Category: Economic Growth

Faster, Stronger 3-D Printing Method May Be Better for Manufacturing

(p. B1) Ford Motor Co. is experimenting with a new form of 3-D printing the auto maker says could solve a structural flaw that has kept the technology from widespread use in manufacturing.
The ability to “print” parts within an assembly plant would drastically reduce transport and logistics costs for the auto industry, where car makers must source parts from dozens of suppliers around the world. But the most widely used version of the technology is ill-suited for mass production because objects are printed layer by layer, a slow process that also creates tiny fault lines that can crack when stressed.
A startup backed by Alphabet Inc.’s Google Ventures is developing a different 3-D printing method that some manufacturers, including Ford, say shows more promise. Carbon3D Inc.’s printers project light continuously through a pool of resin, gradually solidifying it onto an overhead platform that slowly lifts the object up until it is fully formed. The process takes a fraction of the time of other printing methods, and forms solid items more similar to those created using conventional auto-part molds, said Ellen Lee, who leads a 3-D printing research division at Ford.

For the full story, see:
LORETTA CHAO. “Fast 3-D Printing Earn New Respect.” The Wall Street Journal (Tues., April 26, 2016): B1 & B4.
(Note: the online version of the story has the date April 25, 2016, and has the title “Auto Makers, Others Explore New Roles for 3-D Printing.”)

Low Interest Rates Cannot Substitute for Needed Deeper Reforms

(p. B3) MUMBAI, India — Three years before the 2008 global financial crisis, an Indian economist named Raghuram G. Rajan presciently warned a skeptical audience of top economic thinkers that excessive risk threatened the entire global financial system.
As Mr. Rajan stepped down on Sunday [Sept. 4, 2016] as India’s top central banker, following intense criticism at home, he offered a new warning: Low interest rates globally could distort markets and would be difficult to abandon.
Countries around the world, including the United States and Europe, have kept interest rates low as a way to encourage growth. But countries could become “trapped” by fear that when they eventually raised rates, they “would see growth slow down,” he said.
Low interest rates should not be a substitute for “other instruments of policy” and “various kinds of reforms” that are needed to encourage growth, Mr. Rajan said in a recent interview with The New York Times. “Often when monetary policy is really easy, it becomes the residual policy of choice,” he said, when deeper reforms are needed.
. . .
In discussing the Indian economy in the interview, Mr. Rajan offered a less-than-ringing endorsement of the government’s emphasis on manufacturing in India — what the prime minister has called his Make in India campaign.
Mr. Rajan said he did not support the view of critics that it was too late in world economic history for India to become a manufacturing hub. But he also said that he would not focus exclusively on manufacturing as the solution to joblessness.
If India improves infrastructure and reduces government regulations, manufacturing might take off in a big way, but it “could also be services. It could be value-added agriculture also.”`

For the full story, see:
GEETA ANAND. “A Departing Central Banker’s Warning.” The New York Times (Mon., SEPT. 5, 2016): B3.
(Note: ellipsis, and bracketed date, added.)
(Note: the online version of the story has the date SEPT. 4, 2016, and has the title “Raghuram Rajan, India’s Departing Central Banker, Has a New Warning.” The online version is somewhat longer than the print version, and has minor differences in the last three paragraphs quoted above. The last three paragraphs quoted above, are from the online version.)

Japan Counting on Innovative Entrepreneurs for Economic Growth

(p. B3) TOKYO–Stacks of cardboard boxes serve as makeshift partitions at Mistletoe Inc.’s new office in Tokyo’s posh Aoyama district, where startups gather to work on their latest projects.
The do-it-yourself vibe–a far cry from the stuffiness typical of Japanese corporate offices–is something founder Taizo Son, serial entrepreneur and youngest brother of SoftBank Group Corp. founder Masayoshi Son, wants to see more of.
“Japan has the talent and funds but lacks the necessary ecosystem to create its own Silicon Valley, so that’s what we’re trying to provide,” said Mr. Son, 43, who describes Mistletoe as a program to cofound new businesses.
The nation that created the Walkman and the bullet train before China even had a tech industry now lags behind as Chinese Internet startups like Alibaba Group Holding Ltd. become global powerhouses. With its once-dominant technology industry struggling, Japan is counting on entrepreneurs to rekindle its hobbling economy.
The government is pledging to fund startups, top universities have launched incubators and venture funds to transform their wealth of knowledge into innovation and even Japan’s oldest and largest conglomerates, such as the Mitsubishi and Mitsui groups, are looking to nurture entrepreneurs..

