Category: Economic Growth

Mokyr Credits the Great Enrichment to a Culture That Values Scientific Inquiry

(p. A13) Life is “solitary, poor, nasty, brutish and short” Thomas Hobbes proclaimed in 1651, and it had been that way ever since humans had inhabited the Earth. At the time Hobbes wrote those words, life expectancy averaged about 30 years old in his native England and income per person typically was around $5 a day (in 2016 dollars). Thanks to the Industrial Revolution and the Great Enrichment that followed, the typical subject of Queen Elizabeth II lives to almost 80 and has an income of over $100 a day. Perhaps more impressively, most people in the world today face the prospect of living at least that well within a generation or two.
What brought about the Great Enrichment? And why did it all start in England? Joel Mokyr, in his fine book, attributes it to the unique and productive culture that evolved there. It was a culture that welcomed change and favored scientific inquiry that spurred radical technological improvements.
. . .
According to Mr. Mokyr, three factors led to the ultimate triumph of the new modern search for scientific truth over the largely inaccurate “science” of the ancients. First, Europe’s fractured political environment was a blessing: Scientists who were banned or ostracized in one political jurisdiction fled to other locales more tolerant of their views. The controversial Franciscan monk, Bernardino Ochino (1487-1564), for example, was often in trouble and moving to evade authorities, leading him to flee from Italy to Switzerland and later, England, Poland and Moravia. Second, the invention of Gutenberg’s printing press around 1440 enormously lowered the cost of widely disseminating knowledge over large areas. Third, an extraordinary intellectual community evolved–Voltaire and others called the Republic of Letters–that made the dissemination of new information (through letters to fellow scientists) obligatory for anyone who wanted to gain respect in the growing international community of scientists.

For the full review, see:
RICHARD VEDDER. “BOOKSHELF; The Genesis of Prosperity; What brought about the Great Enrichment? And why did it start in England? It had a culture that embraced change and scientific inquiry.” The Wall Street Journal (Fri., Nov. 11, 2016): A13.
(Note: ellipsis added.)
(Note: the online version of the review has the date Nov. 10, 2016.)

The book under review, is:
Mokyr, Joel. A Culture of Growth: The Origins of the Modern Economy, Graz Schumpeter Lectures. New Haven, CT: Princeton University Press, 2016..

Economic Growth Depends Mainly on Micro Policies and Serendipity

(p. A2) In the long run, . . . , potential growth is a job for microeconomic, not macroeconomic, policy. It requires countless, painstaking fixes: raising labor-force participation with training and safety-net programs that don’t discourage work; investment-friendly tax and regulatory policies to incentivize investments that take years to pay off, if ever; and trade deals that let firms market their products to the entire world. It will also take some serendipity as firms keep hunting for the next miracle technology. No one foresaw how the information revolution would revitalize productivity in the 1990s, and the next such breakthrough will probably surprise us as well.

For the full story, see:
GREG IP. “CAPITAL ACCOUNT; Rewriting Recent Economic History.” The Wall Street Journal (Mon., June 2, 2016): A2.
(Note: ellipsis added.)
(Note: the online version of the story has the date June 1, 2016, and has the title “CAPITAL ACCOUNT; Post-Recession Rethink: Growth Potential Dimmed Before Downturn.”)

“We Shall Increasingly Have the Power to Make Life Good”

(p. B13) Derek Parfit, a British philosopher whose writing on personal identity, the nature of reasons and the objectivity of morality re-established ethics as a central concern for contemporary thinkers and set the terms for philosophic inquiry, died on Monday at his home in London.
. . .
The two volumes of “On What Matters,” published in 2011, dealt with the theory of reasons and morality, arguing for the existence of objective truth in ethics.
. . .
“With no other philosopher have I had such a clear sense of someone who had already thought of every objection I could make, of the best replies to them, of further objections that I might then make, and of replies to them too,” the philosopher Peter Singer wrote recently on the philosophy website Daily Nous.
. . .
In February [2017], Oxford University Press plans to publish a third volume of “On What Matters.” It consists in part of responses to criticism of his work by leading philosophers, which will appear in a companion volume, edited by Mr. Singer, titled “Does Anything Really Matter?”
. . .
On Daily Nous, Mr. Singer offered a snippet from Mr. Parfit’s new work:
“Life can be wonderful as well as terrible, and we shall increasingly have the power to make life good. Since human history may be only just beginning, we can expect that future humans, or supra-humans, may achieve some great goods that we cannot now even imagine.
“In Nietzsche’s words, there has never been such a new dawn and clear horizon, and such an open sea.”

