Category: Government

David R. Henderson Offers Advance Praise for Openness to Creative Destruction

In Openness to Creative Destruction, Art Diamond tells amazing story after story of entrepreneurs who have made our lives better. Read it and pinch yourself at your luck in being alive in the 21st century. And learn about how, as a citizen, to keep the innovations coming. Hint: Don’t give government too much power over us.

David R. Henderson, Research Fellow, Hoover Institution.

Henderson’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.

Bureaucratic FDA Delays Approvals for Fear “We’ll Be Toast”

(p. A21) Oct. 30 [2018] marks the 36th anniversary of the FDA’s approval of human insulin synthesized in genetically engineered bacteria, the first product made with “gene splicing” techniques. As the head of the FDA’s evaluation team, I had a front-row seat.
. . .
My team and I were ready to recommend approval after four months’ review. But when I took the packet to my supervisor, he said, “Four months? No way! If anything goes wrong with this product down the road, people will say we rushed it, and we’ll be toast.” That’s the bureaucratic mind-set. I don’t know how long he would have delayed it, but when he went on vacation a month later, I took the packet to his boss, the division director, who signed off.
That anecdote is an example of Milton Friedman’s observation that to understand the motivation of an individual or organization, you need to “follow the self-interest.” A large part of regulators’ self-interest lies in staying out of trouble. One way to do that, my supervisor understood, is not to approve in record time products that might experience unanticipated problems.

For the full commentary, see:
Miller, Henry I. “Follow the FDA’s Self-Interest; While approving a new form of insulin, I saw how regulators protect themselves.” The Wall Street Journal (Monday, Oct. 29, 2018: A21.
(Note: ellipsis, and bracketed year, added.)
(Note: the online version of the commentary has the date Oct. 28, 2018.)

Kansas City Government Pours Bleach on Food for the Homeless

(p. A17) KANSAS CITY, Mo. — They unfurled colorful blankets on a grassy slope, and unloaded steaming trays of corn dogs, baked beans and vegetable beef soup. Every week for the past three years, the volunteers have gone to a park just outside downtown Kansas City with home-cooked meals for the homeless. They call it a picnic with friends.
But on a cloudy afternoon earlier this month, an inspector from the Kansas City Health Department showed up and called it something else: an illegal food establishment.
She ordered most of the food put into black garbage bags, bundled them on the grass and, in a move that stunned the gathered group, doused the pile with bleach.
Allen Andrews, who has been living on the streets for the past year, said he watched silently as the bleach was poured, thinking back to when he had a home. He remembered how he had sometimes poured bleach on trash he put out for collection, to deter rodents from getting into it.
“They treat us like animals,” Mr. Andrews, 46, said.

For the full story, see:
John Eligon. “‘Where Feeding the Needy Requires Both a Heart and a Permit.” The New York Times (Thursday, Nov. 22, 2018): A17.
(Note: the online version of the story has the date Nov. 21, 2018, and has the title “You Want to Feed the Hungry? Lovely. Let’s See Your Permit.” The online version says that the article appeared on p. A13 of the New York edition. It appeared on p. A17 of the National edition that I subscribe to.)

A Tale of Two Bookstores: New York City Subsidizes Amazon and Regulates the Strand

(p. A22) Since it opened in 1927, the Strand bookstore has managed to survive by beating back the many challenges — soaring rents, book superstores, Amazon, e-books — that have doomed scores of independent bookshops in Manhattan.
With its “18 Miles of Books” slogan, film appearances and celebrity customers, the bibliophile’s haven has become a cultural landmark.
Now New York City wants to make it official by declaring the Strand’s building, at the corner of Broadway and 12th Street in Greenwich Village, a city landmark.
There’s only one problem: The Strand does not want the designation.
Nancy Bass Wyden, who owns the Strand and its building at 826 Broadway, said landmarking could deal a death blow to the business her family has owned for 91 years, one of the largest book stores in the world.
So at a public hearing on Tuesday before the city’s Landmarks Preservation Commission, her plea will be simple, she said: “Do not destroy the Strand.”
Like many building owners in New York, Ms. Wyden argues that the increased restrictions and regulations required of landmarked buildings can be cumbersome and drive up renovation and maintenance costs.
“By landmarking the Strand, you can also destroy a piece of New York history,” she said. “We’re operating on very thin margins here, and this would just cost us a lot more, with this landmarking, and be a lot more hassle.”
. . .
Another rich twist, Ms. Wyden said, was that the move coincides with the announcement that Amazon — not exactly beloved by brick-and-mortar booksellers — plans to open a headquarters in Queens, after city and state leaders offered upwards of $2 billion in incentives to Amazon and its multibillionaire chief executive, Jeff Bezos.
“The richest man in America, who’s a direct competitor, has just been handed $3 billion in subsidies. I’m not asking for money or a tax rebate,” Ms. Wyden said. “Just leave me alone.”
. . .
Owners of buildings with landmark status are in many cases barred from using plans, materials and even paint colors that vary from the original design without the commission’s approval.
. . .
Ms. Wyden — who is married to Senator Ron Wyden of Oregon, whom she met at the similarly renowned Powell’s book store in Portland — is a third-generation owner of the Strand, which stocks roughly 2.5 million used, rare and new books and employs 230 people.
. . .
While she would not divulge the bookstore’s finances, she said that she could make more money renting out the Strand’s five floors, but she loves the family business too much.
She accused city officials of trying to hurry the landmarking process, leaving her little time to prepare a defense, especially during the holiday rush.
“It’s our busiest time of year, and we should be focused on customers and Christmas, which is where we make our most money,” Ms. Wyden said. “But they have no sympathy for that.”

