November 30, 2015

Sense of Purpose, Not Greed, Is Reason Multimillionaires Keep Working

(p. 10) I've often wondered why the so-called Masters of the Universe, those C.E.O.s with multimillion-dollar monthly paychecks, keep working. Why, once they have earned enough money to live comfortably forever, do they still drag themselves to the office? The easy answer, the one I had always settled on, was greed.

But as I watched the hours slowly drip by in my cubicle, an alternative reason came into view. Without a sense of purpose beyond the rent money, malaise sets in almost immediately. We all need a reason to get up in the morning, preferably one to which we can attach some meaning. It is why people flock to the scene of a natural disaster to rescue and rebuild, why people devote themselves to a cause, no matter how doomed it may be. In the end, it's the process as much as the reward that nourishes us.

For the full commentary, see:

TED GELTNER. "ON WORK; Bored to Tears by a Do-Nothing Dream Job." The New York Times, SundayBusiness Section (Sun., NOV. 22, 2015): 10.

(Note: the online version of the commentary was updated on NOV. 21, 2015.)

November 29, 2015

For Movies, Film Option Survives Digital Advance

(p. B1) Faced with the possible extinction of the material that made Hollywood famous, a coalition of studios is close to a deal to keep Eastman Kodak Co. in the business of producing movie film.

The negotiations--secret until now--are expected to result in an arrangement where studios promise to buy a set quantity of film for the next several years, even though most movies and television shows these days are shot on digital video.

Kodak's new chief executive, Jeff Clarke, said the pact will allow his company to forestall the closure of its Rochester, N.Y., film manufacturing plant, a move that had been under serious consideration. Kodak's motion-picture film sales have plummeted 96% since 2006, from 12.4 billion linear feet to an estimated 449 million this year. With the exit of competitor Fujifilm Corp. last year, Kodak is the only major company left producing motion-picture film.

. . .

Film and digital video both "are valid choices, but it would be a tragedy if suddenly directors didn't have the opportunity to shoot on film," said Mr. Apatow. director of comedies including "Knocked Up" and "The 40 Year-Old Virgin," speaking from the New York set of his coming movie "Trainwreck," which he is shooting on film. "There's a magic to the grain and the color quality that you get with film."

For the full story, see:

BEN FRITZ. "Movie Film, at Death's Door, Gets a Reprieve." The Wall Street Journal (Weds., July 30, 2014): B1 & B8.

(Note: ellipsis added.)

(Note: the online version of the article was dated July 29, 2014.)

November 28, 2015

Price Theory Paradox When Gas Prices Fall

(p. A3) When gas prices fall, Americans reliably do two things that don't make much sense.

They spend more of the windfall on gasoline than they would if the money came from somewhere else.

And they don't just buy more gasoline. They switch from regular gas to high-octane.

A new report by the JPMorgan Chase Institute, looking at the impact of lower gas prices on consumer spending, finds the same pattern as earlier studies. The average American would have saved about $41 a month last winter by buying the same gallons and grades. Instead, Americans took home roughly $22 a month. People, in other words, used almost half of the windfall to buy more and fancier gas.

. . .

Professors Hastings and Shapiro showed that households adjusted their gas consumption much more sharply in response to changes in gas prices than in response to equivalent changes in overall income. In the fall of 2008, for example, as gas prices fell amid a broad economic collapse, consumers responded as if the decline of gas prices were the more important event, significantly increasing purchases of premium gas.

Moreover, this behavior was prevalent: 61 percent of the households made at least one irrational gas purchase. People "treat changes in gasoline prices as equivalent to very large changes in income when deciding which grade of gasoline to purchase," they wrote.

For the full commentary, see:

Binyamin Appelbaum. "When Gas Becomes Cheaper, Americans Buy Fancier Gas." The New York Times (Thurs., OCT. 20, 2015): A3.

(Note: ellipsis added.)

(Note: the online version of the commentary was updated on OCT. 19, 2015, and has the title "When Gas Becomes Cheaper, Americans Buy More Expensive Gas.")

The Hastings and Shapiro article mentioned above, is:

Hastings, Justine S., and Jesse M. Shapiro. "Fungibility and Consumer Choice: Evidence from Commodity Price Shocks." Quarterly Journal of Economics 128, no. 4 (Nov. 2013): 1449-98.

November 26, 2015

Professors Oppose Diversity by Discriminating Against Conservatives

(p. A23) One of the great intellectual and moral epiphanies of our time is the realization that human diversity is a blessing. It has become conventional wisdom that being around those unlike ourselves makes us better people -- and more productive to boot.

Scholarly studies have piled up showing that race and gender diversity in the workplace can increase creative thinking and improve performance. Meanwhile, excessive homogeneity can lead to stagnation and poor problem-solving.

Unfortunately, new research also shows that academia has itself stopped short in both the understanding and practice of true diversity -- the diversity of ideas -- and that the problem is taking a toll on the quality and accuracy of scholarly work. This year, a team of scholars from six universities studying ideological diversity in the behavioral sciences published a paper in the journal Behavioral and Brain Sciences that details a shocking level of political groupthink in academia. The authors show that for every politically conservative social psychologist in academia there are about 14 liberal social psychologists.

Why the imbalance? The researchers found evidence of discrimination and hostility within academia toward conservative researchers and their viewpoints. In one survey cited, 79 percent of social psychologists admitted they would be less likely to support hiring a conservative colleague than a liberal scholar with equivalent qualifications.

For the full commentary, see:

Arthur C. Brooks. "Academia's Rejection of Diversity." The New York Times (Sat., OCT. 31, 2015): A23.

(Note: the online version of the commentary has the date OCT. 30, 2015.)

The Behavioral and Brain Sciences article mentioned above, is:

Duarte, José L., Jarret T. Crawford, Charlotta Stern, Jonathan Haidt, Lee Jussim, and Philip E. Tetlock. "Political Diversity Will Improve Social Psychological Science." Behavioral and Brain Sciences 38 (Jan. 2015) DOI:

November 24, 2015

Haiti Stagnates Under Crony Capitalism

(p. A13) A May 2015 World Bank "systematic country diagnostic" on Haiti is instructive.

. . .

As the World Bank report notes, Haiti suffers from crony capitalism that holds back economic growth.

. . .

The record of Haiti's elected politicians, since the transition to democracy at the beginning of the 1990s, is dismal. The political class still uses its power for personal aggrandizement, as the infamous dictators François Duvalier and his son Jean-Claude did for almost 30 years.

Just as discouraging is that after more than two decades of going to the polls, Haitians have yet to taste economic freedom, and emigration has become the only option for those who hope to get ahead by hard work. The World Bank reports that between 1971 and 2013 gross domestic product per capita "fell by .7% per year on average."

. . .

The World Bank authors gently speculate that there is "little competitive pressure." They observe this "could be the result of high legal or behavioral entry barriers" and this "could facilitate tacit agreements among families/groups to allocate markets among themselves, which may harm productivity and incentive to innovate."

This is polite jargon for collusion, which Haitians already know. They also know that absent the political will to open markets to competition, elections won't matter much.

For the full commentary, see:

MARY ANASTASIA O'GRADY. "Diagnosing What Ails Haiti's Economy; The World Bank fingers cronyism, of which Bill Clinton was for years a symbol." The Wall Street Journal (Mon., Oct. 12, 2015): A13.

(Note: ellipses added.)

(Note: the online version of the commentary was updated on Oct. 11, 2015.)

The World Bank report mentioned in the passages quoted above, is:


November 22, 2015

Skills Gap Is Bigger Labor Market Problem than Technology Progress

(p. A17) Technology disrupting the workforce is not a new phenomenon and it has never proved a lasting impediment for those eager to work. The invention of, say, the internal-combustion engine put buggy-whip makers and carriage assemblers out of business, but it created many more jobs in the manufacture, advertising, sales and maintenance of automobiles. Other technologies, from the cotton gin to the airplane, expanded job opportunities and created goods and services that made the hard work worthwhile.

What is unique about today's digital revolution is the suspicion, fanned by progressives, that for the first time technology threatens to make obsolete not only some jobs--as assembly-line robotics has, for instance--but human labor itself.

. . .

That poor schooling, and not some intrinsic human limitation, is the real barrier to full employment seems to be borne out by what economists call the "skills gap." More than nine million Americans are currently looking for work, but 5.4 million job openings continue to sit unfilled, according to the Bureau of Labor Statistics. Most of the largest increases have been in health care or professional and business services.

In a recent study by the large U.S. online job site, CareerBuilder, more than half the employers surveyed had positions for which they could not find qualified candidates: 71% had trouble finding information-technology specialists, 70% engineers, 66% managers, 56% health-care and other specialists, and 52% financial operations personnel. Nearly half of small and medium-size employers say they can find few or no "qualified applicants" for recent vacancies, according to the latest survey by the National Federation of Independent Businesses.

With the Labor Department conceding that help-wanted postings have "remained at a historically high level," this is the time not to rail against technology but to use it to make education more effective: gearing coursework to the learning styles of individual students, identifying and remedying disabilities early on, and providing online access to the best classes in the world.

For the full commentary, see:

LEWIS M. ANDREWS. "Robots Don't Mean the End of Human Labor; The left frets about the impact of technology, but new jobs will be created. The real problem is bad schools." The Wall Street Journal (Mon., Aug. 24, 2015): A13.

(Note: ellipsis added.)

(Note: the online version of the commentary was updated on Aug. 23, 2015.)

November 17, 2015

Inflation of the Co-Authorship Bubble

CoauthorInflationGraph2015-10-30.jpg Source of graphic: online version of the WSJ article quoted and cited below.

(p. A1) . . . , there has been a notable spike since 2009 in the number of technical reports whose author (p. A10) counts exceeded 1,000 people, according to the Thomson Reuters Web of Science, which analyzed citation data. In the ever-expanding universe of credit where credit is apparently due, the practice has become so widespread that some scientists now joke that they measure their collaborators in bulk--by the "kilo-author."

Earlier this year, a paper on rare particle decay published in Nature listed so many co-authors--about 2,700--that the journal announced it wouldn't have room for them all in its print editions. And it isn't just physics. In 2003, it took 272 scientists to write up the findings of the first complete human genome--a milestone in biology--but this past June, it took 1,014 co-authors to document a minor gene sequence called the Muller F element in the fruit fly.

. . .

More than vanity is at stake. Credit on a peer-reviewed research article weighs heavily in hiring, promotion and tenure decisions. "Authorship has become such a big issue because evaluations are performed based on the number of papers people have authored," said Dr. Larivière.

. . .

Michigan State University mathematician Jack Hetherington published a paper in 1975 on low temperature physics in Physical Review Letters with F.D.C. Willard. His colleagues only discovered that his co-author was a siamese cat several years later when Dr. Hetherington started handing out copies of the paper signed with a paw print.

In the same spirit, Shalosh B. Ekhad at Rutgers University so far has published 32 peer-reviewed papers in scientific journals with his co-author Doron Zeilberger. It turns out that Shalosh B. Ekhad is Hebrew for the model number of a personal computer used by Dr. Zeilberger. "The computer helps so much and so often," Dr. Zeilberger said.

Not everyone takes such pranks lightly.

Immunologist Polly Matzinger at the National Institute of Allergy and Infectious Diseases named her dog, Galadriel Mirkwood, as a co-author on a paper she submitted to the Journal of Experimental Medicine. "What amazed me was that the paper went through the entire editorial process and nobody noticed," Dr. Matzinger said. When the journal editor realized he had published work crediting an Afghan hound, he was furious, she recalled.

Physicists may be more open-minded. Sir Andre Geim, winner of the 2010 Nobel Prize in Physics, credited H.A.M.S. ter Tisha as his co-author of a 2001 paper published in the journal Physica B. Those journal editors didn't bat an eye when his co-author was unmasked as a pet hamster. "Not a harmful joke," said Physica editor Reyer Jochemsen at the Leiden University in the Netherlands.

"Physicists apparently, even journal editors, have a better sense of humor than the life sciences," said Dr. Geim at the U.K.'s University of Manchester.

For the full story, see:

ROBERT LEE HOTZ. "Scientists Observe Odd Phenomenon of Multiplying Co-Authors."The Wall Street Journal (Mon., Aug. 10, 2015): A1 & A10.

(Note: ellipses added.)

(Note: the online version of the story has the title "How Many Scientists Does It Take to Write a Paper? Apparently, Thousands.")

November 14, 2015

Good Deflation in Switzerland

(p. A2) It's as close to an economic consensus as you can get: Deflation is bad for an economy, and central bankers should avoid it at all costs.

Then there's Switzerland, whose steady growth and rock-bottom unemployment is chipping away at that wisdom.

At a time of lively global debate about low inflation and its ill effects, tiny Switzerland--with an economy 4% the size of the U.S.--offers a fascinating counterpoint, with some even pointing to what they call "good deflation."

Consumer prices in Switzerland have fallen on an annual basis for most of the past four years. They hit a milestone last month with an annual price drop of 1.4%, the biggest in more than five decades. Even after food and energy prices are stripped out, core prices fell 0.7%.

"It's hard not to call that deflation," said Jennifer McKeown of Capital Economics, referring to the technical term for a sustained slump in consumer prices.

And yet evidence of deflation's pernicious side effects--recession, weak employment, rising debt burdens--is pretty much nonexistent in Switzerland. Its economy is expected to expand this year and next, albeit slowly, in the 1% to 1.5% range. Unemployment was just 3.4% in September. Government debt is low.

"Usually people associate deflation with depression," said Charles Wyplosz, a professor at the Graduate Institute in Geneva. "In the Swiss case, the economy is doing OK."

For the full commentary, see:

BRIAN BLACKSTONE. "THE OUTLOOK; Switzerland Offers Counterpoint on Deflation's Ills." The Wall Street Journal (Mon., Oct. 19, 2015): A2.

(Note: the online version of the commentary has the date Oct. 18, 2015, and the title "THE OUTLOOK; Switzerland Offers Counterpoint on Deflation's Ills.")

November 12, 2015

The Cure for Technology Problems Is Better Technology

(p. D2) The real lesson in VW's scandal -- in which the automaker installed "defeat devices" that showed the cars emitting lower emissions in lab tests than they actually did -- is not that our cars are stuffed with too much technology. Instead, the lesson is that there isn't enough tech in vehicles.

In fact, the faster we upgrade our roads and autos with better capabilities to detect and analyze what's going on in the transportation system, the better we'll be able to find hackers, cheaters and others looking to create havoc on (p. B11) the highways.

. . .

"What happened at Volkswagen had to do with embedded software that's buried deep in the car, and only the supplier knows what's in it -- and it's a black box for everybody else," said Stefan Heck, the founder of Nauto, a new start-up that is introducing a windshield-mounted camera that monitors road conditions for commercial fleets and consumers. The camera uses artificial intelligence to track traffic conditions; over time, as more vehicles use it, it could provide users with traffic and safety information plus data about mileage and other automotive functions.

The end goal for intelligent-car systems, said Dr. Heck, is to create an on-road network with data that is constantly being analyzed to get a sharper picture of what's happening on the road. Sure, companies might still be able to cheat. But with enough independent data sources coming from different places on the road, it would become much more difficult.

He said there really isn't any going back -- software in cars is responsible not just for driver comforts like in-dash navigation, but also for critical safety and performance systems, many of which improve the car's environmental footprint.

For the full commentary, see:

Farhad Manjoo. "STATE OF THE ART; Our Cars Need More Technology." The New York Times (Thurs., Oct. 1, 2015): B1 & B11.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date SEPT. 30, 2015, and the title "STATE OF THE ART; VW Scandal Shows a Need for More Tech, Not Less." )

November 10, 2015

Steve Jobs as Demanding Consumer: Jerk or Benefactor?

(p. D2) Mr. Jobs said he wanted freshly squeezed orange juice.

After a few minutes, the waitress returned with a large glass of juice. Mr. Jobs took a tiny sip and told her tersely that the drink was not freshly squeezed. He sent the beverage back, demanding another.

A few minutes later, the waitress returned with another large glass of juice, this time freshly squeezed. When he took a sip he told her in an aggressive tone that the drink had pulp along the top. He sent that one back, too.

My friend said he looked at Mr. Jobs and asked, "Steve, why are you being such a jerk?"

Mr. Jobs replied that if the woman had chosen waitressing as her vocation, "then she should be the best."

. . .

. . . it wasn't until my mother found out that she had terminal cancer in mid-March and was given a prognosis of only two weeks to live that I learned even if a job is just a job, you can still have a profound impact on someone else's life. You just may not know it.

. . .

. . . one evening my mother became incredibly lucid and called for me. She was craving shrimp, she said. "I'm on it," I told her as I ran down to the kitchen. "Shrimp coming right up!"

. . .

The restaurant was bustling. In the open kitchen in the back I could see a dozen men and women frantically slaving over the hot stoves and dishwashers, with busboys and waiters rushing in and out.

While I stood waiting for my mother's shrimp, I watched all these people toiling away and I thought about what Mr. Jobs had said about the waitress from a few years earlier. Though his rudeness may have been uncalled-for, there was something to be said for the idea that we should do our best at whatever job we take on.

This should be the case, not because someone else expects it. Rather, as I want to teach my son, we should do it because our jobs, no matter how seemingly small, can have a profound effect on someone else's life; we just don't often get to see how we're touching them.

Certainly, the men and women who worked at that little Thai restaurant in northern England didn't know that when they went into work that evening, they would have the privilege of cooking someone's last meal.

It was a meal that I would unwrap from the takeout packaging in my mother's kitchen, carefully plucking four shrimp from the box and meticulously laying them out on one of her ornate china plates before taking it to her room. It was a meal that would end with my mother smiling for the last time before slipping away from consciousness and, in her posh British accent, saying, "Oh, that was just lovely."

For the full commentary, see:

NICK BILTON. "Rites of Passage; Life Lessons from Steve Jobs." The New York Times, SundayReview Section (Fri., AUG. 7, 2015): D2.

(Note: ellipses added.)

(Note: the online version of the commentary has the title "Rites of Passage; What Steve Jobs Taught Me About Being a Son and a Father.")

November 9, 2015

Marxist Wrecks Brazil Economy

(p. A6) "The Brazilian model celebrated just a few years ago is turning into a slow-motion train wreck," said Mansueto Almeida, a prominent commentator on economic policy. "Our political leaders want to point fingers at China or some external villain, but they cannot escape the fact that this self-inflicted crisis was made in Brazil."

Even with the country's legacy of economic turmoil, some historians say that Ms. Rousseff's track record on economic growth ranks among the worst of any Brazilian president's over the last century.

. . .

Hoping to prevent Brazil from cooling too much after the sizzling boom of the previous decade, Ms. Rousseff, 67, a former Marxist guerrilla who was tortured during the military dictatorship in the 1970s and took office in 2011, doubled down on bets that she could stave off a severe slowdown by harnessing a web of government-controlled banks and energy companies.

Ms. Rousseff pressured the central bank to reduce interest rates, fueling a credit spree among overstretched consumers who are now struggling to repay loans. She cut taxes for certain domestic industries and imposed price controls on gasoline and electricity, creating huge losses at public energy companies.

Going further, she expanded the sway of Brazil's colossal national development bank, whose lending portfolio already dwarfed that of the World Bank. Drawing funds from the national treasury, the bank, known as the B.N.D.E.S., increased taxpayer-subsidized loans to large corporations at rates that were often significantly lower than those individuals could obtain from their banks.

Ms. Rousseff's critics argue that she also began using funds from giant government banks to cover budget shortfalls as she and her leftist Workers' Party headed into elections.

"They deliberately destroyed the public finances to obtain re-election," said Antônio Delfim Netto, 87, a former finance minister and one of Brazil's most influential economists. Taking note of the government's inability to rein in spending as a budget deficit expands, Mr. Delfim Netto and other economists are warning that officials may simply opt to print more money, stirring ghosts in an economy once ravaged by high inflation.

. . .

Unemployment is expected to climb even higher as the authorities ponder ways to cut a federal bureaucracy that grew almost 30 percent from 2003 to 2013, to 600,000 civil servants.

A pension crisis is also brewing, partly because of laws that allow many Brazilians to start receiving retirement benefits in their early 50s, even though life expectancy has increased and the fertility rate has fallen, limiting the number of young people to support the aging population.

"How can a person who is 52 years old be able to retire with a pension?" Luiz Fernando Figueiredo, a former central bank official, asked reporters. "These things have to be confronted. If not, the country will become another Greece."

Parts of Brazil's business establishment are in revolt, openly expressing disdain. Exame, a leading business magazine, devotes an entire section called "Only in Brazil" to documenting problems with the public bureaucracy.

These examples include a $120 million light-rail system in the city of Campinas that lies abandoned because of poor planning, and a measure requiring companies to obtain a special license before allowing employees to work on Sundays.

For the full story, see:

SIMON ROMERO. "As Boom Fades, Brazil Asks How Sizzle Turned to Fizzle."The New York Times (Fri., SEPT. 11, 2015): A1 & A6.

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

(Note: the online version of the story has the date SEPT. 10, 2015, and has the title "As a Boom Fades, Brazilians Wonder How It All Went Wrong.")

November 3, 2015

Top-Down Aid "Hasn't Worked in Africa"

(p. 2) John Mackey is the co-founder and co-chief executive officer of Whole Foods Market, the nation's largest chain of natural foods supermarkets.


. . . "The Idealist: Jeffrey Sachs and the Quest to End Poverty," by Nina Munk. Sachs is an economist and I'm sure he doesn't like the book because it points out that his top-down aid type of approach hasn't worked in Africa. A more bottom-up approach through entrepreneurship and boot strapping seems to be more effective, which is the approach we take at our Whole Planet Foundation.

For the full interview, see:

KATE MURPHY, interviewer. "Download; John Mackey." The New York Times, SundayReview Section (Sun., NOV. 23, 2014): 2.

(Note: bold in original; ellipses added.)

(Note: the online version of the interview has the date NOV. 22, 2014.)

The book praised in the interview is:

Munk, Nina. The Idealist: Jeffrey Sachs and the Quest to End Poverty. New York: Doubleday, 2013.

October 30, 2015

Exponential Entrepreneurs Get Rich by Innovating (and Fleecing?)

The reviewer's concern about technology platforms fleecing the masses is shared by Jaron Lanier who describes, and tries to solve it, in a thought-provoking book called Who Owns the Future? (Hint: his solution involves an extension of property rights.)

(p. A9) The exponential entrepreneurs are "paving the way for a new world of abundance" by finding big problems and exploiting the "Six D's": digitalization, deception, disruption, demonetization, dematerialization, democratization.

Take the case of Kodak and photography. First came the technology that allowed photographs to be taken and stored digitally rather than on film--digitization. But it seemed too trivial for a giant like Kodak to worry about--an act of self-deception. Then came disruption, when digital photography grew from a tiny niche into a big business and then surpassed print photography. People no longer needed to pay to store or share their photographs because free digital services had sprung up. Kodak found itself demonetized. Then photography was dematerialized, as cameras were built into phones and the physical materials of the darkroom were replaced by digital tools. Finally, the entire process was democratized, since anyone with a phone can (at no additional cost) take pictures, edit them and share them.

In 1996 Kodak employed 140,000 people and had a market value of $28 billion. In January 2012 it filed for bankruptcy. Instagram was founded in October 2010 and was bought by Facebook in April 2012 for $1 billion. It had 13 employees at the time. Instagram was the definition of an exponential organization, one "whose impact (or output)--because of its use of networks or automation and/or its leveraging of the crowd--is disproportionally large compared to its number of employees." The Six D's, the authors make clear, are leaving the poor executives who think in linear rather than exponential fashion in a state of three D's: "distraught, depressed and departed."

. . .

The great lie about so much technology is that it has enabled a more sharing, more democratic age. But too much of the "sharing" that happens online seems to involve people abandoning their livelihoods to the owners of "platforms"--letting the masses be demonetized and dematerialized for the enrichment of a few. Too much of the "democracy" feels like voyeurism or surveillance. The crowd is not just sourcing and funding this new economy; it's also getting fleeced.

For the full review, see:

PHILIP DELVES BROUGHTON. "BOOKSHELF; Go Big Or Go Home." The Wall Street Journal (Tues., Feb. 17, 2015): A9.

(Note: ellipsis added.)

(Note: the online version of the review has the date Feb. 16, 2015.)

The book discussed in the review is:

Diamandis, Peter H., and Steven Kotler. Bold: How to Go Big, Create Wealth and Impact the World. New York: Simon & Schuster, 2015.

The book mentioned by Lanier is:

Lanier, Jaron. Who Owns the Future? pb ed. New York: Simon & Schuster, 2013.

October 29, 2015

World Inequality Declines

(p. 6) Income inequality has surged as a political and economic issue, but the numbers don't show that inequality is rising from a global perspective. Yes, the problem has become more acute within most individual nations, yet income inequality for the world as a whole has been falling for most of the last 20 years. It's a fact that hasn't been noted often enough.

The finding comes from a recent investigation by Christoph Lakner, a consultant at the World Bank, and Branko Milanovic, senior scholar at the Luxembourg Income Study Center. And while such a framing may sound startling at first, it should be intuitive upon reflection. The economic surges of China, India and some other nations have been among the most egalitarian developments in history.

For the full commentary, see:

TYLER COWEN. "The Upshot; Economic View; All in All, a More Egalitarian World." The New York Times, SundayBusiness Section (Sun., JULY 20, 2014): 6.

(Note: the online version of the commentary has the date JULY 19, 2014, has the title "The Upshot; Economic View; Income Inequality Is Not Rising Globally. It's Falling.")

October 28, 2015

Lax College Accreditors May Be "Doing More Harm than Good"

(p. A19) Most colleges can't keep their doors open without an accreditor's seal of approval, which is needed to get students access to federal loans and grants. But accreditors hardly ever kick out the worst-performing colleges and lack uniform standards for assessing graduation rates and loan defaults.

Those problems are blamed by critics for deepening the student-debt crisis as college costs soared during the past decade. Last year alone, the U.S. government sent $16 billion in aid to students at four-year colleges that graduated less than one-third of their students within six years, according to an analysis by The Wall Street Journal of the latest available federal data.

. . .

(p. A12) Accreditors say their job is to help colleges get better rather than to weed out laggards. Colleges pay for the inspections, which can cost more than $1 million at large institutions.

"You're not there to remove an institution," says Judith Eaton, president of the Council for Higher Education Accreditation, a trade group. "You're there to enhance the operation."

The government has relied on accreditors as watchdogs since the 1950s. Colleges are evaluated by teams of volunteers from similar institutions, who follow standards set by the accreditation group. For example, colleges sometimes are required to collect student-retention data but given the freedom to set their own goals for those numbers.

. . .

Stephen Roderick, former provost at Fort Lewis College in Colorado, says he now has misgivings about his 2013 review of Glenville State College in West Virginia for the Higher Learning Commission. The review team wrote that the college had a "responsible program" to minimize default rates and "demonstrates a commitment" to evaluating graduation data.

Glenville's graduation rate is 30%, while about 22% of students defaulted on loans from 2011 to 2013. Both percentages rank near the bottom 10% of accredited four-year colleges. David Millard, assistant to Glenville's president, says the figures reflect the opportunity offered by the college to students in one of the poorest parts of the U.S.

Mr. Roderick says accreditors are inclined to see the best in colleges like Glenville, but that might not be the best for students. "Sometimes I feel that we're doing more harm than good," he says.

For the full story, see:

ANDREA FULLER and DOUGLAS BELKIN. "Education Watchdogs Rarely Bite; Accreditors keep hundreds of schools with low graduation rates or high loan defaults alive." The Wall Street Journal (Thurs., June 18, 2015): A1 & A12.

(Note: ellipses added.)

(Note: the online version of the article was dated June 17, 2015, and had the title "The Watchdogs of College Education Rarely Bite; Accreditors keep hundreds of schools with low graduation rates or high loan defaults alive.")

October 27, 2015

Those Who Use "Consensus" Argument on Global Warming, Should Endorse Genetically Modified Food

(p. B3) NAIROBI, Kenya -- Mohammed Rahman doesn't know it yet, but his small farm in central Bangladesh is globally significant. Mr. Rahman, a smallholder farmer in Krishnapur, about 60 miles northwest of the capital, Dhaka, grows eggplant on his meager acre of waterlogged land.

As we squatted in the muddy field, examining the lush green foliage and shiny purple fruits, he explained how, for the first time this season, he had been able to stop using pesticides. This was thanks to a new pest-resistant variety of eggplant supplied by the government-run Bangladesh Agricultural Research Institute.

Despite a recent hailstorm, the weather had been kind, and the new crop flourished. Productivity nearly doubled. Mr. Rahman had already harvested the small plot 10 times, he said, and sold the brinjal (eggplant's name in the region) labeled "insecticide free" at a small premium in the local market. Now, with increased profits, he looked forward to being able to lift his family further out of poverty. I could see why this was so urgent: Half a dozen shirtless kids gathered around, clamoring for attention. They all looked stunted by malnutrition.

. . .

I, . . . , was once in [the] . . . activist camp. A lifelong environmentalist, I opposed genetically modified foods in the past. Fifteen years ago, I even participated in vandalizing field trials in Britain. Then I changed my mind.

After writing two books on the science of climate change, I decided I could no longer continue taking a pro-science position on global warming and an anti-science position on G.M.O.s.

There is an equivalent level of scientific consensus on both issues, I realized, that climate change is real and genetically modified foods are safe. I could not defend the expert consensus on one issue while opposing it on the other.

For the full commentary, see:

MARK LYNAS. "How I Got Converted to G.M.O. Food." The New York Times, SundayReview Section (Sun., APRIL 26, 2015): 5.

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

(Note: the online version of the commentary has the date APRIL 24, 2015.)

October 26, 2015

"Plunged Back into a Pre-Industrial Hell"

(p. B1) If you drive a car, or use modern medicine, or believe in man's right to economic progress, then according to Alex Epstein you should be grateful--more than grateful. In "The Moral Case for Fossil Fuels" the author, an energy advocate and founder of a for-profit think tank called the Center for Industrial Progress, suggests that if all you had to rely on were the good intentions of environmentalists, you would be soon plunged back into a pre-industrial hell. Life expectancy would plummet, climate-related deaths would soar, and the only way that Timberland and Whole Foods could ship their environmentally friendly clothing and food would be by mule. "Being forced to rely on solar, wind, and biofuels would be a horror beyond anything we can imagine," writes Mr. Epstein, "as a civilization that runs on cheap, plentiful, reliable energy would see its machines dead, its productivity destroyed, its resources disappearing."

For the full review, see:

PHILIP DELVES BROUGHTON. "BOOKSHELF; Go Ahead, Fill 'Er Up; Renouncing oil and its byproducts would plunge civilization into a pre-industrial hell--a fact developing countries keenly realize." The Wall Street Journal (Tues., Dec. 2, 2014): A15.

(Note: the online version of the review has the date Dec. 1, 2014, and has the title "BOOKSHELF; Making 'The Moral Case for Fossil Fuels'; Renouncing oil and its byproducts would plunge civilization into a pre-industrial hell--a fact developing countries keenly realize.")

The book praised in the review is:

Epstein, Alex. The Moral Case for Fossil Fuels. New York: Portfolio, 2014.

October 25, 2015

Bernanke Not Clear if His Zero Interest Rate Policy Increased Inequality

(p. B3) . . . it is striking to find Mr. Bernanke . . . receptive to a . . . critique: that the bond-purchasing efforts, known as quantitative easing, increased economic inequality.

"Monetary policy is a blunt tool which certainly affects the distribution of income and wealth, although whether the net effect is to increase or reduce inequality is not clear," Mr. Bernanke wrote in a blog post on Monday.

This was not a white flag. Mr. Bernanke went on to argue that the stimulus campaign was justified irrespective of the impact on inequality. But it struck a surprisingly hesitant note on a day when the Brookings Institution, Mr. Bernanke's new home, hosted a conference on the same subject that was largely devoted to evidence that the Fed's efforts had reduced economic inequality.

. . .

Current Fed officials share Mr. Bernanke's judgment about the basic economic impact of the program. "Did these policies work?" Stanley Fischer, the Fed's vice chairman, asked rhetorically during a speech on Monday in Toronto. "The econometric evidence says yes. So does the evidence of one's eyes."

But the "eye test" has also suggested to many that the wealthy have benefited disproportionately. The stock market has soared, and investors have prospered, even as wage growth has stagnated. Kevin Warsh, a former Fed governor, has memorably described the Fed's current role as a "reverse Robin Hood," rewarding the rich at the expense of the poor.

For the full commentary, see:

Binyamin Appelbaum. "The Upshot; Ben Bernanke Says Fed Can't Get Caught Up in Inequality Debate." The New York Times (Tues., JUNE 2, 2015): B3.

(Note: ellipses added.)

(Note: the online version of the article has the date JUNE 1, 2015 and has the title "The Upshot; Ben Bernanke Says Fed Can't Get Caught Up in Inequality Debate.")

October 24, 2015

China Looks to Innovation to Increase Growth

(p. 6) Wrapping up the 11-day session at a news conference on Sunday [March 15, 2015], Premier Li Keqiang said that while the economy faced downward pressure, the government has room to step in and has "more tools in our toolbox" should growth flag and affect employment.

. . .

As exports, investment and infrastructure become more ineffective in generating economic growth, China's leadership is looking to innovation and entrepreneurship to pick up the slack.

Toward that end, Mr. Li said Beijing will continue to reduce regulatory interference. The number of government approvals required to begin a new venture has roughly halved to 50 to 60 steps in recent years, he said, although this level still raises costs and damps enthusiasm for startups.

But the Chinese state retains an oversized role in the economy and many of the outlined moves to limit its role are difficult to verify.

For the full story, see:

MARK MAGNIER. "Beijing Plans More Action to Spur Growth." The Wall Street Journal (Mon., March 16, 2015): A9.

(Note: ellipsis, and bracketed date, added. Where there was a small difference in paragraph structure, the quoted passages follow the print version.)

(Note: the online version of the story has the date March 15, 2015, has the title "China Plans More Action to Spur Growth.")

October 22, 2015

"Bring Prosperity to Billions of People"

(p. B1) If you're feeling down about the world, the book, "Resource Revolution: How to Capture the Biggest Business Opportunity in a Century," is an antidote. Mr. Rogers and Mr. Heck outline how emerging advances -- among them 3-D printing, autonomous vehicles, modular construction systems and home automation -- might in time alter some of the world's largest industries and (p. B7) bring prosperity to billions of people.

They put forward a rigorous argument bolstered by mountains of data and recent case studies. And once you start looking at Silicon Valley their way, your mind reels at the far-reaching potential of the innovations now spreading through society.

For the full commentary, see:

Farhad Manjoo. "STATE OF THE ART; The Future Could Work, if We Let It." The New York Times (Thurs., AUG. 28, 2014): B1 & B7.

(Note: the online version of the commentary has the date AUG. 27, 2014.)

The book praised in the commentary is:

Heck, Stefan, and Matt Rogers. Resource Revolution: How to Capture the Biggest Business Opportunity in a Century. New York: Melcher Media, 2014.

October 20, 2015

Workers May Prefer to Have More Workcations than Fewer Vacations

(p. B6) . . . for various reasons, people might choose or need to work from remote destinations, and logging in from the beach may be more relaxing than clocking into the office.

Adds Kenneth Matos, senior director of research at the Families and Work Institute: "Is the workcation detracting from the vacation you were going to have, or is it enabling the vacation you otherwise wouldn't have had?"

. . .

For Bill Raymond, Disney World proved an ideal workcation destination. In February, Mr. Raymond and his wife flew from their suburban Boston home to Orlando, where they spent a couple of days touring the theme park.

For the next two days, Mr. Raymond, a solutions architect at enterprise search firm Voyager Search, clocked full workdays from the Orlando resort, hunkering down with his laptop and taking sales calls by the pool.

Mr. Raymond even wrote a post on his personal blog with tips on how to be a productive "workcationer" at Disney, pinpointing locations at the resort that offer fewer distractions. (Among his top picks were the pool at the Disney Port Orleans French Quarter resort, which he says wasn't "overrun with kids being kids.")

Brian Goldin, Voyager's chief executive and Mr. Raymond's boss, was "totally fine" with the arrangement. "The idea of the traditional office environment doesn't really exist that much," Mr. Goldin says.

. . .

The working vacation kept Ms. Granzella Larssen, 32 years old, current with her email; she also felt more productive in a tropical setting because she wasn't being pulled into impromptu meetings. And despite being by the beach, "I felt completely plugged in."

For the full commentary, see:

RACHEL EMMA SILVERMAN. "This Summer, How About a Workcation?" The Wall Street Journal (Weds., June 24, 2015): B1 & B6.

(Note: ellipses added.)

(Note: the online version of the commentary has the date June 23, 2015, has the title "This Summer, How About a Workcation?")

October 17, 2015

Affluent Are More Likely to Work During Retirement

That the affluent are more than twice as likely to work past retirement, may be a sign that the better paying jobs are also the more satisfying jobs.

(p. B9) But retirement isn't for everyone. Affluent individuals are more than twice as likely as other people to keep working in retirement, according to a July survey by Bank of America's Merrill Lynch and Age Wave, a research firm based in Emeryville, Calif., that specializes in aging populations.

Some 33% of retirees with $1 million to $5 million in assets are working, as are 29% of those with more than $5 million. Most say they do so because they want to, not because they have to, according to the survey.

Half of affluent working retirees have shifted to a different line of work, most often because of greater flexibility of scheduling, the opportunity to experience new things, and the pursuit of a passion or interest, the survey found.

The results show how important it is to consider what you will do with your time and to think hard about whether that will be satisfying.

For the full commentary, see:

LIZ MOYER. "Can You Afford to Retire Early?" The Wall Street Journal (Sat., Aug. 2, 2014): B7 & B9.

(Note: the online version of the commentary has the date Aug. 1, 2014.)

October 16, 2015

"We Embrace New Technology"

(p. 2D) . . . , the first digital images created by the earliest digital cameras "were terrible," Rockbrook's Chuck Fortina said. "These were real chunky images made by big, clunky cameras."

Viewing those results, some retailers dismissed the new digital technology and clung doggedly to film. But Rockbrook Camera began stocking digital cameras alongside models that used film, Fortina said.

"Film sales were great, but we just knew digital was going to take over," Fortina said. As those cameras and their images improved, the retailer saw a huge opportunity. ''Instead of thinking this is going to kill our business, we were thinking people are going to have to buy all new gear," Fortina said of the switch from analog to digital.

"By 2000, film was over," he said. Companies that didn't refocus their business found themselves struggling or forced to close their doors.

Today, Rockbrook Camera is constantly scouring the Internet, attending trade shows and quizzing customers and employees in search of new technologies, Fortina said. "We embrace new technology," he said.

For the full story, see:

Janice Podsada. "More Ready than Not for Tech Shifts; How 3 Omaha-area businesses altered course and thrived amid technological changes." Omaha World-Herald (SUNDAY, SEPTEMBER 27, 2015 ): 1D-2D.

(Note: ellipsis added.)

(Note: the online version of the story has the title "How 3 Omaha-area businesses altered course and thrived amid technological changes.")

October 12, 2015

French Billionaire Entrepreneur Starts Small and Cuts Costs

On Mon., October 13, 2014, Iliad dropped it's bid for T-Mobile, after lack of interest from some of the T-mobile board and from the majority owner, Deutsche Telekom AG.

(p. B1) Iliad wants to improve T-Mobile US's cost structure by applying its own ultraslim cost base, under which it has kept costs to a minimum in everything from IT services to back office to equipment purchases. Iliad estimates it will be able to save about $2 billion annually by cutting out costs such as sending paper bills, and savings on equipment and IT systems, Mr. Niel said.

. . .

(p. B4) . . . before Mr. Niel can execute his American dream, Iliad has to win over T-Mobile US's board, which could prove a formidable challenge.

. . .

He says he is sticking to the same principle that has guided his ascent from a teenage computer programmer in a working class Paris suburb to one of France's richest men.

"I always follow the same idea: Start small and disrupt to create something big," he said.

For the full story, see:

RUTH BENDER. "Will This Billionaire Bring $3-a-Month Phone Plans to U.S.?" The Wall Street Journal (Sat., Aug. 2, 2014): B1 & B4.

(Note: ellipses added.)

(Note: the online version of the story says it was updated on Aug. 4, 2014.)

October 11, 2015

Feds Constrain Startups

(p. A15) Virtually every state has suffered a drop in startups, which suggests that this is a national, and not a regional or state, problem.

. . .

If history is any indication, many of today's economic heavyweights will ultimately decline as new businesses take their place. Research by the Kaufman Foundation shows that only about half of the 1995 Fortune 500 firms remained on the list in 2010.

Startups also have declined in high technology. John Haltiwanger of the University of Maryland reports that there are fewer startups in high technology and information-processing since 2000, as well as fewer high-growth startups--annual employment growth of more than 25%--across all sectors. Even more troubling is that the smaller number of high-growth startups is not growing as quickly as in the past.

. . .

Surveys by John Dearie and Courtney Gerduldig, authors of "Where the Jobs Are: Entrepreneurship and the Soul of the American Economy" (2013), show that entrepreneurs report being hamstrung by difficulties in finding skilled workers, by a complex tax code that penalizes small business, by regulations that raise the costs of doing business, and by difficulties in obtaining financing that have worsened since 2008.

For the full story, see:

EDWARD C. PRESCOTT and LEE E. OHANIAN. "Behind the Productivity Plunge: Fewer Startups; New businesses were created at a 30% lower rate in 2012 than the annual average rate in the 1980s." The Wall Street Journal (Thurs., June 26, 2014): A15.

(Note: ellipses added.)

(Note: the online version of the story has the date June 25, 2014.)

October 9, 2015

Smugglers Respond to Putin's Ban on Cheese

(p. A4) When the Russian government banned dairy products from a host of nations, including the United States and members of the European Union, last year in response to Western economic sanctions imposed over Russia's military meddling in Ukraine, President Vladimir V. Putin said the restrictions would create a profitable opportunity for domestic industries.

Instead they appear to have created an opening for forgers and smugglers. The "cheese ring" was busted with an estimated $30 million worth of the stuff, nearly 500 tons, according to the Interior Ministry police.

For the full story, see:

NEIL MacFARQUHAR. "A Crackdown in Russia on a Creamy Contraband." The New York Times (Weds., AUG. 19, 2015): A4.

(Note: the online version of the story has the date AUG. 18, 2015, and has the title "Russian Police Get Tough on Illicit Cheese.")

October 8, 2015

Bicycles Emancipated Women


"A portrait from the 1890s at the Smithsonian Institution's National Museum of American History. Susan B. Anthony said cycling did more to emancipate women than anything else in the world." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. D1) . . . , Twain promoted the new sport of cycling with characteristic rhubarb tartness. "Get a bicycle," he urged readers. "You will not regret it, if you live."

. . .

The full-bore bicycle fever was brief, and by the early 20th century it had given way to fascination with the automobile. Yet, as a new exhibit at the Smithsonian Institution's National Museum of American History makes clear, the impact of the bicycle on the nation's industrial, cultural, emotional and even moral landscape has been deep and long lasting.

In addition to air-filled rubber tires, we can thank the bicycle for essential technologies like ball bearings, originally devised to reduce friction in the bicycle's axle and steering column; for wire spokes and wire spinning generally; for differential gears that allow connected wheels to spin at different speeds.

And where would our airplanes, tent poles and lawn furniture be without the metal tubing developed to serve as the bicycle frame? "The hollow steel tube is a great form," said Jim Papadopoulos, an assistant teaching professor of mechanical and industrial engineering at Northeastern University in Boston. "It's tremendously structurally efficient, light and strong, and it came into being for the bicycle."

. . .

(p. D4) Bicycles also gave birth to our national highway system, as cyclists outside major cities grew weary of rutted mud paths and began lobbying for the construction of paved roads. The car connection goes further still: Many of the bicycle repair shops that sprang up to service the wheeling masses were later converted to automobile filling stations, and a number of pioneers in the auto industry, including Henry Ford and Charles Duryea, started out as bicycle mechanics. So, too, did the Wright brothers.

"The pre-story is so important," said Eric S. Hintz, a historian with the Smithsonian's Lemelson Center for the Study of Invention and Innovation. "You don't get automobiles unless you first have bikes."

. . .

By the mid-1890s, some 300 American companies were churning out well over a million bicycles a year, making the safety bike one of the first mass-produced items in history. Among the most exuberant customers were women, who discovered in the bicycle a sense of freedom they had rarely experienced before.

. . .

Bicycles allowed young men and women to tool around the countryside unsupervised, and relationships between the sexes grew more casual and spontaneous. With a bicycle at her disposal, a young woman could also venture forth in search of work.

Small wonder that Susan B. Anthony said of cycling, "I think it has done more to emancipate women than any one thing in the world."

For the full story, see:

NATALIE ANGIER. "Basics; A Ride to Freedom." The New York Times (Tues., JULY 14, 2015): D1 & D4.

(Note: ellipses added.)

(Note: the online version of the story has the date JULY 13, 2015, and has the title "Basics; The Bicycle and the Ride to Modern America.")

October 7, 2015

Analyst Conflict of Interest in Predicting Tesla Stock Price

(p. A1) Just like the Internet stocks of yore, Tesla has its own Wall Street cheerleader: Adam Jonas, Morgan Stanley's auto analyst. Jonas could not be less interested in mundane factors like earnings per share; indeed, he has had to lower his 2015 earnings estimates several times; he now predicts the company will lose $2.70 a share. But never mind: In the future that he envisions, Tesla will be the most important car company on earth.

Just a few weeks ago, in fact, Jonas raised his share price target for Tesla from $280 to $465, which would make Tesla more valuable than General Motors or Ford. Had anything fundamental changed for Tesla? Of course not!

Jonas based his new target on something he labeled Tesla Mobility, which he describes as "an app based, on-demand mobility service." Where did he learn about Tesla Mobility? Who knows? Tesla, a company hardly averse to hype, has never acknowledged its existence.

And that's not the worst of it. No, the worst is the timing of his call. It came days after Tesla announced that it would be issuing stock to raise yet more money -- and that Morgan Stanley was among the underwriters. (The company raised close to $800 million.)

For the full commentary, see:

Joe Nocera. "The Tesla Cheerleader." The New York Times (Sat., AUG. 29, 2015): A1 & A19.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date AUG. 28, 2015.)

October 5, 2015

Belgian Government Mandates Mayo to Be No Less than 80% Fat

(p. A1) BRUSSELS--Mayonnaise here is a sauce celebre, so important that a 60-year-old royal decree governs what goes in it.

. . .

Belgian mayonnaise must contain at least 80% fat and 7.5% egg yolk. European rivals are permitted to sell mayo with a mere 70% fat and 5% egg yolk.

For the full story, see:

TOM FAIRLESS. "No Yolk, Belgian Food Producers Fed Up with Mayonnaise Rules; But effort to relax royal recipe doesn't go down well with chefs; yellow peas." The Wall Street Journal (Mon., Sept. 20, 2015): A1 & A10.

(Note: ellipsis added.)

(Note: the online version of the story has the date Sept. 20, 2015 and the title "In Belgium, Mayonnaise Makers Want a New Recipe; But effort to relax royal recipe doesn't go down well with chefs; yell;ow peas.")

October 3, 2015

Recent Job Losses from City Minimum Wage Hikes

(p. A13) The city councils in Seattle, San Francisco and Los Angeles have already voted to increase their minimum wage to $15 an hour over several years. For large employers in Seattle, the first increase to $11 from $9.47 took effect in April. In San Francisco a hike to $12.25 from $10.74 began in May. Los Angeles rolled out a minimum wage for hotel workers of $15.37 in July.

It's still early to know how the hikes are affecting the job market, but the preliminary data aren't good. Mark Perry of the American Enterprise Institute, Adam Ozimek of Moody's Analytics and Stephen Bronars of Edgewood Economics reported last month that the restaurant and hotel industries have lost jobs in all three cities. Mr. Bronars crunched the numbers and discovered that the "first wave of minimum wage increases appears to have led to the loss of over 1,100 food service jobs in the Seattle metro division and over 2,500 restaurant jobs in the San Francisco metro division." That is a conservative estimate, he notes, as the data include areas outside city limits, where the minimum wage didn't increase.

This comes as no surprise. In 2014 the Congressional Budget Office found that increasing the minimum wage to $10.10 an hour would result in employment falling by 500,000 jobs nationally. By the way, less than 20% of the earning benefits would flow to people living below the poverty line, as University of California-Irvine economist David Neumark has pointed out.

For the full commentary, see:

ANDY PUZDER. "A Post-Labor Day, Minimum-Wage Hangover; The evidence is already coming in: Mandatory increases in Los Angeles, San Francisco and Seattle have cost thousands of jobs." The Wall Street Journal (Tues., Sept. 8, 2015): A13.

(Note: the online version of the commentary has the date Sept. 7, 2015.)

October 1, 2015

Evidence Minimum Wage Causes Job Loss

(p. A1) Some economists have reported that there is no longer any evidence that raising wages will cost jobs.

Unfortunately, that last claim is inaccurate. There are in fact many studies on each side of the issue. David Neumark of the University of California, Irvine and William Wascher of the Federal Reserve have done their own studies and point to dozens of others showing significant job losses.

Recently, Michael Wither and Jeffrey Clemens of the University of California, San Diego looked at data from the 2007 federal minimum-wage hike and found that it reduced the national employment-to-population ratio by 0.7 percentage points (which is actually a lot), and led to a six percentage point decrease in the likelihood that a low-wage worker would have a job.

Because low-wage workers get less work experience under a higher minimum-wage regime, they are less likely to transition to higher-wage jobs down the road. Wither and Clemens found that two years later, workers' chances of making $1,500 a month was reduced by five percentage points.

Many economists have pointed out that as a poverty-fighting measure the minimum wage is horribly targeted. A 2010 study by Joseph Sabia and Richard Burkhauser found that only 11.3 percent of workers who would benefit from raising the wage to $9.50 an hour would come from poor households. An earlier study by Sabia found that single mothers' employment dropped 6 percent for every 10 percent increase in the minimum wage.

A study by Thomas MaCurdy of Stanford built on the fact that there are as many individuals in high-income families making the minimum wage (teenagers) as in low-income families. MaCurdy found that the costs of raising the wage are passed on to consumers in the form of higher prices. Minimum-wage workers often work at places that disproportionately serve people down the income scale. So raising the minimum wage is like a regressive consumption tax paid for by the poor to subsidize the wages of workers who are often middle class.

For the full commentary, see:

David Brooks. "Minimum Wage Muddle." The New York Times (Fri., JULY 24, 2015): A25.

(Note: ellipsis added.)

(Note: the online version of the article has the title "The Minimum-Wage Muddle.")

September 29, 2015

Smart and Energetic Young Adults in France Find Opportunity in England, Australia or the U.S.

(p. A6) The income gap between generations is even more severe in France than in the United States, said Louis Chauvel, a French sociologist who has also worked in America on income inequality and other issues. On top of that, Mr. Chauvel added, the United States economy has been rebounding, while unemployment in France has been rising since 2008 and has hovered around 10 percent for the last two years.

"In the U.S., the young 25-year-olds have lots of opportunities," he said. "It's generally much better to be relatively young in the United States than to be aging.

"In France, we face a completely different trend: We have more and more educated young French citizens, and they face economic scarcity, even though they have more education than their parents."

Young adults in France see their taxes going to finance social benefits for retirees that they believe they will never receive, Mr. Chauvel added. The most energetic and smartest among them do find jobs, he said, but often they can do it only by leaving France for Britain, Australia or the United States.

For the full story, see:

ALISSA J. RUBIN and AURELIEN BREEDEN. "'Song for French Charity Strikes Discordant Note." The New York Times (Weds., MARCH 4, 2015): A6.

(Note: the online version of the story has the date MARCH 3, 2015, and has the title "'Toute La Vie,' Song for French Charity, Strikes Discordant Note.")

September 26, 2015

112 Years of Spectacular Progress Started With Wilbur Wright

"New close-up images of a region near Pluto's equator reveal a giant surprise: a range of youthful mountains." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) LAUREL, Md. -- The first close-up image of Pluto has revealed mountains as tall as the Rockies, and an absence of craters -- discoveries that, to their delight, baffled scientists working on NASA's New Horizons mission and provided punctuation for a journey nine and a half years in the making.

Only 112 years after the Wright Brothers were barely able to get their airplane off the ground, a machine from Earth has crossed the solar system to a small, icy world three billion miles away. The flyby on Tuesday, when New Horizons buzzed within 7,800 miles of the former ninth planet, came 50 years to the day after NASA's Mariner 4 spacecraft made a similar first pass by Mars.

For the full story, see:

KENNETH CHANG. "Pluto's Portrait From New Horizons: Ice Mountains and No Craters." The New York Times (Thurs., JULY 16, 2015): A1 & A17.

(Note: the online version of the article has the date JULY 15, 2015.)

September 25, 2015

"If You Get Too Cold, I'll Tax the Heat"

(p. A11) George Harrison knew what he was talking about when he wrote the song "Taxman" for the Beatles: "If you get too cold, I'll tax the heat / If you take a walk, I'll tax your feet." Had the Internet been around in 1966, they might have added: "If you use the Web, I'll tax your tweet."

For the full commentary, see:

OHN THUNE and AJIT PAI. "Taxman, Won't You Please Spare The Internet?; A moratorium on taxing online access has been an unqualified success. Let's make it permanent." The Wall Street Journal (Fri., July 18, 2014): A11.

(Note: the online version of the commentary has the date July 17, 2014.)

September 23, 2015

Venezuelans Irritated by Short Supply of Cerveceria Polar Beer

(p. 5A) CARACAS, Venezuela (AP) -- Venezuelans are facing the prospect of a heat wave without their favorite beer, the latest indignity in a country that has seen shortages of everything from disposable diapers to light bulbs.

Cerveceria Polar, which distributes 80 percent of the beer in the socialist South American country, began shutting down breweries this week because of a lack of barley, hops and other raw materials, and has halted deliveries to Caracas liquor stores.

"This is never-never land," said Yefferson Ramirez, who navigated a rush of disgruntled customers Thursday behind the counter at a corner store in posh eastern Caracas. The shop has been out of milk and bottled water for months, but the beer shortfall is provoking a new level of irritation.

For the full story, see:

Associated Press. "Venezuela's top beer scarce amid heat wave." Omaha World-Heraldl (Sat., Aug. 8, 2015): 5A.

(Note: the online version of the story has the date Aug. 7, 2015.)