For the full obituary, see:
WILLIAM GRIMES. “Derek Parfit, 74, Philosopher Who Explored Identity.” The New York Times (Thurs., JAN. 5, 2017): B13.
(Note: ellipses, and bracketed year, added.)
(Note: the online version of the obituary has the date JAN. 4, 2017, and has the title “Derek Parfit, Philosopher Who Explored Identity and Moral Choice, Dies at 74.”)

The book by Parfit quoted above, is:
Parfit, Derek. On What Matters: Volume Three. Oxford, UK: Oxford University Press, forthcoming 2017.

Internet Innovations Only Arose After Entrepreneurs Created PCs

(p. B15) Leo L. Beranek, an engineer whose company designed the acoustics for the United Nations and concert halls at Lincoln Center and Tanglewood, then built the direct precursor to the internet under contract to the Defense Department, died on Oct. 10 [2016] at his home in Westwood, Mass.
. . .
After the war, Dr. Beranek was recruited to teach at M.I.T., where he was named technical director of the engineering department’s acoustics laboratory. The administrative director of that lab was Richard Bolt, who later founded Bolt, Beranek & Newman with Dr. Beranek and Robert Newman, a former student of Dr. Bolt’s.
The company was conceived as a center for leading-edge acoustic research. But Dr. Beranek changed its direction in the 1950s to include a focus on the nascent computer age.
“As president, I decided to take B.B.N. into the field of man-machine systems because I felt acoustics was a limited field and no one seemed to be offering consulting services in that area,” Dr. Beranek said in a 2012 interview for this obituary.
He hired J.C.R. Licklider, a pioneering computer scientist from M.I.T., to lead the effort, and it was Dr. Licklider who persuaded him that the company needed to get involved in computers.
Under Dr. Licklider, the company developed one of the best software research groups in the country and won many critical projects with the Department of Defense, NASA, the National Institutes of Health and other government agencies. Though Dr. Licklider left in 1962, the company became a favored destination for a new generation of software developers and was often referred to as the third university in Cambridge.
“We bought our first digital computer from Digital Equipment Corporation, and with it we were able to attract some of the best minds from M.I.T. and Harvard, and this led to the ARPA contract to build the Arpanet,” Dr. Beranek said.
“I never dreamed the internet would come into such widespread use, because the first users of the Arpanet were large mainframe computer owners,” he said. “This all changed when the personal computer became available. With the PC, I could see that computers were fun, and that is the real reason why all innovations come into widespread use.”

For the full obituary, see:

GLENN RIFKIN. “Leo Beranek, 102, Who Pivoted From Acoustics to Computers, Dies.” The New York Times (Tues, OCT. 18, 2016): B15.
(Note: ellipsis, and bracketed year, added.)
(Note: the online version of the obituary has the date OCT. 17, 2016, and has the title “Leo Beranek, Acoustics Designer and Internet Pioneer, Dies at 102.” )

Complex Regulations Stifle Innovation

(p. A15) In “The Innovation Illusion” . . . [Fredrik Erixon and Björn Weigel] argue that “there is too little breakthrough innovation . . . and the capitalist system that used to promote eccentricity and embrace ingenuity all too often produces mediocrity.”
The authors identify four factors that have made Western capitalism “dull and hidebound.” The first is “gray capital,” the money held by entities such as investment institutions, which are often just intermediaries for other investors. Their shareholders, say the authors, tend to focus on short-term outcomes, a perspective that makes company managers reluctant to invest in the research and development that is the lifeblood of the new. The authors’ second villain is “corporate managerialism,” which breeds a “custodian corporate culture” that searches for certainty and control instead of “fast and radical innovation.”
A third villain is globalization, though the authors have a novel complaint: The global economy, they say, has given rise to large firms that are more interested in protecting their turf than pursuing path-breaking ideas. Finally, they decry “complex regulation” for injecting uncertainty into corporate investment and thus stifling the emergence of new ideas and new products.
Echoing the views of Northwestern economist Robert Gordon, Messrs. Erixon and Weigel lament the paucity of big-bang innovation, writing that “the advertised technologies for the future underwhelm.” They wonder why there hasn’t been more progress in all sorts of realms, from the engineering of flying cars to the curing of cancer. Responding to those who worry that robots will drive up unemployment, they say that the real concern should be “an innovation famine rather than an innovation feast.”

