November 2013 – Page 2 – artdiamondblog.com

Companies Do Less R&D in Countries that Steal Intellectual Property

The conclusions of Gupta and Wang, quoted below, are consistent with research done many years ago by economist Edwin Mansfield.

(p. A15) China’s indigenous innovation program, launched in 2006, has alarmed the world’s technology giants more than any other policy measure since the start of economic reforms in 1978. A recent report from the U.S. Chamber of Commerce even went so far as to call this program “a blueprint for technology theft on a scale the world has not seen before.”
. . .
A comparison with India is illustrative. India has no equivalent to indigenous innovation rules. The government also is content to allow companies to set up R&D facilities without any rules about sharing technology with local partners or the like.
These policy differences appear to have a significant influence on corporate behavior. Consider the top 10 U.S.-based technology giants that received the most patents from the U.S. Patent and Trademark Office (USPTO) between 2006 and 2010: IBM, Microsoft, Intel, Hewlett-Packard, Micron, GE, Cisco, Texas Instruments, Broadcom and Honeywell.
Half of these companies appear not to be doing any significant R&D work in China. Between 2006 and 2010, the U.S. PTO did not award a single patent to any China-based units of five out of the 10 companies. In contrast, only one of the 10 did not receive a patent for an innovation developed in India.

For the full commentary, see:
Anil K. Gupta and Haiyan Wang. “How Beijing Is Stifling Chinese Innovation.” The Wall Street Journal (Thurs., September 1, 2011): A15.
(Note: ellipsis added.)
(Note: the online version of the commentary has the title “Beijing Is Stifling Chinese Innovation.”)

Mansfield’s relevant paper is:
Mansfield, Edwin. “Unauthorized Use of Intellectual Property: Effects on Investment, Technology Transfer, and Innovation.” In Global Dimensions of Intellectual Property Rights in Science and Technology, edited by M. E. Mogee M. B. Wallerstein, and R. A. Schoen. Washington, D.C.: National Academy Press, 1993, pp. 107-45.

Mansfield’s research on this issue is discussed on pp. 1611-1612 of:
Diamond, Arthur M., Jr. “Edwin Mansfield’s Contributions to the Economics of Technology.” Research Policy 32, no. 9 (Oct. 2003): 1607-17.

Booker Bravely Boosted Bain

“Cory A. Booker, right, the Democratic mayor of Newark, on “Meet the Press” with Mike Murphy, a Republican strategist. “Enough is enough,” Mr. Booker said of attacks in the presidential race.” Source of caption and photo: online version of the NYT article quoted and cited below.

Romney was criticized for his past association with Bain Capital which was criticized for its role in the process of creative destruction. Democrat Cory Booker, to his credit, defended Bain. (But to his discredit, he later went wobbly when fellow Democrats were appalled by his defense.)

(p. A15) Mayor Cory A. Booker of Newark, a prominent Democrat enlisted as a surrogate for President Obama’s campaign, sharply criticized it on Sunday for attacking Mitt Romney’s work at the private equity firm Bain Capital.

Mr. Booker, speaking on the NBC program “Meet the Press,” made his comments in response to a television advertisement the president’s campaign unveiled last week. It portrays Mr. Romney, the presumptive Republican presidential nominee, as someone who eliminated jobs for the sake of profits during his years running Bain Capital.
“I have to just say, from a very personal level, I’m not about to sit here and indict private equity,” Mr. Booker said. “To me, it’s just we’re getting to a ridiculous point in America, especially that I know I live in a state where pension funds, unions and other people are investing in companies like Bain Capital. If you look at the totality of Bain Capital’s record, they’ve done a lot to support businesses, to grow businesses. And this to me, I’m very uncomfortable with.”

For the full story, see:
RAYMOND HERNANDEZ. “Newark Mayor Criticizes Obama’s Ad.” The New York Times (Mon., May 21, 2012): A15.
(Note: the online version of the article has the date May 20, 2012, and has the title “Surrogate for Obama Denounces Anti-Romney Ad.”)

