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"Pratt & Whitney hopes its Geared Turbo Fan engine will defy skeptics and win it a spot on the next generation of jets from Boeing and Airbus." Source of the caption and photo: online version of the WSJ article quoted and cited below.

(p. B1) Once every 20 years or so, the companies that make jet engines battle it out for a chance to power the next generation of single-aisle airplanes.

. . .

General Electric Co. unveiled plans to develop a new family of engine cores that it said would vault it ahead of United Technologies Corp.'s Pratt & Whitney, which has a two-year head start on a novel engine that promises to burn 12% less fuel than today's best engines.

GE, which is working with French partner Safran SA, said its engine will have fewer moving parts than Pratt & Whitney's, and will deliver equal or better performance. "We've been pretty quiet for the last couple of years, but we've been doing plenty of work in secret," said GE Aviation President David Joyce, in an interview. "So be it. Game on."

. . .

Besides GE and Pratt & Whitney, the other major player in the industry is Britain's Rolls-Royce PLC. Hoping to dominate the market, all three companies plan to spend well over $1 billion on their new engines, stretching the limits of their technology. Developing fuel-efficient engines requires the use of exotic alloys and ceramic coatings that can cope with internal engine temperatures that would be above the melting points of untreated metal components.

The next generation of engines may look radically different from those used today. One design that GE and Rolls-Royce are exploring separately would have a double row of propellers at the (p. B3) back end of the engine, with no protective covering. Such an engine would be noisier and significantly slower than today's planes. It also would have to be mounted at the rear of the airplane, but the companies say it would consume as much as 24% less fuel.

. . .

Pratt & Whitney had hoped to get a boost in the engine race by promoting a design called the Geared Turbo Fan. It uses a gearbox at the front of the engine that allow various fans and compressors to turn at different speeds for greater efficiency and less noise. . . .

. . .

The company has been working on the gear technology for almost 20 years, investing almost $1 billion so far, Mr. Finger said. He said that in addition to fuel and emissions savings, the new engine will cut noise by a factor of two and reduce maintenance by 40% because it will have fewer moving parts throughout the engine.

For the full story, see:

J. LYNN LUNSFORD and DANIEL MICHAELS. "Jet-Engine Makers Launch New War; Billions of Dollars at Stake in Race To Develop Efficient Power Source For Next Wave of Boeing, Airbus Planes." The Wall Street Journal (Mon., July 14, 2008): B1 & B3.

(Note: ellipses added.)

"GE is creating an engine with fewer moving parts than Pratt & Whitney's design, and seeks to deliver equal or better performance." Source of the caption and photo: online version of the WSJ article quoted and cited above.

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"Hachette's audio department recently held a "funeral" for cassette tapes; an invitation is above." Source of caption and photo: online version of the NYT article quoted and cited below.

The article quoted below mentions a feature of new "leapfrog" technologies that has received too little attention. The new product, overall, for most purposes, or for most important purposes, is better than the old product, but it may be that the new product lacks some features that the old product had, that had value. It is a step forward in most respects, but not in all respects.

I salute the observation in the last quoted paragraph below. When I am listening to a book, while walking Willy, some UPS truck often passes me, noisily making a sentence of two inaudible. If I'm listening to a cassette, I can back up a few sentences. If I'm listening to a CD, I have to back up at least a few minutes, and often many minutes (depending on how short the tracks are on the CD).

I remember an early word processor (can't remember its name, maybe it was Wordmarc), that allowed you to type in the page number of a long document and then go directly to that page. I am currently writing a book using Microsoft Word. And in the vast majority of respects it is better than the word processor of yore. But every time I have to scroll and and scroll and scroll, to get to a page, when I already know exactly which page I want, I irrationally curse Bill Gates.

Addendum posted 10/10/08:

Since this post was created on July 30, 2008, I have discovered that Word 2007 has the feature that I missed from Wordmarc, and I also learned that if I had invested more time in Word 2003, I might have discovered that by drilling down to an obscure option menu, it too could have been customized to have had the feature. (In Wordmarc the feature was real obvious.)

(p. C7) There was a funeral the other day in the Midtown offices of Hachette, the book publisher, to mourn the passing of what it called a "dear friend." Nobody had actually died, except for a piece of technology, the cassette tape.

While the cassette was dumped long ago by the music industry, it has lived on among publishers of audio books. Many people prefer cassettes because they make it easy to pick up in the same place where the listener left off, or to rewind in case a certain sentence is missed. For Hachette, however, demand had slowed so much that it released its last book on cassette in June, with "Sail," a novel by James Patterson and Howard Roughan.

The funeral at Hachette -- an office party in the audio-book department -- mirrored the broader demise of cassettes, which gave vinyl a run for its money before being eclipsed by the compact disc. (The CD, too, is in rapid decline, thanks to Internet music stores, but that is a different story.)

. . .

Cassette tapes' tendency to hiss -- and to melt in the summer and snap in the winter -- turns off audiophiles. But for audio books, the cassette is an oddly elegant medium: you can eject it from your car, carry it home and stick it in a boombox, and it will pick up in the same place, an analog feat beyond the ability of the CD.

For the full story, see:

ANDREW ADAM NEWMAN. "Say So Long to an Old Companion: Cassette Tapes." The New York Times Company (Mon., July 28, 2008): C7.

(Note: ellipsis added.)