For the full story, see:
Corey Kilgannon. “‘Declaring Strand Bookstore a Landmark Would Kill It, Says Strand.” The New York Times (Tuesday, Dec. 4, 2018): A22.
(Note: ellipses added.)
(Note: the online version of the story has the date Dec. 3, 2018, and has the title “Declare the Strand Bookstore a City Landmark? No Thanks, the Strand Says.” The online version says that the New York print edition appeared on p. A20 and had the title: “A Bid to Preserve Strand Bookstore Would Destroy It, Owner Says.” The page and title in the citation I give further above, is from the National print edition that I receive.)

Politicians and Special Interests “Are Joined at the Hip”

(p. A15) In August 1979, when Paul Volcker began what would prove to be an eight-year stint as chairman of the Federal Reserve, inflation was running at a rate of more than 11% a year.
. . .
Before Jay Powell and Janet Yellen, before Ben Bernanke and Alan Greenspan, there was “tall Paul,” the thrifty, 6-foot-7 career civil servant who smoked cheap cigars and fished for trout with a fly rod. His policy, announced in an extraordinary Saturday press conference just two months after he took office, was the polar opposite of the radical “stimulus” imposed after the downfall of Lehman Brothers in 2008.
. . .
“Good government” and “sound” money are Mr. Volcker’s themes, in life as in print.
. . .
Washington in the early 1960s was a “comfortable, convenient medium-sized city,” he writes; its law firms were “entirely local and small, occupying maybe a floor or two in a K Street office building.” Today the capital is “a very different, unpleasant, place, dominated by wealth and lobbyists who are joined at the hip with the Congress and too many officials. I stay away.”
Humility is one of the charms of both the man and his book (written with Christine Harper, editor in chief of Bloomberg Markets). Though his kindergarten teacher, Miss Palmer, saw in young Paul a worrying lack of self-confidence, the grown man stuck to his anti-inflationary guns, let joblessness mount, bankruptcies climb and brickbats rain down. Refusing to flinch, he made the paper dollar, if not actually sound, then respectable. Tall Paul, indeed.

For the full review, see:
James Grant. “BOOKSHELF; The Last Monetary Hero; The Fed under Ben Bernanke opened the monetary spigots; the Fed under Paul Volcker shut them off–and ended an inflation crisis.” The Wall Street Journal (Monday, Nov. 26, 2018): A15.
(Note: ellipses added.)
(Note: the online version of the review has the date Nov. 25, 2018, and has the title “BOOKSHELF; ‘Keeping At It’ Review: The Last Monetary Hero; The Fed under Ben Bernanke opened the monetary spigots; the Fed under Paul Volcker shut them off–and ended an inflation crisis.”)

The book under review, is:
Volcker, Paul. Keeping at It: The Quest for Sound Money and Good Government. New York: PublicAffairs, 2018.

