Category: Economics

Infrastructure Costs Often Exceed Benefits

(p. A13) Most federal infrastructure spending is done by sending funds to state and local governments. For highway programs, the ratio is usually 80% federal, 20% state and local. But that means every local district has an incentive to press the federal authorities to fund projects with poor national returns. We all remember Alaska’s infamous “bridge to nowhere.”
In other words, if a local government is putting up only 20% of the funds, it needs the benefits to its own citizens to be only 21% of the total national cost. Yet every state and every locality has potential infrastructure needs that it would like the rest of the country to pay for. That leads to the misallocation of federal funds and infrastructure projects that benefit the few at the cost of the many.
. . .
Japan tried infrastructure-heavy serial fiscal stimuli for decades and is trying again under Prime Minister Shinzo Abe. Yes, Japan now has many new bridges, roads and paved drainage ditches, but the spending has done little to improve Japan’s meager growth rate.

For the full story, see:
MICHAEL J. BOSKIN. “All Aboard the Infrastructure Boondoggle; Whoever wins on Nov. 8, a flood of public-works money is coming. Cost-benefit tests are crucial.” The Wall Street Journal (Tues., Nov. 1, 2016): A13.
(Note: ellipsis added.)
(Note: the online version of the article has the date Oct. 31, 2016.)

Blockchain Can Cut Out Financial Middlemen

(p. A9) Blockchains are basically a much better way of managing information. They are distributed ledgers, run on multiple computers all over the world, for recording transactions in a way that is fast, limitless, secure and transparent. There is no central database overseen by a single institution responsible for auditing and recording what goes on. If you and I were to engage in a transaction, it would be executed, settled and recorded on the blockchain and evident for all to see, yet encrypted so as to be villain-proof. “The new platform enables a reconciliation of digital records regarding just about everything in real time,” write the Tapscotts. No more waiting for that check to clear. It would all be done and recorded for eternity before you know it.
The digital currency bitcoin is currently the best-known blockchain technology. If I wanted to pay you using bitcoin, I would start with a bitcoin wallet on my computer or phone and buy bitcoins using dollars. I would then send you a message identifying the bitcoin I would like to send you and sign the transaction using a private key. The heavily encrypted reassignment of the bitcoin to your wallet is recorded and verified in the bitcoin ledger for all to see, and they are now yours to spend. The transaction is likely more secure and cheaper than a traditional bank transfer.
. . .
The layman, . . . , might want to wait for a more penetrable explanation of blockchains to come along–as one surely will if the authors’ predictions are even one-zillionth right.​

For the full review, see:
PHILIP DELVES BROUGHTON. “BOOKSHELF; Bitcoin Is Just The Beginning; Imagine a personal-identity service that gives us control over selling our personal data. Right now, Google and Facebook reap the profit.” The Wall Street Journal (Fri., May 27, 2016): A9.
(Note: ellipses added.)
(Note: the online version of the review has the date May 26, 2016.)

The book under review, is:
Tapscott, Don, and Alex Tapscott. Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World. New York: Portfolio, 2016.

Udacity Entrepreneur Counters Creeping Credentialism

(p. B2) Udacity, an online learning start-up founded by a pioneer of self-driving cars, is finally taking the wraps off a job trial program it has worked on for the last year with 80 small companies.
The program, called Blitz, provides what is essentially a brief contract assignment, much like an internship. Employers tell Udacity the skills they need, and Udacity suggests a single candidate or a few. For the contract assignment, which usually lasts about three months, Udacity takes a fee worth 10 to 20 percent of the worker’s salary. If the person is then hired, Udacity does not collect any other fees, such as a finder’s fee.
For small start-ups, a hiring decision that goes bad can be a time-consuming, costly distraction. “This lets companies ease their way into hiring without the hurdle of making a commitment upfront,” said Sebastian Thrun, co-founder and chairman of Udacity.
. . .
Mr. Thrun, a former Stanford professor and Google engineer who led the company’s effort in self-driving cars, said he was also trying to nudge the tech industry’s hiring beyond its elite-college bias.
“For every Stanford graduate, there are hundreds of people without that kind of pedigree who can do just as well,” he said.

For the full story, see:
STEVE LOHR. “Udacity, an Education Start-Up, Offers Tech Job Tryouts.” The New York Times (Fri., NOV. 18, 2016): B2.
(Note: ellipsis added.)
(Note: the online version of the story has the date NOV. 17, 2016, and has the title “Udacity, an Online Learning Start-Up, Offers Tech Job Trials.”)

Dignity and Equality Before the Law Unleashes Creativity in the Poor

(p. A23) We can improve the conditions of the working class. Raising low productivity by enabling human creativity is what has mainly worked. By contrast, taking from the rich and giving to the poor helps only a little — and anyway expropriation is a one-time trick.
. . .
Look at the astonishing improvements in China since 1978 and in India since 1991. Between them, the countries are home to about four out of every 10 humans. Even in the United States, real wages have continued to grow — if slowly — in recent decades, contrary to what you might have heard. Donald Boudreaux, an economist at George Mason University, and others who have looked beyond the superficial have shown that real wages are continuing to rise, thanks largely to major improvements in the quality of goods and services, and to nonwage benefits. Real purchasing power is double what it was in the fondly remembered 1950s — when many American children went to bed hungry.
What, then, caused this Great Enrichment?
Not exploitation of the poor, not investment, not existing institutions, but a mere idea, which the philosopher and economist Adam Smith called “the liberal plan of equality, liberty and justice.” In a word, it was liberalism, in the free-market European sense. Give masses of ordinary people equality before the law and equality of social dignity, and leave them alone, and it turns out that they become extraordinarily creative and energetic.