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"Making glass has long been energy-intensive, but soaring energy prices provide a strong incentive for that to change." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 4) Glassmaking is a based on old, stable technologies that require lots of materials and energy. The basic furnace, which melts sand into glass at extremely high temperatures, hasn't undergone a fundamental change since the 1850s. Furnace designers have long contented themselves with small improvements, such as using pure oxygen to improve energy efficiency.

Today, glassmaking faces a technological upheaval that offers a reminder that "it is a mistake to assume that older technologies are less dynamic than new ones," says David Edgerton, a historian at Imperial College in London and the author of "The Shock of the Old," a history of the evolution of pre-electronic technologies in the 20th century.

. . .

Mr. Greenman sees a new willingness to innovate among glassmakers who, until recently, usually shunned technological advances because savings in materials and energy didn't justify the costs of introducing new designs and processes.

"Many innovations were, frankly, thwarted by cost," says C. Philip Ross, a consultant in Laguna Niguel, Calif., who has studied technological options for the industry. "There's a lot of upside in revisiting old, discarded ideas."

Glassmakers are searching for both small and large advances on three fronts: designing more efficient furnaces; creating much stronger glass; and using heat better.

. . .

The potential revolution in glass-making suggests a new model for innovation: Creators go back to the future, spending almost as much time retrieving once-discarded inventions as they do creating new ones.

For the full story, see:

G. PASCAL ZACHARY. "Ping; Starting to Think Outside the Jar." The New York Times, SundayBusiness Section (Sun., June 15, 2008): 4.

(Note: ellipses added.)

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

(p. C1) The salad days of organic salad are wilting in favor of high-tech tomatoes.

As global food shortages threaten to ignite social and economic instability from Nigeria to India, the popular aversion to genetically modified foods is turning into more of a luxury for the wealthy than a practical option for the masses.

This trend is evident in the share price and earnings growth of Monsanto, the world leader in agricultural biotechnology by market share. Its stock has soared 22% this year, trading at a breathless 37 times estimated 2008 per-share earnings.

For the full story, see:

KAREN RICHARDSON. "AHEAD OF THE TAPE; Food Shortage Recasts Image of 'Organic'." The Wall Street Journal (Weds., June 25, 2008): C1.

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

(p. B7) One day during Trip Adler's sophomore year at Harvard University, he saw fellow undergraduates Mark Zuckerberg and Dustin Moskovitz outside their dormitory with suitcases and boxes. When Mr. Adler asked what the two -- who happened to be Facebook Inc.'s co-founders -- were doing, Mr. Moskovitz lightly replied that they were moving from Cambridge, Mass., to Silicon Valley "to make Facebook big."

"I was so jealous," recalls Mr.Adler, now 23 years old. "I thought, 'I've got to find an idea and drop out of Harvard.'"

Mr. Adler didn't leave school, but after graduating in 2006, he did start an online document-sharing company. San Francisco-based Scribd Inc., employs 12 people and attracts 11.1 million monthly visitors, according to Web-tracking company comScore Inc. It has raised nearly $3.9 million from Redpoint Ventures and other venture-capital and individual investors.

Mr. Adler is just one of the Harvard students who have caught start-up fever since Facebook, founded when Mr. Zuckerberg was at Harvard in 2004, exploded in popularity. Other recent Harvard-born start-ups include Internet companies Kirkland North Inc., Drop.io Inc. and Labmeeting Inc. And Facebook has become a model for these start-ups on many fronts, from the look of company Web sites to their corporate strategies.

For the full story, see:

VAUHINI VARA. "ENTERPRISE; Facebook Ignites Entrepreneurial Spirit at Harvard Students, Graduates Start Firms, Using The Site as a Model." The Wall Street Journal (Tues., May 20, 2008): B7.

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Source of book image:
http://bp2.blogger.com/_Sar8IPNlxOY/SClPS33oTxI/AAAAAAAAB_0/B8GjajHtetY/s1600/PixarTouch.jpg

(p. A19) One of Mr. Catmull's other inspirations was to hire computer animator John Lasseter after he was fired by Walt Disney Co. in 1983. (He had apparently stepped on one too many toes in the company's sprawling management structure.) Then again, as Mr. Price reports, in the world of computer animators, workplace comings and goings seemed to be part of the job. Mr. Lasseter himself had already quit Disney and then returned before being fired. In the creative ferment of computer animation in the late 1970s and early 1980s, what mattered most was the work itself: Never mind who signs the paychecks - what project are you working on now?

. . .

One of Pixar's first projects revealed a truth that would point the way to success: Storytelling is more important than graphics firepower. The company created a short film, directed by Mr. Lasseter, called "Tin Toy," about a mechanical one-man band fleeing the terrors of a baby who wants to play with it. "Tin Toy" made audiences laugh in part because it turned established themes on their heads. The story was told from the toy's-eye view, close to the floor. The baby, doing what babies do, seemed like a gigantic, capricious monster. "Tin Toy" won the 1988 Academy Award for animated short film.

The upside-down "Tin Toy" point of view seems to fit much of what happened at Pixar afterward. The company made a deal with Disney in 1991: The little animation outfit would produce three movies, and the entertainment behemoth would distribute and market them. With the outsize success of the first movie in the deal, "Toy Story" - it grossed $355 million world-wide - Pixar and Disney were perhaps on an inevitable collision course over control and profits. Mr. Price adroitly depicts the clashes between Mr. Jobs and his nemesis at Disney, chief executive Michael Eisner, and captures the sweet vindication of Mr. Lasseter as the projects he guides outstrip the animation efforts of his former employer.

