February 2014 – artdiamondblog.com

Growth Slow Due to Policies Impeding Start-Ups

(p. A11) The most recent period of rapid productivity growth in the U.S.–and rapid economic growth–was in the 1980s and ’90s and reflected the remarkable success of new businesses in information and communications technologies, including Microsoft, Apple, Amazon, Intel and Google. These new companies not only created millions of jobs but transformed modern society, changing how much of the world produces, distributes and markets goods and services.
Rising living standards in the future will depend on the continued success of these businesses but also on the next generation of success stories. Getting the U.S. economy back on track will require a much higher annual rate of new business startups. Sadly, the annual rate of new business creation is about 28% lower today than it was in the 1980s, according to our analysis of the U.S. Census Bureau’s Business Dynamics Statistics annual data series.
Why is the startup rate so low? The answer lies in Washington and the policies implemented in the wake of the 2008 financial crisis that were, ironically, intended to grow and stabilize the economy. . . .
This explosion in federal regulation, intervention and subsidies has retarded productivity growth by protecting incumbents at the expense of more efficient producers, including startups. The number of pages in the Federal Code of Regulations peaked at nearly 175,000 in 2012, an increase of more than 7% in President Obama’s first three years.

For the full commentary, see:
EDWARD C. PRESCOTT and LEE E. OHANIAN. “U.S. Productivity Growth Has Taken a Dive; It has averaged about 1.1% since 2011, less than half the historical rate since 1948. Here’s how to increase it.” The Wall Street Journal (Tues., Feb. 4, 2014): A11.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date Feb. 3, 2014.)

Fired Dissident Xia Yeliang Warns that Chinese Universities Do Not Value Academic Freedom

“Xia Yeliang in New Jersey. Professor Xia, whose firing by Peking University provoked an outcry, is joining the Cato Institute.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A10) A Chinese dissident, dismissed from his job as an economics professor at Peking University after clashes with his government over liberalization, will become a visiting fellow at the Cato Institute on Monday, he said.

In an interview on Friday, the dissident, Xia Yeliang, warned that American universities should be careful about partnerships with Chinese universities. “They use the reputations of Western universities to cover their own scandals,” he said.
“Perhaps Western universities do not realize that Chinese universities do not have the basic value of academic freedom, and try to use Western universities to cover their bad side,” Professor Xia added.

For the full story, see:
TAMAR LEWIN. “Chinese Dissident Lands at Institute With a Caution to Colleges.” The New York Times (Mon., FEB. 10, 2014): A10.
(Note: the online version of the story has the date FEB. 9, 2014, and has the title “Chinese Dissident Lands at Cato Institute With a Caution to Colleges.”)

Carnegie’s Not-Fully-Grown-Infant-Industry Argument for Steel Tariffs

(p. 375) The steel industry was doubly dependent on state and national governments for the generous loans and subsidies that fueled railway expansion and rail purchases and the protective tariffs that enabled the manufacturers to keep their prices–and profits–higher than would have been possible had they been compelled to compete with European steelmakers. If, in the beginning, as Carnegie had argued, the tariff had been needed to nurture an infant steel industry, by the mid-1880s that infant had become a strapping, abrasive youth, who kept on growing. Why then, one might inconveniently ask, was there need for a protective tariff? Because, as Carnegie argued in the North American Review in July 1890, the steel industry was not yet fully grown and would have to be protected until it was.
On the issue of the tariff–as on few others–Pittsburgh’s workingmen were in agreement with Carnegie. They voted Republican in large numbers because the Republicans were the guardians of the protective tariff, and the tariff, they believed, protected their wage rates.
The argument linking the tariff and wages in the manufacturing sector was a compelling one in the industrial states, but nowhere else. As the Democrats took great delight in pointing out, high tariffs led to high prices for all consumers.

Source:
Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.
(Note: italics in original.)
(Note: the pagination of the hardback and paperback editions of Nasaw’s book are the same.)