September 22, 2015

Venezeuelan Socialists Seize Warehouses of Cerveceria Polar Beer

PolarWorkersProtestSocialistsSeizingProperty.jpg "Polar workers protested the government's decision to expropriate warehouse land in Caracas on Thursday [July 30, 2015]." Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A7) CARACAS, Venezuela--The government ordered major food companies, including units of PepsiCo and Nestlé Inc., to evacuate warehouses in an area where the state plans to expropriate land to build low-cost housing.

. . .

Manuel Larrazábal, a director at Polar, said he hoped the government would reconsider the measure. "We don't doubt that they need to construct housing, which is so important, but we ask why it has to affect active industrial facilities."

. . .

Some workers painted messages including "No to expropriation" and "Let us work" onto the walls of the industrial park and on dozens of trucks that lined the streets outside, which were blocked by police and National Guard. Polar said the move would affect some 600 workers, as well as 1,400 employees who transport their goods around Caracas and two neighboring states.

. . .

Polar suspended operations at its facility after getting the order Wednesday night. The expropriation order extends a history of shaky relations between it and the government, which began under the late leader Hugo Chávez and continues under his protégé, Mr. Maduro.

In recent months, the company, which is the largest beer maker in Venezuela, said it had to halt work at several plants and breweries due to labor strife. It has also struggled with difficulties in acquiring raw materials and U.S. dollars to pay overseas suppliers, a process controlled by the government due to complicated currency regulations.

For the full story, see:

KEJAL VYAS . "Venezuela Takeover Order Riles Companies; Maduro's government wants industrial zone to build housing for poor." The Wall Street Journal (Fri., July 31, 2015): A7.

(Note: ellipses added.)

(Note: the online version of the story has the date July 30, 2015.)

September 15, 2015

More Danger from Existing Artificial Stupidity than from Fictional Artificial Intelligence

(p. B6) In the kind of artificial intelligence, or A.I., that most people seem to worry about, computers decide people are a bad idea, so they kill them. That is undeniably bad for the human race, but it is a potentially smart move by the computers.

But the real worry, specialists in the field say, is a computer program rapidly overdoing a single task, with no context. A machine that makes paper clips proceeds unfettered, one example goes, and becomes so proficient that overnight we are drowning in paper clips.

In other words, something really dumb happens, at a global scale. As for those "Terminator" robots you tend to see on scary news stories about an A.I. apocalypse, forget it.

"What you should fear is a computer that is competent in one very narrow area, to a bad degree," said Max Tegmark, a professor of physics at the Massachusetts Institute of Technology and the president of the Future of Life Institute, a group dedicated to limiting the risks from A.I.

In late June, when a worker in Germany was killed by an assembly line robot, Mr. Tegmark said, "it was an example of a machine being stupid, not doing something mean but treating a person like a piece of metal."

. . .

"These doomsday scenarios confuse the science with remote philosophical problems about the mind and consciousness," Oren Etzioni, chief executive of the Allen Institute for Artificial Intelligence, a nonprofit that explores artificial intelligence, said. "If more people learned how to write software, they'd see how literal-minded these overgrown pencils we call computers actually are."

What accounts for the confusion? One big reason is the way computer scientists work. "The term 'A.I.' came about in the 1950s, when people thought machines that think were around the corner," Mr. Etzioni said. "Now we're stuck with it."

It is still a hallmark of the business. Google's advanced A.I. work is at a company it acquired called DeepMind. A pioneering company in the field was called Thinking Machines. Researchers are pursuing something called Deep Learning, another suggestion that we are birthing intelligence.

. . .

DeepMind made a program that mastered simple video games, but it never took the learning from one game into another. The 22 rungs of a neural net it climbs to figure out what is in a picture do not operate much like human image recognition and are still easily defeated.

For the full story, see:

QUENTIN HARDY. "The Real Threat Computers Pose: Artificial Stupidity, Not Intelligence." The New York Times (Mon., JULY 13, 2015): B6.

(Note: ellipses added.)

(Note: the online version of the story has the date JULY 11, 2015, and has the title "The Real Threat Posed by Powerful Computers.")

September 14, 2015

How Jack Dorsey Achieves Work-Life Balance: "I Don't Have a Family"

(p. B1) Maybe Jack Dorsey needs to clone himself.

On July 1, the technology entrepreneur took on the challenge of turning around Twitter, the social media site that he co-founded and that he was asked to run as interim chief executive. At the same time, Mr. Dorsey has filed confidential paperwork to sell stock to the public in the other company where he is chief executive, Square, a mobile payments provider, a person briefed on the action said on Friday [July 24, 2015].

The collision of events adds fodder to one of Silicon Valley's hottest topics: how Mr. Dorsey will juggle the companies, and whether he will forgo responsibilities at one to concentrate on the other.

. . .

(p. B2) On Tuesday [July 28, 2015], Mr. Dorsey will face Twitter investors when he reports the San Francisco-based company's quarterly earnings. The executive has been preparing for the event, where his performance will be scrutinized.

Mr. Dorsey has also spent time at Square, which has offices about a block away from Twitter's on Market Street in San Francisco. Last week, he moderated a panel discussion on women in technology at Square's twice-monthly staff meeting, featuring three women -- Sarah Friar, Alyssa Henry and Francoise Brougher -- who head finance, engineering and business operations, respectively, at the mobile payments company.

During a part of the session that focused on parenting, according to a person who attended the meeting, Mr. Dorsey was asked how he managed to achieve work-life balance. He told the audience, "Uh, I don't have a family."

For the full story, see:

MIKE ISAAC and VINDU GOEL. "Square's Filing Turns Talk to Dorsey's Juggling Skills." The New York Times (Sat., JULY 25, 2015): B1-B2.

(Note: ellipsis, and bracketed dates, added.)

(Note: the online version of the obituary has the date JULY 24, 2015.)

September 13, 2015

The Dynamism of Venturesome New Yorkers: "If You Want Country Living, Move to the Country"

(p. A18) One cannot live any closer to the terminals of La Guardia Airport than the residents of East Elmhurst, Queens. Some homes sit only a few hundred yards away from the control tower, on the opposite side of the Grand Central Parkway. The new $4 billion airport hub envisioned for the site, announced this week by Gov. Andrew M. Cuomo and Vice President Joseph R. Biden, would be even closer.

So it might be assumed that the promise of years of heavy-duty construction and the associated noise, traffic and dust would fill residents with dread.

Not quite.

"We live in New York City, honey," said Michele Mongeluzo, 56, whose house sits on a rise just south of the parkway, offering an unobstructed view of the airport and the proposed construction site. "If you want country living, move to the country."

In interviews this week along the blocks closest to the airport, residents almost universally said that they not only had no trepidation about the construction but that they also actually welcomed it. Improvements, they said, were long overdue.

Furthermore, they suggested, what was a little construction on top of the aural challenges -- the roaring jet engines, the chop of helicopter rotors, the incessant highway traffic -- that they had already contended with and apparently overcome?

"If it's noisy, I'm used to it," said Freddy Fuhrtz, 75, who retired as an employee in the cargo division of Pan Am and still lives in the two-story house on 92nd Street where he grew up and raised his children. "It's progress."

For the full story, see:

KIRK SEMPLE. "Construction Plans Don't Faze Airport Neighbors." The New York Times (Fri., JULY 31, 2015): A18 & A21.

(Note: the online version of the story has the date JULY 30, 2015, and has the title "Construction Plans for La Guardia Airport Don't Faze Its Neighbors.")

September 11, 2015

Refugee Walks Nearly 30 Miles Across English Channel, Dodging Hurtling Trains in Dark, Before His Arrest

(p. A1) LONDON -- For one African migrant, there was nothing left to lose.

The migrant, Abdul Rahman Haroun, 40, risked his life this week by climbing four fences, evading international search teams and as many as 400 security cameras, and walking about 30 miles in the darkness of the Channel Tunnel in an effort to reach Britain from Calais, France. He dodged trains traveling to London from Paris as they hurtled by at up to 100 miles per hour.

He had made it nearly to the other side, Folkestone, England, before he was caught and arrested on Tuesday [August 4, 2015].

Three days later news of Mr. Haroun's perilous journey was still reverberating in Britain, a country polarized by a spiraling migration crisis. Though much about him remains unknown -- the police said he is Sudanese and has no fixed address -- his story of determination had reduced the sprawling migration crisis to a human scale, . . .

For the full story, see:

DAN BILEFSKY. "In a First, a Sudanese Migrant Nearly Crosses the English Channel on Foot." The New York Times (Sat., AUG. 8, 2015): A1 & A8.

(Note: ellipsis, and bracketed date, added.)

(Note: the online version of the story has the date AUG. 7, 2015.)

September 9, 2015

"I'll Be Lucky When I'm in England"

(p. A4) CALAIS, France -- The sun had barely set when a 23-year-old Eritrean woman who gave her name as Akbrat fell into step with dozens of other men and women and started scaling the fence surrounding the entrance to the French side of the Channel Tunnel.

The barbed wire cut her hands, but she did not feel the pain. The police seemed to be everywhere. She thought of her 5-year-old son back in Africa and ran, zigzag through the falling shadows, once almost colliding with an officer in a helmet.

Then she was alone. She slipped under the freight train and waited, clambering out just as it began moving.

But before she could hurl herself onto the train bed transporting trucks filled with Britain-bound produce, a French officer caught up with her, she recalled in an interview on Thursday. Blinded by tear gas, she stumbled and bruised her right ankle. After being ejected from the complex around the tunnel, it took her five hours to limp the nine miles back to the refugee camp of makeshift shelters that its 3,000 inhabitants call the "jungle."

"You're lucky you weren't killed," someone told her.

"I'm not lucky," she responded. "I'll be lucky when I'm in England."

. . .

For many of the migrants who have been coming to the Continent from Africa, the Middle East and beyond, Calais, a mere 21 miles from the white cliffs of Dover, is their last stop. If they make it across to Britain, many believe they will have reached safety and a better life.

For the full story, see:

KATRIN BENNHOLD and ALISSA J. RUBIN. "Migrants Taste Freedom at Tunnel's Door." The New York Times (Fri., JULY 31, 2015): A4 & A10.

(Note: ellipsis added.)

(Note: the online version of the story has the date JULY 30, 2015, and has the title "Migrants in Calais Desperately Rush the Channel Tunnel to England, Night After Night.")

See also:

ALISSA J. RUBIN. "Hundreds of Migrants Try to Clamber Onto Trains and Cross Channel to England." The New York Times (Fri., JULY 29, 2015): A6.

(Note: the online version of the story has the date JULY 28, 2015, and has the title "Hundreds of Migrants Try to Cross English Channel on Freight Trains.")

MATTHIAS VERBERGT and NOEMIE BISSERBE. "Migrant Crisis Continues at U.K.-France Border; Up to about 1,000 migrants spotted Wednesday night near the Eurotunnel terminal site." The Wall Street Journal (Fri., JULY 31, 2015): A7.

(Note: the online version of the story has the date JULY 30, 2015.)

September 8, 2015

"The Countryside Was Romantic Only to People Who Didn't Have to Live There"

(p. C4) Mr. Meyer's motivation for writing his book is simple and straightforward. "Since 2000, a quarter of China's villages had died out, victims of migration or the redrawing of municipal borders," as the country urbanizes, he notes early on, adding: "Before it vanished I wanted to experience a life that tourists, foreign students, and journalists (I had been, in order, all three) only viewed in passing."

"In Manchuria" shifts back and forth among various genres. It is part travelogue, part sociological study, part reportage and part memoir, but it is also a love offering to Mr. Meyer's wife, Frances, who grew up in the unfortunately named Wasteland, the village that Mr. Meyer chooses as his base near the start of this decade, and to the unborn son she is carrying by the time "In Manchuria" ends.

. . .

After a year in Wasteland, Mr. Meyer was ready to move on, and he now divides his time between Singapore and Pittsburgh, where he teaches nonfiction writing. But his interlude in Manchuria clearly taught him many lessons, perhaps the most fundamental being this: "The countryside was romantic only to people who didn't have to live there."

For the full review, see:

LARRY ROHTER. "A Vanishing Way of Life for Peasants in China." The New York Times Book Review (Mon., MARCH 8, 2015): C4.

(Note: ellipsis added.)

(Note: the online version of the review has the date MARCH 8, 2015, and has the title "Review: Michael Meyer's 'In Manchuria' Documents a Changing Rural China.")

The book under review, is:

Meyer, Michael. In Manchuria: A Village Called Wasteland and the Transformation of Rural China. New York: Bloomsbury Press, 2015.

September 3, 2015

Dynamism "in Danger of Being Stultified by Planners"

(p. A25) . . . , the attempt to tame the market will end up stultifying it. Everybody knows that capitalism's creative destruction can be rough. But over the last few decades, a ragged version of global capitalism in places ranging from China to Nigeria has brought about the greatest reduction in poverty in human history. America's fluid style of capitalism attracts driven and talented immigrants and creates vast waves of technological innovation. This dynamism is always in danger of being stultified by planners who think they can tame it and by governing elites who want to rig it. We should not take it for granted.

The coming debate about capitalism will be between those who want to restructure the underlying system and those who want to help people take advantage of its rough intensity. It will be between people who think you need strong government to defeat oligarchy and those who think you need open competition.

For the full commentary, see:

David Brooks. "Two Cheers for Capitalism." The New York Times (Fri., July 31, 2015): A25.

(Note: ellipsis added.)

September 2, 2015

Communist Party Destroying Dissenting Civic Groups in China

YangZiliTransitionInstituteChina2015-07-05.jpg"Yang Zili of the Transition Institute of Social and Economic Research went into hiding." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A4) BEIJING -- First, the police took away the think tank's former graphic designer, then the young man who organized seminars, and eventually its founder. Another employee fled China's capital, fearing he would be forced to testify against his colleagues in rigged trials.

"The anxiety is overwhelming, not knowing if they are coming for you," said the employee, Yang Zili, a researcher at the Transition Institute of Social and Economic Research in Beijing, who has been in hiding since November. "It's frightening because as they disappear, one friend after another, the police are not following any law. They just do as they please."

These are perilous days for independent civic groups in China, especially those that take on politically contentious causes like workers' rights, legal advocacy and discrimination against people with AIDS. Such groups have long struggled to survive inside China's ill-defined, shifting margins of official tolerance, but they have served as havens for socially committed citizens.

Under President Xi Jinping, however, the Communist Party has forcefully narrowed the bounds of accepted activity, setting off fears that these pockets of greater openness in China's generally restrictive political landscape may soon disappear.

. . .

The campaign has focused on groups deemed sanctuaries for dissent. From its cramped offices in the university district of northwest Beijing, the Transition Institute championed a mix of free market economics and support for the downtrodden, conducting research on the exploitation of taxi drivers, school policies that shortchange rural children and the environmental costs of the massive Three Gorges Dam on the Yangtze River. But the institute also attracted advocates of democratic reform, some of whom had prior run-ins with the authorities.

"We always hoped to eke out survival in tough circumstances," said Mr. Yang, 43, the researcher now in hiding, who spent eight years in prison for holding informal discussions with a group of friends about multiparty elections and a free press. "But the more independent NGOs," he added, referring to nongovernmental organizations, "especially the ones that criticize government policies or don't help the government's image, have encountered a policy of containment, even destruction."

. . .

(p. A6) With his colleagues disappearing one by one, Mr. Yang decided to go underground. He was in the institute office one morning in late November when a police officer called and told him to go to a station for questioning. Instead, Mr. Yang left an Internet message for his wife, shut off his cellphone, and slipped away, taking only the clothes on his back. "It was a spur-of-the-moment decision," he said in an interview.

Meeting with a reporter at a location several hours' drive from Beijing, he said he missed his wife and 4-year-old son, and visibly nervous, he talked about his fear of being returned to prison.

Mr. Yang said he would turn himself in should a warrant be issued for his arrest, but he was not interested in cooperating with what he described as an extralegal persecution of his colleagues.

"I still don't understand what we did wrong," he said. "We were just trying to help improve China."

For the full story, see:

ANDREW JACOBS and CHRIS BUCKLEY. "In China, Civic Groups' Freedom, and Followers, Are Vanishing." The New York Times (Fri., FEB. 27, 2015): A4 & A6.

(Note: ellipses added.)

(Note: the online version of the story has the date FEB. 26, 2015.)

September 1, 2015

Keeping Growth Rate High in China Achieved by More Misallocation of Capital

(p. A11) . . . , it is Beijing's recent moves to ease fiscal policy that will ensure that this year's growth target can be met. Unlike traditional Keynesian stimulus programs, which are typically conducted at the central-government level, in China fiscal easing primarily involves providing additional state-bank money to local governments.

This has a more immediate and powerful effect on GDP growth and job creation, but it comes at a high cost: overinvestment in local projects and the misallocation of capital. China's landscape is littered with unused highways and airports, redundant steel and cement plants, unnecessary municipal office buildings and "ghost cities" filled with empty high-rises and deserted shopping malls.

From 2009-13, "ineffective investment" amounted to a stunning 41.8 trillion yuan ($6.8 trillion), according to research published in 2014 by Xu Ce of China's National Development and Reform Commission and Wang Yuan of the Academy of Macroeconomic Research.

That China is heading down this path again can only mean that it has no other way to reach its growth target. It is also an indication of how little the economic system has changed despite the leadership's much vaunted reform initiatives and efforts to tackle corruption at all levels of government.

For the full commentary, see:

MARK A. DEWEAVER. "Why China Will Still Reach Its Target Growth Rate; The stock market crash won't stop Beijing from shoveling trillions into wasteful local projects.'" The Wall Street Journal (Fri., July 31, 2015): A11.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date July 30, 2015.)

August 29, 2015

From Self-Funding, and Sony, Khanna Builds PlayStation Supercomputer to Advance Science

KhannaGauravPlaystationSupercomputer2015-07-05.jpg"Gaurav Khanna with a supercomputer he built at the University of Massachusetts Dartmouth physics department using 200 Playstation 3 consoles that are housed in a refrigerated shipping container." 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. D3) This spring, Gaurav Khanna noticed that the University of Massachusetts Dartmouth physics department was more crowded than usual. Why, he wondered, were so many students suddenly so interested in science?"

It wasn't a thirst for knowledge, it turns out. News of Dr. Khanna's success in building a supercomputer using only PlayStation 3 video game consoles had spread quickly; the students, a lot of them gamers, just wanted to gape at the sight of nearly 200 consoles stacked on one another.

. . .

Making a supercomputer requires a large number of processors -- standard desktops, laptops or the like -- and a way to network them. Dr. Khanna picked the PlayStation 3 for its viability and cost, currently, $250 to $300 in stores. Unlike other game consoles, the PlayStation 3 allows users to install a preferred operating system, making it attractive to programmers and developers. (The latest model, the PlayStation 4, does not have this feature.)

"Gaming had grown into a huge market," Dr. Khanna said. "There's a huge push for performance, meaning you can buy low-cost, high-performance hardware very easily. I could go out and buy 100 PlayStation 3 consoles at my neighborhood Best Buy, if I wanted."

That is just what Dr. Khanna did, though on a smaller scale. Because the National Science Foundation, which funds much of Dr. Khanna's research, might not have viewed the bulk buying of video game consoles as a responsible use of grant money, he reached out to Sony Computer Entertainment America, the company behind the PlayStation 3. Sony donated four consoles to the experiment; Dr. Khanna's university paid for eight more, and Dr. Khanna bought another four. He then installed the Linux operating system on all 16 consoles, plugged them into the Internet and booted up the supercomputer.

Lior Burko, an associate professor of physics at Georgia Gwinnett College and a past collaborator with Dr. Khanna, praised the idea as an "ingenious" way to get the function of a supercomputer without the prohibitive expense.

"Dr. Khanna was able to combine his two fields of expertise, namely general relativity and computer science, to invent something new that allowed for not just a neat new machine, but also scientific progress that otherwise might have taken many more years to achieve," Dr. Burko said.

. . .

His team linked the consoles, housing them in a refrigerated shipping container designed to carry milk. The resulting supercomputer, Dr. Khanna said, had the computational power of nearly 3,000 laptop or desktop processors, and cost only $75,000 to make -- about a tenth the cost of a comparable supercomputer made using traditional parts.

For the full story, see:

LAURA PARKER "An Economical Way to Save Progress." The New York Times (Tues., DEC. 23, 2014): D3.

(Note: ellipses added.)

(Note: the online version of the story has the date DEC. 22, 2014, and has the title "That Old PlayStation Can Aid Science.")

August 28, 2015

No Increase in Public's Concern with Income Inequality Since 1978

(p. 4A) DENVER (AP) -- Income inequality is all the rage in public debate nowadays. Political figures from Sen. Elizabeth Warren on the left to Republican presidential prospect Jeb Bush on the right are denouncing the widening gap between the wealthy and everyone else.

But ordinary Americans don't seem as fascinated by the issue as their would-be leaders. The public's expressed interest in income inequality has remained stagnant over the past 36 years, according to the General Social Survey, which measures trends in public opinion.

In 2014 polling, Republicans' support for the government doing something to narrow the rich-poor gap reached an all-time low. Even Democrats were slightly less interested in government action on the issue than they were two years ago.

The survey is conducted by the independent research organization NORC at the University of Chicago. Because of its long-running and comprehensive questions, it is a highly regarded source on social trends.

In the latest survey, made public last week, less than half of Americans -- 46 percent -- said the government ought to reduce income differences between the rich and the poor. That level has held fairly steady since 1978. Thirty-seven percent said the government shouldn't concern itself with income differences, and the rest didn't feel strongly either way.

For the full story, see:

AP. "Income Inequality? Pols Want to Talk about It; Public Yawns." Omaha World-Herald (Monday, March 23, 2015): 4A.

For more details on the National Opinion Research Center (NORC) General Social Survey (GSS) results through 2014, see:

Inequality: Trends in Americans' Attitudes URL:

August 26, 2015

Pentagon Seeks Innovation from Private Start-Ups Since "They've Realized that the Old Model Wasn't Working Anymore"

(p. A3) SAN FRANCISCO -- A small group of high-ranking Pentagon officials made a quiet visit to Silicon Valley in December to solicit national security ideas from start-up firms with little or no history of working with the military.

The visit was made as part of an effort to find new ways to maintain a military advantage in an increasingly uncertain world.

In announcing its Defense Innovation Initiative in a speech in California in November, Chuck Hagel, then the defense secretary, mentioned examples of technologies like robotics, unmanned systems, miniaturization and 3-D printing as places to look for "game changing" technologies that would maintain military superiority.

"They've realized that the old model wasn't working anymore," said James Lewis, director of the Strategic Technologies Program at the Center for Strategic and International Studies in Washington. "They're really worried about America's capacity to innovate."

There is a precedent for the initiative. Startled by the Soviet launch of the Sputnik satellite in 1957, President Dwight D. Eisenhower created the Advanced Research Projects Agency, or ARPA, at the Pentagon to ensure that the United States would not be blindsided by technological advances.

Now, the Pentagon has decided that the nation needs more than ARPA, renamed the Defense Advanced Research Projects Agency, or Darpa, if it is to find new technologies to maintain American military superiority.

. . .

The Pentagon focused on smaller companies during its December visit; it did not, for example, visit Google. Mr. Welby acknowledged that Silicon Valley start-ups were not likely to be focused on the Pentagon as a customer. The military has captive suppliers and a long and complex sales cycle, and it is perceived as being a small market compared with the hundreds of millions of customers for consumer electronics products.

Mr. Welby has worked for three different Darpa directors, but he said that Pentagon officials now believed they had to look beyond their own advanced technology offices.

"The Darpa culture is about trying to understand high-risk technology," he said. "It's about big leaps." Today, however, the Pentagon needs to break out of what can be seen as a "not invented here" culture, he said.

"We're thinking about what the world is going to look like in 2030 and what tools the department will need in 20 or 30 years," he added.

For the full story, see:

JOHN MARKOFF. "Pentagon Shops in Silicon Valley for Game Changers." The New York Times (Fri., FEB. 27, 2015): A3.

(Note: ellipsis added.)

(Note: the online version of the story has the date FEB. 26, 2015.)

August 23, 2015

Starting in Late Middle Ages the State Tried "to Control, Delineate, and Restrict Human Thought and Action"

(p. C6) . . . transregional organizations like Viking armies or the Hanseatic League mattered more than kings and courts. It was a world, as Mr. Pye says, in which "you went where you were known, where you could do the things you wanted to do, and where someone would protect you from being jailed, hanged, or broken on the wheel for doing them."

. . .

This is a world in which money rules, but money is increasingly an abstraction, based on insider information, on speculation (the Bourse or stock market itself is a regional invention) and on the ability to apply mathematics: What was bought or sold was increasingly the relationships between prices in different locations rather than the goods themselves.

What happened to bring this powerful, creative pattern to a close? The author credits first the reaction to the Black Death of the mid-14th century, when fear of contamination (perhaps similar to our modern fear of terrorism) justified laws that limited travel and kept people in their place. Religious and sectarian strife further limited the free flow of ideas and people, forcing people to choose one identity to the exclusion of others or else to attempt to disappear into the underground of clandestine and subversive activities. And behind both of these was the rise of the state, a modern invention that attempted to control, delineate, and restrict human thought and action.

For the full review, see:

PATRICK J. GEARY. "Lighting Up the Dark Ages." The Wall Street Journal (Sat., May 30, 2015): C6.

(Note: ellipses added.)

(Note: the online version of the review has the date May 29, 2015.)

The book under review, is:

Pye, Michael. The Edge of the World: A Cultural History of the North Sea and the Transformation of Europe. New York: Pegasus Books LLC, 2014.

August 21, 2015

More Tech Stars Skip College, at Least for a While

(p. B1) The college dropout-turned-entrepreneur is a staple of Silicon Valley mythology. Steve Jobs, Bill Gates and Mark Zuckerberg all left college.

In their day, those founders were very unusual. But a lot has changed since 2005, when Mr. Zuckerberg left Harvard. The new crop of dropouts has grown up with the Internet and smartphones. The tools to create new technology are more accessible. The cost to start a company has plunged, while the options for raising money have multiplied.

Moreover, the path isn't as lonely.

. . .

Not long ago, dropping out of school to start a company was considered risky. For this generation, it is a badge of honor, evidence of ambition and focus. Very few dropouts become tycoons, but "failure" today often means going back to school or taking a six-figure job at a big tech company.

. . .

(p. B5) There are no hard numbers on the dropout trend, but applicants for the Thiel Fellowship tripled in the most recent year; the fellowship won't disclose numbers.

. . .

It has tapped 82 fellows in the past five years.

"I don't think college is always bad, but our society seems to think college is always good, for everyone, at any cost--and that is what we have to question," says Mr. Thiel, a co-founder of PayPal and an early investor in Facebook.

Of the 43 fellows in the initial classes of 2011 and 2012, 26 didn't return to school and continued to work on startups or independent projects. Five went to work for large tech firms, including a few through acquisitions. The remaining 12 went back to school.

Mr. Thiel says companies started by the fellows have raised $73 million, a record that he says has attracted additional applicants. He says fellows "learned far more than they would have in college."

For the full story, see:

DAISUKE WAKABAYASHI. "College Dropouts Thrive in Tech." The Wall Street Journal (Thurs., June 4, 2015): B1 & B10.

(Note: ellipses added. The phrase "the fellowship won't disclose numbers" was in the online, but not the print, version of the article.)

(Note: the online version of the article has the date June 3, 2015, and has the title "College Dropouts Thrive in Tech.")

August 20, 2015

The Complementarity of Humans and Robots in Education

(p. 6) Computers and robots are already replacing many workers. What can young people learn now that won't be superseded within their lifetimes by these devices and that will secure them good jobs and solid income over the next 20, 30 or 50 years? In the universities, we are struggling to answer that question.

. . .

Some scholars are trying to discern what kinds of learning have survived technological replacement better than others. Richard J. Murnane and Frank Levy in their book "The New Division of Labor" (Princeton, 2004) studied occupations that expanded during the information revolution of the recent past. They included jobs like service manager at an auto dealership, as opposed to jobs that have declined, like telephone operator.

The successful occupations, by this measure, shared certain characteristics: People who practiced them needed complex communication skills and expert knowledge. Such skills included an ability to convey "not just information but a particular interpretation of information." They said that expert knowledge was broad, deep and practical, allowing the solution of "uncharted problems."

. . .

When I arrived at Yale in 1982, there were no undergraduate courses in finance. I started one in the fall of 1985, and it continues today. Increasingly, I've tried to connect mathematical theory to actual applications in finance.

Since its beginnings, the course has gradually become more robotic: It resembles a real, dynamic, teaching experience, but in execution, much of it is prerecorded, and exercises and examinations are computerized. Students can take it without need of my physical presence. Yale made my course available to the broader public on free online sites: AllLearn in 2002, Open Yale in 2008 and 2011, and now on Coursera.

The process of tweaking and improving the course to fit better in a digital framework has given me time to reflect about what I am doing for my students. I could just retire now and let them watch my lectures and use the rest of the digitized material. But I find myself thinking that I should be doing something more for them.

So I continue to update the course, thinking about how I can integrate its lessons into an "art of living in the world." I have tried to enhance my students' sense that finance should be the art of financing important human activities, of getting people (and robots someday) working together to accomplish things that we really want done.

For the full commentary, see:

ROBERT J. SHILLER. "Economic View; What to Learn in College to Stay One Step Ahead of Computers." The New York Times, SundayBusiness Section (Sun., MAY 24, 2015): 6.

(Note: ellipses added.)

(Note: the online version of the commentary has the date MAY 22, 2015, and has the title "Economic View; What to Learn in College to Stay One Step Ahead of Computers.")

The Levy and Murnane book mentioned above, is:

Levy, Frank, and Richard J. Murnane. The New Division of Labor: How Computers Are Creating the Next Job Market. Princeton, NJ: Princeton University Press, 2004.

Some of the core of the Levy and Murnane book can be found in:

Levy, Frank, and Richard Murnane. "Book Excerpt: The New Division of Labor." Milken Institute Review 6, no. 4 (Dec. 2004): 61-82.

August 18, 2015

"Buy Local" Inefficiently Wastes Resources

(p. 8) Much is . . . made about the eco-friendliness of handmade.

"Buying handmade (especially really locally) can greatly reduce your carbon footprint on the world," reads a post on the popular website Handmadeology.

But few economists give much credence to the idea that buying local necessarily saves energy. Most believe that the economies of scale inherent in mass production outweigh the benefits of nearness. These same economies of scale most likely make a toothbrush factory less wasteful, in terms of materials, than 100 individual toothbrush makers each handcrafting 10 toothbrushes a day.

For the full commentary, see:

EMILY MATCHA. "OPINION; It's Chic. Not Morally Superior. That Handmade Scarf Won't Save the World." The New York Times, SundayReview Section (Sun., MAY 3, 2015): 8.

(Note: ellipses added.)

(Note: the online version of the coomentary has the date MAY 2, 2015, and has the title "OPINION; Sorry, Etsy. That Handmade Scarf Won't Save the World.")

August 15, 2015

Spread of Robots Creates New and Better Human Jobs

(p. A11) The issues at the heart of "Learning by Doing" come into sharp relief when James Bessen visits a retail distribution center near Boston that was featured on "60 Minutes" two years ago. The TV segment, titled "Are Robots Hurting Job Growth?," combined gotcha reporting with vintage movie clips--scary-looking Hollywood robots--to tell a chilling tale of human displacement and runaway job loss.

Mr. Bessen isn't buying it. Although robots at the distribution center have eliminated some jobs, he says, they have created others--for production workers, technicians and managers. The problem at automated workplaces isn't the robots. It's the lack of qualified workers. New jobs "require specialized skills," Mr. Bessen writes, but workers with these skills "are in short supply."

It is a deeply contrarian view. The conventional wisdom about robots and other new workplace technology is that they do more harm than good, destroying jobs and hollowing out the middle class. MIT economists Erik Brynjolfsson and Andrew McAfee made the case in their best-selling 2014 book, "The Second Machine Age." They describe a future in which software-driven machines will take over not just routine jobs--replacing clerks, cashiers and warehouse workers--but also tasks done by nurses, doctors, lawyers and stock traders. Mr. Bessen sets out to refute the arguments of such techno-pessimists, relying on economic analysis and on a fresh reading of history.

For the full review, see:

TAMAR JACOBY. "BOOKSHELF; Technology Isn't a Job Killer; Many predicted ATMs would eliminate bank tellers, but the number of tellers in the U.S. has risen since the machines were introduced." The Wall Street Journal (Thurs., May 21, 2015): A11.

(Note: the online version of the review has the date May 20, 2015.)

The book under review, is:

Bessen, James. Learning by Doing: The Real Connection between Innovation, Wages, and Wealth. New Haven, CT: Yale University Press, 2015.

August 14, 2015

Computer Programs "Lack the Flexibility of Human Thinking"

(p. A11) . . . let's not panic. "Superintelligent" machines won't be arriving soon. Computers today are good at narrow tasks carefully engineered by programmers, like balancing checkbooks and landing airplanes, but after five decades of research, they are still weak at anything that looks remotely like genuine human intelligence.

. . .

Even the best computer programs out there lack the flexibility of human thinking. A teenager can pick up a new videogame in an hour; your average computer program still can only do just the single task for which it was designed. (Some new technologies do slightly better, but they still struggle with any task that requires long-term planning.)

For the full commentary, see:

GARY MARCUS. "Artificial Intelligence Isn't a Threat--Yet; Superintelligent machines are still a long way off, but we need to prepare for their future rise." The Wall Street Journal (Sat., Dec. 13, 2014): A11.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Dec. 11, 2014.)

August 13, 2015

Cultural and Institutional Differences Between Europe and U.S. Keep Europe from Having a Silicon Valley

(p. B7) "They all want a Silicon Valley," Jacob Kirkegaard, a Danish economist and senior fellow at the Peterson Institute for International Economics, told me this week. "But none of them can match the scale and focus on the new and truly innovative technologies you have in the United States. Europe and the rest of the world are playing catch-up, to the great frustration of policy makers there."

Petra Moser, assistant professor of economics at Stanford and its Europe Center, who was born in Germany, agreed that "Europeans are worried."

"They're trying to recreate Silicon Valley in places like Munich, so far with little success," she said. "The institutional and cultural differences are still too great."

. . .

There is . . . little or no stigma in Silicon Valley to being fired; Steve Jobs himself was forced out of Apple. "American companies allow their employees to leave and try something else," Professor Moser said. "Then, if it works, great, the mother company acquires the start-up. If it doesn't, they hire them back. It's a great system. It allows people to experiment and try things. In Germany, you can't do that. People would hold it against you. They'd see it as disloyal. It's a very different ethic."

Europeans are also much less receptive to the kind of truly disruptive innovation represented by a Google or a Facebook, Mr. Kirkegaard said.

He cited the example of Uber, the ride-hailing service that despite its German-sounding name is a thoroughly American upstart. Uber has been greeted in Europe like the arrival of a virus, and its reception says a lot about the power of incumbent taxi operators.

"But it goes deeper than that," Mr. Kirkegaard said. "New Yorkers don't get all nostalgic about yellow cabs. In London, the black cab is seen as something that makes London what it is. People like it that way. Americans tend to act in a more rational and less emotional way about the goods and services they consume, because it's not tied up with their national and regional identities."

. . .

With its emphasis on early testing and sorting, the educational system in Europe tends to be very rigid. "If you don't do well at age 18, you're out," Professor Moser said. "That cuts out a lot of people who could do better but never get the chance. The person who does best at a test of rote memorization at age 17 may not be innovative at 23." She added that many of Europe's most enterprising students go to the United States to study and end up staying.

She is currently doing research into creativity. "The American education system is much more forgiving," Professor Moser said. "Students can catch up and go on to excel."

Even the vaunted European child-rearing, she believes, is too prescriptive. While she concedes there is as yet no hard scientific evidence to support her thesis, "European children may be better behaved, but American children may end up being more free to explore new things."

For the full story, see:

JAMES B. STEWART. "Common Sense; A Fearless Culture Fuels Tech." The New York Times (Fri., JUNE 19, 2015): B1 & B7.

(Note: ellipses added.)

(Note: the online version of the story has the date JUNE 18, 2015, and has the title "Common Sense; A Fearless Culture Fuels U.S. Tech Giants.")

August 11, 2015

"The Great Fact" of "the Ice-Hockey Stick"

(p. 2) Economic history has looked like an ice-hockey stick lying on the ground. It had a long, long horizontal handle at $3 a day extending through the two-hundred-thousand-year history of Homo sapiens to 1800, with little bumps upward on the handle in ancient Rome and the early medieval Arab world and high medieval Europe, with regressions to $3 afterward--then a wholly unexpected blade, leaping up in the last two out of the two thousand centuries, to $30 a day and in many places well beyond.

. . .

(p. 48) The heart of the matter is sixteen. Real income per head nowadays exceeds that around 1700 or 1800 in, say, Britain and in other countries that have experienced modern economic growth by such a large factor as sixteen, at least. You, oh average participant in the British economy, go through at least sixteen times more food and clothing and housing and education in a day than an ancestor of yours did two or three centuries ago. Not sixteen percent more, but sixteen multiplied by the old standard of living. You in the American or the South Korean economy, compared to the wretchedness of former Smiths in 1653 or Kims in 1953, have done even better. And if such novelties as jet travel and vitamin pills and instant messaging are accounted at their proper value, the factor of material improvement climbs even higher than sixteen--to eighteen, or thirty, or far beyond. No previous episode of enrichment for the average person approaches it, not the China of the Song Dynasty or the Egypt of the New Kingdom, not the glory of Greece or the grandeur of Rome.

No competent economist, regardless of her politics, denies the Great Fact.


McCloskey, Deirdre N. Bourgeois Dignity: Why Economics Can't Explain the Modern World. Chicago: University of Chicago Press, 2010.

(Note: ellipsis added.)

August 7, 2015

Steven Johnson Is Advocate of Collaboration in Innovation

(p. A13) Theories of innovation and entrepreneurship have always yo-yoed between two basic ideas. First, that it's all about the single brilliant individual and his eureka moment that changes the world. Second, that it's about networks, collaboration and context. The truth, as in all such philosophical dogfights, is somewhere in between. But that does not stop the bickering. This controversy blew up in a political context during the 2012 presidential election, when President Obama used an ill-chosen set of words ("you didn't build that") to suggest that government and society had a role in creating the setting for entrepreneurs to flourish, and Republicans berated him for denigrating the rugged individualists of American enterprise.

Through a series of elegant books about the history of technological innovation, Steven Johnson has become one of the most persuasive advocates for the role of collaboration in innovation. His latest, "How We Got to Now," accompanies a PBS series on what he calls the "six innovations that made the modern world." The six are detailed in chapters titled "Glass," "Cold," "Sound," "Clean," "Time" and "Light." Mr. Johnson's method is to start with a single innovation and then hopscotch through history to illuminate its vast and often unintended consequences.

For the full review, see:

PHILIP DELVES BROUGHTON. "BOOKSHELF; Unintended Consequences; Gutenberg's printing press sparked a revolution in lens-making, which led to eyeglasses, microscopes and, yes, the selfie." The Wall Street Journal (Tues., Sept. 30, 2014): A13.

(Note: ellipses added.)

(Note: the online version of the review has the date Sept. 29, 2014, and has the title "BOOKSHELF; Book Review: 'How We Got to Now' by Steven Johnson; Gutenberg's printing press sparked a revolution in lens-making, which led to eyeglasses, microscopes and, yes, the selfie." )

The book under review, is:

Johnson, Steven. How We Got to Now: Six Innovations That Made the Modern World. New York: Riverhead Books, 2014.

August 3, 2015

Tesla Cars Are Built on Government Subsidies

(p. A13) Nowhere in Mr. Vance's book, . . . , does the figure $7,500 appear--the direct taxpayer rebate to each U.S. buyer of Mr. Musk's car. You wouldn't know that 10% of all Model S cars have been sold in Norway--though Tesla's own 10-K lists the possible loss of generous Norwegian tax benefits as a substantial risk to the company.

Barely developed in passing is that Tesla likely might not exist without a former State Department official whom Mr. Musk hired to explore "what types of tax credits and rebates Tesla might be able to drum up around its electric vehicles," which eventually would include a $465 million government-backed loan.

And how Tesla came by its ex-Toyota factory in California "for free," via a "string of fortunate turns" that allowed Tesla to float its IPO a few weeks later, is just a thing that happens in Mr. Vance's book, not the full-bore political intrigue it actually was.

The fact is, Mr. Musk has yet to show that Tesla's stock market value (currently $32 billion) is anything but a modest fraction of the discounted value of its expected future subsidies. In 2017, he plans to introduce his Model 3, a $35,000 car for the middle class. He expects to sell hundreds of thousands a year. Somehow we doubt he intends to make it easy for politicians to whip away the $7,500 tax credit just when somebody besides the rich can benefit from it--in which case the annual gift from taxpayers will quickly mount to several billion dollars each year.

Mother Jones, in a long piece about what Mr. Musk owes the taxpayer, suggested the wunderkind could be a "bit more grateful, a bit more humble." Unmentioned was the shaky underpinning of this largess. Even today's politicized climate modeling allows the possibility that climate sensitivity to carbon dioxide is far less than would justify incurring major expense to change the energy infrastructure of the world (and you certainly wouldn't begin with luxury cars). Were this understanding to become widespread, the subliminal hum of government favoritism could overnight become Tesla's biggest liability.

For the full commentary, see:

HOLMAN W. JENKINS, JR. "BUSINESS WORLD; The Savior Elon Musk; Tesla's impresario is right about one thing: Humanity's preservation is a legitimate government interest." The Wall Street Journal (Sat., May 30, 2015): A13.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date May 29, 2015.)

The book discussed in the commentary is:

Vance, Ashlee. Elon Musk: Tesla, SpaceX, and the Quest for a Fantastic Future. New York: Ecco, 2015.

The Mother Jones article discussing government subsidies for Musk's Tesla, is:

Harkinson, Josh. "Free Ride." Mother Jones 38, no. 5 (Sept./Oct. 2013): 20-25.

August 1, 2015

Little Progress Toward Complex Autonomous Robots

(p. A8) [In June 2015] . . . , the Defense Advanced Research Projects Agency, a Pentagon research arm, . . . [held] the final competition in its Robotics Challenge in Pomona, Calif. With $2 million in prize money for the robot that performs best in a series of rescue-oriented tasks in under an hour, the event . . . offer[ed] what engineers refer to as the "ground truth" -- a reality check on the state of the art in the field of mobile robotics.

A preview of their work suggests that nobody needs to worry about a Terminator creating havoc anytime soon. Given a year and a half to improve their machines, the roboticists, who shared details about their work in interviews before the contest in June, appear to have made limited progress.

. . .

"The extraordinary thing that has happened in the last five years is that we have seemed to make extraordininary progress in machine perception," said Gill Pratt, the Darpa program manager in charge of the Robotics Challenge.

Pattern recognition hardware and software has made it possible for computers to make dramatic progress in computer vision and speech understanding. In contrast, Dr. Pratt said, little headway has been made in "cognition," the higher-level humanlike processes required for robot planning and true autonomy. As a result, both in the Darpa contest and in the field of robotics more broadly, there has been a re-emphasis on the idea of human-machine partnerships.

"It is extremely important to remember that the Darpa Robotics Challenge is about a team of humans and machines working together," he said. "Without the person, these machines could hardly do anything at all."

In fact, the steep challenge in making progress toward mobile robots that can mimic human capabilities is causing robotics researchers worldwide to rethink their goals. Now, instead of trying to build completely autonomous robots, many researchers have begun to think instead of creating ensembles of humans and robots, an approach they describe as co-robots or "cloud robotics."

Ken Goldberg, a University of California, Berkeley, roboticist, has called on the computing world to drop its obsession with singularity, the much-ballyhooed time when computers are predicted to surpass their human designers. Rather, he has proposed a concept he calls "multiplicity," with diverse groups of humans and machines solving problems through collaboration.

For decades, artificial-intelligence researchers have noted that the simplest tasks for humans, such as reaching into a pocket to retrieve a quarter, are the most challenging for machines.

"The intuitive idea is that the more money you spend on a robot, the more autonomy you will be able to design into it," said Rodney Brooks, an M.I.T. roboticist and co-founder two early companies, iRobot and Rethink Robotics. "The fact is actually the opposite is true: The cheaper the robot, the more autonomy it has."

For example, iRobot's Roomba robot is autonomous, but the vacuuming task it performs by wandering around rooms is extremely simple. By contrast, the company's Packbot is more expensive, designed for defusing bombs, and must be teleoperated or controlled wirelessly by people.

For the full story, see:

JOHN MARKOFF. "A Reality Check for A.I." The New York Times (Tues., MAY 26, 2015): D2.

(Note: ellipses, and bracketed expressions, added. I corrected a misspelling of "extraordinary.")

(Note: the date of the online version of the story is MAY 25, 2015, and has the title "Relax, the Terminator Is Far Away.")

July 30, 2015

Institutional Improvements Can Sometimes Be Designed, Rather than Only Spontaneous

A distinguished school of libertarian and neo-Austrian economic thought argues, following F.A. Hayek, that institutional improvements only arise from spontaneous order, and never from conscious design. There is something to their argument, but the designs of Alvin Roth provide counter-examples.

(p. A13) Mr. Roth's work has been to discover the most efficient and equitable methods of matching and implement them in the world. He writes with verve and style, describing many market malfunctions--from aboriginal tribes in Australia arranging marriages for children not yet born to judges bending every rule in the book to hire law clerks years before they have graduated from law school--and how we ought to think about them.

Mr. Roth's approach contrasts with standard debates over free markets versus government regulation. We want markets to be thick, quick, timely and trustworthy, but without careful design markets can become thin, slow, ill-timed and dangerous for the honest. The solution to these problems is unlikely to be regulation legislated from on high. Instead what Mr. Roth practices is nuanced market design created mostly by market participants. Mr. Roth found, for example, that even though the problems in the market for gastroenterologists and law clerks looked the same (hiring started years before schooling ended), the solutions had to be subtly different because of differences in culture, history and norms.

For the full review, see:

ALEX TABARROK. "BOOKSHELF; The Designer of Markets; In some markets, price isn't the determining factor. You can choose to go to Harvard, but Harvard has to choose to accept you first." The Wall Street Journal (Tues., JUNE 16, 2015): A13.

(Note: ellipses added.)

(Note: the online version of the review has the date JUNE 15, 2015, and has the title "BOOKSHELF; Matchmaker, Make Me a Market; In some markets, price isn't the determining factor. You can choose to go to Harvard, but Harvard has to choose to accept you first.")

The book under review is:

Roth, Alvin E. Who Gets What -- and Why: The New Economics of Matchmaking and Market Design. New York: Houghton Mifflin Harcourt Publishing Co., 2015.

July 29, 2015

How Home Solar Panel Subsidies Increase Inequality

(p. A13) Well-meaning--but ill-conceived--federal, state and local tax incentives for rooftop solar give back between 30% and 40% of the installation costs to the owner as a tax credit. But more problematic are hidden rate subsidies, the most significant of which is called net metering, which is available in 44 states. Net metering allows solar-system owners to offset on a one-for-one basis the energy they receive from the electric grid with the solar power they generate on their roof.

While this might sound logical, it isn't. An average California resident with solar, for example, generally pays about 17 cents per kilowatt-hour for electric service when the home's solar panels aren't operating. When they are operating, however, net metering requires the utility to pay that solar customer the same 17 cents per kilowatt-hour. But the solar customer still needs the grid to back up his intermittent solar panels, and the utility could have purchased that same solar power from a utility-scale solar power plant for about five cents per kilowatt-hour.

This 12-cents-per-kwh cost difference amounts to a wealth transfer from average electric customers to customers with rooftop solar systems (who also often have higher incomes). This is because utilities collect much of their fixed costs--the unavoidable costs of power plants, transmission lines, etc.--from residential customers through variable-use charges, in other words, charges based on how much energy they use. When a customer with rooftop solar purchases less electricity from the utility, he pays fewer variable-use charges and avoids contributing revenue to cover the utility's fixed costs. The result is that all of the other customers have to pick up the difference.

For the full commentary, see:

BRIAN H. POTTS . "The Hole in the Rooftop Solar-Panel Craze; Large-scale plants make sense, but panels for houses simply transfer wealth from average electric customers." The Wall Street Journal (Mon., May 18, 2015): A13.

(Note: ellipses added.)

(Note: the online version of the commentary has the date May 17, 2015.)

July 26, 2015

"Nimble" Account of the Creative Destruction of the Music Industry

(p. C1) Stephen Witt's nimble new book, "How Music Got Free," is the richest explanation to date about how the arrival of the MP3 upended almost everything about how music is distributed, consumed and stored. It's a story you may think you know, but Mr. Witt brings fresh reporting to bear, and complicates things in terrific ways.

He pushes past Napster (Sean Fanning, dorm room, lawsuits) and goes deep on the German audio engineers who, drawing on decades of research into how the ear works, spent years developing the MP3 only to almost see it nearly become the Betamax to another group's VHS.

. . .

(p. C6) Even better, he has found the man -- a manager at a CD factory in small-town North Carolina -- who over eight years leaked nearly 2,000 albums before their release, including some of the best-known rap albums of all time. He smuggled most of them out behind an oversized belt buckle before ripping them and putting them online.

Mr. Witt refers to this winsome if somewhat hapless manager, Dell Glover, as "the most fearsome digital pirate of them all."

. . .

Into these two narratives Mr. Witt inserts a third, the story of Doug Morris, who ran the Universal Music Group from 1995 to 2011. At some points you wonder if Mr. Morris has been introduced just so the author can have sick fun with him.

The German inventors and Mr. Glover operate as if they unwittingly have voodoo dolls of this man. Every time they make an advance, and prick the music industry, there's a jump to Mr. Morris for a reaction shot, screaming in his corner office.

. . .

Mr. Witt covers a lot of terrain in "How Music Got Free" without ever becoming bogged down in one place for long. He is knowledgeable about intellectual property issues. In finding his reporting threads, he doesn't miss the big picture: He gives us a loge seat to the entire digital music revolution.

He is especially good on the arrival of iTunes and the iPod.

For the full review, see:

DWIGHT GARNER. "Books of The Times; That Download Has a Back Story." The New York Times (Tues., JUNE 16, 2015): C1 & C6.

(Note: ellipses added.)

(Note: the online version of the review has the date JUNE 15, 2015, and has the title "Books of The Times; Review: In 'How Music Got Free,' Stephen Witt Details an Industry Sea Change.")

The book under review is:

Witt, Stephen. How Music Got Free: The End of an Industry, the Turn of the Century, and the Patient Zero of Piracy. New York: Viking, 2015.

July 25, 2015

Computers Lack Intuition about How to Handle Novel Situations

(p. 11) It seems obvious: The best way to get rid of human error is to get rid of humans.

But that assumption, however fashionable, is itself erroneous. Our desire to liberate ourselves from ourselves is founded on a fallacy. We exaggerate the abilities of computers even as we give our own talents short shrift.

. . .

Human skill has no such constraints. Think of how Capt. Chesley B. Sullenberger III landed that Airbus A320 in the Hudson River after it hit a flock of geese and its engines lost power. Born of deep experience in the real world, such intuition lies beyond calculation. If computers had the ability to be amazed, they'd be amazed by us.

. . .

Computers break down. They have bugs. They get hacked. And when let loose in the world, they face situations that their programmers didn't prepare them for. They work perfectly until they don't.

. . .

We should view computers as our partners, with complementary abilities, not as our replacements.

For the full commentary, see:

NICHOLAS CARR. "Why Robots Will Always Need Us." The New York Times (Weds., MAY 20, 2015): 11.

(Note: ellipses added.)

July 13, 2015

Banks Used "Regulatory Arbitrage" to Rent Seek at Taxpayers' Expense

(p. 21) Between 2009 and 2011, a group of economists at New York University's Stern School of Business published an influential series of reports and books that sought to explain what, exactly, happened during the financial crisis. The depth of the inquiry was notable because the school is generally thought of as a Wall Street-friendly training ground for future bankers. One of the most striking findings was that between 1980 and 2000, the large banks in America had significantly moved away from productivity ­enhancement and toward rent-­seeking.

For the reports' principal authors, Matthew Richardson and Viral Acharya, the evidence of this shift came from careful study of the various ways that banks have legally evaded regulation of their capital requirements. A fundamental tenet of bank regulation is that banks shouldn't borrow too much, because being overleveraged makes them vulnerable to collapse. But banks can most easily make huge profits if they borrow huge amounts, and they tend to pursue unsafe levels of borrowing. Then, the authors observed, they use their power as essential tools in an economy to negotiate bailouts from the government, forcing taxpayers to guarantee their losses. Richardson and Acharya showed that it was precisely because our banking regulations were so extensive and complex that banks were able to seek rents. They called this "regulatory arbitrage," a term that means banks have harnessed regulation and turned it into a powerful business tool.

For the full commentary, see:

ADAM DAVIDSON. "Wall Street Is Using the Power of Dodd-Frank Against Itself." The New York Times Magazine (Sun., May 31, 2015): 18 & 20-21.

(Note: ellipsis added.)

(Note: the date of the online version of the commentary is MAY 27, 2015, and has the title "Wall Street Is Using the Power of Dodd-Frank Against Itself.")

One of the relevant papers by Acharya and Richardson is:

Acharya, Viral V., and Matthew Richardson. "Causes of the Financial Crisis." Critical Review 21, no. 2-3 (2009): 195-210.

July 8, 2015

Not Clear If Net Neutrality Is Good for Consumers

(p. B2) Of course, government antitrust and communications policy is supposed to benefit consumers, not any individual company or group of companies. "It's fair to say Netflix has gotten something of a free pass," said Scott Hemphill, visiting professor of antitrust and intellectual property at New York University School of Law. "This open Internet principle that's in ascendance is certainly good for Netflix. It's harder to say it's good for consumers."

. . .

Despite Netflix's arguments that it shouldn't have to pay fees to a broadband provider, that proposition is hardly self-evident. The fees Netflix so fiercely opposes are analogous to those found in many industries, such as credit cards, where both consumers and merchants pay the credit card companies. "It's hard to say if these fees are good or bad for consumers," Professor Hemphill said.

For the full story, see:

JAMES B. STEWART. "Common Sense; Netflix's Invisible Hand In Policy and Mergers." The New York Times (Fri., MAY 29, 2015): B2-B3.

(Note: ellipsis added.)

