Economics of Technology – Page 28

Creativity Was Permissionless on the Internet Before Obama Made It a Regulated Utility

(p. A15) Critics of President Obama’s “net neutrality” plan call it ObamaCare for the Internet.
That’s unfair to ObamaCare.
Both ObamaCare and “Obamanet” submit huge industries to complex regulations. Their supporters say the new rules had to be passed before anyone could read them. But at least ObamaCare claimed it would solve long-standing problems. Obamanet promises to fix an Internet that isn’t broken.
. . .
Utility regulation was designed to maintain the status quo, and it succeeds. This is why the railroads, Ma Bell and the local water monopoly were never known for innovation. The Internet was different because its technologies, business models and creativity were permissionless.
This week Mr. Obama’s bureaucrats will give him the regulated Internet he demands. Unless Congress or the courts block Obamanet, it will be the end of the Internet as we know it.

For the full commentary, see:
L. GORDON CROVITZ. “INFORMATION AGE; From Internet to Obamanet; BlackBerry and AT&T are already making moves that could exploit new ‘utility’ regulations.” The Wall Street Journal (Mon., Feb. 23, 2015): A15.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date Feb. 22, 2015,)

Remaining Airline Regulations Increase Fares and Reduce Services

(p. 256) Kenneth Button makes the case for “Really Opening Up the American Skies.” “The deregulation of the 1970s, by removing entry quantitative controls, led to a considerable increase in services. It also increased the capability of individuals to access a wider range of destinations from their homes via the hub-and-spoke system of routings that emerged. This pattern has been reversed since 2007. The largest 29 airports in the United States lost 8.8 percent of their scheduled flights between 2007 and 2012, but medium-sized airports lost 26 percent and small airports lost 21.3 percent. . . . In sum, the 1978 Airline Deregulation Act only partially liberalized the U.S. domestic airline market. One important restriction that remains is the lack of domestic competition from foreign carriers. The U.S. air traveler benefited from the country being the first mover in deregulation, and this provided lower fares and consumer-driven service attributes some 15-20 years before they were enjoyed in other markets; the analogous reforms in Europe only fully materialized after 1997. But the world has changed, and so have the demands of consumers and the business models adopted by the airlines. . . . But remaining regulations still limit the amount of competition in the market and, with this, the ability of travelers to enjoy even lower fares and a wider range of services.” Regulation, Spring 2014, pp. 40-45 http://object.cato.org/sites/cato.org/files/serials/files/regulation/2014/4/regulation-v37n1-8.pdf.

Source:
Taylor, Timothy. “Recommendations for Further Reading.” Journal of Economic Perspectives 28, no. 3 (Summer 2014): 249-56.
(Note: ellipses in original.)

The article quoted by Taylor is:
Button, Kenneth. “Really Opening up the American Skies.” Regulation 37, no. 1 (Spring 2014): 40-45.

New Evidence on the Antikythera Mechanism

The Antikythera Mechanism was recovered in about 1901 and is believed to date from about 200 BC. Its complicated gear mechanism is believed to have been used to generate calendars or predict astronomical events. The technology never spread to benefit ordinary people. It was forgotten and mechanical gears had to be re-invented.
The Antikythera Mechanism raises a question: how is it that technologies with the potential to benefit humankind can fail to be adopted? This issue of the causes of technology adoption is an important issue for economic growth.