The sweetest moment in the Pixar saga came two years ago, when Disney bought the company for $7.4 billion in an all-stock deal - one that gave Pixar executives enormous power at their new home. Mr. Jobs sits on the Disney board and is the company's largest shareholder. (Mr. Eisner left in 2005.) And Mr. Lasseter became the chief creative officer for the combined Disney and Pixar animation studios, where Mr. Catmull serves as president.

The day after the sale was announced, Mr. Lasseter and Mr. Catmull flew to Burbank, Calif., to address a crowd of about 500 animation staffers on a Disney soundstage. "Applause built as they made their way to the front," Mr. Price reports, "and then erupted again in force" when the two men were introduced. "Lasseter was welcomed as a rescuer of the studio from which he had been fired some twenty-two years before." In one of their first moves, Mr. Price says, Messrs. Lasseter and Catmull "brought back a handful of Disney animation standouts who had only recently been laid off." Redemption, after all, is essential to any story well told.

For the full review, see:

PAUL BOUTIN. "Bookshelf, An Industry Gets Animated." The Wall Street Journal (Weds., May 14, 2008): A19.

(Note: ellipsis added.)

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"Campaigning Monday in Fresno, Calif., Senator John McCain said, if elected, he would offer $300 million to anyone who could build a more efficient car battery." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A15) FRESNO, Calif. -- In the 18th century the British offered a £20,000 prize to anyone who figured out how to calculate longitude. More recently, Netflix offered a million dollars for improving movie recommendations on its Web site. Now Senator John McCain is suggesting a new national prize: He said here Monday that if elected president he would offer $300 million to anyone who could build a better car battery.

. . .

"I further propose we inspire the ingenuity and resolve of the American people," Mr. McCain said, "by offering a $300 million prize for the development of a battery package that has the size, capacity, cost and power to leapfrog the commercially available plug-in hybrids or electric cars."

He said the winner should deliver power at 30 percent of current costs. "That's one dollar, one dollar, for every man, woman and child in the U.S. -- a small price to pay for helping to break the back of our oil dependency," he said.

For the full story, see:

MICHAEL COOPER. "McCain Proposes a $300 Million Prize for a Next-Generation Car Battery." The New York Times (Tues., June 24, 2008): A15 & A20.

(Note: ellipsis added.)

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Source of book image: http://creativecapital.wordpress.com/category/how-to-buy-creative-capital/

Doriot taught at Harvard during the whole time that Joseph Schumpeter taught at Harvard. Given that their interests apparently overlapped, it is surprising that there are no references to Schumpeter or to "creative destruction" in Ante's book.

There are also no references to Doriot in McCraw's recent comprehensive intellectual biography of Schumpeter.

(Scherer in his essay "An Accidental Schumpeterian" mentions taking a useful course from Doriot, but does not illuminate the relationship, if any, between Doriot and Schumpeter.)

(p. A17) Before Sand Hill Road near Stanford University became the center of the venture-capital universe - before Google and Pets.com - the modern market for financing risky startup companies took shape far from Silicon Valley in the years after World War II.

ARD was the first to raise what was then known as "risk capital" from outsiders at a time when investors' wounds were still fresh from the stock-market crash of 1929 and the Depression of the 1930s. The high failure rate of start-ups had generally precluded raising money from average investors. And so ARD's chief competitors in the postwar years were the Rockefellers and another old-money operation, J.H. Whitney & Co.

. . .

The company would hardly merit attention except for its one grand slam, Digital Equipment Corp., which helped establish the East Coast high-tech stronghold along Route 128 outside Boston.

Digital, a minicomputer maker co-founded by former Massachusetts Institute of Technology engineer Ken Olsen, received $70,000 from ARD in 1957 in return for a 70% stake, which eventually grew in value to hundreds of millions of dollars. Mr. Ante calculates the investment's return at 70,000%.

. . .

Doriot, who taught at Harvard for 40 years, beginning in 1926, offered a popular class that was ostensibly about manufacturing but was more a seminar in his business philosophy. "He stressed common sense themes such as self-improvement, teamwork, and contributing to society," Mr. Ante writes. Doriot was known for "spicing up his philosophy with practical and pithy words of advice." Among them: "Always remember that someone somewhere is making a product that will make your product obsolete."

For the full review, see:

RANDALL SMITH. "Bookshelf; Money to Make Things New." The Wall Street Journal (Weds., May 21, 2008): A17.

(Note: ellipses added.)

Reference to the biography of Doriot:

Ante, Spencer E. Creative Capital: Georges Doriot and the Birth of Venture Capital. Boston: Harvard Business School Press, 2008.

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"Steven J. Sasson, an electrical engineer, created the first digital camera." Source of caption and photo: online version of the NYT article quoted and cited below.

Kodak's problems in detailed in the article below, fit very well Christensen's account about how difficult it is for incumbent firms to embrace major disruptive technologies.

(p. C1) ROCHESTER -- Steven J. Sasson, an electrical engineer who invented the first digital camera at Eastman Kodak in the 1970s, remembers well management's dismay at his feat.

"My prototype was big as a toaster, but the technical people loved it," Mr. Sasson said. "But it was filmless photography, so management's reaction was, 'that's cute -- but don't tell anyone about it.' "

. . .