(Note: the date of the online version of the story is MAY 28, 2015, and has the title "Her Majesty's Jihadists" which was also the title used on the cover, but not at the start of the actual article on p. 42, which has the title "Common Sense; How Netflix Keeps Finding Itself on the Same Side as Regulators.")

July 6, 2015

Competition between Greek City-States "Led to Specialization and Innovation"

(p. C8) Mr. Ober's approach is theoretical, not narrative-driven. When he does discuss the specifics of classical history, in the second half of the book, he does so largely to support the theses he has developed in the first half about the key causes of Greece's rise.

These causes, in Mr. Ober's view, derived from the competitive world of small, self-governing city-states that emerged in Greece starting around 800 B.C. Competition between states led to specialization and innovation, as exemplified by the high-grade ceramics industry at Athens, and to a spirit of "rational cooperation" among the members of each polity (think of those ants). Within each state, self-governance created what Mr. Ober terms "rule egalitarianism": a sense of fairness and security that "encouraged investment in human capital and lowered transaction costs." The result was a rise not only in standards of living but also in civic pride, technological progress and refinement of artisanship.

. . .

It's no accident that Mr. Ober's terminology overlaps with the language of modern economics--"creative destruction" is a phrase he uses frequently. He wants to encourage comparisons between ancient Greece and the modern West. They offer two examples of "political and economic exceptionalism," featuring both pluralistic government and the rapid growth of wealth.

For the full review, see:

James Romm. "Greeks and Their Gifts; Competition among self-governing city-states led to specialization, innovation and cooperation." The Wall Street Journal (Sat., May 23, 2015): C8.

(Note: ellipsis added.)

(Note: the online version of the review has the date May 22, 2015.)

The book under review, is:

Ober, Josiah. The Rise and Fall of Classical Greece. Princeton, NJ: Princeton University Press, 2015.

July 1, 2015

"Secure in the Knowledge that She Has Other Opportunities"

(p. A11) . . . , Professor Higgins notes that it is Eliza's "curbstone English that will keep her in the gutter to the end of her days." He boasts that with a few months under his instruction, she could get a job "as a lady's maid or a shop's assistant."

The next morning, Eliza appears at Professor Higgins's doorstep to hire him to teach her English because she wants to be "a lady in a flow'r shop, 'stead of sellin' at the corner of Tottenham Court Road." He accepts.

Note the assumptions. Eliza didn't place her hope in new regulations for street-side flower mongering. For Eliza, upward mobility was about acquiring the skills she needed to get ahead, in this case proper English and the manners that went with it.

. . .

In the end, the only real leverage a worker has over a boss is her ability to tell him where to get off--secure in the knowledge that she has other opportunities. Which is exactly what Eliza Doolittle does at the end, when she's acquired the English and manners that mean she no longer has to put up with the bullying of Professor Henry Higgins.

For the full commentary, see:

WILLIAM MCGURN. "MAIN STREET; Audrey Hepburn Teaches Economics; Progressives rushing to help New York nail-salon workers should rent a copy of 'My Fair Lady'." The Wall Street Journal (Tues., May 26, 2015): A11.

(Note: ellipses added.)

(Note: the online version of the commentary has the date May 25, 2015.)

June 25, 2015

More Detailed Rules Reduce Ability to Improvise, and Result in More Deaths

(p. 41) How do wildland firefighters make decisions in life-threatening situations when, for instance, a fire explodes and threatens to engulf the crew? They are confronted with endless variables, the most intense, high-stakes atmosphere imaginable, and the need to make instant decisions. Psychologist Karl Weick found that traditionally, successful firefighters kept four simple survival guidelines in mind:

1. Build a backfire if you have time.
2. Get to the top of the ridge where the fuel is thinner, where there are stretches of rock and shale, and where winds usually fluctuate.
3. Turn into the fire and try to work through it by piecing together burned-out stretches.
4. Do not allow the fire to pick the spot where it hits you, because it will hit you where it is burning fiercest and fastest.

But starting in the mid-1950s, this short list of survival rules was gradually replaced by much longer and more detailed ones. The current lists, which came to exceed forty-eight items, were designed to specify in greater detail what to do to survive in each particular circumstance (e.g., fires at the urban-wildland interface).

Weick reports that teaching the firefighters these detailed lists was a factor in decreasing the survival rates. The original short list was a general guide. The firefighters could easily remember it, but they knew it needed to be interpreted, modified, and embellished based on (p. 42) circumstance. And they knew that experience would teach them how to do the modifying and embellishing. As a result, they were open to being taught by experience. The very shortness of the list gave the firefighters tacit permission-- even encouragement-- to improvise in the face of unexpected events. Weick found that the longer the checklists for the wildland firefighters became, the more improvisation was shut down. Rules are aids, allies, guides, and checks. But too much reliance on rules can squeeze out the judgment that is necessary to do our work well. When general principles morph into detailed instructions, formulas, unbending commands-- wisdom substitutes-- the important nuances of context are squeezed out. Better to minimize the number of rules, give up trying to cover every particular circumstance, and instead do more training to encourage skill at practical reasoning and intuition.


Schwartz, Barry, and Kenneth Sharpe. Practical Wisdom: The Right Way to Do the Right Thing. New York: Riverhead Books, 2010.

June 23, 2015

"Brazen Federal Overreach" Blocks Wine Process Innovation

(p. A13) On May 27, our Napa Valley winery will pull eight cases of Cabernet Sauvignon out of Charleston Harbor in South Carolina. We placed them there six months ago, protected from the elements, following similar experiments in the past two years. The cold water and the tides seem to expedite the aging process, and we believe that our ocean-aged fine wine--which we've trademarked as Aquaoir--could revolutionize how vintners around the world think about winemaking. The only obstacle: the federal government.

For more than a year, our winery has been targeted by the Treasury Department, specifically, the Alcohol and Tobacco Tax and Trade Bureau. The agency believes our product is unfit for human consumption, despite an utter lack of evidence, and it has threatened to revoke our winemaking license. Washington doesn't recognize this wine for what it is: the product of entrepreneurship and experimentation.

. . .

We don't envision expanding into vast underwater wine-storage development. We simply want to try to understand the ocean-aging effects so that we can try to simulate them on dry land. It would be lamentable if brazen federal overreach blocked the potential for innovation in an industry that could be on the cusp of a true sea change. Only in Washington could you raise a glass to that.

For the full commentary, see:

JIM DYKE JR. "The Wine-Dark Sea of Regulation; We aged wine at the bottom of the ocean--then the feds threatened our license." The Wall Street Journal (Thurs., May 21, 2015): A13.

(Note: ellipsis added.)

(Note: the date of the online version of the commentary is MAY 20, 2015.)

June 20, 2015

Early Standard Oil Executive Preserved Shakespeare First Folios

(p. 17) "The Millionaire and the Bard," by Andrea Mays, is an American love story. It is the engaging chronicle of a sober, hard-working, respectably married industrialist of the Gilded Age who became obsessed with the object of his desire. Though generally frugal and self-­disciplined, he was willing to pay extraordinary sums in order to put his hands on his mistress, to gaze at her lovingly and longingly, to caress her. To possess her only once was not enough for him; he craved the experience again and again, without limit.

. . .

I am, as readers have probably surmised, speaking of the peculiar passion of book collecting. The lover in question was Henry Clay Folger, who made his fortune as one of the presidents and, by 1923, the chairman of the board of Standard Oil of New York. And the beloved, which he pursued with unflagging ardor, was a single book: "Mr. William Shakespeares Comedies, Histories, & Tragedies, Published according to the True Originall Copies." Printed in London in 1623, seven years after the author's death, it is the book known to all lovers of Shakespeare simply as the First Folio.

. . .

Andrea Mays is a professor of economics, and the great strength of her book is an unflagging interest in exactly how Folger played the game.

. . .

Rarely has a mad passion brought forth such a splendid and enduring fruit.

For the full review, see:

STEPHEN GREENBLATT. "In Love with Shakespeare." The New York Times Book Review (Sun., MAY 24, 2015): 17.

(Note: ellipses added.)

(Note: the online version of the review has the date MAY 22, 2015, and has the title "'The Millionaire and the Bard,' by Andrea E. Mays.")

The book under review, is:

Mays, Andrea E. The Millionaire and the Bard: Henry Folger's Obsessive Hunt for Shakespeare's First Folio. New York: Simon & Schuster, 2015.

June 14, 2015

Jury Out on Whether Bossless Zappos Will Succeed

(p. A1) Brironni Alex was so good at answering telephone calls and emails from customers at Inc. that the company promoted her to customer-service manager.

But when the online retailer adopted a management philosophy called Holacracy, she lost her job title and responsibility for performance reviews. Since the end of April, Zappos has zero managers to oversee employees, who are supposed to decide largely for themselves how to get their work done.

"I am managing the work, but before I was managing the worker," says Ms. Alex, 26 years old, now part of a team implementing Holacracy throughout Zappos. Ex-managers haven't been guaranteed another job and could have their pay cut next year, though Zappos says that is unlikely. Ms. Alex says the changes give her more time for a workplace diversity committee and to perform on the Zappos dance team.

The shake-up has been jarring even for a company famous for doing things differently. Earlier this month, Zappos said about 14%, or 210, of its roughly 1,500 employees had decided Holacracy wasn't for them, and they will leave the retailer.

They were offered at least three months of severance pay by Zappos Chief Executive Tony Hsieh, who wrote in a 4,700-word memo in March that the company hadn't "made fast enough progress towards self-management."

. . .

(p. A10) Mr. Hsieh, 41, concedes that Holacracy "takes time and a lot of trial and error." He still has faith that the system empowers employees "to act more like entrepreneurs" and stokes faster "idea flow," collaboration and innovation, he says.

. . .

Research shows that the value of flat organizations is mixed, though highly motivated workers who thrive on creativity generally are best suited for going bossless.

The results at Zappos will be watched closely because it has long embraced employee independence even while striving to meet exacting customer-service standards. "Delivering Happiness," a 2010 book by Mr. Hsieh, was a best seller and spawned a management consulting firm.

. . .

"They are adopting Holacracy as more how to get to the next level, as opposed to how to fix something broken in their system, which is actually one of their unique challenges," says Brian Robertson, 36, the inventor of Holacracy. The term comes from the word "holarchy," coined by writer Arthur Koestler for self-organizing units that combine to form a larger organization.

For the full story, see:

RACHEL EMMA SILVERMAN. "Going Boseless Backfires at Zappos." The Wall Street Journal (Thurs., May 21, 2015): A1 & A10.

(Note: ellipses added.)

(Note: the date of the online version of the story is MAY 20, 2015, and has the title "At Zappos, Banishing the Bosses Brings Confusion.")

June 13, 2015

Ed Telling's Band of Irregulars Had the Freedom to Perform

(p. 482) . . . Bill Sanders, Charlie Bacon's replacement as the head of corporate personnel, . . . had once served Telling in the East despite having hair that flowed far below his ears. Sanders had grown his hair out in order to irritate an old-school store manager who exercised his sovereign rights by refusing to hire any man not sporting a crew cut. The fact that Telling never told Sanders to cut his hair was an early indication to others in the East that Ed Telling was much more interested in people who could do the job and who exhibited a healthy contempt for the status quo than he was in appearances.

. . .

(p. 492) It was more than dumb luck that his band of loyalists happened to include several supersensitive and insecure men, some deeply religious men, some obsessively ambitious men, several quite short men, and others, from secretaries to former window-dressers, who never fit into the status quo until Ed Telling discovered them and helped them flourish among his private band of irregulars. Along the way, the Eastern Territory troupe was joined by others. Whether they were bright-button kids from Utah itching to accomplish an act that truly counted on a large scale, or frustrated wordsmiths so enamored of the metaphors of power that the practice of management appeared to them in Biblical panoramas, they all had a part. All irregulars were welcome, and in his quiet way Ed Telling played them all. Telling could sense through instinct which people were willing to submit and which ones were willing to fight. Far from being unaware of his motivational skills, Telling would on occasion call Pat Jamieson into his office after one of his managers left, then convey to Pat the elliptical words he'd uttered to the manager, and predict the number of days it would take the officer to come back with the problem ironed out. He was rarely off by more than twenty-four hours. He said his management style involved giving subordinates a great deal of freedom, "the freedom," he called it, "to perform."


Katz, Donald R. The Big Store: Inside the Crisis and Revolution at Sears. New York: Viking Adult, 1987.

(Note: ellipses added.)

June 11, 2015

Having Your Intellectual Property Stolen, Modifies Your Views on Piracy

(p. C18) Dear Dan,

My nephew has been downloading music and movies illegally from the Internet. Without sounding self-righteous, how can I get him to respect intellectual-property rights?


My own view on illegal downloads was deeply modified the day that my book on dishonesty was published--when I learned that it had been illegally downloaded more than 20,000 times from one overseas website. (The irony did not escape me.) My advice? Get your nephew to create something and then, without his knowing, put it online and download it many, many times. I suspect that will make it much harder for him to keep up his blithe attitude toward piracy.

For the full advice column by Dan Ariely, professor of behavioral economics at Duke , see:

DAN ARIELY. "ASK ARIELY; It's Risky to Rely on Retirement Questionnaires." The Wall Street Journal (Sat., May 23, 2015): C18.

(Note: italics in original.)

(Note: the online version of the advice column has the date May 22, 2015.)

June 9, 2015

Sears Democratized the Washing Machine

(p. 301) The pieces of a new dream had finally been drawn in--big, diverse businesses that could combine as a sum greater than the proverbial parts. Now Sears could continue to "democratize" products that were previously too expensive or sophisticated for everyday people.

The automatic washing machine was an artifact owned only by the rich until Sears democratized the machine in 1942: $37.95--three bucks down and four more a month on time. The process was at the core of the entire industrial revolution-the humbling of products: buckles, buttons, and beer--and the efficient distribution of previously unattainable things to the huge pools of human desire called markets. Now the possibility stood before them of starting the cycle all over again.

Sears could spin a grand, gilded net for the people that included housing, mortgages, all manner of insurance, variations on banking sources, investment services, and, of course, consumer goods. People could get a house from Sears again. When the system was up and running, they could even get the money to buy the house; get the stuff that goes in the house; and the services that ensure the sustenance of the house if something unforeseen happens.


Katz, Donald R. The Big Store: Inside the Crisis and Revolution at Sears. New York: Viking Adult, 1987.

June 7, 2015

Merton Miller Applauded Bankers Who Cleverly Evaded Government Interference with Free Markets

(p. 12) . . . Merton Miller, a Nobel laureate economist at the University of Chicago, . . . was in many ways the father of financial innovation. Miller praised complex financial instruments, in large part because they helped institutions avoid the law. He applauded bankers for cleverly avoiding government attempts to interfere with markets.

For the full review, see:

FRANK PARTNOY. "Societal Bonds." The New York Times Book Review (Sun., MAY 10, 2015): 28.

(Note: ellipses added.)

(Note: the online version of the review has the date MAY 8, 2015, and has the title "'Smart Money,' by Andrew Palmer.")

June 3, 2015

A Highly Mathematical Model Endorses Friedman's View that Feds Directed Economics toward Highly Mathematical Models

(p. 1138) . . . , in many areas, the existing organization of research is characterized by large research institutions staffed with hundreds of
researchers and national funding agencies who set the research agenda for the field. Given the size of such institutions, if they decide to launch a new research program, then the critical mass of scholars can be reached with certainty, and individual researchers need not fear the coordination risk. Researchers should thus choose to work on that research topic, provided that they perceive an expected reward that is larger than s. (p. 1139) Unfortunately, if the large institution selects a poor idea (with a small or even negative θ), it would then be responsible for the emergence of a strand of research with modest scientific value. As an example, Diamond (1996) recalls Milton Friedman's criticism of the U.S. National Science Foundation, which, in his opinion, has directed the economics profession toward a highly mathematical model.12

. . .

12. Ironically, his opinion is endorsed in this paper by a "highly mathematical model."


Besancenot, Damien, and Radu Vranceanu. "Fear of Novelty: A Model of Scientific Discovery with Strategic Uncertainty." Economic Inquiry 53, no. 2 (April 2015): 1132-39.

(Note: ellipses added; italics in original.)

The 1996 Diamond article mentioned above, is:

Diamond, Arthur M., Jr. "The Economics of Science." Knowledge and Policy 9, nos. 2/3 (Summer/Fall 1996): 6-49.

June 1, 2015

Ed Telling's Nimble, Intuitive Labor Decisions at Sears

(p. 49) Telling rarely gave a direct order, so the Searsmen near him knew they had to listen hard and learn to read his arcane signals. You had to understand his gnomic comments and apparent throwaway lines, for you would only hear what Telling thought about something twice. The requirement made people scared, because the third time he spoke you were gone. "No need to beat a horse if he's not able to pull," he'd say. "Let's get another horse."

He had a habit he said he couldn't do anything about of judging the utility and character of a man the first time he looked into his eyes. Quick-draw decisions like this were a part of the general managerial ethos at Sears. The practice might have descended from the store master's knack for spotting at fifteen paces a shopper in the mood to spend freely.


Katz, Donald R. The Big Store: Inside the Crisis and Revolution at Sears. New York: Viking Adult, 1987.

May 30, 2015

Skill Differences Cause Four Times Inequality as Wealth Concentration

(p. A25) "What I find destructive," says David Autor of the Massachusetts Institute of Technology, "is the message that if you don't get into the top 1 percent then you're out of the game. That's deeply, deeply incorrect."

Autor's own research shows that skills differences are four times more important than concentration of wealth in driving inequality. If we could magically confiscate and redistribute the above-average income gains that have gone to the top 1 percent since 1979, that would produce $7,000 more per household per year for the bottom 99 percent. But if we could close the gap so that high-school-educated people had the skills of college-educated people, that would increase household income by $28,000 per year.

For the full commentary, see:

David Brooks. "The Temptation of Hillary." The New York Times (Fri., MARCH 6, 2015): A25.

May 29, 2015

Studebaker Competed with "Unique Designs and Powerful Engines"


"Greg Lange, 53, with his two-tone 1955 Studebaker President, near his home in Edmonds, Wash." Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. D4) I've always rooted for underdogs.

. . .

Studebaker wasn't a big Detroit corporation. It was a smaller company out of South Bend, Ind., and had to be highly imaginative to compete with Ford and General Motors. This resulted in unique designs and powerful engines. The one in my President is called a Passmaster (a 259 cubic inch V8); the meaning is obvious.

For the full interview, see:

Greg Lange as told to interviewer A.J. BAIME. "Studebaker: President Still in Office." The Wall Street Journal (Weds., April 8, 2015): D4.

(Note: ellipsis added.)

(Note: the online version of the interview has the date April 7, 2015, and has the title "Studebaker: Still Stands Out After 60 Years." Where the online version differs from the print version, the quoted passage follows the online version.)

May 26, 2015

Voters Want Texas-Style Economic Dynamism

(p. A23) Surveys and interviews give us some sense of what's going on. Voters have a lot of economic anxieties. But they also have a template in their heads for what economic dynamism looks like.

That template does not include a big role for government. Polls show that faith in government is near all-time lows. In a Gallup survey, voters listed dysfunctional government as the nation's No. 1 problem. In fact, American voters' traditional distrust has morphed and hardened. They used to think it was bloated and ineffective. Now they think it is bloated and ineffective and rigged to help those who need it least.

When many of these voters think of economic dynamism, they think of places like Texas, the top job producer in the nation over the past decade, and, especially, places like Houston, a low-regulation, low-cost-of-living place. In places like Wisconsin, voters in the middle class private sector support candidates who cut state pensions and pass right-to-work laws, so that economic governance can be more Texas-style.

For the full commentary, see:

David Brooks. "The Field Is Flat." The New York Times (Fri., MARCH 27, 2015): A23.

May 25, 2015

To FDA Aging Is Not a Disease, So FDA Will Not Approve Drugs that Extend Life

(p. D1) Some of the top researchers on aging in the country are trying to get an unusual clinical trial up and running.

. . .

The trial aims to test the drug metformin, a common medication often used to treat Type 2 diabetes, and see if it can delay or prevent other chronic diseases. (The project is being called Targeting/Taming Aging With Metformin, or TAME.) Metformin isn't necessarily more promising than other drugs that have shown signs of extending life and reducing age-related chronic diseases. But metformin has been widely and safely used for more than 60 years, has very few side effects and is inexpensive.

The scientists say that if TAME is a well-designed, large-scale study, the Food and Drug Administration might be persuaded to consider aging as an indication, or preventable condition, a move that could spur drug makers to target factors that contribute to aging.

. . .

(p. D4) Fighting each major disease of old age separately isn't winnable, said S. Jay Olshansky, another TAME project planner and a professor at the school of public health at the University of Illinois at Chicago. "We lower the risk of heart disease, somebody lives long enough to get cancer. If we reduce the risk of cancer, somebody lives long enough to get Alzheimer's disease."

"We are suggesting that the time has arrived to attack them all by going after the biological process of aging," Dr. Olshansky said.

Sandy Walsh, an FDA spokeswoman, said the agency's perspective has long been that "aging" isn't a disease. "We clearly have approved drugs that treat consequences of aging," she said. Although the FDA currently is inclined to treat diseases prevalent in older people as separate medical conditions, "if someone in the drug-development industry found something that treated all of these, we might revisit our thinking."

For the full story, see:

SUMATHI REDDY. "To Grow Old Without Disease." The Wall Street Journal (Tues., March 17, 2015): D1 & D4.

(Note: ellipses added.)

(Note: the online version of the story has the date March 16, 2015, and has the title "Scientists' New Goal: Growing Old Without Disease.")

May 24, 2015

Sears CEO Ed Telling Opposed the "Sloppiness" of Across-the-Board Layoffs

(p. 46) It was never that layoffs were anathema to Telling as such; he just resented the sloppiness of a 10-percent across-the-board layoff when some areas of the company should have been cut by 40 percent and some built up by half.


Katz, Donald R. The Big Store: Inside the Crisis and Revolution at Sears. New York: Viking Adult, 1987.

May 23, 2015

Henry Paulson Fears Chinese Economy "Will Face a Reckoning"

(p. B1) About 340 pages into Henry M. Paulson's new book on China, a sentence comes almost out of nowhere that stops readers in their tracks.

"Frankly, it's not a question of if, but when, China's financial system," he writes, "will face a reckoning and have to contend with a wave of credit losses and debt restructurings."

. . .

(p. B2) Like the United States crisis in 2008, Mr. Paulson worries that in China "the trigger would be a collapse in the real estate market," and he declared in an interview that China is experiencing a real estate bubble. He noted that debt as a percentage of gross domestic product in China rose to 204 percent in June 2014 from 130 percent in 2008.

"Slowing economic growth and rapidly rising debt levels are rarely a happy combination, and China's borrowing spree seems certain to lead to trouble," he wrote.

Mr. Paulson's analysis in his book, "Dealing With China: An Insider Unmasks the New Economic Superpower," is all the more remarkable because he has long been a bull on China and has deep friendships with its senior leaders, who could frown upon his straightforward comments.

For the full commentary, see:

Andrew Ross Sorkin. "DEALBOOK; A Veteran of the Crisis Tells China to Be Wary." The New York Times (Tues., APRIL 21, 2015): B1-B2.

(Note: the online version of the review has the date APRIL 20, 2015, and has the title "DEALBOOK; A Veteran of the Financial Crisis Tells China to Be Wary.")

The book discussed above is:

Paulson, Henry M. Dealing with China: An Insider Unmasks the New Economic Superpower. New York: Twelve, 2015.

May 22, 2015

Longevity and Frugality Allow More Happiness Through New "Second Act" Jobs

(p. B7) Research suggests that happiness over the course of our lives is U-shaped, with our satisfaction deteriorating through our 20s and 30s, hitting bottom in our 40s and then bouncing back from there.

What causes the decline in our happiness during our early adult years? We don't know for sure. It might be the stress of juggling work and home life, or it could be the gradual realization that we won't fulfill all of our youthful ambitions.

But for some, midlife dissatisfaction may reflect growing disenchantment with their chosen career. The good news: Today, thanks to our longer life expectancy, we have time for a second act.

In fact, that second act may be necessary if we are laid off. Our new career could prove more fulfilling, but it might come with a smaller paycheck.

This is a reason to start saving as soon as we enter the workforce. If we do that, we likely will have the financial flexibility to swap into a less lucrative job. What if we haven't been good savers? We may be stuck in a job we have come to hate.

For the full commentary, see:

JONATHAN CLEMENTS. "Can You Afford a Long Life?" The Wall Street Journal (Sat., APRIL 25, 2015): B7.

(Note: the online version of the commentary has the date APRIL 23, 2015, and has the title "What Long Life Spans Mean for Your Money and Career.")

May 14, 2015

Automation Anxieties Unjustified

(p. 5B) In 1964, technology anxieties caused President Lyndon Johnson to create a national commission on automation. When it reported in 1966, the unemployment rate had dropped to 3.8 percent.

"Technological shocks have been happening for decades, and ... the U.S. economy has been adapting to them," writes economist Timothy Taylor (whose website recounts the 1960s episode).

. . .

Human contact is wanted or needed in places where it seems obsolete. Logically, ATMs should have decimated bank tellers. In reality, the number of tellers (about 600,000) is slightly above its 1990 level, notes Taylor, citing a study by James Bessen of Boston University law school.

For the full commentary, see:

ROBERT J. SAMUELSON. "Must we fear robots in workplace?" Omaha World-Herald (Mon., March 23, 2015): 5B.

(Note: ellipsis internal to quote, in original; ellipsis between paragraphs, added.)

The article by Bessen mentioned above, is:

Bessen, James. "Toil and Technology." Finance and Development 94, no. 1 (March 2015): 16-19.

May 12, 2015

Aaron Burr Gave Jeremy Bentham a Copy of The Federalist Papers

(p. 720) For four years, the disgraced Burr traveled in Europe, resorting occasionally to the pseudonym H. E. Edwards to keep creditors at bay. Sometimes he lived in opulence with fancy friends and at other times languished in drab single rooms. This aging roué sampled opium and seduced willing noblewomen and chambermaids with a fine impartiality. All the while, he cultivated self-pity. "I find that among the great number of Americans here and there all are hostile to A.B.-- All-- What a lot of rascals they must be to make war on one whom they do not know, on one who never did harm or wished harm to a human being," he recorded in his diary. He befriended the English utilitarian philosopher Jeremy Bentham and spoke to him with remarkable candor. "He really meant to make himself emperor of Mexico," Bentham recalled. "He told me I should be the legislator and he would send a ship of war for me. He gave me an account of his duel with Hamilton. He was sure of being able to kill him, so I thought it little better than murder." Always capable of irreverent surprises, Burr gave Bentham a copy of The Federalist. The shade of Alexander Hamilton rose up to haunt Burr at unexpected moments. In Paris, he called upon Talleyrand, who instructed his secretary to deliver this message to the uninvited caller: "I shall be glad to see Colonel Burr, but please tell him that a portrait of Alexander Hamilton always hangs in my study where all may see it." Burr got the message and left.


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

(Note: italics in original.)

May 9, 2015

Incandescents Better than LEDs at Allowing a Good Night's Sleep

(p. D6) Studies have shown that such light, especially from the blue part of the spectrum, inhibits the body's production of melatonin, a hormone that helps people fall asleep.

. . .

Devices such as smartphones and tablets are often illuminated by light-emitting diodes, or LEDs, that tend to emit more blue light than incandescent products.

For the full story, see:

KATE GALBRAITH. "WIRED WELL; Can Orange Glasses Help You Sleep Better?" The New York Times (Tues., APRIL 7, 2015): D6.

(Note: ellipsis added.)

(Note: the online version of the story has the title "WIRED WELL; Can Orange Glasses Help You Sleep Better?")

May 7, 2015

Frugal Entrepreneurs May Be Able to Self-Finance Their Innovations

In my Economics of Entrepreneurship seminar we spend part of an evening reading the summary chapter of The Millionaire Next Door, discussed in the tribute below. In the seminar I suggest that at key early moments, innovative entrepreneurs may need to self-finance their innovations. They will be more likely to be able to do so if they have followed Stanley and Danko's advice on how to live frugally.

(p. B1) . . . the enduring lesson of the classic personal finance book, "The Millionaire Next Door," is this: Most of the rich grow wealthy because of modesty, thrift and prudence. They live happily in starter homes. They don't subsidize irresponsible adult children. They have an allergy to luxury automobiles.

. . .

The book, which has sold more than three million copies since its publication in 1996, made its co-author, William D. Danko, a millionaire himself and helped Mr. Stanley achieve similar security and leave academia for research and writing.

. . .

(p. B2) . . . even Mr. Danko, who ought to know better, has not always been able to resist the siren call of the Germans and their advertising. He bought one older Mercedes from a widowed friend, but his other one came new. "I was planning on buying a used one again, but the salesman was very good, and I was weak," he said. "These luxury cars are clearly overrated when you have to get your oil changed, and it costs $200."

. . .

. . . I was curious that Mr. Stanley died behind the wheel of a 2013 Corvette, rammed by another driver who might soon face charges in the accident. Mr. Stanley too, it turns out, couldn't help but have a taste for the finer things in life.

So does that make him a hypocrite? Or just a human being? All the best research tells us that we get much more joy out of doing things than having things, and a weekend drive in a car that goes really fast probably falls into both categories. But he earned that drive -- and that car -- by putting untold numbers of readers in a position where they'd be lucky enough to have that same choice themselves.

For the full commentary, see:

RON LIEBER. "YOUR MONEY; A Tribute to the 'Millionaire Next Door'." The New York Times (Sat., MARCH 7, 2015): B1-B2.

(Note: ellipses added.)

(Note: the online version of the commentary has the date MARCH 6, 2015, and has the title "YOUR MONEY; Paying Tribute to Thomas Stanley and His 'Millionaire Next Door'.")

The book under discussion is:

Stanley, Thomas J., and William D. Danko. The Millionaire Next Door: The Surprising Secrets of America's Wealthy. First ed. Atlanta: Longstreet Press, 1996.

May 6, 2015

Economic Growth Depends on the Talented Becoming Entrepreneurs Instead of Rent Seekers

(p. 6) In an influential paper, the economists Kevin M. Murphy and Robert W. Vishny, both at the University of Chicago Booth School of Business, and Andrei Shleifer at Harvard University argue that countries suffer when talented people become what we economists call "rent seekers." Instead of creating wealth, rent seekers simply transfer it -- from others to themselves.

Job titles don't tell you whether someone is primarily a rent seeker. A lawyer who helps draft precise contracts may actually be helping the wheels of commerce turn, and so creating wealth. But trial lawyers in a country with poorly functioning tort systems may simply be extracting rents: They can make money by pursuing frivolous lawsuits.

For the full commentary, see:

SENDHIL MULLAINATHAN. "Economic View; Maximizing the Social Returns to a Career in Finance." The New York Times, SundayBusiness Section (Sun., APRIL 12, 2015): 6.

(Note: the online version of the commentary has the date APRIL 10, 2015, and has the title "Economic View; Why a Harvard Professor Has Mixed Feelings When Students Take Jobs in Finance.")

The paper praised and summarized above, is:

Murphy, Kevin M., Andrei Shleifer, and Robert W. Vishny. "The Allocation of Talent: Implications for Growth." Quarterly Journal of Economics 106, no. 2 (May 1991): 503-30.

May 3, 2015

Social Security "Produces Inequality Systematically"

(p. B5) Mr. Kotlikoff, 64, did not set out to become Dr. Social Security. Two decades ago, he and a colleague were studying the adequacy of life insurance. To do so, you need to know something about Social Security. Soon, Mr. Kotlikoff was developing a computer model for various payouts from the government program and realized that consumers might actually pay to use it.

From that instinct, a service called Maximize My Social Security was born, though it wasn't easy to do and get it right. "We had to develop very detailed code, and the whole Social Security rule book is written in geek," he said. "It's impossible to understand."

Because of that, most people filing for benefits have to get lucky enough to encounter a true expert in their social circle, at a Social Security office or on its hotline. They are rare, and this information dissymmetry offends Mr. Kotlikoff. "We have a system that produces inequality systematically," he said. It's not because of what the beneficiaries earned, either; it's simply based on their (perhaps random) access to those who have a deep understanding of the rules.

. . .

"Get What's Yours" is a useful book. Indeed, we all need better instruction guides for the many parts of our financial lives that only grow more complex over time.

For the full commentary, see:

RON LIEBER. "YOUR MONEY; The Social Security Maze and Other U.S. Mysteries." The New York Times (Sat., MARCH 14, 2015): B1 & B5.

(Note: ellipsis added.)

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

The book under discussion is:

Kotlikoff, Laurence J., Philip Moeller, and Paul Solman. Get What's Yours: The Secrets to Maxing out Your Social Security. New York: Simon & Schuster, 2015.

May 2, 2015

Fongoli Chimps, Where Prey Is Scarce, Show "Respect of Ownership"

(p. A10) The Fongoli chimpanzees live in a mix of savanna and woodlands where prey is not as abundant as in rain forests. There are no red colobus monkeys, and although the chimps do hunt young vervet monkeys and baboons, the much smaller bush babies are their main prey.

Dr. Pruetz argues that less food may have prompted both technological and social innovation, resulting in new ways to hunt and new social interactions as well. Humans evolved in a similar environment, and, as she and her colleagues write in Royal Society Open Science, "tool-assisted hunting could have similarly been important for early hominins."

. . .

By and large, said Dr. Pruetz, the adult males, which could take away a kill, show a "respect of ownership." Theft rates are only about 5 percent. The chimps she studies also have more mixed-sex social groups than chimp bands in East Africa.

Travis Pickering, an anthropologist at the University of Wisconsin, said that with less food available it seems that the Fongoli chimps, "have to be more inventive" and that "these hunting weapons even the playing field for non-adults and females."

Early hominins may have been in a similar situation, he said.

For the full story, see:

JAMES GORMAN. "Hunter Chimps Offer New View on Evolution." The New York Times (Fri., APRIL 15, 2015): A10.

(Note: ellipsis added.)

(Note: the online version of the story has the date APRIL 14, 2015, and has the title "Chimps That Hunt Offer a New View on Evolution.")

The academic article discussed above is:

Pruetz, Jill D., Paco Bertolani, K. Boyer Ontl, S. Lindshield, M. Shelley, and E. G. Wessling. "New Evidence on the Tool-Assisted Hunting Exhibited by Chimpanzees (Pan Troglodytes Verus) in a Savannah Habitat at Fongoli, Sénégal." Royal Society Open Science 2, no. 4 (Weds., April 15, 2015), URL: .

May 1, 2015

Resilient Italian Entrepreneur Planned to Build Trattoria and Ended Up Building Museum

FaggianoAndSonsDigToFixPipe2015-04-19.jpg "Luciano Faggiano and his sons were digging to fix a pipe in Lecce, Italy. They found a buried world tracing back before Jesus." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) LECCE, Italy -- All Luciano Faggiano wanted when he purchased the seemingly unremarkable building at 56 Via Ascanio Grandi was to open a trattoria. The only problem was the toilet.

Sewage kept backing up. So Mr. Faggiano enlisted his two older sons to help him dig a trench and investigate. He predicted the job would take about a week.

If only.

"We found underground corridors and other rooms, so we kept digging," said Mr. Faggiano, 60.

His search for a sewage pipe, which began in 2000, became one family's tale of obsession and discovery. He found a subterranean world tracing back before the birth of Jesus: a Messapian tomb, a Roman granary, a Franciscan chapel and even etchings from the Knights Templar. His tratto-(p. A8)ria instead became a museum, where relics still turn up today.

. . .

If this history only later became clear, what was immediately obvious was that finding the pipe would be a much bigger project than Mr. Faggiano had anticipated. He did not initially tell his wife about the extent of the work, possibly because he was tying a rope around the chest of his youngest son, Davide, then 12, and lowering him to dig in small, darkened openings.

. . .

Mr. Faggiano still dreamed of a trattoria, even if the project had become his white whale. He supported his family with rent from an upstairs floor in the building and income on other properties.

"I was still digging to find my pipe," he said. "Every day we would find new artifacts."

. . .

Today, the building is Museum Faggiano, an independent archaeological museum authorized by the Lecce government. Spiral metal stairwells allow visitors to descend through the underground chambers, while sections of glass flooring underscore the building's historical layers.

His docent, Rosa Anna Romano, is the widow of an amateur speleologist who helped discover the Grotto of Cervi, a cave on the coastline near Lecce that is decorated in Neolithic pictographs. While taking an outdoor bathroom break, the husband had noticed holes in the ground that led to the underground grotto.

"We were brought together by sewage systems," Mr. Faggiano joked.

. . .

"I still want it," he said of the trattoria. "I'm very stubborn."

For the full story, see:

JIM YARDLEY. "Home Repair Opens a Portal to Italy's Past." The New York Times (Fri., APRIL 15, 2015): A1 & A8.

(Note: ellipses added.)

(Note: the online version of the story has the date APRIL 14, 2015, and has the title "Centuries of Italian History Are Unearthed in Quest to Fix Toilet.")

April 30, 2015

Hamilton Fostered the Preconditions for Capitalism

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

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


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

April 28, 2015

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

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

That's unfair to ObamaCare.

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

. . .

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

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

For the full commentary, see:

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

(Note: ellipsis added.)

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

April 26, 2015

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

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


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

April 24, 2015

Remaining Airline Regulations Increase Fares and Reduce Services

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


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

(Note: ellipses in original.)

The article quoted by Taylor is:

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

April 20, 2015

International Evidence that Young Firms Create Most Jobs

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


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

(Note: bracketed letter in original.)

April 16, 2015

Occupational Licensing Creates Cartels

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


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

(Note: ellipsis in original.)

April 15, 2015

New Evidence on the Antikythera Mechanism

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

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

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

. . .

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

. . .

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

. . .

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

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

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

For the full story, see:

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

(Note: ellipses added.)

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

April 14, 2015

"The Most Celebrated Meal in American History"

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

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

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


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

(Note: ellipsis in original.)

April 13, 2015

Italian Traditional Family Stunts Individual Enterprise

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

. . .

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

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

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

For the full review, see:

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

(Note: ellipses added; italics in original.)

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

The book under review is:

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

April 12, 2015

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

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


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

(Note: ellipsis in original.)

April 10, 2015

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

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


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

(Note: italics in original.)

April 9, 2015

Federal Government Main Cause of 2008 Financial Crisis

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

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

. . .

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

For the full review, see:

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

(Note: ellipsis added.)

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

The book under review is:

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

April 8, 2015

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

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


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

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

April 7, 2015

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

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

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

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

. . .

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

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

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

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

For the full story, see:

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

(Note: ellipsis added.)

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

April 6, 2015

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

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


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

April 5, 2015

Railroad Regulation Helped Kill Passenger Service

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

. . .

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

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

. . .

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

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

For the full review, see:

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

(Note: ellipses added.)

The book under review is:

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

April 4, 2015

Heckman Thinks that Economists Who Are Only Economists May Be Dangerous

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

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

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


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

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

April 3, 2015

Chinese Communists Crush Innovative Entrepreneurs by Banning Open Internet

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

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

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

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

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

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

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

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

. . .

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

. . .

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

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

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

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

For the full story, see:

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

(Note: ellipses added.)

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

April 2, 2015

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

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

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


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

April 1, 2015

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

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

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

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

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

For the full story, see:

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

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

The book highlighted in the passage quoted is:

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

March 30, 2015

How a Chavista Uses Her Chávez T-Shirt

(p. A1) CARACAS, Venezuela -- Mary Noriega heard there would be chicken.

She hated being herded "like cattle," she said, standing for hours in a line of more than 1,500 people hoping to buy food, as soldiers with side arms checked identification cards to make sure no one tried to buy basic items more than once or twice a week.

But Ms. Noriega, a laboratory assistant with three children, said she had no choice, ticking off the inventory in her depleted refrigerator: coffee and corn flour. Things had gotten so bad, she said, that she had begun bartering with neighbors to put food on the table.

"We always knew that this year would start badly, but I think this is super bad," Ms. Noriega said.

Venezuelans have put up with shortages and long lines for years. But as the price of oil, the country's main export, has plunged, the situation has grown so dire that the government has sent troops to patrol huge lines snaking for blocks. Some states have barred people from waiting outside stores overnight, and government officials are posted near entrances, ready to arrest shoppers who cheat the rationing system.

. . .

One of the nation's most prestigious public hospitals shut down its heart surgery unit for weeks (p. A12) because of shortages of medical supplies. Some drugs have been out of stock for months, and at least one clinic performed heart operations only by smuggling in a vital drug from the United States. Diapers are so coveted that some shoppers carry the birth certificates of their children in case stores demand them.

. . .

The shortages and inflation present another round of political challenges for President Nicolás Maduro, who has vowed to continue the Socialist-inspired revolution begun by his predecessor, the charismatic leftist Hugo Chávez.

"I've always been a Chavista," said Ms. Noriega, using a term for a loyal Chávez supporter. But "the other day, I found a Chávez T-shirt I'd kept, and I threw it on the ground and stamped on it, and then I used it to clean the floor. I was so angry. I don't know if this is his fault or not, but he died and left us here, and things have been going from bad to worse."

For the full commentary, see:

WILLIAM NEUMAN. "Oil Cash Waning, Venezuelan Shelves Lie Bare." The New York Times (Fri., JAN. 30, 2015): A1 & A12.

(Note: ellipses added.)

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

March 28, 2015

Most of Benefits of Minimum Wage Increases Do Not Go to the Poor

(p. A11) A higher minimum wage raises wages of low-wage workers, and even though most evidence points to job losses from higher minimum wages, the evidence doesn't point to widespread employment declines. Thus, consistent with a recent Congressional Budget Office report, many more low-wage workers will get a raise than will lose their jobs. But that argument is about low-wage workers, not low-income families. Minimum wages are ineffective at helping poor families because such a small share of the benefits flow to them.

One might think that low-wage workers and low-income families are the same. But data from the U.S. Census Bureau show that there is only a weak relationship between being a low-wage worker and being poor, for three reasons.

First, many low-wage workers are in higher-income families--workers who are not the primary breadwinners and often contribute a small share of their family's income. Second, some workers in poor families earn higher wages but don't work enough hours. And third, about half of poor families have no workers, in which case a higher minimum wage does no good. This is simple descriptive evidence and is not disputed by economists.

A historical perspective is instructive. Assembling Census Bureau data over nearly seven decades, Richard Burkhauser and Joseph Sabia have shown that in 1939, just after the federal minimum wage was established, 85% of low-wage workers (those earning less than one-half the private-sector wage) were in poor families. Such a high percentage implies that, in that year, the new minimum wage targeted poor families well. However, as the public safety net expanded, family structure changed and more people in families began working, this percentage fell sharply over time--to around 17% by the early 2000s.

In contrast, as of the early 2000s 34% of low-wage workers were in families that were far from poor, with incomes more than three times the poverty line. In other words, for every poor minimum-wage worker who might directly benefit from the minimum wage, two workers in families with incomes more than three times the poverty line would benefit.

For the full commentary, see:

DAVID NEUMARK. "Who Really Gets the Minimum Wage; Obama's $10.10 target would steer only 18% of the benefits to poor families; 29% would go to families with incomes three times the poverty level." The New York Times (Mon., July 7, 2014): A11.

(Note: the online version of the commentary has the date July 6, 2014.)

For more of Neumark on minimum wages, see:

Neumark, David, and William L. Wascher. Minimum Wages. Cambridge, MA: The MIT Press, 2008.

March 27, 2015

Recovery Slows When Start-Ups Are Taxed to Pay for Bailouts of Failed Firms

Vernon Smith, whose views are quoted below, won the Nobel Prize in economics in 2002.

(p. A11) The rescue of incumbent investors in the government bailout of the largest U.S. banks in the autumn of 2008 has been widely viewed as unfair, as indeed it was in applying different rules to different players. . . .

. . .

The rescue, . . . , had a hidden cost for the economy that is difficult to quantify but can be crippling. New economic activity is hobbled if it is not freed from the burden of sharing its return with investors who bore risks that failed. The demand for new economic activity is enlarged when its return does not have to be shared with former claimants protected from the consequences of their risk-taking. This is the function of bankruptcy in an economic system organized on loss as well as profit principles of motivation.

. . .

Growth in both employment and output depends vitally on new and young companies. Unfortunately, U.S. firms face exceptionally high corporate income-tax rates, the highest in the developed world at 35%, which hobbles growth and investment. Now the Obama administration is going after firms that reincorporate overseas for tax purposes. Last week Treasury Secretary Jack Lew wrote a letter to the chairman of the House Ways and Means Committee urging Congress to "enact legislation immediately . . . to shut down this abuse of our tax system."

This is precisely the opposite of what U.S. policy makers should be doing. To encourage investment, the U.S. needs to lower its corporate rates by at least 10 percentage points and reduce the incentive to escape the out-of-line and unreasonably high corporate tax rate. Ideally, since young firms generally reinvest their profits in production and jobs, such taxes should fall only on business income after it is paid out to individuals. As long as business income is being reinvested it is growing new income for all.

There are no quick fixes. What we can do is reduce bureaucratic and tax barriers to the emergence and growth of new economic enterprises, which hold the keys to a real economic recovery.

For the full commentary, see:

VERNON L. SMITH. "The Lingering, Hidden Costs of the Bank Bailout; Why is growth so anemic? New economic activity has been discouraged. Here are some ways to change that." The Wall Street Journal (Thurs., July 24, 2014): A11.

(Note: last ellipsis in original, other ellipses added.)

(Note: the online version of the commentary has the date July 23, 2014.)

March 20, 2015

Moral Progress Accelerated in the 18th Century

(p. A11) For hundreds of years, people flocked to public hangings as a form of entertainment. Onlookers crowded into town squares and brought their families, reveling in the carnival atmosphere. Today most people are sickened at the idea of merriment at an execution. (Many are disturbed that executions take place at all.) We recoil from other once-common practices, too: slavery, the mistreatment of children, animal cruelty. Such shifts in attitude or belief surely constitute a form of moral progress and suggest, for once, that civilization is advancing and not receding.

. . .

Mr. Shermer defines moral progress as an "increase in the survival and flourishing of sentient beings," which he illustrates with graphs and charts that reveal, among other things, a decline in war-related deaths, the expansion of the food supply, the reduction in major epidemics, the growth of world GDP and the spread of democracy.

Humanitarian achievements in the West, Mr. Shermer notes, began in earnest [in] the 18th century. Yet the ability to reason ethically is not a product of the Enlightenment. A moral instinct seems to be present at birth: Even infants possess innate intuitions about fairness and reciprocity, as Mr. Shermer explains. All societies punish free riders. The Golden Rule and Babylon's Code of Hammurabi (advocating proportionate punishment) predate the ancient Greeks. So why did we need an Enlightenment to jump-start our moral progress?

For the full review, see:

SALLY SATEL. "BOOKSHELF; Getting Better All the Time; Crowds once flocked to watch executions. Now we recoil at the idea. What causes such transformations of ethical standards?" The Wall Street Journal (Tues., Jan. 20, 2015): A11.

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

(Note: the online version of the review has the date Jan. 19, 2015.)

The book under review is:

Shermer, Michael. The Moral Arc: How Science and Reason Lead Humanity toward Truth, Justice, and Freedom. New York: Henry Holt and Co., 2015.

March 19, 2015

Over-Regulation Could Stifle Drones' Potential to Revolutionize Our Lives

(p. A15) In the early days of the automobile, Vermont enacted a law requiring someone to walk one-eighth of a mile in front of every car and wave a red flag to warn pedestrians. Iowa directed all motorists to call ahead to warn each town on their route that they were coming. Some jurisdictions set speed limits so low that drivers who obeyed them risked having their engines stall.

Those laws seem humorously quaint, but if they had been widely adopted and enforced, the automobile revolution might have been shut down and its manifold benefits denied to millions. Today over-regulation could stifle the development of drones, which have the potential to revolutionize many parts of the economy and our everyday lives.

To cite a few examples: Amazon hopes to launch Prime Air, which would use drones to deliver packages in less than 30 minutes after an order is placed. Texas Equusearch, which organizes missing-person recovery efforts, can replace the labor of 100 volunteers with one drone. Clayco Inc., a construction firm, intends to use drones for aerial imaging of construction projects--replacing either helicopters, which burn fossil fuels and can be dangerous to those below, or construction workers, who risk serious injury through falls when they must climb to reach high, hard-to-reach places to take photos.

For the full commentary, see:

JOSEPH R. PALMORE and CHRISTOPHER J. CARR. "Overregulated Drones Struggle for Take-Off; The FAA has been slow and stuck in the past--precisely what the technology is not." The Wall Street Journal (Mon., Feb. 23, 2015): A15.

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

March 18, 2015

Technology Getting Bum Rap for Job Woes

The job market has been anemic in a variety of ways, for several years. Some, as below, want to pin this on the advance of technology. I argue, to the contrary, that it is mainly due to our discouraging start-ups by bad policies (such as over-regulating and over-taxing). Start-ups, as Haltiwanger and his colleagues have been showing, are the main source of new jobs.

(p. A1) Lawrence H. Summers, the former Treasury secretary, recently said that he no longer believed that automation would always create new jobs. "This isn't some hypothetical future possibility," he said. "This is something that's emerging before us right now."

Erik Brynjolfsson, an economist at M.I.T., said, "This is the biggest challenge of our society for the next decade."

Mr. Brynjolfsson and other experts say they believe that society has a chance to meet the challenge in ways that will allow technology to be mostly a positive force. In addition to making some jobs obsolete, new technologies have also long complemented people's skills and enabled them (p. A3) to be more productive -- as the Internet and word processing have for office workers or robotic surgery has for surgeons.

More productive workers, in turn, earn more money and produce goods and services that improve lives.

"It is literally the story of the economic development of the world over the last 200 years," said Marc Andreessen, a venture capitalist and an inventor of the web browser. "Just as most of us today have jobs that weren't even invented 100 years ago, the same will be true 100 years from now."

. . .

There are certain human skills machines will probably never replicate, like common sense, adaptability and creativity, said David Autor, an economist at M.I.T. Even jobs that become automated often require human involvement, like doctors on standby to assist the automated anesthesiologist, called Sedasys.

. . .

Whether experts lean toward the more pessimistic view of new technology or the most optimistic one, many agree that the uncertainty is vast. Not even the people who spend their days making and studying new technology say they understand the economic and societal effects of the new digital revolution.

When the University of Chicago asked a panel of leading economists about automation, 76 percent agreed that it had not historically decreased employment. But when asked about the more recent past, they were less sanguine. About 33 percent said technology was a central reason that median wages had been stagnant over the past decade, 20 percent said it was not and 29 percent were unsure.

Perhaps the most worrisome development is how poorly the job market is already functioning for many workers. More than 16 percent of men between the ages of 25 and 54 are not working, up from 5 percent in the late 1960s; 30 percent of women in this age group are not working, up from 25 percent in the late 1990s. For those who are working, wage growth has been weak, while corporate profits have surged.

For the full story, see:

Claire Cain Miller. "Rise of Robot Work Force Stokes Human Fears." The New York Times (Tues., DEC. 16, 2014): A1 & A3.

(Note: ellipses are added.)

(Note: the online version of the story has the date DEC. 15, 2014, and has the title "As Robots Grow Smarter, American Workers Struggle to Keep Up.")

A relevant Haltiwanger paper is:

Haltiwanger, John C., Ron S. Jarmin, and Javier Miranda. "Who Creates Jobs? Small Vs. Large Vs. Young." Review of Economics and Statistics 95, no. 2 (May 2013): 347-61.

March 16, 2015

Fishing with Mosquito Nets, Where Food Is the Binding Constraint

(p. 1) BANGWEULU WETLANDS, Zambia -- Out here on the endless swamps, a harsh truth has been passed down from generation to generation: There is no fear but the fear of hunger.

With that always weighing on his mind, Mwewa Ndefi gets up at dawn, just as the first orange rays of sun are beginning to spear through the papyrus reeds, and starts to unclump a mosquito net.

Nets like his are widely considered a magic bullet against malaria -- one of the cheapest and most effective ways to stop a disease that kills at least half a million Africans each year. But Mr. Ndefi and countless others are not using their mosquito nets as global health experts have intended.

Nobody in his hut, including his seven children, sleeps under a net at night. Instead, Mr. Ndefi has taken his family's supply of anti-malaria nets and sewn them together into a gigantic sieve that he uses to drag the bottom of the swamp ponds, sweeping up all sorts of life: baby catfish, banded tilapia, tiny mouthbrooders, orange fish eggs, water bugs and the occasional green frog.

"I know it's not right," Mr. Ndefi said, "but without these nets, we wouldn't eat."

Across Africa, from the mud flats of Nigeria to the coral reefs off Mozambique, mosquito-net fishing is a growing problem, an unintended consequence of one of the biggest and most celebrated public health campaigns in recent years.

The nets have helped save millions of lives, but scientists worry about the collateral damage: Africa's fish.

. . .

"The nets go straight out of the bag into the sea," said Isabel Marques da Silva, a marine biologist at Universidade Lúrio in Mozambique. "That's why the inci-(p. 10)dence for malaria here is so high. The people don't use the mosquito nets for mosquitoes. They use them to fish."

But the unsparing mesh, with holes smaller than mosquitoes, traps much more life than traditional fishing nets do. Scientists say that could imperil already stressed fish populations, a critical food source for millions of the world's poorest people.

. . .

In many places, fish are dried for hours in direct sunlight on treated mosquito nets. Direct sunlight can break down the insecticide coating. Anthony Hay, an associate professor of environmental toxicology at Cornell University, said fish could absorb some of the toxins, leaving people to ingest them when they eat the fish.

"It's just another one of these 'white man's burdens,' " Mr. Hay said, referring to William Easterly's well-known book critical of foreign aid by the West. "We think we have a solution to everybody's problems, and here's an example of where we're creating a new problem."

. . .

For Mr. Ndefi, it is a simple, if painful, matter of choice. He knows all too well the dangers of malaria. His own toddler son, Junior, died of the disease four years ago. Junior used to always be there, standing outside his hut, when Mr. Ndefi came home from fishing.

Mr. Ndefi hopes his family can survive future bouts of the disease. But he knows his loved ones will not last long without food.

For the full story, see:

JEFFREY GETTLEMAN. "Meant to Keep Mosquitos Out, Nets Are Used to Haul Fish In." The New York Times, First Section (Sun., JAN. 25, 2015): 1 & 10.

(Note: ellipses are added.)

(Note: the online version of the story has the date JAN. 24, 2015, and has the title "Meant to Keep Malaria Out, Mosquito Nets Are Used to Haul Fish In.")