(p. D3) A riddle for the ages may be a small step closer to a solution: Who made the famed Antikythera Mechanism, the astronomical calculator that was raised from an ancient shipwreck near Crete in 1901?
. . .
. . . a new analysis of the dial used to predict eclipses, which is set on the back of the mechanism, provides . . . another clue to one of history’s most intriguing puzzles. Christián C. Carman, a science historian at the National University of Quilmes in Argentina, and James Evans, a physicist at the University of Puget Sound in Washington, suggest that the calendar of the mysterious device began in 205 B.C., just seven years after Archimedes died.
. . .
Starting with the ways the device’s eclipse patterns fit Babylonian eclipse records, the two scientists used a process of elimination to reach a conclusion that the “epoch date,” or starting point, of the Antikythera Mechanism’s calendar was 50 years to a century earlier than had been generally believed.
. . .
. . . Archimedes was killed by a Roman soldier in 212 B.C., while the commercial grain ship carrying the mechanism is believed to have sunk sometime between 85 and 60 B.C. The new finding suggests the device may have been old at the time of the shipwreck, but the connection to Archimedes now seems even less likely.
An inscription on a small dial used to date the Olympic Games refers to an athletic competition that was held in Rhodes, according to research by Paul Iversen, a Greek scholar at Case Western Reserve University.
“If we were all taking bets about where it was made, I think I would bet what most people would bet, in Rhodes,” said Alexander Jones, a specialist in the history of ancient mathematical sciences at New York University.

For the full story, see:
JOHN MARKOFF. “On the Trail of an Ancient Mystery.” The New York Times (Tues., NOV. 25, 2014): D3.
(Note: ellipses added.)
(Note: the online version of the story has the date NOV. 24, 2014.)

Railroad Regulation Helped Kill Passenger Service

(p. 1179) By 1970, passenger service was a not only losing money, but had deteriorated to such an extent that it was no more the elegant transportation mode as it once was. No more were the Hollywood stars long distance rail passengers. No more movies like “North by Northwest,” which featured the New York Central’s Twentieth Century Limited service from New York to Chicago. The book highlights the factors causing the decline of private rail passenger service and the creation of AMTRAK. The authors cite ICC regulation, the growth in alternative modes, which were heavily subsidized, the mix of freight and passenger service on the same lines, and public policy, which favored the airline industry.
. . .
One public policy that government got right is deregulation. This started with the 3R Act, then the 4R Act and then the Staggers Rail Act of 1980, which had a massive impact on the industry. Deregulation culminated in the ICC Elimination Act, in which the ICC was replaced by the Surface Transportation Board–or STB–with substantially diminished regulatory power. Gallamore worked in government when much of this legislation was passed and gives a firsthand account of the debates that took place in Congressional (p. 1180) hearings and the discussions in and out of government on the merits of deregulation.
In the concluding chapter of the over 500-page book, entitled “Decline and Renaissance of American Railroads in the Twentieth Century” the authors provide a summary of the history of the railroads and the lessons for public policy in the future. This chapter is such a great summary, that the reader may be best off starting with it, before reading the book. But don’t forget the afterword, which provides the authors’ recommendations for future U.S. policies for the railroads. It is a very insightful chapter.
. . .
American Railroads should be on the reading list of economists interested in transportation and logistics, economic historians, government officials, and rail fans who would like to know more about the history of the railroads in the twentieth century, and are interested in understanding the economics of the industry and the problems of government regulation. Gallamore and Meyer, at the end of the book, sum up why it should be read:

This book’s authors love railroads because they have a great history, fascinating operations, intriguing technology and untold opportunity for the future, but we also love them because no other enterprises illustrate elegant economic principles quite so well (p. 435).

For the full review, see:
Pagano, Anthony M. “American Railroads: Decline and Renaissance in the Twentieth Century.” Journal of Economic Literature 52, no. 4 (Dec. 2014): 1178-80.
(Note: ellipses added.)

The book under review is:
Gallamore, Robert E., and John R. Meyer. American Railroads: Decline and Renaissance in the Twentieth Century. Cambridge, MA: Harvard University Press, 2014.

