Category: Economics

Over-Taxed and Over-Regulated Castles for Sale in Italy

(p. A3) While castles and historic mansions in Italy have long been family inheritances, today dozens of them are for sale, even in one of the most conservative real estate markets in Europe.
. . .
On historic buildings, where owners used to pay little as compensation for the elevated costs of maintaining centuries-old structures, the taxes increased by 20 or 30 times, depending on the property’s location.
On some buildings, taxes spiked from 3,000 euros (about $3,400) in 2011 to 75,000 euros (about $84,000) by 2013. That might be a small figure for castle dwellers in the United Kingdom, but it is a burden for Italian pockets, especially in regions where the property’s market value or tourism interest is low.
The trends, to many here, are indicative of Italy’s place as a country caught between its past glory and its modern difficulty in producing an innovative climate capable of ensuring its future.
. . .
. . . buyer beware: Living a nobleman’s life in Italy comes at a cost, even for many tycoons. New owners face the same onerous bureaucracy as Italians to make even minimal changes to many older properties.
Under Italian law, the owner of a historic building is its custodian, bound to maintain it and grant its security and, in some cases, its use to the public. Many buyers give up on properties of great historic value, but in bad condition, for this reason, brokers said.
“This is a problem for possible investors, who want to have modern comforts like a spa, air-conditioning or a lift,” said Mr. Pallavicini, of the Italian Historic Houses Association.
“We no longer live like in 1800,” he added. “But 99 percent of those changes are either impossible or extremely bureaucratic and complicated in an Italian historic building.”

For the full story, see:
GAIA PIANIGIANI. “PONTASSIEVE JOURNAL; Life of Italian Nobility for Sale, Complete With Regulations and Taxes.” The New York Times (Weds., JAN. 28, 2015): A11.
(Note: ellipses are added.)
(Note: the online version of the story has the date JAN. 27, 2015.)

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.

Depression of 1920-21 Ended Quickly, Without Government Stimulus or Bailouts

(p. C3) Beginning in January 1920, something much worse than a recession blighted the world. The U.S. suffered the steepest plunge in wholesale prices in its history (not even eclipsed by the Great Depression), as well as a 31.6% drop in industrial production and a 46.6% fall in the Dow Jones Industrial Average. Unemployment spiked, and corporate profits plunged.
. . .
In the absence of anything resembling government stimulus, a modern economist may wonder how the depression of 1920-21 ever ended. Oddly enough, deflation turned out to be a tonic. Prices–and, critically, wages too–were allowed to fall, and they fell far enough to entice consumers, employers and investors to part with their money. Europeans, noticing that America was on the bargain counter, shipped their gold across the Atlantic, where it swelled the depression-shrunken U.S. money supply. Shares of profitable and well-financed American companies changed hands at giveaway valuations.
Of course, the year-and-a-half depression must have seemed interminable for all who were jobless or destitute. It was, however, a great deal shorter than the 43 months of the Great Depression of 1929-33. Then too, the 1922 recovery would bring tears of envy to today’s central bankers and policy makers: Passenger-car production shot up by 63%, for instance, and the Dow jumped by 21.5%. “From practically all angles,” this newspaper judged in a New Year’s Day 1923 retrospective, “1922 can be recorded as the renaissance of prosperity.”
In 2008, as Lehman Brothers toppled, the Great Depression monopolized the market on historical analogies. To avoid a recurrence of the 1930s, officials declared, the U.S. had to knock down interest rates, manipulate stock prices to go higher, repave the highways and trade in the clunkers.
The forgotten depression teaches a very different lesson. Sometimes the best stimulus is none at all.

For the full commentary, see:
JAMES GRANT. “The Depression Fixed by Doing Nothing; The agonizing but often forgotten 1920-21 economic crisis suggests that sometimes the best stimulus is none at all.” The Wall Street Journal (Sat., Jan. 3, 2015): C3.
(Note: ellipsis added.)
(Note: the online version of the review has the date Jan. 2, 2015, and has the title “The Depression That Was Fixed by Doing Nothing; The often forgotten 1920-21 economic crisis suggests that sometimes the best stimulus is none at all.”)

Grant’s commentary is elaborated on in his book:
Grant, James. The Forgotten Depression: 1921, the Crash That Cured Itself. New York: Simon & Schuster, 2014.