The book referenced by Professor Hay, is:

Easterly, William. The White Man's Burden: Why the West's Efforts to Aid the Rest Have Done So Much Ill and So Little Good. New York: The Penguin Press, 2006.

March 11, 2015

Occupational Licensing Raises Costs for Consumers and Reduces Jobs

(p. B1) What lesson should we draw from the success of Uber?

Customers have flocked to its service. In the final three months of last year, its so-called driver-partners made $656.8 million, according to an analysis of Uber data released last week by the Princeton economist Alan B. Krueger, who served as President Obama's chief economic adviser during his first term, and Uber's Jonathan V. Hall.

Drivers like it, too. By the end of last year, the service had grown to over 160,000 active drivers offering at least four drives a month, from near zero in mid-2012. And the analysis by Mr. Krueger and Mr. Hall suggests they make at least as much as regular taxi drivers and chauffeurs, on flexible hours. Often, they make more.

This kind of exponential growth confirms what every New Yorker and cab riders in many other cities have long suspected: Taxi service is woefully inefficient. It also raises a question of broader relevance: Why stop here?

. . .

(p. B5) . . . like taxi medallions, state licenses required to practice all sorts of jobs often serve merely to cordon off occupations for the benefit of licensed workers and their lobbying groups, protecting them from legitimate competition.

This comes at a substantial social cost. "Lower-income people suffer from licensing," Professor Krueger told me. "It raises the costs of many services and prevents low-income people from getting into some professions."

In a study commissioned by the Brookings Institution's Hamilton Project, Morris Kleiner of the University of Minnesota found that almost three out of 10 workers in the United States need a license from state governments to do their jobs, up from one in 20 in the 1950s. By cordoning off so many occupations, he estimates, professional licensing by state governments ultimately reduces employment by up to 2.8 million jobs.

For the full commentary, see:

Eduardo Porter. "Job Licenses in Spotlight as Uber Rises." The New York Times (Weds., JAN. 28, 2015): B1 & B5.

(Note: ellipses added.)

(Note: the online version of the commentary has the date JAN. 27, 2015.)

The working paper co-authored by Krueger, is:

Hall, Jonathan V., and Alan B. Krueger. "An Analysis of the Labor Market for Uber's Driver-Partners in the United States." Working paper. January 22, 2015.

Kleiner's working paper at Brookings, is:

Kleiner, Morris M. "Reforming Occupational Licensing Policies." In The Hamilton Project, Brookings, Discussion Paper 2015-01, January 2015.

March 10, 2015

Over-Taxed and Over-Regulated Castles for Sale in Italy

(p. A3) While castles and historic mansions in Italy have long been family inheritances, today dozens of them are for sale, even in one of the most conservative real estate markets in Europe.

. . .

On historic buildings, where owners used to pay little as compensation for the elevated costs of maintaining centuries-old structures, the taxes increased by 20 or 30 times, depending on the property's location.

On some buildings, taxes spiked from 3,000 euros (about $3,400) in 2011 to 75,000 euros (about $84,000) by 2013. That might be a small figure for castle dwellers in the United Kingdom, but it is a burden for Italian pockets, especially in regions where the property's market value or tourism interest is low.

The trends, to many here, are indicative of Italy's place as a country caught between its past glory and its modern difficulty in producing an innovative climate capable of ensuring its future.

. . .

. . . buyer beware: Living a nobleman's life in Italy comes at a cost, even for many tycoons. New owners face the same onerous bureaucracy as Italians to make even minimal changes to many older properties.

Under Italian law, the owner of a historic building is its custodian, bound to maintain it and grant its security and, in some cases, its use to the public. Many buyers give up on properties of great historic value, but in bad condition, for this reason, brokers said.

"This is a problem for possible investors, who want to have modern comforts like a spa, air-conditioning or a lift," said Mr. Pallavicini, of the Italian Historic Houses Association.

"We no longer live like in 1800," he added. "But 99 percent of those changes are either impossible or extremely bureaucratic and complicated in an Italian historic building."

For the full story, see:

GAIA PIANIGIANI. "PONTASSIEVE JOURNAL; Life of Italian Nobility for Sale, Complete With Regulations and Taxes." The New York Times (Weds., JAN. 28, 2015): A11.

(Note: ellipses are added.)

(Note: the online version of the story has the date JAN. 27, 2015.)

March 8, 2015

Progress Depends on Removing Barriers to Innovation

In the quotation below, Bill Gates is referring to the late, and way-under-appreciated, economist Julian Simon.

(p. A3) ". . . Simon's view was that humans would have to change to innovate," Mr. Gates said. Innovation, in other words, is not preordained. Indeed, it's happened much more in some societies than in others. And it has happened, Mr. Gates was arguing, because people and institutions took steps to remove the barriers to progress.

. . .

. . . , much of the world is enjoying one of history's most rapid increases in prosperity. Life expectancy has risen more than six years just since 1990. The world, to quote the title of a book by the economist Charles Kenny, is "Getting Better." As Mr. Gates says: "The world is actually improving a lot. We're trying to deliver both the good news on the progress and the possibility to do more."

For the full commentary, see:

David Leonhardt. "Africa's Economy Is Rising, and Focus Turns to Food." The New York Times (Thurs., JAN. 22, 2015): A3.

(Note: ellipses added.)

(Note: the online version of the commentary has the title "Africa's Economy Is Rising. Now What Happens to Its Food?")

The book mentioned by Charles Kenny is:

Kenny, Charles. Getting Better: Why Global Development Is Succeeding--and How We Can Improve the World Even More. Philadelphia, PA: Basic Books, 2011.

One of the great books by Julian Simon is:

Moore, Stephen, and Julian L. Simon. It's Getting Better All the Time: 100 Greatest Trends of the Last 100 Years. Washington, D.C.: Cato Institute, 2000.

March 4, 2015

Depression of 1920-21 Ended Quickly, Without Government Stimulus or Bailouts

(p. C3) Beginning in January 1920, something much worse than a recession blighted the world. The U.S. suffered the steepest plunge in wholesale prices in its history (not even eclipsed by the Great Depression), as well as a 31.6% drop in industrial production and a 46.6% fall in the Dow Jones Industrial Average. Unemployment spiked, and corporate profits plunged.

. . .

In the absence of anything resembling government stimulus, a modern economist may wonder how the depression of 1920-21 ever ended. Oddly enough, deflation turned out to be a tonic. Prices--and, critically, wages too--were allowed to fall, and they fell far enough to entice consumers, employers and investors to part with their money. Europeans, noticing that America was on the bargain counter, shipped their gold across the Atlantic, where it swelled the depression-shrunken U.S. money supply. Shares of profitable and well-financed American companies changed hands at giveaway valuations.

Of course, the year-and-a-half depression must have seemed interminable for all who were jobless or destitute. It was, however, a great deal shorter than the 43 months of the Great Depression of 1929-33. Then too, the 1922 recovery would bring tears of envy to today's central bankers and policy makers: Passenger-car production shot up by 63%, for instance, and the Dow jumped by 21.5%. "From practically all angles," this newspaper judged in a New Year's Day 1923 retrospective, "1922 can be recorded as the renaissance of prosperity."

In 2008, as Lehman Brothers toppled, the Great Depression monopolized the market on historical analogies. To avoid a recurrence of the 1930s, officials declared, the U.S. had to knock down interest rates, manipulate stock prices to go higher, repave the highways and trade in the clunkers.

The forgotten depression teaches a very different lesson. Sometimes the best stimulus is none at all.

For the full commentary, see:

JAMES GRANT. "The Depression Fixed by Doing Nothing; The agonizing but often forgotten 1920-21 economic crisis suggests that sometimes the best stimulus is none at all." The Wall Street Journal (Sat., Jan. 3, 2015): C3.

(Note: ellipsis added.)

(Note: the online version of the review has the date Jan. 2, 2015, and has the title "The Depression That Was Fixed by Doing Nothing; The often forgotten 1920-21 economic crisis suggests that sometimes the best stimulus is none at all.")

Grant's commentary is elaborated on in his book:

Grant, James. The Forgotten Depression: 1921, the Crash That Cured Itself. New York: Simon & Schuster, 2014.

February 25, 2015

Wall Street Democrats Question Hillary Clinton's Views on Job Creation

(p. B1) "Hillary said what?"

That was the question whispered among some of Wall Street's most prominent Democratic supporters over the weekend after Hillary Rodham Clinton spoke on the campaign trail for Martha Coakley, the Democratic candidate for governor of Massachusetts.

"Don't let anybody tell you that it's corporations and businesses that create jobs," Mrs. Clinton said on Friday in Boston.

For the full commentary, see:

ANDREW ROSS SORKIN. "Wall St. Wonders About Hillary Clinton." The New York Times (Tues., OCTOBER 28, 2014): B1 & B6.

(Note: the online version of the commentary has the date OCTOBER 27, 2014, and has the title "Hillary Clinton's Comment on Jobs Raises Eyebrows on Wall St.")

February 23, 2015

Piketty Prefers Reform Instead of Receiving Legion of Honor

(p. A16) PARIS--French economist Thomas Piketty, author of the best-selling book "Capital in the Twenty-First Century," has turned down the Legion of Honor, saying the government should focus on reviving the country's anemic economy rather than "decide who is honorable."

Mr. Piketty's refusal of one of France's highest distinctions--announced via a short declaration to the Agence France-Presse news agency--is a snub to the government a day after President François Hollande cited the global influence of French scholars as evidence of the country's unfailing might.

For the full story, see:

INTI LANDAURO. "French Economist Refuses State Honor." The Wall Street Journal (Fri., Jan. 2, 2015): A16.

(Note: the online version of the story has the date Jan. 1, 2015, and has the title "French Economist Thomas Piketty Refuses Legion of Honor.")

February 20, 2015

High Costs of Public Sector Unions

(p. A11) . . . the costs of public-sector unions are great. "The byproduct of political management of the economy is waste," the author notes. Second, pension and benefit obligations weigh down our cities. Trash disposal in Chicago costs $231 per ton, versus $74 in non-union Dallas. Increasingly, such a burden is fatal. When Detroit declared bankruptcy in 2013, a full half of the city's$18.2 billion long-term debt was owed for employee pensions and health benefits. Even before the next downturn, other cities and some states will find themselves faltering because of similarly massive obligations.

There is something grotesque about public workers fighting for benefits whose provision will hurt the public. Citizens who vote Democratic may choose not to acknowledge the perversity out of party loyalty. But over the years a few well-known Democrats have sided against the public-sector unions. "The process of collective bargaining as usually understood cannot be transplanted into the public service," a Democratic politician once declared. His name? Franklin Roosevelt.

For the full review, see:

AMITY SHLAES. "BOOKSHELF; Public Unions vs. the Public; Pension and benefit obligations weigh down our cities. Trash disposal in Chicago costs $231 per ton, versus $74 in non-union Dallas." The Wall Street Journal (Fri., Jan. 16, 2015): A11.

(Note: ellipsis added.)

(Note: the online version of the review has the date Jan. 15, 2015.)

The book under review is:

DiSalvo, Daniel. Government against Itself: Public Union Power and Its Consequences. New York: Oxford University Press, 2015.

February 18, 2015

Private Power Lights the Darkness

(p. A10) NUSEIRAT CAMP, Gaza Strip--It was just after sunset when the power went out in this Palestinian refugee camp. Within seconds, Ali al-Majdalawi flipped a switch on a blue generator in his backyard and the lights in 500 homes flickered back on again.

The 64-year-old patriarch runs what he calls the A. Majdalawi Electricity Co., a pop-up utility that consists of three generators and a spider's web of power lines radiating from an empty lot he owns in the camp.

Mr. Majdalawi has no license to operate his company. But he does have an invoice pad at the ready and boasts a long list of customers including five mosques, a library and a police station.

. . .

Along with three partners, Mr. Majdalawi, a retired school official for the U.N., invested $80,000 of their savings to buy several diesel-powered generators two years ago and set about building their own power-delivery network.

The community of about 65,000 began in 1948, the year of Israel's creation, when hundreds of families displaced by war between Jews and Arabs set up rows of temporary dwellings. Decades later, the refugees and their descendants still live here, tightly packed among schools run by the United Nations and a cemetery built into a sand dune at the center of town.

Because his company is private, Mr. Majdalawi couldn't use municipal power polls to string up lines. He and his sons asked neighbors to let them use the walls of their homes for the wiring and allow crews to come in for periodic maintenance.

In most other respects, the business runs much like any other electricity company. Customers apply to join the grid and if approved, one of Mr. Majdalawi's sons enters their names into a computer for monthly billing. Most clients request two amperes, enough to run lights, a television and a computer during blackouts. The price is 120 shekels a month, about $30.

"It is an alternate grid," explained Mr. Majdalawi's son, Rafet, the company's chief accountant.

Deya Shaheen, a 25-year-old barber, said Mr. Majdalawi's electricity has kept his year-old shop in business. The electric razors and the lights he uses to light the shop when customers drop in at night are powered on the three amperes he receives from the grid.On many nights, his shop is filled with young men looking for somewhere to watch soccer matches on television.

"Look, the power thing destroys your life," he said. "People go to bed early not because they are sleepy, but because there is no power. There is nothing to do, no TV, no Internet. It is just dark."

For the full story, see:

NICHOLAS CASEY. "Entrepreneur Fills in Gaza Electricity Gap; Palestinian Territory's One Power Plant Meets Barely a Quarter of Demand, Posing an Obstacle in Reconstruction Efforts." The Wall Street Journal (Weds., DEC. 24, 2014): A10.

(Note: ellipsis added.)

(Note: the online version of the story has the date DEC. 23, 2014, and has the title "Entrepreneur Fills in Gaps in Gaza Electricity Supplies; Palestinian Territory's One Power Plant Meets Barely a Quarter of Demand.")

February 17, 2015

Congress Appropriates Funds to Test Concussion Theory of Rain

(p. 190) the first century A.D., when the Greek moralist Plutarch came up with the notion that rain followed military battles. Napoleon believed as much and fired cannons and guns at the sky to muddy up the ground between him and his attackers. Civil War veterans who wallowed in cold slop believed that ceaseless, close-range artillery fire had opened up the skies. In the late 1890s, as the first nesters started to dig their toeholds on the dry side of the one hundredth meridian, Congress had appropriated money to test the concussion theory in Texas. The tests were done by a man named Dyrenforth. He tried mightily, with government auditors looking over (p. 191) his shoulder, but Dyrenforth could not force a drop from the hot skies of Texas. From then on, he was called "Dry-Henceforth."

Government-sponsored failure didn't stop others from trying. A man who called himself "the moisture accelerator," Charles M. Hatfield, roamed the plains around the turn of the century. A Colonel Sanders of rainmaking, Hatfield had a secret mixture of ingredients that could be sent to the sky by machine. In the age before the widespread use of the telephone, it was hard to catch up with the moisture accelerator after he had fleeced a town and moved on.


Egan, Timothy. The Worst Hard Time: The Untold Story of Those Who Survived the Great American Dust Bowl. Boston: Houghton Mifflin, 2006.

February 16, 2015

Smart Phones Bring Power to the Patient

(p. A11) We instinctively reach for our smartphones when we need to take pictures, get directions, deposit checks or reserve a table. Eric Topol, a cardiologist and digital pioneer, thinks that they are ready to perform at least one more task: revolutionize health care. In "The Patient Will See You Now," he argues that smartphones will democratize medicine by bringing data and control directly to the people.

The power of doctors, says Dr. Topol, "can be likened to that of religious leaders and nobility" in centuries past, when knowledge and authority belonged to a small elite. He notes that we've never seen "a discrete challenge to the medical profession" akin to Luther 's challenge to the Roman Catholic Church or democracy's challenge to monarchy and despotism. "But we've not had the platform or landscape for that to be accomplished. Until now." Smartphones, he says, enable a range of medical applications to move from the hospital to the home, and they shift medicine's locus of control from doctor to patient.

For the full review, see:

DAVID A. SHAYWITZ. "BOOKSHELF; Doctor Android; In the same way that Luther challenged the Catholic Church, smartphones are poised to upend the medical profession." The Wall Street Journal (Tues., Jan. 13, 2015): A11.

(Note: the online version of the review has the date Jan. 12, 2015.)

The book under review is:

Topol, Eric. The Patient Will See You Now: The Future of Medicine Is in Your Hands. New York: Basic Books, 2015.

February 15, 2015

Police Unions Make It Harder to Get Rid of Bad Cops

(p. A29) A small percentage of cops commit most of the abuses. A study by WNYC News in New York found that, since 2009, 40 percent of the "resisting arrest" charges were filed by just 5 percent of New York Police Department officers. In other words, most officers rarely get in a confrontation that leads to that charge, but a few officers often get in violent confrontations.

But it's very hard to remove the bad apples from the force. Trying to protect their members, unions have weakened accountability. The investigation process is softer on police than it would be on anyone else. In parts of the country, contract rules stipulate that officers get a 48-hour cooling-off period before having to respond to questions. They have access to the names and testimony of their accusers. They can be questioned only by one person at a time. They can't be threatened with disciplinary action during questioning.

More seriously, cops who are punished can be reinstated through a secretive appeals process that favors job retention over public safety. In The Atlantic, Conor Friedersdorf has a riveting piece with egregious stories of cops who have returned to the force after clear incompetence. Hector Jimenez was an Oakland, Calif., cop who shot and killed an unarmed 20-year-old man in 2007. Seven months later, he killed another unarmed man, shooting him in the back three times while he ran away. The city paid damages. Jimenez was fired. But he appealed through his union and was reinstated with back pay.

For the full commentary, see:

David Brooks. "The Union Future." The New York Times (Fri., DEC. 19, 2014): A29.

(Note: the online version of the commentary has the date DEC. 18, 2014. )

February 14, 2015

Delta and Atlanta Protect Their Huge Hartsfield-Jackson Airport from Little Silver Comet Field

(p. B6) DALLAS, Ga. -- Airports do not get much smaller than Silver Comet Field at Paulding Northwest Atlanta Airport, where an undeveloped two-lane road weaves to a church-quiet setting framed by small hills.

On a recent weekday morning, four small business jets were planted on the tarmac, if it can be called that. Nine automobiles dotted the parking lot, most of them driven there for a meeting. Outside the two-story building that serves as the terminal, which was reminiscent of a lodge in off-peak season, there was no sign of human life.

Only 50 miles away sits the world's most bustling airport, Hartsfield-Jackson. It maintains a monopoly on commercial flights in Atlanta, the largest metropolitan region without a secondary airport.

Paulding Northwest would like to change that grip on the market. The airport has applied for a commercial license so it can introduce two flights a week, and has since encountered stiff opposition.

Leading the charge against the bid is the Atlanta-based Delta Air Lines, which averages about 1,000 daily departures from its sprawling hub.

But the airport's supporters are crying foul, saying that Delta, along with the city of Atlanta, which owns Hartsfield-Jackson, has managed to throw up a series of barriers, legal and political, against the bid.

For the full story, see:

MIKE TIERNEY. "Fighting for 2 Fights a Week." The New York Times (Tues., DEC. 23, 2014): B6.

(Note: the online version of the story has the date DEC. 22, 2014, and has the title "Tiny Airport Fights for Sliver of Atlanta Market.")

February 11, 2015

Ways Technology May Decrease Inequality

(p. 7) As the previous generation retires from the work force, many more people will have grown up with intimate knowledge of computers. And over time, it may become easier to work with computers just by talking to them. As computer-human interfaces become simpler and easier to manage, that may raise the relative return to less-skilled labor.

The future may also extend a growing category of employment, namely workers who team up with smart robots that require human assistance. Perhaps a smart robot will perform some of the current functions of a factory worker, while the human companion will do what the robot cannot, such as deal with a system breakdown or call a supervisor. Such jobs would require versatility and flexible reasoning, a bit like some of the old manufacturing jobs, but not necessarily a lot of high-powered technical training, again because of the greater ease of the human-computer interface. That too could raise the returns to many relatively unskilled workers.

For the full commentary, see:

TYLER COWEN "TheUpshot; Economic View; The Technological Fix to Inequality." The New York Times, SundayBusiness Section (Sun., DEC. 7, 2014): 7.

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

(Note: the online version of the commentary has the date DEC. 6, 2014, and has the title "TheUpshot; Economic View; How Technology Could Help Fight Income Inequality." )

February 9, 2015

The "Miracle Machines" of Farming

(p. 75) Nobody had washing machines, vacuum cleaners, or incandescent light bulbs. But the farmers did have their miracle machines. In fifteen years, the Lucas family had gone from a walking plow pulled along behind a mule, to a riding plow, in which horses carried the blade through the soil, to a fine-tuned internal combustion plow.

"Machinery is the new Messiah," said Henry Ford, and though that sounded blasphemous to a devout sodbuster, there was something to it. Every ten seconds a new car came off Ford's factory line, and some of them were now parked next to dugouts in No Man's Land.


Egan, Timothy. The Worst Hard Time: The Untold Story of Those Who Survived the Great American Dust Bowl. Boston: Houghton Mifflin, 2006.

February 7, 2015

Marxist Chinese Education Minister Bans "Western Values" from Textbooks and Lectures

(p. D8) This week [the week starting Sun. January 25, 2015], China's ideological drive against Western liberal ideas broadened to take in a new target: foreign textbooks.

Meeting in Beijing with the leaders of several prominent universities, Education Minister Yuan Guiren laid out new rules restricting the use of Western textbooks and banning those sowing "Western values."

"Strengthen management of the use of original Western teaching materials," Mr. Yuan said at a meeting with university officials, according to Xinhua, the state news agency. "By no means allow teaching materials that disseminate Western values in our classrooms."

The strictures on textbooks are the latest of a succession of measures to strengthen the Communist Party's control of intellectual life and eradicate avenues for spreading ideas about rule of law, liberal democracy and civil society that it regards as dangerous contagions, which could undermine its hold on power.

On Jan. 19, the leadership issued guidelines demanding that universities make a priority of ideological loyalty to the party, Marxism and Mr. Xi's ideas.

Mr. Yuan's message this week spelled out how universities should do that.

"Never allow statements that attack and slander party leaders and malign socialism to be heard in classrooms," he said, according to the Xinhua report. "Never allow teachers to grumble and vent in the classroom, passing on their unhealthy emotions to students."

For the full story, see:

CHRIS BUCKLEY. "China Warns Against 'Western Values' in Imported Textbooks." The New York Times (Sat., JAN. 31, 2015): A9.

(Note: ellipsis, and bracketed words, added.)

(Note: the online version of the story has the date JAN. 30, 2015.)

February 3, 2015

"Valuable Things Should Be Paid For . . . Music Should Not Be Free"

(p. R10) Music is art, and art is important and rare. Important, rare things are valuable. Valuable things should be paid for. It's my opinion that music should not be free, and my prediction is that individual artists and their labels will someday decide what an album's price point is. I hope they don't underestimate themselves or undervalue their art.

For the full commentary, see:

Swift, Taylor. "WSJ 125 (A Special Report): Music --- it's Too Soon to Write Off the Album: Yes, Musicians Aren't Selling as Many of them; but Taylor Swift Argues that the Best Artists Will always Find Ways to Break through to the Audience." Wall Street Journal (Tues., July 8, 2014): R10.

(Note: the online version of the commentary has the date July 7, 2014, and has the title "For Taylor Swift, the Future of Music Is a Love Story.")

January 31, 2015

Ezra Pound, a Major Literary Figure of the 20th Century, "Loved the Movies of Walt Disney"

(p. C5) "Mussolini asked," in A. David Moody 's retelling, "what was his aim in writing The Cantos, and Pound replied, 'to put my ideas in order'; and Mussolini said, 'What do you want to do that for?' " When the poet turned from this dismissal to economic policy, which had lately become the central obsession of his life, the dictator was unimpressed by Pound's list of 18 proposals, alighting particularly on his assertion that "in the Fascist state taxes were no longer necessary": "Have to think about THAT," Mussolini said and ended the interview. To the fascist dictator, Pound, by any measure one of the 20th century's major literary figures, merited hardly more bother than a fly.

. . .

(p. C7) . . . he was not always an elitist. He loved the movies of Walt Disney, . . .

For the full review, see:

DAVID MASON. "The Makers of Modernism; Pound's generous spirit looms over 20th-century literature, and in the early years his megalomania seemed harmless." The Wall Street Journal (Sat., Dec. 6, 2014): C5 & C7.

(Note: ellipses added; italics in original.)

(Note: the online version of the review has the date Dec. 5, 2014, and has the title "The Tragic Hero of Literary Modernism; Ezra Pound's generous spirit looms over 20th-century literature, and in the early years his megalomania seemed harmless." The first part of the title in the print version was intended to cover both the review of the Pound biography and an accompanying review of a biography of the writer and publisher James Laughlin.)

The book under review is:

Moody, A. David. Ezra Pound: Poet: Volume II: The Epic Years. Oxford, UK: Oxford University Press, 2014.

January 30, 2015

Lower Cost LEDs Will Reduce Light Prices, and Increase Quantity Consumed (Yes, Virginia, There Really Is a Law of Demand)

(p. A29) The growing evidence that low-cost efficiency often leads to faster energy growth was recently considered by both the Intergovernmental Panel on Climate Change and the International Energy Agency. They concluded that energy savings associated with new, more energy efficient technologies were likely to result in significant "rebounds," or increases, in energy consumption. This means that very significant percentages of energy savings will be lost to increased energy consumption.

. . .

That's not a bad thing. Most people in the world, still struggling to achieve modern living standards, need to consume more energy, not less. Cheap LED and other more efficient energy technologies will be overwhelmingly positive for people and economies all over the world.

For the full commentary, see:

MICHAEL SHELLENBERGER and TED NORDHAUS. "The Problem With Energy Efficiency." The New York Times (Thurs., OCT. 9, 2014): A29.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date OCT. 8, 2014.)

January 23, 2015

"It Is the Individual Who Is the Agent of the Action"

(p. C6) Mr. Mischel begins by describing how, in the late 1960s, he and his colleagues devised a straightforward experiment to measure self-control at the Bing Nursery School at Stanford University. In its simplest form, children between the ages of 4 and 6 were given a choice between one marshmallow now or two marshmallows if they waited 15 minutes. Some kids ate the marshmallow right away, but most would engage in unintentionally hilarious attempts to overcome temptation.

. . . About a third of the original subjects, the researchers reported, deferred gratification long enough to get the second treat.

. . . in 2006, . . . Mr. Mischel published a new paper in the prestigious journal Psychological Science. The researchers had done a follow-up study with the students they had tested 40 years before, examining the sort of adults they had grown into. They found that the children who were able to delay gratification had higher SAT scores entering college, higher grade-point averages at the end of college and made more money after college. Perhaps not surprisingly, they also tended to have a lower body-mass index.

. . .

In his commencement address, Adm. McRaven explained his final life lesson with an anecdote: "In SEAL training there is a bell," he explained. "A brass bell that hangs in the center of the compound for all the students to see. All you have to do to quit--is ring the bell. Ring the bell and you no longer have to wake up at 5 o'clock. Ring the bell and you no longer have to do the freezing cold swims. Ring the bell and you no longer have to do the runs, the obstacle course, the PT--and you no longer have to endure the hardships of training. Just ring the bell." To ring the bell is to give up.

Interestingly, one of Mr. Mischel's lesser-known marshmallow experiments had a similar setup, with a bell that the children could ring to call back the experimenter and save them from themselves. For the children, though, ringing the bell was not giving up but calling in the cavalry. His book is an encouraging reminder that, despite all the factors that urge us to indulge, "at the end of that causal chain, it is the individual who is the agent of the action and decides when to ring the bell." You are ultimately in control of your self.

For the full review, see:

MICHAEL SHERMER. "Willpower and Won't Power; To resist the tempting treat, kids looked away, squirmed, sang or simply pretended to take a bite." The Wall Street Journal (Sat., Sept. 20, 2014): C6.

(Note: ellipses added.)

(Note: the online version of the review has the date Sept. 19, 2014, and has the title "Book Review: 'The Marshmallow Test' by Walter Mischel; To resist the tempting treat, kids looked away, squirmed, sang or simply pretended to take a bite.")

The book under review is:

Mischel, Walter. The Marshmallow Test: Mastering Self-Control. New York: Little, Brown and Company, 2014.

January 22, 2015

As with Airplanes, Lives Must Be Risked to Achieve Routine Safety in Spaceships

(p. A21) SEATTLE -- ONE clear winter day in 1909, in Hampshire, England, a young man named Geoffrey de Havilland took off in a twin-propeller motorized flying machine of his own design, built of wood, piano wire and stiff linen hand-stitched by his wife. The launch was flawless, and soon he had an exhilarating sensation of climbing almost straight upward toward the brilliant blue sky. But he soon realized he was in terrible trouble.

The angle of ascent was unsustainable, and moments later de Havilland's experimental plane crashed, breaking apart into a tangled mass of shards, splinters and torn fabric, lethal detritus that could easily have killed him even if the impact of smashing into the ground did not. Somehow, he survived and Sir Geoffrey -- he was ultimately knighted as one of the world's great aviation pioneers -- went on to build an astonishing array of military and civilian aircraft, including the world's first jet airliner, the de Havilland Comet.

I thought immediately of de Havilland on Friday when I heard that Virgin Galactic's SpaceShipTwo, a rocket-powered vehicle designed to take well-heeled tourists to the edge of space, had crashed on a flight over the Mojave Desert, killing one test pilot and seriously injuring the other.

. . .

Certainly the Wright brothers and others like de Havilland were involved in what we now view as an epic quest, but many experts of the day were certain that flight, however interesting, was destined to be not much more than a rich man's hobby with no practical value.

"The public has greatly over-estimated the possibilities of the aeroplane, imagining that in another generation they will be able to fly over to London in a day," said a Harvard expert in 1908. "This is manifestly impossible." Two other professors patiently explained that while laymen might think that "because a machine will carry two people another may be constructed that will carry a dozen," in fact "those who make this contention do not understand the theory of weight sustentation in the air."

. . .

There will be tragedies like the crash of SpaceShipTwo and nonlethal setbacks such as the fiery explosion, also last week, of a remote-controlled rocket intended for a resupply mission to the International Space Station. There will be debates about how to improve regulation without stifling innovation. Some will say private industry can't do the job -- though it's not as if the NASA-sponsored Apollo or space shuttle missions went off without a hitch (far from it, sadly).

But at the heart of the enterprise there will always be obsessives like Sir Geoffrey, who forged ahead with his life's work of building airplanes despite his own crash and, incredibly, the deaths of two of his three sons while piloting de Havilland aircraft, one in an attempt to break the sound barrier. Getting to routine safety aloft claimed many lives along the way, and a hundred years from now people will agree that in that regard, at least, spaceships are no different from airplanes.

For the full commentary, see:

SAM HOWE VERHOVEK. "Not a Flight of Fancy." The New York Times (Tues., NOV. 4, 2014): A21.

(Note: ellipses added.)

(Note: the online version of the commentary has the date NOV. 3, 2014.)

January 21, 2015

Obamacare Advisor Says Obscure Law Passed Due to "Stupidity of the American Voter"

(p. A4) Jonathan Gruber, the economist at the heart of a fresh debate about the Affordable Care Act, has had more than a dozen appointments to visit the White House since Democrats began drafting the health law in 2009, records show.

The visits included at least one group meeting with President Barack Obama , as well as appointments with senior administration officials who helped shape the 2010 law that expanded health insurance to millions of Americans.

The White House in recent days has tried to distance itself from Mr. Gruber, a 49-year-old Massachusetts Institute of Technology economist, since a 2013 video surfaced last week in which he said the law passed because of the "huge political advantage" of the legislation's lacking transparency. He also referred to the "stupidity of the American voter."

Republicans have seized on the comments as evidence that supporters of the law purposely misled the public about its costs.

"It is amusing to watch Washington liberals discount Mr. Gruber's truth-telling as a gaffe and disown" his involvement in the law, said Sen. Orrin Hatch (R., Utah).

For the full story, see:

STEPHANIE ARMOUR and COLLEEN MCCAIN NELSON. "Health Adviser Gruber Logged Regular White House Visits." The Wall Street Journal (Tues., Nov. 18, 2014): A4.

(Note: the online version of the story has the date Nov. 17, 2014.)

January 19, 2015

Leading Computability Expert Says Humans Can Do What Computers Cannot

(p. B4) What does Turing's research tell us?

"There is some scientific basis for the view that humans are doing something that a machine isn't doing--and that we don't even want our machine to do," says S. Barry Cooper, a mathematician at Leeds and the foremost scholar of Turing's work.

The math behind this is deep, but here's the short version: Humans seem to be able to decide the validity of statements that should stump us, were we strictly computers as Turing described them. And since all modern computers are of the sort Turing described, well, it seems that we've won the race against the machines before it's even begun.

. . .

The future of technology isn't about replacing humans with machines, says Prof. Cooper--it's about figuring out the most productive way for the two to collaborate. In a real and inescapable way, our machines need us just as much as we need them.

For the full commentary, see:

Mims, Christopher. "KEYWORDS; Why Humans Needn't Fear the Machines All Around Us; Turing's Heirs Realize a Basic Truth: The Machines We Create Are Not, Indeed Cannot Be, Replacements for Humans." The Wall Street Journal (Tues., DEC. 1, 2014): B4.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Nov. 30, 2014, and has the title "KEYWORDS; Why We Needn't Fear the Machines; A Basic Truth: Computers Can't Be Replacements for Humans.")

One of the major books by the Turing and computability expert quoted in the passages above, is:

Cooper, S. Barry. Computability Theory, Chapman Hall/CRC Mathematics Series. Boca Raton, Florida: Chapman and Hall/CRC Mathematics, 2003.

January 14, 2015

Bezos Devices Aim to Create a Virtuous Cycle 'Flywheel'

(p. B1) Amazon now makes four different kinds of devices. There are dedicated e-readers, multipurpose tablets and, starting this year, a TV streaming device and a smartphone, the Fire Phone. Just this week, Amazon introduced another streaming machine, the Fire TV Stick, a $39 gadget that is the size of a USB stick and promises to turn your television into an Amazon-powered video service.

. . .

(p. B9) What is Amazon's endgame with all these devices? Mr. Bezos has always said that his mission, with hardware, is to delight users with devices that are priced fairly. The devices also contribute to Mr. Bezos's famous "flywheel," the virtuous cycle by which greater customer satisfaction leads to more sellers in his store, which leads to more products, greater efficiencies, lower prices and, in turn, more customers.

"Everything is about getting that flywheel spinning, and it isn't necessarily about building a big and successful tablet business of their own," said Benedict Evans, an analyst who works at the investment firm Andreessen Horowitz and has studied Amazon closely. "Whether they actually drive meaningful commerce isn't entirely clear, but Amazon is rigorously focused on data, so if they're doing it, you can trust that there must be data that justifies it."

And if this year's devices don't take off, you can bet that Mr. Bezos will try a slightly different tack next year.

For the full commentary, see:

Farhad Manjoo. "STATE OF THE ART; Amazon's Grand Design for Devices." The New York Times (Thurs., OCT. 30, 2014): B1 & B9.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date OCT. 29, 2014, and has the title "STATE OF THE ART; Amazon's Grand Design in Devices.")

Bezos's enthusiasm for Jim Collins's "flywheel" idea is discussed in:

Stone, Brad. The Everything Store: Jeff Bezos and the Age of Amazon. New York: Little, Brown and Company, 2013.

January 11, 2015

Solution to Problems of Retirement: Don't Retire

(p. A13) Unsurprisingly, one response to the retirement challenge is: Don't do it. Not, at least, until you really must. As Mr. Farrell argues (with plenty of supporting evidence), there is no magic element of personal doom attached to one's 65th birthday or whatever age is believed to separate honest labor from a twilight of idleness. If you like what you do well enough, can perform your tasks competently and could use the income, why not keep working? The satisfactions of work are too often unrecognized in the popular imagination. Without it, a lot people wouldn't know what to do.

And the longer you work, of course, the more money you will have when you eventually do retire, a strategy that works to the good of society too, since your paychecks will be contributing to FICA and will help keep the system running.

For the full review, see:

GEOFFREY NORMAN. "BOOKSHELF; Second Acts After 65; People who could be playing golf and doting on their grandchildren are starting businesses. One senior launched a coffee house in Detroit." The Wall Street Journal (Weds., Sept. 24, 2014): A13.

(Note: the online version of the review has the date Sept. 23, 2014, and has the title "BOOKSHELF; Book Review: 'Unretirement' by Chris Farrell; People who could be playing golf and doting on their grandchildren are starting businesses. One senior launched a coffee house in Detroit.")

The book under review is:

Farrell, Chris. Unretirement: How Baby Boomers Are Changing the Way We Think About Work, Community, and the Good Life. New York: Bloomsbury Press, 2014.

January 10, 2015

Inequality Much Less If You Count Government Transfers as Part of Income

Despite the gratuitous jab contained in the "fanciful assumptions" phrase, what is notable about the passages quoted below is that Porter is mainly, though grudgingly, granting Burkhauser's main point: including government transfers reduces allegedly high inequality.

(p. B1) Washington already redistributes income from the rich to the poor. Richard Burkhauser and Philip Armour from Cornell and Jeff Larrimore from the Joint Committee on Taxation have become heroes to the right by trying to establish that government redistribution has, in fact, erased the trend of increasing inequality.

While these claims rest on fanciful assumptions about what counts as income, their analysis of taxes and government programs does support the argument that the government does more than it has in a long time to protect lower-income Americans from the blows of the market economy.

. . .

(p. B5) "Substantial changes in tax and transfer policies during the Bush and Obama administrations have increased dramatically the resources available at the middle of the distribution and at the bottom more so," Professor Burkhauser told me.

. . .

Research by Leslie McCall of Northwestern University finds that . . . American voters remain lukewarm about government interventions to reduce income inequality, . . .

For the full commentary, see:

Eduardo Porter. "Seeking New Tools to Address a Wage Gap." The New York Times (Weds., NOV. 5, 2014): B1 & B5.

(Note: ellipses added.)

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

The Burkhauser co-authored paper summarized above, is:

Armour, Philip, Richard V. Burkhauser, and Jeff Larrimore. "Levels and Trends in U.S. Income and Its Distribution: A Crosswalk from Market Income Towards a Comprehensive Haig-Simons Income Approach." Southern Economic Journal 81, no. 2 (Oct. 2014): 271-93.

I believe that the research being to referred to by McCall is in her book:

McCall, Leslie. The Undeserving Rich: American Beliefs About Inequality, Opportunity, and Redistribution. New York: Cambridge University Press, 2013.

January 9, 2015

French Entrepreneurs Protest Government Crushing Them with Taxes and Regulations

FrenchBossesProtest2014-12-26.jpg "Protesting business owners in Paris brandished locks and chains to signify the constraints they said the government imposed on French businesses." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B3) PARIS -- They jammed the boulevards, blowing whistles, tossing firecrackers, wearing locks and chains around their necks, and shouting into megaphones: "Enough is enough!"

In France, where protest marches are a well-practiced tradition, it is usually workers who take to the streets. But in a twist on Monday, thousands of French bosses demonstrated in Paris and Toulouse, the opening act in a weeklong revolt against government regulations and taxes that they say are straitjacketing companies, discouraging hiring and choking the economy.

"We feel like we're being taken hostage," said Laurence Manabre, owner of a home-maintenance business that has 28 workers -- but could employ many more, she said, if not for onerous government-imposed labor rules.

Ms. Manabre marched with the throng toward the Finance Ministry, brandishing a bronze lock, a symbol that hundreds of other bosses wore to signify the constraints they said the Socialist government imposed on French businesses. "Between regulations, taxes, new laws, and razor-thin margins," she said, "we're being crushed little by little."

. . .

. . . there are . . . entrenched parts of the French labor code, which employers say make it a difficult, lengthy process to lay off employees, and make bosses reluctant to take on new workers, especially with permanent contracts.

"France has high unemployment," Ms. Manabre said. "But the French labor code is incomprehensible, and it just keeps getting more complex. How can I possibly hire more people?"

. . .

Mr. Roland has 35 employees, and his son is supposed to take over the business when he retires. But now his son is thinking of leaving the country, Mr. Roland said, because "France doesn't seem to have a future, and the conditions for entrepreneurs are difficult."

Mr. Roland said he did not plan to hire more workers, out of concern that coming regulations would menace his already-thin profit margins.

For the full story, see:

LIZ ALDERMAN. "In Twist on French Tradition, Bosses Take to Streets in Protest." The New York Times (Tues., DEC. 2, 2014): B3.

(Note: ellipses added.)

(Note: the online version of the story has the date DEC. 1, 2014,)

January 7, 2015

Pentagon Bureaucracy "Hindered Progress" on Drones

(p. A13) Compared with, say, a B-2 Bomber, drones are simple things. An empty B-2 weighs 158,000 pounds. The largest version of the Predator--the unmanned aerial vehicle now playing a critical role in every theater where the American military is engaged--weighs just under 5,000. Yet these small aircraft are revolutionizing warfare. Given the simplicity of drones, why did it take so long to put them into operation?

. . .

The most alarming take-away from Mr. Whittle's history is the persistent opposition of officials in the Pentagon who, for bureaucratic reasons, hindered progress at every step of the way.

A case in point: Two months after 9/11, the Predator was employed to incinerate one of al Qaeda's senior operatives, Mohammed Atef. The same blast also incinerated--metaphorically--a study released two weeks earlier by the Pentagon's office of operational testing and evaluation. The study had declared Predator "not operationally effective or suitable" for combat. If one seeks to understand why the drone revolution was late in coming--too late to help avert 9/11--the hidebound mentality behind that Pentagon document is one place to start.

For the full review, see:

Gabriel Schoenfeld. "BOOKSHELF; Building Birds of Prey; Red tape at the Pentagon prevented the development of a drone that could have helped avert the attacks of Sept. 11, 2001." The Wall Street Journal (Tues., Sept. 16, 2014): A13.

(Note: ellipsis added.)

(Note: the online version of the review has the date Sept. 15, 2014, and has the title "BOOKSHELF; Book Review: 'Predator' by Richard Whittle; Red tape at the Pentagon prevented the development of a drone that could have helped avert the attacks of Sept. 11, 2001.")

The book under review is:

Whittle, Richard. Predator: The Secret Origins of the Drone Revolution. New York, NY: Henry Holt and Co., 2014.

January 6, 2015

Netflix Proved TV Programs Can Be Delivered on Web

(p. B1) Netflix pointed a way forward by not only establishing that programming could be reliably delivered over the web, but showing that consumers were more than ready to make the leap. The reaction of the incumbents has been fascinating to behold.

As a reporter, I watched as newspapers, books and music all got hammered after refusing to acknowledge new competition and new consumption habits. They fortified their defenses, doubled down on legacy approaches and covered their eyes, hoping the barbarians would recede. That didn't end up being a good idea.

Television, partly because its files are so much larger and tougher to download, was insulated for a time, and had the benefit of having seen what happens when you sit still -- you get run over.

. . .

For any legacy business under threat of disruption, the challenge is to get from one room -- the one with the tried and true profitable approach -- to another, (p. B5) where consumers are headed and innovators are setting up shop. To get there, you have to enter a long, dark hallway, a scary place.

For the full commentary, see:

David Carr. "The Stream Finally Cracks the Dam of Cable TV." The New York Times (Mon., OCT. 20, 2014): B1 & B5.

(Note: bolded words, and last ellipsis, in original; other ellipses, and bracketed date, added.)

(Note: the online version of the commentary has the date OCT. 19, 2014.)

January 5, 2015

Inequality Increased by Lack of Investment Knowledge or Discipline

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

(p. A2) Millions of Americans inadvertently made a classic investment mistake that contributed to today's widening economic inequality: They bought high and sold low.

. . .

. . . the data suggest some investors simply sold at the wrong moment. "Even at the worst of the recession, most people still had jobs," said Mr. Maki. "Certainly, some of the people who got out of the equity market were doing it because of fear rather than need."

That's also the finding of new research from economists Bing Chen and Frank Stafford at the University of Michigan. They plumbed the Panel Study of Income Dynamics, a survey that tracks the same households over time, to evaluate the factors behind their fluctuating incomes and wealth.

Households with the highest education and strong portfolios to begin with were likely to keep buying stocks during the decline, they found. Those with less education and smaller account balances were more likely to sell during the downturn.

When the subsequent rebound happened, the already rich got even richer.

. . .

". . . there certainly is a widening gap there in terms of the return that higher-income people are receiving in the market," said Mr. Akabas [an economist at the Bipartisan Policy Center in Washington who works on the center's Personal Savings Initiative]. "Lower- to middle-income people aren't privy to those gains. That's exacerbated by the fact that many of them have taken their money out of the stock market."

For the full commentary, see:

JOSH ZUMBRUN. "THE OUTLOOK; Market Missteps Fuel Inequality." The Wall Street Journal (Mon., Oct. 27, 2014): A2.

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

(Note: the online version of the commentary has the date Oct. 26, 2014, and has the title "THE OUTLOOK; Bad Stock-Market Timing Fueled Wealth Disparity.")

January 2, 2015

Somewhere in a Garage Is the Next Google

(p. B6) . . . Monday [Oct. 13, 2014] Eric Schmidt, Google's executive chairman used a speech in Berlin to talk about Amazon's success in search, how Facebook crushed Google on social networking and his conviction that somewhere in the world there is a garage-based company that will take out Google.

. . .

Here are some excerpts from Mr. Schmidt's speech:

. . .

THE NEXT GOOGLE: "But more important, someone, somewhere in a garage is gunning for us. I know, because not long ago we were in that garage. ... The next Google won't do what Google does, just as Google didn't do what AOL did."

For the full story, see:

CONOR DOUGHERTY. "Google Chairman on Competition." The New York Times (Mon., OCT. 20, 2014): B6.

(Note: bolded words, and last ellipsis, in original; other ellipses, and bracketed date, added.)

(Note: the online version of the story has the date OCT. 14, 2014, and has the title "Google Executive Chairman: Amazon Is a Lovely Place to Shop and Search." There are minor differences between the print and online versions. In the passages quoted above, where the two differ, I follow the print version.)

January 1, 2015

FAA Requires Drones to Carry Onboard Manuals

(p. B1) BERLIN--In four years, GmbH has emerged as a promising player here in the rapidly expanding commercial-drone industry. The 20-employee startup has sold more than 400 unmanned aircraft to private-sector companies and now is pitching its fourth-generation device.

Over the same period, Seattle-based Applewhite Aero has struggled to get permission from the Federal Aviation Administration just to fly its drones, which are designed for crop monitoring. The company, founded the same year as Service-drone, has test-flown only one of its four aircraft, and is now moving some operations to Canada, where getting flight clearance is easier.

"We had to petition the FAA to not carry the aircraft manual onboard," said Applewhite founder Paul Applewhite. "I mean, who's supposed to read it?" Mr. Applewhite, like many of his U.S. peers, fears the drone industry "is moving past the U.S., and we're just getting left behind."

For the full story, see:

JACK NICAS. "U.S. Rules Clips Drone Makers' Wings." The Wall Street Journal (Mon., Oct. 6, 2014): B1 & B4.

(Note: the online version of the story has the date Oct. 5, 2014, and has the title "Regulation Clips Wings of U.S. Drone Makers.")

December 28, 2014

"Milestone of Dubious Distinction:" Venezuela Joins North Korea and Cuba in Food Rationing

(p. A15) MARACAIBO, Venezuela--Amid worsening shortages, Venezuela recently reached a milestone of dubious distinction: It has joined the ranks of North Korea and Cuba in rationing food for its citizens.

On a recent, muggy morning, Maria Varge stood in line outside a Centro 99 grocery store, ready to scour the shelves for scarce items like cooking oil and milk. But before entering, Ms. Varge had to scan her fingerprint to ensure she wouldn't buy more than her share.

Despite its technological twist on the old allotment booklet, Venezuela's new program of rationing is infuriating consumers who say it creates tiresome waits, doesn't relieve shortages and overlooks the far-reaching economic overhauls the country needs to resolve the problem.

"These machines make longer lines," said Ms. Varge, 50, as she was jostled by people in line, "but you get inside, and they still don't have what you want."

For the full story, see:

SARA SCHAEFER MUÑOZ. "WORLD NEWS; Despite Riches, Venezuela Starts Food Rationing; Government Rolls Out Fingerprint Scanners to Limit Purchases of Basic Goods; 'How Is it Possible We've Gotten to This Extreme'." The Wall Street Journal (Thurs., Oct. 23, 2014): A15.

(Note: the online version of the story has the date Oct. 22, 2014.)

December 26, 2014

How "the Credentials Arms-Race" Now "Defines Young Adulthood"

(p. A11) . . . "Excellent Sheep" is a cri de coeur against the credentials arms-race that now defines young adulthood--and even childhood--for many Americans. But you don't have to take his word for it: The book features interviews and correspondence with students and recent graduates of elite institutions. Beyond their glowing transcripts and the fact that they have become "accomplished adult-wranglers," these students are anxious, depressed and searching for some deeper meaning in their lives. "For many students, rising to the absolute top means being consumed by the system. I've seen my peers sacrifice health, relationships, exploration, activities that can't be quantified and are essential for developing souls and hearts, for grades and resume building," one Stanford student told the author. A Yalie put it more succinctly: "I might be miserable, but were I not miserable, I wouldn't be at Yale."

For the full review, see:

EMILY ESFAHANI SMITH. "BOOKSHELF; The Credentials Arms-Race; Students sacrifice all to grades and resume building--'I might be miserable,' a Yalie noted, 'but were I not miserable, I wouldn't be at Yale.'." The Wall Street Journal (Thurs., Aug. 21, 2014): A11.

(Note: ellipsis added.)

(Note: the online version of the review has the date Aug. 20, 2014, and has the title "BOOKSHELF; Book Review: 'Excellent Sheep: The Miseducation of the American Elite' by William Deresiewicz; Students sacrifice all to grades and resume building--'I might be miserable,' a Yalie noted, 'but were I not miserable, I wouldn't be at Yale.'.")

The book under review is:

Deresiewicz, William. Excellent Sheep: The Miseducation of the American Elite and the Way to a Meaningful Life. New York, NY: Free Press, 2014.

December 25, 2014

U.S. Patents and Start-Ups Fall When We Exclude Tech Immigrants

(p. A19) The process of bringing skilled immigrants to the U.S. via H-1B visas and putting them on the path to eventual citizenship has been a political football for at least a decade. It has long been bad news for those immigrants trapped in this callous process. Now the U.S. economy is beginning to suffer, too.

Every year, tens of thousands of disappointed tech workers and other professionals give up while waiting for a resident visa or green card, and go home--having learned enough to start companies that compete with their former U.S. employers. The recent historic success of China's Alibaba IPO is a reminder that a new breed of companies is being founded, and important innovation taking place, in other parts of the world. More than a quarter of all patents filed today in the U.S. bear the name of at least one foreign national residing here.

The U.S. no longer has a monopoly on great startups. In the past, the best and brightest people would come to the U.S., but now they are staying home. In Silicon Valley, according to a 2012 survey by Duke and Stanford Universities and the University of California at Berkeley, the percentage of new companies started by foreign-born entrepreneurs has begun to slide for the first time--down to 43.9% during 2006-12, from 52.4% during 1995-2005.

For the full commentary, see:

MICHAEL S. MALONE. "OPINION; The Self-Inflicted U.S. Brain Drain; Up to 1.5 million skilled workers are stuck in immigration limbo. Many give up and go home." The Wall Street Journal (Thurs., OCT. 16, 2014): A19.

(Note: the online version of the commentary has the date OCT. 15, 2014.)

The 2012 survey is discussed further in:

Wadhwa, Vivek, AnnaLee Saxenian, and F. Daniel Siciliano. "Then and Now: America's New Immigrant Entrepreneurs, Part VII." Ewing Marion Kauffman Foundation, October 2012.

An in-depth discussion of the issues raised by Malone can be found in:

Wadhwa, Vivek. The Immigrant Exodus: Why America Is Losing the Global Race to Capture Entrepreneurial Talent. pb ed. Philadelphia, PA: Wharton Digital Press, 2012.

December 24, 2014

How Creative Destruction Reuses Capital

(p. B1) The Internet is moving to a shopping center near you.

In Fort Wayne, Ind., a vacated Target store is about to be home to rows of computer servers, network routers and Ethernet cables courtesy of a local data-center operator. In Jackson, Miss., a former McRae's department store will get the same treatment next year. And one quadrant of the Marley Station Mall south of Baltimore is already occupied by a data-center company that last year offered to buy out the rest of the building.

As America's retailers struggle to keep up with online shopping, the Internet is starting to settle into some of the very spaces where brick-and-mortar customers used to shop.

For the full story, see:

DREW FITZGERALD and PAUL ZIOBRO. "This Used to Be a Shopping Mall." The Wall Street Journal (Tues., NOV. 4, 2014): B1 & B6.

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

(Note: the online version of the story has the date NOV. 3, 2014, and has the title "Malls Fill Vacant Stores With Server Rooms.")

December 22, 2014

Charismatic Prophets of Technological and Organizational Innovation

(p. C7) Walter Isaacson's last book was the best-selling biography of Steve Jobs --the charismatic business genius of Apple Computer and one of the beatified icons of modern technology and entrepreneurship. Mr. Isaacson's fine new book, "The Innovators," is a serial biography of the large number of ingenious scientists and engineers who, you might say, led up to Jobs and his Apple co-founder Steve Wozniak --"forerunners" who, over the past century or so, produced the transistor, the microchip and microprocessor, the programmable computer and its software, the personal computer, and the graphic interface.

. . .

Mr. Isaacson's heart is with the engineers: the wizards of coding, the artists in electrons, silicon, copper, networks and mice. But "The Innovators" also gives space to the revolutionary work done with men as well as mice: experiments in the organizational forms in which creativity might be encouraged and expressed; in the aesthetic design of personal computers, phones and graphical fonts; in predicting and creating what consumers did not yet know they wanted; and in the advertising and marketing campaigns that make them want those things. Not the least of the revolutionaries' inventions was their own role as our culture's charismatic prophets, uniquely positioned to pronounce on which way history was going and then to assemble the capital, the motivated workers and the cheering audiences that helped them make it go that way.

For the full review, see:

ALEXANDRA KIMBALL. "The Best Way to Predict the Future." The Wall Street Journal (Sat., Oct. 4, 2014): C9.

(Note: ellipsis added. The first word of the title in the print version was "They." Above, I have corrected the typo.)

(Note: the online version of the review has the date Oct. 3, 2014, and has the title "Book Review: 'The Innovators' by Walter Isaacson.")