Chinese Communists Crush Innovative Entrepreneurs by Banning Open Internet

(p. A1) BEIJING — Jing Yuechen, the founder of an Internet start-up here in the Chinese capital, has no interest in overthrowing the Communist Party. But these days she finds herself cursing the nation’s smothering cyberpolice as she tries — and fails — to browse photo-sharing websites like Flickr and struggles to stay in touch with the Facebook friends she has made during trips to France, India and Singapore.
Gmail has become almost impossible to use here, and in recent weeks the authorities have gummed up Astrill, the software Ms. Jing and countless others depended on to circumvent the Internet restrictions that Western security analysts refer to as the Great Firewall.
By interfering with Astrill and several other popular virtual private networks, or V.P.N.s, the government has complicated the lives of Chinese astronomers seeking the latest scientific data from abroad, graphic designers shopping for clip art on Shutterstock and students submitting online applications to American universities.
If it was legal to protest and throw rotten eggs on the street, I’d definitely be up for that,” Ms. Jing, 25, said.
China has long had some of the world’s most onerous Internet restrictions. But until now, the authorities had effectively tolerated the proliferation of V.P.N.s as a lifeline for millions of people, from archaeologists to foreign investors, who rely heavily on less-fettered access to the Internet.
But earlier this week, after a number of V.P.N. companies, including StrongVPN and Golden Frog, complained that the Chi-(p. A6)nese government had disrupted their services with unprecedented sophistication, a senior official for the first time acknowledged its hand in the attacks and implicitly promised more of the same.
The move to disable some of the most widely used V.P.N.s has provoked a torrent of outrage among video artists, entrepreneurs and professors who complain that in its quest for so-called cybersovereignty — Beijing’s euphemism for online filtering — the Communist Party is stifling the innovation and productivity needed to revive the Chinese economy at a time of slowing growth.
“I need to stay tuned into the rest of the world,” said Henry Yang, 25, the international news editor of a state-owned media company who uses Facebook to follow American broadcasters. “I feel like we’re like frogs being slowly boiled in a pot.”
. . .
The vast majority of Chinese Internet users, especially those not fluent in English and other foreign languages, have little interest in vaulting the digital firewall. But those who require access to an unfiltered Internet are the very people Beijing has been counting on to transform the nation’s low-end manufacturing economy into one fueled by entrepreneurial innovation.
. . .
Avery Goldstein, a professor of contemporary Chinese studies at the University of Pennsylvania, said the growing online constraints would not only dissuade expatriates from relocating here, but could also compel ambitious young Chinese studying abroad to look elsewhere for jobs.
“If they aren’t able to get the information to do their jobs, the best of the best might simply decide not to go home,” he said.
For those who have already returned to China and who crave membership in an increasingly globalized world, the prospect of making do with a circumscribed Internet is dispiriting. Coupled with the unrelenting air pollution and the crackdown on political dissent, a number of Chinese said the blocking of V.P.N.s could push them over the edge.
“It’s as if we’re shutting down half our brains,” said Chin-Chin Wu, an artist who spent almost a decade in Paris and who promotes her work online. “I think that the day that information from the outside world becomes completely inaccessible in China, a lot of people will choose to leave.”

For the full story, see:
ANDREW JACOBS. “China Further Tightens Grip on the Internet.” The New York Times (Fri., JAN. 30, 2015): A1 & A12.
(Note: ellipses added.)
(Note: the online version of the story has the date JAN. 29, 2015.)

Is There “a Fortune to Be Made” in Selling to the Poor?

(p. B1) For years, multinational companies had little interest in lower-end consumers, figuring no money was to be made. Now, they are increasingly attractive to all types of industries, from consumer product makers to technology businesses. Google just announced plans to sell a stripped-down, cheaper version of its Android phone in India.
A decade ago, C. K. Prahalad, a University of Michigan business professor, in his book “The Fortune at the Bottom of the Pyramid,” detailed the potential, contending that such households were every bit as discriminating and aspirational as their counterparts at the other end of the income spectrum.
Mr. Prahalad, now dead, estimated there were four billion such consumers in a market worth $13 trillion. “People were saying, ‘There’s a fortune to be made. Let’s go,’ ” said Mark B. Milstein, director of the Cen-(p. B6)ter for Sustainable Global Enterprise at Cornell University.
But many of the first efforts failed. “There was not much thinking about what those consumers needed or wanted or how they might be different from consumers with more disposable income,” Mr. Milstein said.

