artdiamondblog.com

(p. 76) After going from room to room, skipping none except the garage (that would be a project in itself), we arrived at a total of 6,000 varieties of things in our house. Since we have multiple examples of some varieties, such as books, CDs, paper plates, spoons, socks, on so on, I estimate the total number of objects in our home, including the garage, to be close to 10,000.

Without trying very hard, our typical modern house holds a king's ransom. But in fact, we are wealthier than King Henry. In fact, the lowest-paid burger flipper working at McDonald's is in many respects (p. 77) better off than King Henry or any of the richest people living not too long ago. Although the burger flipper barely makes enough to pay the rent, he or she can afford many things that King Henry could not. King Henry's wealth--the entire treasure of England--could not have purchased an indoor flush toilet or air-conditioning or secured a comfortable ride for 500 kilometers. Any taxicab driver can afford these today. Only 100 years ago, John Rockefeller's vast fortune as the world's richest man could not have gotten him the cell phone that any untouchable street sweeper in Bombay now uses. In the first half of the 19th century Nathan Rothschild was the richest man in the world. His millions were not enough to buy an antibiotic. Rothschild died of an infected abscess that could have been cured with a three-dollar tube of neomycin today. Although King Henry had some fine clothes and a lot of servants, you could not pay people today to live as he did, without plumbing, in dark, drafty rooms, isolated from the world by impassable roads and few communication connections. A poor university student living in a dingy dorm room in Jakarta lives better in most ways than King Henry.

Source:

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

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"Anderson found Dickens World to be "surprisingly grisly" for a park that markets itself to children; he noted several severed heads and a gruesome performance of "Oliver Twist" in the courtyard. Here, a mannequin of Nancy from "Oliver Twist."" Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 48) . . . even if it were possible to create a lavish simulacrum of 1850s London -- with its typhus and cholera and clouds of toxic corpse gas, its sewage pouring into the Thames, its (p. 49) average life span of 27 years -- why would anyone want to visit? ("If a late-20th-century person were suddenly to find himself in a tavern or house of the period," Peter Ackroyd, a Dickens biographer, has written, "he would be literally sick -- sick with the smells, sick with the food, sick with the atmosphere around him.")

For the full story, see:

SAM ANDERSON. "VOYAGES; The Pippiest Place on Earth." The New York Times Magazine (Sun., February 7, 2012): 48-53.

(Note: ellipsis added.)

(Note: the online version of the story has the date February 7, 2012 (sic), and has the title "VOYAGES; The World of Charles Dickens, Complete With Pizza Hut.")

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"A police officer attempted to stop residents from rushing into a real estate trading center in Shanghai after new restrictions were announced." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A4) SHANGHAI -- When the Chinese government announced new curbs on property prices this month, homeowners bombarded social networking sites with complaints. They formed long lines at property bureaus to register to sell their homes before the restrictions went into effect.

And some couples went even further: they filed for divorce.

Divorce filings shot up here and in other big cities across China this past week after rumors spread that one way to avoid the new 20 percent tax on profits from housing sales was to separate from a spouse, at least on paper.

The surge in divorce filings is the latest indication of how volatile an issue real estate has become in China in the past decade and how resistant people are to additional taxes.

. . .

On Friday, at a marriage registration center in the Pudong district, a 33-year-old woman named Frances Tao arrived with her husband. She acknowledged that they were filing for divorce, not to avoid the 20 percent capital gains tax on second homes, but to get around another restriction, which requires home buyers to put down a much higher deposit on a second home than on a primary residence.

Ms. Tao said that by divorcing, one of them would be able to purchase a first home and put down less money and get a better interest rate.

"We don't have other choices," Ms. Tao said. "But the government and developers continue to make a lot of money."

For the full story, see:

DAVID BARBOZA. "In China, Checklist for a Home Seller: First, Get a Divorce." The New York Times (Sat., March 9, 2012): A4.

(Note: ellipsis added.)

(Note: the online version of the story has the date March 8, 2012.)

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(p. 67) Our present economic migration from a material-based industry to a knowledge economy of intangible goods (such as software, design, and media products) is just the latest in a steady move toward the immaterial. (Not that material processing has let up, just that intangible processing is now more economically valuable.) Richard Fisher, president of the Federal Reserve Bank of Dallas, says, "Data from nearly all parts of the world show us that consumers tend to spend relatively less on goods and more on services as their incomes rise. . . . Once people have met their basic needs, they tend to want medical care, transportation and communication, information, recreation, entertainment, financial and legal advice, and the like." The disembodiment of value (more value, less mass) is a steady trend in the technium. In six years the average weight per dollar of U.S. exports (the most valuable things the U.S. produces) (p. 68) dropped by half. Today, 40 percent of U.S. exports are services (intangibles) rather than manufactured goods (atoms). We are steadily substituting intangible design, flexibility, innovation, and smartness for rigid, heavy atoms. In a very real sense our entry into a service- and idea-based economy is a continuation of a trend that began at the big bang.

Source:

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

(Note: ellipsis in original; a graph is omitted that appears in the middle of the paragraph quoted above.)

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"A worker cleaned equipment at a new dairy factory outside Riga. The I.M.F. has hailed Latvia for its deep budget cuts." Source of caption and photo: online version of the NYT article quoted and cited below.

It is interesting that the New York Times photographer (see above) chose to display the Latvian economic success story in bleak shades of grey and darkness.

(p. A1) RIGA, Latvia -- When a credit-fueled economic boom turned to bust in this tiny Baltic nation in 2008, Didzis Krumins, who ran a small architectural company, fired his staff one by one and then shut down the business. He watched in dismay as Latvia's misery deepened under a harsh austerity drive that scythed wages, jobs and state financing for schools and hospitals.

But instead of taking to the streets to protest the cuts, Mr. Krumins, whose newborn child, in the meantime, needed major surgery, bought a tractor and began hauling wood to heating plants that needed fuel. Then, as Latvia's economy began to pull out of its nose-dive, he returned to architecture and today employs 15 people -- five more than he had before. "We have a different mentality here," he said.

. . .

Hardship has long been common here -- and still is. But in just four years, the country has gone from the European Union's worst economic disaster zone to a model of what the International Monetary Fund hails as the healing properties of deep budget cuts. Latvia's economy, after shriveling by more than 20 percent from its peak, grew by about 5 percent last year, making it the best performer in the 27-nation European Union. Its budget deficit is down sharply and exports are soaring.

For the full story, see:

ANDREW HIGGINS. "Used to Hardship, Latvia Accepts Austerity, and Its Pain Eases." The New York Times (Weds., January 2, 2013): A1 & A6.

(Note: ellipsis added.)

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

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

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

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

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

Book discussed:

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

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(p. A29) CAMBRIDGE, Mass. In May 2010, we published an academic paper, "Growth in a Time of Debt." Its main finding, drawing on data from 44 countries over 200 years, was that in both rich and developing countries, high levels of government debt -- specifically, gross public debt equaling 90 percent or more of the nation's annual economic output -- was associated with notably lower rates of growth.

. . .

Last week, three economists at the University of Massachusetts, Amherst, released a paper criticizing our findings. They correctly identified a spreadsheet coding error that led us to miscalculate the growth rates of highly indebted countries since World War II. But they also accused us of "serious errors" stemming from "selective exclusion" of relevant data and "unconventional weighting" of statistics -- charges that we vehemently dispute.

. . .

Our 2010 paper found that, over the long term, growth is about 1 percentage point lower when debt is 90 percent or more of gross domestic product. The University of Massachusetts researchers do not overturn this fundamental finding, which several researchers have elaborated upon.

. . .

There were just 26 cases where the ratio of debt to G.D.P. exceeded 90 percent for five years or more; the average high-debt spell was 23 years. In 23 of the 26 cases, average growth was slower during the high-debt period than in periods of lower debt levels. Indeed, economies grew at an average annual rate of roughly 3.5 percent, when the ratio was under 90 percent, but at only a 2.3 percent rate, on average, at higher relative debt levels.

. . .

The fact that high-debt episodes last so long suggests that they are not, as some liberal economists contend, simply a matter of downturns in the business cycle.

In "This Time Is Different," our 2009 history of financial crises over eight centuries, we found that when sovereign debt reached unsustainable levels, so did the cost of borrowing, if it was even possible at all. The current situation confronting Italy and Greece, whose debts date from the early 1990s, long before the 2007-8 global financial crisis, support this view.

For the full commentary, see:

CARMEN M. REINHART and KENNETH S. ROGOFF. "Debt, Growth and the Austerity Debate." The New York Times (Fri., April 26, 2013): A29.

(Note: ellipses added.)

(Note: the online version of the commentary has the date April 25, 2013.)

The full reference to the authors' book is:

Reinhart, Carmen M., and Kenneth Rogoff. This Time Is Different: Eight Centuries of Financial Folly. Princeton, NJ: Princeton University Press, 2009.

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Source of book image: http://javelindc.com/home/wp-content/uploads/2012/11/regulating_to_disaster.jpg

I caught part of a C-SPAN presentation on the Regulating to Disaster book. It sounded plausible and intriguing---consistent with other evidence I have seen that "green" jobs have been over-hyped and under-delivered.

Perhaps more important, there are the high opportunity costs of the tax dollars devoted to the "green" jobs, in terms of the non-green jobs that would have been created by entrepreneurs if less of their income had been taxed away.

I hope to look at the book in the near future.

Book discussed:

Furchtgott-Roth, Diana. Regulating to Disaster: How Green Jobs Policies Are Damaging America's Economy. New York: Encounter Books, 2012.

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Source of book image: http://www.anderson.ucla.edu/faculty/edward.leamer/images/COVER%209120_jkt_Rev1.jpg

(p. 190) When I was a younger man, I and all of my cohort were apprehensive if we saw Ed Leamer in the audience when we were presenting a paper. His comments were blunt, incisive, and often negative. But what truly terrified us was that he was almost always right. . . .

Leamer has produced a highly original little book, with big insights and lessons for us all. He explores the tension between economics that is mathematically sophisticated and complex but often vacuous, versus economics that may be vague but which is useful and carries a message. It is frankly a remarkable work, full of insights and persuasive arguments that need to be read, debated, and taken seriously.

. . .

(p. 191) But this is no rant of an old guy. Leamer gets very specific about his notions of usefulness versus rigor. A good drum to bang on is Samuelson, an important "mathematizer." I would strongly encourage all young trade economists and perhaps all graduate students who have been subjected to a traditional international trade course at any level, to read the section on factor-price equalization. This is beautifully done and even exciting and funny at times. As told by Leamer, the young Samuelson excoriates Ohlin for largely dismissing the possibility of factor-price equalization and then presents his (Samuelson's) "proof" of factor-price equalization. The latter, of course, is a theorem that is mathematically correct given the assumptions, but Ohlin is talking about its usefulness in understanding the world and constructing policy. The factor-price-equalization theorem is indeed a prime example of something that is valid but not useful.

. . .

Yet at the same time, I have thought long and hard about exactly what message should be given to graduate students and assistant professors without much success. The journal publishing business puts a huge premium on rigor over usefulness and few referees or editors are inclined to take the chance inherent in accepting papers that are a bit loose in their analytical or econometric structures, no matter how exciting they might be. If you accept that, then the profession as a whole has to rethink our view of what is an important scientific contribution: I cannot simply tell graduate students to think more broadly and worry less about elegance. Some will of course deny that there is any tension, but I side with Leamer. Over and over again, I hear, read, and/or referee papers (p. 192) where, in order to get an analytical solution to a model, the author has to assume away almost every interesting feature of the problem to the point that the remaining model is uninteresting and uninformative. But that at least qualifies the paper for possible publication in Econometrica, RESTud, or JET.

For the full review, see:

Markusen, James R. "Book Review of Ed Leamer's the Craft of Economics." Journal of Economic Literature 51, no. 1 (2013): 190-92.

(Note: ellipses added; italics in original.)

The book under review is:

Leamer, Edward E. The Craft of Economics, Ohlin Lectures. Cambridge, MA: The MIT Press, 2012.

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(p. B1) PARIS -- "How stupid do you think we are?"

With those choice words, and several more similar in tone, the chief executive of an American tire company touched off a furor in France on Wednesday as he responded to a government plea to take over a Goodyear factory slated for closing in northern France.

"I have visited the factory a couple of times," Maurice Taylor Jr., the head of Titan International, wrote to the country's industry minister, Arnaud Montebourg, in a letter published in French newspapers on Wednesday.

"The French work force gets paid high wages but works only three hours. They have one hour for their breaks and lunch, talk for three and work for three."

"I told this to the French unions to their faces and they told me, 'That's the French way!' "

For the full story, see:

LIZ ALDERMAN. "Quel Brouhaha! A Diatribe on Unions Irks the French." The New York Times (Thurs., February 21, 2013): B1 & B6.

(Note: the online version of the story has the date February 20, 2013.)

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"Tom Morse, left, and his father, Burr, at work on their maple farm in Vermont." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 11) Scientists say the tapping season -- the narrow window of freezing nights and daytime temperatures over 40 degrees needed to convert starch to sugar and get sap flowing -- is on average five days shorter than it was 50 years ago. But technology developed over the past decade and improved in recent years offers maple farmers like Mr. Morse a way to offset the effects of climate change with high-tech tactics that are far from natural.

Today, five miles of pressurized blue tubing spider webs down the hillside at Morse Farm, pulling sap from thousands of trees and spitting it into tubs like an immense, inverse IV machine. Modern vacuum pumps are powerful enough to suck the air out of a stainless steel dairy tank and implode it, and they help producers pull in twice as much sap as before.

"You can make it run when nature wouldn't have it run," Mr. Morse said.

His greatest secret weapon is a reverse-osmosis machine that concentrates the sap by pulling it through sensitive membranes, greatly increasing the sugar content before it even hits the boiler. The $8,000 instrument with buttons and dials looks like it belongs in a Jetsons-era laboratory more than in a Vermont sugarhouse. But it saves more fuel and money than every other innovation combined. With it Mr. Morse can process sap into syrup in 30 minutes, something that used to take two hours.

. . .

The biggest United States maple farmers have expanded their production acreage and are tapping more trees than ever before: the total was 5.5 million taps last year, compared with slightly over 4 million taps 10 years earlier.

As a result, United States maple syrup production hit a new high in 2011. In Vermont, the top-producing state, sap yield per tap has risen over the past decade.

For the full story, see:

JULIA SCOTT. "Maple Syrup: Old-Fashioned Product, Newfangled Means of Production." The New York Times, First Section (Sun., March 31, 2013): 11.

(Note: ellipsis added.)

(Note: the online version of the story has the date March 30, 2013, and has the title "High-Tech Means of Production Belies Nostalgic Image of Maple Syrup.")

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(p. A23) Higher taxes will produce long-term changes in social norms, behavior and growth. Edward Prescott, a winner of the Nobel Memorial Prize in economics, found that, in the 1950s when their taxes were low, Europeans worked more hours per capita than Americans. Then their taxes went up, reducing the incentives to work and increasing the incentives to relax. Over the next decades, Europe saw a nearly 30 percent decline in work hours.

The rich tend to be more sensitive to tax-rate changes because they've got advisers who are paid to be. Martin Feldstein, an economics professor at Harvard, looked into tax changes in the 1980s and concluded that raising rates causes people to shift compensations to untaxed fringe benefits and otherwise suppresses their economic activity. A study last year by the economists Michael Keane and Richard Rogerson found that tax rates can have a surprisingly large influence on how much people invest in education, how likely they are to create businesses and which professions they go into.

For the full commentary, see:

DAVID BROOKS. "The Progressive Shift." The New York Times (Tues., March 19, 2013): A23.

(Note: the online version of the commentary has the date March 18, 2013.)

The Keane and Rogerson paper summarized by Brooks is:

Keane, Michael, and Richard Rogerson. "Micro and Macro Labor Supply Elasticities: A Reassessment of Conventional Wisdom." Journal of Economic Literature 50, no. 2 (June 2012): 464-76.

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"Michael Winner, left, and Charles Bronson on the set of the 1974 film "Death Wish." The two collaborated on several films." Source of caption and photo: online version of the NYT obituary quoted and cited below.

(p. B8) Michael Winner, the brash British director known for violent action movies starring Charles Bronson including "The Mechanic" and the first three "Death Wish" films, died on Monday [January 21, 2013] at his home in London. He was 77.

. . .

Mr. Winner's films viscerally pleased crowds, largely ignored artistic pretensions and often underwhelmed critics. He directed many major stars in more than 30 films over more than four decades.

. . .

Mr. Bronson played Paul Kersey, a New York City architect who becomes a vigilante after his wife is murdered and his daughter is sexually assaulted by muggers.

. . .

Michael Robert Winner was born in London on Oct. 30, 1935. The son of a well-to-do business owner, Mr. Winner graduated from Cambridge, having studied law and economics.

. . .

He was confident on set, sometimes bordering on the dictatorial. "You have to be an egomaniac about it. You have to impose your own taste," he said. "The team effort is a lot of people doing what I say."

For the full obituary, see:

DANIEL E. SLOTNIK. "Michael Winner, 77, 'Death Wish' Director." The New York Times (Tues., January 22, 2013): B8.

(Note: the online version of the obituary has the slightly different title "Michael Winner, 'Death Wish' Director, Dies at 77.")

(Note: ellipses and bracketed date were added.)

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Source of book image: http://thesocietypages.org/cyborgology/files/2012/02/kevin-kelly-book_rdax_620x349-300x285.jpg

Kevin Kelly's book has received a lot of attention, sometimes in conjunction with Steven Johnson's Where Good Ideas Come From, with which it shares some themes. I found the Kelly book valuable, but frustrating.

The valuable part includes the discussion of the benefits of technology, and the chapter detailing Amish attitudes and practices related to technology. On the latter, for instance, I learned that the Amish do not categorically reject new technology, but believe that it should be adopted more slowly, after long community deliberation.

What frustrated me most about the book is that it argues that technology has a life of its own and that technological progress is predetermined and inevitable. (I believe that technological progress depends on enlightened government policies and active entrepreneurial initiative, neither of which is inevitable.)

In the next several weeks, I will be quoting some of the more important or thought-provoking passages in the book.

The reference for Kelly's book, is:

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

The Johnson book mentioned above, is:

Johnson, Steven. Where Good Ideas Come From: The Natural History of Innovation. New York: Riverhead Books, 2010.

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"Above, Robert Tinker, the chief executive of MobileIron, at its offices in Mountain View, Calif." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B2) "There are disruptions everywhere," said Robert Tinker, the chief executive of MobileIron, which makes software for companies to manage smartphones and tablets. "Mobile disrupts personal computers, a market worth billions. Cloud disrupts computer servers and data storage, billions of dollars more. Social may be one of those rare things that is totally new."

Relative to the size of the markets that mobile devices, cloud computing and social media are toppling, he says, the valuations are reasonable.

But most of these chief executives are also veterans of the Internet bubble of the late '90s, and confess to worries that maybe things are not so different this time. Mr. Tinker, 43, drives a 1995 Ford Explorer that has logged 265,000 miles.

"If somebody comes to a job interview here in a $100,000 car, I know he's not hungry," he said. "The reality is, I've taken $94 million in investors' money, and we haven't gone public yet. I feel that responsibility every day."

For the full story, see:

QUENTIN HARDY. "A Billion-Dollar Club, and Not So Exclusive." The New York Times (Weds., February 5, 2013): B1 & B2.

(Note: the online version of the story has the date February 4, 2013.)

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"Shown in 1960, the eight engineers who founded Fairchild Semiconductor and revolutionized world technology in "Silicon Valley," an "American Experience" documentary, . . . ." Source of caption and photo: online version of the NYT review quoted and cited below.

(p. C4) "Silicon Valley" is a deceptively grand title for the new "American Experience" documentary Tuesday night on PBS. "Fairchild Semiconductor" would be more accurate.

. . .

One startling image shows a handwritten list of the many corporations that declined to bankroll the eight pioneers before Fairchild Camera and Instrument said yes. If any of them had possessed more foresight, the silicon chip might have belonged to National Cash Register, Motorola, Philco, BorgWarner, Chrysler, General Mills or United Shoe.

For the full review, see:

MIKE HALE. "Men Who Took Silicon to Silicon Valley." The New York Times (Tues., February 5, 2013): C4.

(Note: ellipses in caption, and in quoted passage, added.)

(Note: the online version of the review has the date February 4, 2013.)

The "Silicon Valley" program first aired on PBS on 2/5/13 and can be viewed at:

http://video.pbs.org/video/2332168287

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The following passage is Steve Jobs speaking, as quoted by Walter Isaacson.

(p. 569) I don't think I run roughshod over people, but if something sucks, I tell people to their face. It's my job to be honest. I know what I'm talking about, and I usually turn out to be right. That's the culture I tried to create. We are brutally honest with each other, and anyone can tell me they think I am full of shit and I can tell them the same. And we've had some rip-roaring arguments, where we are yelling at each other, and it's some of the best times I've ever had. I feel totally comfortable saying "Ron, that store looks like shit" in front of everyone else. Or I might say "God, we really fucked up the engineering on this" in front of the person that's responsible. That's the ante for being in the room: You've got to be able to be super honest. Maybe there's a better way, a gentlemen's club where we all wear ties and speak in this Brahmin language and velvet codewords, but I don't know that way, because I am middle class from California.

I was hard on people sometimes, probably harder than I needed to be. I remember the time when Reed was six years old, coming home, and I had just fired somebody that day, and I imagined what it was like (p. 570) for that person to tell his family and his young son that he had lost his job. It was hard. But somebody's got to do it. I figured that it was always my job to make sure that the team was excellent, and if I didn't do it, nobody was going to do it.

Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

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As a defender of the process of innovation through creative destruction, I try to be alert to evidence on creative destruction's benefits and costs. The highest cost is usually viewed as technological unemployment. The evidence below will have to be examined and, if sound, added to the costs.

(p. D6) Unemployment increases the risk of heart attack, a new study reports, and repeated job loss raises the odds still more.

. . .

After adjusting for well-established heart attack risks -- age, sex, smoking, income, hypertension, cholesterol screening, exercise, depression, diabetes and others -- the researchers found that being unemployed also increased the risk of a heart attack, by an average of 35 percent.

For the full story, see:

NICHOLAS BAKALAR. "Job Loss Raises Threat of Heart Attack." The New York Times (Tues., November 27, 2012): D6.

(Note: ellipsis added.)

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

The Dupre article mentioned above, is:

Dupre, Matthew E., Linda K. George, Guangya Liu, and Eric D. Peterson. "The Cumulative Effect of Unemployment on Risks for Acute Myocardial Infarction." Archives of Internal Medicine 172, no. 22 (Dec. 10, 2012): 1731-37.

(Note: the Archives of Internal Medicine has been re-named JAMA Internal Medicine.)

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"Phil Libin, chief of Evernote, at its headquarters in Redwood City, Calif." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B1) SAN FRANCISCO -- The number of privately held Silicon Valley start-ups that are worth more than $1 billion shocks even the executives running those companies.

"I thought we were special," said Phil Libin, chief executive of Evernote, an online consumer service for storing clippings, photos and bits of information as he counted his $1 billion-plus peers.

He started Evernote in 2008 on the eve of the recession and built it methodically. "A lot of us didn't set out to have a big valuation, we're just trying to build something that lasts," Mr. Libin said. "There is no safe industry anymore, even here."

. . .

(p. B2) Silicon Valley entrepreneurs contend that the price spiral is not a sign of another tech bubble. The high prices are reasonable, they say, because innovations like smartphones and cloud computing will remake a technology industry that is already worth hundreds of billions of dollars.

. . .

The founders of the highly valued companies are old enough to remember past busts, and many shun the bubble lifestyle of fast cars and fancy parties.

Mr. Libin, who said he grew up on food stamps as the son of Russian immigrants in the Bronx, became a millionaire when he sold his first company, Engine5, to Vignette in 2000.

"The company I sold to, there were purple Lamborghinis in the garage. I got into watches," he said. "Maybe a half-dozen, nothing over $10,000, but I needed this glass and leather watch winder."

Evernote started as the financial crisis hit. "One night I was almost busted again," he said, "and there was that watch winder on the shelf, mocking me."

"Every job out there is insecure now," he said. "People sell 10 percent of their stock, and they have an incentive to make the other 90 percent worth more. They are still working, but not worrying about what will happen to their home or their kids."

For the full story, see:

QUENTIN HARDY. "A Billion-Dollar Club, and Not So Exclusive." The New York Times (Weds., February 5, 2013): B1 & B2.

(Note: the online version of the story has the date February 4, 2013.)

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(p. 1093) Methodologically, the most fundamental and forceful message from the book is that, by ignoring history and the fact that crises remain frequent, recurrent, episodic events--in both rich and poor countries--almost everyone, including researchers and policymakers, made themselves vulnerable to the wishful thinking encapsulated in the book's title. There is a deeper statistical point here. Crises, and for that matter large recessions and other phenomena that are of first-order interest given their implications for economic activity, occur at quite a low frequency. They are rare events, meaning that they do not occur so frequently, at least for most countries in a short-span time series. Thus recent experience can be an unfaithful guide for scholars and statesmen alike, a good example being the complacent thinking that accompanied the erstwhile Great Moderation of recent decades even as financial pressures built up nationally and internationally. Possibly the most important lesson that readers will take away from this book is that if we are to do better in future, from our policy thinking in the chambers of power to our macroeconometric analyses in academe, (p. 1094) we need to admit the existence of, and come to grips with, a much broader universe of evidence.

For the full review, see:

Taylor, Alan M. "Global Financial Stability and the Lessons of History: A Review of Carmen M. Reinhart and Kenneth S. Rogoff's This Time Is Different: Eight Centuries of Financial Folly." Journal of Economic Literature 50, no. 4 (Dec. 2012): 1092-105.

(Note: italics in original.)

The book that Taylor reviews, is:

Reinhart, Carmen M., and Kenneth Rogoff. This Time Is Different: Eight Centuries of Financial Folly. Princeton, NJ: Princeton University Press, 2009.

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The following passage is Steve Jobs speaking, as quoted by Walter Isaacson.

(p. 568) People pay us to integrate things for them, because they don't have the time to think about this stuff 24/7. If you have an extreme passion for producing great products, it pushes you to be integrated, to connect your hardware and your software and content management. You want to break new ground, so you have to do it yourself. If you want to allow your products to be open to other hardware or software, you have to give up some of your vision.

Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

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The following passage is Steve Jobs speaking, as quoted by Walter Isaacson.

(p. 567) Some people say, "Give the customers what they want." But that's not my approach. Our job is to figure out what they're going to want before they do. I think Henry Ford once said, "If I'd asked customers what they wanted, they would have told me, 'A faster horse!'" People don't know what they want until you show it to them. That's why I never rely on market research. Our task is to read things that are not yet on the page.

Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

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My colleague Mark Wohar, and his co-author David McMillan, have used sophisticated econometrics to analyze a very long time-series dataset on carbon dioxide (CO2) and temperature. They find that CO2 has little, if any, effect on temperature. Here is the abstract of their paper:

(p. 3683) The debate regarding rising temperatures and CO2 emissions has attracted the attention of economists employing recent econometric techniques. This article extends the previous literature using a dataset that covers 800,000 years, as well as a shorter dataset, and examines the interaction between temperature and CO2 emissions. Unit root tests reveal a difference between the two datasets. For the long dataset, all tests support the view that both temperature and CO2 are stationary around a constant. For the short dataset, temperature exhibits trend-stationary behaviour, while CO2 contains a unit root. This result is robust to nonlinear trends or trend breaks. Modelling the long dataset reveals that while contemporaneous CO2 appears positive and significant in the temperature equation, including lags results in a joint effect that is near zero. This result is confirmed using a different lag structure and Vector Autoregressive (VAR) model. A Generalized Method of Moments (GMM) approach to account for endogeneity suggests an insignificant relationship. In sum, the key result from our analysis is that CO2 has, at best, a weak relationship with temperature, while there is no evidence of trending when using a sufficiently long dataset. Thus, as a secondary result we highlight the danger of using a small sample in this context.

Source:

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.

(Note: bold added.)

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(p. A13) Eric Schmidt, executive chairman of Google, gave a remarkable interview this month to The Washington Post. So remarkable that Post editors preceded the transcript with this disclosure: "He had just come from the dentist. And he had a toothache."

Perhaps it was the Novocain talking, but Mr. Schmidt has done us a service. He said in public what most technologists will say only in private. Whatever caused him to speak forthrightly about the disconnects between Silicon Valley and Washington, his comments deserve wider attention.

Mr. Schmidt had just given his first congressional testimony. He was called before the Senate Judiciary Antitrust Subcommittee to answer allegations that Google is a monopolist, a charge the Federal Trade Commission is also investigating.

"So we get hauled in front of the Congress for developing a product that's free, that serves a billion people. OK? I mean, I don't know how to say it any clearer," Mr. Schmidt told the Post. "It's not like we raised prices. We could lower prices from free to . . . lower than free? You see what I'm saying?"

. . .

"Regulation prohibits real innovation, because the regulation essentially defines a path to follow," Mr. Schmidt said. This "by definition has a bias to the current outcome, because it's a path for the current outcome."

. . .

Washington is always slow to recognize technological change, which is why in their time IBM and Microsoft were also investigated after competing technologies had emerged.

Mr. Schmidt recounted a dinner in 1995 featuring a talk by Andy Grove, a founder of Intel: "He says, 'This is easy to understand. High tech runs three times faster than normal businesses. And the government runs three times slower than normal businesses. So we have a nine-times gap.' All of my experiences are consistent with Andy Grove's observation."

Mr. Schmidt explained there was only one way to deal with this nine-times gap, which this column hereby christens "Grove's Law of Government." That is "to make sure that the government does not get in the way and slow things down."

Mr. Schmidt recounted that when Silicon Valley first started playing a large role in the economy in the 1990s, "all of a sudden the politicians showed up. We thought the politicians showed up because they loved us. It's fair to say they loved us for our money."

He contrasted innovation in Silicon Valley with innovation in Washington. "Now there are startups in Washington," he said, "founded by people who were policy makers. . . . They're very clever people, and they've figured out a way in regulation to discriminate, to find a new satellite spectrum or a new frequency or whatever. They immediately hired a whole bunch of lobbyists. They raised some money to do that. And they're trying to innovate through regulation. So that's what passes for innovation in Washington."

For the full commentary, see:

L. GORDON CROVITZ. "INFORMATION AGE; Google Speaks Truth to Power; About the growing regulatory state, even Google's Eric Schmidt--a big supporter of the Obama administration--now feels the need to tell it like it is." The Wall Street Journal (Mon., October 24, 2011): A13.

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

The original Eric Schmidt interview with the Washington Post, can be read at:

http://articles.washingtonpost.com/2011-10-01/national/35278181_1_google-chairman-eric-schmidt-regulation-disconnects

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(p. 565) . . . I think . . . [Jobs] actually could have controlled himself, if he had wanted. When he hurt people, it was not because he was lacking in emotional awareness. Quite the contrary: He could size people up, understand their inner thoughts, and know how to relate to them, cajole them, or hurt them at will.

The nasty edge to his personality was not necessary. It hindered him more than it helped him. But it did, at times, serve a purpose. Polite and velvety leaders, who take care to avoid bruising others, are generally not as effective at forcing change. Dozens of the colleagues whom Jobs most abused ended their litany of horror stories by saying that he got them to do things they never dreamed possible. And he created a corporation crammed with A players.

Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

(Note: ellipses and bracketed "Jobs" added.)

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

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

. . .

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

So did you vote for Romney?
I did.

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

For the full interview, see:

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

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

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

Mackey's book is:

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

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(p. A11) . . . in Baltimore, . . . a local entrepreneur, following the logic of need, invested seven years and $30 million developing a robotic system for packaging prescription drugs for long-term patients in nursing homes and hospitals.

In a conversation last year, inventor Michael Bronfein told me if he'd known what it would cost him in time and money, he might never have started. How many entrepreneurs say the same? Probably all of them. But Mr. Bronfein saw a need and the power of technology to meet it, and the result was the Paxit automated medication dispensing system.

He saw workers spending hours under the old system sticking pills in monthly blister packs known as "bingo cards," a process expensive and error-prone. He saw nurses on the receiving end then spending time to pluck the pills out of blister packs and into paper cups, to create the proper daily drug regimen for each patient.

. . .

He followed the economic logic that indicated that all the people involved in the old system were becoming too valuable to have their time wasted by the old system. Backed by his company, Remedi SeniorCare, Paxit--in which a robot packages, labels and dispatches a daily round of medicines for each patient--is spreading across the mid-Atlantic and Midwest and winning plaudits from medical-care providers.

. . .

We need to preserve the incentive for investors to bring us the robots that will make the future bearable, rather than burying entrepreneurs in taxes in a vain attempt to seize the returns of investments before those investments are made.

For the full commentary, see:

Jenkins, HOLMAN W., JR. "BUSINESS WORLD; Robots to the Rescue? The flip side of an entitlements crisis is a labor shortage." The Wall Street Journal (Weds., January 9, 2013): A11.

(Note: ellipses added.)

(Note: the online version of the review has the date January 8, 2013.)

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"The economy 'will remain challenging for a long time,' says IKEA Chief Executive Mikael Ohlsson." Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. B3) MALMO, Sweden--IKEA is poised to embark on a global spending spree, but its departing chief executive says red tape is slowing how fast the home-furnishings retailer can open its pocket book.

With the company set to report record sales on Wednesday, CEO Mikael Ohlsson said the amount of time it takes to open a store has roughly doubled in recent years.

"What some years ago took two to three years, now takes four to six years. And we also see that there's a lot of hidden obstacles in different markets and also within the [European Union] that's holding us back," he said in an interview recently at an IKEA store on Sweden's western coast.

. . .

IKEA plans to invest €2 billion in stores, factories and renewable energy this year. But the company fell €1 billion short of its goal of investing €3 billion in new projects last year, largely because of bureaucratic obstacles, he said. For 10 years IKEA has tried unsuccessfully to relocate a store in France, for example. The company also is challenging German policy dictating what can be sold and where, saying the rules are out of sync with EU legislation.

"It's a pity, because it can help create jobs and investments at a time when unemployment is high in many countries," Mr. Ohlsson said. A new IKEA store creates construction and store jobs for about 1,000 workers, he said.

. . .

The company's highest-profile headaches have come in India, an untapped market where IKEA wants to open a first store in at least five years and roll out an additional three soon thereafter.

For the full story, see:

ANNA MOLIN. "IKEA Chief Takes Aim at Red Tape." The Wall Street Journal (Weds., January 23, 2013): B3.

(Note: ellipses added.)

(Note: the online version of the story has the date January 22, 2013.)

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(p. D1) Late last year Matthew Barzun, an official with the Obama campaign, called Craig Fox, a psychologist in Los Angeles, and invited him to a political planning meeting in Chicago, according to two people who attended the session.

"He said, 'Bring the whole group; let's hear what you have to say,' " recalled Dr. Fox, a behavioral economist at the University of California, Los Angeles.

So began an effort by a team of social scientists to help their favored candidate in the 2012 presidential election. Some members of the team had consulted with the Obama campaign in the 2008 cycle, but the meeting in January signaled a different direction.

"The culture of the campaign had changed," Dr. Fox said. "Before then I felt like we had to sell ourselves; this time there was a real hunger for our ideas."

. . .

(p. D6) When asked about the outside psychologists, the Obama campaign would neither confirm nor deny a relationship with them.

. . .

For their part, consortium members said they did nothing more than pass on research-based ideas, in e-mails and conference calls. They said they could talk only in general terms about the research, because they had signed nondisclosure agreements with the campaign.

In addition to Dr. Fox, the consortium included Susan T. Fiske of Princeton University; Samuel L. Popkin of the University of California, San Diego; Robert Cialdini, a professor emeritus at Arizona State University; Richard H. Thaler, a professor of behavioral science and economics at the University of Chicago's business school; and Michael Morris, a psychologist at Columbia.

"A kind of dream team, in my opinion," Dr. Fox said.

For the full story, see:

BENEDICT CAREY. "Academic 'Dream Team' Helped Obama's Effort." The New York Times (Tues., November 13, 2012): D1 & D6.

(Note: ellipses added.)

(Note: the online version of the story has the date November 12, 2012.)

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

(p. C1) President Richard Nixon declared a "war on drugs" in 1971. The expectation then was that drug trafficking in the United States could be greatly reduced in a short time through federal policing--and yet the war on drugs continues to this day. The cost has been large in terms of lives, money and the well-being of many Americans, especially the poor and less educated. By most accounts, the gains from the war have been modest at best.

The direct monetary cost to American taxpayers of the war on drugs includes spending on police, the court personnel used to try drug users and traffickers, and the guards and other resources spent on imprisoning and punishing those convicted of drug offenses. Total current spending is estimated at over $40 billion a year.

These costs don't include many other harmful effects of the war on drugs that are difficult to quantify. For example, over the past 40 years the fraction of students who have dropped out of American high schools has remained large, at about 25%. Dropout rates are not high for middle-class white children, but they are very high for black and Hispanic children living in poor neighborhoods. Many factors explain the high dropout rates, especially bad schools and weak family support. But another important factor in inner-city neighborhoods is the temptation to drop out of school in order to profit from the drug trade.

The total number of persons incarcerated in state and federal prisons in the U.S. has grown from 330,000 in 1980 to about 1.6 million today. Much of the increase in this population is directly due to the war on drugs and the severe punishment for persons convicted of drug trafficking. About 50% of the inmates in federal prisons and 20% of those in state prisons have been convicted of either selling or using drugs. The many minor drug traffickers and drug users who spend time in jail find fewer opportunities for legal employment after they get out of prison, and they develop better skills at criminal activities.

. . .

(p. C2) It is generally harder to break an addiction to illegal goods, like drugs. Drug addicts may be leery of going to clinics or to nonprofit "drugs anonymous" groups for help. They fear they will be reported for consuming illegal substances. Since the consumption of illegal drugs must be hidden to avoid arrest and conviction, many drug consumers must alter their lives in order to avoid detection.

Usually overlooked in discussions of the effects of the war on drugs is that the illegality of drugs stunts the development of ways to help drug addicts, such as the drug equivalent of nicotine patches. Thus, though the war on drugs may well have induced lower drug use through higher prices, it has likely also increased the rate of addiction. The illegality of drugs makes it harder for addicts to get help in breaking their addictions. It leads them to associate more with other addicts and less with people who might help them quit.

. . .

The decriminalization of both drug use and the drug market won't be attained easily, as there is powerful opposition to each of them. The disastrous effects of the American war on drugs are becoming more apparent, however, not only in the U.S. but beyond its borders. Former Mexican President Felipe Calderon has suggested "market solutions" as one alternative to the problem. Perhaps the combined efforts of leaders in different countries can succeed in making a big enough push toward finally ending this long, enormously destructive policy experiment.

For the full commentary, see:

GARY S. BECKER and KEVIN M. MURPHY. "Have We Lost the War on Drugs? After more than four decades of a failed experiment, the human cost has become too high. It is time to consider the decriminalization of drug use and the drug market." The Wall Street Journal (Sat., January 5, 2013): C1 & C2.

(Note: the online version of the commentary has the date January 4, 2013.)

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(p. 531) In theory, you could go to your iPhone or any computer and access all aspects of your digital life. There was, however, a big problem: The service, to use Jobs's terminology, sucked. It was complex, devices didn't sync well, and email and other data got lost randomly in the ether. "Apple's MobileMe Is Far Too Flawed to Be Reliable," was the headline on Walt Mossberg's review in the Wall Street Journal.

Jobs was furious. He gathered the MobileMe team in the auditorium on the Apple campus, stood onstage, and asked, "Can anyone tell me what MobileMe is supposed to do?" After the team members offered their answers, Jobs shot back: "So why the fuck doesn't it do that?" Over the next half hour he continued to berate them. "You've tarnished Apple's reputation," he said. You should hate each other for having let each other down. Mossberg, our friend, is no longer writing good things about us." In front of the whole audience, he got rid of the leader of the MobileMe team and replaced him with Eddy Cue, who oversaw all Internet content at Apple. As Fortune's Adam Lashinsky reported in a dissection of the Apple corporate culture, "Accountability is strictly enforced."

Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

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Source of book image: http://catholicexchange.com/wp-content/uploads/2012/07/Coming-Apart.jpg

(p. C6) The future as described by Charles Murray in "Coming Apart'' is bleak enough to have been imagined by George Orwell. Unfortunately, "Coming Apart" is nonfiction, meticulously documented and depressingly real. Mr. Murray examines America as it moves away from an upwardly mobile, socially mobile country with shared purpose and shared identities to a country dividing into two isolated and disparate camps.

For the full review essay, see:

Jeb Bush (author of passage quoted above, one of 50 contributors to whole article). "Twelve Months of Reading; We asked 50 of our friends to tell us what books they enjoyed in 2012--from Judd Apatow's big plans to Bruce Wagner's addictions. See pages C10 and C11 for the Journal's own Top Ten lists." The Wall Street Journal (Sat., December 15, 2012): passim (Bush's contribution is on p. C6).

(Note: the online version of the review essay has the date December 14, 2012.)

The book under review, is:

Murray, Charles. Coming Apart: The State of White America, 1960-2010. New York: Crown Forum, 2012.

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(p. 113) This research examines the determinants of the match between high school seniors and postsecondary institutions in the United States. I model college application decisions as a nonsequential search problem and specify a unified structural model of college application, admission, and matriculation decisions that are all functions of unobservable individual heterogeneity. The results indicate that black and Hispanic representation at all 4-year colleges is predicted to decline modestly--by 2%--if race-neutral college admissions policies are mandated nationwide. However, race-neutral admissions are predicted to decrease minority representation at the most selective 4-year institutions by 10%.

Source of abstract:

Howell, Jessica S. "Assessing the Impact of Eliminating Affirmative Action in Higher Education." Journal of Labor Economics 28, no. 1 (January 2010): 113-66.

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(p. C7) In chronicling the decline and fall of the Roman Empire, Edward Gibbon declared that "if a man were called to fix the period in the history of the world during which the human race was most happy and prosperous, he would, without hesitation, name that which elapsed from the death of Domitian to the accession of Commodus." Gibbon himself elegantly narrated how happiness and prosperity withered after this flowering between 96 and 180 A.D. But what about the near-millennium of Roman history that came before? "What was it," as Anthony Everitt asks in "The Rise of Rome," "that enabled a small Italian market town by a ford on the river Tiber to conquer the known world" and thereby made Gibbon's golden years possible?

. . .

Most of that economic activity, whether it developed autonomously as a result of lower costs or was driven by the coercive rule of the state, was catalyzed by the Mediterranean, with which even the sophisticated Roman road network could not compete. Yet in the period from the middle of the third century B.C. to the middle of the first, Mr. Everitt, following his literary sources, directs our attention to Hamilcar, the Carthaginian general; and to Hannibal, his hot-tempered son, leading elephants first across the Pyrenees and then the Alps. Both are important, and, had they not been defeated, Rome would have had a very short "rise" indeed. But the real action was on the Mediterranean. As the number of shipwrecks datable to these years attests, it was being crossed by trading vessels with a frequency never yet seen and never again matched--including the halcyon years hymned by Gibbon.

Sometimes the data can preserve an astonishingly precise record of a trade route. For example, storage containers--probably for wine--salvaged from the spectacular wrecks at Grand Congloué, off Marseilles, bear the stamp "SES." Archaeologists have confidently linked this mark with a certain Sestius, who must have manufactured the wares at the villa we know he owned in southwestern Tuscany, no mean distance away.

When the shipwreck data, which suggest increased economic activity, are considered alongside the population contraction that Rome suffered in its bloody military campaigns, a tentative but rich answer to Mr. Everitt's question begins to emerge: Rome's rise is a story of economic growth, not divine intervention or native virtue. And although even this account, like all our conclusions about the distant past, must be provisional, it is at least anchored in an empirical model of how income gains from trade and lowered transaction costs were not swallowed up by an ever-expanding population.

For the full review, see:

BRENDAN BOYLE. "BOOKSHELF; The Economy of Empire; The rise of the world's greatest empire is as much a story of shipping and markets as of divine providence and individual virtue." The Wall Street Journal (Sat., September 22, 2012): C7.

(Note: ellipsis added.)

(Note: the online version of the article was dated September 21, 2012.)

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

(p. A2) . . . research has shown that even those who should be especially clear-sighted about numbers--scientific researchers, for example, and those who review their work for publication--are often uncomfortable with, and credulous about, mathematical material. As a result, some research that finds its way into respected journals--and ends up being reported in the popular press--is flawed.

In the latest study, Kimmo Eriksson, a mathematician and researcher of social psychology at Sweden's Mälardalen University, chose two abstracts from papers published in research journals, one in evolutionary anthropology and one in sociology. He gave them to 200 people to rate for quality--with one twist. At random, one of the two abstracts received an additional sentence, the one above with the math equation, which he pulled from an unrelated paper in psychology. The study's 200 participants all had master's or doctoral degrees. Those with degrees in math, science or technology rated the abstract with the tacked-on sentence as slightly lower-quality than the other. But participants with degrees in humanities, social science or other fields preferred the one with the bogus math, with some rating it much more highly on a scale of 0 to 100.

"Math makes a research paper look solid, but the real science lies not in math but in trying one's utmost to understand the real workings of the world," Prof. Eriksson said.

For the full story, see:

CARL BIALIK. "THE NUMBERS GUY; Don't Let Math Pull the Wool Over Your Eyes." The Wall Street Journal (Sat., January 5, 2013): A2.

(Note: ellipsis added.)

(Note: the online version of the story has the date January 4, 2013,)

A pdf of Eriksson's published article can be downloaded from:

Eriksson, Kimmo. "The Nonsense Math Effect." Judgment and Decision Making 7, no. 6 (November 2012): 746-49.

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(p. 686) An empirical review of the three fiscal stimulus packages of the 2000s shows that they had little if any direct impact on consumption or government purchases. Households largely saved the transfers and tax rebates. The federal government only increased purchases by a small amount. State and local governments saved their stimulus grants and shifted spending away from purchases to transfers. Counterfactual simulations show that the stimulus-induced decrease in state and local government purchases was larger than the increase in federal purchases. Simulations also show that a larger stimulus package with the same design as the 2009 stimulus would not have increased government purchases or consumption by a larger amount. These results raise doubts about the efficacy of such packages adding weight to similar assessments reached more than thirty years ago.

Source:

Taylor, John B. "An Empirical Analysis of the Revival of Fiscal Activism in the 2000s." Journal of Economic Literature 49, no. 3 (September 2011): 686-702.

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Source of book image: http://si.wsj.net/public/resources/images/OB-VL312_bkrvta_DV_20121122124330.jpg

(p. C12) Nassim Nicholas Taleb's "Antifragile" argues that some people, organizations and systems are resilient in the face of stress because they are able to alter themselves by adapting and learning. The converse is fragility, embodied in entities that are immovable even when faced with shocks or adversity. To my mind, an obvious example is how numerous governments and international agencies have clung to foreign aid as a tool to combat poverty even though aid has failed to deliver sustainable growth and meaningfully reduce indigence. And nation-states, which rest on one unifying vision of the nation, tend to be fragile, while city-states that adjust, adapt and constantly evolve tend to be antifragile. Mr. Taleb's lesson: Embrace, rather than try to avoid, the shocks.

For the full review essay, see:

Dambisa Moyo (author of passage quoted above, one of 50 contributors to whole article). "Twelve Months of Reading; We asked 50 of our friends to tell us what books they enjoyed in 2012--from Judd Apatow's big plans to Bruce Wagner's addictions. See pages C10 and C11 for the Journal's own Top Ten lists." The Wall Street Journal (Sat., December 15, 2012): passim (Moyo's contribution is on p. C12).

(Note: the online version of the review essay has the date December 14, 2012.)

The book under review, is:

Taleb, Nassim Nicholas. Antifragile: Things That Gain from Disorder. New York: Random House, 2012.

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(p. 229) Carmen M. Reinhart, Jacob F. Kirkegaard, and M. Belen Sbrancia make a case for "Financial Repression Redux: Governments Are Once Again Finding Ways to Manipulate Markets to Hold Down the Cost of Financing Debt." "Financial repression occurs when governments implement policies to channel to themselves funds that in a deregulated market environment would go elsewhere. . . . One of the main goals of financial repression is to keep nominal interest rates lower than they would be in more competitive markets. Other things equal, this reduces the government's interest expenses for a given stock of debt and contributes to deficit reduction. (p. 230) However, when financial repression produces negative real interest rates (nominal rates below the inflation rate), it reduces or liquidates existing debts and becomes the equivalent of a tax--a transfer from creditors (savers) to borrowers, including the government . . ." "Financial repression contributed to rapid debt reduction following World War II. . . . It seems probable that policymakers for some time to come will be preoccupied with debt reduction, debt management, and efforts to keep debt servicing costs at a reasonable level. In this setting, financial repression, with its dual aims of keeping interest rates low and creating or maintaining captive domestic audiences, will continue to find renewed favor, and the measures and developments we have described and discussed are likely to be only the tip of a very large iceberg."

Reinhart et al as quoted in:

Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 25, no. 4 (Fall 2011): 223-30.

(Note: ellipses added by Taylor.)

For the full Reinhart et al paper, see:

Reinhart, Carmen M., Jacob F. Kirkegaard, and M. Belen Sbrancia. "Financial Repression Redux." Finance and Development 48, no. 2 (June 2011): 22-26.

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

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

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

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

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

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

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

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

Q. Then why?

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

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

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

Q. Did you have any experience in Internet sales?

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

For the full version of the condensed conversation, see:

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

(Note: bold in original.)

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

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

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

(p. C12) From Indiana to Indonesia, ExxonMobil is the multinational corporation that people love to hate. John D. Rockefeller's creation is famed and feared for its discipline, its disregard for public opinion and its ability, year after year, to pump out the largest profits of any corporation on the planet. In "Private Empire," Steve Coll provides a rare exploration of what makes a modern corporate giant tick and shows why the world looks different to the executives in the "God Pod" at ExxonMobil's Texas headquarters than it might to you or me.

For the full review essay, see:

Marc Levinson. "Boardroom Reading of 2012." The Wall Street Journal (Sat., December 15, 2012): C12.

(Note: the online version of the review essay has the date December 14, 2012.)

From another review of the same book:

"Private Empire" is meticulous, multi-angled and valuable. It is also, perhaps surprisingly, despite all the dark facts I have dumped above, impartial. Mr. Coll and his phlegmatic research assistants have interviewed more than 400 people, including Exxon Mobil's longtime chief executive Lee R. Raymond, a legendarily hard character.

It's among this book's achievements that it attempts to view a dysfunctional energy world, as often as not, through Exxon Mobil's eyes. The company is portrayed here, some egregious missteps aside, as possessing an honorable if rigid corporate culture that seeks to supply a product (unlike tobacco companies, to which it is often compared) that a functioning society actually must have.

For this full review, see:

DWIGHT GARNER. "Oil's Dark Heart Pumps Strong." The New York Times (Sat., April 27, 2012): C25 & C32(?).

(Note: the online version of the review essay has the date April 26, 2012 and has the title "BOOKS OF THE TIMES; Oil's Dark Heart Pumps Strong; 'Private Empire,' Steve Coll's Book on Exxon Mobil.")

The book under review, is:

Coll, Steve. Private Empire: ExxonMobil and American Power. New York: The Penguin Press, 2012.

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(p. 85) What does concern me about my discipline, . . . , is that its current core--by which I mainly mean the so-called dynamic stochastic general equilibrium approach--has become so mesmerized with its own internal logic that it has begun to confuse the precision it has achieved about its own world with the precision that it has about the real one. This is dangerous for both methodological and policy reasons. On the methodology front, macroeconomic research has been in "fine-tuning" mode within the local-maximum of the dynamic stochastic general equilibrium world, when we should be in "broad-exploration" mode. We are too far (p. 86) from absolute truth to be so specialized and to make the kind of confident quantitative claims that often emerge from the core. On the policy front, this confused precision creates the illusion that a minor adjustment in the standard policy framework will prevent future crises, and by doing so it leaves us overly exposed to the new and unexpected.

. . .

(p. 100) Going back to our macroeconomic models, we need to spend much more effort in understanding the topology of interactions in real economies. The financial sector and its recent struggles have made this need vividly clear, but this issue is certainly not exclusive to this sector.

The challenges are big, but macroeconomists can no longer continue playing internal games. The alternative of leaving all the important stuff to the "policy"-types (p. 101) and informal commentators cannot be the right approach. I do not have the answer. But I suspect that whatever the solution ultimately is, we will accelerate our convergence to it, and reduce the damage we do along the transition, if we focus on reducing the extent of our pretense-of-knowledge syndrome.

Source:

Caballero, Ricardo J. "Macroeconomics after the Crisis: Time to Deal with the Pretense-of-Knowledge Syndrome." Journal of Economic Perspectives 24, no. 4 (Fall 2010): 85-102.

(Note: ellipses added.)

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"Dr. Robert Langer's research lab is at the forefront of moving academic discoveries into the marketplace." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 1) HOW do you take particles in a test tube, or components in a tiny chip, and turn them into a $100 million company?