For the full story, see:
ALEXANDER MARTIN. “Japan Looks to Rekindle Its Technology Innovation.” The Wall Street Journal (Mon., April 11, 2016): B3.
(Note: the online version of the story has the date April 10, 2016, and has the title “Japan Tech Hunts for Restart Button.”)

Cutting Taxes Helps Economy More than Increasing Government Spending

I believe the “policy missteps” diagnosis is mainly the right one, but quote some comments on the “secular stagnation” diagnosis because I want to document that for easy access for my book project.

(p. 3) Economists, like physicians, sometimes confront a patient with an obvious problem but no obvious diagnosis. That is precisely the situation we face right now.

. . .
Secular stagnation Lawrence H. Summers, former economic adviser to President Obama, has suggested that the problem predates the recent financial crisis. He points to the long-term decline in inflation-adjusted interest rates as evidence of reduced demand for capital to fund investment projects. He cites several reasons for the change, including lower population growth, lower prices for capital goods and the nature of recent innovations, like the replacement of brick-and-mortar stores with retail websites. The result, he says, is secular stagnation — a persistent inability of the economy to generate sufficient demand to maintain full employment.
His solution? More government spending on infrastructure, like roads, bridges and airports. If the government takes advantage of lower interest rates to make the right investments in public capital — admittedly a big if — the policy would promote employment in the short run as projects are being built and make the economy more productive when they are put into use.
. . .
Policy missteps When Barack Obama took office in 2009, the economy was in the midst of the Great Recession. President Obama’s advisers relied on standard Keynesian theory when they proposed a large increase in government spending to energize the economy. The stimulus package was the administration’s first economic policy initiative. As the economy recovered, the administration supported tax increases to shrink the budget deficit.
But even at the time, there were reasons to doubt this approach. A 2002 study of United States fiscal policy by the economists Olivier Blanchard and Roberto Perotti found that “both increases in taxes and increases in government spending have a strong negative effect on private investment spending.” They noted that this finding is “difficult to reconcile with Keynesian theory.”
Consistent with this, a more recent study of international data by the economists Alberto Alesina and Silvia Ardagna found that “fiscal stimuli based on tax cuts are more likely to increase growth than those based on spending increases.”

For the full commentary, see:
N. GREGORY MANKIW. “Economic View; One Economic Sickness, Five Diagnoses.” The New York Times, SundayBusiness Section (Sun., JUNE 19, 2016): 5.
(Note: ellipses added, bold font in original.)
(Note: the online version of the commentary has the date JUNE 17, 2016.)

A Larry Summers paper on his version of secular stagnation, is:
Summers, Lawrence H. “U.S. Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound.” Business Economics 49, no. 2 (April 2014): 65-73.

The Blanchard and Perotti paper mentioned above, is:
Blanchard, Olivier, and Roberto Perotti. “An Empirical Characterization of the Dynamic Effects of Changes in Government Spending and Taxes on Output.” The Quarterly Journal of Economics 117, no. 4 (Nov. 2002): 1329-68.

The Alesina and Ardagna paper mentioned above, is:
Alesina, Alberto, and Silvia Ardagna. “Large Changes in Fiscal Policy: Taxes Versus Spending.” In Tax Policy and the Economy. Volume 24, edited by Jeffrey R. Brown. Chicago and London: University of Chicago Press; Cambridge, Mass.: National Bureau of Economic Research, 2010, pp. 35-68.