Drones Bringing Vaccine May Be Interpreted by Some as Cargo Cult Vindication

(p. A10) In the village of Cook’s Bay, on the remote side of the remote island of Erromango, in the remote South Pacific nation of Vanuatu, 1-month-old Joy Nowai was given shots for hepatitis and tuberculosis that were delivered by a flying drone on Monday.
It may not have been the first vial of vaccine ever delivered that way, but it was the first in Vanuatu, which is the only country in the world to make its childhood vaccine program officially drone-dependent.
“I am so happy the drone brought the stick medicine to Cook’s Bay as I don’t have to walk several hours to Port Narvin for her vaccines,” her mother, Julie Nowai told a Unicef representative. “It is only 15 minutes’ walk from my home.”
.. . .
. . . , about 20 percent of Vanuatu’s 35,000 children under age 5 do not get all their shots, according to the United Nations Children’s Fund.
So the country, with support from Unicef, the Australian government and the Global Fund to Fight AIDS, Tuberculosis and Malaria, began its drone program on Monday. It will initially serve three islands but may be expanded to many more.
In the future, that expansion may run into some unusual turbulence — Vanuatu is one of the few places where “cargo cults” are still active, and the drones match their central religious dogma: that believers will receive valuable goods delivered by airplane.
That will have to be handled carefully, a Unicef representative said.
. . .
. . . : Vanuatu still has adherents of the John Frum movement, one of the South Pacific cargo cults whose adherents pray for valuables arriving from the sky.
The cults date back more than 100 years, but reached their zenith during and after World War II.
Islanders whose ancestors had been kidnapped by whites to work on plantations in Australia and Fiji watched “silver birds” flown in by the Japanese and American militaries disgorge vast amounts of “cargo” — food, medicines, tools and weapons — which was sometimes shared with them.
The legend spread that the cargo was gifts from the ancestors, but that it had been intercepted and stolen by the foreigners. After the war ended, the cults built airstrips and model planes to lure the “birds” back.

For the full story, see:
Donald G. McNeil Jr. “‘A Buzzing Thing in the Sky’ Delivers Vaccines to Vanuatu.” The New York Times (Tuesday, Dec. 18, 2018): A10.
(Note: ellipses added.)
(Note: the online version of the story has the date Dec. 17, 2018, and has the title “An Island Nation’s Health Experiment: Vaccines Delivered by Drone.”)

Mitch Daniels Views Higher Education as a “Racket” (Health Care Too)

(p. A11) Mr. Daniels, 69, is the most innovative university president in America.
. . .
Mr. Daniels kicks off our conversation with a morality tale: “I’ll speak to an audience of businesspeople and say: Here’s the racket that you should have gone into. You’re selling something, a college diploma, that’s deemed a necessity. And you have total pricing power.” Better than that: “When you raise your prices, you not only don’t lose customers, you may actually attract new ones.”
For lack of objective measures, “people associate the sticker price with quality: ‘If school A costs more than B, I guess it’s a better school.’ ” A third-party payer, the government, funds it all, so that “the customer–that is, the student and the family–feels insulated against the cost. A perfect formula for complacency.” The parallels with health care, he observes, are “smack on.”

For the full interview, see:
Tunku Varadarajan, interviewer. “THE WEEKEND INTERVIEW: College Bloat Meets ‘The Blade’.” The Wall Street Journal (Saturday, Dec. 15, 2018): A11.
(Note: ellipsis added.)
(Note: the online version of the interview has the date Dec. 14, 2018.)

Tech Entrepreneurs Know Innovation Thrives in Flexible Labor Markets

(p. B1) A politically awakened Silicon Valley, buttressed by the tech industry’s growing economic power, could potentially alter politics long after President Trump has left the scene. But if the tech industry becomes a political force, what sort of policies will it push?
(p. B6) A new survey by political scientists at Stanford University suggests a mostly straightforward answer — with one glaring twist. The study is the first comprehensive look at the political attitudes of wealthy technologists, whose views have long been misunderstood to the point of caricature by many outside the industry.
. . .
Over all, the study showed that tech entrepreneurs are very liberal — among some of the most left-leaning Democrats you can find. They are overwhelmingly in favor of economic policies that redistribute wealth, including higher taxes on rich people and lots of social services for the poor, including universal health care.
. . .
Now for the twist. The study found one area where tech entrepreneurs strongly deviate from Democratic orthodoxy and are closer to most Republicans: They are deeply suspicious of the government’s efforts to regulate business, especially when it comes to labor. They said that it was too difficult for companies to fire people, and that the government should make it easier to do so. They also hope to see the influence of both private and public-sector unions decline.
. . .
. . . if they’re not libertarians, what accounts for techies’ opposition to regulation? One idea might be that it’s driven by self-interest. A large fraction said they opposed regulating car-sharing services as if they were taxis, for instance; to the extent that the tech elite have a lot of money riding on the sharing economy, they may worry that regulation of such companies could hurt their wallets.
. . .
To tease out whether self-interest was at play in their views on regulation, surveyors asked a question about Uber’s surge-pricing policy, which increases prices during periods of peak demand. But the researchers disguised it with a business unrelated to tech: “On a holiday, when there is a great demand for flowers, sellers usually increase their prices. Do you think it is fair for them to raise their prices like this?”
A majority of Democrats and Republicans said it would be unfair for a florist to do that. But 96 percent of the tech elite thought it would be fair.
“My guess is there’s an underlying principle to their views,” Dr. Broockman said. “They see an entrepreneur trying to do what they want in the marketplace, and they see nothing unfair about that.”