Google Was Lax in Killing Failed Projects

(p. 255) Oddly, whereas Google had built its data infrastructure to reroute around failure, it had no human infrastructure to deal with failed projects. “We didn’t know which ones they were, because we never paused to ask ourselves that question,” says Pichette. “The people working on that project know it’s failing– as senior management you have to say, ‘Let’s declare failure– let’s get the champagne out and kill this puppy. Then we can put you on stuff that’s really cool and sexy.'” That had always been part of Google’s philosophy, but whether from lack of rigor or just distraction, the company had been lax in actually issuing execution orders. One of the first puppies Pichette helped drown was a virtual-reality-style communications program called Lively.

Source:
Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.

Foreign Aid Frees Despots from Having to Seek the Consent of the Governed

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

(p. 4) IN his new book, Angus Deaton, an expert’s expert on global poverty and foreign aid, puts his considerable reputation on the line and declares that foreign aid does more harm than good. It corrupts governments and rarely reaches the poor, he argues, and it is high time for the paternalistic West to step away and allow the developing world to solve its own problems.

It is a provocative and cogently argued claim. The only odd part is how it is made. It is tacked on as the concluding section of “The Great Escape: Health, Wealth, and the Origins of Inequality” (Princeton University Press, 360 pages), an illuminating and inspiring history of how mankind’s longevity and prosperity have soared to breathtaking heights in modern times.
. . .
THE author has found no credible evidence that foreign aid promotes economic growth; indeed, he says, signs show that the relationship is negative. Regretfully, he identifies a “central dilemma”: When the conditions for development are present, aid is not required. When they do not exist, aid is not useful and probably damaging.
Professor Deaton makes the case that foreign aid is antidemocratic because it frees local leaders from having to obtain the consent of the governed. “Western-led population control, often with the assistance of nondemocratic or well-rewarded recipient governments, is the most egregious example of antidemocratic and oppressive aid,” he writes. In its day, it seemed like a no-brainer. Yet the global population grew by four billion in half a century, and the vast majority of the seven billion people now on the planet live longer and more prosperous lives than their parents did.

For the full review, see:
FRED ANDREWS. “OFF THE SHELF; A Surprising Case Against Foreign Aid.” The New York Times, SundayBusiness Section (Sun., October 13, 2013): 4.
(Note: ellipsis added.)
(Note: the online version of the review has the date October 12, 2013.)

The book reviewed is:
Deaton, Angus. The Great Escape: Health, Wealth, and the Origins of Inequality. Princeton, N.J.: Princeton University Press, 2013.

Successful Entrepreneurs Focus Their Attention

(p. A31) Most successful people also have a phenomenal ability to consciously focus their attention. . . .
Control of attention is the ultimate individual power. People who can do that are not prisoners of the stimuli around them. They can choose from the patterns in the world and lengthen their time horizons. This individual power leads to others. It leads to self-control, the ability to formulate strategies in order to resist impulses. If forced to choose, we would all rather our children be poor with self-control than rich without it.
It leads to resilience, the ability to persevere with an idea even when all the influences in the world say it can’t be done. A common story among entrepreneurs is that people told them they were too stupid to do something, and they set out to prove the jerks wrong.
It leads to creativity. Individuals who can focus attention have the ability to hold a subject or problem in their mind long enough to see it anew.

For the full commentary, see:
DAVID BROOKS. “Lost in the Crowd.” The New York Times (Tues., December 16, 2008): A31.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date December 15, 2008.)

Income of Rich Is More Volatile than Income of Poor or Middle Class

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

(p. C1) During the past three recessions, the top 1% of earners (those making $380,000 or more in 2008) experienced the largest income shocks in percentage terms of any income group in the U.S., according to research from economists Jonathan A. Parker and Annette Vissing-Jorgensen at Northwestern University. When the economy grows, their incomes grow up to three times faster than the rest of the country’s. When the economy (p. C2) falls, their incomes fall two or three times as much.

