March 2011 – Page 3 – artdiamondblog.com

“Rocket” Showed the Motive Power of the Industrial Revolution

Stephenson’s steam locomotive, called “Rocket,” won the Rainhill Trials in 1829. Rosen uses this as the culminating event in his history of the development of steam power.

(p. 310) The reason for ending with Stephenson’s triumph . . . seems persuasive. Rainhill was a victory not merely for George and Robert Stephenson, but for Thomas Saverv and Thomas Newcomen, for James Watt and Matthew Boulton, for Oliver Evans and Richard Trevithick. It was a triumph for the iron mongers of the Severn Valley, the weavers of Lancashire, the colliers of Newcastle, and the miners of Cornwall. It was even a triumph for John Locke and Edward Coke, whose ideas ignited the Rocket just as much as its firebox did.

When the American transcendentalist Ralph Waldo Emerson met Stephenson in 1847, he remarked, “he had the lives of many men in him.”
Perhaps that’s what he meant.

Source:
Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.
(Note: italics in original; ellipsis added.)

Egypt’s Urban Decline as Cause (or Symptom) of Slow Growth

Source of graphs: online version of the NYT article quoted and cited below.

We all know that correlation is not the same as causation. The main cause of Egypt’s slow growth is its lack of institutions and policies supporting entrepreneurial capitalism, and not the decline of Egyptian cities. (But the decline of Egyptian cities does not help.)

(p. B1) Since then, the cities of Asia have expanded rapidly, drawing in millions of peasant farmers looking for a better life — and, more often than not, finding it. Almost 50 percent of East Asians now live in cities. And Egypt? It is the only large country to have become less urban in the last 30 years, according to the World Bank. About 43 percent of Egyptians are city dwellers today.

This urban stagnation helps explain Egypt’s broader stagnation. As tough as city life in poor countries can be, it’s also fertile ground for economic growth. Nearly everything can be done more efficiently in a well-run city, be it plumbing, transportation or the generation of new ideas and businesses. “Being around other people,” says Paul Romer, the economist and growth expert, “helps make us smarter.”
Edward Glaeser, a Harvard economist (and weekly contributor to the Times’s Economix blog), has just published a book, “The Triumph of the City, making the case that cities are humanity’s greatest invention. Countries that become more urban tend to become far more productive, Mr. Glaeser writes. The effect is even bigger for poor countries than rich ones.
. . .
Three researchers — Michael Clemens, Lant Pritchett and Claudio Montenegro — recently found a novel way to measure how well various countries use the workers they have. The three compared the wages of immigrants to the United States with the wages of similar workers from the same country who remained home.
A 35-year-old urban Egyptian man with a high school education who moves to the United States can expect an incredible eightfold increase in living standards, the researchers found. Immigrants from only two countries, Yemen and Nigeria, receive a larger boost. In effect, these are the countries with the biggest gap between what their workers can produce in a different environment and what they are actually producing at home.
No wonder 19 percent of Egyptians told Gallup (well before the protests) that they would move to another country if they could. Mr. Clemens says that for every green card the United States awarded in a recent immigration lottery, 146 Egyptians had applied.

For the full commentary, see:
DAVID LEONHARDT. “Economic Scene; For Egypt, a Fresh Start, With Cities.” The New York Times (Weds., February 16, 2011): B1 & B11.
(Note: ellipsis added.)
(Note: the online version of the article was dated February 15, 2011.)

The scholarly article summarized is:
Clemens, Michael, Claudio Montenegro, and Lant Pritchett. “The Place Premium: Wage Differences for Identical Workers across the Us Border.” HKS Faculty Research Working Paper Series # RWP09-004, January 2009.

The Glaeser book is:
Glaeser, Edward L. Triumph of the City: How Our Greatest Invention Makes Us Richer, Smarter, Greener, Healthier, and Happier. New York: Penguin Press, 2011.

Warren Buffett Says “the American System” Unleashes “Human Potential”

(p. 16) Mr. Buffett said Berkshire last year spent more than $5 billion on property and equipment in the United States – more than 90 percent of the company’s total expenditure – and that the overwhelming part of the company’s future investment will be at home.

“The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential – a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War – remains alive and effective,” he wrote.
“Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead.”

