Author: Art Diamond

Universal Basic Income Increases Taxes and Does Not Increase Work Among Unemployed

(p. 13) HELSINKI, Finland — A basic income made recipients happier than they were on unemployment benefits, a two-year government experiment in Finland has found. But it did not, as proponents had hoped, make them more likely to work.
. . .
The basic income has been controversial, however, with leaders of the main Finnish political parties keen to streamline the benefits system but wary of offering “money for nothing,” especially ahead of parliamentary elections due in April [2019].
. . .
The higher taxes that the Organization for Economic Cooperation and Development says would be needed to pay for basic income schemes might also be off-putting for voters.
In a review of the Finnish scheme last year, the organization warned that implementing it nationally and cost-neutrally for the state would imply significant income redistribution, especially toward couples from single people, and increase poverty.
The researchers have acknowledged that the Finnish pilot was less than realistic because it did not include any tax clawback once participants found work and reached a certain income level.
Swiss voters rejected a similar scheme in 2016.

For the full story, see:
Reuters. “Experiment Explores Income, Jobs and Happiness.” The New York Times, First Section (Sunday, Feb. 10, 2019): 13.
(Note: ellipses, and bracketed year, added.)
(Note: the online version of the story has the date Feb. 9, 2019, and has the title “Finland’s Basic Income Trial Boosts Happiness, but Not Employment.”)

Vernon Smith Offers Advance Praise for Openness to Creative Destruction

Read this book and discover what matters most in economics–ideas and knowledge-how summarized in the word “innovation.” But to fuel innovation resources have to be released from their old incumbent uses and flow into the new. That is the destruction that creates.

Vernon Smith, Nobel Prize in Economics, received in 2002.

Vernon Smith’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.

How the Poor, Hungry, and Determined Can Persevere and Succeed

(p. B1) “I believe tech can be a road to the middle class for large numbers of Americans,” said Mr. Hsu, a co-founder and the chief executive of Pursuit, a nonprofit social venture. “But there’s real skepticism about that among people who see the winners in technology as a small network of the privileged.”
He is using Pursuit, housed in a former zipper factory in Long Island City, the Queens neighborhood where Amazon had intended to locate, to try to prove those skeptics wrong.
The venture is a small yet innovative player in a growing number of nonprofits developing new models for work force training.
(p. B5) Their overarching goal is upward mobility for low-income Americans and the two-thirds of workers without four-year college degrees.
Pursuit, according to its donors and to work force experts, stands out for the size of the income gains of its graduates and its experiment with a kind of bond to finance growth. It is a program worth watching, they say, and beginning to attract attention nationally.
About 85 percent of Pursuit’s 300 graduates have landed well-paying tech jobs within a year. They work as software engineers both at major corporations like JPMorgan Chase and at start-ups like Oscar Health. They earn $85,000 a year on average, compared with $18,000 before the Pursuit program.
. . .
Max Rosado heard about the Pursuit program from a friend. Intrigued, he filled out an online form, and made it through a written test in math and logic, interviews and a weekend workshop with simple coding drills, joining the 10-month program in 2016.
At Pursuit, Mr. Rosado, who has a two-year community college degree in liberal arts, got an intensive immersion in programming languages, concepts and projects. But the curriculum also covered so-called soft skills like making presentations, working in teams and writing résumés and thank-you notes.
Today, Mr. Rosado, 30, is an engineer at GrubHub, the meal delivery service, working on its smartphone software. In his previous jobs, in back office and sales associate roles in stores, he earned $15,000 to $20,000 a year. He makes nearly $100,000 now, he said.
. . .
Pursuit screens applicants for many characteristics, but those mainly fall into two categories: problem-solving skills and perseverance. The program, Mr. Hsu said, looks for people who are hungry and determined, willing to put in the time and effort to become a software developer, but also able to adapt to new and unfamiliar environments.

For the full story, see:
Lohr, Steve. “A Way Out of Poverty and Into an $85,000 Tech Job.” The New York Times (Saturday, March 16, 2019): B1 & B5.
(Note: ellipses added.)
(Note: the online version of the story has the date March 15, 2019, and has the title “Income Before: $18,000. After: $85,000. Does Tiny Nonprofit Hold a Key to the Middle Class?”)

