December 2008 – Page 3 – artdiamondblog.com

“The Authorities Were Shocked” at Private Airport Success

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

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

In most cities, airports are monopolies. Even in cities that have more than one, including New York, Paris and Tokyo, airports are usually owned by the same operator. That means airlines can rarely make the kind of choices passengers take for granted, such as choosing an airport for its efficiency, shopping or lounges.
Not so in Moscow, where two international airports, Domodedovo and Sheremetyevo, owned by rival organizations, battle for business. The result is lower fees, better service and fast-improving facilities all around.
Domodedovo Airport, for example, recently convinced several top airlines to make it their Russian base, thanks to a major modernization that added more than 20 new restaurants, jewelry boutiques and a shop where passengers can rent DVDs to watch in booths.
Sheremetyevo Airport responded by building a fast rail link to Moscow, complete with a Starbucks at the airport station.
Moscow’s airport rivalry highlights a paradox of the global aviation industry: Airlines compete fiercely with each other for customers, but they face many monopolist suppliers, such as air-traffic control systems, fuel distributors and airports. Resulting costs and poor services get passed on to travelers.
. . .
During Russia’s privatization drive of the 1990s, local investors bought Domodedovo, which was previously Moscow’s airport serving Soviet Central Asia. The investors, grouped into an upstart charter-airline operator, East Line Group, renovated a terminal at Domodedovo and oversaw construction of a train line to Moscow.
East Line charged airlines landing and operating fees that undercut Sheremetyevo by around 30%. For passengers, Domodedovo’s rail link guaranteed a 40-minute trip to downtown Moscow. Private Russian carriers, largely frozen out of Aeroflot’s base at Sheremetyevo, expanded quickly at the spacious Domodedovo.
East Line’s big break came in 2003, when British Airways announced it would switch from Sheremetyevo to Domodedovo.
“The authorities were shocked that a major airline would leave the government airport,” recalls Daniel Burkard, BA’s former country manager for Russia.

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

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

“Inebriated with the Exuberance of His Own Verbosity”

Elegant verbal wit is highly entertaining, so long as one is not being skewered by it. I lack the erudition to either affirm or refute the accuracy of Benjamin Disreali’s wonderful description of rival William Gladstone:

A sophistical rhetorician, inebriated with the exuberance of his own verbosity, and gifted with an egotistical imagination that can at all times command an interminable and inconsistent series of arguments to malign an opponent and to glorify himself.

Source: I first heard part of this description quoted by Patrick Allitt in a lecture on Gladstone and Disreali. I found the quotation, as well as the attribution below, online at:
http://www.enotes.com/famous-quotes/a-sophistical-rhetorician-inebriated-with-the

Attribution: Benjamin Disraeli (1804-1881), British statesman, author. Speech, July 27, 1878, Knightsbridge, London. Quoted in Times (London, July 29, 1878). Referring to Prime Minister Gladstone. On another occasion, Disraeli said of Gladstone, “He has not a single redeeming defect.”

I Was Wrong: Apparently the U.S. Auto Industry Does Have a Prayer

“PRAYING FOR A MIRACLE. S.U.V.’s sat on the altar of Greater Grace Temple, a Pentecostal church in Detroit, as congregants prayed to save the auto industry.” Source of the caption and photo: online version of the NYT article quoted and cited below.

The process of creative destruction, requires that failed businesses be allowed to fail, so that the resources (labor and capital) devoted to the failed businesses, can be devoted to more productive uses.
The Danny DeVito character in “Other People’s Money” makes this point in a speech near the end, in which he says that the Gregory Peck character has just delivered a “prayer for the dead” in calling for continued support for a dead business that is technologically obsolete.
On a more personal level, we have always bought cars from Honda and Toyota, because we sincerely believe that they build better cars than Detroit does. By what right does the government force taxpayers to prop up companies whose products have been rejected in the marketplace?
When the economic and moral arguments for bailout fail, all that is left for a failed industry is prayer (and politics)—one more reason to believe that the opportunity cost of prayer, is high.