Dr. Robert Langer, 64, knows how. Since the 1980s, his Langer Lab at the Massachusetts Institute of Technology has spun out companies whose products treat cancer, diabetes, heart disease and schizophrenia, among other diseases, and even thicken hair.

The Langer Lab is on the front lines of turning discoveries made in the lab into a range of drugs and drug delivery systems. Without this kind of technology transfer, the thinking goes, scientific discoveries might well sit on the shelf, stifling innovation.

A chemical engineer by training, Dr. Langer has helped start 25 companies and has 811 patents, issued or pending, to his name. More than 250 companies have licensed or sublicensed Langer Lab patents.

Polaris Venture Partners, a Boston venture capital firm, has invested $220 million in 18 Langer Lab-inspired businesses. Combined, these businesses have improved the health of many millions of people, says Terry McGuire, co-founder of Polaris.

. . .

(p. 7) Operating from the sixth floor of the David H. Koch Institute for Integrative Cancer Research on the M.I.T. campus in Cambridge, Mass., Dr. Langer's lab has a research budget of more than $10 million for 2012, coming mostly from federal sources.

. . .

David H. Koch, executive vice president of Koch Industries, the conglomerate based in Wichita, Kan., wrote in an e-mail that "innovation and education have long fueled the world's most powerful economies, so I can't think of a better or more natural synergy than the one between academia and industry." Mr. Koch endowed Dr. Langer's professorship at M.I.T. and is a graduate of the university.

For the full story, see:

HANNAH SELIGSON. "Hatching Ideas, and Companies, by the Dozens at M.I.T." The New York Times, SundayBusiness Section (Sun., November 25, 2012): 1 & 7.

(Note: ellipses added.)

(Note: the online version of the story has the date November 24, 2012.)

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(p. 226) Stephen Slivinski discusses "Economic History: The Lessons of Jamestown." In the years after the Jamestown settlement of 1607, the settlers often lacked food. "The company sent Sir Thomas Dale, a British naval commander, to take over the office of colony governor in 1611. Yet, upon arrival in May--a time when the farmers should have been tending to their fields--Dale found virtually no planting activity. Instead, the workers were devoted mainly to leisure and 'playing bowls.' . . . All land was owned by the company and farmed collectively. . . . The workers would not hope to reap more compensation from a productive farming of the land any more than the farmers would be motivated by an interest in making their farming operations more efficient and, hence, more profitable. Seeing this, Dale decided to change the labor arrangements: When the seven-year contracts of most of the original surviving settlers were about to expire in 1614, he assigned private allotments of land to them. Each got three acres, 12 acres if he had a family. The only obligation was that they needed to provide two and a half barrels of corn annually to the company so it could be distributed to the newcomers to tide them over during their first year. Dale left Jamestown for good in 1616. By then, however, the new land grants had unleashed a vast increase in agricultural productivity. In fact, upon returning to England with Dale, John Rolfe--one of the colony's former leaders--reported to the Virginia Company that the Powhatans were now asking the colonists to give them corn instead of vice versa."

As quoted in:

Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 24, no. 4 (Fall 2010): 219-26.

(Note: ellipses added by Taylor.)

The Slivinski article is:

Slivinski, Stephen. "The Lessons of Jamestown." Region Focus 14, no. 1 (First Quarter 2010): 27-29.

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

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

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

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

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

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

. . .

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

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

. . .

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

. . .

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

. . .

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

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

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

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

Big money, he said, was about $50.

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

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

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

For the full story, see:

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

(Note: ellipses added.)

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

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

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(p. 408) Microsoft was willing to license its Windows Media software and digital rights format to other companies, just as it had licensed out its operating system in the 1980s. Jobs, on the other hand, would not license out Apple's FairPlay to other device makers; it worked only on an iPod. Nor would he allow other online stores to sell songs for use on iPods. A variety of experts said this would eventually cause Apple to lose market share, as it did in the computer wars of the 1980s. "If Apple continues to rely on a proprietary architecture," the Harvard Business School professor Clayton Christensen told Wired, "the iPod will likely become a niche product." (Other than in this case, Christensen was one of the world's most insightful business analysts, and Jobs was deeply (p. 409) influenced by his book The Innovator's Dilemma.) Bill Gates made the same argument. "There's nothing unique about music," he said. "This story has played out on the PC."

Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

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(p. 226) Joel Kotkin writes about "The Broken Ladder: The Threat to Upward Mobility in the Global City." "A great city, wrote Rene Descartes in the 17th Century, represented 'an inventory of the possible,' a place where people could create their own futures and lift up their families. In the 21st Century--the first in which the majority of people will live in cities--this unique link between urbanism and upward mobility will become ever more critical."

Source:

Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 24, no. 4 (Fall 2010): 219-26.

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Is the example sketched below, and in a previous entry, a case of a first mover disadvantage? Or is it simply a case of a lucky or wise bounce-back from a genuine mistake?

(p. 382) . . . [Job's] angry insistence that the iMac get rid of its tray disk drive and use instead a more elegant slot drive meant that it could not include the first CD burners, which were initially made for the tray format. "We kind of missed the boat on that," he recalled. "So we needed to catch up real fast." The mark of an innovative company is not only that it comes up with new ideas first, but also that it knows how to leapfrog when it finds itself behind.

Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

(Note: ellipsis and bracketed "Job's" added.)

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In Nobel-prize-winner Robert Solow's congressional testimony, quoted below, "DSGE" is an abbreviation for "dynamic stochastic general equilibrium."

(p. 221) Solow argues: "It may be unusual for the Committee to focus on so abstract a question, but it is certainly natural and urgent. Here we are, still near the bottom of a deep and prolonged recession, with the immediate future uncertain, desperately short of jobs, and the approach to macroeconomics that dominates serious thinking, certainly in our elite universities and in many central banks and other influential policy circles, seems to have absolutely nothing to say about the problem. Not only does it (p. 222) offer no guidance or insight, it really seems to have nothing useful to say. . . . Especially when it comes to matters as important as macroeconomics, a mainstream economist like me insists that every proposition must pass the smell test: does this really make sense? I do not think that the currently popular DSGE models pass the smell test."

Source:

Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 24, no. 4 (Fall 2010): 219-26.

(Note: ellipsis in original.)

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Isaacson says Jobs wanted two refinements in the iMac. One was new colors. The other is discussed below.

I am not sure what to make of this episode. Is Isaacson suggesting that it was good for Apple that Jobs made a mistake on the type of CD hardware to put in the iMac? That this added constraint "would then force Apple to be imaginative and bold"?

Or is the moral that good people who make a lot of quick decisions, make mistakes, sometimes big mistakes, and that Jobs found a way to bounce back from this one?

(p. 356) There was one other important refinement that Jobs wanted for the iMac: getting rid of that detested CD tray. "I'd seen a slot-load drive on a very high-end Sony stereo," he said, "so I went to the drive manufacturers and got them to do a slot-load drive for us for the version of the iMac we did nine months later." Rubinstein tried to argue him out of the change. He predicted that new drives would come along that could burn music onto CDs rather than merely play them, and they would be available in tray form before they were made to work in slots. "If you go to slots, you will always be behind on the technology," Rubinstein argued.

"I don't care, that's what I want," Jobs snapped back. They were having lunch at a sushi bar in San Francisco, and Jobs insisted that they continue the conversation over a walk. "I want you to do the slot-load drive for me as a personal favor," Jobs asked. Rubinstein agreed, of course, but he turned out to be right. Panasonic came out with a CD drive that could rip and burn music, and it was available first for computers that had old-fashioned tray loaders. The effects of this (p. 357) would ripple over the next few years: It would cause Apple to be slow in catering to users who wanted to rip and burn their own music, but that would then force
Apple to be imaginative and bold in finding a way to leapfrog over its competitors when Jobs finally realized that he had to get into the music market.

Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

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(p. 243) "It is hardly possible to take very seriously any of the professoriate all of the time or most of them most of the time. They commonly are fearful, hesitant, and foolish when confronted by complex real issues and aggressive enemies, but they tend to screech, snarl, and spit when they perceive their territory, reputation, and perquisites to be threatened. They can pose as being valiant and principled, but they are inclined to disperse and camouflage themselves upon hearing the first volleys of significant battle."

Source:

Distinguished UCLA economist William R. Allen from an interview with Daniel B. Klein as quoted in:

Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 25, no. 1 (Winter 2011): 239-46.

For the full article/interview, see:

Allen, William R. "A Life among the Econ, Particularly at UCLA." Econ Journal Watch 7, no. 3 (September 2010): 205-34.

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(p. 339) At the January 1998 San Francisco Macworld, Jobs took the stage where Amelio had bombed a year earlier. He sported a full beard and a leather jacket as he touted the new product strategy. And for the first time he ended the presentation with a phrase that he would make his signature coda: "Oh, and one more thing . . ." This time the "one more thing" was "Think Profit." When he said those words, the crowd erupted in applause. After two years of staggering losses, Apple had enjoyed a profitable quarter, making $45 million. For the full fiscal year of 1998, it would turn in a $309 million profit. Jobs was back, and so was Apple.

Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

(Note: ellipsis in original.)

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

(p. A7) Socialist President François Hollande has come up with a plan to ease the problem: give €4,000 ($5,276) a year for three years to small companies that hire a young person on a permanent contract while committing to keep an employee age 57 or over.

. . .

The French government hopes as many as half a million youths will find permanent jobs over the next five years due to the measure, which could cost the government about €1 billion a year when it is in place.

Economists say the number of real new jobs is likely to be much lower because the government will be subsidizing jobs that would have been created anyway. Only around 100,000 new jobs will be created, according to OFCE, an economic-research think tank in Paris.

French companies say they are reluctant to hire young people on permanent contracts because it gives employees a level of protection the companies say they can't afford to grant--even if they get the subsidy proposed by Mr. Hollande.

"It's great to have €4,000, but if the new recruit isn't good, we don't know how long we'll be stuck with them," said Philippe Lehmann, who runs Lehmann Sarl, a mechanical-parts factory in Molsheim, eastern France that employs seven people.

For the full story, see:

WILLIAM HOROBIN. "France Pins Hopes on Youth Jobs Plan." The Wall Street Journal (Mon., December 24, 2012): A7.

(Note: ellipsis added.)

(Note: the online version of the story has the date December 23, 2012.)

(Note: the online version of the last two paragraphs quoted above contains a few extra words of elaboration at the end of each paragraph, as compared to the print version. I have underlined these words in the passages quoted above.)

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(p. 196) In 2004, the Hugo Chávez regime in Venezuela distributed the list of several million voters who had attempted to remove him from office throughout the government bureaucracy, allegedly to identify and punish these voters. We match the list of petition signers distributed by the government to household survey respondents to measure the economic effects of being identified as a Chávez political opponent. We find that voters who were identified as Chávez opponents experienced a 5 percent drop in earnings and a 1.3 percentage point drop in employment rates after the voter list was released.

Source:

Hsieh, Chang-Tai, Edward Miguel, Daniel Ortega, and Francisco Rodriguez. "The Price of Political Opposition: Evidence from Venezuela's Maisanta." American Economic Journal: Applied Economics 3, no. 2 (2011): 196-214.

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"Willis Whitfield with a mobile clean room in the 1960s." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B16) Half a century ago, as a rapidly changing world sought increasingly smaller mechanical and electrical components and more sanitary hospital conditions, one of the biggest obstacles to progress was air, and the dust and germs it contains.

. . .

Then, in 1962, Willis Whitfield invented the clean room.

"People said he was a fraud," recalled Gilbert V. Herrera, the director of microsystems science and technology at Sandia National Laboratories in Albuquerque. "But he turned out to be right."

. . .

His clean rooms blew air in from the ceiling and sucked it out from the floor. Filters scrubbed the air before it entered the room. Gravity helped particles exit. It might not seem like a complicated concept, but no one had tried it before. The process could completely replace the air in the room 10 times a minute.

Particle detectors in Mr. Whitfield's clean rooms started showing numbers so low -- a thousand times lower than other methods -- that some people did not believe the readings, or Mr. Whitfield. He was questioned so much that he began understating the efficiency of his method to keep from shocking people.

"I think Whitfield's wrong," a scientist from Bell Labs finally said at a conference where Mr. Whitfield spoke. "It's actually 10 times better than he's saying."

For the full obituary, see:

WILLIAM YARDLEY. "W. Whitfield, 92, Dies; Built Clean Room." The New York Times (Weds., December 5, 2012): B16.

(Note: ellipses added.)

(Note: the online version of the obituary has the date December 4, 2012, and has the title "Willis Whitfield, Inventor of Clean Room That Purges Tiny Particles, Dies at 92.")

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(p. 339) In his first year back, Jobs laid off more than three thousand people, which salvaged the company's balance sheet. For the fiscal year that ended when Jobs became interim CEO in September 1997, Apple lost $1.04 billion. "We were less than ninety days from being insolvent," he recalled.

Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

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

(p. A10) This year, researchers in Spain studied more than 200 online retailers and found a handful of examples of price differences--including at Staples within Massachusetts--that appeared to be based on location and other factors. Those findings suggest that Staples' price adjustments have been present at least since this summer.

It is difficult for online shoppers to know why, or even if, they are being offered different deals from other people. Many sites switch prices at lightning speed in response to competitors' offerings and other factors, a practice known as "dynamic pricing." Other sites test different prices but do so without regard to the buyer's characteristics.

To find differences that weren't purely the result of dynamic pricing or randomized tests, the Journal conducted preliminary scans by simulating visits from different computers to a variety of e-commerce sites. If a website showed different prices or offers, the Journal then analyzed the site's computer code and conducted follow-up testing.

The Journal's tests, which were conducted in phases between August and December, indicated that some big-name retailers are experimenting with offering different prices and products to different users.

Some sites, for example, gave discounts based on whether or not a person was using a mobile device. A person searching for hotels from the Web browser of an iPhone or Android phone on travel sites Orbitz and CheapTickets would see discounts of as much as 50% off the list price, Orbitz said.

. . .

At home-improvement site Lowe's Cos., . . . prices depend on location. For example, a refrigerator in the Journal's tests cost $449 in Chicago, Los Angeles and Ashburn, Va., but $499 in seven other test cities. Lowe's said online shoppers receive the lower of the online store price or the price at their local Lowe's store as indicated by their ZIP Code.

Home Depot's website offered price variations that appeared to be based on the nearest brick-and-mortar store as well. A 250-foot spool of electrical wiring fell into six pricing groups, including $70.80 in Ashtabula, Ohio; $72.45 in Erie, Pa.; $75.98 in Olean, N.Y and $77.87 in Monticello, N.Y.

. . .

The differences found on the Staples website presented a complex pricing scheme. The Journal simulated visits to Staples.com from all of the more than 42,000 U.S. ZIP Codes, testing the price of a Swingline stapler 20 times in each. In addition, the Journal tested more than 1,000 different products in 10 selected ZIP Codes, 10 times in each location.

The Journal saw as many as three different prices for individual items. How frequently a simulated visitor saw low and high prices appeared to be tied to the person's ZIP Code. Testing suggested that Staples tries to deduce people's ZIP Codes by looking at their computer's IP address. This can be accurate, but isn't foolproof.

In the Journal's tests, ZIP Codes whose center was farther than 20 miles from a Staples competitor saw higher prices 67% of the time. By contrast, ZIP Codes within 20 miles of a rival saw the high price least often, only 12% of the time.

For the full story, see:

JENNIFER VALENTINO-DEVRIES, JEREMY SINGER-VINE and ASHKAN SOLTANI. "Websites Vary Prices, Deals Based on Users' Information." The Wall Street Journal (Mon., December 24, 2012): A1 & A10.

(Note: ellipses added.)

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"Xerox PARC headquarters." Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A11) A telling moment in the presidential race came recently when Barack Obama said: "If you've got a business, you didn't build that. Somebody else made that happen." He justified elevating bureaucrats over entrepreneurs by referring to bridges and roads, adding: "The Internet didn't get invented on its own. Government research created the Internet so that all companies could make money off the Internet."

. . .

Robert Taylor, who ran the ARPA program in the 1960s, sent an email to fellow technologists in 2004 setting the record straight: "The creation of the Arpanet was not motivated by considerations of war. The Arpanet was not an Internet. An Internet is a connection between two or more computer networks."

If the government didn't invent the Internet, who did? Vinton Cerf developed the TCP/IP protocol, the Internet's backbone, and Tim Berners-Lee gets credit for hyperlinks.

But full credit goes to the company where Mr. Taylor worked after leaving ARPA: Xerox. It was at the Xerox PARC labs in Silicon Valley in the 1970s that the Ethernet was developed to link different computer networks. Researchers there also developed the first personal computer (the Xerox Alto) and the graphical user interface that still drives computer usage today.

According to a book about Xerox PARC, "Dealers of Lightning" (by Michael Hiltzik), its top researchers realized they couldn't wait for the government to connect different networks, so would have to do it themselves. "We have a more immediate problem than they do," Robert Metcalfe told his colleague John Shoch in 1973. "We have more networks than they do." Mr. Shoch later recalled that ARPA staffers "were working under government funding and university contracts. They had contract administrators . . . and all that slow, lugubrious behavior to contend with."

For the full commentary, see:

Gordon Crovitz. "INFORMATION AGE; Who Really Invented the Internet?" The Wall Street Journal (Mon., July 23, 2012): A11.

(Note: ellipsis between paragraphs was added; ellipsis internal to last paragraph was in original.)

(Note: the online version of the commentary has the date July 22, 2012.)

I read the Hiltzik book several years ago, and my memory of it is not sharp, but I remember thinking that it was a useful book:

Hiltzik, Michael A. Dealers of Lightning: Xerox PARC and the Dawn of the Computer Age. New York: HarperBusiness, 1999.

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"A Chávez supporter. The president runs a well-oiled patronage system, a Tammany Hall-like operation but on a national scale. Government workers are frequently required to attend pro-Chávez rallies, and they come under pressure to vote for him." Source of caption and photo: online version of the NYT article quoted and cited below.

After the story quoted below was published, Chávez (alas) was re-elected.

(p. A1) Many Venezuelans who are eager to send Mr. Chávez packing, fed up with the country's lackluster economy and rampant crime, are nonetheless anxious that voting against the president could mean being fired from a government job, losing a government-built home or being cut off from social welfare benefits.

"I work for the government, and it scares me," said Luisa Arismendi, 33, a schoolteacher who cheered on a recent morning as Mr. Chávez's challenger, Henrique Capriles Radonski, drove by in this northeastern city, waving from the back of a pickup truck. Until this year, she always voted for Mr. Chávez, and she hesitated before giving her name, worried about what would happen if her supervisors found out she was switching sides. "If Chávez wins," she said, "I could be fired."

. . .

(p. A6) The fear has deep roots. Venezuelans bitterly recall how the names of millions of voters were made public after they signed a petition for an unsuccessful 2004 recall referendum to force Mr. Chávez out of office. Many government workers whose names were on the list lost their jobs.

Mr. Chávez runs a well-oiled patronage system, a Tammany Hall-like operation but on a national scale. Government workers are frequently required to attend pro-Chávez rallies, and they come under other pressures.

"They tell me that I have to vote for Chávez," said Diodimar Salazar, 37, who works at a government-run day care center in a rural area southeast of Cumaná. "They always threaten you that you will get fired."

Ms. Salazar said that her pro-Chávez co-workers insisted that the government would know how she voted. But experience has taught her otherwise. She simply casts her vote for the opposition and then tells her co-workers that she voted for Mr. Chávez.

"I'm not going to take the risk," said Fabiana Osteicoechea, 22, a law student in Caracas who said she would vote for Mr. Chávez even though she was an enthusiastic supporter of Mr. Capriles. She said she was certain that Mr. Chávez would win and was afraid that the government career she hoped to have as a prosecutor could be blocked if she voted the wrong way.

"After the election, he's going to have more power than now, lots more, and I think he will have a way of knowing who voted for whom," she said. "I want to get a job with the government so, obviously I have to vote for Chávez."

For the full story, see:

WILLIAM NEUMAN. "Fear of Losing Benefits Affects Venezuela Vote." The New York Times (Sat., October 6, 2012): A1 & A6.

(Note: ellipsis added.)

(Note: the online version of the article has the date October 5, 2012, and has the title "Fears Persist Among Venezuelan Voters Ahead of Election.")

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In the spirit of the great Bastiat:

(p. 1117) Buy local (BL) campaigns are gaining ground in many towns, cities, counties, and states throughout the United States. These commendable efforts are based on intuitive principles that: local production reduces energy usage and therefore mitigates against climate change; the rapid approach of peak oil will lead to potentially disastrous dislocations that will erode society's ability to provide adequate food supplies and medical care; and face-to-face economic relationships between producer and consumer, such as in a farmers' market setting, provide a superior form of economic organization relative to the impersonal nature of our current industrial modes of production.

It is in this spirit that we, the members of Sustainability in Transportation, Utilities, Production, the Environment, and Development (STUPED), urge our local governments to take the next logical step: requirements for selling local.

. . .

This is also clearly a fairer way to approach the problem of non-local production. There exists the temptation for a given locality to urge its community members to BL, but to also simultaneously promote selling to other localities in the name of "increased local employment." Of course, this kind of thinking totally ignores the fact that by selling goods to another region, those of us in a local production area cause harm to workers in that distant region who, as a result of our incursion into their local economies, reduce that distant region's abilities to provide for itself.

Given the foregoing, it is evident that selllocal requirements are virtually required for the sustainability of our local economies. Buy Local publicity campaigns may make us feel better, but a well-enforced set of sell-local regulations eliminates the thorniest problem of a free-market approach--the tendency of consumers to buy whatever they darn well please. STUPED urges our local governments to adopt such a set of regulations.

Source:

Thompson, Philip, and Hart Hodges. "Sell Local! The Next Logical Step." Economic Inquiry 49, no. 4 (October 2011): 1117-17.

(Note: italics in original; ellipsis added.)

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(p. 299) . . . Jobs and his family went to Hawaii for Christmas vacation. Larry Ellison was also there, as he had been the year (p. 300) before. "You know, Larry, I think I've found a way for me to get back into Apple and get control of it without you having to buy it," Jobs said as they walked along the shore. Ellison recalled, "He explained his strategy, which was getting Apple to buy NeXT, then he would go on the board and be one step away from being CEO." Ellison thought that Jobs was missing a key point. "But Steve, there's one thing I don't understand," he said. "If we don't buy the company, how can we make any money?" It was a reminder of how different their desires were. Jobs put his hand on Ellison's left shoulder, pulled him so close that their noses almost touched, and said, "Larry, this is why it's really important that I'm your friend. You don't need any more money."

Ellison recalled that his own answer was almost a whine: "Well, I may not need the money, but why should some fund manager at Fidelity get the money? Why should someone else get it? Why shouldn't it be us?"

"I think if I went back to Apple, and I didn't own any of Apple, and you didn't own any of Apple, I'd have the moral high ground," Jobs replied.

"Steve, that's really expensive real estate, this moral high ground," said Ellison. "Look, Steve, you're my best friend, and Apple is your company. I'll do whatever you want."

Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

(Note: ellipsis added.)

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(p. 538) The only benefit of war rationing, of which I am aware, is that an alert entrepreneur invented the bikini so as to conserve on the textiles that were then hard to come by for civilian use.

Source:

Shughart II, William F. "The New Deal and Modern Memory." Southern Economic Journal 77, no. 3 (Jan. 2011): 515-42.

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The wonderful clip above is from Hans Rosling's TED talk entitled "The Magic Washing Machine."

He clearly and strongly presents his central message that the washing machine has made life better.

What was the greatest invention of the industrial revolution? Hans Rosling makes the case for the washing machine. With newly designed graphics from Gapminder, Rosling shows us the magic that pops up when economic growth and electricity turn a boring wash day into an intellectual day of reading.

Source of video clip summary:

http://www.ted.com/talks/hans_rosling_and_the_magic_washing_machine.html

The version of the clip above is embedded from YouTube, where it was posted by TED: http://youtu.be/BZoKfap4g4w

It can also be viewed at the TED web site at:

http://www.ted.com/talks/hans_rosling_and_the_magic_washing_machine.html

(Note: I am grateful to Robin Kratina for telling me about Rosling's TED talk,)

(Note: I do not agree with Rosling's acceptance of the politically correct consensus view that the response to global warning should mainly be mitigation and green energy---to the extent that a response turns out to be necessary, I mainly support adaptation, as suggested in many previous entries on this blog.)

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

Gawande as quoted in:

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

The full Gawande article can be viewed online at:

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

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

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

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(p. 170) After the Macintosh team returned to Bandley 3 that afternoon, a truck pulled into the parking lot and Jobs had them all gather next to it. Inside were a hundred new Macintosh computers, each personalized with a plaque. "Steve presented them one at a time to each team member, with a handshake and a smile, as the rest of us stood around cheering," Hertzfeld recalled. It had been a grueling ride, and many egos had been bruised by Jobs's obnoxious and rough management style. But neither Raskin nor Wozniak nor Sculley nor anyone else at the company could have pulled off the creation of the Macintosh. Nor would it likely have emerged from focus groups and committees. On the day he unveiled the Macintosh, a reporter from Popular Science asked Jobs what type of market research he had done. Jobs responded by scoffing, "Did Alexander Graham Bell do any market research before he invented the telephone?"

Source:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

(Note: italics in original.)

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(p. 234) Melinda Beeuwkes Buntin and David Cutler discuss "The Two Trillion Dollar Solution: Saving Money by Modernizing the Health Care System." "Two sorts of savings are possible in health care. The first is eliminating waste and inefficiency. The most commonly cited estimate is that 30 percent of the money spent on medical care does not buy care worth its cost. Medicare costs per capita in Minneapolis, for example, are about half those in Miami, yet Miami does not have better health outcomes. International comparisons yield the same conclusion. . . . Second, reform might stimulate cost-reducing innovation instead of the continuous cost increases that accompany current innovation. For nearly 20 years, scholars have argued that generous reimbursement policies for medical care have led to innovations that almost always increase health care costs. Changing that dynamic by investing in research about what works and rewarding health care providers who choose efficient treatments could have a dramatic effect on cost growth. . . . Reducing costs by 30 percent will take time and effort, but it is not inconceivable over the long term. Experience in the health care sector and other industries suggests that cost reductions on the order of 1.5-to-2.0 percentage points per year are within reach."

Buntin and Cutler as quoted in:

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

(Note: ellipses in original.)

The Buntin and Cutler report is:

Buntin, Melinda Beeuwkes, and David Cutler. "The Two Trillion Dollar Solution: Saving Money by Modernizing the Health Care System." Washington, D.C.: Center for American Progress, 2009.