For the full commentary, see:
Farhad Manjoo. “Tech’s Giants Skew Liberal.” The New York Times (Thursday, Sept. 7, 2017): B1 & B6.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Sept. 6, 2017, and has the title “STATE OF THE ART; Silicon Valley’s Politics: Liberal, With One Big Exception.”)

The Stanford study, discussed above, has been published online in advance of print publication:
Broockman, David E., Gregory Ferenstein, and Neil Malhotra. “Predispositions and the Political Behavior of American Economic Elites: Evidence from Technology Entrepreneurs.” American Journal of Political Science published online on Nov. 19, 2018, https://doi.org/10.1111/ajps.12408.

Little Correlation Between a State’s Tax Breaks and Subsidies to Firms, and the State’s Unemployment and Income Levels

(p. A27) It’s politically difficult for city and state officials to offer incentives to one firm and not another, Timothy Bartik, an economist at the W.E. Upjohn Institute for Employment Research, told me. Like Lay’s potato chips, “you can’t hand out just one,” as he put it. He fears that after the hysteria over Amazon’s HQ2 and the recent $4.1 billion deal struck between the state of Wisconsin and the Taiwanese electronics company Foxconn, incentive amounts will only climb.
Unfortunately, incentives and tax breaks don’t work. Research by Mr. Bartik indicates that there is not a large correlation between a state’s giveaways and its unemployment rate or income levels.
. . .
Lavish benefits also don’t have much influence over the choice of a location. The typical package changes a decision only 25 percent of the time or less — about two-thirds of the incentives are handed to companies that would have moved to the state offering them, regardless.
Instead, the deals often end up being a burden on budgets. Texas schools have lost an estimated $4 billion to the state’s economic development program and Cleveland schools lost over $34 million in one year alone. New Jersey’s budget is at risk of bleeding $1 billion a year, while Michigan’s liability for its business tax credits is set to soar to $9.38 billion over the next two decades and incentives have already led to a $325 million budget deficit. None of that accounts for the extra outlays to upgrade infrastructure and services for the people who move in to take advantage of any jobs that are created.
. . .
The solution, . . . , must be an armistice. States and cities need to collectively swear off big-dollar economic deals aimed at particular companies. If no one offers them, corporations will have to figure out where to locate on their own.
There’s nothing to love about these incentives. Republicans should be outraged by the idea of government picking winners and insist instead that companies be left to choose locations based on the conditions they need to operate their businesses, not sweetheart deals. Democrats should oppose them because they are starving state and city coffers of funds needed for important services, such as schools.

For the full commentary, see:

Covert, Bryce. “HQ2 Winners Are Losers.” The New York Times (Wednesday, Nov. 13, 2018): A27.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Nov. 13, 2018, and has the title “Cities Should Stop Playing the Amazon HQ2 Bidding Game.” Where there are minor differences in the versions, the passages quoted above follow the online version.)

The research by Bartik, mentioned above, is:
Bartik, Timothy J. “A New Panel Database on Business Incentives for Economic Development Offered by State and Local Governments in the United States.” W.E. Upjohn Institute for Employment Research: Prepared for the Pew Charitable Trusts, 2017.

Musk Jabs the SEC as “the Shortseller Enrichment Commission”

(p. B1) Elon Musk risked reigniting a battle with federal securities regulators on Thursday when he appeared to openly mock the Securities and Exchange Commission only days after the Tesla Inc. chief executive settled fraud charges with the agency.
Seemingly without prompt, Mr. Musk sent a tweet in the early afternoon that suggested the SEC was enriching investors betting against the electric-car maker. “Just want to [say] that the Shortseller Enrichment Commission is doing incredible work,” Mr. Musk tweeted. “And the name change is so on point!”

For the full story, see:
Tim Higgins and Gabriel T. Rubin. “Tweet by Elon Musk Takes Jab at the SEC.” The Wall Street Journal (Saturday, October 5, 2018): B1 & B4.
(Note: the online version of the story has the date Oct. 4, 2018, and has the title “Elon Musk Tweet Mocks the Securities and Exchange Commission.”)