(p. A19) DETROIT — The Sunday service at Greater Grace Temple began with the Clark Sisters song “I’m Looking for a Miracle” and included a reading of this verse from the Book of Romans: “I consider that our present sufferings are not worth comparing with the glory that will be revealed in us.”

Pentecostal Bishop Charles H. Ellis III, who shared the sanctuary’s wide altar with three gleaming sport utility vehicles, closed his sermon by leading the choir and congregants in a boisterous rendition of the gospel singer Myrna Summers’s “We’re Gonna Make It” as hundreds of worshipers who work in the automotive industry — union assemblers, executives, car salesmen — gathered six deep around the altar to have their foreheads anointed with consecrated oil.

While Congress debated aid to the foundering Detroit automakers Sunday, many here whose future hinges on the decision turned to prayer.

Outside the Corpus Christi Catholic Church, a sign beckoned passers-by inside to hear about “God’s bailout plan.”

For the full story, see:
NICK BUNKLEY. “Detroit Churches Pray for ‘God’s Bailout’.” The New York Times (Mon., December 8, 2008): A19.
(Note: The photo of the top appeared on p. A1 of the print edition of the December 8, 2008 NYT; also, the online version of the article has a date of Dec. 7 instead of the Dec. 8 date of the print version.)

“Worshipers at Greater Grace Temple, a Pentecostal church in Detroit, prayed on Sunday for an automobile industry miracle.” Source of the caption and photo: online version of the NYT article quoted and cited above.

Amateur Leeuwenhoek Made Huge Contribution to Science

(p. 40) Antoni van Leeuwenhoek was a scientific superstar. The greats of Europe traveled from afar to see him and witness his wonders. It was (p. 41) not just the leading minds of the era—Descartes, Spinoza, Leibnitz, and Christopher Wren—but also royalty, the prince of Liechtenstein and Queen Mary, wife of William III of Orange. Peter the great of Russia took van Leeuwenhoek for an afternoon sail on his yacht. Emperor Charles of Spain planned to visit as well but was prevented by a strong eastern storm.

It was nothing that the Dutch businessman had ever expected. He came from an unknown family, had scant education, earned no university degrees, never traveled far from Delft, and knew no language other than Dutch. At age twelve he had been apprenticed to a linen draper, learned the trade, then started his own business as a fabric merchant when he came of age, making ends meet by taking on additional work as a surveyor, wine assayer, and minor city official. He picked up a skill at lens grinding along the way, a sort of hobby he used to make magnifying glasses so he could better see the quality of fabrics he bought and sold. At some point he got hold of a copy of Micrographia, a curious and very popular book by the British scientist Robert Hooke. Filled with illustrations, Micrographia showed what Hooke had sen through a novel instrument made of two properly ground and arranged lenses, called a “microscope.” . . . Micrographia was an international bestseller in its day. Samuel Pepys stayed up until 2:00 A.M. one night poring over it, then told his friends it was “the most ingenious book that I ever read in my life.”

Van Leeuwenhoek, too was fascinated. He tried making his own microscopes and, as it turned out, had talent as a lens grinder. His lens were better than anyone’s in Delft; better than any Hooke had access to; better, it seemed, than any in the world. . . .

(p. 42) Then, in the summer of 1675, he looked deep within a drop of water from a barrel outside and became the first human to see an entirely new world. In that drop he could make out a living menagerie of heretofore invisible animals darting, squirming, and spinning.

Source:
Hager, Thomas. The Demon under the Microscope: From Battlefield Hospitals to Nazi Labs, One Doctor’s Heroic Search for the World’s First Miracle Drug. New York: Three Rivers Press, 2007.
(Note: ellipses added.)

The example above is consistent with Baumol’s hypotheses about formal education mattering less, in the initial stages of great discoveries. (And maybe even being a hindrance).
See:
Baumol, William J. “Education for Innovation: Entrepreneurial Breakthroughs Versus Corporate Incremental Improvements.” In Innovation Policy and the Economy, edited by Adam B. Jaffe, Josh Lerner and Scott Stern, 33-56. Cambridge, Mass.: MIT Press, 2005.