RFID Tags Can Enable Process Innovations

(p. A11) The numbers don’t look good: Last week the Bureau of Labor Statistics reported that worker productivity dropped 0.5% in the second quarter of 2016–the third quarterly decline in a row. Productivity growth, a key driver of improved living standards, has averaged only 1.3% a year over the past decade, compared with 2.9% from mid-1995 through the end of 2005.
Why the slowdown? One theory is that markets have already wrung the easy efficiencies out of current technology. Federal Reserve Chair Janet Yellen noted in June that some economists “believe that the low-hanging fruit of innovation largely has been picked and that there is simply less scope for further gains.”
Count me in the optimistic camp. Low-cost wireless technologies are only beginning to break down the wall between the physical and digital worlds, and early-adopting companies are already achieving astounding productivity gains.
. . .
Employees can take inventory by waving an RFID reader over a shelf or a rack. A 2009 study by the University of Arkansas found scanning 10,000 items took 53 hours using bar codes, but only two hours with RFID. That efficiency allows Macy’s to inventory items every month rather than once or twice annually. Pam Sweeney, Macy’s senior vice president of logistics systems, tells me that RFID has pushed inventory accuracy in these departments to 95%.
. . .
As the cost of RFID tags falls to only cents apiece, the applications widen. Imagine checking out at the grocery store one day simply by running your cart through a scanner in a few seconds–no bar codes required. How many hours a year would that save consumers and employees both? If you want a million minuscule reasons to be bullish about productivity, look no further than tiny RFID tags.

For the full commentary, see:
MARK ROBERTI. “How Tiny Wireless Tech Makes Workers More Productive; Macy’s and Delta are using cheap RFID tags to blend the physical and digital.” The Wall Street Journal (Weds., Aug. 17, 2016): A11.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Aug. 16, 2016.)

Cancer Is Not Due to Modernity

(p. 1A) Scientists’ conventional opinion about cancer was that it’s a relatively recent phenomenon caused by the stresses of modern life.

Dietary changes, behavioral changes and man-made changes to our environment have subjected humans to toxins that contribute to cancers, they say.

But new findings from researchers at South Africa’s University of the Witwatersrand published in the South African Journal of Science challenge that assumption.

Paleontologists found a benign tumor in a 12 or 13-year-old boy specimen that dates back almost 2 million years.

More significantly, they also found a malignant tumor that’s 1.7 million years old on the little toe bone of a left foot.

Previously the oldest discovered human cancer was between 780,000 and 120,000 years old.

. . .

(p. 2A) “The evidence is out there that these conditions have been with us a long time and we’ve been kind of hoodwinked that cancer is a modernity,” said Patrick Randolph-Quinney, one of the study’s authors. “These things are ancient.”

The greatest predictor of cancer, the study argues, even in our ancestors, is longevity. The longer we live, the more chances something in our bodies goes wrong, the more chances that something is a tumor.

For the full story, see:
The Washington Post. “Ancient tumor upends notion of cancer as modern affliction; 1.7-million-year-old malignant growth is causing scientists to rethink diseases and human history.” Omaha World-Herald (Sat., JUNE 20, 2016): 1A & 2A.
(Note: ellipsis added.)

The scientific article mentioned above, is:
Patrick, S. Randolph-Quinney, A. Williams Scott, Steyn Maryna, R. Meyer Marc, S. Smilg Jacqueline, E. Churchill Steven, J. Odes Edward, Augustine Tanya, Tafforeau Paul, and R. Berger Lee. “Osteogenic Tumour in Australopithecus Sediba: Earliest Hominin Evidence for Neoplastic Disease.” South African Journal of Science (July/Aug. 2016), DOI: http://dx.doi.org/10.17159/sajs.2016/20150470.

