, especially in parts of Asia.

In 1915, the foundation declared war on yellow fever; by 1932, scientists had realized that monkeys were also a reservoir for the virus, making eradication impossible, but by then Rockefeller scientists had invented the vaccine still used today.

Patty Stonesifer, chief executive of the Gates foundation, said she and William H. Gates Sr., the father of the software pioneer and co-chair of the foundation, consider the Rockefeller campaigns especially instructive. "We stood on their shoulders," she said.

. . .

As Ms. Stonesifer said admiringly of the Rockefeller campaign against hookworm: "A lot of people would say, 'you've got to reduce poverty to get rid of hookworm.' But the Rockefellers said, 'You don't need a 20-year intervention. You can use shoes.' "



For the full article, see:

DONALD G. McNEIL Jr. "The Rich, Sometimes, Are the Best Medicine." The New York Times, Section 4 (Sun., December 11, 2005): 3.

(Note: ellipses added.)






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