The example is also consistent with Terence Kealey’s claim that important science can often arise as a side-effect of the pursuit of business activity.
See:
Kealey, Terence. The Economic Laws of Scientific Research. New York: St. Martin’s Press, 1996.

In Amsterdam: Expecting the Spanish Inquisition

A cartoon of the cartoonist who calls himself Gregorius Nekschot. Source of the photo: online version of the WSJ article quoted and cited below.

(p. W1) Amsterdam
On a sunny May morning, six plainclothes police officers, two uniformed policemen and a trio of functionaries from the state prosecutor’s office closed in on a small apartment in Amsterdam. Their quarry: a skinny Dutch cartoonist with a rude sense of humor. Informed that he was suspected of sketching offensive drawings of Muslims and other minorities, the Dutchman surrendered without a struggle.
“I never expected the Spanish Inquisition,” recalls the cartoonist, who goes by the nom de plume Gregorius Nekschot, quoting the British comedy team Monty Python. A fan of ribald gags, he’s a caustic foe of religion, particularly Islam. The Quran, crucifixion, sexual organs and goats are among his favorite motifs.
Mr. Nekschot, whose cartoons had appeared mainly on his own Web site, spent the night in a jail cell. Police grabbed his computer, a hard drive and sketch pads. He’s been summoned for further questioning later this month by prosecutors. He hasn’t been charged with a crime, but the prosecutor’s office says he’s been under investigation for three years on suspicion that he violated a Dutch law that forbids discrimination on the basis of race, religion or sexual orientation.
The cartoon affair has come as a shock to a country that sees itself as a bastion of tolerance, a tradition forged by grim memories of bloody conflict between Catholics and Protestants. The Netherlands sheltered Jews and other refugees from the Spanish Inquisition, and Calvinists fleeing persecution in France. Its thinkers helped nurture the 18th-century Enlightenment. Prostitutes, marijuana and pornography have been legal for decades.
“This is serious. It is about freedom of speech,” says Mark Rutte, the leader of a center-right opposition party. Some of Mr. Nekschot’s oeuvre is “really disgusting,” he says, “but that is free speech.”
. . .
Mr. Nekschot, who calls the investigation “surreal,” says, “Not even Monty Python could have come up with this.” (His pen name, Gregorius Nekschot, is a mocking tribute to Gregory IX, a 13th-century pope who set up a Vatican department to hunt down and execute heretics. Nekschot means “shot in the neck” in Dutch.) Some Muslim groups have voiced dismay at his arrest as well. The head of an organization of Moroccan preachers in Holland said authorities seemed “more afraid” of offending Islam than Muslims.
. . .
The cartoonist blames his woes on what he calls Holland’s “political correctness industry,” a network of often state-funded organizations set up to protect Muslims and other minority groups. One of these, an Internet monitoring group known as MDI, says it received dozens of complaints about the cartoonist’s mockery of Islam and first reported him to the prosecutor’s office in 2005.
“We’re not sure what he does is illegal, but there is a possibility that it is not legal,” says the group’s head, Niels van Tamelen. Many of the complaints, he says, came from followers of a controversial Muslim convert called Abdul-Jabbar van de Ven.
Mr. Van de Ven caused an uproar after the 2004 murder of Mr. Van Gogh, when he seemed to welcome the killing on national TV. He said Mr. Wilders, the anti-immigrant legislator, also deserved to die, preferably from cancer. Mr. Nekschot, appalled by the outburst, caricatured the convert as a fatwa-spewing fanatic.

For the full story, see:
ANDREW HIGGINS. “Why Islam Is Unfunny for a Cartoonist; The arrest of a controversial Dutch cartoonist has set off a wave of protests. The case is raising questions for a changing Europe about free speech, religion and art.” The Wall Street Journal (Sat., JULY 12, 2008): W1 & W6.
(Note: ellipses added.)