Catmull’s Pixar Had Technology Serve Story

Source of book image: http://rorotoko.com/images/uploads/gottschall_storytelling_animal.jpg

Ed Catmull, one of the creators of Pixar, discusses a favorite book of 2013. Catmull’s appreciation of the importance of storytelling may help explain why the early Pixar movies were so wonderful:

(p. C6) I am constantly struck by how many people think of stories solely as entertainment–edifying or time-wasting but still: entertainment. “The Storytelling Animal” by Jonathan Gottschall shows that the storytelling part of our brain is deeper and more complex than that, wired into the way we think and learn. This struck me as a powerful idea, that our brain is structured for and shaped by stories whose value goes beyond entertainment and socialization.

For the full article, see:
“12 Months of Reading; We asked 50 of our friends–from April Bloomfield to Mike Tyson–to name their favorite books of 2013.” The Wall Street Journal (Sat., Dec. 14, 2013): C6 & C9-C12.
(Note: the online version of the article has the date Dec. 13, 2013.)

The book that Catmull praises is:
Gottschall, Jonathan. The Storytelling Animal: How Stories Make Us Human. New York: Houghton Mifflin Harcourt, 2012.

Terrorist Threat to Electric Grid Is Overblown

(p. A13) On April 16, 2013, TV stations in Northern California reported a rifle attack on the Metcalf substation near San Jose along with the cutting of a nearby fiber-optic line.
. . .
One expert suggested if the assault were widely replicated around the country, it could take down the grid. Well, yes, but it would require an army. Every substation is different and would have to be scouted separately. And wouldn’t such an army be keen not to give away its presence? And why, if a terrorist had dozens of trained and disciplined fighters to deploy inside the U.S., would their target be utility substations?
. . .
One agency that wasn’t overselling the terrorist threat was the FBI, perhaps because the FBI investigates so many such attacks. Until the Metcalf incident is solved, any motive anyone cares to suggest will be plausible. PG&E has been a hate target of paranoiacs who believe smart meters cause cancer. The substation serves Silicon Valley, which lately has been accruing class enemies from San Francisco “progressives.” Eco-radicals have been quoting Ted Kaczynski for years on the need to attack the vital systems of industrial society. And, yes, the odd al Qaeda enthusiast exists in our midst. So do 15-year-old males with a surfeit of testosterone.

For the full story, see:
HOLMAN W. JENKINS, JR. “Bull’s-Eye on the Electric Grid; There’s nothing new about people shooting out the lights.” The Wall Street Journal (Weds., Feb. 12, 2014): A13.
(Note: ellipses added.)
(Note: the online version of the story has the date Feb. 11, 2014, and the title “Bull’s-Eye on the Utility System; There’s nothing new about people shooting out the lights.”)

Salt Encapsulates Nuclear Waste for “Millions of Years”

“Half a mile beneath the desert surface, in thick salt beds left behind by seas that dried up hundreds of millions of years ago, the Department of Energy is carving out rooms as long as football fields and cramming them floor to ceiling with barrels and boxes of nuclear waste. Metal walls are installed once a “panel” is filled with waste containers and backfilled with salt, shown during a tour of the mines at the Waste Isolation Pilot Plant in Carlsbad, New Mexico.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A9) CARLSBAD, N.M. — Half a mile beneath the desert surface, in thick salt beds left behind by seas that dried up hundreds of millions of years ago, the Department of Energy is carving out rooms as long as football fields and cramming them floor to ceiling with barrels and boxes of nuclear waste.

The salt beds, which have the consistency of crumbly rock so far down in the earth, are what the federal government sees as a natural sealant for the radioactive material left over from making nuclear weapons.
The process is deceptively simple: Plutonium waste from Los Alamos National Laboratory and a variety of defense projects is packed into holes bored into the walls of rooms carved from salt. At a rate of six inches a year, the salt closes in on the waste and encapsulates it for what engineers say will be millions of years.
. . .
Some people despair of finding a place for what officials call a high-level nuclear “repository” — they shy away from “dump” — but Allison M. Macfarlane, a geologist who is chairwoman of the Nuclear Regulatory Commission and who served on a presidential study commission established after the Yucca plan was canceled, said WIPP proves it can be done.
“The main lesson from WIPP is that we have already developed a geologic repository for nuclear waste in this country, so we can in the future,” she said.