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"Stanford R. Ovshinsky and Iris M. Ovshinsky founded Energy Conversion Laboratories in 1960." Source of caption and photo: online version of the NYT obituary quoted and cited below.

(p. A23) Stanford R. Ovshinsky, an iconoclastic, largely self-taught and commercially successful scientist who invented the nickel-metal hydride battery and contributed to the development of a host of devices, including solar energy panels, flat-panel displays and rewritable compact discs, died on Wednesday [October 17, 2012] at his home in Bloomfield Hills, Mich. He was 89.

. . .

His ideas drew only scorn and skepticism at first. He was an unknown inventor with unconventional ideas, a man without a college education who made his living designing automation equipment for the automobile industry in Detroit, far from the hotbeds of electronics research like Silicon Valley and Boston.

But Mr. Ovshinsky prevailed. Industry eventually credited him for the principle that small quantities or thin films of amorphous materials exposed to a charge can instantly reorganize their structures into semicrystalline forms capable of carrying significant current.

. . .

In 1960, he and his second wife, the former Iris L. Miroy, founded Energy Conversion Laboratories in Rochester Hills, Mich., to develop practical products from the discovery. It was renamed Energy Conversion Devices four years later.

Energy Conversion Devices and its subsidiaries, spinoff companies and licensees began translating Mr. Ovshinsky's insights into mechanical, electronic and energy devices, among them solar-powered calculators. His nickel-metal battery is used to power hybrid cars and portable electronics, among other things.

He holds patents relating to rewritable optical discs, flat-panel displays and electronic-memory technology. His thin-film solar cells are produced in sheets "by the mile," as he once put it.

. . .

"His incredible curiosity and unbelievable ability to learn sets him apart," Hellmut T. Fritzsche, a longtime friend and consultant, said in an interview in 2005.

For the full obituary, see:

BARNABY J. FEDER. "Stanford R. Ovshinsky Dies at 89, a Self-Taught Maverick in Electronics." The New York Times (Fri., October 19, 2012): A23.

(Note: ellipses and bracketed date added.)

(Note: the online version of the article was dated October 18, 2012.)

(Note: in the first sentence of the print version, "hybrid" was used instead of the correct "hydride.")

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(p. 136) Early retirement appears to have a significant negative impact on the cognitive ability of people in their early 60s that is both quantitatively important and causal. We obtain this finding using cross-nationally comparable survey data from the United States, England, and Europe that allow us to relate cognition and labor force status. We argue that the effect is causal by making use of a substantial body of research showing that variation in pension, tax, and disability policies explain most variation across countries in average retirement rates.

Further exploration of existing data and new data being collected would allow a considerably deeper exploration of the roles of work and leisure in determining the pace of cognitive aging. For example, the HRS contains considerable information on how respondents use their leisure time that would allow both cross-sectional and longitudinal analysis of changes in cognitive exercise that are associated with (p. 137) retirement. In addition, detailed occupation and industry data could be used to understand differences in the pace of technical change to which workers must adjust during the latter part of their careers. Also, in the 2010 wave, the HRS will be adding measures of other components of fluid intelligence. Future work in this area should be able to separate the effects of the "unengaged lifestyle hypothesis" (that early retirees suffer cognitive declines because the work environment they have left is more cognitively stimulating than the full-time leisure environment they have entered) from the "on-the-job retirement hypothesis" (which holds that incentives to invest among older workers are significantly reduced when they expect to retire at an early age).

During the past decade, older Americans seem to have reversed a century-long trend toward early retirement and have been increasing their labor force participation rates, especially beyond age 65. This is good news for the standard of living of elderly Americans, as well as for the fiscal balance of the Social Security and Medicare systems. Our paper suggests that it may also be good news for the cognitive capacities of our aging nation.

Source:

Rohwedder, Susann, and Robert J. Willis. "Mental Retirement." Journal of Economic Perspectives 24, no. 1 (Winter 2010): 119-38.

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The passage below is a comment by former head of the Fed, Paul Volcker.

(p. 25) . . . I recently commented to some of my economist friends that I'm not aware of any large contribution that economic science has made to central banking in the last 50 years or so.

Our ability to forecast is still very limited. The old issues of the relative role of fiscal and monetary policies are still debated. Markets are certainly more complex, and some of the old approaches toward monetary control seem less relevant. Recent events have certainly illustrated limitations in our understanding of the economy.

The advent of floating exchange rates, which partly reflects a shift in academic thinking, has certainly been important, but the underlying problems of policy seem familiar.

Stern, Gary H., interviewer. "Paul A.Volcker in Conversation with Gary H. Stern." The Region (September 2009): 18-29.

(Note: ellipsis added.)

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Source of book image: http://www.internetmonk.com/wp-content/uploads/walter-isaacson-steve-jobs1.png

Steve Jobs is one of my favorite examples of what I call the "project entrepreneur." Walter Isaacson has written a fascinating biography of Jobs, full of memorable examples for any student of the innovative entrepreneur.

During the next few weeks, I will occasionally add entries that quote some of the more important or thought-provoking passages.

The book under review is:

Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

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The Slutsky result summarized below would seem to imply that you can explain business cycles without fingering creative destruction as the culprit, as Schumpeter had seemed to do. The costs of creative destruction are thus reduced, and the case for creative destruction strengthened.

(p. 232) Phil Davies and Joe Mahon investigate "The Meaning of Slutsky." "A middleaged professor working at a Moscow think tank, [Eugen] Slutsky was virtually unknown to economists in Europe and the United States when he published his landmark paper on cyclical phenomena in 1927. In a bold statistical experiment, Slutsky demonstrated that random numbers subjected to statistical calculations similar to those used to reveal trends in economic time-series formed wavelike patterns indistinguishable from business cycles. The implication was that a similar stochastic process--'the summation of random causes,' as Slutsky described it--might be at work in the actual economy, causing prosperity to ebb and flow without the agency of sunspots, meteorological patterns or other cyclical forces. 'That was a hell of an idea,' said Robert Lucas, a University of Chicago economist who pioneered modern business cycle theory, in an interview. 'It was just a huge jump from what anyone had done.'

Source:

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

(Note: bracketed name in original.)

The published version of the article summarized by Taylor is:

Davies, Phil, and Joe Mahon. "The Meaning of Slutsky." The Region (Dec. 2009): 13-17, 42-46.

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"In a straightforward sense, Mr. García, 44, is a Mexican ecologist. More broadly, though, he is a self-appointed emissary from the land once known as Pimería Alta, an interpreter of its culture, plants and people." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. D6) Over the weekend, Mr. García would be driving back to his family seat in the mission town of Magdalena de Kino, Mexico. In a way, his personal mission is to recreate the orchards he knew there. He has started with dozens of seedlings in the backyard of the small ranch house that he shares with his girlfriend, Dena Cowan, a Spanish-language interpreter and videographer. (The couple recently produced a documentary, in Spanish and English, about the Kino Heritage Fruit Trees Project called "Tasting History.")

Yet he remembered the orchards with something other than simple nostalgia.

As a child, he packed boxes of fruit to load onto his uncle's truck. "My father had this farm that he was renting, probably two acres," Mr. García recalled. By necessity, "the only things we bought from the store were salt, sugar, coffee and kerosene," he said. "Everything else we produced."

"Our mother, she made our underwear out of the wheat sacks," he continued. "My father used to make these homemade shoes for my brothers: leather, with used tires on the sole. They would hide them in the river on the way to school and then go to school barefooted." Better that, he recalled, than let classmates see their privation.

By the time Mr. García reached junior high, his older sister has become a teacher and the family's lot had improved. They installed indoor plumbing, for a start. There was nothing trendy about what he ironically calls their "sustainable" years. "I got the tail end," Mr. García said. "But I got enough to realize how hard work it is. I learned enough to realize I wanted to get an education and get out of that life."

For the full story, see:

MICHAEL TORTORELLO. "Seeds of an Era Long Gone." The New York Times (Thurs., November 22, 2012): D1 & D6.

(Note: the online version of the article was dated November 21, 2012.)

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(p. 233) John J. Horton surveys "The Condition of the Turking Class: Are Online Employers Fair and Honest?" Amazon Mechanical Turk is a "marketplace for work," as explained at <https://www.mturk.com/mturk/welcome>. Employers post "Human Intelligence Tasks," which can be tasks like writing keywords that accompany photos or writing bogus product reviews, and workers anywhere in the world can sign up to do them. Horton used Mechanical Turk to survey 200 respondents, who were paid 12 cents apiece for responding to a survey. Of the respondents, 111 were Americans, 58 from India, and the others from other countries. When asked what percentage of employers in their home country treat workers honestly and fairly, the average answer was 64 percent; in comparison, when asked what percentage of Mechanical Turk Requestors treated them (p. 234) fairly, the median answer was 69 percent.

Source:

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

(Note: ellipses in original.)

The published version of the article summarized by Taylor is:

Horton, John J. "The Condition of the Turking Class: Are Online Employers Fair and Honest?" Economics Letters 111, no. 1 (April 2011): 10-12.

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"Raghuram G. Rajan criticized Indian policy makers during a speech in April at the Indian School of Business. In August, the Indian government offered him a job." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B3) NEW DELHI -- In April, the economist Raghuram G. Rajan gave a speech to a group of graduating Indian students in which he criticized the country's policy makers for "repeating failed experiment after failed experiment," rather than learning from the experiences of other countries. A week later, he assailed the government again, this time in a speech attended by Prime Minister Manmohan Singh.

But instead of drawing a rebuke from India's often thin-skinned leaders, he got a job offer. In August, Mr. Singh, who has frequently sought Mr. Rajan's advice, called and asked him to take a leave from his job as a professor at the University of Chicago to return to India, where he was born, to help revive the country's flagging economy. Within weeks, he was at work as the chief economic adviser in the Finance Ministry.

Analysts say the appointment of an outspoken academic like Mr. Rajan, along with the recent push by New Delhi to reduce energy subsidies and open up retailing, insurance and aviation to foreign investment, signal that India's policy makers appear to be serious about tackling the nation's economic problems.

. . .

Mr. Rajan said he would like to focus his efforts on three big themes: liberalizing India's financial system; making it easier to do business, particularly for entrepreneurs and manufacturers; and fixing India's dysfunctional food distribution system, which wastes a lot of food even as many of the country's poor are malnourished.

For the full story, see:

VIKAS BAJA. "As Its Economy Sags, India Asks a Critic to Come Home and Help Out." The New York Times (Sat., October 6, 2012): B3.

(Note: ellipsis added.)

(Note: the online version of the article was dated October 5, 2012.)

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

Nobel-Prize winner Edmund Phelps as quoted in:

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

(Note: ellipses in original.)

The original source of the Phelps quotes is:

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

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

(p. A13) . . . the post-Civil War industrialization had an important and largely overlooked predecessor in the first decades of the 19th century, when, as Charles Morris writes in "The Dawn of Innovation," "the American penchant for mechanized, large-scale production spread throughout industry, presaging the world's first mass-consumption economy." It is a story well worth telling, and Mr. Morris tells it well.

. . .

Whole industries sprang up as the country's population boomed and spilled over into the Middle West. The rich agricultural lands there produced huge surpluses of grain and meat, especially pork. The city of Cincinnati--whose population grew to 160,000 in 1860, from 2,500 in 1810--became known as "Porkopolis" because of the number of hogs its slaughterhouses processed annually.

Mr. Morris does a particularly good job of explaining the crucial importance of synergy in economic development, how one development leads to another and to increased growth. The lard (or pig fat) from the slaughterhouses, he notes, served as the basis for the country's first chemical industry. Lard had always been used for more than pie crust and frying. It was a principal ingredient in soap, which farm wives made themselves, a disagreeable and even dangerous task thanks to the lye used in the process.

But when lard processing was industrialized to make soap, it led to an array of byproducts such as glycerin, used in tanning and in pharmaceuticals. Stearine, another byproduct, made superior candles. Just in the decade from the mid-1840s to the mid-1850s, Cincinnati soap exports increased 20-fold, as did the export of other lard-based products. Procter & Gamble, founded in Cincinnati in 1837 by an Irish soap maker and an English candle maker who had married sisters, grew into a giant company as the fast-rising middle class sought gentility.

Mr. Morris goes into great detail on the development of interchangeable parts--the system of making the components of a manufactured product so nearly identical that they can be easily substituted and replaced.

For the full review, see:

John Steele Gordon. "BOOKSHELF; The Days Of Porkopolis." The Wall Street Journal (Tues., November 20, 2012): A13.

(Note: ellipses added.)

(Note: the online version of the article was updated November 19, 2012.)

The book under review, is:

Morris, Charles R. The Dawn of Innovation: The First American Industrial Revolution. Philadelphia, PA: PublicAffairs, 2012.

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

(p. A9) STOCKHOLM--Sweden's economy, bolstered by solid exports and healthy consumer spending, is picking up considerable steam even as many of its European neighbors gasp for breath amid the struggle to contain the euro-zone debt crisis.

Sweden's second-quarter economic output data, released Monday, significantly outpaced expectations, further solidifying the Northern European country's reputation as a haven in a volatile period. The Swedish krona, which recently reached a 12-year peak against the euro, strengthened further after the report.

. . .

. . . , Sweden has built a reputation for fiscal discipline since it suffered a financial crisis in the early 1990s. Successive governments have since stuck to a target to post a surplus of 1% of GDP over any business cycle.

Lawmakers resisted the temptation to borrow to fuel growth during the boom of the early 2000s, which meant Sweden hit the global financial crisis of 2008 and 2009 with strong public finances. The government hasn't needed to increase taxes in the way Spain has, or to cut spending as in the U.K.

For the full story, see:

CHARLES DUXBURY. "In Crisis, a Rare Swede Spot." The Wall Street Journal (Tues., July 31, 2012): A9.

(Note: ellipses added.)

(Note: the online version of the article was dated July 30, 2012.)

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(p. 44) Ignorance is a formidable foe, and to have hope of even modest victories, we economists need to use every resource and every weapon we can muster, including thought experiments (theory), and the analysis of data from nonexperiments, accidental experiments, and designed experiments. We should be celebrating the small genuine victories of the economists who use their tools most effectively, and we should dial back our adoration of those who can carry the biggest and brightest and least-understood weapons. We would benefit from some serious humility, and from burning our "Mission Accomplished" banners. It's never gonna happen.

Source:

Leamer, Edward E. "Tantalus on the Road to Asymptopia." Journal of Economic Perspectives 24, no. 2 (Spring 2010): 31-46.

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Source of book image: http://si.wsj.net/public/resources/images/ED-AK313_book10_DV_20091008170122.jpg

(p. 762) Every once in a while, a work comes along whose key points ought to be part of the information set of every literate economist. Carmen M. Reinhart and Kenneth S. Rogoff's This Time is Different: Eight Centuries of Financial Folly is such a work. It describes and analyzes a long international history of several types of financial crises.

. . .

The authors resist giving too much structural interpretation to their analysis. Most would agree with their conclusion that " . . . highly leveraged economies, particularly those in which continual rollover of short-term debt is sustained only by confidence in relatively illiquid underlying assets, seldom survive" (p. 292).

For the full review, see:

Boskin, Michael J. "Review of: This Time Is Different: Eight Centuries of Financial Folly." Journal of Economic Literature 48, no. 3 (September 2010): 762-66.

(Note: ellipsis internal to the final quotation, and the italics, are in the original; ellipsis between paragraphs is added.)

(Note: the "p. 292" refers to a page in the book, and not a page of the review.)(

The book being reviewed, is:

Reinhart, Carmen M., and Kenneth Rogoff. This Time Is Different: Eight Centuries of Financial Folly. Princeton, NJ: Princeton University Press, 2009.

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(p. 177) Atherosclerosis, referring to a progressive and degenerative process of artery walls, is typically translated for a lay audience as "hardening of the arteries." We've never needed a similar word to describe the medical community. It came with sclerosis built in. Of all the professions represented on the planet, perhaps none is more resistant to change than physicians. If there were ever a group defined by lacking plasticity, it would first apply to doctors.

(p. 178) The inherent "hardness" of physicians and the medical community suggests they will have a difficult time adapting to the digital world. Before the emergence of the Internet, physicians were high priests, holding all the knowledge and expertise, not to be challenged or questioned by the lowly consumer patient. "Doctor knows best" was the pervasive sentiment, shared by patients and especially physicians.

Source:

Topol, Eric. The Creative Destruction of Medicine: How the Digital Revolution Will Create Better Health Care. New York: Basic Books, 2012.

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The American Economic Association's Journal of Economic Perspectives published a symposium focused on the thought-provoking views of the distinguished econometrician Edward Leamer.

I quote below some of Leamer's comments in his own contribution to the symposium.

(p. 31) We economists trudge relentlessly toward Asymptopia, where data are unlimited and estimates are consistent, where the laws of large numbers apply perfectly and where the full intricacies of the economy are completely revealed. But it's a frustrating journey, since, no matter how far we travel, Asymptopia remains infinitely far away. Worst of all, when we feel pumped up with our progress, a tectonic shift can occur, like the Panic of 2008, making it seem as though our long journey has left us disappointingly close to the State of Complete Ignorance whence we began.

The pointlessness of much of our daily activity makes us receptive when the Priests of our tribe ring the bells and announce a shortened path to Asymptopia. (Remember the Cowles Foundation offering asymptotic properties of simultaneous equations estimates and structural parameters?) We may listen, but we don't hear, when the Priests warn that the new direction is only for those with Faith, those with complete belief in the Assumptions of the Path. It often takes years down the Path, but sooner or later, someone articulates the concerns that gnaw away in each of (p. 32) us and asks if the Assumptions are valid. (T. C. Liu (1960) and Christopher Sims (1980) were the ones who proclaimed that the Cowles Emperor had no clothes.) Small seeds of doubt in each of us inevitably turn to despair and we abandon that direction and seek another.

Two of the latest products-to-end-all-suffering are nonparametric estimation and consistent standard errors, which promise results without assumptions, as if we were already in Asymptopia where data are so plentiful that no assumptions are needed. But like procedures that rely explicitly on assumptions, these new methods work well in the circumstances in which explicit or hidden assumptions hold tolerably well and poorly otherwise. By disguising the assumptions on which nonparametric methods and consistent standard errors rely, the purveyors of these methods have made it impossible to have an intelligible conversation about the circumstances in which their gimmicks do not work well and ought not to be used. As for me, I prefer to carry parameters on my journey so I know where I am and where I am going, not travel stoned on the latest euphoria drug.

This is a story of Tantalus, grasping for knowledge that remains always beyond reach. In Greek mythology Tantalus was favored among all mortals by being asked to dine with the gods. But he misbehaved--some say by trying to take divine food back to the mortals, some say by inviting the gods to a dinner for which Tantalus boiled his son and served him as the main dish. Whatever the etiquette faux pas, Tantalus was punished by being immersed up to his neck in water. When he bowed his head to drink, the water drained away, and when he stretched up to eat the fruit hanging above him, wind would blow it out of reach. It would be much healthier for all of us if we could accept our fate, recognize that perfect knowledge will be forever beyond our reach and find happiness with what we have. If we stopped grasping for the apple of Asymptopia, we would discover that our pool of Tantalus is full of small but enjoyable insights and wisdom.

For the full article, see:

Leamer, Edward E. "Tantalus on the Road to Asymptopia." Journal of Economic Perspectives 24, no. 2 (Spring 2010): 31-46.

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". . . , Ena K. McPherson holds the key to three different community gardens." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. D1) There is some evidence, . . . , that the bulk of New Yorkers do not have an unlimited appetite for growing their own kale. Official counts of New York gardens are fragmentary. But John Ameroso, the Johnny Appleseed of the New York community garden movement, suspects that the number of present-day gardens -- around 800 -- may be half what it was in the mid-1980s.

In his long career as an urban extension agent for Cornell University, Mr. Ameroso, 67, kept a log with ratings of all the plots he visited. "I remember that there were a lot of gardens that were not in use or minimally used," he said. "Into the later '80s, a lot of these disappeared or were abandoned. Or maybe there was one person working them. If nothing was developed on them, they just got overgrown."

The truth, Ms. Stone said, is that at any giv-(p. D6)en time, perhaps 10 percent of the city's current stock of almost 600 registered GreenThumb gardens is growing mostly weeds. "In East New York, I can tell you that there are basically many gardens that are barely functioning now."

. . .

An honest census would reveal that many gardens (perhaps most) depend on just one or two tireless souls, said Ena K. McPherson, a Brooklyn garden organizer. She would know because she's one of them.

Ms. McPherson holds the keys to three community gardens in Bedford-Stuyvesant. (Ms. Stone appreciatively refers to these blocks as "the Greater Ena McPherson Zone.") And she serves on the operations committee for the nonprofit Brooklyn Queens Land Trust, which holds the deeds to 32 garden plots.

"In an ideal situation, we would have gardens with everyone in the community participating," Ms. McPherson said. "But in fact, a few die-hard people end up carrying the flag."

. . .

The original gardens followed the city's vacant lots, which by 1978 numbered 32,000. Mr. Ameroso, though trained in agronomy, pitched them as an instrument for community renewal. "How did you take back your block?" he said. "Put in a community garden and stop that dumping."

Ms. Stone, who laughingly (and earnestly) describes herself as a socialist, continues to embrace something of this mission. "All the people who are marginal in society -- and I'm not using that as a judgmental term, it's children, senior citizens, people on disability, the 47 percent -- these people are the main power people in the garden," she said.

These days, Mr. Ameroso espouses more of what he calls an "urban agriculture" model: a food garden with a dedicated farmers' market or a C.S.A. These amenities make stakeholders out of neighbors who may not like dirt under their nails and rural farmers who drive in every weekend.

"The urban-agriculture ones are flourishing," he said. "There's a lot of excitement. They're active eight days a week." But "community gardens, as such, where people come in to take care of their own boxes -- those are not flourishing."

It's almost a cliché to point out that this new green model seems to have attracted tillers with a different skin tone. "Back then," Mr. Ameroso said of his earlier career, "when we worked in Bronx or Bed-Stuy, it was mostly communities of color. Now when we talk about the urban agriculture stuff, it's white people in their 30s."

What explains this demographic shift?

"I have no idea," he said. "I'm still baffled by it, and I'm involved in it!"

For the full story, see:

MICHAEL TORTORELLO. "IN THE GARDEN; Growing Everything but Gardeners." The New York Times (Sat., November 1, 2012): D1 & D6.

(Note: ellipses added.)

(Note: the online version of the article was dated October 31, 2012.)

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(p. 6) There is no shortage of writing -- often from a locavore point of view -- in support of more organic methods of farming, for both developed and developing countries. These opinions recognize that current farming methods bring serious environmental problems involving water supplies, fertilizer runoff and energy use. Yet organic farming typically involves smaller yields -- 5 to 34 percent lower, as estimated in a recent study in the journal Nature, depending on the crop and the context. For all the virtues of organic approaches, it's hard to see how global food problems can be solved by starting with a cut in yields. Claims in this area are often based on wishful thinking rather than a hard-nosed sense of what's practical.

For the full story, see:

TYLER COWEN. "ECONOMIC VIEW; World Hunger: The Problem Left Behind." The New York Times, SundayBusiness (Sun., September 16, 2012): 6.

(Note: the online version of the article is dated September 15, 2012.)

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"EUROPEAN JOURNEY; Thomas Edison, seated center, sent Adelbert Theodor Edward Wangemann, standing behind him, to France in 1889. From there Wangemann traveled to Germany to record recitations and performances." Source of caption and photo: online version of the NYT article quoted and cited below.

Edison is often ridiculed for failing to foresee that playing music would be a major use for his phonograph invention. (Nye 1991, p. 142 approvingly references Hughes 1986, p. 201 on this point.) But if Edison failed to foresee, then why did he assign Wangemann to make the phonograph "a marketable device for listening to music"?

(p. D3) Tucked away for decades in a cabinet in Thomas Edison's laboratory, just behind the cot in which the great inventor napped, a trove of wax cylinder phonograph records has been brought back to life after more than a century of silence.

The cylinders, from 1889 and 1890, include the only known recording of the voice of the powerful chancellor Otto von Bismarck. . . . Other records found in the collection hold musical treasures -- lieder and rhapsodies performed by German and Hungarian singers and pianists at the apex of the Romantic era, including what is thought to be the first recording of a work by Chopin.

. . .

The lid of the box held an important clue. It had been scratched with the words "Wangemann. Edison."

The first name refers to Adelbert Theodor Edward Wangemann, who joined the laboratory in 1888, assigned to transform Edison's newly perfected wax cylinder phonograph into a marketable device for listening to music. Wangemann became expert in such strategies as positioning musicians around the recording horn in a way to maximize sound quality.

In June 1889, Edison sent Wangemann to Europe, initially to ensure that the phonograph at the Paris World's Fair remained in working order. After Paris, Wangemann toured his native Germany, recording musical artists and often visiting the homes of prominent members of society who were fascinated with the talking machine.

Until now, the only available recording from Wangemann's European trip has been a well-known and well-worn cylinder of Brahms playing an excerpt from his first Hungarian Dance. That recording is so damaged "that many listeners can scarcely discern the sound of a piano, which has in turn tarnished the reputations of both Wangemann and the Edison phonograph of the late 1880s," Dr. Feaster said. "These newly unearthed examples vindicate both."

For the full story, see:

RON COWEN. "Restored Edison Records Revive Giants of 19th-Century Germany." The New York Times (Tues., January 31, 2012): D3.

(Note: ellipses added.)

(Note: the online version of the article is dated January 30, 2012.)

"Adelbert Theodor Edward Wangemann used a phonograph to record the voice of Otto von Bismarck." Source of caption and photo: online version of the NYT article quoted and cited above.

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Here is more evidence that the role of athletics in higher education should be reconsidered. Another useful discussion occurs in the book by Christensen and Eyring. An earlier entry on this blog is also relevant.

(p. 230) The Knight Commission on Intercollegiate Athletics offers "College Sports 101: A Primer on Money, Athletics, and Higher Education in the 21st Century." "In fact, the vast majority of athletics programs reap far less money from external sources than they need to function. Virtually all universities subsidize athletics departments through general fund allocations, student fees, and state appropriations, and the NCAA estimates in a given year that only 20 to 30 athletics programs actually generate enough external revenue to cover operating expenses. Institutional subsidies to athletics can exceed $11 million, according to data provided by the NCAA. With costs in athletics rising faster than in other areas of university operations, it is not clear how many institutions can continue to underwrite athletics at their current level . . . Rigorous studies of the subject, however, suggest that there is no significant institutional benefit to athletic success. . . . Indeed, donations to athletics departments may cannibalize contributions to academic programs. . . . There are two other myths to be dispelled. First, there is no correlation between spending more on athletics and winning more . . . Second, increased spending on coaches' salaries has no significant relationship to success or increased revenue . . . October 2009, at 〈http://collegesports101.knightcommission.org〉.