For the full story, see:
STEPHANIE STROM. “Billions of Buyers.” The New York Times (Thurs., Sept. 18, 2014): B1 & B6.
(Note: the online version of the story has the date SEPT. 17, 2014, and has the title “Multinational Companies Court Lower-Income Consumers.”)

The book highlighted in the passage quoted is:
Prahalad, C. K. Fortune at the Bottom of the Pyramid Eradicating Poverty through Profits. Revised ed. Philadelphia, PA: Wharton School Publishing, 2009.

Over-Regulation Could Stifle Drones’ Potential to Revolutionize Our Lives

(p. A15) In the early days of the automobile, Vermont enacted a law requiring someone to walk one-eighth of a mile in front of every car and wave a red flag to warn pedestrians. Iowa directed all motorists to call ahead to warn each town on their route that they were coming. Some jurisdictions set speed limits so low that drivers who obeyed them risked having their engines stall.
Those laws seem humorously quaint, but if they had been widely adopted and enforced, the automobile revolution might have been shut down and its manifold benefits denied to millions. Today over-regulation could stifle the development of drones, which have the potential to revolutionize many parts of the economy and our everyday lives.
To cite a few examples: Amazon hopes to launch Prime Air, which would use drones to deliver packages in less than 30 minutes after an order is placed. Texas Equusearch, which organizes missing-person recovery efforts, can replace the labor of 100 volunteers with one drone. Clayco Inc., a construction firm, intends to use drones for aerial imaging of construction projects–replacing either helicopters, which burn fossil fuels and can be dangerous to those below, or construction workers, who risk serious injury through falls when they must climb to reach high, hard-to-reach places to take photos.

For the full commentary, see:
JOSEPH R. PALMORE and CHRISTOPHER J. CARR. “Overregulated Drones Struggle for Take-Off; The FAA has been slow and stuck in the past–precisely what the technology is not.” The Wall Street Journal (Mon., Feb. 23, 2015): A15.
(Note: the online version of the commentary has the date Feb. 22, 2015,)

Technology Getting Bum Rap for Job Woes

The job market has been anemic in a variety of ways, for several years. Some, as below, want to pin this on the advance of technology. I argue, to the contrary, that it is mainly due to our discouraging start-ups by bad policies (such as over-regulating and over-taxing). Start-ups, as Haltiwanger and his colleagues have been showing, are the main source of new jobs.

(p. A1) Lawrence H. Summers, the former Treasury secretary, recently said that he no longer believed that automation would always create new jobs. “This isn’t some hypothetical future possibility,” he said. “This is something that’s emerging before us right now.”

Erik Brynjolfsson, an economist at M.I.T., said, “This is the biggest challenge of our society for the next decade.”
Mr. Brynjolfsson and other experts say they believe that society has a chance to meet the challenge in ways that will allow technology to be mostly a positive force. In addition to making some jobs obsolete, new technologies have also long complemented people’s skills and enabled them (p. A3) to be more productive — as the Internet and word processing have for office workers or robotic surgery has for surgeons.
More productive workers, in turn, earn more money and produce goods and services that improve lives.
“It is literally the story of the economic development of the world over the last 200 years,” said Marc Andreessen, a venture capitalist and an inventor of the web browser. “Just as most of us today have jobs that weren’t even invented 100 years ago, the same will be true 100 years from now.”
. . .
There are certain human skills machines will probably never replicate, like common sense, adaptability and creativity, said David Autor, an economist at M.I.T. Even jobs that become automated often require human involvement, like doctors on standby to assist the automated anesthesiologist, called Sedasys.
. . .
Whether experts lean toward the more pessimistic view of new technology or the most optimistic one, many agree that the uncertainty is vast. Not even the people who spend their days making and studying new technology say they understand the economic and societal effects of the new digital revolution.
When the University of Chicago asked a panel of leading economists about automation, 76 percent agreed that it had not historically decreased employment. But when asked about the more recent past, they were less sanguine. About 33 percent said technology was a central reason that median wages had been stagnant over the past decade, 20 percent said it was not and 29 percent were unsure.
Perhaps the most worrisome development is how poorly the job market is already functioning for many workers. More than 16 percent of men between the ages of 25 and 54 are not working, up from 5 percent in the late 1960s; 30 percent of women in this age group are not working, up from 25 percent in the late 1990s. For those who are working, wage growth has been weak, while corporate profits have surged.