For the full review, see:

MATTHEW REES. “BOOKSHELF; Bending the Arc of History.” The Wall Street Journal (Tues., December 13, 2016): A15.
(Note: first ellipsis added; second ellipsis in original.)
(Note: the online version of the review has the date Dec. 12, 2016,)

The book under review, is:
Erixon, Fredrik, and Björn Weigel. The Innovation Illusion: How So Little Is Created by So Many Working So Hard. New Haven, CN: Yale University Press, 2016.

The Good Old Days Were Grim

(p. A15) In “Progress,” the Swedish author Johan Norberg deploys reams of data to show just how much life has improved–especially over the past few decades but over the past couple of centuries as well. Each chapter is devoted to documenting progress in a single category, including food, sanitation, life expectancy, poverty, violence, the environment, literacy and equality.
In response to people who look fondly on the “good old days,” Mr. Norberg underscores just how grim they could be. Rampant disease, famine and violence routinely killed off millions. In the 14th century, the so-called Black Death wiped out a third of Europe’s population. Five hundred years later, cholera outbreaks throughout the world led to hundreds of thousands of deaths and even killed a U.S. president, James Polk.

For the full review, see:

MATTHEW REES. “BOOKSHELF; Bending the Arc of History.” The Wall Street Journal (Tues., December 13, 2016): A15.
(Note: the online version of the review has the date Dec. 12, 2016,)

The book under review, is:
Norberg, Johan. Progress: Ten Reasons to Look Forward to the Future. London, UK: Oneworld Publications, 2016.

Rigid Labor Regulations Hurt Labor in India

(p. A9) . . . rigid and complex regulations have discouraged investment in labor-intensive industries in India, . . . .
Many economists say India’s labor laws have encouraged enterprises to stay small, rely on informal labor or substitute capital for workers. A report by the Paris-based Organization for Economic Cooperation and Development said for India to return to a high-growth trajectory, it must “reduce barriers to formal employment by introducing a simpler and more flexible labor law which doesn’t discriminate by size of enterprise.”

For the full story, see:
NIHARIKA MANDHANA. “India State Tests Labor-Law Overhaul.” The Wall Street Journal (Sat., Dec. 6, 2014): A9.
(Note: ellipses added.)
(Note: the online version of the article has the date Dec. 7 [sic], 2014, and has the title “Modi’s BJP-Controlled States Become Labs for Contentious Reform.”)

Innovation Brought Rise of Middle Class and Decline of Aristocracy

(p. C7) Mr. Evans claims that “master narratives” have fallen into disrepute, and he does not aspire to provide one. But he returns repeatedly to such themes as the growth of “public space” as Europe urbanized and communications improved. He likewise describes the “shifting contours of inequality” as the middle classes burgeoned and benefited from the hastening pace of scientific innovation while the aristocracy slowly declined in status (albeit not in creature comforts).
Similarly, Mr. Evans offers an interesting discussion of how various forms of serfdom disappeared, even as the essence of rural immiseration generally did not. He conveys the degradation of existence for the emergent working class of the cities with controlled pathos yet without acknowledging the improvements in living standards that took place in advanced countries during the last decades of the century. He adduces evidence to show that the benefits of improved sanitation and hygiene, health and nutrition, consumer products and home conveniences, as well as longer life expectancy, went at first disproportionately to the urban middle and professional classes, strata that tripled as a fraction of the population in leading countries. Thus even in comparatively prosperous England, well-off adolescents at midcentury stood almost 9 inches taller than their proletarian contemporaries and by 1900 enjoyed a life expectancy 14 years longer.

For the full review, see:
STEPHEN A. SCHUKER. “The European Century.” The Wall Street Journal (Sat., December 3, 2016): C7.
(Note: the online version of the review has the date Dec. 2, 2016, and has the title “A Long Century of Peace.”)

The book under review, is:
Evans, Richard J. The Pursuit of Power: Europe 1815-1914. New York: Viking, 2016.

