Bush on Entrepreneurship

Source of book image: http://www.harpercollins.com/harperimages/isbn/large/8/9780060841638.jpg

 

At lunchtime today (11/27/06) I heard part of a C-Span broadcast of a Heritage Foundation event in which Carl J. Schramm gave a presentation based on his new book (see above). It sounded as though Schramm has some useful thoughts about the impact of entrepreneurship, and on how the institutions of higher education are very unentrepreneurial.

I smiled when Schramm mentioned that George W. Bush had once said that: "The problem with the French is that they don’t know the meaning of the word "entrepreneur." To those who don’t "get" the joke: it is another of those Bush-is-stupid jokes, based on the word "entrepreneur" being of French origins.

A web site devoted to "urban legends" identifies the Bush quote as one of these legends:

Yet another "George W. Bush is dumb" story has been taken up by those who like their caricatures drawn in stark, bold lines.  According to scuttlebutt that emerged in the British press in July 2002, President Bush, Britain’s Prime Minister Tony Blair, and France’s President Jacques Chirac were discussing economics and, in particular, the decline of the French economy.  "The problem with the French," Bush afterwards confided in Blair, "is that they don’t have a word for entrepreneur."  

The source was Shirley Williams, also known as the Baroness Williams of Crosby, who claimed "my good friend Tony Blair" had recently regaled her with this anecdote in Brighton.

Lloyd Grove of The Washington Post was unable to reach Baroness Williams to gain her confirmation of the tale, but he did receive a call from Alastair Campbell, Blair’s director of communications and strategy.  "I can tell you that the prime minister never heard George Bush say that, and he certainly never told Shirley Williams that President Bush did say it," Campbell told The Post.  "If she put this in a speech, it must have been a joke."

 

The main reference relied on by the Urban Legend web site for this entry, was: 

Grove, Lloyd. "The Reliable Source." The Washington Post. 10 July 2002 (p. C3).

 

The most obvious interpretation of the joke is that it is ridiculing W.  But, more subtly, it could be taken to be giving just a bit of a jab to the French too.  (Just because the French invented the word, doesn’t mean that they couldn’t have forgotten its meaning, through lack of use.)

 

The reference on the Schramm book is: 

Schramm, Carl J. The Entrepreneurial Imperative: How America’s Economic Miracle Will Reshape the World (and Change Your Life). New York: Collins, 2006.

 

“Forgotten not for lack of importance, but for lack of theoretical frame-works”

A paper by current head of the President’s Council of Economic Advisors, Ed Lazear, is significant for what it says near the end about economists forgetting facts, because the facts do not fit into current theory.

(p. 260)  Human capital theory is primarily a supply-side approach that focuses on the characteristics and skills of the individual workers.  It pays far less attention to the environments in which workers work.  As such, the human capital framework has led researchers to focus on one class of questions, but to ignore others.  Specifically, little attention has been paid to the jobs in which workers are employed. 

(p. 263) The fact that some jobs and some job characteristics are more likely to lead to promotions than other jobs is not surprising.  But the analysis suggests that other ways of thinking about wage determination, namely, through job selection, may have been unduly ignored in the past. 

. . .

Researchers have begun to make jobs rather than individuals the unit of analysis.  This change of focus can illuminate new issues and provide answers to questions that were once posed and forgotten.  The questions were forgotten not for lack of importance, but for lack of theoretical frame-works.  The theory is now developed and awaits confirmation in the data.

 

For the full paper, see:

Lazear, Edward P.  "A Jobs-Based Analysis of Labor Markets."  American Economic Review 85, no. 2 (May 1995):  260-265.

(Note:  elipsis added.)

 

Career Opportunities for Economists

  Econ major, and rap recording artist, Stat Quo.  So who says economists aren’t cool?  Source of photo:  http://www.statquo.com/

 

According to Wikipedia, up and coming rap artist Stat Quo earned a 3.54 gpa, while majoring in economics at the University of Florida. How’s that for refuting the stereotypes about economists?

See: http://en.wikipedia.org/wiki/Stat_Quo

 

“Smart People Can’t Come Here”

Several years ago, I got up in the middle of the night to call the United States embassy in Beijing, in order to beg an embassy official to issue a visa to our best applicant for our open Research Assistant position.  He did not want to do so, solely on the grounds that she might not return to China.  The woman we wanted to hire had sky-high credentials by every measurable criterion, and based on letters of recommendation, was exceptional by the non-measurable criteria too. 

How bizarre is the immigration policy of the United States when we view it as a problem that such a person might honor us by wanting to stay in the United States?

 

PALO ALTO, Calif. – Some of technology’s biggest names shared the stage at Stanford University last week to discuss the future of American innovation.

Yahoo co-founder Jerry Yang and Kleiner Perkins Caufield & Byers venture capitalist John Doerr were among the members of two panels at a technology summit at the university.

The third annual innovation summit, where industry leaders talked about emerging trends and government technology policy, was organized by TechNet, an advocacy group that lobbies on behalf of tech executives.

. . .  

The executives also lamented government policies limiting student and work visas, warning that this shuts out people like Google co-founder Sergey Brin and former Intel chief executive Andrew Grove.

"We have this crazy policy in the U.S. that says smart people can’t come here. I think we all agree it makes absolutely no sense," Yang said. "Are people going to want to build a company in the U.S. . . . or in the new talent centers?"