Source:

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

(Note: ellipses in original.)

The Knight Commission report can be downloaded at:

Weiner, Jay. "College Sports 101: A Primer on Money, Athletics, and Higher Education in the 21st Century." Knight Commission on Intercollegiate Athletics, 2009.

The Christensen and Eyring book is:

Christensen, Clayton M., and Henry J. Eyring. The Innovative University: Changing the DNA of Higher Education from the Inside Out. San Francisco, CA: Jossey-Bass, 2011.

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Source of YouTube video:

http://www.youtube.com/watch?feature=player_embedded&v=ZAq06n79QIs#!

(p. 257) You can watch a 99 year-old Ronald Coase speaking in December 2009 for 25 minutes on the subjects of "Markets, Firms and Property Rights." "One of the things that people don't understand is that markets are creations. . . . In fact, it's very difficult to imagine that firms act in the way that is described in the textbooks, where you maximize profits by equating marginal costs and marginal revenues. One of the reasons one can feel doubtful about this particular way of looking at things is that firms never calculate marginal costs . . . I think we ought to study directly how firms operate and develop our theory accordingly." From the conference "Markets, Firms and Property Rights: A Celebration of the Research of Ronald Coase," held at the University of Chicago Law School by the Information Economy Project at George Mason University School of Law. The webpage also includes video of seven panels of prominent speakers, along with PDF files of a dozen or so papers given at the conference. Available at 〈http://iep.gmu.edu/CoaseConference.php〉.

Source:

Taylor, Timothy. "Recommendations for Further Reading." Journal of Economic Perspectives 24, no. 3 (Summer 2010): 251-58.

(Note: ellipses in original.)

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The article quoted below is a useful antidote to those economists who sometimes seem to argue that health gains fully justify the rise in health costs.

(p. 645) In the United States, health care technology has contributed to rising survival rates, yet health care spending relative to GDP has also grown more rapidly than in any other country. We develop a model of patient demand and supplier behavior to explain these parallel trends in technology growth and cost growth. We show that health care productivity depends on the heterogeneity of treatment effects across patients, the shape of the health production function, and the cost structure of procedures such as MRIs with high fixed costs and low marginal costs. The model implies a typology of medical technology productivity: (I) highly cost-effective "home run" innovations with little chance of overuse, such as anti-retroviral therapy for HIV, (II) treatments highly effective for some but not for all (e.g., stents), and (III) "gray area" treatments with uncertain clinical value such as ICU days among chronically ill patients. Not surprisingly, countries adopting Category I and effective Category II treatments gain the greatest health improvements, while countries adopting ineffective Category II and Category III treatments experience the most rapid cost growth. Ultimately, economic and political resistance in the United States to ever-rising tax rates will likely slow cost growth, with uncertain effects on technology growth.

Source of abstract:

Chandra, Amitabh, and Jonathan Skinner. "Technology Growth and Expenditure Growth in Health Care." Journal of Economic Literature 50, no. 3 (Sept. 2012): 645-80.

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Source of book image: http://www.mikedash.com/assets/images/Batavia-l.jpg

(p. 236) In Mike Dash's book, Batavia's Graveyard, the mutineers on the ship Batavia get stranded on a parched sand bar with the liquor and foodstuffs, but no fresh water. A few hundred watery yards away are the remnants of the loyal crew, stuck on another islet without liquor or provisions, but with plentiful fresh water. Trade proves impossible. The analog of this breakdown is the current relationship between history and the social sciences.

Source:

Clark, Gregory. "The Ends of Life: Roads to Fulfillment in Early Modern England." Journal of Economic History 71, no. 1 (March 2011): 236-37.

(Note: italics in original.)

Dash's book that Clark mentions:

Dash, Mike. Batavia's Graveyard: The True Story of the Mad Heretic Who Led History's Bloodiest Mutiny. New York: Crown, 2002.

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(p. 819) Levinson's book opens up a crucial discussion on the role of integrated retailer-distributors in shaping the twentieth-century U.S. economy. As he rightly notes in the book's conclusion, A&P was in many ways the Walmart of its day: it used its buying power to squeeze inefficiencies out of supply chains, it was widely reviled for upending small-town business patterns and bitterly fighting union organizers, and yet it drew waves of customers who appreciated its low prices. While we have many business histories of mass-production industries, we have only a handful of richly researched studies of the mass retailers that have, in the words of historian Nelson Lichtenstein (2009), "become the key players in the worldwide marketplace of our time." Levinson has produced a valuable book for business and economic historians interested in retailing, supply chains, and the ironies of antitrust policy. As a former editor for The Economist, furthermore, Levinson is particularly effective at translating challenging economic concepts into language that lay audiences and undergraduate students can grasp.

For the full review, see:

Hamilton, Shane. "The Great A&P and the Struggle for Small Business in America." Journal of Economic Literature 50, no. 3 (Sept. 2012): 818-19.

(Note: italics in original.)

The book under review is:

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

The Lichtenstein book mentioned is:

Lichtenstein, Nelson. The Retail Revolution: How Wal-Mart Created a Brave New World of Business. hb ed. New York: Metropolitan Books, 2009.

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"Eden Full, 20, tested her rotating solar panel in Kenya in 2010." Source of caption and photo: online version of the NYT article quoted and cited below.

(p.1) EDEN FULL should be back at Princeton by now. She should be hustling to class, hitting the books, acing tests. In short, she should be climbing that old-school ladder toward a coveted spot among America's future elite.

She isn't doing any of that. Instead, Ms. Full, as bright and poised and ambitious as the next Ivy Leaguer, has done something extraordinary for a Princetonian: she has dropped out.

It wasn't the exorbitant cost of college. (Princeton, all told, runs nearly $55,000 a year.) She says she simply received a better offer -- and, perhaps, a shot at a better education.

Ms. Full, 20, is part of one of the most unusual experiments in higher education today. It rewards smart young people for not going to college and, instead, diving into the real world of science, technology and business.

The idea isn't nuts. After all, Bill Gates and Steve Jobs dropped out, and they did O.K.

Of course, their kind of success is rare, degree or no degree. Mr. Gates and Mr. Jobs changed the world. Ms. Full wants to, as well, and she's in a hurry. She has built a low-cost solar panel and is starting to test it in Africa.

"I was antsy to get out into the world and execute on my ideas," she says.

At a time when the value of a college degree is being called into question, and when job prospects for many new graduates are grimmer than they've been in years, perhaps it's no surprise to see a not-back-to-school movement spring up. What is surprising is where it's springing up, and who's behind it.

The push, which is luring a handful of select students away from the likes of Princeton, Harvard and M.I.T., is the brainchild of Peter A. Thiel, 44, a billionaire and freethinker with a remarkable record in Sil-(p. 7)icon Valley. Back in 1998, during the dot-com boom, Mr. Thiel gambled on a company that eventually became PayPal, the giant of online payments. More recently, he got in early on a little start-up called Facebook.

Since 2010, he has been bankrolling people under the age of 20 who want to find the next big thing -- provided that they don't look for it in a college classroom. His offer is this: $50,000 a year for two years, few questions asked. Just no college, unless a class is helpful for their Thiel projects.

. . .

Ms. Full is friends with another Thiel fellow, Laura Deming, 18. Ms. Deming is clearly brilliant. When she was 12, her family moved to San Francisco from New Zealand so she could work with Cynthia Kenyon, a molecular biologist who studies aging. When Ms. Deming was 14, the family moved again, this time to the Boston area, so she could study at M.I.T.

"Families of Olympic-caliber athletes make these kinds of sacrifices all the time," says Tabitha Deming, Laura's mother. "When we lived nearby in Boston, we were lucky to see her once a month. She never came home for weekends."

John Deming, Laura's father, graduated from Brandeis University at the age of 35 but says he disdains formal education at every level. His daughter was home-schooled.

"I can't think of a worse environment than school if you want your kids to learn how to make decisions, manage risk and take responsibility for their choices," Mr. Deming, an investor, wrote in an e-mail. "Rather than sending them to school, turn your kids loose on the world. Introduce them to the rigors of reality, the most important of which is earning your own way." He added, "I detest American so-called 'education.' "

His daughter's quest to slow aging was spurred by her maternal grandmother, Bertie Deming, 85, who began having neuromuscular problems a decade ago. Laura, a first-year fellow, now spends her days combing medical journals, seeking a handful of researchers worth venture capital funding, which is a continuation of her earlier work.

"I'm looking for therapies that target aging damage and slow or reverse it," she says. "I've already spent six years on this stuff. So far I've found only a few companies, two or three I'm really bullish on."

For the full story, see:

CAITLIN KELLY. "Drop Out, Dive In, Start Up.." The New York Times, SundayBusiness (Sun., September 16, 2012): 1 & 7.

(Note: ellipsis added.)

(Note: the online version of the article is dated September 15, 2012, and had he title "Forgoing College to Pursue Dreams.")

"Laura Deming, left, at age 6 with her grandmother, whose neuromuscular problems have now inspired Laura to work on anti-aging technology." Source of caption and photo: online version of the NYT article quoted and cited above.

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(p. 254) We investigate the effect of climate on population levels in preindustrial Iceland. We find that short-term temperature changes affect the population growth rate. In particular, a 1ºC decrease in temperature causes about 0.57 percent decrease in the population growth rate for the two subsequent years, for a total effect of 1.14 percent. This effect appears to attenuate as the growth rate returns to trend in subsequent years. We also quantify the extent to which eighteenth- and nineteenth-century Icelanders adapt to long-run climate change. In particular, the data suggest that long-run adaptation to climate takes about 20 years and reduces the effect of cold shocks by about 60 percent. Our results also allow us to approximate the effect of permanent climate change on steady-state population levels. This approximation suggests that steady state population levels decrease by 10 percent to 26 percent for each 1ºC of sustained adverse temperature change.

(p. 255) . . .

If contemporary poor agricultural populations behave like their eighteenth- and nineteenth century Icelandic counterparts, then our results suggest that adverse climate change (which now refers to warming, not cooling) will have three effects. First, in the short run it will lead to a significant decrease in population growth rates. Second, over the course of a generation, adaptation will offset about 60 percent of the short run effects. Finally, in the long run, we expect a decrease in steady-state populations.

For the full article, from which the above conclusion is quoted, see:

Turner, Matthew A., Jeffrey S. Rosenthal, Jian Chen, and Chunyan Hao. "Adaptation to Climate Change in Preindustrial Iceland." American Economic Review 102, no. 3 (May 2012): 250-55.

(Note: underlining added; the underlined words appeared on p. 254 of the print issue, and on p. 255 of the online issue, of the article.)

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Source of book image: http://s.wsj.net/public/resources/images/OB-UU147_mcgreg_DV_20121001022644.jpg





In the passages quoted below "SOE" means "state-owned enterprise."

(p. B1) If the U.S. needs another wake-up call, it will get one this week with the publication of a bracing account of the danger that China's state capitalism poses to global business--and to China itself. James McGregor's new book, "No Ancient Wisdom, No Followers: The Challenges of Chinese Authoritarian Capitalism," dissects the complex policies and state structures that produced China's novel system. And it describes the limited recourse the U.S. and other nations have. (Full disclosure: Mr. McGregor is a friend and former colleague at the Journal.)

"The Communist Party of China has two unwavering objectives: Make China rich and powerful and guarantee the Party's political monopoly," Mr. McGregor writes. "At the center of this are behemoth state-owned enterprises that dominate all key sectors and have been instrumental to the country's current success.

"As China's global reach expands, this one-of-a-kind system is challenging the rules and organizations that govern global trade as well as the business plans and strategies of multinationals around the globe. At the same time, the limits of authoritarian capital-(p.B2)ism are increasingly evident at home, where corruption is endemic, the SOEs are consuming the fruits of reform, and the economic engine is running out of gas."

Born in the 1950s when 10,000 Soviet advisers helped China organize central planning, the state-owned enterprises quickly became bloated extensions of the Party's patronage and power.

. . .

The enterprises themselves, meanwhile, crowded out private competition. SOEs account for about 96% of China's telecom industry, 92% of power and 74% of autos. The combined profit of China Petroleum & Chemical and China Mobile in 2009 alone was greater than all the profit of China's 500 largest private firms, Mr. McGregor writes.

An independent Chinese study, he adds, says that if you subtract government subsidies from the biggest SOEs they actually lose money.

Mr. McGregor believes pressures are building within China for change--the result of SOEs that don't innovate enough, slowing growth, an angry private sector, and a pending leadership change, among other factors. Even some top leaders say reform is needed.

For the full commentary, see:

JOHN BUSSEY. "THE BUSINESS; Tackling the Many Dangers of China's State Capitalism." The New York Times (Fri., September 28, 2012): B1 & B2.

(Note: ellipsis added.)

(Note: the online version of the article has the date September 27, 2012.)

Book under discussion:

McGregor, James. No Ancient Wisdom, No Followers: The Challenges of Chinese Authoritarian Capitalism. Westport, CT: Prospecta Press, 2012.

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(p. 242) This paper has investigated the role of natural disaster shocks in determining gross migration flows, controlling for other place-based features. Using two micro datasets, we documented that in the 1920s and 1930s population was repelled from tornado-prone areas, with a larger effect on potential in-migrants than on existing residents, while flood events were associated with net inmigration. The differential migration responses by disaster type raises the question of whether public efforts at disaster mitigation counteract individual migration decisions. The nascent investment in rebuilding and protecting flood-prone areas could provide one example of public investment crowding out private self-protection (i.e., migration).

(p. 243) In future work, we plan to explore the role of New Deal disaster management more directly by exploiting variation across SEAs in federal expenditures and representation on key congressional committees. We predict that residents of areas that received federal largesse after a disaster in the 1930s will be less likely to move out and that new arrivals may be more likely to move in, while residents of areas that benefited less from New Deal spending will continue to use migration as a means of self-protection.

For the full article, from which the above conclusion is quoted, see:

Boustan, Leah Platt, Matthew E. Kahn, and Paul W. Rhode. "Moving to Higher Ground: Migration Response to Natural Disasters in the Early Twentieth Century." American Economic Review 102, no. 3 (May 2012): 238-44.

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"Abigail Fisher, 22, at the Supreme Court last month. "I probably would have gotten a better job offer had I gone to U.T.," Ms. Fisher said." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) WASHINGTON -- Abigail Fisher is a slight young woman with strawberry blond hair, a smile that needs little prompting, a determined manner and a good academic record. She played soccer in high school, and she is an accomplished cellist.

But the university she had her heart set on, the one her father and sister had attended, rejected her. "I was devastated," she said, in her first news interview since she was turned down by the University of Texas at Austin four years ago.

Ms. Fisher, 22, who is white and recently graduated from Louisiana State University, says that her race was held against her, and the Supreme Court is to hear her case on Wednesday, bringing new attention to the combustible issue of the constitutionality of racial preferences in admissions decisions by public universities.

"I'm hoping," she said, "that they'll completely take race out of the issue in terms of admissions and that everyone will be able to get into any school that they want no matter what race they are but solely based on their merit and if they work hard for it."

. . .

(p. A17) The majority opinion in the Grutter case, written by Justice Sandra Day O'Connor, rejected the use of racial quotas in admissions decisions but said that race could be used as one factor among many, as part of a "holistic review." Justice O'Connor retired in 2006, and her replacement by Justice Samuel A. Alito Jr. may open the way for a ruling cutting back on such race-conscious admissions policies, or eliminating them.

. . .

She said she was trying to come to terms with her role in a case that could reshape American higher education. Asked if she found it interesting or exciting or scary, she said, "All of the above."

But she did not hesitate to say how she would run an admission system. "I don't think," she said, "that we even need to have a race box on the application."

For the full story, see:

ADAM LIPTAK. "Race and College Admissions, Facing a New Test by Justices." The New York Times (Tues., October 9, 2012): A1 & A17.

(Note: ellipses added.)

(Note: the online version of the review has the date October 8, 2012.)

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Clarke Conor interviewed Paul Samuelson in the summer of 2009. Since Samuelson died in October 2009, the interview was one of his last.

Samuelson was a student of Joseph Schumpeter at Harvard, and Schumpeter worked to get Samuelson financial support and a job. Near the end of his life, Schumpeter was ridiculed when he warned National Bureau of Economic Research (NBER) economists that they should not neglect economic history.

It took Paul Samuelson a long time to appreciate Schumpeter's truth.

Very last thing. What would you say to someone starting graduate study in economics? Where do you think the big developments in modern macro are going to be, or in the micro foundations of modern macro? Where does it go from here and how does the current crisis change it?

Well, I'd say, and this is probably a change from what I would have said when I was younger: Have a very healthy respect for the study of economic history, because that's the raw material out of which any of your conjectures or testings will come. And I think the recent period has illustrated that. The governor of the Bank of England seems to have forgotten or not known that there was no bank insurance in England, so when Northern Rock got a run, he was surprised. Well, he shouldn't have been.

But history doesn't tell its own story. You've got to bring to it all the statistical testings that are possible. And we have a lot more information now than we used to.

For the full interview, see:

Clarke, Conor. "An Interview with Paul Samuelson, Part Two." The Atlantic (2009), http://www.theatlantic.com/politics/archive/2009/06/an-interview-with-paul-samuelson-part-two/19627/.

(Note: bold indicates Conor question, and is bolded in original.)

(Note: the interview was posted on The Atlantic online website, but I do not believe that it ever appeared in the print version of the magazine.)

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"Blitz gasoline cans, at Ace Hardware in Miami, Okla., will soon disappear from stores. The company closed because of the costs of lawsuits contending that the cans were unsafe." Source of caption and photo: online version of the NYT article quoted and cited below.

The "Mr. Flick" quoted below is Rocky Flick, the former CEO of Blitz.

(p. B1) Crusading against what it considers frivolous lawsuits, the United States Chamber of Commerce has had no shortage of cases to highlight, like the man suing a cruise line after burning his feet on a sunny deck or the mother claiming hearing loss from the screaming at a Justin Bieber concert.

Now, the lobbying group's Institute for Legal Reform is showing a 30-second commercial that uses Blitz USA, a bankrupt Oklahoma gasoline can manufacturer, to illustrate the consequences of abusive lawsuits. The ad shows tearful workers losing their jobs and the lights going out at the 46-year-old company as a result of steep legal costs from lawsuits targeting the red plastic containers, according to the company and the institute.

The closing of the 117-employee operation this summer became a rallying point for proponents of tort reform. . . .

. . .

(p. B2) Blitz executives note that the company, which was the nation's leading gas can producer, sold more than 14 million cans a year over the last decade, with fewer than two reported incidents per million cans sold. The company said the most serious incidents usually involved obvious misuse of the cans, like pouring gasoline on an open fire.

. . .

A decade ago, Mr. Flick said, the company would face one or two lawsuits a year. The number grew to six or seven a year, and finally to 25 or so last year when Blitz filed for bankruptcy.

For the full story, see:

CLIFFORD KRAUSS. "Two Sides of Product Liability: A Factory's Closing Focuses Attention on Tort Reform." The New York Times (Fri., October 4, 2012): B1.

(Note: ellipses added.)

(Note: the online version of the article is dated October 5, 2012 and has the shorter title "A Factory's Closing Focuses Attention on Tort Reform.")

View the Chamber video clip on the Blitz example:

"Rocky Flick, Blitz's former chief executive." Source of caption and photo: online version of the NYT article quoted and cited above.

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(p. 122) VANE and MULHEARN: The prize rewards specific discoveries, achievements, or breakthroughs in economic science. Your pioneering contributions have opened up a rich seam of research for others to mine. Does academic knowledge largely progress through the lead taken by a small number of creative innovators?
PHELPS: That's such a good question. It resonates with a subject in the area of innovation theory. The old guys like Arthur Spiethoff thought that progress was due to the great discoveries of the scientists and navigators. Schumpeter (1934) (p. 123) didn't depart altogether from that, he simply said, well, that's right but you've got to have some entrepreneur to actually implement it. But don't think there's much creativity there--everybody knows what's in the air. And it's very rare that anything new really gets created in the course of this development work. But now we don't think about innovation in that way so much. We recognize that once in a while there is a big leap which creates the ground for a surge of innovations to follow. Nowadays we realize that an awful lot of innovation just comes from business people operating at the grass roots having ideas on the basis of what they see around them. Nothing to do with science--it's just creative mankind chipping away at things. I know that the Sens and the Mundells and the Lucases are towering figures, but they couldn't have become so if they hadn't read a lot of papers by, well, pretty average people who are just doing a good job of exploring a question and giving inspiration. I guess the towering figures are people with just a little more drive, a little more imagination, just a little cleverer in putting some things together. In other words, I don't know the answer to the question [laughter].

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

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

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

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

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

(Note: ellipsis added.)

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(p. 234) Using a powerful method due to Singh, we have established a relationship between God's attitude toward man and the amount of prayer (p. 235) transmitted to God. The method presented here is applicable to a number of important problems. Provided conditional density (1) is assumed, we do not need to observe a variable to compute its conditional expectation with respect to another variable whose density can be estimated. For example, one can extend current empirical work in a variety of areas of economics to estimate the effect of income on happiness or the effect of income inequality on democracy. We conjecture that this powerful method can be extended to the more general case when X is not observed either.

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

Heckman, James. "The Effect of Prayer on God's Attitude toward Mankind." Economic Inquiry 48, no. 1 (Jan. 2010): 234-35.

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Source of book image: http://si.wsj.net/public/resources/images/OB-RO889_bkrvmu_DV_20120130124608.jpg

(p. C2) There remains a core of civic virtue and involvement in working-class America that could make headway against its problems if the people who are trying to do the right things get the reinforcement they need--not in the form of government assistance, but in validation of the values and standards they continue to uphold. The best thing that the new upper class can do to provide that reinforcement is to drop its condescending "nonjudgmentalism." Married, educated people who work hard and conscientiously raise their kids shouldn't hesitate to voice their disapproval of those who defy these norms. When it comes to marriage and the work ethic, the new upper class must start preaching what it practices.

For the full essay, see:

CHARLES MURRAY. "The New American Divide; The ideal of an 'American way of life' is fading as the working class falls further away from institutions like marriage and religion and the upper class becomes more isolated. Charles Murray on what's cleaving America, and why." The Wall Street Journal (Sat., January 21, 2012): C1-C2.

The essay quoted above is related to Murray's book:

Murray, Charles. Coming Apart: The State of White America, 1960-2010. New York: Crown Forum, 2012.

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(p. 150) We study competition between two publicly funded school systems in Ontario, Canada: one that is open to all students, and one that is restricted to children of Catholic backgrounds. A simple model of competition between the competing systems predicts greater effort by school managers in areas with more Catholic families who are willing to switch systems. Consistent with this insight, we find significant effects of competitive pressure on test score gains between third and sixth grade. Our estimates imply that extending competition to all students would raise average test scores in sixth grade by 6 percent to 8 percent of a standard deviation.

For the full article, from which the above abstract is quoted, see:

Card, David, Martin D. Dooley, and A. Abigail Payne. "School Competition and Efficiency with Publicly Funded Catholic Schools." American Economic Journal: Applied Economics 2, no. 4 (Oct. 2010): 150-76.

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(p. 351) The intense aversion to trading increased risk for some other advantage plays out on a grand scale in the laws and regulations governing risk. This trend is especially strong in Europe where the precautionary principle, which prohibits any action that might cause harm, is a widely accepted doctrine. In the regulatory context, the precautionary principle imposes the entire burden of proving safety on anyone who undertakes actions that might harm people or the environment. Multiple international bodies have specified that the absence of scientific evidence of potential damage is not sufficient justification for taking risks. As the jurist Cass Sunstein points out, the precautionary principle is costly, and when interpreted strictly it can be paralyzing. He mentions an impressive list of innovations that would not have passed the test, including "airplanes, air conditioning, antibiotics, automobiles, chlorine, the measles vaccine, open-heart surgery, radio, refrigeration, smallpox vaccine, and X-rays." The strong version of the precautionary principle is obviously untenable. But enhanced loss aversion is embedded in a strong and widely shared moral intuition; it originates in System 1. The dilemma between intensely loss-averse moral attitudes and efficient risk management does not have a simple and compelling solution.

Source:

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

(Note: italics in original.)

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(p. 435) Using institutional data on race-specific college enrollment and completion, I examine whether minority students were less likely to enroll in a four-year public college or receive a degree following a statewide affirmative action ban. As in previous studies, I find that black and Hispanic enrollment dropped at the top institutions; however, there is little evidence that overall black enrollment at public universities fell. Finally, despite evidence that fewer blacks and Hispanics graduated from college following a ban, the effects on graduation rates are very noisy.

For the full article, from which the above abstract is quoted, see:

Backes, Ben. "Do Affirmative Action Bans Lower Minority College Enrollment and Attainment?" Journal of Human Resources 47, no. 2 (Spring 2012): 435-55.

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Source of book image: http://2.bp.blogspot.com/-N1hV093ckVc/T8YmCXE2sQI/AAAAAAAAAYc/1B5hWDeXbzQ/s1600/basement.jpg

(p. 17) In June 2008, The Atlantic published an essay by an adjunct instructor of English, identified only as "Professor X," whose job filled him with despair. Although the courses he taught were introductory, success was beyond many of his students, who, he wrote, were "in some cases barely literate." X found giving F's to be excruciating -- "I am the man who has to lower the hammer," he lamented -- in part because he identified with his older students, who seemed to have lost their way in their careers much as X himself had.

. . .

. . . X's function, in the ecology of the colleges where he teaches, is gatekeeper -- most students who fail his classes will drop out -- and he articulates the ethical challenge before him this way: "What grade does one give a college student who progresses from a 6th- to a 10th-grade level of achievement?" X gives F's.

. . .

X and his wife got snookered in the housing bubble, and he wonders if the misery in his classroom might result from a similar education bubble. In 1940, there were 1.5 million college students in America; in 2006, there were 20.5 million. In X's opinion, a glut of degrees has led to a spurious inflation of the credentials required for many jobs. Tuitions are rising, and two-thirds of college graduates now leave school with debt, owing on average about $24,000. A four-year degree is said to increase wages about $450,000 over the course of a lifetime, but X doubts the real value of degrees further down on the hierarchy of prestige. To him, the human cost is more conspicuous.

. . .

Professor X can be caustic about the euphemism and somewhat willed optimism that sometimes befog discussion of how to teach unprepared students. To relieve his and his students' unhappiness, he proposes that employers stop demanding unnecessary degrees: a laudable suggestion, unlikely to be realized until the degree glut has dried up.