The super-high earners have the biggest crashes. The number of Americans making $1 million or more fell 40% between 2007 and 2009, to 236,883, while their combined incomes fell by nearly 50%–far greater than the less than 2% drop in total incomes of those making $50,000 or less, according to Internal Revenue Service figures.
. . .
“High beta” is a term used in financial markets to describe a stock or asset that has exaggerated up and down swings with the market. Tech start-ups and casino stocks have high betas, for example. Yet studies show that today’s rich have higher betas than many of the riskiest gambling stocks. Between 1947 and 1982, the beta of the top 1% was a modest 0.72, meaning that their incomes moved relatively in line with the rest of America. Between 1982 and 2007, their beta soared more than three-fold.
What created high-beta wealth? Economists aren’t sure. The rise of the high-betas and the rise in inequality started at the same time, suggesting they have a common cause. Mr. Parker and Ms. Vissing-Jorgenssen cite new communication technologies that allow the best workers and products to be scaled over larger markets, thus making them more sensitive to economic changes. Others cite globalization and the rise of “winner-take-all” pay schemes.

For the full commentary, see:
ROBERT FRANK. “The Wild Ride of the 1%; The once-stable incomes of America’s biggest earners now fluctuate dramatically from year to year. And as go the rich, so goes much of the economy.” The Wall Street Journal (Sat., October 22, 2011): C1-C2.
(Note: ellipsis added.)

The Parker and Vissing-Jorgenssen paper is:
Parker, Jonathan A., and Annette Vissing-Jorgensen. “The Increase in Income Cyclicality of High-Income Households and Its Relation to the Rise in Top Income Shares.” Brookings Papers on Economic Activity, no. 2 (Fall 2010): 1-70.

Google Gave YouTube Entrepreneurial Autonomy

(p. 250) But after the purchase [of YouTube], Google did something very smart. Almost as if acknowledging that overattention from the top had hobbled Google’s original video effort, the company made a conscious decision not to integrate YouTube. “They were edgy and small, and we were getting big,” says Drummond. “We didn’t want to screw them up.” (Google was also smarting from its $ 900 million acquisition of dMarc Broadcasting, a company dealing in radio advertising, which had not gone well. “They had tried more of a top-down approach with dMarc and considered that a disaster,” says Hurley.) YouTube would keep its brand and even stay in the building it had recently occupied in San Bruno, a former headquarters of the Gap.

Source:
Levy, Steven. In the Plex: How Google Thinks, Works, and Shapes Our Lives. New York: Simon & Schuster, 2011.
(Note: bracketed words added.)

Greenspan’s Epiphany: As Entitlements Rise, Savings Fall

Source of book image: http://s.wsj.net/public/resources/images/BN-AB661_bkrvgr_GV_20131021130523.jpg

(p. C11) In his new book “The Map and the Territory,” to be released on Tuesday, Mr. Greenspan, 87, goes on a hunt for what has gone wrong in American politics and in the U.S. economy.
. . .
Mr. Greenspan’s biggest revelation came one day about a year ago when he was playing with gross domestic savings numbers. What he found, to his surprise and initial skepticism, was that an increase in entitlements has closely corresponded to a decline in the country’s savings. “We had this extraordinary increase in benefits, with each party trying to outbid the other,” he says. “That practice has been eroding the country’s flow of savings that’s so critical in financing our capital investment.” The decline in savings has been partly offset by borrowing from abroad, which brings us to our current foreign debt: “$5 trillion and counting,” he says.
. . .
Studying the minutiae of the events leading to the financial crisis brought to mind some lessons from his famous friendship, from the 1950s on, with the late Objectivist philosopher Ayn Rand.
. . .
Mr. Greenspan then believed in analysis based mainly on hard science and empirical facts. Rand told him that unless he considered human nature and its irrational side, he would “miss a very large part of how human beings behaved.” At the time they weren’t discussing economics, but today he realizes the full impact of emotions and instincts on markets. He also has come to admire psychologist and Princeton University professor emeritus Daniel Kahneman’s work applying psychological insights to economic theory, for which he won a Nobel Prize in 2002.
. . .
With his new book, Mr. Greenspan hopes to provide politicians and the public with a road map to avoid making the same mistakes again. His suggestions include reducing entitlements, embracing “creative destruction” by letting facilities with cutting-edge technology displace those with low productivity, and fixing the political system by encouraging bipartisanship.