Wall Street Democrats Question Hillary Clinton’s Views on Job Creation

(p. B1) “Hillary said what?”
That was the question whispered among some of Wall Street’s most prominent Democratic supporters over the weekend after Hillary Rodham Clinton spoke on the campaign trail for Martha Coakley, the Democratic candidate for governor of Massachusetts.
“Don’t let anybody tell you that it’s corporations and businesses that create jobs,” Mrs. Clinton said on Friday in Boston.

For the full commentary, see:
ANDREW ROSS SORKIN. “Wall St. Wonders About Hillary Clinton.” The New York Times (Tues., OCTOBER 28, 2014): B1 & B6.
(Note: the online version of the commentary has the date OCTOBER 27, 2014, and has the title “Hillary Clinton’s Comment on Jobs Raises Eyebrows on Wall St.”)

Piketty Prefers Reform Instead of Receiving Legion of Honor

(p. A16) PARIS–French economist Thomas Piketty, author of the best-selling book “Capital in the Twenty-First Century,” has turned down the Legion of Honor, saying the government should focus on reviving the country’s anemic economy rather than “decide who is honorable.”
Mr. Piketty’s refusal of one of France’s highest distinctions–announced via a short declaration to the Agence France-Presse news agency–is a snub to the government a day after President François Hollande cited the global influence of French scholars as evidence of the country’s unfailing might.

For the full story, see:
INTI LANDAURO. “French Economist Refuses State Honor.” The Wall Street Journal (Fri., Jan. 2, 2015): A16.
(Note: the online version of the story has the date Jan. 1, 2015, and has the title “French Economist Thomas Piketty Refuses Legion of Honor.”)

High Costs of Public Sector Unions

(p. A11) . . . the costs of public-sector unions are great. “The byproduct of political management of the economy is waste,” the author notes. Second, pension and benefit obligations weigh down our cities. Trash disposal in Chicago costs $231 per ton, versus $74 in non-union Dallas. Increasingly, such a burden is fatal. When Detroit declared bankruptcy in 2013, a full half of the city’s$18.2 billion long-term debt was owed for employee pensions and health benefits. Even before the next downturn, other cities and some states will find themselves faltering because of similarly massive obligations.
There is something grotesque about public workers fighting for benefits whose provision will hurt the public. Citizens who vote Democratic may choose not to acknowledge the perversity out of party loyalty. But over the years a few well-known Democrats have sided against the public-sector unions. “The process of collective bargaining as usually understood cannot be transplanted into the public service,” a Democratic politician once declared. His name? Franklin Roosevelt.

For the full review, see:
AMITY SHLAES. “BOOKSHELF; Public Unions vs. the Public; Pension and benefit obligations weigh down our cities. Trash disposal in Chicago costs $231 per ton, versus $74 in non-union Dallas.” The Wall Street Journal (Fri., Jan. 16, 2015): A11.
(Note: ellipsis added.)
(Note: the online version of the review has the date Jan. 15, 2015.)

The book under review is:
DiSalvo, Daniel. Government against Itself: Public Union Power and Its Consequences. New York: Oxford University Press, 2015.

Private Power Lights the Darkness

(p. A10) NUSEIRAT CAMP, Gaza Strip–It was just after sunset when the power went out in this Palestinian refugee camp. Within seconds, Ali al-Majdalawi flipped a switch on a blue generator in his backyard and the lights in 500 homes flickered back on again.
The 64-year-old patriarch runs what he calls the A. Majdalawi Electricity Co., a pop-up utility that consists of three generators and a spider’s web of power lines radiating from an empty lot he owns in the camp.
Mr. Majdalawi has no license to operate his company. But he does have an invoice pad at the ready and boasts a long list of customers including five mosques, a library and a police station.
. . .
Along with three partners, Mr. Majdalawi, a retired school official for the U.N., invested $80,000 of their savings to buy several diesel-powered generators two years ago and set about building their own power-delivery network.
The community of about 65,000 began in 1948, the year of Israel’s creation, when hundreds of families displaced by war between Jews and Arabs set up rows of temporary dwellings. Decades later, the refugees and their descendants still live here, tightly packed among schools run by the United Nations and a cemetery built into a sand dune at the center of town.
Because his company is private, Mr. Majdalawi couldn’t use municipal power polls to string up lines. He and his sons asked neighbors to let them use the walls of their homes for the wiring and allow crews to come in for periodic maintenance.
In most other respects, the business runs much like any other electricity company. Customers apply to join the grid and if approved, one of Mr. Majdalawi’s sons enters their names into a computer for monthly billing. Most clients request two amperes, enough to run lights, a television and a computer during blackouts. The price is 120 shekels a month, about $30.
“It is an alternate grid,” explained Mr. Majdalawi’s son, Rafet, the company’s chief accountant.
Deya Shaheen, a 25-year-old barber, said Mr. Majdalawi’s electricity has kept his year-old shop in business. The electric razors and the lights he uses to light the shop when customers drop in at night are powered on the three amperes he receives from the grid.On many nights, his shop is filled with young men looking for somewhere to watch soccer matches on television.
“Look, the power thing destroys your life,” he said. “People go to bed early not because they are sleepy, but because there is no power. There is nothing to do, no TV, no Internet. It is just dark.”