For the full review, see:

CALEB CRAIN. "Lost in the Meritocracy." The New York Times Book Review (Sun., May 1, 2011): 17.

(Note: ellipses added.)

(Note: the online version of the review has the date April 29, 2011.)

The full reference for the book under review, is:

X, Professor. In the Basement of the Ivory Tower: Confessions of an Accidental Academic. New York: Viking, 2011.

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(p. 346) The sunk-cost fallacy keeps people for too long in poor jobs, unhappy marriages, and unpromising research projects. I have often observed young scientists struggling to salvage a doomed project when they would be better advised to drop it and start a new one. Fortunately, research suggests that at least in some contexts the fallacy can be overcome. The sunk-cost fallacy is identified and taught as a mistake in both economics and business courses, apparently to good effect: there is evidence that graduate students in these fields are more willing than others to walk away from a failing project.

Source:

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

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(p. 31) We measure the extent to which skilled immigrants increase innovation in the United States. The 2003 National Survey of College Graduates shows that immigrants patent at double the native rate, due to their disproportionately holding science and engineering degrees. Using a 1940-2000 state panel, we show that a 1 percentage point increase in immigrant college graduates' population share increases patents per capita by 9-18 percent. Our instrument for the change in the skilled immigrant share is based on the 1940 distribution across states of immigrants from various source regions and the subsequent national increase in skilled immigration from these regions.

For the full article, from which the above abstract is quoted, see:

Hunt, Jennifer, and Marjolaine Gauthier-Loiselle. "How Much Does Immigration Boost Innovation?" American Economic Journal: Macroeconomics 2, no. 2 (April 2010): 31-56.

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Source of book image: http://t0.gstatic.com/images?q=tbn:ANd9GcQPLdrVlC1FT3ojxyxWJLq55AeAs87pw_Bw6ks1ugFnkcI_DBa_1w&t=1

(p. 23) Next time you find yourself grousing when the passenger in front reclines his seat a smidge too far, consider the astronomers of the Enlightenment. In 1761 and 1769, dozens and dozens of stargazers traveled thousands of miserable miles to observe a rare and awesome celestial phenomenon. They went by sailing ship and open dinghy, by carriage, by sledge and on foot. They endured discomfort that in our own flabby century would generate years of litigation. And they did it all for science: the men in powdered wigs and knee britches were determined to measure the transit of Venus.

. . .

The British astronomer Edmond Halley had realized that precise measurement of a transit might give astronomers armed with a clock and a telescope the data they needed to calculate how far Earth is from the Sun. With that distance in hand, they could work out the actual size of the solar system, the great astronomical problem of the era. The catch was that it would take multiple measurements from carefully chosen locations all over the Northern and Southern Hemispheres. But that was somebody else's problem. Halley knew he wouldn't live to see the transit of 1761.

That challenge fell to the French astronomer Joseph-Nicolas Delisle, who managed to energize and rally his colleagues in the years leading up to the transit, then coordinate the enormous effort that would ultimately involve scientists and adventurers from France, Britain, Russia, Germany, the Netherlands, Italy, Sweden and the American colonies. When you think about how hard it is to arrange a simple dinner with a few friends who live in the same city and use the same language when e-mailing, it's enough to take your breath away.

. . .

Sea travel was so risky in 1761 that observers took separate ships to the same destination to increase the chances some of them would make it alive. The Seven Years' War was on, and getting caught in the cross-fire was a constant concern. One French scientist carried a passport arranged by the Royal Society in London advising the British military "not to molest his person or Effects upon any account." Others were shelled by the French or caught in border troubles with the Russians. An observer en route to Tobolsk, in Siberia, found himself floating in ice up to his waist when his carriage fell through the frozen river they were traveling in lieu of a road. He made it to his destination. Another, heading toward eastern Finland via the iced-over Gulf of Bothnia, was repeatedly catapulted out of his sledge as the runners caught on the crests of frozen waves. He made it too.

For the full review, see:

JoANN C. GUTIN. "Masters of the Universe." The New York Times Book Review (Sun., May 20, 2012): 19.

(Note: ellipses added.)

(Note: the online version of the review has the date May 18, 2012.)

The full reference for the book under review, is:

Wulf, Andrea. Chasing Venus: The Race to Measure the Heavens. New York: Alfred A. Knopf, 2012.

Source of image: online version of the NYT article quoted and cited above.

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(p. 338) . . . I have a sermon ready for Sam if he rejects the offer of a single highly favorable gamble played once, and for you if you share his unreason-able aversion to losses:

I sympathize with your aversion to losing any gamble, but it is costing you a lot of money. Please consider this question: Are you on your deathbed? Is this the last offer of a small favorable gamble that you will ever consider? Of course, you are unlikely to be offered exactly this gamble again, but you will have many opportunities to consider attractive gambles with stakes that are very small relative to your wealth. You will do yourself a large financial favor if you are able to see each of these gambles as part of a bundle of small gambles and rehearse the mantra that will get you significantly closer to economic rationality: you win a few, you lose a few. The main purpose of the mantra is to control your emotional response when you do lose. If you can trust it to be effective, you should remind yourself of it when deciding whether or not to accept a small risk with positive expected value. Remember these qualifications when using the mantra:

• It works when the gambles are genuinely independent of each other; it does not apply to multiple investments in the same industry, which would all go bad together.

(p. 339)

• It works only when the possible loss does not cause you to worry about your total wealth. If you would take the loss as significant bad news about your economic future, watch it!

• It should not be applied to long shots, where the probability of winning is very small for each bet.

If you have the emotional discipline that this rule requires, you will never consider a small gamble in isolation or be loss averse for a small gamble until you are actually on your deathbed and not even then.

This advice is not impossible to follow. Experienced traders in financial markets live by it every day, shielding themselves from the pain of losses by broad framing. As was mentioned earlier, we now know that experimental subjects could be almost cured of their loss aversion (in a particular context) by inducing them to "think like a trader," just as experienced baseball card traders are not as susceptible to the endowment effect as novices are. Students made risky decisions (to accept or reject gambles in which they could lose) under different instructions. In the narrow-framing condition, they were told to "make each decision as if it were the only one" and to accept their emotions. The instructions for broad framing of a decision included the phrases "imagine yourself as a trader," "you do this all the time," and "treat it as one of many monetary decisions, which will sum together to produce a 'portfolio'." The experimenters assessed the subjects' emotional response to gains and losses by physiological measures, including changes in the electrical conductance of the skin that are used in lie detection. As expected, broad framing blunted the emotional reaction to losses and increased the willingness to take risks.

Source:

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

(Note: ellipsis added; italics in original.)

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(p. 155) Should the income tax system include a tax credit for short taxpayers and a tax surcharge for tall ones? This paper shows that the standard utilitarian framework for tax policy analysis answers this question in the affirmative. This result has two possible interpretations. One interpretation is that individual attributes correlated with wages, such as height, should be considered more widely for determining tax liabilities. Alternatively, if policies such as a tax on height are rejected, then the standard utilitarian framework must in some way fail to capture our intuitive notions of distributive justice.

For the full article, from which the above abstract is quoted, see:

Mankiw, N. Gregory, and Matthew Weinzierl. "The Optimal Taxation of Height: A Case Study of Utilitarian Income Redistribution." American Economic Journal: Economic Policy 2, no. 1 (Feb. 2010): 155-76.

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(p. 290) The omission of the reference point from the indifference map is a surprising case of theory-induced blindness, because we so often encounter cases in which the reference point obviously matters. In labor negotiations, it is well understood by both sides that the reference point is the existing contract and that the negotiations will focus on mutual demands for concessions relative to that reference point. The role of loss aversion in bargaining is also well understood: making concessions hurts. You have much (p. 291) personal experience of the role of reference point. If you changed jobs or locations, or even considered such a change, you surely remember that the features of the new place were coded as pluses or minuses relative to where you were. You may also have noticed that disadvantages loomed larger than advantages in this evaluation--loss aversion was at work. It is difficult to accept changes for the worse. For example, the minimal wage that unemployed workers would accept for new employment averages 90% of their previous wage, and it drops by less than 10% over a period of one year.

Source:

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

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(p. 165) This article reviews the role of monetary and fiscal policy in the financial crisis and draws lessons for future macroeconomic policy. It shows that policy deviated from what had worked well in the previous two decades by becoming more interventionist, less rules-based, and less predictable. The policy implications are thus that policy should "get back on track."

For the full article, from which the above abstract is quoted, see:

Taylor, John B. "Getting Back on Track: Macroeconomic Policy Lessons from the Financial Crisis." Federal Reserve Bank of St. Louis Review 92, no. 3 (May-June 2010): 165-76.

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(p. 286) Most graduate students in economics have heard about prospect theory and loss aversion, but you are unlikely to find these terms in the index of an introductory text in economics. I am sometimes pained by this omission, but in fact it is quite reasonable, because of the central role of rationality in basic economic theory. The standard concepts and results that undergraduates are taught are most easily explained by assuming that Econs do not make foolish mistakes. This assumption is truly necessary, and it would be undermined by introducing the Humans of prospect theory, whose evaluations of outcomes are unreasonably short-sighted.

There are good reasons for keeping prospect theory out of introductory texts. The basic concepts of economics are essential intellectual tools, which are not easy to grasp even with simplified and unrealistic assumptions about the nature of the economic agents who interact in markets. Raising questions about these assumptions even as they are introduced would be confusing, and perhaps demoralizing. It is reasonable to put priority on helping students acquire the basic tools of the discipline. Furthermore, the failure of rationality that is built into prospect theory is often irrelevant to the predictions of economic theory, which work out with great precision in some situations and provide good approximations in many others. In some contexts, however, the difference becomes significant: the Humans described by prospect theory are (p. 287) guided by the immediate emotional impact of gains and losses, not by long-term prospects of wealth and global utility.

I emphasized theory-induced blindness in my discussion of flaws in Bernoulli's model that remained unquestioned for more than two centuries. But of course theory-induced blindness is not restricted to expected utility theory. Prospect theory has flaws of its own, and theory-induced blindness to these flaws has contributed to its acceptance as the main alternative to utility theory.

Source:

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

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(p. 678) A natural experiment in an economics fleld journal afforded time-series observations on payments to referees for on-time reviews. The natural experiment yielded 15 months' worth of data with no payments and about two subsequent years of data with payments. Using referee and manuscript-specific measures as covariates, hazard models were used to gauge the effects of payments on individual referee's review times. All models indicate statistically significant reductions in review times owing to referee payments. Reductions in review times translate into significant reductions in first-response time (FRT). Median FRT was reduced from 90 to 70 days, a 22% reduction in the presence of payments. With payments, only 1% of the FRTs exceeded six months; without payments, 16% of the FRTs exceeded six months.

For the full article, from which the above abstract is quoted, see:

Thompson, Gary D., Satheesh V. Aradhyula, George Frisvold, and Russell Tronstad. "Does Paying Referees Expedite Reviews?: Results of a Natural Experiment." Southern Economic Journal 76, no. 3 (Jan. 2010): 678-92.

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Source of book image: http://www.namingandtreating.com/wp-content/uploads/2011/04/SuperCooperators_small.png

(p. 18) Nowak is one of the most exciting modelers working in the field of mathematical biology today. But a model, of course, is only as good as its assumptions, and biology is much messier than physics or chemistry. Nowak tells a joke about a man who approaches a shepherd and asks, ''If I tell you how many sheep you have, can I have one?'' The shepherd agrees and is astonished when the stranger answers, ''Eighty-three.'' As he turns to leave, the shepherd retorts: ''If I guess your profession, can I have the animal back?'' The stranger agrees. ''You must be a mathematical biologist.'' How did he know? ''Because you picked up my dog.''

. . .

Near the end of the book, Nowak describes Gustav Mahler's efforts, in his grandiloquent Third Symphony, to create an all-encompassing structure in which ''nature in its totality may ring and resound,'' adding, ''In my own way, I would like to think I have helped to give nature her voice too.'' But there remains a telling gap between the precision of the models and the generality of the advice Nowak offers for turning us all into supercooperators. We humans really are infinitely more complex than falling apples, metastasizing colons, even ant colonies. Idealized accounts of the world often need to ignore the messiness of reality. Mahler understood this. In 1896 he invited Bruno Walter to Lake Attersee to glimpse the score of the Third. As they walked beneath the mountains, Walter admonished Mahler to look at the vista, to which he replied, ''No use staring up there -- I've already composed it all away into my symphony!''

For the full review, see:

OREN HARMAN. "A Little Help from Your Friends." The New York Times Book Review (Sun., April 10, 2011): 18.

(Note: ellipsis added.)

(Note: the online version of the review has the date April 8, 2011, and has the title "How Evolution Explains Altruism.")

The full reference for the book under review, is:

Nowak, Martin A., and Roger Highfield. Supercooperators: Altruism, Evolution, and Why We Need Each Other to Succeed. New York: Free Press, 2011.

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(p. 592) Using data drawn from the March Current Population Survey, we find that state and federal minimum wage increases between 2003 and 2007 had no effect on state poverty rates. When we then simulate the effects of a proposed federal minimum wage increase from $7.25 to $9.50 per hour, we find that such an increase will be even more poorly targeted to the working poor than was the last federal increase from $5.15 to $7.25 per hour. Assuming no negative employment effects, only 11.3% of workers who will gain live in poor households, compared to 15.8% from the last increase. When we allow for negative employment effects, we find that the working poor face a disproportionate share of the job losses. Our results suggest that raising the federal minimum wage continues to be an inadequate way to help the working poor.

For the full article, from which the above abstract is quoted, see:

Sabia, Joseph J., and Richard V. Burkhauser. "Minimum Wages and Poverty: Will a $9.50 Federal Minimum Wage Really Help the Working Poor?" Southern Economic Journal 76, no. 3 (Jan. 2010): 592-623.

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Source of book image: http://images.amazon.com/images/G/01/richmedia/images/cover.gif

(p. 19) Growing up in the erratic care of a feckless single mother, "Kewauna seemed able to ignore the day-to-day indignities of life in poverty on the South Side and instead stay focused on her vision of a more successful future." Kewauna tells Tough, "I always wanted to be one of those business ladies walking downtown with my briefcase, everybody saying, 'Hi, Miss Lerma!' "

Here, as throughout the book, Tough nimbly combines his own reporting with the findings of scientists. He describes, for example, the famous "marshmallow experiment" of the psychologist Walter Mischel, whose studies, starting in the late 1960s, found that children who mustered the self-control to resist eating a marshmallow right away in return for two marshmallows later on did better in school and were more successful as adults.

"What was most remarkable to me about Kewauna was that she was able to marshal her prodigious noncognitive capacity -- call it grit, conscientiousness, resilience or the ability to delay gratification -- all for a distant prize that was, for her, almost entirely theoretical," Tough observes of his young subject, who gets into college and works hard once she's there. "She didn't actually know any business ladies with briefcases downtown; she didn't even know any college graduates except her teachers. It was as if Kewauna were taking part in an extended, high-stakes version of Walter Mischel's marshmallow experiment, except in this case, the choice on offer was that she could have one marshmallow now or she could work really hard for four years, constantly scrimping and saving, staying up all night, struggling, sacrificing -- and then get, not two marshmallows, but some kind of elegant French pastry she'd only vaguely heard of, like a napoleon. And Kewauna, miraculously, opted for the napoleon, even though she'd never tasted one before and didn't know anyone who had. She just had faith that it was going to be delicious."

For the full review, see:

ANNIE MURPHY PAUL. "School of Hard Knocks." The New York Times Book Review (Sun., August 26, 2012): 19.

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

The full reference for the book under review, is:

Tough, Paul. How Children Succeed: Grit, Curiosity, and the Hidden Power of Character. Boston, MA: Houghton Mifflin Harcourt, 2012.

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(p. 755) The economist of today has the tools to slap together a model to 'explain' any and all phenomena that come to mind. The flood of models is rising higher and higher, spouting from an ever increasing number of journal outlets. In the midst of all this evidence of highly trained cleverness, it is difficult to retain the realisation that we are confronting a complex system 'the working of which we do not understand'. . . . That the economics profession might be humbled by recent events is a realisation devoutly to be wished.

Source:

Leijonhufvud, Axel. "Out of the Corridor: Keynes and the Crisis." Cambridge Journal of Economics 33, no. 4 (July 2009): 741-57.

(Note: ellipsis added.)

(Note: the passage above was quoted on the back cover of The Cato Journal 30, no. 2 (Spring/Summer 2010).)

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Source of book image: http://www.bibliovault.org/thumbs/978-0-226-47988-0-frontcover.jpg

(p. 222) Efficient policy decisions regarding climate change require credible estimates of the future costs of possible (in)action. The edited volume by Gary Libecap and Richard Steckel contributes to this important policy discussion by presenting work estimating the ability of economic actors to adapt to a changing climate. The eleven contributed research chapters primarily focus on the historical experience of the United States and largely on the agricultural sector. While the conclusions are not unanimous, on average, the authors tend to present an optimistic perspective on the ability of the economy to adapt to climate change.

For the full review, see:

Swoboda, Aaron. "Review of: The Economics of Climate Change: Adaptations Past and Present." Journal of Economic Literature 50, no. 1 (March 2012): 222-24.

Book under review:

Libecap, Gary D., and Richard H. Steckel, eds. The Economics of Climate Change: Adaptations Past and Present, National Bureau of Economic Research Conference Report. Chicago: University of Chicago Press, 2011.

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

Source:

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

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

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

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(p. 2) . . . I want to argue that something deep is going on with information technology, something that goes well beyond the use of computers, social media, and commerce on the Internet. Business processes that once took place among human beings are now being executed electronically. They are taking place in an unseen domain that is strictly digital. On the surface, this shift doesn't seem particularly consequential -- it's almost something we take for granted. But I believe it is causing a revolution no less important and dramatic than that of the railroads. It is quietly creating a second economy, a digital one.

. . .

(p. 5) Now this second, digital economy isn't producing anything tangible. It's not making my bed in a hotel, or bringing me orange juice in the morning. But it is running an awful lot of the economy. It's helping architects design buildings, it's tracking sales and inventory, getting goods from here to there, executing trades and banking operations, controlling manufacturing equipment, making design calculations, billing clients, navigating aircraft, helping diagnose patients, and guiding laparoscopic surgeries. Such operations grow slowly and take time to form.

. . .

(p. 6) Is this the biggest change since the Industrial Revolution? Well, without sticking my neck out too much, I believe so. In fact, I think it may well be the biggest change ever in the economy. It is a deep qualitative change that is bringing intelligent, automatic response to the economy. There's no upper limit to this, no place where it has to end.

. . .

I think that for the rest of this century, barring wars and pestilence, a lot of the story will be the building out of this second economy, an unseen underground economy that basically is giving us intelligent reactions to what we do above the ground.

Source:

Arthur, W. Brian. "The Second Economy." McKinsey Quarterly, no. 4 (Oct. 2011): 90-99.

(Note: ellipses added.)

(Note: I first saw the passages quoted above on pages 243-244 of Timothy Taylor's "Recommendations for Further Reading" feature in The Journal of Economic Perspectives 26, no. 1 (Winter 2012).)

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Source of book image: http://mittromneycentral.com/uploads/No-Apology1.jpg

(p. 108) Innovation and Creative Destruction

The key to increasing national prosperity is to promote good ideas and create the conditions that can lead them to be fully exploited--in existing businesses as well as new ones. Government is generally not the source of new ideas, although innovations from NASA and the military have provided frequent exceptions. Nor is government where innovation is commercially developed. But government policies do, in fact, have a major impact on the implementation of innovative ideas. The degree to which a nation makes itself productive, and thus how prosperous its citizens become, is determined in large measure by whether government adopts policies that stimulate innovation or that stifle it.

The government policy that has the greatest effect on innovation is simply whether or not the government will allow it. It's sad but true: Government can and often does purposefully prevent innovation and the resulting improvement in productivity. Recall my hypothetical example of a society in which half the farming jobs were lost due to innovation in the use of a plow? Some nations accept and encourage such "creative destruction," recognizing that in the long run it leads to greater productivity and wealth for its citizens. But other nations succumb to the objections of those in danger of becoming unemployed and prevent innovation that may reduce short-term employment.

Two centuries ago, more than three-quarters of our workforce actually did labor on farms. Over the succeeding decades, innovations like irrigation, fertilizer, and tractors were welcomed, and eventually large farming corporations were allowed to prosper, despite protests from family farmers and the often heart-wrenching dislocations that accompanied consolidation of farmlands. The result was the disappearance of millions of agricultural jobs and the large-scale migration of Americans from rural regions to our cities. Once there, they provided the labor that powered America's new industrial age. And at the same time, because farming innovation and productivity were allowed to flourish, America became the leader in agriculture education, research, and industry. Innovations from these sources have enabled us to produce sufficient food to feed not only our growing population but other parts of the world as well.

Source:

Romney, Mitt. No Apology: The Case for American Greatness. New York: St. Martin's Press, 2010.

(Note: bold in original.)

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(p. 260) Colin Camerer and Dan Lovallo, who coined the concept of competition neglect, illustrated it with a quote from the then chairman of Disney Studios. Asked why so many expensive big-budget movies are released on the same days (such as Memorial Day and Independence Day), he replied: Hubris. Hubris. If you only think about your own business, you think, "I've got a good story department, I've got a good marketing department, we're (p. 261) going to go out and do this." And you don't think that everybody else is thinking the same way. In a given weekend in a year you'll have five movies open, and there's certainly not enough people to go around.

The candid answer refers to hubris, but it displays no arrogance, no conceit of superiority to competing studios. The competition is simply not part of the decision, in which a difficult question has again been replaced by an easier one. The question that needs an answer is this: Considering what others will do, how many people will see our film? The question the studio executives considered is simpler and refers to knowledge that is most easily available to them: Do we have a good film and a good organization to market it? The familiar System 1 processes of WYSIATI and substitution produce both competition neglect and the above-average effect. The consequence of competition neglect is excess entry: more competitors enter the market than the market can profitably sustain, so their average outcome is a loss. The outcome is disappointing for the typical entrant in the market, but the effect on the economy as a whole could well be positive. In fact, Giovanni Dosi and Dan Lovallo call entrepreneurial firms that fail but signal new markets to more qualified competitors "optimistic martyrs"-- good for the economy but bad for their investors.

Source:

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

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People have a right to be overly-optimistic when they invest their own money in entrepreneurial projects. But governments should be prudent caretakers of the money they have taken from taxpayers. The overly-optimistic bias of subsidy-seeking entrepreneurs weakens the case for government support of entrepreneurial projects.

(p. 259) The optimistic risk taking of entrepreneurs surely contributes to the economic dynamism of a capitalistic society, even if most risk takers end up disappointed. However, Marta Coelho of the London School of Economics has pointed out the difficult policy issues that arise when founders of small businesses ask the government to support them in decisions that are most likely to end badly. Should the government provide loans to would-be entrepreneurs who probably will bankrupt themselves in a few years? Many behavioral economists are comfortable with the "libertarian paternalistic" procedures that help people increase their savings rate beyond what they would do on their own. The question of whether and how government should support small business does not have an equally satisfying answer.

Source:

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

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"JOHN HENNESSY: 'There's a tsunami coming.' [At left] . . . , John Hennessy & Salman Khan." Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. R8) Is there anything to be done about the rising price of higher education? That was the question posed to John Hennessy, president of Stanford University, and Salman Khan, founder of Khan Academy, a nonprofit online-learning organization. They sat down with The Wall Street Journal's Walt Mossberg to discuss how technology might be part of the solution.

Here are edited excerpts of their conversation.

. . .

MR. MOSSBERG: You have a lot of money at Stanford. I've been, until recently, a trustee of Brandeis University. It's a very good university. It charges about what you do. But it doesn't have your money, and there are a lot of colleges like that.

MR. HENNESSY: Agreed, and if you look at the vast majority of colleges in the U.S., there are way too many that are [dependent on tuition to fund their budgets]. That is not sustainable. We have to do something to bend the cost curve, and this is where technology comes in.

MR. KHAN: On the sustainability question, I agree. I think the elites will probably do just fine, but for the bulk of universities, nothing can grow 5% faster than inflation forever. It will just take over the world, and that's what's happening now.

There is a fundamental disconnect happening between the providers of education and the consumers of education. If you ask universities what they are charging the $60,000 for, they'll say, "Look at our research facilities. Look at our faculty. Look at the labs and everything else." And then if you ask the parents and the students why they are taking on $60,000 of debt, they'll say, "Well, I need the credential. I need a job."

So one party thinks they're selling a very kind of an enriching experience, and the other one thinks that they're buying a credential. And if you ask the universities what percentages of your costs are "credentialing," they say oh, maybe 5% to 10%. And so I think there's an opportunity if we could decouple those things--if the credentialing part could happen for significantly less.

MR. MOSSBERG: What do you mean by the credentialing part?

MR. KHAN: If you think about what education is, it's a combination. There's a learning part. You learn accounting, you learn to write better, to think, whatever. Then there is a credentialing part, where I'm going to hand you something that you can go take into the market and signal to people that you know what you're doing.

Right now they're very muddled, but this whole online debate or what's happening now is actually starting to clarify things. At Khan Academy we're 100% focused on the learning side of things. And I think it would be interesting [if credentials could be earned based on what you know and not on where you acquired that knowledge].

For the full interview, see:

Walt Mossberg, interviewer. "Changing the Economics of Education; John Hennessy and Salman Khan on how technology can make the college numbers add up." The Wall Street Journal (Mon., June 4, 2012): R8.

(Note: bracketed words in caption, and ellipses, added; bold and italics in original.)

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(p. B1) Will there be another?

It's a bit absurd to try to identify "the next Steve Jobs." Two decades ago, Mr. Jobs himself wouldn't even have qualified. Exiled from Apple Inc., . . . Mr. Jobs was then hoping to revive his struggling computer maker, NeXT Inc. . . .

But just as Mr. Jobs followed Henry Ford and Thomas Edison, there will some day be another innovator with the vision, drive and disdain of the status quo to spark, and then direct, big changes in how we live.

. . .

"You have to try the unreasonable," says Vinod Khosla, a co-founder of Sun Microsystems Inc., who, as a longtime venture capitalist, has seen thousands of would-be revolutionaries. Two key characteristics, Mr. Khosla says: "unbridled confidence and arrogance."

For the full story, see:

SCOTT THURM and STU WOO. "Who Will Be the 'Next Steve Jobs'?" The Wall Street Journal (Sat., October 8, 2011): B1 & B3.

(Note: ellipses added.)