$10,000 Universal Income Would Reduce Work and Cost Taxpayers Trillions

(p. B4) This month [June 2016], Charles Murray of the American Enterprise Institute will publish an updated version of his plan to replace welfare as we know it with a dollop of $10,000 in after-tax income for every American above the age of 21.
. . .
Its first hurdle is arithmetic. As Robert Greenstein of the left-leaning Center on Budget and Policy Priorities put it, a check of $10,000 to each of 300 million Americans would cost more than $3 trillion a year.
Where would that money come from? It amounts to nearly all the tax revenue collected by the federal government. Nothing in the history of this country suggests Americans are ready to add that kind of burden to their current taxes. Cut it by half to $5,000?
. . .
As Lawrence H. Summers, the former Treasury secretary and onetime top economic adviser to President Obama, told me, paying a $5,000 universal basic income to the 250 million nonpoor Americans would cost about $1.25 trillion a year. . . .
The popularity of the universal basic income stems from a fanciful diagnosis born in Silicon Valley of the challenges faced by the working class across industrialized nations: one that sees declining employment rates and stagnant wages and concludes that robots are about to take over all the jobs in the world.
. . .
Work, as Lawrence Katz of Harvard once pointed out, is not just what people do for a living. It is a source of status. It organizes people’s lives. It offers an opportunity for progress. None of this can be replaced by a check.
A universal basic income has many undesirable features, starting with its non-negligible disincentive to work. Almost a quarter of American households make less than $25,000. It would be hardly surprising if a $10,000 check each for mom and dad sapped their desire to work.
. . .
As Mr. Summers told a gathering last week at the Brookings Institution, “a universal basic income is one of those ideas that the longer you look at it, the less enthusiastic you become.”

For the full commentary, see:
Porter, Eduardo. “ECONOMIC SCENE; Plan to End Poverty Is Wide of the Target.” The New York Times (Weds., June 1, 2016): B1 & B4.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the commentary has the date MAY 31, 2016, and has the title “ECONOMIC SCENE; A Universal Basic Income Is a Poor Tool to Fight Poverty.”)

Bourgeois Ideology Caused the Great Enrichment

(p. A13) What accounts for the wealth and prosperity of the developed nations of the world? How did we get so rich, and how might others join the fold?
Deirdre McCloskey, a distinguished economist and historian, has a clarion answer: ideas. It was ideas, she insists–about commerce, innovation and the virtues that support them–that account for the “Great Enrichment” that has transformed much of the world since 1800.
. . .
. . . , this monumental achievement was caused by a change in values, Ms. McCloskey says–the rise of what she calls, in a mocking nod to Marx, a “bourgeois ideology.” It was far from an apology for greed, however. Anglo-Dutch in origin, the new ideology presented a deeply moral vision of the world that vaunted the value of work and innovation, earthly happiness and prosperity, and the liberty, dignity and equality of ordinary people. Preaching tolerance of difference and respect for the individual, it applauded those who sought to improve their lives (and the lives of others) through material betterment, scientific and technological inquiry, self-improvement, and honest work. Suspicious of hierarchy and stasis, proponents of bourgeois values attacked monopoly and privilege and extolled free trade and free lives while setting great store by prudence, enterprise, decency and hope.

For the full review, see:
DARRIN M. MCMAHON. “BOOKSHELF; The Morality of Prosperity; Grinding poverty was the norm for humanity until 1800. It changed with the rise of values like tolerance and respect for individual liberty.” The Wall Street Journal (Mon., June 13, 2016): A13.
(Note: ellipses added.)
(Note: the online version of the review has the date June 12, 2016.)

The book under review, is:
McCloskey, Deirdre N. Bourgeois Equality: How Ideas, Not Capital, Transformed the World. Chicago: University of Chicago Press, 2016.