(p. C2) The company now has digital techniques that can remove scratches and otherwise enhance old movies. It has found more efficient ways to make O.L.E.D.'s -- organic light-emitting diodes -- for displays in cameras, cellphones and televisions.

This month, Kodak will introduce Stream, a continuous inkjet printer that can churn out customized items like bill inserts at extremely high speeds. It is working on ways to capture and project three-dimensional movies.

. . .

Paradoxically, many of the new products are based on work Kodak began, but abandoned, years ago. The precursor technology to Stream, for example, pushed ink through a single nozzle. Stream has thousands of holes and uses a method called air deflection to separate drops of ink and control the speed and order in which they are deposited on a page.

"I remember wandering through the labs in 2003, and seeing the theoretical model that could become Stream," said Philip J. Faraci, Kodak's president. "The technology was half-baked, but it was a real breakthrough."

Other digital technologies languished as well, said Bill Lloyd, the chief technology officer. "I've been here five years, and I'm still learning about all the things they already have," he said. "It seems Kodak had developed antibodies against anything that might compete with film."

It took what many analysts say was a near-death experience to change that. Kodak, a film titan in the 20th century, entered the next one in danger of being mowed down by the digital juggernaut. Electronics companies like Sony were siphoning away the photography market, while giants like Hewlett-Packard and Xerox had a lock on printers.

"This was a supertanker that came close to capsizing," said Timothy M. Ghriskey, chief investment officer at Solaris Asset Management, which long ago sold its Kodak shares.

For the full story, see:

CLAUDIA H. DEUTSCH. "At Kodak, Some Old Things Are New Again." The New York Times (Fri., May 2, 2008): C1-C2.

(Note: ellipses added.)

"Allan Camp, a technician at Kodak's inkjet development center in Rochester, works on the development of print heads for printers." Source of caption and photo: online version of the NYT article quoted and cited above.

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Source of book image: http://press.princeton.edu/images/k8618.gif

(p. A13) The space shuttle Discovery arrived safely home over the weekend, and I suppose we are all rather relieved - that is, those of us who were aware that the shuttle had blasted off a couple of weeks ago on yet another mission. Space exploration is attracting a lot of excitement these days, but the excitement seems to have less to do with the shuttle and more to do with private space ventures, like Richard Branson's Virgin Galactic or Robert Bigelow's plans for space hotels or Space Adventures Ltd., whose latest customer for a private space trip is Google co-founder Sergey Brin. He bought a ticket only last week.

Robert Zimmerman's "The Universe in the Mirror" serves to remind us that NASA, too, can do exciting things in space. Yet the career of the Hubble Space Telescope has been both triumphant and troubled, bringing into focus the strengths and the weaknesses of doing things the NASA way.

. . .

In addition to telling a thrilling tale, Mr. Zimmerman provides a number of lessons. One, he says, is the importance of having human beings in space: Had Hubble not been designed for servicing by astronauts, it would have been an epic failure and a disaster for a generation of astronomers and astrophysicists. Though robots have their uses, he notes, "humans can fix things, something no unmanned probe can do." . . .

But the biggest lesson of "The Universe in a Mirror" comes from the utterly dysfunctional funding and management system that Mr. Zimmerman portrays. Hubble was a triumph, but a system that requires people to sacrifice careers and personal lives, and to engage in "courageous and illegal" acts, in order to see it succeed is a system that is badly in need of repair. Alas, fixing Hubble turned out to be easier than fixing the system that lay behind its problems.

For the full review, see:

GLENN HARLAN REYNOLDS. "Bookshelf; We Can See Clearly Now." The Wall Street Journal (Mon., June 16, 2008): A13.

(Note: ellipses added.)

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

Apparently the WSJ's new owner, Rupert Murdoch, has not yet succeeded in killing the wonderful, quirky, inimitable front page, center column, articles that are part of what makes the WSJ great:

(p. A1) CHANDLER, Ariz. -- Jerry Knoblach wants to bring wireless service to millions of rural Americans. His plan: Beam it down from balloons hovering at the edge of space.

This isn't just hot air. His company, Space Data Corp., already launches 10 balloons a day across the Southern U.S., providing specialized telecom services to truckers and oil companies. His balloons soar 20 miles into the stratosphere, each carrying a shoebox-size payload of electronics that acts like a mini cellphone "tower" covering thousands of square miles below.

His idea has caught the eye of Google Inc., according to people familiar with the matter. The Internet giant -- which is now pushing into wireless services -- has considered contracting with Space Data or even buying the firm, according to one person.

. . .

Maintaining a telecom system based on gas-filled bladders floating in the sky requires some creativity. The inexpensive bal-(p. A9)loons are good for only 24 hours or so before ultimately bursting in the thin air of the upper atmosphere. The electronic gear they carry, encased in a small Styrofoam box, then drifts gently back to earth on tiny parachutes.

This means Space Data must constantly send up new balloons. To do that, it hires mechanics employed at small airports across the South. It also hires farmers -- particularly, dairy farmers.

They're "very reliable people," says Mr. Knoblach. They have to "milk the cows 24-7, 365 days a year, so they're great people to use as a launch crew." Space Data pays them $50 per launch.

For the full story, see:

AMOL SHARMA "Floating a New Idea For Going Wireless, Parachute Included; Balloon Launch Gets Google's Attention; Dairy Farmers Can Help." The Wall Street Journal (Weds., February 20, 2008): A1 & A9.

(Note: ellipsis added.)