The book under review is:

Isaacson, Walter. The Innovators: How a Group of Inventors, Hackers, Geniuses, and Geeks Created the Digital Revolution. New York: Simon & Schuster, 2014.

December 18, 2014

The Washing Machine Is a Great Bulwark of Women's Liberation

(p. C9) If the past is foreign country because they do things differently there, we're lucky to have such a knowledgeable cicerone as Ruth Goodman.

. . .

"I like to put time and effort into studying the objects and tools that people made and used, and I like to try methods and approaches out for myself," she writes in "How to Be a Victorian." This sounds straightforward enough but hardly hints at the leaps of imaginative empathy the author is so good at: When she visits a museum to examine a Victorian farm worker's wool coat, for example, she sees both the husband "who sweated and left stains on his clothes, who physically felt the cold" and the wife who "spent hours carefully and neatly sewing up the tear."

Ms. Goodman observes that the wife's technique for repair matches one taught in working-class textbooks, a fact that raises questions in her mind. "How widespread was such needlework education, and was it likely to have been women who carried out such repairs?" she wonders. "If it takes me over an hour to do the work, would my Victorian forebears have been quicker? When would they have fitted such a chore into their day?" That little rip in the man's coat, it turns out, is like a tiny window into "the great sweeps of political and economic life" that in turn "bring us back to the personal." Trade disruptions in textiles during the American Civil War, for instance, "pushed up the price of the labourer's coat, making that repair more necessary."

. . .

Many, many things about daily life are far better now: "My own historical laundry experiences have led me to see the powered washing machine as one of the great bulwarks of women's liberation, an invention that can sit alongside contraception and the vote."

For the full review, see:

ALEXANDRA KIMBALL. "Living Like a Queen; You might get used to using soot to brush your teeth. But steel corsets? Never." The Wall Street Journal (Sat., Oct. 4, 2014): C9.

(Note: ellipses added.)

(Note: the online version of the review has the date Oct. 3, 2014, and has the title "Book Review: 'How to Be a Victorian" by Ruth Goodman; You might get used to using soot to brush your teeth. But steel corsets? Never.")

The book under review is:

Goodman, Ruth. How to Be a Victorian: A Dawn-to-Dusk Guide to Victorian Life. New York: Liveright Publishing Corporation, 2014.

December 17, 2014

Most Venture Capital Firms Do Not Back "Ambitious, Long-Shot Projects"

(p. B4) Successful venture capitalism is about managing risk, so partners at most VC firms invest in businesses they think will become viable, or at least worthy of an acquisition, in the shortest time possible.

That doesn't leave much appetite among VCs for startups working on ambitious, long-shot projects, the sort that require basic research, and that's a shame.

For the full commentary, see:

CHRISTOPHER MIMS. "KEYWORDS; Our Last Great Hope: Venture Capital." The Wall Street Journal (Tues., Oct. 21, 2014): B1 & B4.

(Note: italics in original.)

(Note: the online version of the commentary has the date Oct. 20, 2014, and the title "KEYWORDS; Humanity's Last Great Hope: Venture Capitalists.")

December 14, 2014

"What Valuable Company Is Nobody Building?"

(p. A15) Peter Thiel is larger than life even for a Silicon Valley billionaire. He co-founded PayPal, was the first investor in Facebook , and funded LinkedIn, Spotify, SpaceX and Airbnb. Now he has written a much-needed explanation of the information economy, masquerading as a breezy how-to book for entrepreneurs. "Zero to One: Notes on Startups, or How to Build the Future" is based on lectures Mr. Thiel gave at Stanford.

He hopes more entrepreneurs will focus on big ideas for health, energy and transportation; his venture firm's tag line is "They promised us flying cars and all we got was 140 characters," a reference to Twitter. His explanation of innovation is also a primer on how free markets work. He encourages entrepreneurs to ask: "What valuable company is nobody building?"

For the full commentary, see:

L. GORDON CROVITZ. "INFORMATION AGE; Three Cheers for 'Creative Monopolies'." The Wall Street Journal (Mon., Oct. 13, 2014): A15.

(Note: the online version of the commentary has the date Oct. 12, 2014.)

The book praised in the passage quoted above is:

Thiel, Peter, and Blake Masters. Zero to One: Notes on Startups, or How to Build the Future. New York: Crown Business, 2014.

December 13, 2014

Economic Hope Cures Terrorism

(p. C1) As the U.S. moves into a new theater of the war on terror, it will miss its best chance to beat back Islamic State and other radical groups in the Middle East if it doesn't deploy a crucial but little-used weapon: an aggressive agenda for economic empowerment. Right now, all we hear about are airstrikes and military maneuvers--which is to be expected when facing down thugs bent on mayhem and destruction.

But if the goal is not only to degrade what President Barack Obama rightly calls Islamic State's "network of death" but to make it impossible for radical leaders to recruit terrorists in the first place, the West must learn a simple lesson: Economic hope is the only way to win the battle for the constituencies on which terrorist groups feed.

I know something about this. A generation ago, much of Latin America was in turmoil. By 1990, a Marxist-Leninist terrorist organization called Sendero Luminoso, or Shining Path, had seized control of most of my home country, Peru, where I served as the president's principal adviser. Fashionable opinion held that the people rebelling were the impoverished or underemployed wage slaves of Latin America, that capitalism couldn't work outside the West and that Latin cultures didn't really understand market economics.

The conventional wisdom proved to be wrong, however. Reforms in Peru gave indigenous entrepreneurs and farmers control over their assets and a new, more accessible legal framework in which to run businesses, make contracts and borrow--spurring an unprecedented rise in living standards.

For the full commentary, see:

HERNANDO DE SOTO. "The Capitalist Cure for Terrorism; Military might alone won't defeat Islamic State and its ilk. The U.S. needs to promote economic empowerment and entrepreneurship to give the Arab world another path." The Wall Street Journal (Sat., Oct. 11, 2014): C1-C2.

(Note: italics in original.)

(Note: the online version of the commentary has the date Oct. 10, 2014, and the title "The Capitalist Cure for Terrorism; Military might alone won't defeat Islamic State and its ilk. The U.S. needs to promote economic empowerment.")

Soto's masterpiece is:

Soto, Hernando de. The Other Path: The Invisible Revolution in the Third World. New York: Basic Books, 1989.

December 10, 2014

Churchill Was More than an Epiphenomenon

(p. C2) It is easy to see why so many historians and historiographers have taken the Tolstoyan line, that the story of humanity isn't the story of great people and shining deeds. It has been fashionable to say that those so-called great men and women are just epiphenomena, meretricious bubbles on the vast tides of social history. The real story, on this view, is about deep economic forces, technological advances, changes in the price of sorghum, the overwhelming weight of an infinite number of mundane human actions.

The story of Winston Churchill is a pretty withering retort to all that malarkey.

For the full essay, see:

BORIS JOHNSON. "He Still Stands Alone." The Wall Street Journal (Sat., Nov. 8, 2014): C1-C2.

(Note: the online version of the essay has the date Nov. 7, 2014, and has the title "Churchill Still Stands Alone.")

The passage quoted above is related to Johnson's book:

Johnson, Boris. The Churchill Factor: How One Man Made History. New York: Riverhead, 2014.

December 4, 2014

Consumers Cannot Count on Regulators for Safety

(p. A1) WASHINGTON -- The nation's top auto regulator faced withering criticism across Capitol Hill on Tuesday over its failure to identify a deadly defect in General Motors cars -- even as its top official tried again and again to shift the blame back to the automaker.

Hours after a House committee released a scathing report about the agency's yearslong failure to spot the ignition-stalling defect that has now been linked to 19 deaths, a Senate subcommittee hearing turned angry and tense. Lawmakers from both parties accused the agency, the National Highway Traffic Safety Administration, of overlooking evidence that could have saved lives and of deferring to the auto industry rather than standing up to it.

The agency was "more interested in singing 'Kumbaya' with the manufacturers than being a cop on the beat," said Senator Claire McCaskill, the subcommittee's chairwoman, in sharp questioning reminiscent of her interrogation of G.M.'s chief executive, Mary T. Barra, in a hearing before the same panel in the spring.

. . .

(p. B2) "You want to obfuscate responsibility, rather than take responsibility," Ms. McCaskill, a Missouri Democrat, said, her voice rising. "We've all said shame on G.M." She added, "You've got to take some responsibility that this isn't being handled correctly."

. . .

Watching from a seat just behind Mr. Friedman [deputy administrator of the N.H.T.S.A.] was Laura Christian, the birth mother of Amber Rose, a teenager who was killed in 2005 when her Cobalt ran off the road, into a tree, and the air bags did not deploy.

As Mr. Friedman continued to speak, Ms. Christian said she could feel herself getting flushed and increasingly upset over the agency's lack of remorse.

"It was extremely frustrating to hear David Friedman go on about how his agency was this wonderful thing," she said. "All along they missed the glaringly obviously defects."

For the full story, see:

HILARY STOUT and AARON M. KESSLER. "Congress Castigates Auto Regulator Over a Deadly G.M. Defect." The New York Times (Weds., SEPT. 17, 2014): A1 & B2.

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

(Note: the online version of the story has the date SEPT. 16, 2014, and has the title "Senators Take Auto Agency to Task Over G.M. Recall." In the Midwest edition that I receive, this article started on p. A1; according to the indexes, and the online edition, in the New York edition, the article started on p. B1.)

December 2, 2014

Lippmann Attacked FDR's Socialist National Industrial Recovery Act

(p. A13) . . . Duke economic historian Craufurd D. Goodwin employs the writings of the once-famous newspaper columnist Walter Lippmann to describe the fervid U.S. debates that began with the 1929 stock-market crash.

. . .

Lippmann established his intellectual credentials in the 1920s, writing several well-received books. They included "Public Opinion," which excoriated the press for sloppy coverage of government policies and actions. The book is often seen as a call for top-down rule by experts, but Mr. Goodwin argues that Lippmann had something else in mind--that he was eager for expert opinion and "reasoned study" to be widely disseminated so that self-government would be more fully informed and the citizenry less easily manipulated.

. . .

At first, Lippmann embraced the Keynesian argument that government could ameliorate downswings in business cycles through deficit spending, but he later had second thoughts about economic engineering and became more attuned to the free-market ideas of Friedrich Hayek, whom he knew and consulted.   . . .    Lippmann attacked as ill-conceived the most ambitious New Deal brainstorm, the 1933 National Industrial Recovery Act, which attempted to organize all business and industry into cartels to boost prices.

For the full review, see:

GEORGE MELLOAN. "BOOKSHELF; The Umpire of American Public Debate; Certain that a return of investment confidence would restore prosperity, Lippmann criticized those that blamed Wall Street for the malaise." The Wall Street Journal (Tues., Oct. 14, 2014): A13.

(Note: ellipses added.)

(Note: the online version of the review has the date Oct. 13, 2014, and has the title "BOOKSHELF; Walter Lippmann: Umpire of American Public Debate; Certain that a return of investment confidence would restore prosperity, Lippmann criticized those that blamed Wall Street for the malaise.")

The book under review, is:

Goodwin, Craufurd D. Walter Lippmann: Public Economist. Cambridge, MA: Harvard University Press, 2014.

November 30, 2014

Esther Dyson Sees a Lot of Silicon Valley as Just Motivated to Make Money

(p. C11) The U.S. Commerce Department recently said that it plans to relinquish its oversight of Icann, handing that task to an international body of some kind. The details are still being worked out, but Ms. Dyson hopes that governments won't be the new regulators. . . .

For now, she thinks there are many Silicon Valley Internet companies with inflated market values. "There is the desire to make money that motivates a lot of that in Silicon Valley, and yes, I think it's totally a bubble," she says. "It's not like the last bubble in that there are a lot of real companies there [now], but there are a lot of unreal companies and...many of them will disappear." She thinks too many people are starting similar companies. "You have people being CEOs of teeny little things who would be much better as marketing managers of someone else's company," she says.

And though her work often takes her to California, she's happy to stay in New York. These days, she finds Silicon Valley "very fashionable," she says, "and I don't really like fashion."

For the full interview, see:

ALEXANDRA WOLFE, interviewer. "WEEKEND CONFIDENTIAL; Esther Dyson's Healthy Investments; The investor is hoping to produce better health through technology with a new nonprofit." The Wall Street Journal (Sat., May 3, 2014): C11.

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

(Note: the online version of the interview has the date May 2, 2014, and has the title "WEEKEND CONFIDENTIAL; Esther Dyson's Healthy Investments; The investor is hoping to produce better health through technology with a new nonprofit.")

November 29, 2014

Einthoven Tried to Share Prize Money with His Assistant

(p. 194) One event that occurred after Einthoven received the Nobel Prize in Physiology or Medicine in 1924 speaks volumes about his integrity. In the construction of his string galvanometer and laboratory experiments over many years, Einthoven was rather clumsy with his hands and relied very much on the collaboration of his chief assistant K. F. L. van der Woerdt. Years later, when he received the $40,000 in Nobel Prize money, Einthoven wished to share it with his assistant but soon learned that the man had died. He sought out the man's two surviving sisters, who were living in genteel poverty in a kind of almshouse. He journeyed there by train and gave them half of the award money.


Meyers, Morton A. Happy Accidents: Serendipity in Modern Medical Breakthroughs. New York: Arcade Publishing, 2007.

November 28, 2014

When Pirates Were More Enlightened than Most Governments

(p. A11) While slaves were oppressed by the social order, Mr. Rediker argues, pirates on the high seas were remaking it. An estimated 2,500 buccaneers prowled the Atlantic and the Caribbean at any given time during the first half of the 18th century. The great majority were former merchant seamen, or deserters from the Royal Navy. They were aged between 14 and 50, though most were in their 20s. Married men were not welcome for fear that they might desert and compromise an entire pirate crew.

Here, Mr. Rediker suggests, egalitarianism was being practiced at sea half a century before it became a catch-cry of the French Revolution. And, he adds, there was a striking uniformity of rules and customs on all pirate vessels. At the start of each voyage, or whenever a new captain was chosen, a wide-ranging social compact would be drawn up listing rights and responsibilities. The articles would allocate authority, deal with the distribution of plunder, and set the rules of punishment to enforce discipline. Booty was usually allocated according to skills and duties--the captain might be given two shares; gunners, boatswains, mates, carpenters and medics one and a half shares; and the rest of the crew a share each. In times of battle, the crew gave the captain unquestioned authority whether fighting, chasing or being chased. What perhaps set the pirates most apart from their former colleagues in the Merchant Navy and the Royal Navy was punishment. The lash, for example, was rarely used. Fighting was not allowed on board and disputes between crew had to be settled ashore by sword or pistol. This brought an unusual degree of harmony to the pirate ship. Incorrigible trouble makers were unceremoniously dumped and left behind on deserted islands. Vengeance was also freely taken upon captives, and woe betide any ship's captain who had tyrannized and abused his crew.

For the full review, see:

MICHAEL FATHERS. "BOOKSHELF; Motley Crew at the Helm; Egalitarianism was being acted out at sea by pirates half a century before it became a catch-cry of the French Revolution. The Wall Street Journal (Fri., Aug. 22, 2014): A11.

(Note: ellipsis in original.)

(Note: the online version of the review has the date Aug. 21, 2014, and has the title "BOOKSHELF; Book Review: 'Outlaws of the Atlantic' by Marcus Rediker; Egalitarianism was being acted out at sea by pirates half a century before it became a catch-cry of the French Revolution.")

Book under review:

Rediker, Marcus. Outlaws of the Atlantic: Sailors, Pirates, and Motley Crews in the Age of Sail. Boston, MA: Beacon Press, 2014.

November 26, 2014

Robotic Milkers Are Less Costly, Easier to Manage and More Humane to Cows

(p. A1) EASTON, N.Y. -- Something strange is happening at farms in upstate New York. The cows are milking themselves.

Desperate for reliable labor and buoyed by soaring prices, dairy operations across the state are charging into a brave new world of udder care: robotic milkers, which feed and milk cow after cow without the help of a single farmhand.

Scores of the machines have popped up across New York's dairy belt and in other states in recent years, changing age-old patterns of daily farm life and reinvigorating the allure of agriculture for a younger, tech-savvy -- and manure-averse -- generation.

. . .

The cows seem to like it, too.

Robots allow the cows to set their own hours, lining up for automated milking five or six times a day -- turning the predawn and late-afternoon sessions (p. A19) around which dairy farmers long built their lives into a thing of the past.

With transponders around their necks, the cows get individualized service. Lasers scan and map their underbellies, and a computer charts each animal's "milking speed," a critical factor in a 24-hour-a-day operation.

. . .

The Bordens and other farmers say a major force is cutting labor costs -- health insurance, room and board, overtime, and workers' compensation insurance -- particularly when immigration reform is stalled in Washington and dependable help is hard to procure.

The machines also never complain about getting up early, working late or being kicked.

"It's tough to find people to do it well and show up on time," said Tim Kurtz, who installed four robotic milkers last year at his farm in Berks County, Pa. "And you don't have to worry about that with a robot."

The Bordens say the machines allow them to do more of what they love: caring for animals.

"I'd rather be a cow manager," Tom Borden said, "than a people manager."

For the full story, see:

JESSE McKINLEY. "With Farm Robotics, the Cows Decide When It's Milking Time." The New York Times (Weds., APRIL 23, 2014): A1 & A19.

(Note: ellipses added.)

(Note: the online version of the story has the date APRIL 22, 2014.)

November 24, 2014

Affordable Care Act Reduces GDP, Employment and Labor Income

(p. A17) Whether the Affordable Care Act lives up to its name depends on how, or whether, you consider its consequences for the wider economy.

. . .

I estimate that the ACA's long-term impact will include about 3% less weekly employment, 3% fewer aggregate work hours, 2% less GDP and 2% less labor income. These effects will be visible and obvious by 2017, if not before. The employment and hours estimates are based on the combined amount of the law's new taxes and disincentives and on historical research on the aggregate effects of each dollar of taxation. The GDP and income estimates reflect lower amounts of labor as well as the law's effects on the productivity of each hour of labor.

. . .

The Affordable Care Act is weakening the economy. And for the large number of families and individuals who continue to pay for their own health care, health care is now less affordable.

For the full commentary, see:

CASEY B. MULLIGAN. "OPINION; The Myth of ObamaCare's Affordability; The law's perverse incentives will have the nation working fewer hours, and working those hours less productively." The Wall Street Journal (Tues., SEPTEMBER 9, 2014): A17.

(Note: ellipses added.)

(Note: the online version of the commentary has the date SEPTEMBER 8, 2014.)

Mulligan's research on the effects of Obamacare is detailed in his Kindle e-book:

Mulligan, Casey B. Side Effects: The Economic Consequences of the Health Reform. Flossmoor, IL: JMJ Economics, 2014.

November 22, 2014

Socialist Price Setting Causes Shortages of Corn Flour, Car Batteries and Toilet Paper

(p. B1) Venezuela's prices on everything from butter to flat-screen TVs are set without warning by the government, which also caps corporate profits at 30%. Any profits evaporate quickly, however, because inflation is almost double that.

And expanded price controls imposed by Venezuelan President Nicolas Maduro, who succeeded late leftist firebrand Hugo Chávez in April 2013, have exacerbated shortages of basic items such as corn flour, car batteries and toilet paper, triggering violent street protests since early February.

For the full story, see:

MAXWELL MURPHY and KEJAL VYAS. "CFO JOURNAL; Currency Chaos in Venezuela Portends Write-Downs." The Wall Street Journal (Tues., May 27, 2014): B1 & B6.

(Note: the online version of the story has the date May 26, 2014.)

November 18, 2014

Japanese Try to Sell the iPhone of Toilets in United States

(p. B8) TOKYO--Yoshiaki Fujimori wants to be the Steve Jobs of toilets.

Like iPhones, app-packed commodes are objects of desire in Mr. Fujimori's Japan. The lids lift automatically. The seats heat up. Built-in bidets make cleanup a breeze. Some of them even sync with users' smartphones via Bluetooth so that they can program their preferences and play their favorite music through speakers built into the bowl.

Three-quarters of Japanese homes contain such toilets, most of them made by one of two companies: Toto Ltd., Japan's largest maker of so-called sanitary ware, or Lixil Corp., where Mr. Fujimori is the chief executive.

Now Mr. Fujimori is leading a push to bring them to the great unwashed. In May, Lixil plans to add toilets with "integrated bidets" to the lineup of American Standard Brands, which Lixil acquired last year for $542 million, including debt.

. . .

Few people realized they needed smartphones until Apple's iPhone came along. So it will be in the U.S. with American Standard's new toilets, Mr. Fujimori said.

"Industry presents iPhone--industry presents shower toilet," Mr. Fujimori said in an interview at Lixil's headquarters in Tokyo. "We can create the same type of pattern."

. . .

Mr. Fujimori maintained that once American consumers try such toilets, they won't go back.

"This improves your standard of living," he said. "It doesn't hurt you. People like comfort, they like ease, they like automatic. And people like clean."

For the full story, see:

ERIC PFANNER and ATSUKO FUKASE. "Smart Toilets Arrive in U.S." The Wall Street Journal (Tues., May 27, 2014): B8.

(Note: ellipses added.)

(Note: the online version of the story has the date May 26, 2014.)

November 14, 2014

High Skill Foreign Workers Raise Wages for Native Workers

WageGrowthRelatedToChangesInForeignSTEMworkersGraph2014-10-08.jpgSource of graph: online version of the WSJ article quoted and cited below.

(p. A6) "A lot of people have the idea there is a fixed number of jobs," said . . . , Giovanni Peri of the University of California, Davis. "It's completely turned around."

Immigrants can boost the productivity of the overall economy, he said, "because then the pie grows and there are more jobs for other people as well and there's not a zero-sum trade-off between natives and immigrants."

Mr. Peri, along with co-authors Kevin Shih at UC Davis, and Chad Sparber at Colgate University, studied how wages for college- and noncollege-educated native workers shifted along with immigration. They found that a one-percentage-point increase in the share of workers in STEM fields raised wages for college-educated natives by seven to eight percentage points and wages of the noncollege-educated natives by three to four percentage points.

Mr. Peri said the research bolsters the case for raising, or even removing, the caps on H-1B visas, the program that regulates how many high-skilled foreign workers employers can bring into the country.

For the full story, see:

JOSH ZUMBRUN and MATT STILES. "Study: Skilled Foreign Workers a Boon to Pay." The Wall Street Journal (Fri., May 23, 2014): A6.

(Note: ellipsis added.)

(Note: the online version of the story has the date May 22, 2014, and has the title "Skilled Foreign Workers a Boon to Pay, Study Finds.")

The paper discussed in the passage quoted above, is:

Peri, Giovanni, Kevin Shih, and Chad Sparber. "Foreign Stem Workers and Native Wages and Employment in U.S. Cities." National Bureau of Economic Research, Inc, NBER Working Paper Number 20093, May 2014.

November 12, 2014

FDR Ruthlessly Manipulated Political Process

(p. D8) Michael C. Janeway, a former editor of The Boston Globe and executive editor of The Atlantic Monthly who wrote two books chronicling what he saw as the intertwined decline of democracy and journalism in the United States, died on Thursday [April 17, 2014] at his home in Lakeville, Conn.

. . .

The second book, "The Fall of the House of Roosevelt: Brokers of Ideas and Power From FDR to LBJ," published in 2004, measured some of the ideas in his first book against the history of the New Deal. It focused on President Franklin D. Roosevelt's inner circle of advisers, a group of political operatives and thinkers often called Roosevelt's "brain trust," who helped conceive ideas like the minimum wage, Social Security and federal bank deposit insurance.

Mr. Janeway's father, Eliot Janeway, an economist, Democratic hand and columnist for Time magazine (a portfolio not unheard-of in those days), was a prominent member of that group.

Michael Janeway suggested that in undertaking the radical changes necessary to yank the "shattered American capitalist system into regulation and reform," Roosevelt and his team manipulated the political process with a level of ruthlessness that may have been justified by the perils of the times. But in the years that followed, he wrote, the habit of guile and highhandedness devolved into the kind of arrogance that defined -- and doomed -- the presidency of Lyndon B. Johnson, Roosevelt's last political heir.

For the full obituary, see:

PAUL VITELLO. "Michael Janeway, 73, Former Editor of The Boston Globe." The New York Times (Sat., APRIL 19, 2014): D8.

(Note: ellipsis, and bracketed date, added.)

(Note: the online version of the obituary has title "Michael Janeway, Former Editor of The Boston Globe, Dies at 73.")

The book mentioned in the passage quoted above is:

Janeway, Michael. The Fall of the House of Roosevelt: Brokers of Ideas and Power from FDR to LBJ, Columbia Studies in Contemporary American History. New York: Columbia University Press, 2004.

November 10, 2014

Pay Gap Widest in Jobs that Value Long Hours, Face Time and Being on Call


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

(p. B3) "The gender gap in pay would be considerably reduced and might vanish altogether if firms did not have an incentive to disproportionately reward individuals who labored long hours and worked particular hours," [Harvard economist Claudia Goldin] . . . wrote in a paper published [in April 2014] . . . in The American Economic Review.

Occupations that most value long hours, face time at the office and being on call -- like business, law and surgery -- tend to have the widest pay gaps. That is because those employers pay people who spend longer hours at the office disproportionately more than they pay people who don't, Dr. Goldin found. A lawyer who works 80 hours a week at a big corporate law firm is paid more than double one who works 40 hours a week as an in-house counsel at a small business.

Jobs in which employees can easily substitute for one another have the slimmest pay gaps, and those workers are paid in proportion to the hours they work.

Pharmacy is Dr. Goldin's favorite example. A pharmacist who works 40 hours a week generally earns double the salary of a pharmacist who works 20 hours a week, and as a result, the pay gap for pharmacists is one of the smallest.

Pharmacy became such an equitable profession not because of activism but because of changes in the labor market (fewer self-owned pharmacies and more large corporations) and changes in technology (storing patient records on computers where they are easily accessible by any pharmacist).

For the full story, see:

Claire Cain Miller. "Pay Gap Is Because of Gender, Not Jobs." The New York Times (Thurs., APRIL 24, 2014): B3.

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

(Note: the online version of the story has the date APRIL 23, 2014.)

The Goldin academic paper mentioned above, is:

Goldin, Claudia. "A Grand Gender Convergence: Its Last Chapter." American Economic Review 104, no. 4 (April 2014): 1091-119.

November 7, 2014

Wal-Mart Nimbly Evades Bank Industry Efforts to Restrict Competition

(p. B3) Here comes Wal-Bank.

After years of thwarted efforts to break into banking, Walmart is making its biggest foray yet into everyday financial services.

Walmart, the nation's largest retailer, is teaming up with Green Dot, known for its prepaid payment cards, to supply checking accounts to almost anyone over 18 who passes an ID check.

. . .

. . . the new Walmart initiative will be the first full-blown, off-the-shelf checking account. To help attract customers, Walmart and Green Dot will forgo a screening system many banks use to vet potential customers and rely instead on a proprietary system. The model is expected to allow almost any consumer who passes an identification check to open an account in minutes, according to Green Dot.

In the past, Walmart has tried to secure a federal bank charter to become a deposit-taking bank, but abandoned that effort in 2007 in the face of opposition from the banking industry. Since then, the retailer has assembled an array of services that could be offered without a charter, as well as partnerships with financial service companies like Green Dot.

For the full story, see:

HIROKO TABUCHI and JESSICA SILVER-GREENBERG. "Finding a Door Into Banking, Walmart Prepares to Offer Checking Accounts." The New York Times (Weds., SEPT. 24, 2014): B3.

(Note: ellipses added.)

(Note: the online version of the story has the date SEPT. 23, 2014, and has the title "Walmart Prepares to Offer Low-Cost Checking Accounts.")

October 27, 2014

China May Have Higher Incomes, But India Has Freedom and Hope

(p. A11) The author remains generally optimistic about India's prospects. Economic reforms that began in 1991 have quickened growth. On average, GDP has grown nearly 7% a year since then. Thanks to a media revolution that began in the 1990s and has exploded over the past decade, a state-owned monopoly over television news has given way to upward of 450 raucous channels that make Fox News look staid by comparison. The author argues that together these two trends have sparked a kind of virtuous cycle: Better-educated and better-fed Indians are demanding more from their politicians. A take-no-prisoners media will keep them on their toes.

. . .

Educated Indians can't stop complaining about the politicians who lead them. Yet, echoing the historian Ramachandra Guha, Mr. Denyer argues that India's main success since its independence in 1947 has been political rather than economic. It has strengthened its democratic institutions and nurtured religious and cultural pluralism. Despite the fact that the average Indian earned $1,500 last year, less than a fourth of the average Chinese, it is in New Delhi, not Beijing, that you can afford to call the president (or prime minister) a blithering idiot without worrying about a midnight knock on the door.

For the full review, see:

SADANAND DHUME. "BOOKSHELF; Book Review: 'Rogue Elephant' by Simon Denyer; The average Indian earns less than the average Chinese. But it's in New Delhi--not Beijing--where you can call the prime minister an idiot without worrying about a knock on the door." The Wall Street Journal (Mon., July 28, 2014): A11.

(Note: ellipsis added.)

(Note: the online version of the review has the date July 27, 2014, and has the title "BOOKSHELF; Book Review: 'Rogue Elephant' by Simon Denyer; The average Indian earns less than the average Chinese. But it's in New Delhi--not Beijing--where you can call the prime minister an idiot without worrying about a knock on the door.")

The book being reviewed is:

Denyer, Simon. Rogue Elephant: Harnessing the Power of India's Unruly Democracy. New York: Bloomsbury Press, 2014.

October 25, 2014

American Poor Are Richer Now than in the Past

PriceChangesBySectorGraph2014-10-07.jpgSource of graph: online version of the NYT article quoted and cited below.

(p. A1) WASHINGTON -- Is a family with a car in the driveway, a flat-screen television and a computer with an Internet connection poor?

Americans -- even many of the poorest -- enjoy a level of material abundance unthinkable just a generation or two ago.

. . .

(p. B2) Two broad trends account for much of the change in poor families' consumption over the past generation: federal programs and falling prices.

Since the 1960s, both Republican and Democratic administrations have expanded programs like food stamps and the earned-income tax credit. In 1967, government programs reduced one major poverty rate by about 1 percentage point. In 2012, they reduced the rate by nearly 13 percentage points.

As a result, the differences in what poor and middle-class families consume on a day-to-day basis are much smaller than the differences in what they earn.

"There's just a whole lot more assistance per low-income person than there ever has been," said Robert Rector, a senior research fellow at the conservative Heritage Foundation. "That is propping up the living standards to a considerable degree," he said, citing a number of statistics on housing, nutrition and other categories.

. . .

. . . another form of progress has led to what some economists call the "Walmart effect": falling prices for a huge array of manufactured goods.

Since the 1980s, for instance, the real price of a midrange color television has plummeted about tenfold, and televisions today are crisper, bigger, lighter and often Internet-connected. Similarly, the effective price of clothing, bicycles, small appliances, processed foods -- virtually anything produced in a factory -- has followed a downward trajectory. The result is that Americans can buy much more stuff at bargain prices.

For the full story, see:

ANNIE LOWREY. "Changed Life of the Poor: Better Off, but Far Behind." The New York Times (Mon., May 1, 2014): A1 & B2 (sic).

(Note: ellipses added.)

(Note: the online version of the story has the date APRIL 30, 2014, and has the title "Changed Life of the Poor: Better Off, but Far Behind.")

October 23, 2014

The Invention of the Vacuum Tube as a Revolutionary Event

(p. A11) Mr. Bryce's engrossing survey has two purposes. The first is to refute pessimists who claim that technology-driven economic growth will burn through the planet's resources and lead to catastrophe. "We are living in a world equipped with physical-science capabilities that stagger the imagination," he writes. "If we want to bring more people out of poverty, we must embrace [technological innovation], not reject it." The book's other purpose is to persuade climate-change fundamentalists that they are standing on the wrong side of history. Instead of saving the planet by going backward to Don Quixote's windmills, they need to take a progressive approach to technology itself, he says, striving to make nuclear power safer, for instance, and using the hydrocarbon revolution sparked by fracking and deep-offshore exploration to bridge the way to the future.

. . .

Mr. Bryce focuses in particular on the vacuum tube, designed in 1906 by Lee de Forest, the man also credited with inventing the radio.

The discovery of the vacuum tube, Mr. Bryce says, was a revolutionary event. By trapping the energy generated from the free flow of electrons and directing it to boost a small AC current into a much larger one, de Forest created electric amplification--which the transistor and integrated circuit would multiply exponentially.

For the full review, see:

ARTHUR HERMAN. "BOOKSHELF; How to Defuse the Power Elite; To compel the switch from fossil fuels to wind and solar power is to consign billions of people to a life of poverty and darkness." The Wall Street Journal (Thurs., May 22, 2014): A11.

(Note: ellipsis added.)

(Note: the online version of the review has the date May 21, 2014, and has the title "BOOKSHELF; Book Review: 'Smaller Faster Lighter Denser Cheaper' by Robert Bryce; To compel the switch from fossil fuels to wind and solar power is to consign billions of people to a life of poverty and darkness.")

The book being reviewed is:

Bryce, Robert. Smaller Faster Lighter Denser Cheaper: How Innovation Keeps Proving the Catastrophists Wrong. New York: PublicAffairs, 2014.

October 22, 2014

Nevada Government Lets Tesla Sell Directly to Consumers

(p. A13) . . . in addition to rubber-stamping the agreement that waived Tesla's property, sales and business taxes for a decade or more--while throwing in discount power rates--the Nevada legislature also approved a bill last week that would exempt the auto maker from franchising regulations outlawing the company's retail approach. The state's auto dealers, who only weeks ago threatened to sue over the matter, shifted gears and endorsed the legislation.

"My car dealers want to assist in any way they can," John Sande of the Nevada Franchise Auto Dealers Association told the Reno Gazette Journal. "Nevada law does not allow Tesla to come in and sell directly to the consumer, so we are going to have to come in and change it so they can sell directly to the consumer."

No doubt the dealers balanced the pros and cons of agitating for their own self-interest against overwhelming political support for the deal and the spending potential of thousands of new, well-paid workers who may prefer a Ford or Chevy pickup over a $70,000 Tesla Model S. But the fact that Nevada legislators so quickly jettisoned a key provision of the state's dealership-franchise provisions speaks volumes about how essential these statutes really are to the well-being of their constituents.

There is no rational reason Tesla--or any other automobile manufacturer--should be restricted from selling new cars directly to those who seek to buy them.

For the full commentary, see:

JOHN KERR. "OPINION; Tesla Breaks the Auto Dealer Cartel; Nevada lets the electric car maker sell directly to consumers. Too bad everyone else still can't." The Wall Street Journal (Weds., Sept. 17, 2014): A13.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Sept. 16, 2014.)

October 21, 2014

Apprenticeships as an Alternative to Education Credentials

(p. R3) College degrees and internships don't produce the same quality of worker as intensive, on-the-job apprenticeships, says Brad Neese, director of Apprenticeship Carolina, a program of the South Carolina Technical College System. Employers are seeing "a real lack of applicability in terms of skill level" from college graduates, Mr. Neese says. "Interns do grunt work, generally." In contrast, he says, "an apprenticeship is a real job."

. . .

"The apprenticeship model helps us show people there's a career path within this company," says Robby Hill, owner of HillSouth, a Florence, S.C., technology consulting firm taking advantage of South Carolina's on-the-job training program. New employees see the opportunities ahead, along with a clearly delineated ladder of skill acquisition and salary increases, says Mr. Hill, whose 22-person firm offers apprenticeships for IT and administrative-support employees. The company also asks employees to sign noncompete agreements as they get accredited for new skills.

For the full story, see:

LAUREN WEBER. "JOURNAL REPORTS: LEADERSHIP IN HR; Here's One Way to Solve the Skills Gap. Apprenticeships Can Help Give Companies the Employees They Need. So Why Aren't There More of Them." The Wall Street Journal (Mon., April 28, 2014): R3.

(Note: ellipsis added.)

(Note: the online version of the story has the date April 27, 2014, and has the title "JOURNAL REPORTS: LEADERSHIP; Apprenticeships Help Close the Skills Gap. So Why Are They in Decline? Some States Try Extending the Practice to More Professions.")

October 17, 2014

French Socialist Wants to Encourage Entrepreneurs by Reducing Regulations

MacronFrenchSocialist2014-10-07.jpg "Emmanuel Macron, France's new economy minister, has been a major force behind a recent shift by President François Hollande toward a more centrist economic policy." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B3) . . . , what is important, Mr. Macron said, as a late train from the nearby Gare de Lyon rumbled beneath his window, is that France continue to streamline and modernize the welfare state.

"For me being a Socialist today is about defending the unemployed, but also defending businessmen who want to create a company, and those who need jobs," he said. "We have to shift the social model from a lot of formal protections toward loosening bottlenecks in the economy."

For the full story, see:

LIZ ALDERMAN. "France's 36-Year-Old Economy minister Is Face of the New Socialism." The New York Times (Tues., OCT. 7, 2014): B3.

(Note: ellipsis added.)

(Note: the online version of the story has the date OCT. 6, 2014, and has the title "Emmanuel Macron, Face of France's New Socialism.")

October 15, 2014

We Feel Safer When We Have More Personal Control

(p. C3) So how should we approach risk? The numbers can help, especially if we simplify them. For acute risks, a good measure is the MicroMort, devised by Stanford's Ronald A. Howard in the 1970s. One MicroMort (1 MM) is equal to a one-in-a-million chance of death.

. . .

In truth, "Don't do that, it's dangerous!" is about much more than the numbers. We must also reflect on the full basis for our preferences--such as, to take one small psychological characteristic among many, what we value in life, as well as what we fear.

. . .

In fact, the numbers tend to have the effect of highlighting the psychological factors. Take traveling. For 1 MM, you can drive 240 miles in the U.S., fly 7,500 miles in a commercial aircraft or fly just 12 miles in a light aircraft. We tend to feel safer if we feel more personal control, but we have no control whatsoever in a passenger jet, the safest of all (notwithstanding last week's terrible tragedy). You could take that as evidence of human irrationality. We take it as evidence that human motives matter more than the pure odds allow.

For the full commentary, see:

MICHAEL BLASTLAND and DAVID SPIEGELHALTER. "Risk Is Never a Strict Numbers Game; We tell children to shun ecstasy but don't fret about horseback riding--and other foibles of our view of danger." The Wall Street Journal (Sat., July 19, 2014): C3.

(Note: ellipses in original.)

(Note: the online version of the commentary has the date July 18, 2014.)

The passages quoted above were from a commentary adapted from the book:

Blastland, Michael, and David Spiegelhalter. The Norm Chronicles: Stories and Numbers About Danger and Death. New York: Basic Books, 2014.

October 14, 2014

Boring Jobs Cause Stress and Lower Productivity

(p. B4) A study published this year in the journal Experimental Brain Research found that measurements of people's heart rates, hormonal levels and other factors while watching a boring movie -- men hanging laundry -- showed greater signs of stress than those watching a sad movie.

"We tend to think of boredom as someone lazy, as a couch potato," said James Danckert, a professor of neuroscience at the University of Waterloo in Ontario, Canada, and a co-author of the paper. "It's actually when someone is motivated to engage with their environment and all attempts to do so fail. It's aggressively dissatisfying."

It's not just the amount of work, Professor Spector said, also but the type.   . . .

"You can be very busy and a have a lot to do and still be bored," he said. The job -- whether a white-collar managerial position or blue-collar assembly line role -- also needs to be stimulating.

. . .

In a 2011 paper based on the doctoral dissertation of his student Kari Bruursema, Professor Spector and his co-authors found that the stress of boredom can lead to counterproductive work behavior, like calling in sick, taking long breaks, spending time on the Internet for nonwork-related reasons, gossiping about colleagues, playing practical jokes or even stealing. While most workers engage in some of these activities at times, the bored employee does it far more frequently, he said.

For the full story, see:

ALINA TUGEND. "Shortcuts; The Contrarians on Stress: It Can Be Good for You." The New York Times (Sat., OCT. 4, 2014): B4.

(Note: ellipsis added.)

(Note: the online version of the story has the date OCT. 3, 2014.)

The Experimental Brain Research study mentioned above, is:

Merrifield, Colleen, and James Danckert. "Characterizing the Psychophysiological Signature of Boredom." Experimental Brain Research 232, no. 2 (Feb. 2014): 481-91.

The article mentioned above, that is co-authored by Spector, is:

Bruursema, Kari, Stacey R. Kessler, and Paul E. Spector. "Bored Employees Misbehaving: The Relationship between Boredom and Counterproductive Work Behaviour." Work & Stress 25, no. 2 (April 2011): 93-107.

October 13, 2014

Mexicans Abandon Government Subsidized Housing Developments

(p. A5) ZUMPANGO, Mexico -- In an enormous housing development on the edge of this scrappy commuter town, Lorena Serrano's 11-foot-wide shoe box of a home is flanked by abandoned houses. The neighborhood has two schools, a few bodegas and a small community center that offers zumba classes.

There is very little else.

"There are no jobs, no cinema, no cantina," said Ms. Serrano of the 8,000-home development, called La Trinidad. Her husband's commute to the capital, Mexico City, about 35 miles south, takes two hours each way by bus and consumes a quarter of his salary, she said. "We're in the middle of nowhere."

Ms. Serrano, 39, is among more than five million Mexicans who, over the past decade, bought houses through a government program that made mortgages available to low-income buyers.

The program, initially hailed by some experts as the answer to Mexico's chronic housing deficit, fueled a frenzy of construction and helped inspire similar efforts in Latin America and beyond, including Brazil's "My House, My Life," which aims to build at least 3 million homes by this year.

But the concrete sprawl around Mexico City and other big towns grew faster than demand. Commutes proved unbearable, and residents abandoned their homes.

For the full story, see:

VICTORIA BURNETT. "ZUMPANGO JOURNAL; They Built It. People Came. Now They Go." The New York Times (Tues., SEPT. 9, 2014): A5.

(Note: the online version of the story has the date SEPT. 8, 2014.)

October 10, 2014

Labor Process Innovations Increased Productivity

(p. 6) . . . , Greg Clark, a professor of economics at the University of California, Davis, has gone so far as to argue that the Industrial Revolution was in part a self-control revolution. Many economists, beginning with Adam Smith, have argued that factories -- an important innovation of the Industrial Revolution -- blossomed because they allowed workers to specialize and be more productive.

Professor Clark argues that work rules truly differentiated the factory. People working at home could start and finish when they wanted, a very appealing sort of flexibility, but it had a major drawback, he said. People ended up doing less work that way.

Factories imposed discipline. They enforced strict work hours. There were rules for when you could go home and for when you had to show up at the beginning of your shift. If you arrived late you could be locked out for the day. For workers being paid piece rates, this certainly got them up and at work on time. You can even see something similar with the assembly line. Those operations dictate a certain pace of work. Like a running partner, an assembly line enforces a certain speed.

As Professor Clark provocatively puts it: "Workers effectively hired capitalists to make them work harder. They lacked the self-control to achieve higher earnings on their own."

The data entry workers in our study, centuries later, might have agreed with that statement. In fact, 73 percent of them did agree to this statement: "It would be good if there were rules against being absent because it would help me come to work more often."

Of course with newer forms of technology, showing up for work on time need not mean being physically at a given workplace. A study by the economists Nicholas Bloom, John Roberts and Zhichun Ying of Stanford and James Liang of Peking University looked at call center workers in China. In their experiment, some workers were randomly assigned to work at home, others worked in group call centers. The work habits of both groups were carefully monitored electronically, and the workers knew it. The researchers found that those working at home were 13 percent more productive than those in call centers. With modern technology, we now have so many ways to quantify, track and motivate productivity. We do not need to lock factory doors or even have a factory. Yet we have not yet begun to scratch the surface of motivating production in this way.

For the full commentary, see:

SENDHIL MULLAINATHAN. "Economic View; Looking at Productivity as a State of Mind." The New York Times, SundayBusiness Section (Sun., SEPT. 28, 2014): 6.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date SEPT. 27, 2014.)

The article mentioned above by Clark is:

Clark, Gregory. "Factory Discipline." Journal of Economic History 54, no. 1 (March 1994): 128-63.

The article mentioned above by Bloom, Liang, Roberts and Ying is:

Bloom, Nicholas, James Liang, John Roberts, and Zhichun Jenny Ying. "Does Working from Home Work? Evidence from a Chinese Experiment." August 18, 2014.

October 9, 2014

Feds Allow Hollywood to Use Drones

(p. B1) LOS ANGELES -- The commercial use of drones in American skies took a leap forward on Thursday [Sept. 25, 2014] with the help of Hollywood.

The Federal Aviation Administration, responding to applications from seven filmmaking companies and pressure from the Motion Picture Association of America, said six of those companies could use camera-equipped drones on certain movie and television sets. Until now, the F.A.A. has not permitted commercial drone use except for extremely limited circumstances in wilderness areas of Alaska.

Put bluntly, this is the first time that companies in the United States will be able to legally use drones to fly over people.

The decision has implications for a broad range of industries including agriculture, energy, real estate, the news media and online retailing. "While the approval for Hollywood is very limited in scope, it's a message to everyone that this ball is rolling," said Greg Cirillo, chairman of the aviation practice at Wiley Rein, a law firm in Washington.

Michael P. Huerta, the administrator of the F.A.A., said at least 40 similar applications were pending from companies beyond Hollywood. One is Amazon, which wants permission to move forward with a drone-delivery service. Google has acknowledged "self-flying vehicle" tests in the Australian outback.

"Today's announcement is a significant milestone in broadening commercial use," Anthony R. Foxx, secretary of transportation, told reporters in a conference call.

For the full story, see:

BROOKS BARNES. "Drone Exemptions for Hollywood Pave the Way for Widespread Use." The New York Times (Fri., SEPT. 26, 2014): B1 & B7.

(Note: bracketed date added.)

(Note: the online version of the story has the date SEPT. 25, 2014.)

October 6, 2014

Shellshock Bug Shows Low Quality of Open Source Software

(p. B1) Long before the commercial success of the Internet, Brian J. Fox invented one of its most widely used tools.

In 1987, Mr. Fox, then a young programmer, wrote Bash, short for Bourne-Again Shell, a free piece of software that is now built into more than 70 percent of the machines that connect to the Internet. That includes servers, computers, routers, some mobile phones and even everyday items like refrigerators and cameras.

On Thursday [Sept. 25, 2014], security experts warned that Bash contained a particularly alarming software bug that could be used to take control of hundreds of millions of machines around the world, potentially including Macintosh computers and smartphones that use the Android operating system.

The bug, named "Shellshock," drew comparisons to the Heartbleed bug that was discovered in a crucial piece of software last spring.

But Shellshock could be a bigger threat. While Heartbleed could be used to do things like steal passwords from a server, Shellshock can be used to take over the entire machine. And Heartbleed went unnoticed for two years and affected an estimated 500,000 machines, but Shellshock was not discovered for 22 years.

. . .

Mr. Fox maintained Bash -- which serves as a sort of software interpreter for different commands from a user -- for five years before handing over the reins to Chet Ramey, a 49-year-old programmer who, for the last 22 years, has maintained the software as an unpaid hobby. That is, when he is not working at his day job as a senior technology architect at Case Western Reserve University in Ohio.

. . .

(p. 2) The mantra of open source was perhaps best articulated by Eric S. Raymond, one of the elders of the open-source movement, who wrote in 1997 that "given enough eyeballs, all bugs are shallow." But, in this case, Steven M. Bellovin, a computer science professor at Columbia University, said, those eyeballs are more consumed with new features than quality. "Quality takes work, design, review and testing and those are not nearly as much fun as coding," Mr. Bellovin said. "If the open-source community does not develop those skills, it's going to fall further behind in the quality race."

For the full story, see:

NICOLE PERLROTH. "Flaw in Code Puts Millions At Big Risk." The New York Times (Fri., SEPT. 26, 2014): B1-B2.

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

(Note: the online version of the story has the date SEPT. 25, 2014, and has the title "Security Experts Expect 'Shellshock' Software Bug in Bash to Be Significant.")

October 5, 2014

Feds Protect Us from Baby Photos

(p. 1) Pictures of smiling babies crowd a bulletin board in a doctor's office in Midtown Manhattan, in a collage familiar to anyone who has given birth. But the women coming in to have babies of their own cannot see them. They have been moved to a private part of the office, replaced in the corridors with abstract art.

"I've had patients ask me, 'Where's your baby board?' " said Dr. Mark V. Sauer, the director of the office, which is affiliated with Columbia University Medical Center. "We just tell them the truth, which is that we no longer post them because of concerns over privacy."

For generations, obstetricians and midwives across America have proudly posted photographs of the babies they have delivered on their office walls. But this pre-digital form of social media is gradually going the way of cigars in the waiting room, because of the federal patient privacy law known as Hipaa.

Under the law, the Health Insurance Portability and Accountability Act, baby photos are a type of protected health information, no less than a medical chart, birth date or Social Security number, according to the Department of Health and Human Services. Even if a parent sends in the photo, it is considered private unless the parent also sends written authorization for its posting, which almost no one does.

For the full story, see:

ANEMONA HARTOCOLLIS. "Baby Pictures at the Doctor's? Cute, Sure, but Illegal." The New York Times, First Section (Sun., AUG. 10, 2014): 1 & 19.

(Note: the online version of the story has the date AUG. 9, 2014.)

October 2, 2014

Regulations Deter Start-Ups, Creating a "Senile Economy"

(p. 5B) We may have a "senile economy," says economist Robert Litan of the Brookings Institution. That's senile as in old, rigid and undynamic.

. . .

Litan is not just blowing smoke. In a new study, he and Ian Hathaway measured the age of American businesses. They were astonished by what they found: From 1992 to 2011, the share of U.S. firms that were 16 and older jumped from 23 percent to 34 percent.

. . .

What happened to all the entrepreneurs? Good question.

"We do not have an explanation," write the University of Maryland and the Census Bureau economists. Neither does Litan. "One theory is that the cumulative effect of regulations," he says, discriminates against new businesses and favors "established firms that have the experience and resources to deal with it." What allegedly deters and hampers startups is not any one regulation but the cost and time of complying with a blizzard of them.

For the full commentary, see:

ROBERT J. SAMUELSON. "Fewer entrepreneurs spells trouble." Omaha World-Herald (Mon., August 11, 2014): 5B.

(Note: ellipses added.)

The article mentioned above by Hathaway and Litan is:

Hathaway, Ian, and Robert E. Litan. "The Other Aging of America: The Increasing Dominance of Older Firms." In Economic Studies at Brookings, The Brookings Institution (July 2014): 1-17.

September 28, 2014

Pause in Global Warming Invalidates Climate-Change Models

(p. A13) When the climate scientist and geologist Bob Carter of James Cook University in Australia wrote an article in 2006 saying that there had been no global warming since 1998 according to the most widely used measure of average global air temperatures, there was an outcry. A year later, when David Whitehouse of the Global Warming Policy Foundation in London made the same point, the environmentalist and journalist Mark Lynas said in the New Statesman that Mr. Whitehouse was "wrong, completely wrong," and was "deliberately, or otherwise, misleading the public."

We know now that it was Mr. Lynas who was wrong. Two years before Mr. Whitehouse's article, climate scientists were already admitting in emails among themselves that there had been no warming since the late 1990s. "The scientific community would come down on me in no uncertain terms if I said the world had cooled from 1998," wrote Phil Jones of the University of East Anglia in Britain in 2005. He went on: "Okay it has but it is only seven years of data and it isn't statistically significant."

If the pause lasted 15 years, they conceded, then it would be so significant that it would invalidate the climate-change models upon which policy was being built. A report from the National Oceanic and Atmospheric Administration (NOAA) written in 2008 made this clear: "The simulations rule out (at the 95% level) zero trends for intervals of 15 yr or more."

Well, the pause has now lasted for 16, 19 or 26 years--depending on whether you choose the surface temperature record or one of two satellite records of the lower atmosphere. That's according to a new statistical calculation by Ross McKitrick, a professor of economics at the University of Guelph in Canada.

For the full commentary, see:

MATT RIDLEY. "OPINION; Whatever Happened to Global Warming? Now come climate scientists' implausible explanations for why the 'hiatus' has passed the 15-year mark." The Wall Street Journal (Fri., Sept. 5, 2014): A13.

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

The article mentioned above by economist McKitrick is:

McKitrick, Ross R. "HAC-Robust Measurement of the Duration of a Trendless Subsample in a Global Climate Time Series." Open Journal of Statistics 4 (2014): 527-35.

For a possible deeper explanation of the McKitrick results, you may consult:

McMillan, David G., and Mark E. Wohar. "The Relationship between Temperature and CO2 Emissions: Evidence from a Short and Very Long Dataset." Applied Economics 45, no. 26 (2013): 3683-90.

September 24, 2014

Less Time in Office Leaves Workers Happier, Less Stressed and Equally Productive

(p. 4) A recent study, published in The American Sociological Review, aimed to see whether the stress of work-life conflicts could be eased if employees had more control over their schedules, including being able to work from home.   . . .

The study, financed by the National Institutes of Health and the Centers for Disease Control and Prevention, involved the information technology department of a large corporation.   . . .

As part of the research, department managers received training to encourage them to show support for employees' family and personal lives, said Erin Kelly, a sociology professor at the University of Minnesota and one of the lead authors of the study. Then employees were given much more control over their schedules than before. They "were free to work where and when they preferred, as long as the work got done," she said.

The results: The employees almost doubled the amount of time they worked at home, to an average of 19.6 hours from 10.2 hours. Total work hours remained roughly the same. Focusing on results rather than time spent at the office, and cutting down on "low value" meetings and other tasks, helped employees achieve more flexibility, Professor Kelly said.

Compared with another group that did not have the same flexibility, employees interviewed by the researchers said they felt happier and less stressed, had more energy and were using their time more effectively, Professor Kelly said. There was no sign that the quality of the work improved or declined with the changed schedules, she added.

For the full story, see:

PHYLLIS KORKKI. "Yes, Flexible Hours Ease Stress. But Is Everyone on Board?." The New York Times, SundayBusiness Section (Sun., AUG. 24, 2014): C4.

(Note: the online version of the story has the date AUG. 23, 2014.)

The study mentioned above is:

Kelly, Erin L., Phyllis Moen, and Eric Tranby. "Changing Workplaces to Reduce Work-Family Conflict: Schedule Control in a White-Collar Organization." American Sociological Review 76, no. 2 (April 2011): 265-90.