For the full story, see:
Claire Cain Miller. “Rise of Robot Work Force Stokes Human Fears.” The New York Times (Tues., DEC. 16, 2014): A1 & A3.
(Note: ellipses are added.)
(Note: the online version of the story has the date DEC. 15, 2014, and has the title “As Robots Grow Smarter, American Workers Struggle to Keep Up.”)

A relevant Haltiwanger paper is:
Haltiwanger, John C., Ron S. Jarmin, and Javier Miranda. “Who Creates Jobs? Small Vs. Large Vs. Young.” Review of Economics and Statistics 95, no. 2 (May 2013): 347-61.

Progress Depends on Removing Barriers to Innovation

In the quotation below, Bill Gates is referring to the late, and way-under-appreciated, economist Julian Simon.

(p. A3) “. . . Simon’s view was that humans would have to change to innovate,” Mr. Gates said. Innovation, in other words, is not preordained. Indeed, it’s happened much more in some societies than in others. And it has happened, Mr. Gates was arguing, because people and institutions took steps to remove the barriers to progress.
. . .
. . . , much of the world is enjoying one of history’s most rapid increases in prosperity. Life expectancy has risen more than six years just since 1990. The world, to quote the title of a book by the economist Charles Kenny, is “Getting Better.” As Mr. Gates says: “The world is actually improving a lot. We’re trying to deliver both the good news on the progress and the possibility to do more.”

For the full commentary, see:
David Leonhardt. “Africa’s Economy Is Rising, and Focus Turns to Food.” The New York Times (Thurs., JAN. 22, 2015): A3.
(Note: ellipses added.)
(Note: the online version of the commentary has the title “Africa’s Economy Is Rising. Now What Happens to Its Food?”)

The book mentioned by Charles Kenny is:
Kenny, Charles. Getting Better: Why Global Development Is Succeeding–and How We Can Improve the World Even More. Philadelphia, PA: Basic Books, 2011.

One of the great books by Julian Simon is:
Moore, Stephen, and Julian L. Simon. It’s Getting Better All the Time: 100 Greatest Trends of the Last 100 Years. Washington, D.C.: Cato Institute, 2000.

Congress Appropriates Funds to Test Concussion Theory of Rain

(p. 190) the first century A.D., when the Greek moralist Plutarch came up with the notion that rain followed military battles. Napoleon believed as much and fired cannons and guns at the sky to muddy up the ground between him and his attackers. Civil War veterans who wallowed in cold slop believed that ceaseless, close-range artillery fire had opened up the skies. In the late 1890s, as the first nesters started to dig their toeholds on the dry side of the one hundredth meridian, Congress had appropriated money to test the concussion theory in Texas. The tests were done by a man named Dyrenforth. He tried mightily, with government auditors looking over (p. 191) his shoulder, but Dyrenforth could not force a drop from the hot skies of Texas. From then on, he was called “Dry-Henceforth.”
Government-sponsored failure didn’t stop others from trying. A man who called himself “the moisture accelerator,” Charles M. Hatfield, roamed the plains around the turn of the century. A Colonel Sanders of rainmaking, Hatfield had a secret mixture of ingredients that could be sent to the sky by machine. In the age before the widespread use of the telephone, it was hard to catch up with the moisture accelerator after he had fleeced a town and moved on.

Source:
Egan, Timothy. The Worst Hard Time: The Untold Story of Those Who Survived the Great American Dust Bowl. Boston: Houghton Mifflin, 2006.