Firms Moving from Silicon Valley to Texas

(p. A3) SAN FRANCISCO–California’s economy is adding jobs far faster than affordable places to live, forcing some employers to leave the state as they expand.
. . .
Karen Holian, 44 years old, joined the startup Lottery.com when it was founded here in 2015. Though a San Francisco native, Ms. Holian, a marketing manager, was excited when the company last year moved to Austin, Texas, because she could finally plan to buy a home.
“In San Francisco, that never seemed like a possibility,” she said. A mother of two, she is for now renting a four-bedroom house for $2,000 a month, a third of what a comparable place costs in her hometown.
Lottery.com CEO Tony DiMatteo said that as the company grew, he found it difficult to persuade current and prospective employees to move to the area. “We can give them a much better bang for their buck if we’re not in San Francisco,” he said.
. . .
Carl Guardino, chief executive of the Silicon Valley Leadership Group, said CEOs tell him “that any new job that doesn’t absolutely need to be in the Bay Area is located outside of the Bay Area.” The public-policy advisory group counts some 360 companies, including Silicon Valley’s largest, as members.
. . .
Texas has drawn more companies leaving California over the past decade than any other state, according to research by Joe Vranich, a relocation consultant who encourages businesses to leave California.
Housing costs are “a major selling point for us,” said Mike Rosa, senior vice president of economic development for the Dallas Regional Chamber. “It’s a factor in just about every [relocation] search we see.”

For the full story, see:
Nour Malas. “Firms Quit California Over Costs.” The Wall Street Journal (Tuesday, March 20, 2019): A3.
(Note: ellipses, and bracketed year, added; bracketed word, in original.)
(Note: the online version of the story has the date March 19, 2019, and has the title “California Has the Jobs but Not Enough Homes.” The sentence quoting Karen Holian appeared in the online, but not the print, version.)

Boghossian May Be Punished for Exposing the “Faulty Epistemology” of Grievance Studies

(p. A15) A massive academic hoax has taken a surprising twist. Peter Boghossian, an assistant professor of philosophy, faces disciplinary action at Oregon’s Portland State University. The accusations against him raise constitutional questions about federal regulation of academic research. They also implicitly acknowledge that the prank had a serious point.
Mr. Boghossian–along with two confederates, neither of whom has an academic affiliation–set out to expose shoddy scholarship in what they call “grievance studies.” They concocted 20 pseudonymous “academic papers,” complete with fake data, and submitted them to leading peer-reviewed scholarly journals in fields like “queer studies” and “fat studies.” The Journal’s Jillian Melchior discovered the deception last summer and broke the story in October, by which time seven of the phony papers had been accepted for publication and four published.
“It had to be done,” Mr. Boghossian tells me. “We saw what was happening in these fields, and we were horrified at the faulty epistemology that these people were using to credential themselves and teach others.” The effort drew praise from some well-known public intellectuals, including Richard Dawkins, Jordan Peterson and Steven Pinker.
. . .
A hastily formed university committee recommended that Mr. Boghossian be investigated for “research misconduct”–that is, purposely fabricating data. That case would seem to be open and shut, but the investigation has stalled.
More serious are the sanctions against Mr. Boghossian announced Dec. 21 on behalf of Portland State’s Institutional Review Board for conducting research on “human subjects” without submitting his research protocol to the IRB for review as required by the federal National Research Act of 1974. The “human subjects” in question were the editors and peer-reviewers of the duped journals. Portland State ordered Mr. Boghossian to undergo “human subjects research training,” and its letter warns that “further actions may be required,” with no elaboration.
. . .
Philip Hamburger, a law professor at Columbia, argues that the National Research Act and the HHS’s regulations violate the First Amendment, infringing on scholars’ freedom of expression. Mr. Hamburger has likened IRB vetting procedures to the Star Chamber’s licensing of publications that prevailed in 17th-century England–which the Constitution’s drafters were eager not to replicate. “Licensing . . . prohibits generally, and then selectively permits what otherwise is forbidden,” Mr. Hamburger wrote in 2007.

For the full commentary, see:
Charlotte Allen. “A Hoax and Its ‘Human Subjects’; An Institutional Review Board disciplines an academic prankster. But is it constitutional?” The Wall Street Journal (Tuesday, Jan. 29, 2019): A15.
(Note: ellipses between paragraphs, added; ellipsis internal to last paragraph, in original.)
(Note: the online version of the commentary has the date Jan. 28, 2019.)