September 20, 2014

Modelers Can Often Obtain the Desired Result

(p. A13) After earning a master's degree in environmental engineering in 1982, I spent most of the next 10 years building large-scale environmental computer models. My first job was as a consultant to the Environmental Protection Agency. I was hired to build a model to assess the impact of its Construction Grants Program, a nationwide effort in the 1970s and 1980s to upgrade sewer-treatment plants.

The computer model was huge--it analyzed every river, sewer treatment plant and drinking-water intake (the places in rivers where municipalities draw their water) in the country. I'll spare you the details, but the model showed huge gains from the program as water quality improved dramatically. By the late 1980s, however, any gains from upgrading sewer treatments would be offset by the additional pollution load coming from people who moved from on-site septic tanks to public sewers, which dump the waste into rivers. Basically the model said we had hit the point of diminishing returns.

When I presented the results to the EPA official in charge, he said that I should go back and "sharpen my pencil." I did. I reviewed assumptions, tweaked coefficients and recalibrated data. But when I reran everything the numbers didn't change much. At our next meeting he told me to run the numbers again.

After three iterations I finally blurted out, "What number are you looking for?" He didn't miss a beat: He told me that he needed to show $2 billion of benefits to get the program renewed. I finally turned enough knobs to get the answer he wanted, and everyone was happy.

. . .

There are no exact values for the coefficients in models such as these. There are only ranges of potential values. By moving a bunch of these parameters to one side or the other you can usually get very different results, often (surprise) in line with your initial beliefs.

For the full commentary, see:

ROBERT J. CAPRARA. "OPINION; Confessions of a Computer Modeler; Any model, including those predicting climate doom, can be tweaked to yield a desired result. I should know." The Wall Street Journal (Weds., July 9, 2014): A13.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date July 8, 2014.)

September 17, 2014

Bill Gates on Xerox's Inventions and Mistakes

(p. C3) Not long after I first met Warren Buffett back in 1991, I asked him to recommend his favorite book about business. He didn't miss a beat: "It's 'Business Adventures,' by John Brooks, " he said. "I'll send you my copy." I was intrigued: I had never heard of "Business Adventures" or John Brooks.

Today, more than two decades after Warren lent it to me--and more than four decades after it was first published--"Business Adventures" remains the best business book I've ever read. John Brooks is still my favorite business writer. (And Warren, if you're reading this, I still have your copy.)

. . .

One of Brooks's most instructive stories is "Xerox Xerox Xerox Xerox." (The headline alone belongs in the Journalism Hall of Fame.) The example of Xerox is one that everyone in the tech industry should study. Starting in the early '70s, Xerox funded a huge amount of R&D that wasn't directly related to copiers, including research that led to Ethernet networks and the first graphical user interface (the look you know today as Windows or OS X).

But because Xerox executives didn't think these ideas fit their core business, they chose not to turn them into marketable products. Others stepped in and went to market with products based on the research that Xerox had done. Both Apple and Microsoft, for example, drew on Xerox's work on graphical user interfaces.

I know I'm not alone in seeing this decision as a mistake on Xerox's part. I was certainly determined to avoid it at Microsoft. I pushed hard to make sure that we kept thinking big about the opportunities created by our research in areas like computer vision and speech recognition. Many other journalists have written about Xerox, but Brooks's article tells an important part of the company's early story. He shows how it was built on original, outside-the-box thinking, which makes it all the more surprising that as Xerox matured, it would miss out on unconventional ideas developed by its own researchers. (To download a free e-book of "Xerox Xerox Xerox Xerox," go to

For the full review, see:

BILL GATES. "My Favorite Business Book." The Wall Street Journal (Sat., July 12, 2014): C3.

(Note: ellipsis added.)

(Note: the last quoted sentence is in the location, and has the wording, of the printer version, not the online version.)

(Note: the online version of the review has the date July 11, 2014, and has the title "Bill Gates's Favorite Business Book.")

The book being reviewed is:

Brooks, John. Business Adventures: Twelve Classic Tales from the World of Wall Street. pb ed. New York: Open Road Integrated Media, Inc., 2014.

September 16, 2014

Structural Reforms Needed to Increase Innovation

(p. A13) . . . , a lack of "demand" is no longer the problem.

. . .

Where, instead, are the problems? John Taylor, Stanford's Nick Bloom and Chicago Booth's Steve Davis see the uncertainty induced by seat-of-the-pants policy at fault. Who wants to hire, lend or invest when the next stroke of the presidential pen or Justice Department witch hunt can undo all the hard work? Ed Prescott emphasizes large distorting taxes and intrusive regulations. The University of Chicago's Casey Mulligan deconstructs the unintended disincentives of social programs. And so forth. These problems did not cause the recession. But they are worse now, and they can impede recovery and retard growth.

These views are a lot less sexy than a unicausal "demand," fixable by simple, magic-bullet policies. They require us to do the hard work of fixing the things we all agree need fixing: our tax code, our cronyist regulatory state, our welter of anticompetitive and anti-innovative protections, education, immigration, social program disincentives, and so on. They require "structural reform," not "stimulus," in policy lingo.

For the commentary, see:

JOHN H. COCHRANE. "OPINION; The Failure of Macroeconomics; When models don't yield the spending policies they want, some Keynesians abandon models--but not the spending." The Wall Street Journal (Thur., July 3, 2014): A13.

(Note: ellipses added.)

(Note: the online version of the commentary has the date July 2, 2014.)

September 5, 2014

"Malthus Was Wrong"

(p. 20) The biggest problem with Malthusiasm, as Mayhew addresses at length, is that Malthus was wrong. He thought England was nearing the limits of its ability to provide for its growing population. But as that population continued to grow in the 19th century, the country proved more than able to feed itself by increasing agricultural productivity and importing food that it could easily pay for with its industrial wealth. And toward the end of the century, birthrates began falling and population growth slowed.

. . .

There is evidence enough in this book for a pretty withering attack on Malthusianism, if not on Malthus. Mayhew, however, prefers the role of calm and evenhanded guide. At the end he's even hinting that today's Malthusian prophets of environmental doom are on to something. They may be: Just because Malthus was wrong about nature's limits in 1798 doesn't prove we won't ever hit those limits. Past performance is no guarantee of future results. Still, you'd think it would put more of a damper on people's Malthusiasm.

For the full review, see:

JUSTIN FOX. "Head Count." The New York Times Book Review (Sun., Aug. 3, 2014): 20.

(Note: ellipsis added.)

(Note: the online version of the review has the date Aug. 1, 2014. )

The book being reviewed is:

Mayhew, Robert J. Malthus: The Life and Legacies of an Untimely Prophet. Cambridge, MA: Belknap Press, 2014.

September 3, 2014

Predictors of Technological Doom Have "All Been Wrong"

GrowingAndDecliningJobsGraph2014.jpgSource of graph: online version of the NYT article quoted and cited below.

(p. 4) JUST over 50 years ago, the cover of Life magazine breathlessly declared the "point of no return for everybody." Above that stark warning, a smaller headline proclaimed, "Automation's really here; jobs go scarce."

As events unfolded, it was Life that was nearing the point of no return -- the magazine suspended weekly publication in 1972. For the rest of America, jobs boomed; in the following decade, 21 million Americans were added to the employment rolls.

Throughout history, aspiring Cassandras have regularly proclaimed that new waves of technological innovation would render huge numbers of workers idle, leading to all manner of economic, social and political disruption.

As early as 1589, Queen Elizabeth I refused a patent on a knitting machine for fear it would put "my poor subjects" out of work.

In the 1930s, the great John Maynard Keynes predicted widespread job losses "due to our discovery of means of economising the use of labour outrunning the pace at which we can find new uses for labour."

So far, of course, they've all been wrong. But that has not prevented a cascade of shrill new proclamations that -- notwithstanding centuries of history -- "this time is different": . . .

For the full commentary, see:

Steven Rattner. "Fear Not the Coming of the Robots." The New York Times, SundayReview Section (Sun., JUNE 22, 2014): 4.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date June 21, 2014.)

September 1, 2014

"The Metric System Can Be Our Operating System Without Being Our Interface"

(p. C6) The outcome was perhaps foreshadowed, as Mr. Marciano points out, when President Ford, using a customary unit, noted that American industries were "miles ahead" when it came to adopting the metric system.

Mr. Marciano tells his story more or less without editorializing, until the end. Surveying the centuries of fights over measurement, he finishes on a rather intriguing point: Standardization no longer matters that much.

. . .

. . . , with the computerization of life, we don't have to worry about converting from one measurement to another; our software does this for us. We can still speak in pounds or feet, even if everything in the world of manufacturing and technology is really, at bottom, done in the metric system. In the evocative terminology of Mr. Marciano, "the metric system can be our operating system without being our interface."

For the full review, see:

SAMUEL ARBESMAN. "Liters and Followers; Gerald Ford once proudly declared the country was 'miles ahead' in converting to the metric system." The Wall Street Journal (Sat., Aug. 2, 2014): C6.

(Note: ellipses added.)

(Note: the online version of the review has the date Aug. 1, 2014, and has the title "Book Review: 'Whatever Happened to the Metric System?' by John Bemelmans Marciano; Gerald Ford once proudly declared the country was 'miles ahead' in converting to the metric system." )

The book being reviewed is:

Marciano, John Bemelmans. Whatever Happened to the Metric System?: How America Kept Its Feet. New York: Bloomsbury USA, 2014.

August 28, 2014

"A Few Really Good Artisanal Cheese Shops Is No Substitute for a Strong School System"

(p. 836) Moretti's writing on the "creative class" takes issue with policies associated with Richard Florida, who has exerted a considerable influence on local policymakers worldwide. Moretti uses the example of Berlin, which is a cool place full of creative types but still isn't much of an economic powerhouse, to make the case against Florida's recommendations.

. . .

A problem exists if city governments start thinking that their main job is to be hip rather than competent. Having a few really good artisanal cheese shops is no substitute for a strong school system. Local leaders would do well to remember that an externality-creating skilled resident is as likely to be a forty-two-year-old mother who works in (p. 837) a lab as a twenty-five-year-old looking for a good time. The forty-two-year-old's tastes in local amenities are likely to be quite different from those of the twenty-five-year-old. If Moretti's caution against creative class policies achieves that end, then it will have done something quite positive.

For the full review, see:

Glaeser, Edward. "A Review of Enrico Moretti's the New Geography of Jobs." Journal of Economic Literature 51, no. 3 (Sept. 2013): 825-37.

(Note: ellipsis added.)

The book under review is:

Moretti, Enrico. The New Geography of Jobs. New York: Houghton Mifflin Harcourt Publishing Co., 2012.

August 27, 2014

Big Increase in Costs of Adhering to Moore's Law

(p. 219) Harald Bauer, Jan Veira, and Florian Weig consider "Moore's Law: Repeal or Renewal?" "Moore's law states that the number of transistors on integrated circuits doubles every two years, and for the past four decades it has set the pace for progress in the semiconductor industry. . . . Adherence to Moore's law has led to continuously falling semiconductor prices. Per-bit prices of dynamic random-access memory chips, for example, have fallen by as much as 30 to 35 percent a year for several decades. . . . Some estimates ascribe up to 40 percent of the global productivity growth achieved during the last two decades to the expansion of information and communication technologies made possible by semiconductor performance and cost improvements." But this continued technological progress comes at an ever-higher price. "A McKinsey analysis shows that moving from 32nm (p. 220) to 22nm nodes on 300-millimeter (mm) wafers causes typical fabrication costs to grow by roughly 40 percent. It also boosts the costs associated with process development by about 45 percent and with chip design by up to 50 percent. These dramatic increases will lead to process-development costs that exceed $1 billion for nodes below 20nm. In addition, the state-of-the art fabs needed to produce them will likely cost $10 billion or more. As a result, the number of companies capable of financing next-generation nodes and fabs will likely dwindle." McKinsey Global Institute, December 2013,


Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 28, no. 2 (Spring 2014): 213-20.

(Note: ellipses in original.)

August 23, 2014

The Vagueness and Regulatory Discretion of Dodd-Frank Is "a Recipe for Cronyism"

(p. 218) Aaron Steelman has an "Interview" with John Cochrane. On Dodd-Frank: "I think Dodd-Frank repeats the same things we've been trying over and over again that have failed, in bigger and bigger ways. . . . The deeper problem is the idea that we just need more regulation--as if regulation is something you pour into a glass like water--not smarter and better designed regulation. Dodd-Frank is pretty bad in that department. It is a long and vague law that spawns a mountain of vague rules, which give regulators huge discretion to tell banks what to do. It's a recipe for cronyism and for banks to game the system to limit competition." On how to stop bailing out large financial institutions: "You have to set up the system ahead of time so that you either can't or won't need to conduct bailouts. Ideally, both. . . . The worst possible system is one in which everyone thinks bailouts are coming, but the government in fact does not have the legal authority to bail out." . . . Econ Focus, Federal Reserve Bank of Richmond, Third Quarter 2013, pp. 34-38. https://www.richmondfed


Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 28, no. 1 (Winter 2014): 235-42.

(Note: italics, and first two ellipses, are in original; the last ellipsis is added.)

August 19, 2014

Political Entrepreneurs Can Find Ways to Overcome Vested Interests

[p. 202] In their recent book, Leighton and López (2013) place special emphasis on political entrepreneurship in making policy reform possible. For new ideas to overcome vested interests, they write (p. 134), it must be the case that "entrepreneurs notice and exploit those loose spots in the structure of ideas, institutions, and incentives." They provide four case studies of this process: spectrum license auctions, airline deregulation, welfare reform, and housing finance. In their words (p. 178): "[T]he public face of political change may be that of a madman, an intellectual, or an academic scribbler. But whatever form these leaders may take, they are political entrepreneurs--people whose ideas and actions are focused on producing change." As these authors stress, political entrepreneurship can be socially harmful, as when the pursuit of individual rents comes at the expense of overall inefficiency. But the returns from shifting the political transformation frontier out can be very large as well.

. . .

(p. 206) I owe a special debt to the recent book by Edward López and Wayne Leighton (2012 sic) for stimulating me to put down on paper a number of ideas I had been mulling over for some time.


Rodrik, Dani. "When Ideas Trump Interests: Preferences, Worldviews, and Policy Innovations." Journal of Economic Perspectives 28, no. 1 (Winter 2014): 189-208.

(Note: the bracketed page number refers to the Rodrik article; the page number in parentheses refers to the Leighton and López book; ellipsis added; italics, and the bracketed letter, in the original.)

The book Rodrik discusses is:

Leighton, Wayne A., and Edward J. López. Madmen, Intellectuals, and Academic Scribblers: The Economic Engine of Political Change. Stanford, CA: Stanford University Press, 2013.

August 16, 2014

Process Innovations, Allowed by Deregulation, Creatively Destroyed Railroads

(p. A11) In "American Railroads: Decline and Renaissance in the Twentieth Century," transportation economists Robert E. Gallamore and John R. Meyer provide a comprehensive account of both the decline and the revival.   . . .    They point to excessive government regulation of railroad rates and services as the catalyst for the industry's decay.

. . .

. . . deregulation, Mr. Gallamore and Meyer demonstrate, was a process of creative destruction. Conrail was created by the government in 1976 in a risky, last-ditch attempt to rescue Penn Central and other bankrupt Eastern railroads. It was quickly losing $1 million a day, and its plight helped make the case for the major revamp of railroad regulation that came in 1980. A wave of mergers followed, and the new companies slashed routes and employees on the way to profitability. The shrinking of the national rail system helped, too, as freight companies consolidated traffic on a smaller (and therefore cheaper) network. Freight-train crews were cut to two or three people from four or five. Cabooses were replaced by electronic gear at the end of freight trains.

For the full review, see:

DANIEL MACHALABA. "BOOKSHELF; Long Train Runnin'; Track conditions got so bad in the 1970s that stationary freight cars were falling off the rails thanks to rotting crossties." The Wall Street Journal (Weds., July 9, 2014): A11.

(Note: ellipses added.)

(Note: the online version of the review has the date July 8, 2014, and has the title "BOOKSHELF; Book Review: 'American Railroads' by Robert E. Gallamore and John R. Meyer; Track conditions got so bad in the 1970s that stationary freight cars were falling off the rails thanks to rotting crossties.")

The book under review is:

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

August 15, 2014

Flexibility of System of Industrial Relations Makes German Economy Strong

(p. 183) We have argued that the remarkable transformation of the German economy from the "sick man of Europe" to a lean and highly competitive economy within little more than a decade is rooted in the inherent flexibility of the German system of industrial relations. This system allowed German industry to react appropriately and flexibly over time to the demands of German unification, and the global challenges of a new world economy.


Dustmann, Christian, Bernd Fitzenberger, Uta Schoenberg, and Alexandra Spitz-Oener. "From Sick Man of Europe to Economic Superstar: Germany's Resurgent Economy." Journal of Economic Perspectives 28, no. 1 (Winter 2014): 167-88.

August 13, 2014

"In the Name of God and of Profit"

Writing of the period of the mid to late 1300s in the area of Florence:

(p. 114) The surviving archive of a single great merchant of this period, Francesco di Marco Datini of nearby Prato--not, by any means, the greatest of these early capitalists--contains some 150,000 letters, along with 500 account books or ledgers, 300 deeds of partnership, 400 insurance policies, several thousand bills of lading, letters of advice, bills of exchange, and checks. On the first pages of Datini's ledgers were inscribed the words: "In the name of God and of profit."


Greenblatt, Stephen. The Swerve: How the World Became Modern. New York: W. W. Norton & Company, 2011.

August 11, 2014

Lynas Apologizes for Organizing Anti-GM (Genetic Modification) Movement

(p. 115) More than a decade and a half since the commercialization of first-generation agricultural biotechnology, concerns about transgenic crop impacts on human and environmental health remain, even though the experience across a cumulative 1.25 billion hectares suggests the relative safety of first-generation genetically engineered seed. The risks posed by agricultural biotechnology warrant continued attention, and new transgenic crops may pose different and bigger risks. Weighing against uncertain risks are benefits from increased food production, reduced insecticide use, and avoided health risks to food consumers and farm workers. At the same time, adoption is shown to increase herbicide use while reducing herbicide toxicity, save land by boosting yields while also making previously unfarmed lands profitable. Adoption benefits food consumers and farmers but also enriches seed companies that enjoy property right protections over new seed varieties. The (p. 116) balance of scientific knowledge weighs in favor of continued adoption of genetically engineered seed, which may explain why some longtime critics have reversed course. For example, Lord Melchett, who was the head of Greenpeace, has been advising biotechnology companies on overcoming constraints to the technology (St. Clair and Frank forthcoming). Mark Lynas, a journalist and organizer of the anti-GM (genetic modification) movement, publicly apologized for helping start the movement in his "Lecture to Oxford Farming Conference" (2013).

Agricultural biotechnology remains regulated by regimes developed at the introduction of the technology. Whereas precaution may have been appropriate before the relative magnitudes of risks and benefits could be empirically observed, accumulated knowledge suggests overregulation is inhibiting the introduction of new transgenic varieties. Regulation also discourages developing-country applications, where benefits are likely greatest. In the future, new genetic traits may promise greater benefits while also posing novel risks of greater magnitudes than existing traits. Efficient innovation and technology adoption will require different and, perhaps, more stringent regulation in the future, as well as continued insights from researchers, including economists, in order to assess evolving costs and benefits.


Barrows, Geoffrey, Steven Sexton, and David Zilberman. "Agricultural Biotechnology: The Promise and Prospects of Genetically Modified Crops." Journal of Economic Perspectives 28, no. 1 (Winter 2014): 99-120.

August 10, 2014

McCloskey's "Great Fact" of "the Ice-Hockey Stick"


Source of image:

(p. 2) Economic history has looked like an ice-hockey stick lying on the ground. It had a long, long horizontal handle at $3 a day extending through the two-hundred-thousand-year history of Homo sapiens to 1800, with little bumps upward on the handle in ancient Rome and the early medieval Arab world and high medieval Europe, with regressions to $3 afterward--then a wholly unexpected blade, leaping up in the last two out of the two thousand centuries, to $30 a day and in many places well beyond.

. . .

(p. 48) The heart of the matter is sixteen. Real income per head nowadays exceeds that around 1700 or 1800 in, say, Britain and in other countries that have experienced modern economic growth by such a large factor as sixteen, at least. You, oh average participant in the British economy, go through at least sixteen times more food and clothing and housing and education in a day than an ancestor of yours did two or three centuries ago. Not sixteen percent more, but sixteen multiplied by the old standard of living. You in the American or the South Korean economy, compared to the wretchedness of former Smiths in 1653 or Kims in 1953, have done even better. And if such novelties as jet travel and vitamin pills and instant messaging are accounted at their proper value, the factor of material improvement climbs even higher than sixteen--to eighteen, or thirty, or far beyond. No previous episode of enrichment for the average person approaches it, not the China of the Song Dynasty or the Egypt of the New Kingdom, not the glory of Greece or the grandeur of Rome.

No competent economist, regardless of her politics, denies the Great Fact.


McCloskey, Deirdre N. Bourgeois Dignity: Why Economics Can't Explain the Modern World. Chicago: University of Chicago Press, 2010.

(Note: ellipsis added.)

August 9, 2014

20 Years Before Fall of Rome, Ammianus Described "a World Exhausted by Crushing Taxes"

(p. 48) . . . ghosts surged up from the Roman past. An ancient literary critic who had flourished during Nero's reign and had written notes and glosses on classical authors; another critic who quoted extensively from lost epics written in imitation of (p. 49) Homer; a grammarian who wrote a treatise on spelling that Poggio knew his Latin-obsessed friends in Florence would find thrilling. Yet another manuscript was a discovery whose thrill might have been tinged for him with melancholy: a large fragment of a hitherto unknown history of the Roman Empire written by a high-ranking officer in the imperial army, Ammianus Marcellinus. The melancholy would have arisen not only from the fact that the first thirteen of the original thirty-one books were missing from the manuscript Poggio copied by hand--and these lost books have never been found--but also from the fact that the work was written on the eve of the empire's collapse. A clearheaded, thoughtful, and unusually impartial historian, Ammianus seems to have sensed the impending end. His description of a world exhausted by crushing taxes, the financial ruin of large segments of the population, and the dangerous decline in the army's morale vividly conjured up the conditions that made it possible, some twenty years after his death, for the Goths to sack Rome.


Greenblatt, Stephen. The Swerve: How the World Became Modern. New York: W. W. Norton & Company, 2011.

(Note: ellipsis added.)

August 7, 2014

Nobel-Prize-Winner Views Success as Rigged (Except for Nobel Prizes)

(p. 245) . . . , Solow interprets the evidence on intergenerational mobility as showing that the economy is not very meritocratic. (Oddly, he exempts the economics profession. He seems to believe that lack of success is often the result of bad luck or a rigged system, unless you are an economist, in which case it's your own fault.) Although I noted in my article that those born into extreme poverty face particularly difficult obstacles, I view the rest of the economy as more meritocratic than Solow does. In addition to the Kaplan and Rauh study, I recommend a popular book called The Millionaire Next Door (Stanley and Danko 1996). Written by two marketing professors who extensively surveyed high net worth individuals, the book reports that the typical millionaire is not someone who was born into wealth but rather is someone who has worked hard and lived frugally.


Mankiw, N. Gregory. "Correspondence: Response from N. Gregory Mankiw." Journal of Economic Perspectives 28, no. 1 (Winter 2014): 244-45.

(Note: ellipsis added; italics in original.)

The Stanley and Danko book that Mankiw praises (and I use in my Economics of Entrepreneurship seminar) is:

Stanley, Thomas J., and William D. Danko. The Millionaire Next Door: The Surprising Secrets of America's Wealthy. First ed. Atlanta: Longstreet Press, 1996.

August 6, 2014

"Different Structural Models Can Fit Aggregate Macroeconomic Data About Equally Well"

(p. 1149) There is an apparent lack of encompassing-forecasting and economic models that can explain the facts uniformly well across business cycles. This is perhaps an inevitable outcome given the changing nature of business cycles. The fact that business cycles are not all alike naturally means that variables that predict activity have a performance that is episodic. Notably, we find that term spreads were good predictors of economic activity in the 1970s and 1980s, but that credit spreads have fared better more recently. This is of course a challenge for forecasters, as we do (p. 1150) not know the origins of future business cycle fluctuations. Much needs to be learned to determine which and how financial variables are to be monitored in real time especially in an evolving economy when historical data do not provide adequate guidance.

Explanations for the Great Recessions usually involve some form of nonlinearity. The sudden nature of the downturn following the collapse of Lehman is consistent with nonlinearity being part of the transmission mechanism. At the same time, we lack robust evidence of nonlinearity from aggregate low-frequency macroeconomic data. Essentially, there is an identification issue as different structural models can fit aggregate macroeconomic data about equally well.

For the full article, see:

Ng, Serena, and Jonathan H. Wright. "Facts and Challenges from the Great Recession for Forecasting and Macroeconomic Modeling." Journal of Economic Literature 51, no. 4 (Dec. 2013): 1120-54.

August 4, 2014

Did Intel Succeed in Spite of, or Because of, Tension Between Noyce and Grove?

(p. C5) . . . , much more so than in earlier books on Intel and its principals, the embedded thread of "The Intel Trinity" is the dirty little secret few people outside of Intel knew: Andy Grove really didn't like Bob Noyce.

. . .

(p. C6) . . . there's the argument that one thing a startup needs is an inspiring, swashbuckling boss who lights up a room when he enters it and has the confidence to make anything he's selling seem much bigger and more important than it actually is. And Mr. Malone makes a compelling case that Noyce was the right man for the job in this phase of the company. "Bob Noyce's greatest gift, even more than his talent as a technical visionary," Mr. Malone writes, "was his ability to inspire people to believe in his dreams, in their own abilities, and to follow him on the greatest adventure of their professional lives."

. . .

Noyce hid from Mr. Grove, who was in charge of operations, the fact that Intel had a secret skunk works developing a microprocessor, a single general-purpose chip that would perform multiple functions--logic, calculation, memory and power control. Noyce had the man who was running it report directly to him rather than to Mr. Grove, even though Mr. Grove was his boss on the organizational chart. When Mr. Grove learned what was going on, he became furious, but like the good soldier he was, he snapped to attention and helped recruit a young engineer from Fairchild to be in charge of the project, which ultimately redefined the company.

. . .

Remarkably, none of this discord seemed to have much effect on the company's day-to-day operations. Mr. Malone even suggests that the dysfunction empowered Intel's take-no-prisoners warrior culture.

. . .

So while the humble, self-effacing Mr. Moore, who had his own time in the CEO's chair from 1975 to 1987, played out his role as Intel's big thinker, the brilliant visionary "who could see into the technological future better than anyone alive," Mr. Grove was the kick-ass enforcer. No excuses. For anything.

For the full review, see:

STEWART PINKERTON. "Made in America; A Born Leader, a Frustrated Martinet Built One of Silicon Valley's Giants." The Wall Street Journal (Sat., July 19, 2014): C5-C6.

(Note: ellipses added.)

(Note: the online version of the review has the date July 18, 2014, and has the title "Book Review: 'The Intel Trinity' by Michael S. Malone; A born leader, an ethereal genius and a tough taskmaster built the most important company on the planet.")

The book under review is:

Malone, Michael S. The Intel Trinity: How Robert Noyce, Gordon Moore, and Andy Grove Built the World's Most Important Company. New York: HarperCollins Publishers, 2014.

August 3, 2014

Locke and Smith Showed How Economic Life Has Moral Value

(p. 241) Andrzej Rapaczynski discusses "The Moral Significance of Economic Life" in the most recent issue of Capitalism and Society. His abstract summarizes the argument (p. 242) compactly: "Much of the modern perception of the role of economic production in human life--whether on the Left or on the Right of the political spectrum--views it as an inferior, instrumental activity oriented toward self-preservation, self-interest, or profit, and thus as essentially distinct from the truly human action concerned with moral values, justice, and various forms of self-fulfillment. This widely shared worldview is rooted, on the one hand, in the Aristotelian tradition that sees labor as a badge of slavery, and freedom as lying in the domain of politics and pure (not technical) knowledge, and, on the other hand, in the aristocratic medieval Christian outlook, which--partly under Aristotle's influence--sees nature as always already adapted (by divine design) to serving human bodily needs, and the purpose of life as directed toward higher, spiritual reality. . . . As against this, liberal thinkers, above all Locke, have developed an elaborate alternative to the Aristotelian worldview, reinterpreting the production process as a moral activity par excellence consisting in a gradual transformation of the alien nature into a genuinely human environment reflecting human design and providing the basis of human autonomy. Adam Smith completed Locke's thought by explaining how production is essentially a form of cooperation among free individuals whose self-interested labor serves the best interest of all. The greatest "culture war" in history is to re-establish the moral significance of economic activity in the consciousness of modern political and cultural elites." Capitalism and Society, December 2013, vol. 8, no. 2,


Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 28, no. 1 (Winter 2014): 235-42.

(Note: italics, and ellipses, in original.)

August 2, 2014

Climate Models Allow "the Modeler to Obtain Almost Any Desired Result"

Integrated assessment models (IAMs) are the commonly-used models that attempt to integrate climate science models with economic effect models. In the passage quoted below, "SCC" stands for "social cost of carbon."

(p. 870) I have argued that IAMs are of little or no value for evaluating alternative climate change policies and estimating the SCC. On the contrary, an IAM-based analysis suggests a level of knowledge and precision that is nonexistent, and allows the modeler to obtain almost any desired result because key inputs can be chosen arbitrarily.

As I have explained, the physical mechanisms that determine climate sensitivity involve crucial feedback loops, and the parameter values that determine the strength of those feedback loops are largely unknown. When it comes to the impact of climate change, we know even less. IAM damage functions are completely made up, with no theoretical or empirical foundation. They simply reflect common beliefs (which might be wrong) regarding the impact of 2º C or 3º C of warming, and can tell us nothing about what might happen if the temperature increases by 5º C or more. And yet those damage functions are taken seriously when IAMs are used to analyze climate policy. Finally, IAMs tell us nothing about the likelihood and nature of catastrophic outcomes, but it is just such outcomes that matter most for climate change policy. Probably the best we can do at this point is come up with plausible estimates for probabilities and possible impacts of catastrophic outcomes. Doing otherwise is to delude ourselves.

For the full article, see:

Pindyck, Robert S. "Climate Change Policy: What Do the Models Tell Us?" Journal of Economic Literature 51, no. 3 (Sept. 2013): 860-72.

July 29, 2014

HR Regulations and Fear of Lawsuits Keep Managers from Firing Workers Who Do Not Work

(p. 1B) The biggest problem in your workplace has a name. His name is Jeff. . . .

Jeff sits two cubicles down from us, or three, or four. His real name may be John, Juan or Joan. He gets to the widget factory late, he leaves early and always mucks up his part of any group project. He complains, loudly, about the smallest things, and when you bring doughnuts for your birthday he probably takes three and then talks with his mouth full, too.

. . .

(p. 2B) . . . , morale suffers greatly when most of a company's employees perceive that their supervisor is failing to deal with their low-performing co-worker, month after month, year after year.

For this, Hoogeveen blames a corporate culture that is so concerned about HR regulations, and the often-imagined threat of litigation, that bosses often fail to take into account how the trouble employee affects the larger climate.

. . .

. . . if Jeff doesn't improve, he needs to be fired. This is perhaps the worst part of a boss's job, Hoogeveen thinks. His eyes mist as he recalls firing an employee whom he liked, but who was simply a bad fit at QLI.

It's human nature to avoid this conflict, to maintain the status quo and let Jeff be, he says. That's what can and does happen at most Omaha companies.

But it's bad for the employees, and it's bad for business.

"A lot of this stuff is incredibly easy to understand," says Omaha's workplace mechanic [Kim Hoogeveen]. "It's incredibly difficult to live."

For the full story, see:

Hansen, Matthew. "Workplace Guru: Don't Let Problem Worker Slide." Omaha World-Herald (Mon., July 21, 2014): 1B-2B.

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

(Note: the online version of the article had the title "Hansen: Don't let Jeff -- the problem worker -- slide, workplace guru says.")

July 28, 2014

Entrepreneur Gutenberg's Press Creatively Destroyed the Jobs of Scribes

(p. 32) Poggio possessed . . . [a] gift that set him apart from virtually all the other book-hunting humanists. He was a superbly well-trained scribe, with exceptionally fine handwriting, great powers of concentration, and a high degree of accuracy. It is difficult for us, at this distance, to take in the significance of such qualities: our technologies for producing transcriptions, facsimiles, and copies have almost entirely erased what was once an important personal achievement. That importance began to decline, though not at all precipitously, even in Poggio's own lifetime, for by the 1430s a German entrepreneur, Johann Gutenberg, began experimenting with a new invention, movable type, which would revolutionize the reproduction and transmission of texts. By the century's end printers, especially the great Aldus in Venice, would print Latin texts in a typeface whose clarity and elegance remain unrivalled after five centuries. That typeface was based on the beautiful handwriting of Poggio and his humanist friends. What Poggio did by hand to produce a single copy would soon be done mechanically to produce hundreds.


Greenblatt, Stephen. The Swerve: How the World Became Modern. New York: W. W. Norton & Company, 2011.

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

July 26, 2014

Countries that Protect Jobs Stifle Economic Growth

(p. 240) In an "Interview" conducted by Jessie Romero, John Haltiwanger discusses changing patterns of job creation and destruction: "But now we're seeing a decline in the entry rate and a pretty stark decline in the share of young businesses. . . . But it's also important to recognize that the decline in the share of young firms has occurred because the impact of entry is not just at the point of entry, it's also over the next five or 10 years. A wave of entrants come in, and some of them grow very rapidly, and some of them fail. That dynamic has slowed down. . . . If you look at young small businesses, or just young businesses period, the 90th percentile growth rate is incredibly high. Young businesses not only are volatile, but their growth rates also are tremendously skewed. It's rare to have a young business take off, but those that do add lots of jobs and contribute a lot to productivity growth. We have found that startups together with high-growth firms, which are disproportionately young, account for roughly 70 percent of overall job creation in the United States. . . . "I think the evidence is overwhelming that countries have tried to stifle the [job] destruction process and this has caused problems. I'm hardly a fan of job destruction per se, but making it difficult for firms to contract, through restricting shutdowns, bankruptcies, layoffs, etc., can have adverse consequences. The reason is that there's so much heterogeneity in productivity across businesses. So if you stifle that destruction margin, you're going to keep lots of low-productivity businesses in existence, and that could lead to a sluggish economy. I just don't think we have any choice in a modern market economy but to allow for that reallocation to go on. Of course, what you want is an environment where not only is there a lot of job destruction, but also a lot of job creation, so that when workers lose their jobs they either immediately transit to another job or their unemployment duration is low." Econ Focus, Federal Reserve Bank of Richmond, Second Quarter 2013, pp. 30-34.


Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 28, no. 1 (Winter 2014): 235-42.

(Note: italics, ellipses, and bracketed word, in original.)

July 23, 2014

How Sega Came Out of Nowhere to Leapfrog Near-Monopolist Nintendo


Source of book image:

(p. C10) "Console Wars" tells how Sega, an unremarkable Japanese manufacturer of games played in arcades, came out of nowhere to challenge Nintendo for dominance of the videogame world in the first half of the 1990s. Nintendo, which had revived the stagnant home videogame category a few years earlier, had something close to a monopoly in 1990 and behaved accordingly, dictating terms to game developers and treating retailers as peons. Sega, in Mr. Harris's telling, was a disruptive force in a highly concentrated market, introducing more advanced gaming technology, toppling Nintendo from its perch and becoming the largest seller of home videogame hardware in the U.S. by late 1993.

Mr. Harris's hero is a former Mattel executive named Tom Kalinske, who became president of Sega of America, then a small subsidiary, in 1990. Mr. Kalinske assembled a team of crack marketers who would not have gone near Sega but for his reputation and persuasiveness. Within a year and a half, according to Mr. Harris, Mr. Kalinske's leadership, along with a new gaming system called Genesis and a marketing assist from a mascot named Sonic the Hedgehog, made Sega the U.S. market leader in videogames.

And then, after only three years at the top, Sega fell from its pedestal. Sega's management in Japan, suffering mightily from not-invented-here syndrome, rejected Mr. Kalinske's proposals to collaborate with Sony and Silicon Graphics on new gaming systems. Instead, over his objections, Sega pushed out its ill-conceived Saturn game console in 1995. While Saturn flopped, Sony struck gold with its PlayStation; Silicon Graphics sold its chip with amazing graphics capabilities to Nintendo; and the game, so to speak, was over.

. . .

The author admits he has taken liberties: "I have re-created the scenes in this book using the information uncovered from my interviews, facts gathered from supporting documents, and my best judgment as to what version most closely fits the historical record," he writes. The result is more a 558-page screenplay than a credible work of nonfiction.

For the full review, see:

MARC LEVINSON. "Sonic Boom; How a no-name company took on Nintendo, tied its fate to a hyperactive hedgehog, and--briefly--won." The Wall Street Journal (Sat., May 24, 2014): C10.

(Note: ellipsis added.)

(Note: the online version of the review has the date May 23, 2014, an has the title "Book Review: 'Console Wars' by Blake J. Harris; How a no-name company took on Nintendo, tied its fate to a hyperactive hedgehog, and--briefly--won.")

The book under review is:

J., Harris Blake. Console Wars: Sega, Nintendo, and the Battle That Defined a Generation. New York: HarperCollins Publishers, 2014.

July 22, 2014

Conserving Whales by a Market in Whale Shares

(p. 218) Ben A. Minteer and Leah R. Gerber propose "Buying Whales to Save Them." "Under this plan, quotas for hunting of whales would be traded in global markets. But again, and unlike most 'catch share' programs in fifisheries, the whale conservation market would not restrict participation in the market; both pro- and antiwhaling interests could own and trade quotas  . . . . Conservation groups, for example, could choose to buy whale shares in order to protect populations that are currently threatened; they could also buy shares to protect populations that are not presently at risk but that conservationists fear might become threatened in the future." "Despite the widely acknowledged failure of the IWC [International Whaling Commission] moratorium to curtail unsustainable whaling, the whale conservation market idea has proved to be wildly controversial within conservation and antiwhaling circles.  . . . Many critics of the idea are also plainly not comfortable with the ethics of putting a price on such iconic species--that is, with using contingent market methods for what they believe should be a categorical ethical obligation to preserve whales. On the other hand . . . the vulnerable status of many whale populations and the failure of the traditional regulatory response to halt unsustainable harvests call for a more innovative and experimental approach to whale policy, including considering unconventional proposals, such as the whale conservation market." Issues in Science and Technology, Spring 2013,


Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 27, no. 4 (Fall 2013): 211-18.

(Note: italics, ellipses, and bracketed words, in original.)

July 18, 2014

Required Recycling Can Waste Resources

(p. 215) Cato Unbound offers four essays on "The Political Economy of Recycling." In the lead essay, Michael Munger asks: "Recycling: Can It Be Wrong, When It (p. 216) Feels So Right?" "There are two general kinds of arguments in favor of recycling. The first is that 'this stuff is too valuable to throw away!' In almost all cases, this argument is false, and when it is correct recycling will be voluntary; very little state action is necessary. The second is that recycling is cheaper than landfilling the waste. This argument may well be correct, but it is difficult to judge because officials need keep landfill prices artificially low to discourage illegal dumping and burning. Empirically, recycling is almost always substantially more expensive than disposing in the landfill. Since we can't use the price system, authorities resort to moralistic claims, trying to persuade people that recycling is just something that good citizens do. But if recycling is a moral imperative, and the goal is zero waste, not optimal waste, the result can be a net waste of the very resources that recycling was implemented to conserve." There are sharp and lively comments from Edward Humes, Melissa Walsh Innes, and Stephen Landsberg. June 2013, at


Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 27, no. 4 (Fall 2013): 211-18.

(Note: italics in original.)

July 17, 2014

Open Source Guru Admits to "Mismatched Incentives" and "Serious Trouble Down the Road"

RaymondEricOpenSourceElder2014-06-02.jpg "Eric S. Raymond said that the code-checking system had failed in the case of Heartbleed." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B1) SAN FRANCISCO -- The Heartbleed bug that made news last week drew attention to one of the least understood elements of the Internet: Much of the invisible backbone of websites from Google to Amazon to the Federal Bureau of Investigation was built by volunteer programmers in what is known as the open-source community.

Heartbleed originated in this community, in which these volunteers, connected over the Internet, work together to build free software, to maintain and improve it and to look for bugs. Ideally, they check one another's work in a peer review system similar to that found in science, or at least on the nonprofit Wikipedia, where motivated volunteers regularly add new information and fix others' mistakes.

This process, advocates say, ensures trustworthy computer code.

But since the Heartbleed flaw got through, causing fears -- as yet unproved -- of widespread damage, members of that world are questioning whether the system is working the way it should.

"This bug was introduced two years ago, and yet nobody took the time to notice it," said Steven M. Bellovin, a computer science professor at Columbia University. "Everybody's job is not anybody's job."

. . .

(p. B2) Unlike proprietary software, which is built and maintained by only a few employees, open-source code like OpenSSL can be vetted by programmers the world over, advocates say.

"Given enough eyeballs, all bugs are shallow" is how Eric S. Raymond, one of the elders of the open-source movement, put it in his 1997 book, "The Cathedral & the Bazaar," a kind of manifesto for open-source philosophy.

In the case of Heartbleed, though, "there weren't any eyeballs," Mr. Raymond said in an interview this week.

. . .

The problem, Mr. Raymond and other open-source advocates say, boils down to mismatched incentives. Mr. Raymond said firms don't maintain OpenSSL code because they don't profit directly from it, even though it is integrated into their products, and governments don't feel political pain when the code has problems.

With OpenSSL, by contrast, "for those that do work on this, there's no financial support, no salaries, no health insurance," Mr. Raymond said. "They either have to live like monks or work nights and weekends. That is a recipe for serious trouble down the road."

For the full story, see:

Perlroth, Nicole. "A Contradiction at the Heart of the Web." The New York Times (Sat., April 19, 2014): B1 & B2.

(Note: ellipses added.)

(Note: the online version of the story was updated APRIL 18, 2014, and has the title "Heartbleed Highlights a Contradiction in the Web.")

Raymond's open source manifesto is:

Raymond, Eric S. The Cathedral & the Bazaar: Musings on Linux and Open Source by an Accidental Revolutionary. Sebastopol, CA: O'Reilly Media, Inc., 1999.

July 14, 2014

Forecasts of Mass Unemployment from Robots Were Wrong

(p. 215) Frank Levy and Richard J. Murnane consider the interaction between workers and machinery in "Dancing with Robots: Human Skills for Computerized Work." "On March 22, 1964, President Lyndon Johnson received a short, alarming memorandum from the Ad Hoc Committee on the Triple Revolution. The memo warned the president of threats to the nation beginning with the likelihood that computers would soon create mass unemployment: 'A new era of production has begun. Its principles of organization are as different from those of the industrial era as those of the industrial era were different from the agricultural. The cybernation revolution has been brought about by the combination of the computer and the automated self-regulating machine. This results in a system of almost unlimited productive capacity which requires progressively less human labor. Cybernation is already reorganizing the economic and social system to meet its own needs.' The memo was signed by luminaries including Nobel Prize winning chemist Linus Pauling, Scientific American publisher Gerard Piel, and economist Gunnar Myrdal (a future Nobel Prize winner). Nonetheless, its warning was only half right. There was no mass unemployment--since 1964 the economy has added 74 million jobs. But computers have changed the jobs that are available, the skills those jobs require, and the wages the jobs pay. For the foreseeable future, the challenge of "cybernation" is not mass unemployment but the need to educate many more young people for the jobs computers cannot do." Third Way, 2013, /publications/714/Dancing-With-Robots.pdf.


Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 27, no. 4 (Fall 2013): 211-18.

(Note: italics in original.)

July 12, 2014

They Begged for a Chance to Help Edison Create the Future

(p. 289) He, and anyone working for him, were perceived as standing at the very outer edge of the present, where it abuts the future. When a young John Lawson sought a position at Edison's lab and wrote in 1879 that he was "willing to do anything, dirty work--become anything, almost a slave, only give me a chance," he spoke with a fervency familiar to applicants knocking today on the door of the hot tech company du jour. In the age of the computer, different companies at different times--for example, Apple in the early 1980s, Microsoft in the early 1990s, Google in the first decade of the twenty-first century--inherited the temporary aura that once hovered over Edison's Menlo Park laboratory, attracting young talents who applied in impossibly large numbers, all seeking a role in the creation of the zeitgeist (and, like John Ott, at the same time open to a chance to become wealthy). The lucky ones got inside (Lawson got a position and worked on electric light).


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

July 10, 2014

Raghuram Rajan: "Never in the Field of Economic Policy Has So Much Been Spent, with So Little Evidence, by So Few"

(p. 213) Raghuram Rajan delivered the Andrew Crockett Memorial Lecture at the Bank of International Settlements, titled "A Step in the Dark: Unconventional Monetary Policy after the Crisis." "Two competing narratives of the sources of the crisis, and attendant remedies, are emerging. The first, and the better known diagnosis, is that demand has collapsed because of the high debt build up prior to the crisis. . . . But there is another narrative. And that is that the fundamental growth capacity in industrial countries has been shifting down for decades now, masked for a while by debt-fueled demand. More such demand, or asking for reckless spending from emerging markets, will not put us back on a sustainable path to growth. Instead, industrial democracies need to improve the environment for growth. The first narrative is the standard Keynesian one, modified for a debt crisis. It is the one (p. 214) most government officials and central bankers, as well as Wall Street economists, subscribe to, and needs little elaboration. The second narrative, in my view, offers a deeper and more persuasive view of the blight that afflicts our times." Rajan argues that central banks took the right actions during the financial crisis, but that the wisdom of the ultra-low interest rate policies in the aftermath of the crisis are not yet clear. "Churchill could well have said on the subject of unconventional monetary policy, 'Never in the field of economic policy has so much been spent, with so little evidence, by so few'. Unconventional monetary policy has truly been a step in the dark." June 23, 2013, at


Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 27, no. 4 (Fall 2013): 211-18.

(Note: ellipsis in original.)

July 9, 2014

French Protest Amazon, but Buy There for Low Prices

(p. B1) LONDON -- On weekends, Guillaume Rosquin browses the shelves of local bookstores in Lyon, France. He enjoys peppering the staff with questions about what he should be reading next. But his visits, he says, are also a protest against the growing power of Amazon. He is bothered by the way the American online retailer treats its warehouse employees.

Still, as with millions of other Europeans, there is a limit to how much he will protest.

"It depends on the price," said Mr. Rosquin, 49, who acknowledged that he was planning to buy a $400 BlackBerry smartphone on Amazon because the handset was not yet available on rival French websites. "If you can get something for half-price at Amazon, you may put your issues with their working conditions aside."

For the full story, see:

MARK SCOTT. "Principles Are No Match for Europe's Love of U.S. Web Titans." The New York Times (Mon., JULY 7, 2014): B1 & B3.

(Note: the online version of the story has the date JULY 6, 2014.)

July 6, 2014

Summers's Unbreakable Washington Power Elite Rule: Insiders Don't Criticize Other Insiders

(p. 5) A telling anecdote involves a dinner that Ms. Warren had with Lawrence H. Summers, then the director of the National Economic Council and a top economic adviser to President Obama. The dinner took place in the spring of 2009, after the oversight panel had produced its third report, concluding that American taxpayers were at far greater risk to losses in TARP than the Treasury had let on.

After dinner, "Larry leaned back in his chair and offered me some advice," Ms. Warren writes. "I had a choice. I could be an insider or I could be an outsider. Outsiders can say whatever they want. But people on the inside don't listen to them. Insiders, however, get lots of access and a chance to push their ideas. People -- powerful people -- listen to what they have to say. But insiders also understand one unbreakable rule: They don't criticize other insiders."

"I had been warned," Ms. Warren concluded.

A spokeswoman for Mr. Summers did not respond to a request for comment.

For the full commentary, see:

GRETCHEN MORGENSON. "Fair Game; From Outside or Inside, the Deck Looks Stacked." The New York Times, SundayBusiness Section (Sun., APRIL 27, 2014): 1 & 5.

(Note: italics in original commentary, and in Warren book. I added a missing quotation mark.)

(Note: the online version of the commentary has the date APRIL 26, 2014.)

The Warren passages quoted above are from p. 106 of her book:

Warren, Elizabeth. A Fighting Chance. New York: Metropolitan Books, 2014.

July 2, 2014

The Opportunity Cost of Surgeons Dictating and Documenting Health Records

(p. A13) Across the country, doctors waste precious time filling in unnecessary electronic-record fields just to satisfy a regulatory measure. I personally spend two hours a day dictating and documenting electronic health records just so I can be paid and not face a government audit. Is that the best use of time for a highly trained surgical specialist?

For the full commentary, see:

DANIEL F. CRAVIOTTO JR. "A Doctor's Declaration of Independence; It's time to defy health-care mandates issued by bureaucrats not in the healing profession." The Wall Street Journal (Tues., April 29, 2014): A13.

(Note: the online version of the commentary has the date April 28, 2014.)

July 1, 2014

Natural Resources Increase through Innovation

SolarPanelsDunhuangChina2014-05-31.jpg "A worker inspects solar panels in Dunhuang, China. We have an estimated supply of one million years of tellurium, a rare element used in some panels." Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. C1) How many times have you heard that we humans are "using up" the world's resources, "running out" of oil, "reaching the limits" of the atmosphere's capacity to cope with pollution or "approaching the carrying capacity" of the land's ability to support a greater population? The assumption behind all such statements is that there is a fixed amount of stuff--metals, oil, clean air, land--and that we risk exhausting it through our consumption.

. . .

But here's a peculiar feature of human history: We burst through such limits again and again. After all, as a Saudi oil minister once said, the Stone Age didn't end for lack of stone.

. . .

Economists call the same phenomenon innovation. What frustrates them about ecologists is the latter's tendency to think in terms of static limits. Ecologists can't seem to see that when whale oil starts to run out, petroleum is discovered, or that when farm yields flatten, fertilizer comes along, or that when glass fiber is invented, demand for copper falls.

. . .

(p. C2) . . ., Mr. Ausubel, together with his colleagues Iddo Wernick and Paul Waggoner, came to the startling conclusion that, even with generous assumptions about population growth and growing affluence leading to greater demand for meat and other luxuries, and with ungenerous assumptions about future global yield improvements, we will need less farmland in 2050 than we needed in 2000. (So long, that is, as we don't grow more biofuels on land that could be growing food.)

. . .

The economist and metals dealer Tim Worstall gives the example of tellurium, a key ingredient of some kinds of solar panels. Tellurium is one of the rarest elements in the Earth's crust--one atom per billion. Will it soon run out? Mr. Worstall estimates that there are 120 million tons of it, or a million years' supply altogether.

. . .

Part of the problem is that the word "consumption" means different things to the two tribes. Ecologists use it to mean "the act of using up a resource"; economists mean "the purchase of goods and services by the public" (both definitions taken from the Oxford dictionary).

But in what sense is water, tellurium or phosphorus "used up" when products made with them are bought by the public? They still exist in the objects themselves or in the environment. Water returns to the environment through sewage and can be reused. Phosphorus gets recycled through compost. Tellurium is in solar panels, which can be recycled. As the economist Thomas Sowell wrote in his 1980 book "Knowledge and Decisions," "Although we speak loosely of 'production,' man neither creates nor destroys matter, but only transforms it."

. . .

If I could have one wish for the Earth's environment, it would be to bring together the two tribes--to convene a grand powwow of ecologists and economists. I would pose them this simple question and not let them leave the room until they had answered it: How can innovation improve the environment?

For the full commentary, see:

MATT RIDLEY. "The Scarcity Fallacy; Ecologists worry that the world's resources come in fixed amounts that will run out, but we have broken through such limits again and again." The Wall Street Journal (Sat., April 26, 2014): C1-C2.

(Note: ellipses added.)

(Note: the online version of the commentary has the date April 25, 2014, and has the title "The World's Resources Aren't Running Out; Ecologists worry that the world's resources come in fixed amounts that will run out, but we have broken through such limits again and again.")

June 27, 2014

Instead of 50 Silicon Valleys, Andreessen Sees 50 Kinds of Silicon Valley

AndreessenMarcCofounderNetscape2014-05-31.jpg "Marc Andreessen, co-founder of the first major web browser, Netscape, has a record for knowing what's coming next with technology." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B8) Mr. Andreessen said new valleys will eventually emerge. But they won't be Silicon Valley copycats.

Over the past couple of years, venture firms have invested in start-ups in Los Angeles, New York, Chicago and all over China. Los Angeles, for example, is home to Snapchat, Tinder, Whisper, Oculus VR and Beats, some of the big tech stories of the year. Mr. Andreessen said another hot place is Atlanta, the home of Georgia Tech.

But he offers a caveat.

"My personal view is that Silicon Valley will continue to take a disproportionate share of the No. 1 positions in great new markets, and I think that's just a reflection that the fact that the valley works as well as it does," Mr. Andreessen said.

There is a caveat to his caveat.

In Mr. Andreessen's view, there shouldn't be 50 Silicon Valleys. Instead, there should be 50 different kinds of Silicon Valley. For example, there could be Biotech Valley, a Stem Cell Valley, a 3-D Printing Valley or a Drone Valley. As he noted, there are huge regulatory hurdles in many of these fields. If a city wanted to spur innovation around drones, for instance, it might have to remove any local legal barriers to flying unmanned aircraft.

For the full interview, see:

NICK BILTON. "DISRUPTIONS; Forecasting the Next Big Moves in Tech." The New York Times (Mon., MAY 19, 2014): B8.

(Note: the online version of the interview has the date MAY 18, 2014, and has the title "DISRUPTIONS; Marc Andreessen on the Future of Silicon Valley(s), and the Next Big Technology." )

June 25, 2014

Occupational Licensing Hurts Poor and Restricts Innovation and Worker Mobility


Source of book image:

(p. A31) In the 1970s, about 10 percent of individuals who worked had to have licenses, but by 2008, almost 30 percent of the work force needed them.

With this explosion of licensing laws has come a national patchwork of stealth regulation that has, among other things, restricted labor markets, innovation and worker mobility.

. . .

Occupational licensing, moreover, does nothing to close the inequality gap in the United States. For consumers, there is likely to be a redistribution effect in the "wrong" direction, as higher income consumers have more choice among higher quality purveyors of a service and lower income individuals are left with fewer affordable service options.