For the full story, see:
MATTHEW L. WALD. “Nuclear Waste Solution Seen in Desert Salt Beds.” The New York Times (Mon., FEB. 10, 2014): A9-A10.
(Note: ellipsis added.)
(Note: the online version of the story has the date FEB. 9, 2014.)

Jay Gould Said Railroad Rates Should Be Set by “the Laws of Supply and Demand”

(p. 344) Jay Gould, asked in 1885 by a Senate investigating committee if he believed a “general national law” was needed to regulate railroad rates, responded that they were already regulated by “the laws of supply and demand, production, and consumption.”

Source:
Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.
(Note: the pagination of the hardback and paperback editions of Nasaw’s book are the same.)

Hero Rebels Against the Bureau of Technology Control

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

(p. D8) In “Influx,” . . . , a sinister Bureau of Technology Control kidnaps scientists that have developed breakthrough technologies (the cure to cancer, immortality, true artificial intelligence), and is withholding their discoveries from humanity, out of concern over the massive social disruption they would cause. “We don’t have a perfect record–Steve Jobs was a tricky one–but we’ve managed to catch most of the big disrupters before they’ve brought about uncontrolled social change,” says the head of the bureau, the book’s villain. The hero has developed a “gravity mirror” but refuses to cooperate, despite the best efforts of Alexa, who has been genetically engineered by the Bureau to be both impossibly sexy and brilliant.

In the publishing world, there is a growing sense that “Influx,” Mr. Suarez’s fourth novel, may be his breakout book and propel him into the void left by the deaths of Tom Clancy and Michael Crichton. “Influx’ has Mr. Suarez’s largest initial print run, 50,000 copies, and Twentieth Century Fox bought the movie rights last month.
An English major at the University of Delaware with a knack for computers, Mr. Suarez started a consulting firm in 1997, working with companies like Nestlé on complex production and logistics-planning issues. “You only want to move 100 million pounds of sugar once,” says Mr. Suarez, 49 years old.
He began writing in his free-time. Rejected by 48 literary agents–(a database expert, he kept careful track)–he began self-publishing in 2006 under the name Leinad Zeraus, his named spelled backward. His sophisticated tech knowledge quickly attracted a cult following in Silicon Valley, Redmond, Wash., and Cambridge, Mass. The MIT bookstore was the first bookstore to stock his self-published books in 2007.

For the full review, see:
EBEN SHAPIRO. “Daniel Suarez Sees Into the Future.” The Wall Street Journal (Fri., Feb. 7, 2014): D8.
(Note: ellipsis added.)
(Note: the online version of the review has the date Feb. 5, 2014, and the title “Daniel Suarez Sees Into the Future.”)

The book under review, is:
Suarez, Daniel. Influx. New York: Dutton, 2014.

Author of Influx, Daniel Suarez. Source of photo: online version of the WSJ article quoted and cited above.

The Young, with Managerial Experience, Are Most Likely to Become Entrepreneurs

(p. A13) In a current study analyzing the most recent Global Entrepreneurship Monitor (GEM) survey, my colleagues James Liang, Jackie Wang and I found that there is a strong correlation between youth and entrepreneurship. The GEM survey is an annual assessment of the “entrepreneurial activity, aspirations and attitudes” of thousands of individuals across 65 countries.
In our study of GEM data, which will be issued early next year, we found that young societies tend to generate more new businesses than older societies. Young people are more energetic and have many innovative ideas. But starting a successful business requires more than ideas. Business acumen is essential to the entrepreneur. Previous positions of responsibility in companies provide the skills needed to successfully start businesses, and young workers often do not hold those positions in aging societies, where managerial slots are clogged with older workers.
In earlier work (published in the Journal of Labor Economics, 2005), I found that Stanford MBAs who became entrepreneurs typically worked for others for five to 10 years before starting their own businesses. The GEM data reveal that in the U.S. the entrepreneurship rate peaks for individuals in their late 20s and stays high throughout the 30s. Those in their early 20s have new business ownership rates that are only two-thirds of peak rates. Those in their 50s start businesses at about half the rate of 30-year-olds.
Silicon Valley provides a case in point. Especially during the dot-com era, the Valley was filled with young people who had senior positions in startups. Some of the firms succeeded, but even those that failed provided their managers with valuable business lessons.
My co-author on the GEM study, James Liang, is an example. After spending his early years as a manager at the young and rapidly growing Oracle, he moved back to China to start Ctrip, one of the country’s largest Internet travel sites.