For the full interview/review, see:
ALEXANDRA WOLFE, interviewer/reviewer. “WEEKEND CONFIDENTIAL; Alan Greenspan.” The Wall Street Journal (Sat., Oct. 19, 2013): C11.
(Note: ellipses added.)
(Note: the online version of the interview/review has the date Oct. 18, 2013, and has the title “WEEKEND CONFIDENTIAL; Alan Greenspan: What Went Wrong; The former Fed chairman on where the economy went wrong, where he went wrong–and Ayn Rand.”)

The book discussed is:
Greenspan, Alan. The Map and the Territory: Risk, Human Nature, and the Future of Forecasting. New York: Penguin Press, 2013.

How Adding Bike Lanes Increases Air Pollution

(p. A1) SAN FRANCISCO — New York is wooing cyclists with chartreuse bike lanes. Chicago is spending nearly $1 million for double-decker bicycle parking.
San Francisco can’t even install new bike racks.
Blame Rob Anderson. At a time when most other cities are encouraging biking as green transport, the 65-year-old local gadfly has stymied cycling-support efforts here by arguing that urban bicycle boosting could actually be bad for the environment. That’s put the brakes on everything from new bike lanes to bike racks while the city works on an environmental-impact report.
. . .
Cars always will vastly outnumber (p. A15) bikes, . . . [Mr. Anderson] reasons, so allotting more street space to cyclists could cause more traffic jams, more idling and more pollution. Mr. Anderson says the city has been blinded by political correctness. It’s an “attempt by the anti-car fanatics to screw up our traffic on behalf of the bicycle fantasy,” he wrote in his blog this month.

For the full story, see:
PHRED DVORAK. “San Francisco Ponders: Could Bike Lanes Cause Pollution?; City Backpedals on a Cycling Plan After Mr. Anderson Goes to Court.” The Wall Street Journal (Weds., Aug. 20, 2008): A1 & A15.
(Note: ellipses, and bracketed name, added.)

Creating Parking Spaces by Variable Meter Pricing Saves Time and Reduces Air Pollution and Double-Parking

“San Francisco is a city chronically plagued with a shortage of street parking. On a recent night in the North Beach neighborhood, the slow chase for a parking space was well under way.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) SAN FRANCISCO — The maddening quest for street parking is not just a tribulation for drivers, but a trial for cities. As much as a third of the traffic in some areas has been attributed to drivers circling as they hunt for spaces. The wearying tradition takes a toll in lost time, polluted air and, when drivers despair, double-parked cars that clog traffic even more.

But San Francisco is trying to shorten the hunt with an ambitious experiment that aims to make sure that there is always at least one empty parking spot available on every block that has meters. The program, which uses new technology and the law of supply and demand, raises the price of parking on the city’s most crowded blocks and lowers it on its emptiest blocks. While the new prices are still being phased in — the most expensive spots have risen to $4.50 an hour, but could reach $6 — preliminary data suggests that the change may be having a positive effect in some areas.

For the full commentary, see:
MICHAEL COOPER and JO CRAVEN McGINTY. “A Meter So Expensive, It Creates Parking Spots.” The New York Times (Fri., March 16, 2012): A1 & A3.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date March 15, 2012.)

“San Francisco has installed sensors and new meters on some blocks to track where cars are parked and set prices accordingly.” Source of caption and photo: online version of the NYT article quoted and cited above.