For the full commentary, see:
DEIRDRE N. McCLOSKEY. “Economic View; Equality, Liberty, Justice and Wealth.” The New York Times, SundayBusiness Section (Sun., SEPT. 4, 2016): 6.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date SEPT. 2, 2016, and has the title “Economic View; The Formula for a Richer World? Equality, Liberty, Justice.”)

McCloskey’s commentary, quoted above, is related to her book:
McCloskey, Deirdre N. Bourgeois Equality: How Ideas, Not Capital, Transformed the World. Chicago: University of Chicago Press, 2016.

Space Trash Start-Up Aims to Be Quicker than Government

(p. D1) Mr. Okada is an entrepreneur with a vision of creating the first trash collection company dedicated to cleaning up some of humanity’s hardest-to-reach rubbish: the spent rocket stages, inert satellites and other debris that have been collecting above Earth since Sputnik ushered in the space age. He launched Astroscale three years ago in the belief that national space agencies were dragging their feet in facing the problem, which could be tackled more quickly by a small private company motivated by profit.
“Let’s face it, waste management isn’t sexy enough for a space agency to convince taxpayers to allocate money,” said Mr. Okada, 43, who put Astroscale’s headquarters in start-up-friendly Singapore but is building its spacecraft in his native Japan, where he found more engineers. “My breakthrough is figuring out how to make this into a business.”
. . .
(p. D3) “The projects all smelled like government, not crisp or quick,” he said of conferences he attended to learn about other efforts. “I came from the start-up world where we think in days or weeks, not years.”
. . .
He also said that Astroscale would start by contracting with companies that will operate big satellite networks to remove their own malfunctioning satellites. He said that if a company has a thousand satellites, several are bound to fail. Astroscale will remove these, allowing the company to fill the gap in its network by replacing the failed unit with a functioning satellite.
“Our first targets won’t be random debris, but our clients’ own satellites,” he said. “We can build up to removing debris as we perfect our technology.”

For the full story, see:

MARTIN FACKLER. “Building a Garbage Truck for Space.” The New York Times (Tues., Nov. 29, 2016): D1 & D3.
(Note: the online version of the story has the date Nov. 28, 2016, and has the title “Space’s Trash Collector? A Japanese Entrepreneur Wants the Job.”)

Prehistoric Hunter Suffered from Ulcer-Causing Microbe

(p. A7) Microbes that once troubled the stomach of a prehistoric hunter known as “Otzi the Iceman,” who died on an Alpine glacier 5,300 years ago, are offering researchers a rare insight into the early settlement of Europe.
In findings reported Thursday [January 7, 2016] in Science, an international research group analyzed remnants of ulcer-causing microbes called Helicobacter pylori exhumed from the well-preserved mummy of the Neolithic nomad. With modern DNA sequencing technology, they reconstructed the genetic structure of this ancient microbe–the oldest known pathogen sequenced so far.
. . .
“We know he had a rough lifestyle,” said Frank Maixner at the European Academy Institute for Mummies and the Iceman in Bolzano, Italy, who led the team of 23 scientists. “We found a lot of pathological conditions.”
. . .
The researchers also determined that the bacteria had inflamed his stomach lining, indicating that the prehistoric hunter, fleeing into the icy highlands where he was shot in the back with an arrow and beaten, may have been feeling ill on the day he was murdered.

For the full story, see:
ROBERT LEE HOTZ. “Iceman’s Gut Sheds Light on Human Migration.” The Wall Street Journal (Fri., Jan. 8, 2016): A7.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the story has the date Jan. 7, 2016, and has the title “Otzi the Iceman’s Stomach Sheds Light on Copper-Age Migration to Europe.”)

The research summarized in the passages quoted above, was more fully reported in:
Maixner, Frank, Ben Krause-Kyora, Dmitrij Turaev, Alexander Herbig, Michael R. Hoopmann, Janice L. Hallows, Ulrike Kusebauch, Eduard Egarter Vigl, Peter Malfertheiner, Francis Megraud, Niall O’Sullivan, Giovanna Cipollini, Valentina Coia, Marco Samadelli, Lars Engstrand, Bodo Linz, Robert L. Moritz, Rudolf Grimm, Johannes Krause, Almut Nebel, Yoshan Moodley, Thomas Rattei, and Albert Zink. “The 5300-Year-Old Helicobacter pylori Genome of the Iceman.” Science 351, no. 6269 (Jan. 8, 2016): 162-65.

Poor Are Exiting High-Housing-Cost Cities

GroupsExitingHighHousingCostCitiesGraph2106-11-18.jpgSource of graph: online version of the WSJ article quoted and cited below.