"A balloon being launched in Piedmont, Oklahoma." Source of image: online version of the WSJ article quoted and cited above.

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"A Monsanto researcher, Mohammadreza Ghaffarzadeh, monitored drought-resistant corn technology in Davis, Calif." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 4) CORN prices are at record high levels. Costs for other agricultural essentials, from wheat to coffee to rice, have surged, too. And many people are stunned, even frightened, by all the increases.

But some entrepreneurs and analysts -- recognizing that relative price increases in specific goods always encourage innovators to find ways around the problem -- say they see an opportunity for creative solutions.

"When something becomes dear, you invent around it as much as you can," says David Warsh, editor of Economicprincipals.com, a newsletter on trends in economic thinking.

Joel Mokyr, an economic historian at Northwestern University, adds, "All of a sudden, some things that didn't look profitable now do."

. . .

A study in the 1950s by the economist Zvi Griliches of American farmers' adoption of more productive varieties of corn showed how higher prices reduced the cost of adopting new technologies.

. . .

Ultimately, higher food prices give innovators room to cover the cost of protecting human health. But prices are a democratic signal: when all innovators see them, their ability to sneak up on an opportunity, while others nap, vanishes.

"The bigger the prize people are chasing, the more people go after it," says Paul Romer, a theorist on sources of economic growth. "As people pile into an area, the expected return to any one innovator goes down."

Yet, fortunately, the return to society goes up.

For the full commentary, see:

G. PASCAL ZACHARY. "Ping; A Brighter Side of High Prices." The New York Times, SundayBusiness Section (Sun., May 18, 2008): 4.

(Note: ellipses added.)

For more on Zvi Griliches's contributions to the economics of innovation, see:

Diamond, Arthur M., Jr. "Zvi Griliches's Contributions to the Economics of Technology and Growth." Economics of Innovation and New Technology 13, no. 4 (June 2004): 365-397.

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(p. C3) The United States may be synonymous with the high-tech revolution, but it is in danger of losing its high-tech edge, according to Cybercities 2008, a report released Tuesday by AeA, a technology industry trade association.

Because the federal government does not issue a sufficient number of green cards or work visas to talented foreign students studying here, there are a "tremendous number of unfilled jobs," said Christopher Hansen, AeA's chief executive.

"We educate them and then tell them to go home. This is absurd," said Mr. Hansen, whose group has lobbied to increase the number of visas for foreign technology industry workers.

For the full story, see:

ERIC A. TAUB. "U.S. High Tech Said to Slip." The New York Times (Weds., June 25, 2008): C3.

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I agree with the Karl Rove's analysis below, that John McCain does not exhibit much understanding of Schumpeter's process of creative destruction. On the other hand, I have seen no evidence that Barack Obama has any such understanding either. (Nor have I seen any evidence that Rove's former boss, George W. Bush, has any such understanding, for that matter.)

And, in general, I am still of the belief that, overall, between the two of them, McCain will put fewer obstacles in the path of innovation than will Obama.

(p. A13) This past Thursday, Mr. McCain came close to advocating a form of industrial policy, saying, "I'm very angry, frankly, at the oil companies not only because of the obscene profits they've made, but their failure to invest in alternate energy."

But oil and gas companies report that they have invested heavily in alternative energy. Out of the $46 billion spent researching alternative energy in North America from 2000 to 2005, $12 billion came from oil and gas companies, making the industry one of the nation's largest backers of wind and solar power, biofuels, lithium-ion batteries and fuel-cell technology.

Such investments, however, are not as important as money spent on technologies that help find and extract more oil. Because oil companies invested in innovation and technology, they are now tapping reserves that were formerly thought to be unrecoverable. Maybe we are all better off when oil companies invest in what they know, not what they don't.

And do we really want the government deciding how profits should be invested? If so, should Microsoft be forced to invest in Linux-based software or McDonald's in weight-loss research?

Mr. McCain's angry statement shows a lack of understanding of the insights of Joseph Schumpeter, the 20th century economist who explained that capitalism is inherently unstable because a "perennial gale of creative destruction" is brought on by entrepreneurs who create new goods, markets and processes. The entrepreneur is "the pivot on which everything turns," Schumpeter argued, and "proceeds by competitively destroying old businesses."

Most dramatic change comes from new businesses, not old ones. Buggy whip makers did not create the auto industry. Railroads didn't create the airplane. Even when established industries help create new ones, old-line firms are often not as nimble as new ones. IBM helped give rise to personal computers, but didn't see the importance of software and ceded that part of the business to young upstarts who founded Microsoft.

So why should Mr. McCain expect oil and gas companies to lead the way in developing alternative energy? As with past technological change, new enterprises will likely be the drivers of alternative energy innovation.

For the full story, see:

KARL ROVE. "Obama and McCain Spout Economic Nonsense." The Wall Street Journal (Thurs., June 19, 2008): A13.

(Note: I thank John Pagin and Dagny Diamond for alerting me to Rove's discussion of Schumpeter.)

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Caricature of Glenn Britt. Source of caricature: online version of the WSJ article quoted and cited below.

(p. B2) WSJ: You invested $550 million in Clearwire Corp., which is building a wireless broadband network. Why?

Mr. Britt: We saw that as a defensive move. The business today is largely about making voice telephone calls, text messaging, and some data.

This venture is about very fast broadband delivery, but the technologies and the products are as yet not fully defined. It's a bit of a start-up, leap-of-faith kind of thing.