Big Firms Can Benefit Consumers

(p. A15) Mr. Wu writes with elegance, conviction, knowledge–and certitude. But he goes over the top in his effort to slay the dragon of the so-called Chicago School of antitrust analysis, which finds its clearest expression in the late Robert Bork’s influential 1978 book, “The Antitrust Paradox.” Bork and the Chicago School insist that “consumer welfare” should be the sole standard for antitrust law. Nothing else matters.
. . .
The deeper source of philosophical disagreement, however, lies in Mr. Wu’s self-proclaimed “neo-Brandeisian” attack on Bork’s underlying worldview. First, Mr. Wu claims that Bork’s consumer-welfare theory shows too little solicitude toward the small businessman, who can be steamrolled by larger businesses with greater economic power. Second, Mr. Wu claims that Bork’s thesis ignores the perverse influence that dominant firms exercise on the overall political system.
Against both challenges, Bork’s position holds up reasonably well. As to the first, the protection of the small businessman comes at a high price. It forces consumers to do business with small firms that may well have a local geographical monopoly, which would be undercut by a larger firm offering better goods at lower prices.
. . .
Similarly, both Brandeis and Mr. Wu have an oversimplified vision of political markets, for economic dominance need not translate into political dominance. Companies like Google and Facebook today enjoy dominant positions with their search engines or social-media platforms, but they face massive political opposition, not only from regulatory authorities but also from skilled political operatives–activist groups, litigation centers, unions, trade associations–who can make their lives a public-relations nightmare.
. . .
Finally, Mr. Wu’s Brandeis fixation blinds him to the distinctive features of modern antitrust litigation, which must contend with often complicated economic arrangements and effects. When American Express tried to prevent its merchants from steering their customers to credit-card companies that charge lower fees to retailers, it was hit with an antitrust lawsuit. But the Supreme Court this year upheld the policy, claiming that it didn’t result in an abuse of market power but was pro-competitive because of indirect effects that improved the benefits to Amex card holders. With his over-concern with bigness per se, Brandeis had nothing to say about these novel issues, and neither, alas, does Mr. Wu.

For the full review, see:
Richard A. Epstein. “BOOKSHELF; Revisiting the Gilded Age; Are Google, Facebook, Apple and Amazon akin to the dominant “trusts” of the late 19th century–and thus deserving of antitrust action?” The Wall Street Journal (Monday, Dec. 3, 2018): A15.
(Note: ellipses added.)
(Note: the online version of the review has the date Dec. 2, 2018, and has the title “BOOKSHELF; ‘The Curse of Bigness’ Review: Revisiting the Gilded Age; Are Google, Facebook, Apple and Amazon akin to the dominant “trusts” of the late 19th century–and thus deserving of antitrust action?”)

The book under review, is:
Wu, Tim. The Curse of Bigness: Antitrust in the New Gilded Age. New York: Columbia Global Reports, 2018.

The Bork book mentioned in the review, is:
Bork, Robert H. The Antitrust Paradox: A Policy at War with Itself. New York: The Free Press, 1993 [first published 1978].

Tight Labor Market Gives a Chance to Outsiders

(p. 7) Traditionally male industries have made a comeback. The three fastest-growing sectors since December 2016 have been the three that are most male-dominated: mining, construction, and transportation and utilities. Yet in the same period women’s employment has increased more. It turns out that women are moving into these male-dominated fields, as well as a few others.
. . .
The faster employment growth for women was concentrated in sectors that are at least two-thirds male. In these sectors, women’s employment rose 5.0 percent, versus 3.0 percent for men. Women’s employment grew more than 10 percent in construction, mining, and transportation and utilities.
. . .
“In a tight labor market, firms give workers a chance they would not otherwise consider,” said Lawrence Katz, a labor economist at Harvard. “But the tight labor market could facilitate longer-term change if it demonstrates to firms that they should be more open to women in previously male-dominated areas.”
This growth in women’s employment in male-dominated industries is not just about desk jobs. Within male-dominated industries, the fastest growth for women has been at the building site and on the factory floor, rather than in the accounting office.