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Source of book image: http://photo.goodreads.com/books/1172699090l/209176.jpg

In the piece quoted below, and in much of the TV media coverage, the story is spun as being that Romney offended the Palestinians. But that is not the story. The story is that Romney courageously highlighted an important, but politically incorrect, truth---culture, generally, does matter for economic performance; and Israeli culture, specifically, has encouraged economic growth.

Romney referred to an important book by the distinguished economic historian David Landes. Last school year, one of the students in my Economics of Technology seminar gave a presentation on a related Landes book. That presentation can be viewed at: http://www.amazon.com/review/R2GLBAMFCS5PXH/ref=cm_cr_pr_perm?ie=UTF8&ASIN=0521094186&linkCode=&nodeID=&tag=

I recently read another relevant book, Start-Up Nation, that directly supports Romney's specific claim, by making the case that Israeli culture is especially congenial to entrepreneurial initiative and success.

(p. A1) JERUSALEM -- Mitt Romney offended Palestinian leaders on Monday by suggesting that cultural differences explain why the Israelis are so much more economically successful than Palestinians, thrusting himself again into a volatile issue while on his high-profile overseas trip.

. . .

In the speech, Mr. Romney mentioned books that had influenced his thinking about nations -- particularly "The Wealth and Poverty of Nations," by David S. Landes, which, he said, argues that culture is the defining factor in determining the success of a society.

"Culture makes all the (p. A14) difference," Mr. Romney said. "And as I come here and I look out over this city and consider the accomplishments of the people of this nation, I recognize the power of at least culture and a few other things."

He added, "As you come here and you see the G.D.P. per capita, for instance, in Israel, which is about $21,000, and compare that with the G.D.P. per capita just across the areas managed by the Palestinian Authority, which is more like $10,000 per capita, you notice such a dramatically stark difference in economic vitality. And that is also between other countries that are near or next to each other. Chile and Ecuador, Mexico and the United States."

The remarks, which vastly understated the disparities between the societies, drew a swift rejoinder from Palestinian leaders.

For the full story, see:

ASHLEY PARKER and RICHARD A. OPPEL Jr. "Romney Trip Raises Sparks at a 2nd Stop." The New York Times (Tues., July 31, 2012): A1 & A14.

(Note: ellipsis added.)

(Note: the online version of the story has the date July 30, 2012.)

The Landes book discussed by Romney is:

Landes, David S. The Wealth and Poverty of Nations. New York: W.W. Norton & Company, 1998.

The book on Israeli entrepreneurship, that I mention in my comments, is:

Senor, Dan, and Saul Singer. Start-Up Nation: The Story of Israel's Economic Miracle. hb ed. New York: Twelve, 2009.

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"Judge Richard Posner." Source of caption and photo: online version of the WSJ article quoted and cited below.

I am deeply conflicted about patents. On the one hand, property rights are important, both ethically and in terms of economic incentives. On the other hand, patents seem to restrict innovation.

The views of Posner are worth serious consideration. My own current view is that the patent rules need to be reformed and their implementation made more efficient. But I do not think the patent system should be abolished.

(p. B1) While technology companies continue to fight over smartphone patents, one judge has fought his way into the ring.

He is 73-year-old Richard Posner, among the most potent forces on the federal bench and an outspoken critic of the patent system.

Presiding over a lawsuit between Apple Inc. . . . and Google Inc.'s . . . Motorola Mobility in June, he dropped a bombshell, scrapping the entire case and preventing the companies from refiling their claims. The ruling startled the litigants in the case and fueled a national discussion about whether the patent system (p. B5) is broken.

. . .

In the June ruling, explaining why he wouldn't ban Motorola products from the shelves, Judge Posner said: "An injunction that imposes greater costs on the defendant than it confers benefits on the plaintiff reduces net social welfare."

Judge Posner, who declined to be interviewed for this article, has continued to press the issue.

This month, he wrote an essay in the Atlantic headlined, "Why There Are Too Many Patents In America." He said "most industries could get along fine without patent protection" and that the U.S. Patent and Trademark Office has done a woeful job, calling it "understaffed," and "many patent examinations...perfunctory."

He saved ammunition for juries and fellow jurists. "Judges have difficulty understanding modern technology and jurors have even greater difficulty," he wrote. He suggested several reforms to the patent system, including shortening the patent term for inventors in some industries and expanding the authority of the Patent and Trademark Office to try patents cases.

. . .

Judge Posner's intellectual curiosity is well-known and "people assume he has no political ax to grind because he's not trying to advance the fortunes of any particular segment of the economy," said Arthur D. Hellman, a law professor at University of Pittsburgh who studies the judiciary.

Yet his ruling poses a difficult question for the Federal Circuit Court of Appeals, the specialized one that handles intellectual property cases, about whether infringement matters without damages.

Peter Menell, a law professor at UC Berkeley, likened it to the old thought experiment that begins "If a tree falls in the woods." He said: "If there are no damages, do you need to have a trial?"

Juge Posner also rejected Google's bid to block the sale of iPhones that allegedly infringed a so-called "standards-essential patent" owned by Google. Standards-essential patents protect innovations used in technologies that industries collectively agree to use, like Wi-Fi or 3G. A company that holds one of these patents stands to profit enormously, because its competitors have to pay it for licenses to use the technology.

But Judge Posner ruled that holders of such patents aren't entitled to injunctions. Michael Carrier, a law professor at Rutgers University, Camden, said the opinion on standards-essential patents came amid a groundswell of opposition to injunctions for such patents and could put an end to the practice among U.S. federal judges.

For the full story, see:

JOE PALAZZOLO and ASHBY JONES. "Also on Trial: A Judge's Worldview." The Wall Street Journal (Tues., July 24, 2012): B1 & B5.

(Note: all ellipses were added except for the one internal to the quote from Judge Posner's Atlantic blog posting.)

(Note: the online version of the article has the date July 23, 2012 and has the title "Apple and Samsung Patent Suit Puts Judge Posner's Worldview on Trial." The print version of the title could be interpreted as a sub-title of the main title to the accompanying adjacent article. The title of the main article was "Apple v. Samsung; In Silicon Valley, Patents Go on Trial." The last two paragraphs above appear only in the online, but not in the print, version of the article.)

The Atlantic blog posting by Posner can be found at:

Posner, Richard A. "Why There Are Too Many Patents in America." In The Atlantic blog, posted on July 12, 2012 at: http://www.theatlantic.com/business/archive/2012/07/why-there-are-too-many-patents-in-america/259725/.

(Note: the WSJ article above implies that the Posner essay was published in the print version of The Atlantic, but I can only find it in Posner's blog on The Atlantic web site.)

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"Thomas Alva Edison." Source of caption and photo: online version of the NYT article quoted and cited below.

I have not read Stross' books on Jobs and Edison. According to some of the Amazon reviews of the Jobs book, back in 1993 Stross was much more critical of Jobs than he is in the piece below:

(p. 4) I wrote a book about Mr. Jobs in 1993.

. . .

Years later, I wrote a biography of Edison, a person whom Mr. Jobs admired. When you compare the two personalities and their careers, a few similarities emerge immediately. Both had less formal schooling than most of their respective peers. Both possessed the ability to visualize projects on a grand scale. Both followed an inner voice when making decisions. And both had terrific tempers that could make their employees quake.

. . .

Mr. Jobs was the far shrewder businessman, even if he never talked about wealth as a matter of personal interest. When Edison died, he left behind an estate valued at about $12 million, or about $180 million in today's dollars. His friend Henry Ford had once joked that Edison was "the world's greatest inventor and the world's worst businessman." Mr. Jobs was worth a commanding $6.5 billion.

Mr. Jobs was perhaps the most beloved billionaire the world has ever known. Richard Branson's tribute captures the way people felt they could identify with Mr. Jobs's life narrative: "So many people drew courage from Steve and related to his life story: adoptees, college dropouts, struggling entrepreneurs, ousted business leaders figuring out how to make a difference in the world, and people fighting debilitating illness. We have all been there in some way and can see a bit of ourselves in his personal and professional successes and struggles."

For the full commentary, see:

RANDALL STROSS. "The Power of Taking the Big Chance." The New York Times, SundayBusiness Section (Sun., October 9, 2011): 4.

(Note: online version of the commentary is dated October 8, 2011, and has the title "The Wizard and the Mortal: Two Sides of Genius.")

(Note: in the print version, the same title, on the same page, was used as heading for two different articles on Steve Jobs--Lohr's on the left side, and Stross' on the right side.)

Stross' books on Jobs and Edison are:

Stross, Randall E. Steve Jobs & the Next Big Thing. New York: Scribner Publishers, 1993.

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

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(p. 219) Tetlock interviewed 284 people who made their living "commenting or offering advice on political and economic trends." He asked them to assess the probabilities that certain events would occur in the not too distant future, both in areas of the world in which they specialized and in regions about which they had less knowledge. Would Gorbachev be ousted in a coup? Would the United States go to war in the Persian Gulf? Which country would become the next big emerging market? In all, Tetlock gathered more than 80,000 predictions. He also asked the experts how they reached their conclusions, how they reacted when proved wrong, and how they evaluated evidence that did not support their positions. Respondents were asked to rate the probabilities of three alternative outcomes in every case: the persistence of the status quo, more of something such as political freedom or economic growth, or less of that thing.

The results were devastating. The experts performed worse than they would have if they had simply assigned equal probabilities to each of the three potential outcomes. In other words, people who spend their time, and earn their living, studying a particular topic produce poorer predictions than dart-throwing monkeys who would have distributed their choices evenly over the options. Even in the region they knew best, experts were not significantly better than nonspecialists.

Source:

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

Tetlock's book is:

Tetlock, Philip E. Expert Political Judgment: How Good Is It? How Can We Know? Princeton, NJ: Princeton University Press, 2005.

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Innovative entrepreneurs, through the process of creative destruction, provide us with wonderful new products and services. But sometimes the process also results in job loss. One response to the job loss is to shut down innovation. Another is to preach resilience. Joe Biden's Dad said "get up." (The clip is from a talk that Joe Biden gave to the National Press Club on August 1, 2007. The full talk is posted to the C-SPAN web site.)

A mainly similar presentation of the "get up" message is on p. xxii of Biden's autobiography:

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

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Source of book image: http://yalepress.yale.edu/images/full13/9780300151091.jpg

(p. 1) UNDERNEATH the misery of the Great Depression, the United States economy was quietly making enormous strides during the 1930s. Television and nylon stockings were invented. Refrigerators and washing machines turned into mass-market products. Railroads became faster and roads smoother and wider. As the economic historian Alexander J. Field has said, the 1930s constituted "the most technologically progressive decade of the century."

. . .

(p. 6) The closest thing to a unified explanation for these problems is a mirror image of what made the 1930s so important. Then, the United States was vastly increasing its productive capacity, as Mr. Field argued in his recent book, "A Great Leap Forward." Partly because the Depression was eliminating inefficiencies but mostly because of the emergence of new technologies, the economy was adding muscle and shedding fat. Those changes, combined with the vast industrialization for World War II, made possible the postwar boom.

In recent years, on the other hand, the economy has not done an especially good job of building its productive capacity. Yes, innovations like the iPad and Twitter have altered daily life. And, yes, companies have figured out how to produce just as many goods and services with fewer workers. But the country has not developed any major new industries that employ large and growing numbers of workers.

For the full commentary, see:

DAVID LEONHARDT. "The Depression: If Only Things Were That Good." The New York Times, SundayReview Section (Sun., October 9, 2011): 1 & 6.

(Note: ellipsis added.)

(Note: online version of the commentary is dated October 8, 2011.)

Book discussed:

Field, Alexander J. A Great Leap Forward: 1930s Depression and U.S. Economic Growth, Yale Series in Economic and Financial History. New Haven, CT: Yale University Press, 2011.

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(p. 215) Some years ago I had an unusual opportunity to examine the illusion of financial skill up close. I had been invited to speak to a group of investment advisers in a firm that provided financial advice and other services to very wealthy clients. I asked for some data to prepare my presentation and was granted a small treasure: a spreadsheet summarizing the investment outcomes of some twenty-five anonymous wealth advisers, for each of eight consecutive years. Each adviser's score for each year was his (most of them were men) main determinant of his year-end bonus. It was a simple matter to rank the advisers by their performance in each year and to determine whether there were persistent differences in skill among them and whether the same advisers consistently achieved better returns for their clients year after year.

To answer the question, I computed correlation coefficients between the rankings in each pair of years: year 1 with year 2, year 1 with year 3, and so on up through year 7 with year 8. That yielded 28 correlation coefficients, one for each pair of years. I knew the theory and was prepared to find weak evidence of persistence of skill. Still, I was surprised to find that the average of the 28 correlations was .01. In other words, zero. The consistent correlations that would indicate differences in skill were not to be found. The results resembled what you would expect from a dice-rolling contest, not a game of skill.

Source:

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

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"Start-up BiteHunter launched with three employees. Above, co-founders Gil Harel, left, and Ido Shilon." Source of caption and photo: online version of the WSJ article quoted and cited below.

Lower costs to entry means more start-ups and that means more innovation, ceteris paribus. All good. For the labor market, there will be fewer initial jobs per start-up. But there will be more start-ups, and more opportunity for erstwhile laborers to themselves become entrepreneurs. So maybe still all good.

(p. B5) New businesses are getting off the ground with nearly half as many workers as they did a decade ago, as the spread of online tools and other resources enables start-ups to do more with less.

The change, which began before the recession, may be permanent, according to some analysts.

. . .

Rather than purchasing the tools and manpower needed to run their companies, more small firms are renting, sharing or outsourcing resources, typically through online services, according to Steve King, a partner at Emergent Research, a research and consulting firm for small businesses.

. . .

Last year, Gil Harel launched BiteHunter, a search engine for restaurant discounts, with just three employees. Based in New York, the site used shared screens and other communications tools to work with developers in Russia, Uruguay and Israel.

"Just to build the infrastructure to get a business off the ground used to take a lot of money and people. But things that you couldn't do in the past, you can now do on your own," Mr. Harel says.

For the full story, see:

ANGUS LOTEN. "With New Technology, Start-Ups Go Lean; Web-Based Services Mean Fewer Workers Needed." The Wall Street Journal (Thurs., September 15, 2011): B5.

(Note: ellipses added.)

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(p. B1) In the world of R&D spending, more doesn't necessarily mean better. And R&D may not describe all the innovation that matters.

"I think the numbers are pretty useless," says Michael Schrage, a research fellow at MIT's Sloan School who has studied the subject. "What matters more is the kind of innovator you are. If it were really true that the people who spent the most on R&D were the most successful, we wouldn't be subsidizing General Motors ."

"There's no statistically significant relationship between how much a company spends on R&D and how they perform over time," adds Barry Jaruzelski of Booz & Co. "There's a set of people who just consistently seem to skin the cat better."

. . .

(p. B2) Booz & Co. in 2007 listed the biggest global corporate spenders of R&D. The top 10 were Toyota, Pfizer, Ford, Johnson & Johnson, DaimlerChrysler, General Motors, Microsoft, GlaxoSmithKline, Siemens and IBM.

Then it drew up a second list, a group of companies it called "high-leverage innovators" that returned the best financial performance for every dollar spent on R&D. Booz screened for companies that, over the five previous years, outperformed industry peers across seven measures--including profit, sales growth, and shareholder return--while also spending less on R&D as a percentage of sales than the median in their industries.

No company from the first list made the second list. (Winners included Adidas, Apple, Exxon, Google, Kobe Steel, Samsung and Tenneco.)

That disconnect essentially hasn't changed, says Mr. Jaruzelski. Winning at innovation "is all about talent, process, execution and strategy," he says. "That's given the U.S. a pretty strong advantage over time."

"Technology," he adds, "is not equal to innovation."

For the full commentary, see:

JOHN BUSSEY. "THE BUSINESS; Myths of the Big R&D Budget." The Wall Street Journal (Fri., June 15, 2012): B1-B2.

(Note: ellipsis added.)

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Funding is a key constraint for the innovative project entrepreneur. By "project entrepreneur" I mean the innovator who views money as a means to achieving the project, and not as an end in itself. In this brief clip from Page's 2007 AAAS talk, he discusses how as a 12 year-old reading Tesla's autobiography he almost cried at how Tesla's failure to commercialize his ideas limited his ability to change the world.

The Tesla autobiography is:

Tesla, Nikola. My Inventions: The Autobiography of Nikola Tesla. SoHo Books, 2012.

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(p. 169) The social norm against stereotyping, including the opposition to profiling, has been highly beneficial in creating a more civilized and more equal society. It is useful to remember, however, that neglecting valid stereotypes inevitably results in suboptimal judgments. Resistance to stereotyping is a laudable moral position, but the simplistic idea that the resistance is costless is wrong. The costs are worth paying to achieve a better society, but denying that the costs exist, while satisfying to the soul and politically correct, is not scientifically defensible.

Source:

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

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"Liz Langer helped John Burks retrieve his keys." Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. A1) A new crop of websites and smartphone applications are allowing people to farm out chores to a growing army of temporary personal assistants. These micro-employees are taking the division of labor to once-unthinkable extremes.

. . .

(p. A14) Some investors see dollar signs. Zaarly Inc., an online marketplace for micro-labor and goods based in San Francisco, recently raised $14.1 million from Google Inc. GOOG -2.18% investor and venture-capital firm Kleiner Perkins Caufield & Byers. Actor Ashton Kutcher and clothing designer Marc Ecko have also put in money. In October, Hewlett-Packard Chief Executive Meg Whitman joined the company's board.

After launching six months ago, Zaarly is processing more than 1,000 transactions a week for jobs that cost around $50 a pop. Chief Executive and cofounder Bo Fishback, 33, says about half the requests involve tangible goods, and the rest involve some sort of service. One of his favorites: a person who hired someone to buy a Michael Jackson-themed dog costume for a puppy.

Sometimes the situation can be dire. John Burks, a 30-year-old actor who also runs an arts organization in Chicago, accidentally dropped his keys in a sewer during a rainstorm over the summer. To replace all the keys--including ones to his home, office and Mercedes--could cost well over $100.

After Googling "lost keys down sewer" to see what tactics others had used, Mr. Burks thought he could recover his keys with a fishing rod and a magnet, but had neither. His girlfriend at the time knew someone who worked at Zaarly, so he posted the job on its site. Liz Langer, a 27-year-old neuroscience graduate student and top Zaarly "fulfiller," spotted the job and within an hour arrived with the needed tools. Fifteen minutes later, they fished the keys out of the sewer. (Price: $80.)

"It's like stranger than fiction," Mr. Burks says. "I thought there was a very small chance that anything like that can happen."

For the full story, see:

EMILY GLAZER. "Serfing the Web: Sites Let People Farm Out Their Chores; Workers Choose Jobs, Negotiate Wages; Mr. Kutcher, Anonymously, Asks for Coffee." The Wall Street Journal (Mon., November 28, 2011): A1 & A14.

(Note: ellipsis added.)

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Steven Johnson's early The Ghost Map is a wondrous story of a courageous medical entrepreneur who fairly single-handedly changes accepted wisdom on a hugely important issue (what causes disease). Steven Johnson's recent Where Ideas Come From provides a mechanical account that attributes new ideas to the inevitable exploration of "the adjacent possible," leaving little room for the great innovative entrepreneur.

It takes guts to contradict one's most recent book, and to contradict it so eloquently. So please join me in welcoming back the Steven Johnson of The Ghost Map:

(p. C3) In the fall of 1986, during the first week of my freshman year of college, my cousin took me to the university computer store to help me buy my first Macintosh. The Mac platform was two years old at that point, and Apple had just released a new machine called the Mac Plus that featured a then-staggering 1 megabyte of RAM. (In today's mileage, that would be just enough memory to store the first few verses of a Katy Perry song.) But the Mac did not yet offer a hard drive, and so my more tech-savvy cousin told me to buy a 10-pack of floppy disks as well.

I looked at him with astonishment. I was an art kid, not a techie. I needed a computer to write plays and short stories and term papers. The computer was just a tool, nothing more. "Why would I ever need 10 floppy disks?" I asked. "I just need one disk for my Microsoft Word files." My cousin smiled, knowing full well where I was headed. "Just buy the disks. Trust me."

He was right, of course, and to this day whenever I call him up to tell him about my latest computer purchase, with its terabytes of storage and gigabytes of memory, he laughs and says, "Just one disk. That's all I need."

. . .

The genius of famous innovators and CEOs is often exaggerated: Most fortunes are built on good fortune as much as sheer brilliance, and invention is a collaborative art. But there is no contesting the fact of Steve Jobs's genius--just a debate about its defining qualities.

I worry that we miss something in hailing him as either a master salesman or a master designer, though he is clearly both. His real gift, from an early age, has been the ability to see that these two worlds could, and should, productively collide. It isn't just that he made computers cool or put them in pretty boxes. It's that he put those computers in new conceptual boxes. A machine originally designed for processing equations and building bombs turned out to have a wonderful hidden potential: for song, laughter, poetry, community, family.

. . .

When I heard the news that he was stepping down from Apple, the image that flashed in my head was of a kid in a computer store trying to save a few bucks by skimping on floppy disks. I suspect my own story is not so unusual. There is, on the one hand, the simple, factual accounting of it: Steve Jobs persuaded me to buy a lot more than 10 disks over the years. But the other hand is so much more interesting: all the wonderful, unexpected things that he got me to put on those disks.

For the full commentary, see:

STEVEN JOHNSON. "THE GENIUS OF JOBS; Marrying Tech and Art; Steven Johnson on the magic of his first Mac--and how it changed his life." The Wall Street Journal (Sat., August 27, 2011): C3.

(Note: ellipses added.)

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(p. 164) The laziness of System 2 is part of the story. If their next vacation had depended on it, and if they had been given indefinite time and told to follow logic and not to answer until they were sure of their answer, I believe that most of our subjects would have avoided the conjunction fallacy. However, their vacation did not depend on a correct answer; they spent very little time on it, and were content to answer as if they had only been "asked for their opinion." The laziness of System 2 is an important fact of life, and the observation that representativeness can block the application of an obvious logical rule is also of some interest.

Source:

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

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(p. B1) Milton Friedman, the Nobel laureate economist, blasted the very idea of corporate social responsibility four decades ago, calling it a "fundamentally subversive doctrine." Speaking for many capitalists then and now, he said, "there is one and only one social responsibility of business--to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game."

Companies shouldn't spend profits on unrelated job creation or social causes, he said. That money should go to shareholders--the owners of the companies. Pronouncements about corporate social responsibility, he added, are the indulgence of "pontificating executives" who are "incredibly shortsighted and muddleheaded in matters that are outside their businesses." And that indulgence can lead to inefficient markets.

. . .

(p. B2) "Jobs are an input, not an output; they're a cost of doing business, not a goal of doing business," says William Frezza, a Boston-based venture capitalist and fellow at the Competitive Enterprise Institute.

"From the perspective of defending capitalism, if you accept the premise of your opponent that business has to give back to society, you've already lost," he says. "To put sack cloth and ashes on--you've delegitimized capitalism, which is the goal of the protesters. Businesses give back to society every day by pleasing their customers and employing their employees. There's nothing business owes other than selling the best product at the best price."

For the full commentary, see:

JOHN BUSSEY. "THE BUSINESS; Are Companies Responsible for Creating Jobs?." The Wall Street Journal (Fri., October 28, 2011): B1-B2.

(Note: ellipsis added.)

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Gary Oldman. Source of photo: online version of the NYT article quoted and cited below.

(p. 2) Gary Oldman is an English actor . . . widely known for his roles as Sirius Black in the "Harry Potter" film series and Jim Gordon in the Batman movies.

. . .

READING Right now I'm reading the Steve Jobs biography by Walter Isaacson. I love when people have a singleness of purpose and don't get dissuaded. I can connect with that. I can recognize it. I think a lot of artists have that. Art and commerce are not particularly happy bedfellows, but he was the exception.

I read quite a lot of biographies. I like nonfiction. The other book I'm carrying around with me at the moment is "River of Shadows: Eadweard Muybridge and the Technological Wild West" by Rebecca Solnit. It deals with the 19th century and the arrival of speed with the coming of the industrial age. We were very much governed by nature before; we were at the mercy of our own speed and horses and the like. It's interesting to think of living at that pace.

For the full interview, see:

KATE MURPHY. "DOWNLOAD; Gary Oldman." The New York Times, SundayReview Section (Sun., February 5, 2012): 2.

(Note: ellipses added; bold in original.)

(Note: online version of the interview is dated February 4, 2012.)

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Source of book image: http://www.abundancethebook.com/wp-content/uploads/2012/01/cover-NYTimes-3d-500.jpg?139d23

(p. 18) in Silicon Valley, where the locals tend to be too busy starting companies to wallow in gloom, Peter Diamandis has stood out as one of the more striking optimists. Several years ago, Diamandis founded the X Prize Foundation, which rewards entrepreneurs with cash for achieving difficult goals, like putting a reusable spaceship into flight on a limited budget. More recently he helped start Singularity University, an academic program that convenes several weeks a year in the Valley and educates business leaders about the "disruptive" -- i.e., phenomenally innovative -- technological changes Diamandis is anticipating. To be sure, Diamandis is both very bright (he studied molecular biology and aerospace engineering at M.I.T. before getting an M.D. at Harvard) and well informed. Moreover, he's not the kind of optimist who will merely see the glass as half full. He'll give you dozens of reasons, some highly technical, why it's half full. Then he'll explain that your cognitive biases are tricking you into seeing the glass of water in a negative light, and cart out the research of acclaimed psychologists like Daniel Kahne­man to prove his point. Finally he may suggest you stop fretting: new technologies will soon fill the glass up anyway. Indeed, they are likely to overfill it.

. . .

(p. 19) Throughout the book Diamandis . . . offers small groups of driven entrepreneurs as a kind of Leatherman solution to the world's problems. It's true that plenty of insurgents are doing impressive things out there -- Elon Musk's Tesla Motors, which helped jump-start the world's electric car industry, is a good example.

. . .

. . . , there's a significant idea embedded within "Abundance": We should remain aware, as writers like Jared Diamond have likewise told us, that societies can choose their own future, and thus their own fate. In that spirit Diamandis and Kotler put forth a range of possible goals we may achieve if we have the imagination and the will. A little optimism wouldn't hurt, either.

For the full review, see:

JON GERTNER. "Plenty to Go Around." The New York Times Book Review (Sun., April 1, 2012): 18 & 19.

(Note: ellipses added.)

(Note: the online version of the review has the date March 30, 2012.)

The book under review is:

Diamandis, Peter H., and Steven Kotler. Abundance: The Future Is Better Than You Think. New York: Free Press, 2012.