WSJ: What uses could this wireless network be put to?

Mr. Britt: An obvious one is using your laptop in a portable way just as you might today with WiFi hot spots. Another is going to be the PDA, the smallest device you can use to access the Internet. If you have an iPhone you can start seeing what that might look like with a more robust network.

Out in the future, people are talking about machine-to-machine communication, the idea of heart monitors talking to hospitals, your camera automatically uploading photos to Shutterfly or whatever printing service you might use.

WSJ: What about the idea of mobile video delivered to portable devices?

Mr. Britt: I know people talk a lot about mobile video, and I certainly think there is some application for it. But I quite honestly haven't seen it as a big deal. People do want to get video wherever they are. We already have a robust over-the-air television system which, as it goes digital, will be able to have a mobile component to it. But I don't know how big the ultimate market is in this country. I'm skeptical.

For the full story, see:

VISHESH KUMAR. "BOSS TALK; Cable Boss Airs Growth Plans; Time Warner Cable CEO Sees New Freedoms, Threats After Its Spinoff." The Wall Street Journal (Mon., June 2, 2008): B1-B2.

(Note: the title of the online version of the article is "BOSS TALK; Grappling With Cable's Future; Time Warner's Glenn Britt Sees Freedoms, Threats As Unit Readies for Spinoff.")

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

(p. A23) . . . the impact of our technological innovation has helped lift untold numbers out of poverty.

This technology has created massive amounts of change. Like the Industrial Revolution before it, the current transformation is anything but pain-free. It's what Joseph Schumpeter called creative destruction. Google, Craigslist and Microsoft have been prospering. General Motors, United Airlines and the New York Times have not. In the midst of layoffs in the newsroom, it's hard to see anything good happening in the rest of the economy.

For the full commentary, see

BRIAN WESBURY. "Change We Can Believe In Is All Around Us." The Wall Street Journal (Weds., June 11, 2008): A23.

(Note: ellipsis added.)

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In the book The Genome War, the story is told about how the leading theorist proved the impossibility of the gene sequencing technique. It was the Venter group that gave it a try and proved it could work. This story is similar to the one about theory saying that what Marconi was trying, was impossible. (See: Larson, 2006.)

Rosenberg and Birdzell (1986) discuss the case that theory had proven how solid objects fall. But Galileo's experiments proved them wrong. This established the primacy of experiment and evidence, over theory.

When governments decide, they usually do what is safe, which is to follow current theory (or in rare cases, they pick Lysenko).

The entrepreneurial system, takes advantage of the tacit individual knowledge that is out there, but not yet theoretically defensible, and allows it to percolate to success.

References:

Larson, Erik. Thunderstruck. New York: Crown, 2006.

Rosenberg, Nathan, and L.E. Birdzell, Jr. How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books, 1986.

Shreeve, James. The Genome War: How Craig Venter Tried to Capture the Code of Life and Save the World. 1st ed. New York: Alfred A. Knopf, 2004.

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Source of book image: http://www.genomenewsnetwork.org/articles/2004/02/20/genome_war.php

The race to decode the genome always seemed like an appealing test case of the relative efficiency of government versus private enterprise. But the results seem muddy because sometimes in the media the outcome has been described as a win for Craig Venter's private Celera corporation, and other times, as a tie.

For years I have wanted to learn more, and now I have finally done so by reading James Shreeve's fascinating The Genome War.

It is clear from the book that the entrance of Celera, greatly accelerated the government's own efforts to sequence the human genome. So one important lesson is that, no matter who "won the race, the consumer benefited from the entrance of a private competitor.

Also clear, is that Venter's group took advantage of public resources and results. Their primary zeal was for sequencing the genome, rather than for promoting private enterprise.

Regrettably, this is a common case: many entrepreneurs take the institutions of their economy as given, and make use of government when it suits their short-run objectives.

Officially the results were announced as a tie. But the main bone of contention had been over Celera's advocacy and use of the "whole genome shotgun" technique for sequencing the gene. The government group had attacked the method as impractical and unreliable.

The proof of who "won" in a deeper sense, was that after the contest was over, everyone, including the government, was using the "whole genome shotgun" technique.

Another lesson is that the usual scientific goal of immediately releasing findings, may actually reduce the information available to the public. If, as with the genome, the information is costly to obtain, allowing a period of proprietary ownership of the information, provides private entrepreneurs with the incentive to discover the information in the first place. Another case of unintended consequences: if we fully follow the alleged idealism of academic scientists, we will end up with less scientific knowledge, not more.

Reference to book:

Shreeve, James. The Genome War: How Craig Venter Tried to Capture the Code of Life and Save the World. 1st ed. New York: Alfred A. Knopf, 2004.

(Note: My comments are based on the whole book. A paragraph on pp. 366-367 is especially important.)

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(p. 258) It is entirely safe to generalize: innovation is more likely to occur in a society that is open to the formation of new enterprises than in a society that relies on its existing organizations for innovation.

Source:

Rosenberg, Nathan, and L.E. Birdzell, Jr. How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books, 1986.

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The dry wit of Rosenberg and Birdzell is illustrated in this justified jab at the idea that technology can be centrally planned:

(p. 258) The advantage of having proposals for innovations considered by many decision centers is illustrated by the microcomputer, which was not undertaken by any of the leading American computer manufacturers, nor by the Soviet Union, nor by the French Commissariat du Plan, nor by MITI in Japan, but which has nevertheless proved widely useful.