(p. A3) Americans are leaving the costliest metro areas for more affordable parts of the country at a faster rate than they are being replaced, according to an analysis of census data, reflecting the impact of housing costs on domestic migration patterns.

Those mostly likely to move from expensive to inexpensive metro areas were at the lower end of the income scale, under the age of 40 and without a bachelor’s degree, the analysis by home-tracker Trulia found.
. . .
Another study this year from California policy group Next 10 and Beacon Economics found that New York state and California had the largest net losses of domestic migrants between 2007 and 2014, and that lower- and middle-income people were more likely to leave.

For the full story, see:
CHRIS KIRKHAM. “Costly Cities See Exodus.” The Wall Street Journal (Thurs., Nov. 3, 2016): A3.
(Note: ellipsis added.)
(Note: the online version of the story has the date Nov. 1, 2016, and has the title “More Americans Leave Expensive Metro Areas for Affordable Ones.”)

About 90% of Current Jobs Include Tasks that Are Hard to Automate

(p. B1) They replaced horses, didn’t they? That’s how the late, great economist Wassily Leontief responded 35 years ago to those who argued technology would never really replace people’s work.
. . .
(p. B6) A research paper published last month by the Organization for Economic Cooperation and Development argued that even the occupations most at risk of being replaced by machines contained lots of tasks that were hard to automate, like face-to-face interaction with customers.
It concluded that only 9 percent of American workers faced a high risk of being replaced by an automaton. Austrians, Germans and Spaniards were the most vulnerable, but only 12 percent of them risked losing their jobs to information technology.

For the full commentary, see:
Porter, Eduardo. “ECONOMIC SCENE; Contemplating the End of Human Workhorse.” The New York Times (Weds., JUNE 8, 2016): B1 & B6.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date JUNE 7, 2016, and has the title “ECONOMIC SCENE; Jobs Threatened by Machines: A Once ‘Stupid’ Concern Gains Respect.”)

The Organization for Economic Cooperation and Development paper mentioned above, is:
Arntz, Melanie, Terry Gregory, and Ulrich Zierahn. “The Risk of Automation for Jobs in OECD Countries: A Comparative Analysis.” OECD Social, Employment and Migration Working Papers, No. 189. Paris: OECD Publishing, 2016.

Berners-Lee Suggests Web Micropayments Replace Ad Revenue

(p. B1) SAN FRANCISCO — Twenty-seven years ago, Tim Berners-Lee created the World Wide Web as a way for scientists to easily find information. It has since become the world’s most powerful medium for knowledge, communications and commerce — but that doesn’t mean Mr. Berners-Lee is happy with all of the consequences.
. . .
So on Tuesday [June 7, 2016], Mr. Berners-Lee gathered in San Francisco with other top computer scientists — including Brewster Kahle, head of the nonprofit Internet Archive and an internet activist — to discuss a new phase for the web.
. . .
(p. B6) Consider payments. In many cases, people pay for things online by entering credit card information, not much different from handing a card to a merchant for an imprint.”
At the session on Tuesday [June 7, 2016], computer scientists talked about how new payment technologies could increase individual control over money. For example, if people adapted the so-called ledger system by which digital currencies are used, a musician might potentially be able to sell records without intermediaries like Apple’s iTunes. News sites might be able to have a system of micropayments for reading a single article, instead of counting on web ads for money.
“Ad revenue is the only model for too many people on the web now,” Mr. Berners-Lee said. “People assume today’s consumer has to make a deal with a marketing machine to get stuff for ‘free,’ even if they’re horrified by what happens with their data. Imagine a world where paying for things was easy on both sides.”

For the full story, see:
QUENTIN HARDY. “World Wide Web’s Creator Looks to Reinvent It.” The New York Times (Weds., JUNE 8, 2016): B1 & B6.
(Note: ellipses, and bracketed dates, added.)
(Note: the online version of the story has the date JUNE 7, 2016, and has the title “The Web’s Creator Looks to Reinvent It.” )

When People’s Lives Stagnate They “Often Become Angry, Resentful”

(p. 3) Benjamin M. Friedman of Harvard University, in his book “The Moral Consequences of Economic Growth” (Knopf, 2005), said that at a deep level people make judgments about the economic progress that they see in their own lifetimes, and in comparison with the progress made by the previous generation, especially their own parents. Few people study economic growth statistics. But nearly everyone knows what they are being paid. If they realize that they are doing less well than their forebears, they become anxious. And if they can’t see themselves and others in their cohort as progressing over a lifetime, their social interactions often become angry, resentful and even conspiratorial.

For the full commentary, see:
ROBERT J. SHILLER. “Economic View; Weak Economies Foment Ethnic Nationalism.” The New York Times, SundayBusiness Section (Sun., OCT. 16, 2016): 3.
(Note: the online version of the commentary has the date OCT. 14, 2016, and has the title “Economic View; What’s Behind a Rise in Ethnic Nationalism? Maybe the Economy.”)

The Benjamin Friedman book mentioned in the commentary above, is:
Friedman, Benjamin M. The Moral Consequences of Economic Growth. New York: Knopf, 2005.