Reason for Success of U.S. Economy: “We Let People Fail”

McCain’s chief economic adviser and entrepreneur-expert Hotz-Eakin offered some cogent comments on the trend toward more government bailouts at the taxpayers’ expense:

(p. A6) Mr. Obama is by no means an activist in the Japanese mold, said Douglas Holtz-Eakin, an economic adviser to John McCain’s presidential campaign. But as a whole, policies crafted to address distinct problems in the auto, energy and banking sectors are merging into a broader policy that would pick some winners and losers, preserve entire industries and shape consumer choices.

“We’re backing into industrial policy in an emergency to correct massive market failures,” said Jared Bernstein, an economist at the liberal Economic Policy Institute who has worked with the president-elect’s economic team.
. . .
“The reason the U.S. economy was so successful for so long was not because we did things so well. It was because we let people fail.” Mr. Hotz-Eakin said. “This is dangerous at some very deep level.”

For the full story, see:
JONATHAN WEISMAN. “Wider U.S. Interventions Would Yield Winners, Losers as Industries Realign.” The Wall Street Journal (Thurs., NOVEMBER 20, 2008): A6.
(Note: ellipsis added.)
(Note: the final paragraph was in the print edition, but was deleted from the online version.)

75th Anniversary of End of Prohibition

(p. W8) “Prohibition went into effect on January 16, 1920, and blew up at last on December 5, 1933 — an elapsed time of twelve years, ten months and nineteen days,” H.L. Mencken wrote shortly after ratification of the 21st Amendment to the Constitution eliminated the 18th Amendment. “It seemed almost a geologic epoch while it was going on, and the human suffering that it entailed must have been a fair match for that of the Black Death or the Thirty Years War.”

The demise of Prohibition, 75 years ago . . . , is something of a cause for celebration, and it will be treated as such with Repeal Day parties in Washington, Chicago, New Orleans, San Francisco, New York and elsewhere. . . .
. . .
Temperance advocates had argued Prohibition would usher in an era of sober moral rectitude. When it didn’t quite work out that way, public opinion began to turn against the drys. They joined those who opposed Prohibition because it had handed new and oppressive powers to the federal government. Charles Lindbergh’s father-in-law, Dwight Whitney Morrow, won a Senate seat from New Jersey in 1930 running as a Republican against Prohibition. He argued that it had caused Americans to “conceive of the Federal Government as an alien and even a hostile Power.”
And yet, it was finance that finally did Prohibition in. As the nation sank into the Depression, tax revenues dwindled. The prospect of capturing all the liquor excise taxes that had for a decade been missing (and, in effect, had gone into the pockets of bootlegging mobs) was alluring to Democrats and Republicans alike. Pierre du Pont lobbied his fellow plutocrats to support repeal in the vain hope that liquor taxes would replace income taxes. But the New Dealers saw repeal as creating a vast pile of money with which to fund expansive new government programs. Not only did Prohibition and its enforcement increase the size and scope of the federal government, but so did Prohibition’s repeal.

For the full story, see:
ERIC FELTEN. “HOW’S YOUR DRINK; Celebrating Cinco de Drinko.” The Wall Street Journal (Fri., NOVEMBER 28, 2008): W8.
(Note: ellipses added.)

The Benefits from the Discovery of Sulfa, the First Antibiotic

I quoted a review of The Demon Under the Microscope in an entry from October 12, 2006. I finally managed to read the book, last month.
I don’t always agree with Hager’s interpretation of events, and his policy advice, but he writes well, and he has much to say of interest about how the first anti-bacterial antibiotic, sulfa, was developed.
In the coming weeks, I’ll be highlighting a few key passages of special interest. In today’s entry, below, Hager nicely summarizes the importance of the discovery of antibiotics for his (and my) baby boom generation.