Source:

Rosenberg, Nathan, and L.E. Birdzell, Jr. How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books, 1986.

(Note: italics in original.)

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The following passage provides some evidence of the importance of information from science (viz., chemistry) in process improvement. Speaking of chemists:

(p. 247) . . ., with their aid, the life of a rail increased from two years to ten, and the car weight it could bear from eight tons to seventy in the forty years between the Civil War and 1905. Only a very few new technologies have had equal significance.

Source:

Rosenberg, Nathan, and L.E. Birdzell, Jr. How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books, 1986.

(Note: ellipsis added.)

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(p. 246) We found . . . a learned German, Dr. Fricke, and great secrets did the doctor open up to us. [Ore] from mines that had a high reputation was now found to contain ten, fifteen, and even twenty per cent less iron than it had been credited with. Mines that hitherto had a poor reputation we found to be now yielding superior ore. The good was bad and the bad was good, and everything was topsy-turvy. Nine-tenths of all the uncertainties of pig iron making were dispelled under the burning sun of chemical knowledge.

What fools we had been! But there was this consolation: we were not as great fools as our competitors . . . Years after we had taken chemistry to guide (p. 247) us [they] said they could not afford to employ a chemist. Had they known the truth then, they would have known they could not afford to be without one.

Andrew Carnegie as quoted in:

Rosenberg, Nathan, and L.E. Birdzell, Jr. How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books, 1986.

(Note: brackets and ellipses were in the original.)

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"Modern construction, Difference Engine No. 2, 2005"   Source of caption and photo: http://www.computerhistory.org/babbage/overview/

Charles Babbage is best known as the inventor of an early computer, but he also made some early, stimulating contributions to the economics of science.

(p. C6) The oldest computer has landed in Silicon Valley, where they design the newest computers.

The Science Museum in London has built two replicas from Charles Babbage's original design for the Difference Engine No. 2. Planned from 1847 to 1849, the five-ton, 8,000-part system for calculating the mathematical expressions known as polynomials was finally built in 2002 by a team of engineers that took 17 years to complete the entire project. The machine includes a remarkable printing component that almost certainly would have been the world's first automated typesetter had Babbage built one from his original design during his lifetime.

The all-mechanical Difference Engine can handle numbers to 31 digits of accuracy. The printer produces an ink printout but also has the capability of making a mold for a printing plate. It automatically typesets results in columns and employs two separate font sizes.

For the full story, see:

JOHN MARKOFF. "BITS; 1800s-Style Computer Comes to U.S." The New York Times (Mon., May 5, 2008): C6.

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Levy and Murnane show that the computer has, on average, benefitted the situation of labor. After I presented a similar example at the Summer Institute in 2007, Dave Mitch asked me if this was in general true of advances in technology, or if it might be an exceptional case.

If computers represent one example of creative destruction, another example, in the process variety, would be the advent of factory production. In the following passage, Rosenberg and Birdzell suggest that factories also benefitted the situation of labor:

The low wages, long hours, and oppressive discipline of the early factories are shocking in that the willingness of the inarticulate poor to work on such terms bespeaks, more forcefully than the most eloquent words, the even more abysmal character of the alternatives they had endured in the past. But this was not the way the romantics of the nineteenth century read the message of the factories. (R & B 1986, p. 173)

In the above passage, Rosenberg and Birdzell suggest that the abysmal alternatives to factory work, that the poor faced, may partly have been the result of the enclosure movement having worsened the situation of the lowest agricultural workers, by denying them access to the fallow lands for animal grazing. But, in the passage below, they also imply that to some extent it may just have been due to the secularly persistent suffering that had long characterized much rural life.

Neither the entrepreneurs who built the factories nor anyone else supposed that they were engaged in a work of charity or an exercise of social conscience. But whatever the moral quality of their intentions, their actions advanced the interests of a down-trodden subproletariat---a subproletariat in part, perhaps, characteristic of pre-industrial societies and, in part, drawn from an agricultural work force hard pressed by the enclosure movement and a high rate of growth in agricultural productivity. (R & B 1986, p. 174)

They further point out that, although everyone was supposed to be compensated for losses from enclosure, the interests of the poorest were not well-represented in the decision-making bodies:

In theory, the acts compensated the cottagers for the loss of their common rights by giving them some of the enclosed land. But the cottagers were not effectively represented in Parliament, and there is much reason to believe that the compensation was in practice inadequate. (R & B 1986, p. 171)

DeLong and Summers note enclosure as one of the major institutional/policy actions that enabled a past episode of creative destruction to create a past 'new economy.' But the fact (if it is a fact) that a majority of farm labor was hurt by the enclosure, does not imply that this had to have been the case. It may in fact illustrate one of the major pints of DeLong and Summers, namely that it is extremely important to try to get institutions and policies right.

Sources mentioned above:

DeLong, J. Bradford, and Lawrence H. Summers. "The "New Economy": Background, Questions and Speculations." Federal Reserve Bank of Kansas City Economic Review (2001): 29-59.

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

Rosenberg, Nathan, and L.E. Birdzell, Jr. How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books, 1986.

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Source of image of the books: http://www.buy.com/prod/the-new-palgrave-dictionary-of-economics-second-edition/q/loc/106/204470936.html

Today (May 30, 2008) is the publication date of the second edition of The New Palgrave Dictionary of Economics, which includes my "Economics of Science" article. The article surveys the history and current status of research on the economics of science, and the relationship of the economics of science to the economics of technology.