. . . , government-issued licenses largely protect occupations from competition. Conservatives often see members of the regulated occupation supporting licensing laws under claims of "public health and safety." However, these laws do much more to stop competition and less to enhance the quality of the service.

Also, all consumers do not demand the same level of quality. If licensure "improves quality" by restricting entry into the profession, then some consumers will be forced to pay for more "quality" than they want or need. Not everyone wants a board-licensed hairdresser.

For the full commentary, see:

MORRIS M. KLEINER. "Why License a Florist?" The New York Times (Thurs., MAY 29, 2014): A31.

(Note: the online version of the commentary has the date MAY 28, 2014.)

Kleiner's most recent book on occupational licensing is:

Kleiner, Morris M. Stages of Occupational Regulation: Analysis of Case Studies. Kalamazoo, Michigan: W.E. Upjohn Institute, 2013.

June 15, 2014

"Apple Bonds Are Giffen Goods"

AppleCampus2014-05-31.jpg "New bonds sold by Apple have been called "Giffen goods," after Sir Robert Giffen, a Scottish economist who noted that the prices of some goods can defy the laws of supply and demand." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B1) . . . Hans Mikkelsen, a credit strategist at Bank of America Merrill Lynch, promptly proclaimed that "Apple bonds are Giffen goods."

Giffen goods, named after Sir Robert Giffen, a 19th-century Scottish statistician and economist who discovered they could exist, defy the normal law of supply and demand. Raise the price, and people will buy more.

They are extremely rare.

The classic example -- and the only one I had heard of before Apple sold its new bonds -- was potatoes at a time when they were the chief source of nourishment for Irish peasants. If potato prices fell, the peasants could afford more meat and would therefore eat fewer potatoes. When potato prices rose, they could no longer afford meat and would consume more potatoes.

For the full story, see:

RAPHAEL MINDER. "Tempting Europe With Ugly Fruit." The New YorkTimes, First Section (Sun., MAY 25, 2014): 6 & 8.

(Note: ellipsis added.)

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


"Sir Robert Giffen was a Scottish economist." Source of caption and photo: online version of the NYT article quoted and cited above.

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."


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

June 8, 2014

Environmental Regulations Cause Housing Crisis in Cities

(p. 16) The developed world's wealthiest cities are facing housing crises so acute that not only low-income workers, but also the middle and creative classes, find them increasingly difficult places to afford.

. . .

(p. 19) The difficulty of deciding where and what to build means that cities with a shortfall of hundreds of thousands of apartments often have only the vaguest plans for how to meet the deficit.

"It's not that it would be physically impossible," says Ed Glaeser, a Harvard economist who has studied housing and deregulation. "After all, the construction industry would love such a challenge. But it's politically totally impossible." Glaeser says cities approve lovely things like landmark districts and sidewalk setbacks without doing any cost-benefit analysis of their effect on housing supply. "One of my pet peeves is that environmental reviews are only focused on the local environmental impact of building the project, but not the global environmental impact of not building the project."

For the full story, see:

SHAILA DEWAN. "It's the Economy; Rent Asunder." The New York Times Magazine (Sun., MAY 4, 2014): 16 & 18-19.

(Note: ellipsis added.)

(Note: the online version of the story has the date APRIL 29, 2014, and has the title "It's the Economy; Rent Too High? Move to Singapore.")

June 6, 2014

Edison Sold General Electric Shares to Keep His Lab and Mine Open

(p. 193) In 1902, at a time when General Electric shares were trading at a historic high and well after Edison had sold his, Mallory happened to be traveling with him and saw in the newspaper the eye-popping closing price. Edison asked what his stake would have been worth had he held on to it. Mallory quickly worked out the number: over $4 million. Hearing this, Edison remained silent, keeping a serious expression for about fifteen seconds. Then his face lit up and he said, "Well, it's all gone, but we had a good time spending it."

(p. 194) The story would be retold by Edison's hagiographers many times. The evidence suggests that Edison did have a jolly time, which, to him, was well worth the $4 million.


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

June 3, 2014

Public Cannot Go into Space Because of Government Run Space Programs

BransonRichard2014-04-25.jpg "'You don't have to be a rocket scientist to be able to run a spaceship company,' says Richard Branson." Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. C11) Richard Branson, founder of the Virgin Group, is just months away from launching what he considers "the biggest Virgin company we've ever built." At 63, he's already founded multiple businesses worth billions, including a record label and a mobile company. But it's his foray into outer space with Virgin Galactic that has Mr. Branson excited.

. . .

Safety has been one of the biggest challenges in building Virgin Galactic. In 2007, two workers died after a tank explosion during a rocket test, and three were seriously wounded. The accident, which occurred at a partner company's facility, delayed the program for an estimated 18 months.

Risk factors weigh on the minds of potential customers as well, especially after NASA's 1986 Challenger disaster, in which seven crew members, including a schoolteacher, died. Mr. Branson thinks that today most people would want to go into space if they could be guaranteed a safe return trip. "Sadly, I think because the space program was run by governments, there was never any real interest in enabling members of the public to go to space after they tried once" with the Challenger, he explains. "After that, they decided not to take any risks whatsoever." He adds, "I would say 90% of people my age thought they would go to space because they saw the moon landing."

For the full story, see:

ALEXANDRA WOLFE. "WEEKEND CONFIDENTIAL; Richard Branson; The Virgin Group founder on his out-of-this world venture: space travel." The Wall Street Journal (Sat., Nov. 2, 2013): C11.

(Note: ellipsis added.)

(Note: the online version of the story has the date Nov. 1, 2013, and has the title "WEEKEND CONFIDENTIAL; Richard Branson on Space Travel; The Virgin Group founder on his latest out-of-this world venture, Virgin Galactic'.")

June 2, 2014

Edison Failed to Stop Film Projectors from Disrupting His Kinetoscope

Edison tried to kill film projection because he thought the whole country would only need 10 projectors, while they could sell a great many of the single-view kinetoscopes. But the wonderful twist to the story is that it DID NOT WORK because Edison could not stop the Lathams and others from coming forward and disrupting the kinetoscope.

(p. 205) The Lathams were not the only exhibitors frustrated with Edison's kinetoscope, and the others urged Edison to introduce a projection machine. Edison was adamant: no. He reasoned that the peephole machines (p. 206) were selling well and at a good profit. The problem with projection was that it would work all too well--if he replaced the inefficient kinetoscope with projection systems that could serve up the show to everyone, "there will be a use for maybe about ten of them in the whole United States." He concluded, "Let's not kill the goose that lays the golden egg."

At Edison's lab in Orange, without his boss's approval, W. K. L. Dickson carried out research on film projection on his own and shared his findings with a friend who was a keen listener: Otway Latham. And when Dickson accepted an invitation to try a projection experiment in a physics laboratory at Columbia, who should show up but Otway's father, Professor Latham. The Lathams made an offer to Dickson--come join us and we'll give you a quarter-share interest in the business--but Dickson was unwilling to make the leap. When Edison got word of his fraternizing with the Lathams, however, and failed to reassure Dickson that he believed Dickson's dealings had been perfectly honorable, Dickson felt he had no choice but to resign. The exact chronology of what he did and what he knew at various points preceding his resignation would be the subject of much litigation that followed. But regardless of intellectual-property issues, Edison lost the one person on his staff who would have been most valuable to him in developing a projection system.

The Lathams and Dickson had discovered that sending a bright light through a moving strip of film did not project satisfactorily because any given image did not absorb enough light before it sped on. The Lathams came up with a partial solution, which was to make the film wider, providing more area for the light to catch as each image went by. The projected images were about the size of a window and good enough to unveil publicly. Professor Latham gave a demonstration of his newly christened Pantoptikon to reporters in April 1895.


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

May 31, 2014

When Labor Markets Are Flexible, Workers Need Not Fear New Technology

(p. 6) Driverless vehicles and drone aircraft are no longer science fiction, and over time, they may eliminate millions of transportation jobs. Many other examples of automatable jobs are discussed in "The Second Machine Age," a book by Erik Brynjolfsson and Andrew McAfee, and in my own book, "Average Is Over." The upshot is that machines are often filling in for our smarts, not just for our brawn -- and this trend is likely to grow.

How afraid should workers be of these new technologies? There is reason to be skeptical of the assumption that machines will leave humanity without jobs. After all, history has seen many waves of innovation and automation, and yet as recently as 2000, the rate of unemployment was a mere 4 percent. There are unlimited human wants, so there is always more work to be done. The economic theory of comparative advantage suggests that even unskilled workers can gain from selling their services, thereby liberating the more skilled workers for more productive tasks.

. . .

Labor markets just aren't as flexible these days for workers, especially for men at the bottom end of the skills distribution.

. . .

Across the economy, a college degree is often demanded where a high school degree used to suffice.

. . .

The law is yet another source of labor market inflexibility: The number of jobs covered by occupational licensing continues to rise and is almost one-third of the work force. We don't need such laws for, say, barbers or interior designers, although they are commonly on the books.

. . .

Many . . . labor market problems were brought on by the financial crisis and the collapse of market demand. But it would be a mistake to place all the blame on the business cycle. Before the crisis, for example, business executives and owners didn't always know who their worst workers were, or didn't want to engage in the disruptive act of rooting out and firing them. So long as sales were brisk, it was easier to let matters lie. But when money ran out, many businesses had to make the tough decisions -- and the axes fell. The financial crisis thus accelerated what would have been a much slower process.

Subsequently, some would-be employers seem to have discriminated against workers who were laid off in the crash. These judgments weren't always fair, but that stigma isn't easily overcome, because a lot of employers in fact had reason to identify and fire their less productive workers.

For the full commentary, see:

TYLER COWEN. "Economic View; Automation Alone Isn't Killing Jobs." The New York Times, SundayBusiness Section (Sun., APRIL 6, 2014): 6.

(Note: ellipses added.)

(Note: the online version of the commentary has the date APRIL 5, 2014.)

The Brynjolfsson and McAfee book mentioned is:

Brynjolfsson, Erik, and Andrew McAfee. The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. New York: W. W. Norton & Company, 2014.

The Cowen book that Cowen mentions is:

Cowen, Tyler. Average Is Over: Powering America Beyond the Age of the Great Stagnation. New York: Dutton Adult, 2013.

May 27, 2014

Warren Buffett Lately Low on Alpha

(p. 3) Warren Buffett is probably the most famous investor of his generation, and for good reason: His track record over the long term is a thing of beauty.

He has beaten the market by a wide margin over 49 years, a record so impressive that it's used in finance classes as a textbook example of "alpha."

Alpha is an elusive quality. Very simply put, it is the ability to beat an index fund without adding risk to a portfolio. Investment managers are always seeking it. If it exists, Warren Buffett surely has had it.

A new statistical analysis of Mr. Buffett's long-term record at Berkshire Hathaway has just been done, and it's come up with some fascinating insights about his abilities, past and present, and about the chances that the rest of us have for beating the market. Using a series of statistical measures, the study suggests that Mr. Buffett has indeed been blessed with an impressively big dose of alpha over a very long career.

But it also reveals something that isn't impressive at all: For four of the last five years, Mr. Buffett has been doing worse than the typical, no-frills Standard & Poor's 500-stock index fund -- so much worse that it's unlikely to be a matter of a string of bad luck. Mr. Buffett has begun to behave like an investor with no alpha at all.

. . .

A vast majority of individuals, including most people now working in finance, do not have alpha, Mr. Mehta says. It doesn't matter whether they have studied finance or have prodigious math skills; the statistics show that they are unlikely to have the ability to beat the market.

That has a serious implication for individual investors, he says: True investing skill is so rare that the rest of us shouldn't even try to emulate those who have it. In addition, he says, we probably shouldn't bother trying to hire the few outperformers to invest our money. Why? Because we aren't likely to be able to identify them.

For the full commentary, see:

JEFF SOMMER. "Strategies; The Oracle of Omaha, Lately Looking a Bit Ordinary." The New York Times, SundayBusiness Section (Sun., APRIL 6, 2014): 3.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date APRIL 5, 2014.)

May 25, 2014

Entrepreneurial Consumer J.P. Morgan "Handled Setbacks with Equanimity"

Schumpeter wrote that the entrepreneur is the one who overcomes obstacles to get the job done (1950, p. 132). Obstacles come in many forms. One of them is consumer resistance to change. So one key contributor to the technological progress is the "entrepreneurial consumer" who is willing to invest in new, buggy, possibly dangerous technologies at an early stage. (Paul Nodskov, a student in my spring 2014 Economics of Technology seminar suggested using the phrase "entrepreneurial consumer.")

Alexis de Tocqueville observed that in contrast to Europeans, Americans were "restless in the midst of their prosperity" (2000 [first published 1835], Ch. 13). Perhaps even that early, America had more entrepreneurial consumers?

(p. 131) Morgan prized being ahead of everyone else, and the next year was concerned that his plant was already less than state of the art, a suspicion that was confirmed when he persuaded Edison to send Edward Johnson to the house for an evaluation. Johnson was instructed to upgrade the equipment and also to devise a way to provide an electric light that would sit on Morgan's desk in his library. At a time when the very concept of an electrical outlet and detachable electrical appliances had yet to appear, this posed a significant challenge. Johnson's solution was to run wires beneath the floor to metal plates that were installed in different places beneath the rugs. One of the legs of the desk was equipped with sharp metal prongs, designed to make contact with one of the plates when moved about the room.

In conception, it was clever; in implementation, it fell short of ideal. On the first evening when the light was turned on, there was a flash, followed by a fire that quickly engulfed the desk and spread across the rug before being put out. When Johnson was summoned to the house the next morning, he was shown into the library, where charred debris was piled in a heap. He expected that when Morgan appeared, he would angrily announce that the services of Edison Electric were no longer needed.

(p. 132) "Well?" Morgan stood in the doorway, with Mrs. Morgan standing behind him, signaling Johnson with a finger across her lips not to launch into elaborate explanations. Johnson cast a doleful eye at the disaster in the room and remained silent.

"Well, what are you going to do about it?" Morgan asked. Johnson said the fault was his own and that he would personally reinstall everything, ensuring that it would be done properly.

"All right. See that you do." Morgan turned and left. The eager purchaser of first-generation technology handled setbacks with equanimity. "I hope that the Edison Company appreciates the value of my house as an experimental station," he would later say. A new installation with second-generation equipment worked well, and Morgan held a reception for four hundred guests to show off his electric lights. The event led some guests to place their own orders for similar installations. Morgan also donated entire systems to St. George's Church and to a private school, dispatching Johnson to oversee the installation as a surprise to the headmistress. The family biographer compared Morgan's gifts of electrical power plants to his sending friends baskets of choice fruit.


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

Schumpeter's book is:

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

The other book I mention, is:

de Tocqueville, Alexis. Democracy in America. Chicago: University of Chicago Press, 2000 [first published in two volumes in 1835 and 1840].

May 22, 2014

In France "'Liberté, Égalité, Fraternité' Means that What's Yours Should Be Mine"

SantacruzGuillaumeFrenchEntrepreneurInLondon2014-04-27.jpgGuillaume Santacruz is among many French entrepreneurs now using London as their base. He said of his native France, "The economy is not going well, and if you want to get ahead or run your own business, the environment is not good." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 1) Guillaume Santacruz, an aspiring French entrepreneur, brushed the rain from his black sweater and skinny jeans and headed down to a cavernous basement inside Campus London, a seven-story hive run by Google in the city's East End.

. . .

A year earlier, Mr. Santacruz, who has two degrees in finance, was living in Paris near the Place de la Madeleine, working in a boutique finance firm. He had taken that job after his attempt to start a business in Marseille foundered under a pile of government regulations and a seemingly endless parade of taxes. The episode left him wary of starting any new projects in France. Yet he still hungered to be his own boss.

He decided that he would try again. Just not in his own country.

"A lot of people are like, 'Why would you ever leave France?' " Mr. Santacruz said. "I'll tell you. France has a lot of problems. There's a feeling of gloom that seems to be growing deeper. The economy is not going well, and if you want to get ahead or run your own business, the environment is not good."

. . .

(p. 5) "Making it" is almost never easy, but Mr. Santacruz found the French bureaucracy to be an unbridgeable moat around his ambitions. Having received his master's in finance at the University of Nottingham in England, he returned to France to work with a friend's father to open dental clinics in Marseille. "But the French administration turned it into a herculean effort," he said.

A one-month wait for a license turned into three months, then six. They tried simplifying the corporate structure but were stymied by regulatory hurdles. Hiring was delayed, partly because of social taxes that companies pay on salaries. In France, the share of nonwage costs for employers to fund unemployment benefits, education, health care and pensions is more than 33 percent. In Britain, it is around 20 percent.

"Every week, more tax letters would come," Mr. Santacruz recalled.

. . .

Diane Segalen, an executive recruiter for many of France's biggest companies who recently moved most of her practice, Segalen & Associés, to London from Paris, says the competitiveness gap is easy to see just by reading the newspapers. "In Britain, you read about all the deals going on here," Ms. Segalen said. "In the French papers, you read about taxes, more taxes, economic problems and the state's involvement in everything."

. . .

"It is a French cultural characteristic that goes back to almost the revolution and Robespierre, where there's a deep-rooted feeling that you don't show that you make money," Ms. Segalen, the recruiter, said. "There is this sense that 'liberté, égalité, fraternité' means that what's yours should be mine. It's more like, if someone has something I can't have, I'd rather deprive this person from having it than trying to work hard to get it myself. That's a very French state of mind. But it's a race to the bottom."

For the full story, see:

LIZ ALDERMAN. "Au Revoir, Entrepreneurs." The New York Times, SundayBusiness Section (Sun., MARCH 23, 2014): 1 & 5.

(Note: ellipses added.)

(Note: the online version of the story has the date MARCH 22, 2014.)

SegalenDianeFrenchEntrepreneurInLondon2014-04-27.jpg 'Diane Segalen moved most of her executive recruiting practice to London from Paris. In France, she says, "there is this sense that 'liberté, égalité, fraternité' means that what's yours should be mine."" Source of caption and photo: online version of the NYT article quoted and cited above.

May 20, 2014

G.D.P. Is a Useful, But Biased Downward, Measure of Growth


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

(p. 6) Dr. Coyle concludes that while imperfect, the G.D.P. is good enough as a measure of how fast the economy is growing and better than any alternative. It is closely correlated with things that do contribute to happiness. (Nobody is happy in a recession.)

"We should not be in a rush to ditch G.D.P.," Dr. Coyle writes. "Yet it is a measure of the economy best suited to an earlier era."

For one thing, it fails to count the value of the staggering growth in consumer choice. Where once we had three television networks, we now have 1,000 channels; greater choice equals greater freedom, she declares. It does poorly in measuring the Internet economy, in which so many benefits -- like Google searches -- are offered free. It badly lags behind the headlong pace of innovation and creativity. It struggles with the true value of a host of products or services that didn't exist before. To the degree that it misses those new benefits to consumers, it understates the pace of economic growth.

For the full review, see:

FRED ANDREWS. "Off the Shelf; An Economic Gauge, Imperfect but Vital." The New York Times, SundayBusiness Section (Sun., APRIL 6, 2014): 6.

(Note: ellipsis added.)

(Note: the online version of the review has the date APRIL 5, 2014.)

The book under review is:

Coyle, Diane. GDP: A Brief but Affectionate History. Princeton, New Jersey: Princeton University Press, 2014.

May 19, 2014

Open Source Heartbleed Bug Sends Internet "into a Panic"

Opponents of patents often point to the open source movement as an alternative. The Heartbleed bug illustrates a big downside to open source:

(p. B1) The encryption flaw that punctured the heart of the Internet this week underscores a weakness in Internet security: A good chunk of it is managed by four European coders and a former military consultant in Maryland.

Most of the 11-member team are volunteers; only one works full time. Their budget is less than $1 million a year. The Heartbleed bug, revealed Monday, was the product of a fluke introduced by a young German researcher.

. . .

The OpenSSL Project was founded in 1998 to create a free set of encryption tools that has since been adopted by two-thirds of Web servers. Websites, network-equipment companies and governments use OpenSSL tools to protect personal and other sensitive information online.

So when researchers at Google Inc. and Codenomicon on Monday stated that Heartbleed could allow hackers to steal such data, the Internet went into a panic.

. . .

(p. B3) Earlier in the day, a German volunteer coder admitted that he had unintentionally introduced the bug on New Year's Eve 2011 while working on bug fixes for OpenSSL. . . .

Errors in complex code are inevitable--Microsoft Corp., Apple Inc. and Google announce flaws monthly. But people close to OpenSSL, which relies in part on donations, say a lack of funding and manpower exacerbated the problem and allowed it to go unnoticed for two years.

. . .

The OpenSSL Project counts a sole full-time developer: Stephen Henson, a 46-year-old British cryptographer with a Ph.D. in mathematics. Two other U.K. residents and a developer in Germany fill out the project's management team.

Associates describe Mr. Henson as brilliant but standoffish and overloaded with work.

. . .

Geoffrey Thorpe, an OpenSSL volunteer on the development team, said he has little time to spend on the project because of his day job at a hardware technology company.

For the full story, see:

DANNY YADRON. "Internet Security Relies on Very Few." The Wall Street Journal (Sat., April 12, 2014): B1 & B3.

(Note: ellipses added.)

(Note: the online version of the story was updated April 11, 2014, and has the title "TECHNOLOGY; Heartbleed Bug's 'Voluntary' Origins; Internet Security Relies on a Small Team of Coders, Most of Them Volunteers; Flaw Was a Fluke.")

May 18, 2014

Russia and China Redistributed Wealth "to Disastrous Effect"


Shane Smith, entrepreneur behind VICE media company. Source of photo: online version of the NYT article quoted and cited below.

(p. 10) You believe that young people worldwide are disenfranchised. Do you think popular uprisings will fix things? No. I'm actually worried, because I believe that it's going to get worse. Look, economic disparity is bad. But we've already tried having governments redistribute wealth. We tried it in Russia and China to disastrous effect.

News Corp. bought a 5 percent stake in Vice, and now James Murdoch is on the board. Why did you sell to them? I've said that I want to be the next MTV, the next CNN, the next ESPN. Cue everyone rolling their eyes. MTV went to Viacom, ESPN went to Disney and Hearst, CNN went to Time Warner. Why? Because to build a global media brand, it's almost impossible to do it alone. James has been involved in one of the largest media companies in the world since he was in short pants.

Do you ever fear that Vice will become legacy media itself? It's our time now. Then, I don't know, it'll be holograms next, and some kid will come up and eat our lunch.

For the full interview, see:

Staley, Willy, interviewer. " 'Have We Unleashed a Monster?': The Vice C.E.O. Shane Smith on His New Kind of News." The New York Times Magazine (Sun., MARCH 23, 2014): 12.

(Note: ellipsis added; bold in original.)

(Note: the online version of the interview has the date MARCH 21, 2014, and has the title "Vice's Shane Smith: 'Have We Unleashed a Monster?'.")

May 16, 2014

"The Experts Keep Getting It Wrong and the Oddballs Keep Getting It Right"

HydraulicFracturingOperationInColorado2014-04-25.jpg "A worker at a hydraulic fracturing and extraction operation in western Colorado on March 29[, 2014]." Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. C3) The experts keep getting it wrong. And the oddballs keep getting it right.

Over the past five years of business history, two events have shocked and transformed the nation. In 2007 and 2008, the housing market crumbled and the financial system collapsed, causing trillions of dollars of losses. Around the same time, a few little-known wildcatters began pumping meaningful amounts of oil and gas from U.S. shale formations. A country that once was running out of energy now is on track to become the world's leading producer.

What's most surprising about both events is how few experts saw them coming--and that a group of unlikely outsiders somehow did.

. . .

Less well known, but no less dramatic, is the story of America's energy transformation, which took the industry's giants almost completely by surprise. In the early 1990s, an ambitious Chevron executive named Ray Galvin started a group to drill compressed, challenging formations of shale in the U.S. His team was mocked and undermined by dubious colleagues. Eventually, Chevron pulled the plug on the effort and shifted its resources abroad.

Exxon Mobil also failed to focus on this rock--even though its corporate headquarters in Irving, Texas, were directly above a huge shale formation that eventually would flow with gas. Later, it would pay $31 billion to buy a smaller shale pioneer.

"I would be less than honest if I were to say to you [that] we saw it all coming, because we did not, quite frankly," Rex Tillerson, Exxon Mobil's chairman and CEO said last year in an interview at the Council on Foreign Relations.

. . .

The resurgence in U.S. energy came from a group of brash wildcatters who discovered techniques to hydraulically fracture--or frack--and horizontally drill shale and other rock. Many of these men operated on the fringes of the oil industry, some without college degrees or much background in drilling, geology or engineering.

For the full commentary, see:

GREGORY ZUCKERMAN. "ESSAY; The Little Guys Who Saw Our Economic Future; Corporate Caution and Complacency Come at a Cost." The Wall Street Journal (Sat., Nov. 2, 2013): C3.

(Note: ellipsis, and bracketed year in caption, added.)

(Note: the online version of the commentary was updated Nov. 3, 2013, and has the title "ESSAY; The Outsiders Who Saw Our Economic Future; In both America's energy transformation and the financial crisis, it took a group of amateurs to see what was coming." )

Zuckerman's commentary, quoted above, is partly based on his book:

Zuckerman, Gregory. The Frackers: The Outrageous inside Story of the New Billionaire Wildcatters. New York: Portfolio/Penguin, 2013.

May 10, 2014

Television Improved Test Scores

GentzkowMatthewChicagoBatesClark2014-04-26.jpg "Economist Matthew Gentzkow found media slant to be a function of audience preference." Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A2) An economist known for pioneering work on slanted coverage in the news media won the John Bates Clark Medal, one of the profession's most prestigious honors.

Matthew Gentzkow, a professor at the University of Chicago's Booth School of Business, on Thursday was awarded the Clark medal by the American Economic Association, which every year honors the nation's most promising economist under age 40.

. . .

A big theme in Mr. Gentzkow's work is finding innovative ways to tackle questions that expand economists' tool kits.

. . . , in 2008, he and Mr. Shapiro examined the fact that different parts of the U.S. got access to television at different times to gauge TV's effects on high-school students in the 1960s.

The economists found that children who lived in cities that gave them more exposure to TV in early childhood performed better on tests than those with less exposure. The work also suggested TV helped American children in non-English-speaking households do better in school.

For the full story, see:

NEIL SHAH. "Economist Honored for Work on Media Slant." The Wall Street Journal (Fri., April 18, 2014): 12.

(Note: ellipses added.)

(Note: the online version of the story has the date April 17, 2014.)

The Gentzkow and Shapiro paper on the effects of television, is:

Gentzkow, Matthew, and Jesse M. Shapiro. "Preschool Television Viewing and Adolescent Test Scores: Historical Evidence from the Coleman Study." Quarterly Journal of Economics 123, no. 1 (Feb. 2008): 279-323.

May 8, 2014

Government Pushed Kiewit to Ignore Worker Safety


Source of book image:

(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 7, 2014

A&P Case Shows that Size Can Bring Economies of Scope and Scale

(p. A9) The claim that large, profit-driven firms are harmful to society has a venerable history in the United States. Perhaps no company was ever more vilified for its bigness than the Great Atlantic and Pacific Tea Co., which from 1920 to the 1960s was the largest retailer in the world. From the 1910s to the 1950s, as it cut out wholesalers and demanded volume discounts from food manufacturers, A&P was criticized for destroying the local merchants that formed the backbone of small-town America and the satisfying jobs they provided. Federal and state governments tried to cripple its business by prohibiting discounting; the Justice Department even won an antitrust case claiming that the company was selling food too cheaply. The fact that A&P's economies of scope and scale saved shoppers 15% or 20% on groceries didn't get much respect, just as Ms. Heffernan doesn't much value the role that big businesses play in lowering costs today.

Yes, competition drives many companies to act in socially harmful ways, and competition within firms can get in the way of collaboration. But the fact that competition can be dysfunctional does not mean that scope and scale are economists' fictions. Size does matter, and competition, while no panacea, does force people to find better ways of doing business.

For the full commentary, see:

MARC LEVINSON. "BOOKSHELF; When Size Does Matter; We glorify the local, but smallness didn't stop the country's savings and loans from needing a federal bailout in the 1980s." The Wall Street Journal (Fri., April 18, 2014): A9.

(Note: the online version of the commentary has the date April 17, 2014, and has the title "BOOKSHELF; Book Review: 'A Bigger Prize' by Margaret Heffernan; We glorify the local, but smallness didn't stop the country's savings and loans from needing a federal bailout in the 1980s.")

Levinson's own book (not the one he is reviewing in the passages quoted above), is:

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

May 6, 2014

Aloysius Siow's Obituary for Gary Becker

My friend Aloysius Siow and I were graduate students at the University of Chicago in the mid to late 1970s, where we took courses from Gary Becker, and attended his workshop. In the past, I have posted several entries on Becker on this blog that appear under the Category "Becker, Gary." I expect to write some thoughts on his passing, but am not ready to do so yet. Aloysius drafted an obituary without delay, and kindly said it was OK for me to post it as an entry on this blog.

Obituary: Gary Becker
The Father of Economics Imperialism

By Aloysius Siow, Professor of Economics
University of Toronto
May 4, 2014

Gary Becker, an American economist, died on May 3 at the age of 83.

His major contribution was the systematic application of economics to the analysis of social issues. Before his work, economists primarily studied how markets and market economies worked. He used economics to study discrimination, criminal behavior, human capital, marriage, fertility and other social issues.

He won the Nobel Prize in economics in 1992. He also won the John Bates Clark medal, awarded to the best American economist under 40, in 1967; and the Presidential Medal of Freedom, the highest honor award by the US president to a civilian, in 2007.

Becker's father, Louis William Becker, migrated from Montreal to the United States at age sixteen and moved several times before settling down in Pottsville, Pennsylvania. Becker's mother was Anna Siskind. He was born in Pottsville in 1930. At age five, Gary and his family moved to Brooklyn. He studied in Princeton University as an undergraduate. He did his PhD at the University of Chicago where he met Milton Friedman who would have an enormous influence on his intellectual development. After he obtained his PhD, Becker spent a few years as an assistant professor at the University of Chicago and then moved to Columbia University.

His path breaking 1955 dissertation was on the economics of discrimination. It was the first systematic study of a non-traditional economic topic using economics. In it, he argued that the difference in wages between a majority and a minority group can be used to measure the extent of discrimination in the labor market. When one points out today that it is unfair that women earn 80 percent of what men make, they are channeling Becker. His thesis analyzed how the South African system of apartheid benefited Whites at the expense of Blacks in South Africa. This analysis predated the Anti-apartheid Boycott Movement of the West which started in 1959.

The methodology and concern of his thesis previewed his research career. At the time of the publication of his thesis in 1957, economics was a conservative discipline, restricting itself to the study of the behavior of markets and market economies. Becker set for himself the task of systematically applying the tools of economics to the study of social issues. At the beginning, his work was generally ignored if not actually denigrated within the profession. Economists were supposed to study more important concerns.

After studying discrimination, he provided a modern economic theory of criminal behavior. Together with his study on discrimination, this work inspired the development of the law and economics movement.

At Columbia University, he began a systematic study of human capital, the study of the allocation of time and other topics in labor economics. Together with his colleague Jacob Mincer, they wrote many of the important papers in labor economics and also produced many successful graduate students. For example, their graduate student, Michael Grossman, wrote his thesis on health economics where he applied economics to the study of individual maintenance of health. Today, health economics is a major field of study and a central pillar of health policy. Due to the topics they worked on, they also attracted and successfully supervised many female PhD students. Claudia Goldin of Harvard University is perhaps his most illustrious female PhD student.

In 1970, Becker returned to the University of Chicago where he remained as a professor until his death. He continue to apply his economics to the study of the family, including the behavior of marriage markets, allocation of resources within the family and fertility behavior. The discussion of how economics can affect fertility anticipated government policies which seek to increase their native fertility rates. For example, Singapore has over 30 programs which seeks to increase her fertility rate.

Today, Becker's approach is known as the rational choice approach in the social sciences. As the economics profession grew to appreciate his contributions, other social sciences have mixed feelings about his influence. On the one hand, they appreciate how he led economists to study different social issues. On the other hand, other social scientists often feel threatened by the invasion of economists.

Economists systematically use mathematical methods, statistical analysis and often large data sets. They prioritize cost benefit calculus over other factors which may also affect individual behavior. They had little patience with qualitative studies. Thus some social scientists felt that their contributions were unfairly ignored and so resisted the application of economics to their fields. For example, the Critical Legal Studies movement was developed in the 1970s in part in reaction to the success of the law and economics movement in law schools. In political science, rational choice theory is now a core field of study. Yet there are many political scientists who reject this approach.

Interestingly, motivated by the work of psychologists, economists have also begun to reject the purely rational calculus model of Becker as too narrow. Rather, these behavioral economics researchers argue that individuals have bounded rationality and are subject to systematic biases in their behavior. For example, Robert Shiller, a Nobel economist, has argued that bubbles occur in asset markets due to psychological biases. Thus the success of Becker has led to qualifications which is a hallmark of progress in science.

Contrary to many successful economists, Becker did not spend much time consulting for either the government or business. He was a conservative but unlike his mentor Milton Friedman, his direct influence on policy was minimal. Rather, the various economic fields which he instigated have had and continue to have significant influence on public policy. For example, every politician who wants to spend more resources on public education says that they are investing in the human capital of their society. Today, economists systematically contribute to policy discussions on maternity leaves, subsidies for child care and other social issues.

On a personal note, I was a graduate student at the University of Chicago in the late seventies where I met Gary Becker. I was interested in social issues. But because he was so intimidating as a scholar, I did not write my thesis under him nor was it on those concerns. Ten years after I obtained my PhD, and after I had moved to the University of Toronto, I wrote my first paper on the economics of the family motivated by a discussion in evolutionary psychology. Our interest on the economics of the family overlapped and we subsequently have had many professional interactions. I also began to realize that he did not know everything and that it is fine to work on topics which he had worked on.

Later in his life, he would sometimes introduce me as a former PhD student. At first I would correct him. But later I did not because perhaps he was right.

May 4, 2014

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


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 30, 2014

Strategic Conversations: Vital to Creative Adaptation or Reinforcers of Lazy Consensus?


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

(p. A15) "Moments of Impact" is at its best on the importance of promoting different perspectives. Businesses need to look at the world through as many disciplinary lenses as possible if they are to cope with the fast-changing threats that confront them. But day-to-day corporate life is all about fences and silos. Strategic conversations give companies a chance to examine their business models from the outside--and, as the authors put it, to "imagine operating within several different yet plausible environments."

. . .

Mr. Ertel and Ms. Solomon argue that companies increasingly face a choice between what Joseph Schumpeter called creative destruction and what they call creative adaptation--and that strategic conversations are vital to creative adaptation. Perhaps so. But strategic conversations can also reinforce lazy consensus, as people try to justify their jobs and protect their turf. Many bold decisions are driven by the opposite of "conversations"--by senior managers deciding to lop-off functions or take the company in a radically new direction.

For the full review, see:

ADRIAN WOOLDRIDGE. "BOOKSHELF; Go Ahead, Strategize; The best 'strategy meetings' unleash fresh thinking and offer maverick views; the worst and dull, unstructured time-sucks." The Wall Street Journal (Thurs., March 27, 2014): A15.

(Note: ellipsis added.)

(Note: the online version of the review has the date March 26, 2014, and has the title "BOOKSHELF; Book Review: 'Moments of Impact,' by Chris Ertel and Lisa Kay Solomon; The best 'strategy meetings' unleash fresh thinking and offer maverick views; the worst and dull, unstructured time-sucks.")

The book under review is:

Ertel, Chris, and Lisa Kay Solomon. Moments of Impact: How to Design Strategic Conversations That Accelerate Change. New York: Simon & Schuster, 2014.

April 27, 2014

Government Wire Inspectors Only Showed Up to Get Their Pay

(p. 121) Edison had originally planned to offer service to the entirety of south Manhattan, south of Canal Street and north of Wall Street, but engineering considerations forced him to carve out a smaller district, bounded by Wall, Nassau, Spruce, and Ferry Streets. Still, his company had to place underground some eighty thousand linear feet of electrical wire. This had never been attempted before, so it should not have been a surprise when H. O. Thompson, the city's commissioner of public works, summoned Edison to his office to explain that the city would have to be assured that the lines were installed safely. Thompson was assigning five inspectors to oversee the work, whose cost would be covered by an assessment of $5 per day, per inspector, payable (p. 122) each week. When Edison left Thompson's office, he was crestfallen, anticipating the harassment and delays ahead that would be caused by the inspectors' interference. On the day that work began, however, the inspectors failed to appear. Their first appearance was on Saturday afternoon, to draw their pay. This set the pattern that the inspectors followed as the work proceeded through 1881 and into 1882.


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

April 26, 2014

One Way to Appreciate All We Take for Granted


Source of book image:

(p. 8) Over the past generation or two we've gone from being producers and tinkerers to consumers. As a result, I think we feel a sense of disconnect between our modern existence and the underlying processes that support our lives. Who has any real understanding of where their last meal came from or how the objects in their pockets were dug out of the earth and transformed into useful materials? What would we do if, in some science-fiction scenario, a global catastrophe collapsed civilization and we were members of a small society of survivors?

My research has to do with what factors planets need to support life. Recently, I've been wondering what factors are needed to support our modern civilization. What key principles of science and technology would be necessary to rebuild our world from scratch?

. . .

. . . there are the many materials society requires: How do you transform base substances like clay and iron into brick or concrete or steel, and then shape that material into a useful tool? To learn a small piece of this, I spent a day in a traditional, 18th-century iron forge, learning the essentials of the craft of the blacksmith. Sweating over an open coke-fired hearth, I managed to beat a lump of steel into a knife. Once shaped, I got it cherry-red hot and then quenched it with a satisfying squeal into a water trough, before reheating the blade slightly to temper it for extra toughness.

. . .

. . . , it needn't take a catastrophic collapse of civilization to make you appreciate the importance of understanding the basics of how devices around you work. Localized disasters can disrupt normal services, making a reasonable reserve of clean water, canned food and backup technologies like kerosene lamps a prudent precaution. And becoming a little more self-reliant is immensely rewarding in its own right. Thought experiments like these can help us to explore how our modern world actually came to be, and to appreciate all that we take for granted.

For the full commentary, see:

LEWIS DARTNELL. "OPINION; Civilization's Starter Kit." The New York Times, SundayReview Section (Sun., MARCH 30, 2014): 8.

(Note: ellipses added.)

(Note: the online version of the commentary has the date MARCH 29, 2014.)

Dartnell's commentary, quoted above, has been elaborated in his book:

Dartnell, Lewis. The Knowledge: How to Rebuild Our World from Scratch. New York: Penguin Press, 2014.

April 24, 2014

Little Estonia Prepares Defense Against Russia's Evil Empire


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


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.

April 15, 2014

Arc Lights Leapfrogged Gas Lights Before Incandescents Leapfrogged Them Both

(p. 85) The gas interests had been dealt a number of recent setbacks even before Edison's announcement of a newly successful variant of electric light. An "enormous abandonment of gas" by retail stores in cities, who now could use less expensive kerosene, was noticed. The shift was attributed not to stores' preference for kerosene but as a means of escaping "the arrogance of the gas companies." Arc lights had now become a newly competitive threat, too. The previous month, Charles Brush had set up his lights in an exhibition hall in New York and then added a display in Boston. Sales to stores followed in several cities; then, as word spread, other establishments sought to obtain the cachet bestowed by the latest technology. William Sharon, a U.S. senator for and energetic booster of California, retrofitted the public spaces of his Palace Hotel in San Francisco with arc lights that replaced 1,085 gas jets.


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

April 11, 2014

Edison, Not Antitrust, Reduced Power of Hated Gas Monopolies

Counterbalancing the angst of those hurt by the death of an old technology is sometimes the triumph creative destruction provides to those who were less well-served by the old technology. Some look to governments to restrain a dominant technology; but sometimes a more effective way is to replace the old technology through creative destruction's leapfrog competition.

(p. 84) Gaslight monopolies had few friends outside of the ranks of shareholders. At the beginning of the nineteenth century, gaslight had been viewed as pure and clean; seventy years later, its shortcomings had become all too familiar: it was dirty, soiled interior furnishings, and emit-(p. 85)ted unhygienic fumes. It was also expensive, affordable for indoor lighting only in the homes of the wealthy, department stores, or government buildings. The New York Times almost spat out the following description of how gas companies conducted business: "They practically made the bills what they pleased, for although they read off the quantity by the meter, that instrument was their own, and they could be made to tell a lie of any magnitude.... Everybody has always hated them with a righteous hatred."

Edison credited the gas monopoly for providing his original motivation to experiment with electric light years before in his Newark laboratory. Recalling in October 1878 his unpleasant dealings years earlier with the local gas utility, which had threatened to tear out their meter and cut off the gas, Edison said, "When I remember how the gas companies used to treat me, I must say that it gives me great pleasure to get square with them." The Brooklyn Daily Eagle printed an editorial titled "Revenge Is Sweet" in which it observed that the general public greatly enjoyed the discomfort of the gas companies, too: "To see them squirm and writhe is a public satisfaction that lifts Edison to a higher plane than that of the wonderful inventor and causes him to be regarded as a benefactor of the human race, the leading deity of popular idolatry."


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

(Note: ellipsis in original.)

April 9, 2014

Patent Trial and Appeal Board May Be Invalidating Low Quality Patents

One of the common complaints about the U.S. patent system for the past couple of decades is that the Patent and Trademark Office (PTO) has been approving too many low quality patents, that are then used by patent holders to extort licensing fees or out-or-court settlements from alleged infringers. One way in which the America Invents Act, signed in September 2011, tried to respond to the complaint was to strengthen the post-approval re-examination process for patents. The article quoted below suggests that the strengthened process may be having the intended effect.

(p. B4) The Patent Trial and Appeal Board is a little known but powerful authority that often allows a company embroiled in a lawsuit to skip the question of whether it infringed a patent--and challenge whether the patent should have been issued in the first place.

The board was launched in September 2012 as part of the massive patent overhaul passed by Congress the previous year and is currently staffed by 181 judges, many of whom have deep experience in intellectual property or technical fields like chemical and electrical engineering. Through last Thursday it had received 1,056 requests to challenge patents, far more than were received by any federal court over the same time period.

The board is part of the Patent and Trademark Office. But so far, it hasn't shied away from upending the office's decisions to issue certain patents. As of last week, the board had issued 25 written decisions concerning patent challenges, and upheld parts of challenged patents in only a few of them.

. . .

In recent months, Randall Rader, the chief judge of the Federal Circuit, has been one of the board's most outspoken critics. At a conference of intellectual-property lawyers last fall, the judge called the board's panels "death squads...killing property rights."

In an interview with The Wall Street Journal, Mr. Rader said the board is too quick to toss out patents that demonstrate only modest innovation. "The board needs to incentivize human progress--and understand that it often happens one small step at a time," he said.

But many company lawyers think the board is doing exactly as it should--taking a skeptical look at patents that have added little to the world.

For the full story, see:

ASHBY JONES. "New Weapon in Intellectual Property Wars; Panel Can Upend Patent Decisions, but Some Say It Goes Too Far; 'Like Getting CAT-Scanned, MRI-ed, and X-Rayed'." The Wall Street Journal (Tues., March 11, 2014): B4.

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

(Note: the online version of the story has the date March 10, 2014, and has the title "A New Weapon in Corporate Patent Wars; Patent Trial and Appeal Board Can Upend PTO Decisions, but Some Say It Goes Too Far.")

April 8, 2014

Government Regulations Slow U.S. Use of Drones

DronesThreeSophisticatedCommerical2014-04-03.jpgThree sophisticated drones. From top to bottom, the Insitu ScanEagle, the Yamaha RMAX, and the Trimble UX5. Source and photo: online version of the WSJ article quoted and cited below.

(p. B1) After Greek land surveyor George Papastamos bought his first drones a year ago, he let go most of his workers. Now, instead of a team of 12, he shows up to work sites with just a drone and an assistant.

"I could see this was the future," said Mr. Papastamos, a second-generation surveyor from Athens. The drones have improved his maps and lowered his costs, enabling him to win more business. "It is much, much more profitable," he said.

As U.S. regulators and courts grapple with when and how to allow the use of drones for commercial purposes, flying robots already are starting to change the way companies do business in countries from Australia to Japan to the U.K. They are showing the potential to provide cheaper and more effective alternatives to manned aircraft--and human workers--in industries like mining, construction and filmmaking.

The U.S. is "the world leader in producing drones," but "the reality is the rest of the world has moved further ahead of us in terms of commercial applications," said drone researcher Missy Cummings, director of the Humans and Autonomy Lab at Duke University.

For the full story, see:

JACK NICAS. "From Farms to Films, Drones Find Commercial Uses." The Wall Street Journal (Tues., March 11, 2014): B1 & B6.

(Note: the online version of the story has the date March 10, 2014, and has the title "Drones Find Fans Among Farmers, Filmmakers; FAA Still Debating Rules but Drones are Spraying 40% of Japan's Rice Fields.")

April 7, 2014

William Vanderbilt Helped Disrupt His Gas Holdings by Investing in Edison's Electricity

(p. 84) But even the minimal ongoing work on the phonograph would be pushed aside by the launch of frenzied efforts to find a way to fulfill Edison's premature public claim that his electric light was working. A couple of months later, when asked in an interview about the state of his phonograph, Edison replied tartly, "Comatose for the time being." He changed metaphors and continued, catching hold of an image that would be quoted many times by later biographers: "It is a child and will grow to be a man yet; but I have a bigger thing in hand and must finish it to the temporary neglect of all phones and graphs."

Financial considerations played a part in allocation of time and resources, too. Commissions from the phonograph that brought in hundreds of dollars were hardly worth accounting for, not when William Vanderbilt and his friends were about to advance Edison $50,000 for the electric light. Edison wrote a correspondent that he regarded the financier's interest especially satisfying as Vanderbilt was "the largest gas stock owner in America."


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

(Note: ellipses, and capitals, in original.)

April 4, 2014

Gary Becker's Grandson Ponders Opportunity Cost of College


"Louis Harboe with his parents, Frederik Harboe and Catherine Becker. Louis, now 18, got his first freelance tech job at age 12. Last year, he attended the Apple Worldwide Developers Conference in San Francisco." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 1) Ryan was headed to South by Southwest Interactive, the technology conference in Austin. There, he planned to talk up an app that he and a friend had built. Called Finish, it aimed to help people stop procrastinating, and was just off its high in the No. 1 spot in the productivity category in the Apple App store.

. . .

Ryan is now 17, a senior at Boulder High. He is among the many entrepreneurially minded, technologically skilled teenagers who are striving to do serious business. Their work is enabled by low-cost or free tools to make apps or to design games, and they are encouraged by tech companies and grown-ups in the field who urge them, sometimes with financial support, to accelerate their transition into "the real world." This surge in youthful innovation and entrepreneurship looks "unprecedented," said Gary Becker, a University of Chicago economist and a Nobel laureate.

Dr. Becker is assessing this subject from a particularly intimate vantage point. His grandson, Louis Harboe, 18, is a friend of (p. 6) Ryan's, a technological teenager who makes Ryan look like a late bloomer. Louis, pronounced Louie, got his first freelance gig at the age of 12, designing the interface for an iPhone game. At 16, Louis, who lives with his parents in Chicago, took a summer design internship at Square, an online and mobile payment company in San Francisco, earning $1,000 a week plus a $1,000 housing stipend.

Ryan and Louis, who met online in the informal network of young developers, are hanging out this weekend in Austin at South by Southwest. They are also waiting to hear from the colleges to which they applied last fall -- part of the parallel universe they also live in, the traditional one with grades and SATs and teenage responsibilities. But unlike their peers for whom college is the singular focus, they have pondered whether to go at all. It's a good kind of problem, the kind faced by great high-school athletes or child actors who can try going pro, along with all the risk that entails.

Dr. Becker, who studies microeconomics and education, has been telling his grandson: "Go to college. Go to college." College, he says, is the clear step to economic success. "The evidence is overwhelming."

But the "do it now" idea, evangelized on a digital pulpit, can feel more immediate than academic empiricism. "College is not a prerequisite," said Jess Teutonico, who runs TEDxTeen, a version of the TED talks and conferences for youth, where Ryan spoke a few weeks ago. "These kids are motivated to take over the world," she said. "They need it fast. They need it now."

For the full story, see:

MATT RICHTEL. "The Youngest Technorati." The New York Times, SundayBusiness Section (Fri., MARCH 9, 2014): 1 & 6.

(Note: ellipsis added.)

(Note: the online version of the story has the date MARCH 8, 2014.)

April 3, 2014

As a Young Inventor, Edison Patented Fast

Edison filed patent applications as fast as the ideas arrived.


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

April 1, 2014

Decline in Hours Worked Shows Weakness in Labor Market

(p. A15) Most commentators viewed the February [2014] jobs report released on March 7 as good news, indicating that the labor market is on a favorable growth path. A more careful reading shows that employment actually fell--as it has in four out of the past six months and in more than one-third of the months during the past two years.

Although it is often overlooked, a key statistic for understanding the labor market is the length of the average workweek. Small changes in the average workweek imply large changes in total hours worked. The average workweek in the U.S. has fallen to 34.2 hours in February from 34.5 hours in September 2013, according to the Bureau of Labor Statistics. That decline, coupled with mediocre job creation, implies that the total hours of employment have decreased over the period.

. . .

. . . , although the U.S. economy added about 900,000 jobs since September, the shortened workweek is equivalent to losing about one million jobs during this same period. The difference between the loss of the equivalent of one million jobs and the gain of 900,000 new jobs yields a net effect of the equivalent of 100,000 lost jobs.

For the full commentary, see:

EDWARD P. LAZEAR. "The Hidden Rot in the Jobs Numbers; Hours worked are declining, resulting in the equivalent of a net loss of 100,000 jobs since September." The Wall Street Journal (Fri., March 17, 2014): A15.

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

(Note: the online version of the commentary has the date March 16, 2014.)

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.

March 30, 2014

Edison Sold Half-Interest in Some Patents, to Fund His Inventing

Stross discusses Edison's inventing at age 21:

(p. 8) Edison soon sought investors who would provide funds in exchange for half-interest in resulting patents.


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

March 29, 2014

If Lack of Focus and Poverty Go Together, Which Is the Cause and Which the Effect?


Source of book image:

Are the poor poor partly because they concentrate less, or do they concentrate less partly because they are poor? Samantha Power discusses one of her favorite books of 2013:

(p. C11) In "Scarcity," Sendhil Mullainathan and Eldar Shafir offer groundbreaking insights into, among other themes, the effects of poverty on (p. C12) cognition and our ability to make choices about our lives. The authors persuasively show that the mental space--or "bandwidth"--of the poor is so consumed with making ends meet that they may be more likely to lose concentration while on a job or less likely to take medication on time.

For the full article, see:

"12 Months of Reading; We asked 50 of our friends--from April Bloomfield to Mike Tyson--to name their favorite books of 2013." The Wall Street Journal (Sat., Dec. 14, 2013): C6 & C9-C12.

(Note: the online version of the article has the date Dec. 13, 2013.)

The book that Power praises is:

Mullainathan, Sendhil, and Eldar Shafir. Scarcity: Why Having Too Little Means So Much. New York: Times Books, 2013.

March 28, 2014

Paul Ryan Warns that the Safety Net Can Be a Hammock

(p. A21) . . . Mr. Ryan said two years ago: "We don't want to turn the safety net into a hammock that lulls able-bodied people to lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives."

For the full commentary, see:

Krugman, Paul. "The Hammock Fallacy." The New York Times (Fri., MARCH 7, 2014): A21.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date MARCH 6, 2014.)

The original source of the Paul Ryan quote appears to be:

"Paul Ryan Wants 'Welfare Reform Round 2'." The Huffington Post (posted 03/20/2012).

Ryan made similar comments in his January 25th official Republican response to the State of the Union speech:

We are at a moment, where if government's growth is left unchecked and unchallenged, America's best century will be considered our past century. This is a future in which we will transform our social safety net into a hammock, which lulls able-bodied people into lives of complacency and dependency.

Depending on bureaucracy to foster innovation, competitiveness, and wise consumer choices has never worked -- and it won't work now.


NPR transcript of Paul Ryan response, January 25, 2011.

March 23, 2014

Disabled Workers Are More Likely to Be Free Agent Entrepreneurs

HartfordKevinEntrepreneurWhoStutters2014-03-10.jpg "Kevin Hartford, right, and a colleague at his factory. He started his business after employers failed to hire him." Source of caption and photo: online version of the NYT article quoted and cited below.

HR departments have incentives to avoid hiring risky employees. But a determined high-risk employee can hire themselves by becoming a free agent entrepreneur. If we want to truly help the disabled, we should remove obstacles to entrepreneurship, such as burdensome regulations and high taxation.

(p. B4) Mr. Hartford, the father of two sons, thrived as a business consultant in his 20s and 30s. He was used to flying first class, staying at swank hotels and advising CEOs. Then the consulting firm unraveled in the mid-1990s. When he began looking for a new job, a stuttering problem--something he had always considered manageable--put off potential employers.

"I applied for job after job after job," says Mr. Hartford, now 58. "I was one of two finalists; I was one of three finalists. But I never got the job."

In the end, Mr. Hartford concluded that his only shot at a satisfying job was to create a company. He is now president and co-owner of Alle-Kiski Industries, which makes parts, such as exhaust pipes for train locomotives and prototype truck wheels, for larger manufacturers, including Alcoa Inc. and General Electric Co.

Like many before him, Mr. Hartford discovered that one option for people who don't fit into large organizations is to start a small one. That is particularly true for people with disabilities. About 11% of disabled workers are self-employed, compared with 6.5% of those with no disabilities, according to Labor Department data.

. . .

The business has grown to 38 employees from a dozen when Messrs. Hartford and Newell started in 2005. They own more than $2 million of equipment used to drill, groove and otherwise shape metal, arrayed in a 27,000-square-foot factory with an American flag hanging from one of the beams. Last year's sales of $6 million were the highest yet, Mr. Hartford says, and the company is building a 4,000-square-foot addition to house more equipment.

For the full story, see:

JAMES R. HAGERTY. "Entrepreneur Let No Impediment Stop Him; Out-of-Work Consultant Started His Own Company After Discovering His Stutter Put Off Employers." The Wall Street Journal (Thurs., Jan. 16, 2014): B4.

(Note: ellipsis added.)