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(p. 12) The Ford Focus Electric has a base price of $39,995 -- minus a $7,500 federal tax credit and a $2,500 rebate in California. That puts its tab at $30,000, some $7,000 above the upscale Focus Titanium. I can hear the electric naysayers exclaiming "Aha! You won't make back the savings at the pumps." That's despite $4 gasoline, and the Focus Electric's 110 m.p.g. equivalent rating.

But when buying any new car, especially an innovative model of any kind, emotions, aesthetics and externalities eclipse economics.

For the full story, see:

BRADLEY BERMAN. "BEHIND THE WHEEL; 2012 FORD FOCUS ELECTRIC; The Battery-Driven Car Just Got a Lot More Normal." The New York Times, SportsSunday (Sun., May 6, 2012): 12.

(Note: online version of the story is dated May 4, 2012.)

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

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

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

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

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

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

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

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

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

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

Book discussed:

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

The Becker article mentioned above is:

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

The Stigler-Becker article mentioned above is:

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

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

(p. C2) The U.S. economy needs the dynamism that renting enables as much as--if not more than--it needs the stability that ownership engenders. In the current economy, there are vast gulfs between the employment pictures in different regions and states, from 12% unemployment in Nevada to 3% unemployment in North Dakota. But a steelworker in Buffalo, or an underemployed construction worker in Las Vegas, can't easily take his skills to where they are needed in North Dakota or Wyoming if he's underwater on his mortgage. Economists, in fact, have found that there is frequently a correlation between persistently high local unemployment rates and high levels of homeownership.

For the full essay, see:

DANIEL GROSS. "Renting Prosperity; Americans are getting used to the idea of renting the good life, from cars to couture to homes. Daniel Gross explores our shift from a nation of owners to an economy permanently on the move--and how it will lead to the next boom.." The Wall Street Journal (Sat., May 5, 2012): C1 & C2.

(Note: the online version of the essay has the date May 4, 2012.)

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(p. B2) First Solar's solar-panel business, which is focused on large solar installations that feed electricity to power companies, is dependent on government subsidies awarded to such developments.

. . .

But some worry that First Solar isn't well positioned for industry trends. The global solar-power market is moving toward rooftop solar-power systems, rather than the large-scale utility power plants where First Solar's products are most effective, said Jesse Pichel, an analyst at Jefferies Group Inc.

"This was a market leader, but its technology is being usurped or surpassed by the Chinese," said Mr. Pichel. "Their product is not competitive in the most economic and sustainable solar market, which is rooftop."

For the full story, see:

CASSANDRA SWEET And RUSSELL GOLD. "First Solar Cuts 2,000 Jobs; Panel Maker Laying Off 30% of Workers, Slashing Production Amid Supply Glut." The Wall Street Journal (Weds., April 18, 2012): B2.

(Note: ellipsis added.)

(Note: online version of the story is dated April 17, 2012.)

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The YouTube video embedded above was from a CBS Evening News broadcast in June 2012. It illustrates the difficulty of the government successfully selecting the technologies, and companies, that will eventually prove successful. (The doctrine that government can and should do such selection is often called "industrial policy.")

The Obama administration has bet billions of tax dollars on lithium ion batteries for electric vehicles that A123 Systems won $249 million of. But as Sharyl Attkisson reports, expensive recalls and other setbacks have put substantial doubt in the company's ability to continue.

The text above, and the embedded video clip were published on YouTube on Jun 17, 2012 by CBSNewsOnline at http://www.youtube.com/watch?v=k4Ugklc0rIo

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(p. 7) . . . is this what an emergent technology looks like before it crosses the valley of death?

"Face it, this is not an easy task," said Brett Smith, assistant research director at the Center for Automotive Research in Ann Arbor, Mich. "You still have an energy storage device that's not ready for prime time. You still have the chicken and egg problem with the charging infrastructure. That's not to say it's not viable over the long run. But the hype is gone and the challenges are still there."

The market for all-electric and plug-in electric cars in the United States is tiny, amounting to fewer than 20,000 sales last year out of total light-vehicle sales of 12.8 million. Even in optimistic forecasts, plug-in vehicles will account for less than 5 percent of the global market by 2025.

For the full commentary, see:

JOHN BRODER. "NEWS ANALYSIS; The Electric Car, Unplugged." The New York Times, SundayReview Section (Sun., March 25, 2012): A8.

(Note: ellipsis added.)

(Note: online version of the commentary is dated March 24, 2012.)

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(p. 192) The chain was called Michaels. I'd never heard of it but, as George related its ancestry, I became more and more intrigued. You see, once upon a time it had been a Ben Franklin store, and therein lies a story.

Back in 1877, Edward and George Butler, brothers from Boston, came up with a new concept for retailing. Instead of setting up a specialty shop to sell one line of items--like shoes or dresses or kitchen supplies--they set up a store where they could sell all sorts of stuff. This was the very beginning of department stores, except that they weren't yet called that. They were called variety stores, and they carried a large assortment of low-cost goods. Then the Butlers set up a "five-cent counter," where everything cost a nickel. It worked in Boston, so they expanded westward and called it Ben Franklin Stores.

Three-quarters of a century later, in the days when America was just starting to move westward with the automobile, there were no shopping malls or big national retail chains. What you found in every town, especially in small-town America, was a variety store, like Ben Franklin's. In Lake Providence, we had Morgan and Lindsey's, where you could buy everything from paper napkins to thimbles, birthday cards, curtain hooks, and boxes of chocolates. The Butlers' idea of a nickel counter became so popular and widespread that these places came to be nicknamed "five-and-dimes" or "five-and ten-cent" stores.

(p. 193) While some of them became the heart of Main Street America, others grew to become legendary department stores, like Macy's in New York, Wanamaker's in Philadelphia, and Lehman's in Chicago. Still others merged into chains to compete with Ben Franklin Stores. That's how JC Penney's was born.

Source:

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

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"One vocal opponent of the tax is Courtland Boozé, a City Council member who calls it a hardship on poor people." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 14) Even here at a sweaty Zumba class sponsored by a nonprofit group called Weigh of Life, the city's proposal for a one-cent-per-ounce tax on sugar-sweetened beverages, which is to appear on the November ballot, meets up against the hard realities of residents' lives.

"What don't I have?" asked Rita Cerda, a longtime soda devotee, ticking off her ailments, including diabetes, high blood pressure and asthma. She is also overweight.

"I have problems drinking water," she said. "I don't like water."

The proposed tax, a license fee on businesses selling sweetened drinks, would require owners of bodegas, theaters, convenience stores and other outlets to tally ounces sold and, presumably, pass the cost on to customers.

. . .

Courtland Boozé is a City Council member and a vocal opponent of the soda tax. "We are primarily an economically suppressed community," he said. "It will be a huge hardship.

"I eat sweet potato pie and candied yams," continued Mr. Boozé, who is from Louisiana. "And what about cupcakes? Are they going to tax those?"

The city's Chamber of Commerce is also opposed to the tax. A group fighting the tax that includes the beverage industry has begun dropping off "Community Coalition Against Beverage Taxes" placards at La Flore de Jalisco Market, a small, cheerful grocery store where soda bottles in dozens of hues match the colorful piñatas hanging from the ceiling.

. . .

Charles Finnie, known as Chuck, a vice president of BMWL, a San Francisco lobbying firm, called the tax "an administrative nightmare for local businesses" that would also put them at a competitive disadvantage, with customers opting for cheaper soda in nearby cities.

. . .

At the RYSE Youth Center, founded 12 years ago after the killing of four high school students, the soda issue seemed both close to the heart and far away.

Kayla Miller, an 18-year-old college freshman, said that if complexion problems from too much sugar would not deter her friends from drinking sodas, neither would a tax.

Shivneel Sen, 14, does not favor the tax but knows how the money should be spent if it passes.

"The police came heck of late," he said, recalling the recent death of a best friend. "We need more of them."

Kimberly Aceves, the center's executive director, says that too often, the burden for making healthy choices falls unfairly on young people. Society may say "go exercise," she said, "but if the community isn't safe, how many kids are going to go out running?"

"Soda is bad for you," Ms. Aceves said. "So is violence."

For the full story, see:

PATRICIA LEIGH BROWN. "RICHMOND JOURNAL; Plan to Tax Soda Gets a Mixed Reception." The New York Times, First Section (Sun., June 3, 2012): 14.

(Note: ellipses added.)

(Note: the online version of the article has the date June 2, 2012.)

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Kevin Costner as the patriarch of the Hatfield clan on the HBO miniseries. Source of photo:
http://www.cowboysindians.com/Blog/May-2012/Blasts-From-Our-Past-With-Kevin-Costner/costner-hatfield.jpg

Kevin Costner plausibly suggests that when the productive activities of capitalism and entrepreneurship are not available or sought, people are more likely to let annoyances lead to violence:

(p. 15) Q. What was the root of the feud?

K.C. It's fair to say that the economics of the time were the provocateurs in this story. I think there was a moment when Hatfield and McCoy would have laid down their guns. But these young guys didn't have jobs anymore as we moved toward industrialization. They started to have children, and their families doubled in size, and suddenly they had to feed 26. Young men killing young men -- it really has a lot to do with the offspring not having enough to do. Look, you're talking about alcohol and guns, and you're talking about unemployment, so there's a reason for the bitterness.

For the full interview, see:

Kathryn Shattuck, interviewer. "Firing Bullets Across a Border And a Bloodline." The New York Times, Arts&Leisure Section (Sun., May 27, 2012): 15.

(Note: bold in original.)

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President Obama's pick for World Bank President, Dr. Jim Yong Kim, is scheduled to take office on July 1, 2012.

(p. A8) Dr. Kim has drawn fire recently for comments in a book he co-edited in 2000, "Dying for Growth." In a piece he co-authored for it, Dr. Kim co-wrote that "the quest for growth in GDP and corporate profits has in fact worsened the lives of millions of women and men."

. . .

. . . an economist who has become one of Dr. Kim's leading critics, New York University's William Easterly, said the World Bank nominee offered an "amateur" approach to economics through an "antiglobalization point of view" that is critical of corporations.

"His critique was much more radical, that the system itself was responsible for creating poverty," Mr. Easterly said.

For the full review, see:

SUDEEP REDDY. "WORLD NEWS; Criticism Over U.S.'s World Bank Pick Swells." The Wall Street Journal (Mon., April 9, 2012): A8.

(Note: ellipses added.)

(Note: online version of the article is dated April 8, 2012.)

William Easterly's wonderful and courageous book is:

Easterly, William. The Elusive Quest for Growth: Economists' Adventures and Misadventures in the Tropics. Cambridge, MA: The MIT Press, 2002 [1st ed. 2001].

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

Source:

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

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Bryan Caplan persuasively pans the book he is revieiwng. But along the way Caplan makes an intriguing observation of his own:

(p. A11) . . . , happiness research makes a powerful case against European-style labor-market regulation. For most economists, the effect on worker well-being is unclear. On the one hand, regulation boosts wages; on the other, it increases the probability that you will have no wages at all. From the standpoint of a happiness researcher, however, this is a no-brainer. A small increase in wages has but a small and ephemeral effect on happiness. A small increase in unemployment, by contrast, has a massive and--unlike most other factors--durable effect on happiness. Supposedly "humane" regulations to boost workers' incomes have a dire cost in terms of human happiness.

For the full review, see:

BRYAN CAPLAN. "BOOKSHELF; Lessons From Cloud Nine; Happiness predicts higher job performance and even future health. But what predicts happiness?" The Wall Street Journal (Tues., August 16, 2011): A11.

(Note: ellipsis added.)

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

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

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

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

Source:

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

(Note: bracketed words and ellipsis added.)

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John Tierney "at his cubicle with a wall of books." Source of caption quote and photo: online version of John Tierney's NYT article quoted and cited below.

(p. 18) The original rationale for the open-plan office, aside from saving space and money, was to foster communication among workers, the better to coax them to collaborate and innovate. But it turned out that too much communication sometimes had the opposite effect: a loss of privacy, plus the urgent desire to throttle one's neighbor.

"Many studies show that people have shorter and more superficial conversations in open offices because they're self-conscious about being overheard," said Anne-Laure Fayard, a professor of management at the Polytechnic Institute of New York University who has studied open offices. . . .

Take Mr. Udeshi's office, at the N.Y.U.-Poly business incubator, a SoHo loft with dozens of start-up companies housed in low cubicles. The entrepreneurs there say they sometimes get useful ideas from overheard conversations but also find themselves retreating to a bathroom or a broom closet for private chats. When they have to discuss a delicate matter with someone sitting next to them, they often use e-mail or instant messaging.

"You talk to more people in an open office, but I think you have fewer meaningful conversations," said Jonathan McClelland, an energy consultant working in the loft. "You end up getting interrupted a lot by people's random thoughts."

. . .

Researchers at Finland's Institute of Occupational Health have studied precisely how far those conversations carry and analyzed their effect on the unwilling listener: a decline of 5 percent to 10 percent on the performance of cognitive tasks requiring efficient use of short-term memory, like reading, writing and other forms of creative work.

"Noise is the most serious problem in the open-plan office, and speech is the most disturbing type of sound because it is directly understood in the brain's working memory," said Valtteri Hongisto, an acoustician at the institute. He found that workers were more satisfied and performed better at cognitive tasks when speech sounds were masked by a background noise of a gently burbling brook

For the full story, see:

JOHN TIERNEY. "From Cubicles, Cry for Quiet Pierces Office Buzz." The New York Times, First Section (Sun., May 20, 2012): 1 & 18.

(Note: the online version of the article is dated May 19, 2012, and has the title "From Cubicles, Cry for Quiet Pierces Office Buzz.")

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(p. 94) Western Union's lawyers carne up with a dusty old New York Stale law, dated 1905, that said no one could buy more than 10 percent of a telegraph company chartered in that state without the approval of Albany lawmakers. Hard to believe, but it was right there in black and white and there was no possibility of getting the New York State legislature to understand why it was vital to build digital highways.

Talk about unintended consequences!

(p. 95) Originally, the law was written to stop Western Union from monopolizing the telegram business, but the law backfired and was used by the monopolist for its own protection.

Source:

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

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(p. A15) The supply-sider has a different view from both the Keynesian and the budget balancer. Fundamentally, supply-side advocates focus on the harmful effects of tax increases. Raising tax rates hurts the economy directly because tax hikes reduce incentives to invest and because they punish hard work. As such, tax increases slow growth. But budget cuts work in the right direction by making lower tax revenues sustainable. If spending exceeds revenues, then the government must borrow and this commits future governments to raising taxes in order to service the debt.

. . .

On the tax side, there is strong evidence that supports the supply-siders. Christina Romer, President Obama's first chairwoman of the President's Council of Economic Advisers, and David Romer document the strong unfavorable effect of increasing tax rates on economic growth (American Economic Review, 2010). They report that an increase in taxes of 1% of gross domestic product lowers GDP by almost 3%. The evidence on government spending also suggests that high spending means lower growth.

For example, Swedish economists Andreas Bergh and Magnus Henrekson (Journal of Economic Surveys 2011) survey a large literature and conclude that an increase in government size by 10 percentage points of GDP is associated with a half to one percentage point lower annual growth rate.

For the full commentary, see:

EDWARD P. LAZEAR. "OPINION; Three Views of the 'Fiscal Cliff'; It's the tax increases we have to fear. Spending cuts won't hurt the economy." The Wall Street Journal (Mon., May 21, 2012): A15.

(Note: ellipsis added.)

(Note: the online version of the commentary is dated May 20, 2012 and has the title "OPINION; Edward Lazear: Three Views of the 'Fiscal Cliff'; It's the tax increases we have to fear. Spending cuts won't hurt the economy.")

The Romer and Romer paper mentioned is:

Romer, Christina D., and David H. Romer. "The Macroeconomic Effects of Tax Changes: Estimates Based on a New Measure of Fiscal Shocks." American Economic Review 100, no. 3 (June 2010): 763-801.

The Bergh and Henrekson paper mentioned is:

Bergh, Andreas, and Magnus Henrekson. "Government Size and Growth: A Survey and Interpretation of the Evidence." Journal of Economic Surveys 25, no. 5 (Dec. 2011): 872-97.

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'The Falcon 9 rocket seen in a time-exposure photograph during liftoff." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A13) CAPE CANAVERAL, Fla. -- He does not have the name recognition of some other space entrepreneurs, people like Richard Branson, the founder of the Virgin empire, or Paul Allen of Microsoft fame, or Jeff Bezos, the Amazon.com billionaire.

That will probably change if things keep going his way. Elon Musk, a computer prodigy and serial entrepreneur whose ambitions include solving the world's energy needs and colonizing the solar system, was the man of the hour -- or of 3:44 a.m. Tuesday, Eastern time -- when the rocket ship built by his company, SpaceX, lifted off gracefully in a nighttime launching and arced off in a streak of light amid loud applause.

. . .

If all goes as planned, his unmanned Dragon capsule, lifted into orbit by his Falcon 9 rocket, will berth at the International Space Station on Friday bearing a modest cargo: 162 meal packets (45 of them low-sodium), a laptop computer, a change of clothes for the station astronauts and 15 student experiments.

Far more important than the supplies is the proof of concept. Mr. Musk is trying to show the world that a determined entrepreneur can start a rocket company from scratch and, a decade later, end up doing a job that has until now been the exclusive province of federal governments.

. . .

Just four years ago, SpaceX went through a near-death experience. The first three launchings of the company's small Falcon 1 rocket failed. One more failure, Mr. Musk said, and he would have run out of money. As he went through a divorce from his first wife, with whom he has five sons, he had to borrow money from friends.

The fourth launching succeeded. Late in 2008, NASA awarded SpaceX the cargo contract. The first two Falcon 9 launchings, in 2010, also succeeded.

Early Tuesday morning, the success streak continued. As the countdown clock hit zero, the engines remained ignited. Less than 10 minutes later, the Dragon was in orbit. It then aced several other early tasks like the deployment of solar arrays and navigational sensors and the testing of GPS equipment.

"Anything could have gone wrong," Mr. Musk said. "And everything went right, fortunately."

For the full story, see:

KENNETH CHANG. "Big Day for Entrepreneur Who Promises More." The New York Times (Weds., May 23, 2012): A13.

(Note: ellipses added.)

(Note: the online version of the story is dated May 22, 2012, and has the title "Big Day for a Space Entrepreneur Promising More.")

"Elon Musk." Source of caption and photo: online version of the NYT article quoted and cited above.

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(p. A23) Forty years ago, corporate America was bloated, sluggish and losing ground to competitors in Japan and beyond. But then something astonishing happened. Financiers, private equity firms and bare-knuckled corporate executives initiated a series of reforms and transformations.

The process was brutal and involved streamlining and layoffs. But, at the end of it, American businesses emerged leaner, quicker and more efficient.

. . .

As Reihan Salam noted in a fair-minded review of the literature in National Review, in any industry there is an astonishing difference in the productivity levels of leading companies and the lagging companies. Private equity firms like Bain acquire bad companies and often replace management, compel executives to own more stock in their own company and reform company operations.

Most of the time they succeed. Research from around the world clearly confirms that companies that have been acquired by private equity firms are more productive than comparable firms.

This process involves a great deal of churn and creative destruction. It does not, on net, lead to fewer jobs. A giant study by economists from the University of Chicago, Harvard, the University of Maryland and the Census Bureau found that when private equity firms acquire a company, jobs are lost in old operations. Jobs are created in new, promising operations. The overall effect on employment is modest.

For the full commentary, see:

DAVID BROOKS. "How Change Happens." The New York Times (Tues., May 22, 2012): A23.

(Note: ellipsis added.)

(Note: the online version of the commentary is dated May 21, 2012.)

The "giant study by economists" mentioned by Brooks is:

Davis, Steven J., John C. Haltiwanger, Ron S. Jarmin, Josh Lerner, and Javier Miranda. "Private Equity and Employment." National Bureau of Economic Research, Inc, NBER Working Papers: # 17399, Sept. 2011.

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(p. A2) In essence, Justice says that, beginning in 2008, several plankton, in the form of five publishers, conspired against a whale, Amazon, whose monopoly clout had imposed a $9.99 retail price for e-books.

The deal the publishers eventually reached with Apple unfixed the price of e-books by linking their prices to the cover price of the print version. More importantly, publishers could begin to reclaim the right to set e-book retail prices generally.

. . .

Apple, with 15% of the e-book market, is no monopolist. The five publishers, though Justice insists they dominate trade publishing, account for only about half of e-book sales. Crucially for antitrust, the barriers to entry are zilch: Amazon, with 60% market share, could create its own e-book imprint tomorrow and begin bidding for the most popular authors.

. . .

Let's go back to "per se" vs. "rule of reason." Because the 1890 Sherman Act is so sweeping and almost any business arrangement could be read as prohibited, courts understandably evolved a "rule of reason" to distinguish the permissible from the impermissible. Unfortunately, the result has been antitrust as we know it: wild and fluctuating discretion masquerading as law. Retail price maintenance alone has been embraced and dumped so many times by the courts that it must feel like Jennifer Aniston.

"Do no harm" would be a better principle for trustbusters.

For the full commentary, see:

HOLMAN W. JENKINS, JR. "BUSINESS WORLD; Washington vs. Books; What about piracy, low barriers to entry and the fact that literature isn't chopped liver?" The Wall Street Journal (Sat., April 14, 2012): A15.

(Note: the online version of the commentary is dated April 13, 2012.)

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"Akis Tsochatzopoulos on April 11 became the highest-ranking Greek official ever to be detained on corruption charges." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A6) Prosecutors accuse the former defense minister, Akis Tsochatzopoulos, 73, a founding member of the Socialist Party and the highest-ranking Greek official ever to be detained on corruption charges, of pocketing at least $26 million in kickbacks for Greece's purchase of submarines and missile systems and funneling the money through offshore accounts to buy property.

. . .

The case of Mr. Tsochatzopoulos (pronounced zok-at-ZOP-ou-los) marks the rise -- and perhaps fall -- of a political culture that has dominated Greece for decades, in which alternating Socialist and center-right New Democracy governments helped spread the spoils and, critics say, the corruption, during the boom years. That system helped drive up Greece's public debt to the point that it was forced to seek a foreign bailout in 2010.

As the money has run out, an entrenched favors-for-votes culture is now coming unglued, and Greeks have become less forgiving of high-level missteps.

For the full story, see:

RACHEL DONADIO and NIKI KITSANTONIS. "Corruption Case Hits Hard in a Tough Time for Greece." The New York Times (Thurs., May 3, 2012): A6 & A11.

(Note: ellipsis added.)

(Note: the online version of the story is dated May 2, 2012.)

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"A computer image shows a rendering of a spacecraft preparing to capture a water-rich, near-Earth asteroid." Source of caption: print version of the WSJ article quoted and cited below. Source of photo: online version of the WSJ article quoted and cited below.

(p. B3) SEATTLE--A start-up with high-profile backers on Tuesday unveiled its plan to send robotic spacecraft to remotely mine asteroids, a highly ambitious effort aimed at opening up a new frontier in space exploration.

At an event at the Seattle Museum of Flight, a group that included former National Aeronautics and Space Administration officials unveiled Planetary Resources Inc. and said it is developing a "low-cost" series of spacecraft to prospect and mine "near-Earth" asteroids for water and metals, and thus bring "the natural resources of space within humanity's economic sphere of influence."

The solar system is "full of resources, and we can bring that back to humanity," said Planetary Resources co-founder Peter Diamandis, who helped start the X-Prize competition to spur nongovernmental space flight.

The company said it expects to launch its first spacecraft to low-Earth orbit--between 100 and 1,000 miles above the Earth's surface--within two years, in what would be a prelude to sending spacecraft to prospect and mine asteroids.

The company, which was founded three years ago but remained secret until last week, said it could take a decade to finish prospecting, or identifying the best candidates for mining.

For the full story, see:

AMIR EFRATI. "Asteroid-Mining Strategy Is Outlined by a Start-Up." The Wall Street Journal (Weds., April 25, 2012): B3.

(Note: the online version of the story is dated April 24, 2012, and has the title "Start-Up Outlines Asteroid-Mining Strategy.")

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

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

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

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

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

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

For the full commentary, see:

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

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

The online Peter Thiel notes are at:

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

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"Space mining has captivated Hollywood. Director James Cameron is a backer of the new venture." Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. B1) A new company backed by two Google Inc. billionaires, film director James Cameron and other space exploration proponents is aiming high in the hunt for natural resources--with mining asteroids the possible target.

The venture, called Planetary Resources Inc., revealed little in a press release this week except to say that it would "overlay two critical sectors--space exploration and natural resources--to add trillions of dollars to the global GDP" and "help ensure humanity's prosperity." The company is formally unveiling its plans at an event . . . in Seattle.

. . .

[The] . . . event is being hosted by Peter H. Diamandis and Eric Anderson, known for their efforts to develop commercial space exploration, and two former NASA officials.

Mr. Diamandis, a driving force behind the Ansari X-Prize competition to spur non-governmental space flight, has long discussed his goal to become an asteroid miner. He contends that such work by space pioneers would lead to a "land rush" by companies to develop lower-cost technology to travel to and extract resources from asteroids.

For the full story, see:

AMIR EFRATI. "A Quixotic Quest to Mine Asteroids." The Wall Street Journal (Sat., April 21, 2012,): B1 & B4.

(Note: ellipses and bracketed word added.)

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

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(p. F1) SOON after the Occupy Wall Street encampment was set up at Zuccotti Park in Manhattan last fall, 26-year-old Ryan Quick told his father, Leslie C. Quick III, a financier, that he might drop by the site.

"Don't you even let me see you over there," the father replied.

The senior Mr. Quick later said that he and his son were both "half-kidding" each other. But he need not have worried about any class rebellion. According to Mr. Quick, his son came back from his visit and said: "It just looks like a Phish concert. It's difficult to get engaged by something that doesn't really have a purpose."

As scions of a family that co-founded Quick & Reilly, a pioneering discount brokerage firm acquired for $1.6 billion by another company in 1997, the Quicks are undoubtedly among the "1 percent" -- the wealthiest 1 percent of Americans targeted by the Occupy Wall Street movement. Indeed, having made their fortune in finance, the Quicks might be particular targets.

. . .

(p. F5) "Almost all my clients are self-made," said Christopher J. Cordaro, chief executive of RegentAtlantic Capital, a wealth management firm based in Morristown, N.J., whose clients have at least $2 million in investable assets. "They're saying, 'We worked hard, we went to college, we tried to better our lives. Isn't that what I'm supposed to do?' "

That is also the Quick family's history. When he joined the year-old family firm after graduating from college in 1975, Leslie Quick recalled, "we didn't know if my father was going to declare bankruptcy or this discount brokerage thing was going to work."