For the full story, see:
PETER LATTMAN. “Buffett Plans to Buy Local, Investing Mostly in the U.S.” The New York Times, First Section (Sun., February 27, 2011): 16.
(Note: the online version of the article was dated February 26, 2011 and has the title “As Berkshire Improves, Buffett Sings Praises of U.S.”)

Russia Boldly Seeks Oil in Arctic

“The Prirazlomnaya oil platform was brought to the Arctic seaport of Murmansk, 906 miles north of Moscow, to be adjusted.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B1) MOSCOW — The Arctic Ocean is a forbidding place for oil drillers. But that is not stopping Russia from jumping in — or Western oil companies from eagerly following.

Russia, where onshore oil reserves are slowly dwindling, last month signed an Arctic exploration deal with the British petroleum giant BP, whose offshore drilling prospects in the United States were dimmed by the Gulf of Mexico disaster last year. Other Western oil companies, recognizing Moscow’s openness to new ocean drilling, are now having similar discussions with Russia.

For the full story, see:
ANDREW E. KRAMER and CLIFFORD KRAUSS. “Russia Embraces Arctic Drilling.” The New York Times (Weds., February 16, 2011): B1-B2.
(Note: the online version of the article was dated February 15, 2011 and had the title “Russia Embraces Offshore Arctic Drilling.”)

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

Better Rails Were Needed Before Train Would “Work”

(p. 300) The other weight problem was the one that licked Trevithick at Penydarren: The tracks on which the locomotive ran were just not able to survive the tonnage traveling over them. Driving a five-ton steam locomotive over rails designed for horse-drawn carts was only slightly more sensible than driving a school bus over a bridge made of wet ice cubes. In both cases, it’s a close call whether the vehicle will skid before or after the surface collapses.

. . .
(p. 301) Two years later, Stephenson, in collaboration with the ironmonger William Losh of Newcastle, produced, and in September 1816 jointly patented, a series of’ improvements in wheels, suspension, and–most important–the method by which the rails and “chairs” connected one piece of track to another. Stephenson’s rails seem mundane next to better-known eureka moments, but as much as any other innovation of the day they underline the importance of such micro-inventions in the making of a revolution. For it was the rails that finally made the entire network of devices–engine, linkage, wheel, and track–work.

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

What a Picture Is Worth

“In Cairo, Egyptian youths used laptops to post video they had shot earlier Tuesday in Tahir Square. The group has been collecting accounts of the demonstrations and voices of the protesters, putting them on social networking sites like Facebook and Twitter.” Source of caption and photo: online version of the NYT article quoted and cited below.

The photo above was at the top of the first page of the New York Times on Weds., Feb. 9, 2011. You have a group of lively, engaged, young people intoxicated with the idea that they may be helping to bring their country freedom. And in the center of the dark picture, amidst the conversations, is one youth looking with concentration at an Apple laptop, the sole source of color and illumination.
If I was Steve Jobs, I would value this one photo at more than a whole hour’s worth of Superbowl ads.

The photo above was placed above the following story on the front page of the NYT:
DAVID D. KIRKPATRICK. “As Egypt Protest Swells, U.S. Sends Specific Demands.” The New York Times (Weds., February 9, 2011): A1 & A12.
(Note: the online version of the article is dated February 8, 2011.)

Caballero Worries about the Relevance of Mainstream Macro Modeling

In the past, I have found some of MIT economist Ricardo Caballero’s research useful because he takes Schumpeter’s process of creative destruction seriously.
In a recent paper, he joins a growing number of mainstream economists who worry that the recent and continuing economic crisis has implications for the methodology of economics:

In this paper I argue that the current core of macroeconomics–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 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.

Source:
Caballero, Ricardo J. “Macroeconomics after the Crisis: Time to Deal with the Pretense-of-Knowledge Syndrome.” NBER Working Paper # w16429, October 2010.

The paper has been published as:
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.

The “Golden Age” When Enemy Blood Was Sipped from Skull-Cups

“Skull-cups found in Somerset, England, were worked with flint tools 14,700 years ago.” Source of caption and photo: online version of the NYT article quoted and cited below.