For the full story, see:
NICHOLAS CASEY. “Entrepreneur Fills in Gaza Electricity Gap; Palestinian Territory’s One Power Plant Meets Barely a Quarter of Demand, Posing an Obstacle in Reconstruction Efforts.” The Wall Street Journal (Weds., DEC. 24, 2014): A10.
(Note: ellipsis added.)
(Note: the online version of the story has the date DEC. 23, 2014, and has the title “Entrepreneur Fills in Gaps in Gaza Electricity Supplies; Palestinian Territory’s One Power Plant Meets Barely a Quarter of Demand.”)

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.

Smart Phones Bring Power to the Patient

(p. A11) We instinctively reach for our smartphones when we need to take pictures, get directions, deposit checks or reserve a table. Eric Topol, a cardiologist and digital pioneer, thinks that they are ready to perform at least one more task: revolutionize health care. In “The Patient Will See You Now,” he argues that smartphones will democratize medicine by bringing data and control directly to the people.
The power of doctors, says Dr. Topol, “can be likened to that of religious leaders and nobility” in centuries past, when knowledge and authority belonged to a small elite. He notes that we’ve never seen “a discrete challenge to the medical profession” akin to Luther ‘s challenge to the Roman Catholic Church or democracy’s challenge to monarchy and despotism. “But we’ve not had the platform or landscape for that to be accomplished. Until now.” Smartphones, he says, enable a range of medical applications to move from the hospital to the home, and they shift medicine’s locus of control from doctor to patient.

For the full review, see:
DAVID A. SHAYWITZ. “BOOKSHELF; Doctor Android; In the same way that Luther challenged the Catholic Church, smartphones are poised to upend the medical profession.” The Wall Street Journal (Tues., Jan. 13, 2015): A11.
(Note: the online version of the review has the date Jan. 12, 2015.)

The book under review is:
Topol, Eric. The Patient Will See You Now: The Future of Medicine Is in Your Hands. New York: Basic Books, 2015.

Police Unions Make It Harder to Get Rid of Bad Cops

(p. A29) A small percentage of cops commit most of the abuses. A study by WNYC News in New York found that, since 2009, 40 percent of the “resisting arrest” charges were filed by just 5 percent of New York Police Department officers. In other words, most officers rarely get in a confrontation that leads to that charge, but a few officers often get in violent confrontations.
But it’s very hard to remove the bad apples from the force. Trying to protect their members, unions have weakened accountability. The investigation process is softer on police than it would be on anyone else. In parts of the country, contract rules stipulate that officers get a 48-hour cooling-off period before having to respond to questions. They have access to the names and testimony of their accusers. They can be questioned only by one person at a time. They can’t be threatened with disciplinary action during questioning.
More seriously, cops who are punished can be reinstated through a secretive appeals process that favors job retention over public safety. In The Atlantic, Conor Friedersdorf has a riveting piece with egregious stories of cops who have returned to the force after clear incompetence. Hector Jimenez was an Oakland, Calif., cop who shot and killed an unarmed 20-year-old man in 2007. Seven months later, he killed another unarmed man, shooting him in the back three times while he ran away. The city paid damages. Jimenez was fired. But he appealed through his union and was reinstated with back pay.

For the full commentary, see:
David Brooks. “The Union Future.” The New York Times (Fri., DEC. 19, 2014): A29.
(Note: the online version of the commentary has the date DEC. 18, 2014. )