(p. 3) I am part of that great demographic bulge, the World War II “Baby Boom” generation, which was the first in history to benefit from birth from the discovery of antibiotics. The impact of this discovery is difficult to overstate. If my parents came down with an ear infection as babies, they were treated with bed rest, painkillers, and sympathy. If I came down with an ear infection as a baby, I got antibiotics. If a cold turned into bronchitis, my parents got more bed rest and anxious vigilance; I got antibiotics. People in my parents’ generation, as children, could and all too often did die from strep throats, infected cuts, scarlet fever, meningitis, pneumonia, or any number of infectious diseases. I and my classmates survived because of antibiotics. My parents as children, and their parents before them, lost friends and relatives, often at very early ages, to bacterial epidemics that swept through American cities every fall and winter, killing tens of thousands. The suddenness and inevitability of these epidemic deaths, facts of life before the 1930s, were for me historical curiosities, artifacts of another age. Antibiotics virtually eliminated them. In many cases, much-feared diseases of my grandparents’ day—erysipelas, childbed fever, cellulitis—had become so rare they were nearly extinct. I never heard the names.

Consumers Bear Costs of Global Warming Policies

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

(p. A10) Leaders of the Group of Eight major industrialized economies, meeting in Japan, issued their first long-term target for cutting global-warming emissions. But their pronouncement failed to address the two toughest questions: How will the world do it, and who will pay?

The answer to the money question is clear: Consumers will pay — at the gasoline pump, at the car dealership and on the monthly electric bill. If the campaign against global warming gets serious, it will transform today’s esoteric environmental threat into a fundamental pocketbook issue for people from Boston to Beijing.

For the full story, see:
JEFFREY BALL. “As Climate Issue Heats Up, Questions of Cost Loom.” The Wall Street Journal (Fri., July 10, 2008): A10.

More Choice is a Robust Result of The Long Tail

I’ve discussed in a previous entry, why The Long Tail is a worthy read. The article quoted below, praises a Harvard Business Review article that disagrees. I haven’t had a chance to read the HBR article yet.
Yet on a fundamental level, I am confident that The Long Tail is right. New technologies such as Amazon and YouTube, reduce the cost of content diversity. If the supply curve of diversity moves right, then (ceteris paribus) the quantity of diverse content will increase. Hence, we can robustly expect more diverse content.
And for us free market libertarians, more choice is good.

(p. B5) The Long Tail theory, as explained by its creator, Wired magazine editor Chris Anderson, holds that society is “increasingly shifting away from a focus on a relatively small number of ‘hits’ (mainstream products and markets) at the head of the demand curve and toward a huge number of niches in the tail.”
The reason involves the abundance of easy choice that the Web makes possible. A record store has room for only a set number of titles. ITunes, though, can link to all of the millions of songs that its servers can store. Thus, said Mr. Anderson, “narrowly-targeted goods and services can be as economically attractive as mainstream fare.” Managers were urged to adopt their business plans accordingly.
Since appearing two years ago, the book has been something of a sacred text in Silicon Valley. Business plans that foresaw only modest commercial prospects for their products cited the Long Tail to justify themselves, as it had apparently proved that the Web allows a market for items besides super-hits. If you demurred, you were met with a look of pity and contempt, as though you had just admitted to still using a Kaypro.
That might now start to change, thanks to the article (online at tinyurl.com/3rg5gp), by Anita Elberse, a marketing professor at Harvard’s business school who takes the same statistically rigorous approach to entertainment and cultural industries that sabermetricians do to baseball.
Prof. Elberse looked at data for online video rentals and song purchases, and discovered that the patterns by which people shop online are essentially the same as the ones from offline. Not only do hits and blockbusters remain every bit as important online, but the evidence suggests that the Web is actually causing their role to grow, not shrink.
Mr. Anderson responded on his Long Tail blog, thelongtail.com, saying much of the difference between his analysis and hers involved how hits and non-hits, or “head” and “tail” in the book’s lingo, are measured. Aside from that, he was generous in praising the article, and said he welcomed the sort of rigorous scrutiny the theory was getting.

For the full commentary, see:
LEE GOMES. “PORTALS; Study Refutes Niche Theory Spawned by Web.” The Wall Street Journal (Weds., JULY 2, 2008): B5.

The full information on The Long Tail, is:
Anderson, Chris. The Long Tail. New York: Hyperion, 2006.

The HBR article that is critical of the long tail, is:
Elberse, Anita. “Should You Invest in the Long Tail?” Harvard Business Review 86, no. 7/8 (2008): 88-96.