If you are one of those who longs nostalgically for the “Golden Age” of our hunter-gatherer paleolithic past, read on:

(p. D3) The three human braincases, two from adults and one from a child, were carefully skinned and cleaned with flint tools. The soft tissue was removed and probably consumed, leaving a well-shaped cup, perhaps made for use in some sort of ritual.

This is not a scene from a horror film. British paleoanthropologists report the discovery of these 14,700-year-old skull-cups in the journal PLoS One. They were found in Gough’s Cave in Somerset, England, and are the oldest directly dated skull-cups known, based on radiocarbon analysis.
. . .
Historical accounts hold that other human societies, like the Scythians, nomadic Indo-European warriors, used skull-cups to sip the blood of enemies. And as late as the 19th century, skull-cups were reportedly used in Fiji and other islands in Oceania.

For the full story, see:
Bhanoo, Sindya N. “Observatory; Skull-Cups in British Cave Conjure an Ancient Rite.” The New York Times (Tues., February 22, 2011): D3.
(Note: ellipsis added.)
(Note: the online version of the article was dated February 16 (sic), 2011.)

The scholarly article summarized is:
Bello, Silvia M., Simon A. Parfitt, and Chris B. Stringer. “Earliest Directly-Dated Human Skull-Cups.” PLoS ONE 6, no. 2 e17026 (Feb. 2011).

France Lacked Good Patent Laws; Great French Inventors “Died Penniless”

(p. 367) If one secret to sustaining an inventive culture was making inventors into national heroes, it was a secret that didn’t translate well into French. Between 1740 and 1780, the French inclination to reward inventors not by enforcing a natural right but by the grant of pensions and prizes resulted in the award of nearly 7 million livres–approximately $600 million today–to inventors of largely forgot-(p. 268)ten devices, but Claude-François Jouffroy d’Abbans (inventor of one of the first working steamboats), Barthélemy Thimonnier (creator of the first sewing machine), and Airné Argand (a partner of Boulton and friend of Watt whose oil lamp became the world’s standard) all died penniless.

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

Occupational Licensing Adds Billions a Year to Cost of Services

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

(p. A1) . . . economists–and workers shut out of fields by educational requirements or difficult exams–say licensing mostly serves as a form of protectionism, allowing veterans of the trade to box out competitors who might undercut them on price or offer new services.

“Occupations prefer to be li-(p. A16)censed because they can restrict competition and obtain higher wages,” said Morris Kleiner, a labor professor at the University of Minnesota. “If you go to any statehouse, you’ll see a line of occupations out the door wanting to be licensed.”
While some states have long required licensing for workers who handle food or touch others–caterers and hair stylists, for example–economists say such regulation is spreading to more states for more industries. The most recent study, from 2008, found 23% of U.S. workers were required to obtain state licenses, up from just 5% in 1950, according to data from Mr. Kleiner. In the mid-1980s, about 800 professions were licensed in at least one state. Today, at least 1,100 are, according to the Council on Licensure, Enforcement and Regulation, a trade group for regulatory bodies. Among the professions licensed by one or more states: florists, interior designers, private detectives, hearing-aid fitters, conveyor-belt operators and retailers of frozen desserts.
. . .
Mr. Kleiner, of the University of Minnesota, looked at census data covering several occupations that are regulated in some states but not others, including librarians, nutritionists and respiratory therapists. He found that employment growth in those professions was about 20% greater, on average, in the unregulated states between 1990 and 2000.
Licensing can also drive up costs to consumers. Licensed workers earn, on average, 15% more than their unlicensed counterparts in other states–a premium that may be reflected in their prices, according to a study published by the National Bureau of Economic Research and conducted by Mr. Kleiner and Alan Krueger, an economist at Princeton University.
Mr. Kleiner estimates that across the U.S. economy, occupational licensing adds at least $116 billion a year to the cost of services, which amounts to about 1% of total consumer spending. In a look at dentistry, Mr. Kleiner found that the average price of dental services rose 11% when a state made it more difficult to get a dental license.

For the full story, see:

STEPHANIE SIMON. “A License to Shampoo: Jobs Needing State Approval Rise.” The Wall Street Journal (Mon., February 7, 2011): A1 & A16.
(Note: ellipses added.)

“Some of the jobs that require licensing in one or more states.” Source of caption and table: online version of the WSJ article quoted and cited above.