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

March 19, 2014

As Venezuelan Economy Collapses, Socialists Urge Citizens to Hit the Beach and Party

VenezuelaProtestersBeachScene2014-03-06.jpg "Antigovernment protesters blocking a street in San Cristóbal, in western Venezuela, decorated their barrier like a beach scene." Source of caption and photo: online version of WILLIAM NEUMAN. "Slum Dwellers in Caracas Ask, What Protests?" The New York Times (Sat., March 1, 2014): A1 & A8.

(p. A6) CARACAS, Venezuela--President Nicolás Maduro declared an extended Carnival holiday season, betting that sun, sand and rum will help calm the worst civil unrest to sweep the oil-rich nation in more than a decade.

As some opposition leaders called to cancel the celebrations to mourn those who died in recent weeks during protests, Mr. Maduro's ministers publicly encouraged Venezuelans to hit the beach for the pre-Lent festivities.

. . .

Among those officials most visible to the public these days has been Tourism Minister Andres Izarra, who has been hitting tourist hot spots with a campaign called "Carnival 2014--The Coolest Holiday."

He said that officials were opening 180 tourist information centers for the long holiday weekend and increasing maintenance and trash pickup at beaches that are often covered with empty alcohol containers. Meanwhile, the transportation minister, Haiman El Troudi, said new bus routes would be added to get Venezuelans to the beach.

For the full story, see:

KEJAL VYAS and JUAN FORERO. "Venezuela Leader Fights Unrest With Fiesta; President Maduro Extends Carnival Celebration After Opposition Call For Mourning, More Protests." The Wall Street Journal (Fri., FEB. 28, 2014): A6.

(Note: ellipsis added.)

(Note: the online version of the story has the date Feb. 27, 2014.)

VenezuelaSupermarketLine2014-03-06.jpg "PARTY LINE: Venezuela President Nicolás Maduro, reeling from weeks of protests, called for Carnival season to begin early, and his ministers urged Venezuelans to hit the beach. But the crumbling economy and food shortages created scenes such as the lines at a supermarket." Source of caption and photo: online version of the WSJ article quoted and cited above.

VenezuelaProtestersWearingCarnivalMasks2014-03-06.jpg "Opposition demonstrators wearing Carnival masks take part in a women's rally against Nicolás Maduro's government in Caracas on Wednesday." Source of caption and photo: online version of the WSJ article quoted and cited above.

March 18, 2014

Nasaw Claims Carnegie Believed in Importance of Basic Scientific Research

But notice that the two main examples of what Carnegie himself chose to fund (the Wilson Observatory and the yacht to collect geophysical data), were empirically oriented, not theoretically oriented.

(p. 480) Carnegie was, as Harvard President James Bryant Conant would comment in 1935 on the centenary of his birth, "more than a generation ahead of most business men of this country [in understanding] the importance of science to industry." He recognized far better than his peers how vital basic scientific research was to the applied research that industry fed off. George Ellery Hale, an astronomer and astrophysicist, later to be the chief architect of the National Research Council, was astounded when he learned of Carnegie's commitment to pure research. "The provision of a large endowment solely for scientific research seemed almost too good to be true.... Knowing as I did the difficulties of obtaining money for this purpose and (p. 481) devoted as I was to research rather than teaching, I could appreciate some of the possibilities of such an endowment." Hale applied for funds to build an observatory on Mount Wilson in California, and got what he asked for. It would take until 1909 to build and install a 60-inch reflecting telescope in the observatory; in 1917, a second 100-inch telescope, the largest in the world, was added.

The Mount Wilson Observatory-- and the work of its astronomers and astrophysicists-- was only one of the projects funded in the early years of the new institution. Another, of which Carnegie was equally proud, was the outfitting of the Carnegie, an oceangoing yacht with auxiliary engine, built of wood and bronze so that it could collect geophysical data without the errors inflicted on compass readings by iron and steel. The ship was launched in 1909; by 1911, Carnegie could claim that the scientists on board had already been able to correct several significant errors on navigational maps.


Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: ellipsis, and italics, in original.)

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)

March 13, 2014

How the Brain May Be Able to Control Robots


Michio Kaku. Source of photo: online version of the NYT article quoted and cited below.

(p. 2) Michio Kaku is a theoretical physicist and professor at City College of New York. When not trying to complete Einstein's theory of everything, he writes books that explain physics and how developments in the field will shape the future.

. . .

One of the most intriguing things I've read lately was by Miguel Nicolelis, called "Beyond Boundaries: The New Neuroscience of Connecting Brains With Machines," in which he describes hooking up the brain directly to a computer, which allows you to mentally control a robot or exoskeleton on the other side of the earth.

For the full interview, see:

KATE MURPHY, interviewer. "Download; Michio Kaku." The New York Times, SundayReview Section (Sun., FEB. 9, 2014): 2.

(Note: ellipsis added.)

(Note: the first paragraph is an introduction by Kate Murphy; the next paragraph is part of a response by Michio Kaku.)

(Note: the online version of the interview has the date FEB. 8, 2014.)

The book mentioned above is:

Nicolelis, Miguel. Beyond Boundaries: The New Neuroscience of Connecting Brains with Machines---and How It Will Change Our Lives. New York: Times Books, 2011.

March 12, 2014

Small Business Will Fire Workers When Minimum Wage Is Raised

(p. B4) . . . , Charlene Conway is watching her numbers. For 22 years, Ms. Conway and her husband have run Carousel Family Fun Centers in Fairhaven and Whitman, Mass. The business has annual revenue of less than $500,000 and depends exclusively on part-time minimum-wage earners, mostly teenagers, to handle tasks like running the snack bar and maintaining the games.

This year, Massachusetts is considering raising its minimum to $9 an hour, from $8. Should that happen, Ms. Conway said, she will probably need to reduce her staff of 20. Her employees currently make an average of $9 an hour, with managers earning from $10 to $15. Like Ms. Riley, Ms. Conway said that an increase in the minimum would force her to raise pay across the board.

And she, too, is reluctant to raise prices again. In 2011 and 2012, she increased her admission fees by a dollar -- they generally run from $5 to $10 now, based on age and time of day. Another increase, she said, would just make things worse: "We will price ourselves out of business."

In the past, when Massachusetts increased the state's minimum, Ms. Conway responded by increasing the minimum age of her workers to 16 from 14. "I'm not going to pay a 14-year-old $9 an hour with no experience, maturity or work ethic," she said. More recently, she has been hiring 18-year-olds with college experience. "What this does," she said, "is eliminate the opportunity for young people to get started in the work force."

Should minimum wage reach $10 an hour, Ms. Conway said she would reduce her staff to 10 employees and double up on work tasks. "This is a slippery slope that could absolutely cause me to shut down and force me into bankruptcy," she said.

For the full commentary, see:

STACY PERMAN. "SMALL BUSINESS; As Minimum Wages Rise, Businesses Grapple With Consequences." The New York Times (Thurs., Feb. 6, 2014): B4.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date FEB. 5, 2014.)

March 9, 2014

In Traditional Societies People Try to Kill Strangers


Jared Diamond. Source of photo: online version of the NYT article quoted and cited below.

(p. 12) Your latest book, "The World Until Yesterday," is about traditional societies and your research in New Guinea. Why is the acronym Weird central to the book? In Weird -- Western, Educated, Industrialized, Rich and Democratic -- societies we take these things for granted that just didn't exist anywhere in the world until a few thousand years ago. We encounter strangers, and it's normal, and we don't freak out and try to kill them. We eat food that somebody else grew for us. We have a government with police and lawyers to settle disputes.

. . .

. . . , the book has been criticized for saying traditional societies are very violent. Some people take a view of traditional society as being peaceful and gentle. But the proportional rate of violent death is much higher in traditional societies than in state-level societies, where governments assert a monopoly on force. During World War II, until Aug. 14, 1945, American soldiers who killed Japanese got medals. On Aug. 16, American soldiers who killed Japanese were guilty of murder. A state can end war, but a traditional society cannot.

People have called the book racist, saying it suggests third-world poverty is caused by environmental factors instead of imperialism and conquests. It's clearly nonsense. It's not as if people in certain parts of the world were rich until Europeans came along and they suddenly became poor. Before that, there were big differences in technology, military power and the development of centralized government around the world. That's a fact.

For the full interview, see:

AMY CHOZICK, interviewer. "Talk; 'New Guinean Kids Are Not Brats'; Jared Diamond on What We Can Learn from Traditional Societies." The New York Times Magazine (Sun., JAN. 12, 2014): A12.

(Note: bold in original; ellipses added.)

(Note: the online version of the interview has the date JAN. 10, 2014, and has the title "Jared Diamond: 'New Guinean Kids Are Not Brats'.")

The book under discussion above is:

Diamond, Jared. The World until Yesterday: What Can We Learn from Traditional Societies? New York: Viking Penguin, 2012.

March 6, 2014

Carnegie Liked Partnership More than Incorporation

(p. 480) "Don't want anything to do with a corporation as long as I am in business--Partnership is the only thing--no one man can manage well--every one needs the companionships of equals in business to contradict and differ from him--one advises the other... I who write you thus have grown gray in the service and speak the words of soberness and wisdom."


Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: ellipsis in original.)

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)

March 5, 2014

Angus Maddison Saw that Life Improved During the "Capitalist Epoch"

HockeyStickGraph2014-03-02.jpgSource of graph: online version of the WSJ article quoted and cited below.

(p. A13) Angus Maddison, the late and eminent economist for the OECD, produced a famous chart in 1995, depicted nearby. For the longest time--basically from after the Garden of Eden until the 19th century--economic benefit for the average person in the West or Japan was flat as toast. The Mona Lisa aside, there was a reason someone back then said life was nasty, brutish and short. Then suddenly, new wealth spread broadly.

Maddison describes 1820 till 1950 as the "capitalist epoch." He means that admiringly. The tools of capitalism unlocked the knowledge created until then. What came to be called "economic growth" gave more people jobs that lifted them and their families from the muck of joblessness and poverty. Maddison also noted that much of the world did not participate in the capitalist epoch. No wonder they revolt now.

This history is worth restating because the importance of strong economic growth, and the unavoidable necessity of a U.S. that leads that growth, may be disappearing down the memory hole of public policy, on the left and even among some on the right. Both share the grim view that the U.S. economy is flatlining, and the grim fight is over how to divide what's left.

For the full commentary, see:

Henninger, DANIEL. "WONDER LAND; The Growth Revolutions Erupt; Ukrainians want what we've got: The benefits of real economic growth." The Wall Street Journal (Thurs., Feb. 27, 2014): A13.

(Note: the online version of the commentary has the date Feb. 26, 2014.)

One of Maddison's last important books was:

Maddison, Angus. Contours of the World Economy, 1-2030 AD: Essays in Macro-Economic History. Oxford and New York: Oxford University Press, 2007.

March 3, 2014

United States Drops Out of Top 10 in Economic Freedom

IndexOfEconomicFreedom2014.jpgSource of table: online version of the WSJ article quoted and cited below.

(p. A13) World economic freedom has reached record levels, according to the 2014 Index of Economic Freedom, released Tuesday [Jan. 14, 2014] by the Heritage Foundation and The Wall Street Journal. But after seven straight years of decline, the U.S. has dropped out of the top 10 most economically free countries.

For 20 years, the index has measured a nation's commitment to free enterprise on a scale of 0 to 100 by evaluating 10 categories, including fiscal soundness, government size and property rights. These commitments have powerful effects: Countries achieving higher levels of economic freedom consistently and measurably outperform others in economic growth, long-term prosperity and social progress.

For the full commentary, see:

TERRY MILLER. "America's Dwindling Economic Freedom; Regulation, taxes and debt knock the U.S. out of the world's top 10." The Wall Street Journal (Tues., Jan. 14, 2014): A13.

(Note: bracketed date added.)

(Note: the online version of the commentary has the date Jan. 13, 2014.)

For more on the 2014 Index of Economic Freedom, visit:

March 2, 2014

Incentives Limit Collusion

(p. 476) Carnegie's business strategy was the one he had followed twenty years earlier: keep production steady by accepting orders at any price. In early (p. 477) October, he notified Frick that the time had come to leave the rail pool. "I confess I can see nothing so good for us as a 'free hand'" in setting prices. He was willing to lower his prices and profit margin on rails if that was the only way to get the orders he needed to keep his works running. "By this policy we shall keep our men at work." Carnegie had never been entirely happy as a member of the rail pool, especially after Illinois Steel was allocated a greater share than Carnegie Steel. "For my part," he now declared, "I do not wish to play second fiddle in the rail business any longer. I get no sweet dividend out of second fiddle business, and I do know that the way to make more money dividends is to lead.... I am sure that The Carnegie Steel Co. can make more dollars, even next year, and certainly in future years, by managing its own business in its own way, free from all understandings with competitors, than by continuing in any combination that possibly can be formed. Now having made my speech, which I trust you will read to all my partners, I take my seat and imagine the loud applause with which my sentiments are greeted."


Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: underlines and ellipsis in original.)

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)

February 28, 2014

Growth Slow Due to Policies Impeding Start-Ups

(p. A11) The most recent period of rapid productivity growth in the U.S.--and rapid economic growth--was in the 1980s and '90s and reflected the remarkable success of new businesses in information and communications technologies, including Microsoft, Apple, Amazon, Intel and Google. These new companies not only created millions of jobs but transformed modern society, changing how much of the world produces, distributes and markets goods and services.

Rising living standards in the future will depend on the continued success of these businesses but also on the next generation of success stories. Getting the U.S. economy back on track will require a much higher annual rate of new business startups. Sadly, the annual rate of new business creation is about 28% lower today than it was in the 1980s, according to our analysis of the U.S. Census Bureau's Business Dynamics Statistics annual data series.

Why is the startup rate so low? The answer lies in Washington and the policies implemented in the wake of the 2008 financial crisis that were, ironically, intended to grow and stabilize the economy.    . . .

This explosion in federal regulation, intervention and subsidies has retarded productivity growth by protecting incumbents at the expense of more efficient producers, including startups. The number of pages in the Federal Code of Regulations peaked at nearly 175,000 in 2012, an increase of more than 7% in President Obama's first three years.

For the full commentary, see:

EDWARD C. PRESCOTT and LEE E. OHANIAN. "U.S. Productivity Growth Has Taken a Dive; It has averaged about 1.1% since 2011, less than half the historical rate since 1948. Here's how to increase it." The Wall Street Journal (Tues., Feb. 4, 2014): A11.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Feb. 3, 2014.)

February 26, 2014

Carnegie's Not-Fully-Grown-Infant-Industry Argument for Steel Tariffs

(p. 375) The steel industry was doubly dependent on state and national governments for the generous loans and subsidies that fueled railway expansion and rail purchases and the protective tariffs that enabled the manufacturers to keep their prices--and profits--higher than would have been possible had they been compelled to compete with European steelmakers. If, in the beginning, as Carnegie had argued, the tariff had been needed to nurture an infant steel industry, by the mid-1880s that infant had become a strapping, abrasive youth, who kept on growing. Why then, one might inconveniently ask, was there need for a protective tariff? Because, as Carnegie argued in the North American Review in July 1890, the steel industry was not yet fully grown and would have to be protected until it was.

On the issue of the tariff--as on few others--Pittsburgh's workingmen were in agreement with Carnegie. They voted Republican in large numbers because the Republicans were the guardians of the protective tariff, and the tariff, they believed, protected their wage rates.

The argument linking the tariff and wages in the manufacturing sector was a compelling one in the industrial states, but nowhere else. As the Democrats took great delight in pointing out, high tariffs led to high prices for all consumers.


Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: italics in original.)

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)

February 22, 2014

Jay Gould Said Railroad Rates Should Be Set by "the Laws of Supply and Demand"

(p. 344) Jay Gould, asked in 1885 by a Senate investigating committee if he believed a "general national law" was needed to regulate railroad rates, responded that they were already regulated by "the laws of supply and demand, production, and consumption."


Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)

February 21, 2014

Hero Rebels Against the Bureau of Technology Control


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

(p. D8) In "Influx," . . . , a sinister Bureau of Technology Control kidnaps scientists that have developed breakthrough technologies (the cure to cancer, immortality, true artificial intelligence), and is withholding their discoveries from humanity, out of concern over the massive social disruption they would cause. "We don't have a perfect record--Steve Jobs was a tricky one--but we've managed to catch most of the big disrupters before they've brought about uncontrolled social change," says the head of the bureau, the book's villain. The hero has developed a "gravity mirror" but refuses to cooperate, despite the best efforts of Alexa, who has been genetically engineered by the Bureau to be both impossibly sexy and brilliant.

In the publishing world, there is a growing sense that "Influx," Mr. Suarez's fourth novel, may be his breakout book and propel him into the void left by the deaths of Tom Clancy and Michael Crichton. "Influx' has Mr. Suarez's largest initial print run, 50,000 copies, and Twentieth Century Fox bought the movie rights last month.

An English major at the University of Delaware with a knack for computers, Mr. Suarez started a consulting firm in 1997, working with companies like Nestlé on complex production and logistics-planning issues. "You only want to move 100 million pounds of sugar once," says Mr. Suarez, 49 years old.

He began writing in his free-time. Rejected by 48 literary agents--(a database expert, he kept careful track)--he began self-publishing in 2006 under the name Leinad Zeraus, his named spelled backward. His sophisticated tech knowledge quickly attracted a cult following in Silicon Valley, Redmond, Wash., and Cambridge, Mass. The MIT bookstore was the first bookstore to stock his self-published books in 2007.

For the full review, see:

EBEN SHAPIRO. "Daniel Suarez Sees Into the Future." The Wall Street Journal (Fri., Feb. 7, 2014): D8.

(Note: ellipsis added.)

(Note: the online version of the review has the date Feb. 5, 2014, and the title "Daniel Suarez Sees Into the Future.")

The book under review, is:

Suarez, Daniel. Influx. New York: Dutton, 2014.


Author of Influx, Daniel Suarez. Source of photo: online version of the WSJ article quoted and cited above.

February 20, 2014

The Young, with Managerial Experience, Are Most Likely to Become Entrepreneurs

(p. A13) In a current study analyzing the most recent Global Entrepreneurship Monitor (GEM) survey, my colleagues James Liang, Jackie Wang and I found that there is a strong correlation between youth and entrepreneurship. The GEM survey is an annual assessment of the "entrepreneurial activity, aspirations and attitudes" of thousands of individuals across 65 countries.

In our study of GEM data, which will be issued early next year, we found that young societies tend to generate more new businesses than older societies. Young people are more energetic and have many innovative ideas. But starting a successful business requires more than ideas. Business acumen is essential to the entrepreneur. Previous positions of responsibility in companies provide the skills needed to successfully start businesses, and young workers often do not hold those positions in aging societies, where managerial slots are clogged with older workers.

In earlier work (published in the Journal of Labor Economics, 2005), I found that Stanford MBAs who became entrepreneurs typically worked for others for five to 10 years before starting their own businesses. The GEM data reveal that in the U.S. the entrepreneurship rate peaks for individuals in their late 20s and stays high throughout the 30s. Those in their early 20s have new business ownership rates that are only two-thirds of peak rates. Those in their 50s start businesses at about half the rate of 30-year-olds.

Silicon Valley provides a case in point. Especially during the dot-com era, the Valley was filled with young people who had senior positions in startups. Some of the firms succeeded, but even those that failed provided their managers with valuable business lessons.

My co-author on the GEM study, James Liang, is an example. After spending his early years as a manager at the young and rapidly growing Oracle, he moved back to China to start Ctrip, one of the country's largest Internet travel sites.

For the full commentary, see:

EDWARD P. LAZEAR. "The Young, the Restless and Economic Growth; Countries with a younger population have far higher rates of entrepreneurship." The Wall Street Journal (Mon., Dec. 23, 2013): A13.

(Note: the online version of the commentary has the date Dec. 22, 2013.)

The Lazear paper mentioned above, is:

Lazear, Edward P. "Entrepreneurship." Journal of Labor Economics 23, no. 4 (October 2005): 649-80.

February 19, 2014

In South Korea, "Spam Is a Classy Gift"

SpamGiftBoxesInSeoul2014-02-07.jpg "Spam gift boxes at the Lotte Department Store in Seoul." Source of caption and photo: online version of the NYT article quoted and cited below.

Often when I explain the concept of an "inferior good" to my micro principles classes, I use the example of Spam, sometimes elaborating that I failed my first attempt to earn the Boy Scouts cooking merit badge, when I was unable to open my can of Spam. I go on to point out that goods that are "inferior" for some people, can be "normal" goods for other people, depending on preferences, and that I had read somewhere that Spam was a treasured gift in South Korea, and hence was probably NOT an inferior good for most South Koreans.

Finally, documentation of my impression:

(p. A1) SEOUL, South Korea -- As the Lunar New Year holiday approaches, Seoul's increasingly well-heeled residents are scouring store shelves for tastefully wrapped boxes of culinary specialties. Among their favorite choices: imported wines, choice cuts of beef, rare herbal teas. And Spam.

Yes, Spam. In the United States, the gelatinous meat product in the familiar blue and yellow cans has held a place as thrifty pantry staple, culinary joke and kitschy fare for hipsters without ever losing its low-rent reputation. But in economically vibrant South Korea, the pink bricks of pork shoulder and ham have taken on a bit of glamour as they have worked their way into people's affections.

"Here, Spam is a classy gift you can give to people you care about during the holiday," said Im So-ra, a saleswoman at the high-end Lotte Department Store in downtown Seoul who proudly displayed stylish boxes with cans of Spam nestled inside.

. . .

(p. A7) . . . George H. Lewis, a sociologist at the University of the Pacific, noted in a 2000 article in The Journal of Popular Culture that Spam won its "highest" status in South Korea. Here, he observed, Spam not only outranked Coca-Cola and Kentucky Fried Chicken in status, but was given as a gift "on occasions of importance when one wishes to pay special honor and proper respect."

. . .

"Spam maintains a mythical aura on the Korean market for reasons that escape many," mused Koo Se-woong, a lecturer of Korean studies at Yale University's MacMillan Center for International and Area Studies. "Given Spam's introduction to South Korea through the U.S. military, it enjoyed an association with prosperity and nutritiousness during an earlier era."

. . .

"To me, Spam was just a tasteful and convenient food that mother used to cook for us," she said. "The thing about Spam is that it goes marvelously well with kimchi and rice."

For the full story, see:

CHOE SANG-HUN. "In South Korea, Spam Is the Stuff Gifts Are Made Of." The New York Times (Mon., JAN. 27, 2014): A1 & A7.

(Note: the online version of the story has the date JAN. 26, 2014.)

Lewis' academic article on spam, is:

Lewis, George H. "From Minnesota Fat to Seoul Food: Spam in America and the Pacific Rim." The Journal of Popular Culture 34, no. 2 (Fall 2000): 83-105.

February 18, 2014

Carnegie Donated to Pro-Steel-Tariff Republicans

(p. 331) Through good times and bad, protected tariffs on imported steel rails had kept the domestic steel business strong--and the steelmakers, a major force in Pennsylvania politics, had responded by doing all they could to reelect pro-tariff Republicans. Three weeks before the 1884 elections, Carnegie had written his partners in Pittsburgh that "Bethlehem, Penna. Steel Co., Cambria, and Lackawanna I & C [Iron & Coal] have each given $ 5,000 to the Republican National Committee and we have been asked to give the same amount which I think is only fair."

Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: bracketed words in original.)

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)

February 17, 2014

Would Science Progress Faster If It Were Less Academic and More Entrepreneurial?


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

(p. D5) There is Big Science, defined as science that gets the big bucks. There is tried and true science, which, from an adventurous dissident's point of view, is boldly going where others have gone before but extending the prevailing knowledge by a couple of decimal places (a safe approach for dissertation writers and grant seekers).

Then there is bootstrap science, personified by Gene Shinn, who retired in 2006 after 31 years with the United States Geological Survey and 15 years with a research arm of the Shell Oil Company.

. . .

Without a Ph.D. and often without much financing, Mr. Shinn published more than 120 peer-reviewed papers that helped change many experts' views on subjects like how coral reefs expand and the underwater formation of limestone. Some of his papers, at odds with established scientific views, were initially rejected, only to be seen later as visionary.

His bootstrap ingredients included boundless curiosity, big ideas -- "gee-whiz science," he calls it -- persistence, a sure hand at underwater demolition (dynamite was comparatively easy to come by in those remarkably innocent days) and versatility at improvising core-sampling equipment on tight budgets. The ability to enlist the talents of other scientists, many with doctorates, who shared his love of hands-on field work and his impatience with official rules and permits added to the mix.

For the full review, see:

MICHAEL POLLAK. "BOOKS; Science on His Own Terms." The New York Times (Tues., November 5, 2013): D5.

(Note: the online version of the review has the date November 4, 2013.)

Book under review:

Shinn, Eugene A. Bootstrap Geologist: My Life in Science. Gainesville, FL: University Press of Florida, 2013.

February 16, 2014


(p. A11) When I am asked if I want a Compact Fluorescent Light, the only thought I have is that I don't want my light to be compact, nor do I wish it to be florescent. I want a light that will incandesce across my room, filling it with a familiar yellow surf, and remind me that it was not with wax or kerosene, but with incandescent bulbs that man conquered the night.

. . .

I imagine what will happen when the filaments in my final incandescent bulbs grow weak, and I can hardly read my notes before me. Will I no longer be able to write at night? Or worse, will living with CFLs and LEDs make every day feel like I have just spent nine hours plastered before a computer screen? One day, soon, I will turn on my light and hear for the last time the signature, explosive death rattle of an incandescent bulb, and I'll hold a vigil for the light that shaped and witnessed more than a century of human history. Tender is the light, Keats might say.

In my lightless room, I'll sit for a moment and wonder how many more times in my life I'll watch a bulb go out again. As I look to my dead bulb, I'll think of the poet again and whisper: Darkling, you were not a piece of technology born for death.

For the full commentary, see:

ALEXANDER ACIMAN. "Tender Is the Light of My Incandescents; Bracing myself for life once the filaments in my beloved bulbs grow weak." The Wall Street Journal (Fri., Jan. 31, 2014): A11.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Jan. 30, 2014.)

February 12, 2014

It Does Not Take a Government to Raise a Railroad

(p. A17) . . . , All Aboard Florida (the train will get a new name this year), is not designed to push political buttons. It won't go to Tampa. It will zip past several aggrieved towns on Florida's Treasure Coast without stopping.

Nor will the train qualify as "high speed," except on a stretch where it will hit 125 miles an hour. Instead of running on a dedicated line, the new service will mostly share existing track with slower freight trains operated by its sister company, the Florida East Coast Railway.

But the sponsoring companies, all owned by the private-equity outfit Fortress Investment Group, appear to have done their sums. By minimizing stops, the line will be competitive with road and air in connecting the beaches, casinos and resorts of Miami and Fort Lauderdale with the big airport and theme-park destination of Orlando. Capturing a small percentage of the 50 million people who travel between these fleshpots, especially European visitors accustomed to intercity rail at home, would let the train cover its costs and then some.

But Fortress has a bigger fish in the pan. Its local operation, Florida East Coast Industries, is a lineal progeny of Henry Flagler, the 1890s entrepreneur who created modern Florida when he built a rail line to support his resort developments. Flagler's heirs are adopting the same model. A Grand Central-like complex will rise on the site of Miami's old train station. A similar but smaller edifice is planned for Fort Lauderdale.

The project is a vivid illustration of the factors that have to fall in place to make passenger rail viable nowadays. If the Florida venture succeeds, it would be the only intercity rail service anywhere in the world not dependent on government operating subsidies. It would be the first privately run intercity service in America since the birth of Amtrak in 1971.

For the full commentary, see:

HOLMAN W. JENKINS, JR. "BUSINESS WORLD; A Private Railroad Is Born; All Aboard Florida isn't looking for government operating subsidies." The Wall Street Journal (Weds., Jan. 15, 2014): A17.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Jan. 14, 2014.)

February 10, 2014

Carnegie Said "Socialism Is the Grandest Theory Ever Presented"

More on why Andrew Carnegie is not my favorite innovative entrepreneur:

(p. 257) "But are you a Socialist?" the reporter asked.

Carnegie did not answer directly. "I believe socialism is the grandest theory ever presented, and I am sure some day it will rule the world. Then we will have obtained the millennium.... That is the state we are drifting into. Then men will be content to work for the general welfare and share their riches with their neighbors."

"'Are you prepared now to divide your wealth' [he] was asked, and Mr. Carnegie smiled. 'No, not at present, but I do not spend much on myself. I give away every year seven or eight times as much as I spend for personal comforts and pleasures."


Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: ellipsis, and bracketed pronoun, in original.)

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)

February 1, 2014

Twitter Founders Were Outsiders and Unafraid of Risk


Source of the book image:

(p. 20) . . . "Hatching Twitter," a fast-paced and perceptive new book by Nick Bilton, a columnist and reporter for The New York Times, establishes that uncertainty and dissension about its true purpose has characterized Twitter from its inception.

. . .

The company was financed by Williams, who made a bundle selling Blogger to Google and was intent on proving he wasn't a one-hit wonder. It rose from the ashes of a failed podcasting enterprise, Odeo, which Williams had bankrolled as a favor to his friend Noah Glass. Bilton sketches the founders' backgrounds and personalities in quick, skillful strokes that will serve the eventual screenwriter, director and storyboard artist well; these are characters made for the big screen.

None came from money. Ev Williams was a shy Nebraska farm boy whose parents never really understood their socially awkward, computer-obsessed son.

. . .

Having known hardship, none of the four founders were afraid of risk. To join the ill-fated Odeo, Stone walked away from a job at Google, leaving more than $2 million in unvested stock options on the table.

Twitter began with a conversation. Dorsey and Glass sat talking in a car one night in 2006 when Odeo was on the verge of collapse. Dorsey mentioned his "status concept," which was inspired by AOL's Instant Messenger "away messages" and LiveJournal status updates that people were using to mention where they were and what they were doing. Glass warmed to the idea, seeing it as a "technology that would erase a feeling that an entire generation felt while staring into their computer screens": loneliness.

For the full review, see:

MAUD NEWTON. "Four Characters." The New York Times Book Review (Sun., November 3, 2013): 20.

(Note: ellipses added.)

(Note: the online version of the review has the date November 1, 2013.)

Book under review:

Bilton, Nick. Hatching Twitter: A True Story of Money, Power, Friendship, and Betrayal. New York: Portfolio, 2013.

January 31, 2014

70 Percent of Current Jobs May Soon Be Done by Robots

Kelly may be right, but it does not imply that we will all be unemployed. What will happen is that new and better jobs, and entrepreneurial opportunities, will be created for humans.

Robots will do the boring, the dangerous, and the physically exhausting. We will do the creative and the analytic, and the social or emotional

(p. A21) Kevin Kelly set off a big debate with a piece in Wired called "Better Than Human: Why Robots Will -- And Must -- Take Our Jobs." He asserted that robots will soon be performing 70 percent of existing human jobs. They will do the driving, evaluate CAT scans, even write newspaper articles. We will all have our personal bot to get coffee. There's already an existing robot named Baxter, who is deliciously easy to train: "To train the bot you simply grab its arms and guide them in the correct motions and sequence. It's a kind of 'watch me do this' routine. Baxter learns the procedure and then repeats it. Any worker is capable of this show-and-tell."

For the full commentary, see:

DAVID BROOKS. "The Sidney Awards, Part 2." The New York Times (Tues., December 31, 2013): A21. [National Edition]

(Note: the online version of the commentary has the date December 30, 2013.)

The article praised by Brooks is:

Kelly, Kevin. "Better Than Human: Why Robots Will -- and Must -- Take Our Jobs." Wired (Jan. 2013).

January 24, 2014

Artificial Intelligence Is a Complement to Human Intelligence, Not a Substitute for It


Source of book image:

(p. 11) Clive Thompson, a Brooklyn-based technology journalist, uses this tale to open "Smarter Than You Think," his judicious and insightful book on human and machine intelligence. But he takes it to a more interesting level. The year after his defeat by Deep Blue, Kasparov set out to see what would happen if he paired a machine and a human chess player in a collaboration. Like a centaur, the hybrid would have the strength of each of its components: the processing power of a large logic circuit and the intuition of a human brain's wetware. The result: human-machine teams, even when they didn't include the best grandmasters or most powerful computers, consistently beat teams composed solely of human grandmasters or superfast machines.

Thompson's point is that "artificial intelligence" -- defined as machines that can think on their own just like or better than humans -- is not yet (and may never be) as powerful as "intelligence amplification," the symbiotic smarts that occur when human cognition is augmented by a close interaction with computers.

For the full review, see:

WALTER ISAACSON. "Brain Gain." The New York Times Book Review (Sun., November 3, 2013): 11.

(Note: the online version of the review has the date November 1, 2013.)

Book under review:

Thompson, Clive. Smarter Than You Think: How Technology Is Changing Our Minds for the Better. New York: Penguin Press, 2013.

January 23, 2014

Peck Shows that Job Interviews Do Not Identify Good Hires

(p. A18) Don Peck looked at how companies assess potential hires in an essay in The Atlantic called "They're Watching You at Work."

Peck demonstrates something that most of us already sense: that job interviews are a lousy way to evaluate potential hires. Interviewers at big banks, law firms and consultancies tend to prefer people with the same leisure interests -- golf, squash, whatever. In one study at Xerox, previous work experience had no bearing on future productivity.

Now researchers are using data to try again to make a science out of hiring. They watch how potential hires play computer games to see who is good at task-switching, who possesses the magical combination: a strict work ethic but a loose capacity for "mind wandering." Peck concludes that this greater reliance on cognitive patterns and game playing may have an egalitarian effect. It won't matter if you went to Harvard or Yale. The new analytics sometimes lead to employees who didn't even go to college. The question is do these analytics reliably predict behavior? Is the study of human behavior essentially like the study of nonhuman natural behavior -- or is there a ghost in the machine?

For the full commentary, see:

DAVID BROOKS. "The Sidney Awards." The New York Times (Fri., December 27, 2013): A18. [National Edition]

(Note: the online version of the commentary has the date December 26, 2013, and has the title "The Sidney Awards, Part 1.")

The article praised by Brooks is:

Peck, Don. "They're Watching You at Work." The Atlantic (Dec. 2013).

January 22, 2014

Regulators Forbid Doctor from Curing Dentist's Pelvic Pain

DavidsonDaneilPelvicPain2014-01-16.jpg "Dr. Daniel Davidson, an Idaho dentist, has pelvic pain so severe that he cannot sit, and can stand for only limited periods." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A18) After visiting dozens of doctors and suffering for nearly five years from pelvic pain so severe that he could not work, Daniel Davidson, 57, a dentist in Dalton Gardens, Idaho, finally found a specialist in Phoenix who had an outstanding reputation for treating men like him.

Dr. Davidson, whose pain followed an injury, waited five months for an appointment and even rented an apartment in Phoenix, assuming he would need surgery and time to recover.

Six days before the appointment, it was canceled. The doctor, Michael Hibner, an obstetrician-gynecologist at St. Joseph's Hospital and Medical Center, had learned that members of his specialty were not allowed to treat men and that if he did so, he could lose his board certification -- something that doctors need in order to work.

The rule had come from the American Board of Obstetrics and Gynecology. On Sept. 12, it posted on its website a newly stringent and explicit statement of what its members could and could not do. Except for a few conditions, gynecologists were prohibited from treating men. Pelvic pain was not among the exceptions.

Dr. Davidson went home, close to despair. His condition has left him largely bedridden. The pain makes it unbearable for him to sit, and he can stand for only limited periods before he needs to lie down.

"These characters at the board jerked the rug out from underneath me," he said.

For the full story, see:

DENISE GRADY. "Men With Pelvic Pain Find a Path to Treatment Blocked by a Gynecology Board." The New York Times (Weds., December 11, 2013): A18.

(Note: the online version of the story has the date December 10, 2013.)

January 21, 2014

Carnegie Created "Plausible Fictions" on the Future Demand for Minor Railroads

Economists and historians continue to debate the importance or unimportance of railroads in the economic growth of the United States. This is a debate that I need to explore more.

(p. 129) It is doubtful that either [Scott or Carnegie] . . . truly believed that the new railroads, when built, would carry enough traffic to earn back their construction costs. A great number of them were along lightly traveled routes, which, like the Gilman, Springfield & Clinton Railroad in Illinois, connected small cities that did little business with one another. The roads were being built because money could be made building them. Carnegie profited from the commissions on the bond sales; Scott from diverting funds earmarked for construction into the hands of the select number of investors, himself included, who were directors of both the railroad and the improvement companies.

To raise money for roads not yet built and probably not really needed, Carnegie and Scott trafficked in what Richard White refers to as "the utilitarian fictions of capitalism." Together, they constructed "plausible fictions" about the railroads, the passengers and freight that would ride them, the tolls that would be collected, the villages that would grow into towns and the towns into cities, creating new populations, products, and commerce.

Carnegie, a consummate optimist, took naturally to the task.


Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: bracketed words and ellipsis added.)

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)

January 18, 2014

Patent Allows Mechanic to Profit from Invention to Ease Births

OdonDeviceEasesBirth2014-01-16.jpg "With Jorge Odón's device, a plastic bag inflated around a baby's head is used to pull it out of the birth canal." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) The idea came to Jorge Odón as he slept. Somehow, he said, his unconscious made the leap from a YouTube video he had just seen on extracting a lost cork from a wine bottle to the realization that the same parlor trick could save a baby stuck in the birth canal.

Mr. Odón, 59, an Argentine car mechanic, built his first prototype in his kitchen, using a glass jar for a womb, his daughter's doll for the trapped baby, and a fabric bag and sleeve sewn by his wife as his lifesaving device.

. . .

(p. A4) In a telephone interview from Argentina, Mr. Odón described the origins of his idea.

He tinkers at his garage, but his previous inventions were car parts. Seven years ago, he said, employees were imitating a video showing that a cork pushed into an empty bottle can be retrieved by inserting a plastic grocery bag, blowing until it surrounds the cork, and drawing it out.

. . .

With the help of a cousin, Mr. Odón met the chief of obstetrics at a major hospital in Buenos Aires. The chief had a friend at the W.H.O., who knew Dr. Merialdi, who, at a 2008 medical conference in Argentina, granted Mr. Odón 10 minutes during a coffee break.

The meeting instead lasted two hours. At the end, Dr. Merialdi declared the idea "fantastic" and arranged for testing at the Des Moines University simulation lab, which has mannequins more true-to-life than a doll and a jar.

Since then, Mr. Odón has continued to refine the device, patenting each change so he will eventually earn royalties on it.

. . .

Dr. Merialdi said he endorsed a modest profit motive because he had seen other lifesaving ideas languish for lack of it. He cited magnesium sulfate injections, which can prevent fatal eclampsia, and corticosteroids, which speed lung development in premature infants.

"But first, this problem needed someone like Jorge," he said. "An obstetrician would have tried to improve the forceps or the vacuum extractor, but obstructed labor needed a mechanic. And 10 years ago, this would not have been possible. Without YouTube, he never would have seen the video."

For the full story, see:

DONALD G. McNEIL Jr. "Promising Tool in Difficult Births: A Plastic Bag." The New York Times (Thurs., November 14, 2013): A1 & A4. [National Edition]

(Note: ellipses added.)

(Note: the online version of the story has the date November 13, 2013, and has the title "Car Mechanic Dreams Up a Tool to Ease Births.")

January 17, 2014

Carnegie Failed Twice Before Bessemer Success

(p. 101) [Carnegie] . . . organized his own company to secure the rights to the Dodd process for strengthening iron rails by coating them with steel facings. Thomson agreed to appropriate $20,000 of Pennsylvania Railroad funds to test the new technology.

On March 12, 1867, Thomson wrote to tell Carnegie that his Dodd-processed rails had failed their first test: "treatment under the hammer.... You may as well abandon the Patent--It will not do if this Rail is a sample." Three days later, Thomson wrote Carnegie again, this time marking his letter with a handwritten "Private" in the top left-hand corner and "a word to the wise" penned in just below. Carnegie had apparently asked Thomson for more time--and/or money--to continue his experiments. Thomson replied that the experiments his engineers had made had so "impaired my confidence in this process that I don't feel at liberty to increase our order for these Rails."

Instead of giving up, Carnegie pushed forward, hawking his new steel-faced iron rails to other railroad presidents, attempting to get a new contract with Thomson, and reorganizing the Freedom Iron Company in Lewistown, Pennsylvania, in which he was a major investor, into Freedom Iron and Steel. In the spring of 1867, he succeeded, despite Thomson's misgivings, in getting the approval to manufacture and deliver a second 500-ton batch of steel-faced rails. The new rails fared as poorly as the old ones. There would be no further contracts forthcoming from the Pennsylvania Railroad or any other railroad.

Carnegie tried to bluff his way through. When his contacts in England recommended that he purchase the American rights to a better process for facing iron rails with steel, this one invented by a Mr. Webb, Carnegie retooled his mill for the new process. He was fooled a second time. Not only was the Webb process as impractical as the Dodd, but there was, as there (p. 102) had been with the Dodd process, confusion as to who held the American patent rights. Within a year, the company Carnegie had organized to produce the new steel-faced rails was out of business.

. . .

These early failures did not deter him from investing in other start-up companies and technologies, but he would in future be a bit more careful before committing his capital. In March 1869, Tom Scott solicited his advice about investing in the rights to a new "Chrome Steel process." Carnegie replied that his "advice (which don't cost anything if of no value) would be to have nothing to do with this or any other great change in the manufacture of steel or iron.... I know at least six inventors who have the secret all are so anxiously awaiting.... That there is to be a great change in the manufacture of iron and steel some of these years is probable, but exactly what form it is to take no one knows. I would advise you to steer clear of the whole thing. One will win, but many lose and you and I not being practical men would very likely be among the more numerous class. At least we would wager at very long odds. There are many enterprises where we can go in even."


Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: bracketed name, ellipsis near start, and ellipsis between paragraphs added; ellipsis internal to other paragraphs, in original.)

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)

January 13, 2014

"Despising to Bury in the Ground Any of the Talents . . . Which Might Reach His Coffers"

(p. 97) . . . , Carnegie was concerned that he was overextended. From Dresden, in mid-November, he half jokingly apologized to his brother for placing his--and the family's--finances in jeopardy. "Your finances are reputed far from healthy," he had written Tom. "But how can they ever be otherwise? It was never intended. One of the firm, at least, was made to be forever head and ears in debt and to crowd full sail, despising to bury in the ground any of the talents (silver talents, I mean) which might reach his coffers, or to lie long under the suspicion of having at the bank even a moderate balance upon the right side of the ledger." Carnegie had fantasized that "a whole year's absence from opening up new enterprises... while the funds remained in charge of a super man, might possibly afford him, upon his return, a new sensation," that of being solvent. But that was not going to happen.


Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: ellipsis in title and at start added; ellipsis in Carnegie quote near end, in original.)

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)

January 12, 2014

In 20th Century, Inventions Had Cultural Impact Twice as Fast as in 19th Century

NgramGraphTechnologies2013-12-08.png I used Google's Ngram tool to generate the Ngram above, using the same technologies used in the Ngram that appeared in the print (but not the online) version of the article quoted and cited below. The blue line is "railroad"; the red line is "radio"; the green line is "television"; the orange line is "internet." The search was case-insensitive. The print (but not the online) version of the article quoted and cited below, includes a caption that describes the Ngram tool: "A Google tool, the Ngram Viewer, allows anyone to chart the use of words and phrases in millions of books back to the year 1500. By measuring historical shifts in language, the tool offers a quantitative approach to understanding human history."

(p. 3) Today, the Ngram Viewer contains words taken from about 7.5 million books, representing an estimated 6 percent of all books ever published. Academic researchers can tap into the data to conduct rigorous studies of linguistic shifts across decades or centuries. . . .

The system can also conduct quantitative checks on popular perceptions.

Consider our current notion that we live in a time when technology is evolving faster than ever. Mr. Aiden and Mr. Michel tested this belief by comparing the dates of invention of 147 technologies with the rates at which those innovations spread through English texts. They found that early 19th-century inventions, for instance, took 65 years to begin making a cultural impact, while turn-of-the-20th-century innovations took only 26 years. Their conclusion: the time it takes for society to learn about an invention has been shrinking by about 2.5 years every decade.

"You see it very quantitatively, going back centuries, the increasing speed with which technology is adopted," Mr. Aiden says.

Still, they caution armchair linguists that the Ngram Viewer is a scientific tool whose results can be misinterpreted.

Witness a simple two-gram query for "fax machine." Their book describes how the fax seems to pop up, "almost instantaneously, in the 1980s, soaring immediately to peak popularity." But the machine was actually invented in the 1840s, the book reports. Back then it was called the "telefax."

Certain concepts may persevere, even as the names for technologies change to suit the lexicon of their time.

For the full story, see:

NATASHA SINGER. "TECHNOPHORIA; In a Scoreboard of Words, a Cultural Guide." The New York Times, SundayBusiness Section (Sun., December 8, 2013): 3.

(Note: ellipsis added; bold in original.)

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

January 9, 2014

Early Carnegie Profits "Were Quickly Reinvested in Other Projects"

(p. 78) The tens of thousands of dollars Carnegie earned in the four years he held the Columbia Oil stock were quickly reinvested in other projects.


Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)

January 7, 2014

Buffett's Returns Not Due to Ability to Pick Good Managers

(p. B7) Investors for years have been searching in vain for a formula to replicate Warren Buffett's legendary returns over the past 50 years.

The wait could be over.

A new study that claims to have uncovered this formula was published [in November 2013] . . . by the National Bureau of Economic Research in Cambridge, Mass. Its authors, all of whom have strong academic credentials, work for AQR Capital Management, a firm that manages several hedge funds and other investment offerings and has $90 billion in assets.

The study's authors analyzed Mr. Buffett's record since he acquired Berkshire Hathaway in 1964.

. . .

One factor that is conspicuous in its absence from the formula is anything to account for Mr. Buffett's significant investments in privately owned companies. But that isn't necessary, according to the researchers, because the public companies in which he has invested have outperformed the private ones.

This is somewhat surprising, given that Mr. Buffett has often trumpeted his abilities to pick good managers. Yet the researchers nevertheless find that his "returns are more due to stock selection than to his effect on management."

For the full commentary, see:

MARK HULBERT. "Hulbert on Investing; Can the Buffett Investing Formula Really Be Bottled?" The Wall Street Journal (Sat., Dec. 14, 2013): B7.

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

(Note: the online version of the commentary has the date Dec. 13, 2013, and has the title "WEEKEND INVESTOR; How to Invest Like Warren Buffett; How can investors emulate Warren Buffett's approach?")

The National Bureau of Economic Research (NBER) paper that is discussed above:

Frazzini, Andrea, David Kabiller, and Lasse H. Pedersen. "Buffett's Alpha." NBER Working Paper # 19681, November 2013.

January 6, 2014

Ignorance of Economics Makes U.S. Agency Complicit in Elephant Deaths

IvoryCrushedByUS2013-11-27.jpg "Crushed ivory falls out of the crusher as the U.S. crushed its six-ton stock of confiscated ivory at the Rocky Mountain Arsenal National Wildlife Refuge . . . ." Source of caption and photo: online version of the WSJ article quoted and cited below.

The higher the price of ivory, the greater the incentive for ivory poachers to kill elephants. The U.S. Fish and Wildlife Service could have put their cache of ivory on the market, thereby increasing the supply, and reducing the price. If they had done so, they would have reduced the incentive of the poachers to poach. (This is basic price theory that I teach in each of my micro-economic principles classes.) Instead they crushed the ivory and thereby doomed some elephants to death, who otherwise could have been saved.

(p. A3) COMMERCE CITY, Colo.--The U.S. government spent the past 25 years amassing contraband ivory in a warehouse here, with pieces ranging from tiny statuettes to full elephant tusks tattooed by intricate carvings. Ultimately, the pile grew to six tons--equivalent to ivory from at least 2,000 elephants.

On Thursday, the stash collected by the U.S. Fish and Wildlife Service was pulverized by an industrial rock crusher as government officials, conservationists from around the world and celebrities gathered to watch the destruction.

The move, which follows similar events in the Philippines and Gabon in recent years, is part of a global effort to combat elephant poaching, on the rise because of growing demand for ivory trinkets in Asia. Proponents argue that crushing the ivory conveys to illegal traffickers and collectors that it has no value unless it is attached to an elephant.

. . .

But critics of the practice said they worry that destroying the coveted commodity, sometimes referred to as "white gold," could instead create the perception that the world's remaining ivory is more valuable--and drive poachers to kill more elephants for their tusks. "This could be self-defeating," said Michael 't Sas-Rolfes, an independent conservation economist.

. . .

While praising efforts to preserve elephants, some in conservation circles consider crushing contraband ivory to be an ineffective strategy.

Kirsten Conrad, a wildlife conservation consultant who has studied the Chinese ivory market, said elephants could be better served if sustainably harvested ivory--from elephants that died from natural causes, for example--were regularly offered for sale.

The proceeds would give communities in Africa an incentive to better protect wildlife, and the steady supply would dissuade speculators in China from stockpiling, as she says they are doing now. A kilo of raw ivory can sell for up to $3,000. "We're losing an elephant every 16 minutes," she said. "We should look really hard at legal trade."

For the full story, see:

ANA CAMPOY. "Crushing Illegal Ivory Trade; In Move to Combat Elephant Poaching, U.S. Destroys Six Tons of 'White Gold'." The Wall Street Journal (Fri., Nov. 15, 2013): A3.

(Note: ellipses added.)

(Note: the online version of the review has the date Nov. 14, 2013, and has the title "Crushing Illegal Ivory Trade; In Move to Combat Elephant Poaching, Government Agency Destroys Six Tons of 'White Gold'.")

IvoryToBeCrushedInUS2013-11-27.jpg "Ivory on display before the U.S. crushed it in Commerce City, Colo., Thursday. On Thursday the government destroyed nearly six tons of seized contraband ivory tusks and trinkets." Source of caption and photo: online version of the WSJ article quoted and cited above.

January 4, 2014

Ending U.S. Sugar Import Quotas Would Create 20,000 U.S. Jobs in Food Manufacturing

CalvoBacciOwnerCandyShop2013-12-j07.jpg "Erin Calvo-Bacci, the owner of a candy shop, the Chocolate Truffle, in Reading, Mass., lamented the cost of American sugar." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A14) READING, Mass. -- Inside the Chocolate Truffle candy shop in this Boston suburb are chocolate pizzas, chocolate buffalo wings, even a chocolate wingtip shoe. The owner, Erin Calvo-Bacci, would like to expand her business close to home, but is instead thinking of moving her operations to Canada, where the sugar essential for her products costs far less.

"We are committed to offering locally made affordable products, but the cost of sugar is driving manufacturers out of the country," Ms. Calvo-Bacci said, echoing other American candy producers, like the maker of Dum Dum lollipops, that are moving jobs to Mexico to take advantage of the lower sugar prices there.

Candy makers say the culprit is the federal sugar program, a combination of import restrictions, production quotas and loan programs dating to the 1930s, all designed to keep the price of American sugar well above that of the world market. Now the program is at the center of an intensifying battle as the House and Senate open formal negotiations this week on a long-delayed farm bill.

The price for one type of sugar, wholesale refined beet sugar, averaged 43.4 cents per pound at Midwest markets last year, the Agriculture Department reported, compared with 26.5 cents per pound for the world refined sugar price.

. . .

. . . sugar producers, bolstered by lawmakers from sugar-beet-producing states like Minnesota and sugarcane states like Florida, have spent an estimated $20 million since 2011 to block efforts to change the program. . . . Small candy makers, bakers and others who have lobbied Congress for lower prices say that taking on the sugar lobby is like taking on Goliath.

"We were no match for the sugar people," said Judy Hilliard McCarthy, an owner of Hilliard's House of Candy, a candy maker just outside Boston. Ms. McCarthy said she had made several trips to Washington to lobby on behalf of the industry.

Government and academic studies support claims by candy makers that the sugar program has had an impact on the industry. A widely cited 2006 study by the Commerce Department and a 2011 Iowa State University study found that the price supports had led to job losses among candy makers.

In particular, the Commerce Department study found that three candy-making jobs were lost for each job growing or processing sugar that was saved by higher prices. The Iowa State study found that eliminating price supports and quotas for sugar would create about 20,000 jobs for American food processors, bakeries and candy makers.

For the full story, see:

RON NIXON. "Candy Makers, Pinched by Inflated Sugar Prices in the U.S., Look Abroad." The New York Times (Thurs., October 31, 2013): A14.

(Note: ellipses added.)

(Note: the online version of the article has the date October 30, 2013, and has the title "American Candy Makers, Pinched by Inflated Sugar Prices, Look Abroad.")

The latest version of the John Beghin Iowa State report, mentioned above, is:

Beghin, John C., and Amani Elobeid. "The Impact of the U.S. Sugar Program Redux." Working Paper No. 13010. Iowa State University, Department of Economics, Staff General Research Papers, May 2013.

SugarPouredForConfection2013-12-07.jpg "Sugar was poured to make a confection for Hilliard's House of Candy, just outside Boston, whose owner has lobbied officials." Source of caption and photo: online version of the NYT article quoted and cited above.

January 1, 2014

"Carnegie Watched, Listened, Learned" from Scott's Process Innovations

(p. 65) Later in life, Scott would be better known for his political skills, but he was, like his mentor Thomson, a master of cost accounting. Together, the two men steadily cut unit costs and increased revenues by investing in capital improvements--new and larger locomotives, better braking systems, improved tracks, new bridges. Instead of running several smaller trains along the same route, they ran fewer but longer trains with larger locomotives and freight cars. To minimize delays--a major factor in escalating costs--they erected their own telegraph lines, built a second track and extended sidings alongside the first one, and kept roadways, tunnels, bridges, and crossings in good repair.

Carnegie watched, listened, learned. Nothing was lost on the young man. With an exceptional memory and a head for figures, he made the most of his apprenticeship and within a brief time was acting more as Scott's deputy than his assistant. Tom Scott had proven to be so good at his job that when Pennsylvania Railroad vice president William Foster died unexpectedly of an infected carbuncle, Scott was named his successor.


Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.

(Note: the pagination of the hardback and paperback editions of Nasaw's book are the same.)

December 31, 2013

"Western Union Bullied the Makers of Public Policy into Serving Private Capital"


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

(p. A13) Until now there has been no full-scale, modern company history. Joshua D. Wolff's "Western Union and the Creation of the American Corporate Order, 1845-1893" ably fills the bill, offering an exhaustive and yet fascinating account.

. . .