Government Land Use Regulations Increase Income Inequality

(p. A1) . . . a growing body of economic literature suggests that anti-growth sentiment, when multiplied across countless unheralded local development battles, is a major factor in creating a stagnant and less equal American economy.
It has even to some extent changed how Americans of different incomes view opportunity. Unlike past decades, when people of different socioeconomic backgrounds tended to move to similar areas, today, less-skilled workers often go where jobs are scarcer but housing is cheap, instead of heading to places with the most promising job opportunities, according to research by Daniel Shoag, a professor of public policy at Harvard, and Peter Ganong, (p. B2 [sic]) also of Harvard.
. . .
“To most people, zoning and land-use regulations might conjure up little more than images of late-night City Council meetings full of gadflies and minutiae. But these laws go a long way toward determining some fundamental aspects of life: what American neighborhoods look like, who gets to live where and what schools their children attend.
And when zoning laws get out of hand, economists say, the damage to the American economy and society can be profound. Studies have shown that laws aimed at things like “maintaining neighborhood character” or limiting how many unrelated people can live together in the same house contribute to racial segregation and deeper class disparities. They also exacerbate inequality by restricting the housing supply in places where demand is greatest.
The lost opportunities for development may theoretically reduce the output of the United States economy by as much as $1.5 trillion a year, according to estimates in a recent paper by the economists Chang-Tai Hsieh and Enrico Moretti. Regardless of the actual gains in dollars that could be achieved if zoning laws were significantly cut back, the research on land-use restrictions highlights some of the consequences of giving local communities too much control over who is allowed to live there.
“You don’t want rules made entirely for people that have something, at the expense of people who don’t,” said Jason Furman, chairman of the White House Council of Economic Advisers.

For the full story, see:
CONOR DOUGHERTY. “When Cities Spurn Growth, Equality Suffers.” The New York Times (Mon., July 4, 2016): A1 & B2 [sic].
(Note: the online version of the story has the date July 3, 2016, and has the title “How Anti-Growth Sentiment, Reflected in Zoning Laws, Thwarts Equality.”)

The paper mentioned above by Ganong and Shoag, is:
Ganong, Peter, and Daniel Shoag. “Why Has Regional Income Convergence in the U.S. Declined?” Working Paper, Jan. 2015.

The paper mentioned above by Hsieh and Moretti, is:
Hsieh, Chang-Tai, and Enrico Moretti. “Why Do Cities Matter? Local Growth and Aggregate Growth.” National Bureau of Economic Research (NBER) Working Paper # 21154, May 2015.

Taxpayer Funded Stadiums Fail to Bring Promised Economic Development

(p. C14) The Twin Cities of Minneapolis and St. Paul have been an epicenter of the U.S. stadium-and-arena boom, rolling out five major sports facilities since 1990 that together cost more than $2 billion.
Now, the neighboring cities are readying for a sixth: a 20,000-seat, $150 million Major League Soccer stadium to be built by 2018 in St. Paul about halfway between the two downtowns.
. . .
But taken with the other facilities that have a combined seat count of nearly 200,000, this latest project illustrates how the Twin Cities are an acute example of the rapid increase in stadiums and arenas in U.S. cities. These developments come despite a growing chorus of warnings from economists who say the stadiums are almost always poor drivers of economic development. Even when these facilities do spur nearby investment, economists and critics say the cost to the public is typically far higher than with traditional economic-development programs.
“I’ve lived in the Twin Cities since 1976, and have seen this proliferation of new sports stadia,” said Jane Prince, a St. Paul city council member who voted against the soccer stadium aid package. “I just don’t see the promised economic development occurring in conjunction with all of these.”
. . .
“There’s not one group that makes these decisions–it was two city governments, it was a legislature, it was sports owners,” said R.T. Rybak, the mayor of Minneapolis from 2002 to 2014. Mr. Rybak said he had long been critical of sports subsidies but he grudgingly helped craft the aid package for the Vikings stadium after the team was poised to move elsewhere.
That deal, and the others, he said, were “also driven by the increasingly crazy politics of sports economics,” in which teams want their own facilities, custom designed for their ideal crowd sizes.

For the full story, see:
ELIOT BROWN. “Twin Cities to Get Yet Another Stadium.” The Wall Street Journal (Weds., March 23, 2016): C14.
(Note: ellipses added.)
(Note: the online version of the story has the date March 22, 2016, and has the title “In Twin Cities, How Many Stadiums Are Enough?”)