Everybody Is Seeking “a Life that Provides Them with Dignity”

(p. A11) I want to end this dramatic year writing of a man whose great and constructive work I discovered in 2016. He is the photojournalist Chris Arnade.
. . .
In his work you see an America that is battered but standing, a society that is atomized–there are lonely people in his pictures–but holding on.
. . .
Mr. Arnade didn’t intend to discover virtue in a mighty corporation, but McDonald’s “has great value to community.” He sees an ethos of patience and respect. “McDonald’s is nonjudgmental.” If you have nowhere to go all day they’ll let you stay, nurse your coffee, read your paper. “The bulk of the franchises leave people alone. There’s a friendship that develops between the people who work there and the people who go.” “In Natchitoches, La., there’s a twice-weekly Bible study group,” that meets at McDonald’s. “They also have bingo games.” There’s the Old Man table, or the Romeo Club, for Retired Old Men Eating Out.
I’ve written of the great divide in America as between the protected and the unprotected–those who more or less govern versus the governed, the facts of whose lives the protected are almost wholly unaware. Mr. Arnade sees the divide as between the front-row kids at school waving their hands to be called on, and the back-row kids, quiet and less advantaged. The front row, he says, needs to learn two things. “One is how much the rest of the country is hurting. It’s not just economic pain, it’s a deep feeling of meaninglessness, of humiliation, of not being wanted.” Their fears and anxieties are justified. “They have been excluded from participating in the great wealth of this country economically, socially and culturally.” Second, “The front-row kids need humility. They need to look in the mirror, ‘We messed this up, we’ve been in charge 30 years and haven’t delivered much.’ ” “They need to take stock of what has happened.”
Of those falling behind: “They’re not lazy and weak, they’re dealing with bad stuff. Both conservative and progressive intellectuals say Trump voters are racist, dumb. When a conservative looks at a minority community and says, ‘They’re lazy,’ the left answers, ‘Wait a minute, let’s look at the larger context, the availability of jobs, structural injustice.’ But the left looks at white working-class poverty and feels free to judge and dismiss.”
. . .
I asked how he describes his work. I see it as an effort to help America better understand itself. He said he was trying to show that “Everybody is kind of working in the same direction, trying to get by, get a life that provides them with dignity.” In this, he suggests, we are more united than we know.

For the full commentary, see:
PEGGY NOONAN. “Shining a Light on ‘Back Row’ America; Chris Arnade’s photos reveal an America that is battered but standing, atomized but holding on.” The Wall Street Journal (Sat., Dec. 31, 2016): A11.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Dec. 29, 2016.)

Better Policies Can Turn Stagnation into Growth

(p. A19) . . . , now ought to be the time that policy makers in Washington come together to tackle America’s greatest economic problem: sclerotic growth. The recession ended more than seven years ago. Unemployment has returned to normal levels. Yet gross domestic product is rising at half its postwar average rate. Achieving better growth is possible, but it will require deep structural reforms.
The policy worthies have said for eight years: stimulus today, structural reform tomorrow. Now it’s tomorrow, but novel excuses for stimulus keep coming. “Secular stagnation” or “hysteresis” account for slow growth. Prosperity demands more borrowing and spending–even on bridges to nowhere–or deliberate inflation or negative interest rates. Others advocate surrender. More growth is impossible. Accept and manage mediocrity.
But for those willing to recognize the simple lessons of history, slow growth is not hard to diagnose or to cure. The U.S. economy suffers from complex, arbitrary and politicized regulation. The ridiculous tax system and badly structured social programs discourage work and investment. Even internet giants are now running to Washington for regulatory favors.
. . .
So why is there so little talk of serious growth-oriented policy? Regulated and protected industries and unions, and the politicians who extract support from them in return for favors, will lose enormously. The global policy elite, steeped in Keynesian demand management for the economy as a whole, and microregulation of individual businesses, are intellectually unprepared for the hard project of “structural reform”–fixing the entire economy by cleaning up the thousands of little messes. Even economists fight to protect outdated skills.

For the full commentary, see:
JOHN H. COCHRANE. “Don’t Believe the Economic Pessimists; Memo to Clinton and Trump: The U.S. economy can and will grow faster with the right policies.” The Wall Street Journal (Mon., Nov. 7, 2016): A19.
(Note: ellipses added.)