For the full commentary, see:
Jed Kolko and Claire Cain Miller. “As Labor Market Tightens, Gender Lines Blur.” The New York Times, SundayBusiness Section (Sunday, Dec. 16, 2018): 7.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Dec. 14, 2018, and has the title “As Labor Market Tightens, Women Are Moving Into Male-Dominated Jobs.”)

Miami Is “Investing in Resilience”

(p. A27) Climate change is not a distant threat for Miami; it’s a daily presence in people’s lives. The city has been fighting to stay above water for decades. It knows that its future as a vibrant international hub for business, tourism, arts and culture depends on making the city more resilient to the impact of global warming.
That’s why the city of Miami is moving aggressively to adapt; in 2017, its citizens voted to tax themselves to build resilience against flooding and storm surges by approving a $400 million bond issue that is financing projects across the city.
. . .
Investing in resilience protects businesses and communities from devastating losses, so it must be measured in the lives saved and businesses that remain open. We are only now learning how to quantify these benefits to communities. Florida’s Division of Emergency Management, for example, calculated that projects to reduce wind and water damage avoided $81 million in losses when Hurricane Matthew struck in 2016, while costing only $19 million to carry out. The projects included raising buildings, improving drainage, and buying and demolishing properties in vulnerable areas.

For the full commentary, see:
Ban Ki-moon and Francis Suarez. “Miami’s Battle Plan for Rising Seas.” The New York Times (Thursday, Feb. 21, 2019): A27.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date Feb. 20, 2019, and has the title “Miami Battles Rising Seas.”)

Li Rui Stood Up to Mao and Xi

(p. A8) BEIJING — While alive, Li Rui was a decades-long headache for China’s ruling Communists — a former aide to Mao Zedong who became an obdurate, sharp-tongued critic of the party. And the controversy did not stop in death, even for his funeral.
Hundreds of people gathered in Beijing on Wednesday to say goodbye to Mr. Li, four days after his death at 101. But the funeral revealed tensions between the government, which wanted a brisk Communist ceremony, and mourners who celebrated Mr. Li as a renegade — one who, even as he lay dying, railed against the authoritarian policies of Xi Jinping, the party’s leader and China’s president.
. . .
A few paid tribute to Mr. Li by holding up handwritten signs, or by making brief speeches that praised him as a freethinker who had stood up to Mao — opposing the calamitous excesses of the Great Leap Forward — and pressed Mao’s successors to take China in a more liberal direction. Police officers and officials kept watch, and tried to keep foreign reporters from talking to mourners throughout the morning.
“He was someone who had the guts to speak up for the people,” said Sheng Lianqi, a retired worker in his 70s, who said he never met Mr. Li but admired his writings.
He held up a handwritten sign that read in part: “Li Rui’s name will live in eternity. The ordinary people have sharp eyes and clear minds.”
. . .
These days, the party restricts criticism of Mao. But Mr. Li seemed determined to have the last word. He donated many of his papers — including notebooks and letters from his decades in the party, and a diary he kept for more than 80 years — to the Hoover Institution at Stanford University, where scholars will eventually be able to study them, said his daughter, Ms. Li.

For the full obituary, see:
Chris Buckley. “A Red-Banner Funeral in Beijing for a Critic of the Party From Mao to Xi.” The New York Times (Thursday, Feb. 21, 2019): A8.
(Note: ellipses added.)
(Note: the online version of the obituary has the date Feb. 20, 2019, and has the title “In Beijing, a Communist Funeral for an Inconvenient Critic.”)

Luis Locay Offers Advance Praise for Openness to Creative Destruction

Openness to Creative Destruction is first and foremost a great read. Much of the book is devoted to skillfully chosen accounts of usually successful, but occasionally unsuccessful, entrepreneurs to illustrate the author’s arguments. At times these accounts made me feel like I was reading a series of short adventure stories. This use of examples to make the argument for the central role of the creative entrepreneur in generating innovation, and the benefits that can accrue to society from creative destruction, makes the book very accessible to the intelligent layman or beginning student, while its serious ideas will be of interest to professional economists and sophisticated policymakers. The theoretician of entrepreneurship or innovation will find it a one-stop source of real-world examples. I plan to make it required reading in my growth and industrial organization classes.

Luis Locay, Associate Professor of Economics, University of Miami.

Locay’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.