For a much earlier, and much longer, take on some of the same issues, see "The Economics of Science."

References to both articles:

Diamond, Arthur M., Jr. "Economics of Science." In The New Palgrave Dictionary of Economics, 2nd Edition, edited by Steven N. Durlauf and Lawrence E.Blume. Basingstoke and New York: Palgrave Macmillan, 2008.

Diamond, Arthur M., Jr. "The Economics of Science." Knowledge and Policy 9, no. 2 & 3 (1996): 6-49.

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"A rendering of XCOR's Lynx rocket-powered vehicle." Source of the caption and image: online version of the WSJ article quoted and cited below.

(p. B1) A price war already is brewing among companies seeking to sign up would-be space tourists, years before the first privately financed rocketplanes are scheduled to begin flying.

XCOR Aerospace of Mojave, Calif., the latest entrant to the derby to blast thrill-seekers into the upper reaches of the atmosphere, is expected to unveil plans Wednesday for a rocket-powered vehicle that is substantially smaller, slower and less expensive to build than any of those proposed by rivals. With tickets projected at $100,000 a pop, the low-fare carrier to the heavens would hardly be cheap.

Anticipated to cost less than $10 million to build and to be more compact than many propeller planes used by recreational pilots, XCOR's Lynx vehicle is intended to carry a pilot and a single passenger at twice the speed of sound to about 37 miles above the earth. The entire outing, which would begin and end at a conventional airport and include about two minutes of suborbital zero gravity, would take less than half an hour.

That is a significantly shorter trip -- and only about half the ticket price -- envisioned by British billionaire Sir Richard Branson on his Virgin Galactic spaceship. A sleek and more powerful six-passenger craft, it is designed to travel at about four times the speed of sound and zoom completely out of the atmosphere -- reaching true space more than 60 miles above the earth.

For the full story, see:

ANDY PASZTOR. "Economy Fare ( $100,000) Lifts Space-Tourism Race." The Wall Street Journal (Weds., March 26, 2008): B1-B2.

"Virgin Galactic will launch its rocket from a plane." Source of the caption and image: online version of the WSJ article quoted and cited above.

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

(p. B1) Corning Inc. has survived for 157 years by betting big on new technologies, from ruby-colored railroad signals to fiber-optic cable to flat-panel TVs. And now the glass and ceramics manufacturer is making its biggest research bet ever.

Under pressure to find its next hit, the company has spent half a billion dollars -- its biggest wager yet -- that tougher regulations in the U.S., Europe and Japan will boost demand for its emissions filters for diesel cars and trucks.

. . .

An investment 25 years ago has turned Corning into the world's largest maker of liquid-crystal-display glass used in flat-panel TVs and computers. But another wager, which made it the biggest producer of optical fiber during the 1990s, almost sank the company when the tech boom turned into a bust.

In Erwin, a few miles from the company's headquarters in Corning, the glassmaker is spending $300 million to ex-(p. B2)pand research labs. There, some 1,700 scientists work on hundreds of speculative projects, from next-generation lasers to optical sensors that could speed the discovery of drugs.

"Culturally, they're not afraid to invest and lose money for many years," says UBS analyst Nikos Theodosopoulos. "That style is not American any more."

Corning also goes against the grain in manufacturing. While it has joined the pack in moving most of its production overseas, it eschews outsourcing and continues to own and operate the 50 factories that churn out thousands of its different products.

Corning argues that retaining control of research and manufacturing is both a competitive advantage and a form of risk management. Its strategy is to keep an array of products in the pipeline and, once a market develops, to build factories to quickly produce in volumes that keep rivals from gaining traction.

For the full story, see:

SARA SILVER. "Corning's Biggest Bet Yet? Diesel-Filter Technologies." The Wall Street Journal (Fri., March 7, 2008): B1-B2.

(Note: ellipsis added.)

"Corning DuraTrap diesel-engine filter." Source of caption and photo: online version of the WSJ article quoted and cited above.

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(p. 492) The long-standing trend away from value produced by manual labor and natural resources and toward the intangible value-added we associate with the digital econnomy can be expected to continue. Today it takes a lot less physical material to produce a unit of output than it did in generations past. Indeed, the physical amount of materials and fuels either consumed in the production of output or embodied in the output has increased very modestly over the past half century. The output of our economy is not quite literally lighter, but it is close.

Thin fiber-optic cable, for instance, has replaced huge tonnages of copper wire. New architectural, engineering, and materials technologies have enabled the construction of buildings enclosing the same space with far less physical material than was required fifty or one hundred years ago. Mobile phones have not only downsized but also morphed into multipurpose communication devices. The movement over the decades toward production of services that require little physical input has also been a major contributor to the marked rise in the ratio of constant dollars of GDP to tons of input.

Source:

Greenspan, Alan. The Age of Turbulence: Adventures in a New World Economic Flexibility. New York: Penguin Press, 2007.

(Note: italics in original.)

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"Apple's chief executive, Steven P. Jobs, left, and the venture capitalist John Doerr at Apple headquarters in Cupertino, Calif." Source of caption and photo: online version of the NYT article cited below.

(p. C3) CUPERTINO, Calif. -- Steven P. Jobs, Apple's chief executive, is hoping to expand the iPhone's appeal by luring software developers to create programs for it.

John Doerr, the venture capitalist, is adding an incentive: his firm is putting