For the full commentary, see:
EDWARD P. LAZEAR. “The Young, the Restless and Economic Growth; Countries with a younger population have far higher rates of entrepreneurship.” The Wall Street Journal (Mon., Dec. 23, 2013): A13.
(Note: the online version of the commentary has the date Dec. 22, 2013.)

The Lazear paper mentioned above, is:
Lazear, Edward P. “Entrepreneurship.” Journal of Labor Economics 23, no. 4 (October 2005): 649-80.

In South Korea, “Spam Is a Classy Gift”

“Spam gift boxes at the Lotte Department Store in Seoul.” Source of caption and photo: online version of the NYT article quoted and cited below.

Often when I explain the concept of an “inferior good” to my micro principles classes, I use the example of Spam, sometimes elaborating that I failed my first attempt to earn the Boy Scouts cooking merit badge, when I was unable to open my can of Spam. I go on to point out that goods that are “inferior” for some people, can be “normal” goods for other people, depending on preferences, and that I had read somewhere that Spam was a treasured gift in South Korea, and hence was probably NOT an inferior good for most South Koreans.
Finally, documentation of my impression:

(p. A1) SEOUL, South Korea — As the Lunar New Year holiday approaches, Seoul’s increasingly well-heeled residents are scouring store shelves for tastefully wrapped boxes of culinary specialties. Among their favorite choices: imported wines, choice cuts of beef, rare herbal teas. And Spam.

Yes, Spam. In the United States, the gelatinous meat product in the familiar blue and yellow cans has held a place as thrifty pantry staple, culinary joke and kitschy fare for hipsters without ever losing its low-rent reputation. But in economically vibrant South Korea, the pink bricks of pork shoulder and ham have taken on a bit of glamour as they have worked their way into people’s affections.
“Here, Spam is a classy gift you can give to people you care about during the holiday,” said Im So-ra, a saleswoman at the high-end Lotte Department Store in downtown Seoul who proudly displayed stylish boxes with cans of Spam nestled inside.
. . .
(p. A7) . . . George H. Lewis, a sociologist at the University of the Pacific, noted in a 2000 article in The Journal of Popular Culture that Spam won its “highest” status in South Korea. Here, he observed, Spam not only outranked Coca-Cola and Kentucky Fried Chicken in status, but was given as a gift “on occasions of importance when one wishes to pay special honor and proper respect.”
. . .
“Spam maintains a mythical aura on the Korean market for reasons that escape many,” mused Koo Se-woong, a lecturer of Korean studies at Yale University’s MacMillan Center for International and Area Studies. “Given Spam’s introduction to South Korea through the U.S. military, it enjoyed an association with prosperity and nutritiousness during an earlier era.”
. . .
“To me, Spam was just a tasteful and convenient food that mother used to cook for us,” she said. “The thing about Spam is that it goes marvelously well with kimchi and rice.”

For the full story, see:
CHOE SANG-HUN. “In South Korea, Spam Is the Stuff Gifts Are Made Of.” The New York Times (Mon., JAN. 27, 2014): A1 & A7.
(Note: the online version of the story has the date JAN. 26, 2014.)

Lewis’ academic article on spam, is:
Lewis, George H. “From Minnesota Fat to Seoul Food: Spam in America and the Pacific Rim.” The Journal of Popular Culture 34, no. 2 (Fall 2000): 83-105.