 

For the full story, see: 

SAN JOSE MERCURY NEWS.  "Technology summit sees risks for U.S."  Omaha World-Herald  (Sunday, November 19, 2006):  7D.

(Note:  the ellipsis between paragraphs was added; the ellipsis in the Yang quote was in the original article.)

 

Playstation 3 Fails to Leapfrog Xbox 360

  If Schiesel’s review is on-target, these shoppers, waiting to buy Playstation 3, may regret having camped-out at the store to be among the first to buy the new game platform.  Source of photo:  http://graphics8.nytimes.com/images/2006/11/17/business/15game1.650.jpg

 

(p. B1)  Howard Stringer, you have a problem.  Your company’s new video game system just isn’t that great.

Ever since Mr. Stringer took the helm last year at Sony, the struggling if still formidable electronics giant, the world has been hearing about how the coming PlayStation 3 would save the company, or at least revitalize it.  Even after Microsoft took the lead in the video-game wars a year ago with its innovative and powerful Xbox 360, Sony blithely insisted that the PS3 would leapfrog all competition to deliver an unsurpassed level of fun.

Put bluntly, Sony has failed to deliver on that promise.

Measured in megaflops, gigabytes and other technical benchmarks, the PlayStation 3 is certainly the world’s most powerful game console.  It falls far short, however, of providing the world’s most engaging overall entertainment experience.  There is a big difference, and Sony seems to have confused one for the other.

The PS3, which was introduced in North America on Friday with a hefty $599 price tag for the top version, certainly delivers gorgeous graphics.  But they are not discernibly prettier than the Xbox 360’s.  More important, the whole PlayStation 3 system is surprisingly clunky to use and simply does not provide many basic functions that users have come to expect, especially online.

 

For the full commentary, see:

SETH SCHIESEL.  "VIDEO GAMES; A Weekend Full of Quality Time With PlayStation 3."  The New York Times  (Mon., November 20, 2006):  B1 & B7.

(Note:  the bold has been added to "leapfrog.")

 

“Atlas May Actually Decide to Shrug”


(p. A16) During the recent off-year elections, the president repeatedly pointed to the booming economy and noted that his tax cuts were responsible.  With growth strong and unemployment low despite the ending of the stock-market bubble, terrorist attacks and the war in Iraq, he had every reason to be proud.  Moreover, both economic theory and the actual timing of the economic revival support his claims regarding the tax cuts.

That is why it is so odd that rumors swarm around Washington that the president may be willing to raise taxes as part of a "deal" on entitlement reform.  In particular, the rumors suggest the president might be willing to get rid of the provision that caps the income level used to compute Social Security taxes and benefits.  These rumors aren’t without substance; last year the president would not rule out raising the cap when asked.

Doing so would raise the marginal tax rate on the entrepreneurs that Mr. Bush credits for having led the economic recovery by more than 10 percentage points.  The new effective rate would be five percentage points above the level when he took office.  Moreover, in 2011, the rate would go up a further 4.3 percentage points to an effective 53% marginal rate on entrepreneurial income.  The president would thus be not just raising taxes on entrepreneurs to well above the levels that prevailed in the Clinton administration, but to a rate higher than that which prevailed in the Carter administration.  Most of the improved incentives for entrepreneurship and work brought about under Reagan would be repealed.

. . .

Last year an entrepreneur similar to me would have paid federal taxes equal to 33.9% of total income.

. . .

Don’t make it too tough on him, or Atlas may actually decide to shrug.

 

For the full commentary, see: 

LAWRENCE B. LINDSEY.  "Compromised."  Wall Street Journal  (Mon., November 20, 2006):  A16.

(Note:  the ellipses are added.) 

 

The last line of the commentary is a not-so-veiled allusion to: 

Rand, Ayn.  Atlas Shrugged.  New York:  Random House, 1957.


When Government Bets, It Bets with Your Money

   Source of graphic:  online version of the Omaha World-Herald article cited below.

 

When an entrepreneur takes a risk, she risks losing her own money; when the government takes a risk, it risks losing your money: 

 

(p. 1A)  Omaha taxpayers escaped paying for the Hilton Omaha this year, but they likely will have to come up with the money for some big bills before the hotel is paid off in 2032.

In April, city officials were almost euphoric.  They announced the city-owned convention hotel performed well enough that its owners, the taxpayers, wouldn’t have to pony up the money to make the debt payments on the hotel this year.

But a recent audit of city finances reveals a much gloomier financial picture.

The audit raises questions about how the hotel that is connected to the Qwest Center Omaha will generate enough money to maintain its upscale look in the years to come.  The report also causes city officials to doubt whether expanding the hotel is realistic in the near future.

The Hilton’s troubles come at the same time that five other hotels are proposed for downtown Omaha.  But those are not full-service, amenity-rich convention hotels that are costly to build and maintain.

Hilton Omaha mainly competes in a national market for convention business, and like Omaha as a whole, the Hilton has (p. 4A) found the convention market tougher than it expected.

Omaha borrowed nearly $103 million to build, equip and finance the state’s largest and fanciest hotel.

Before the 450-room hotel opened in April 2004, the city projected net revenues would be $8.4 million in 2005.

But net revenues last year totaled just $4.6 million, according to the audit conducted for the city by KPMG.

 

For the full story, see: 

C. DAVID KOTOK.  "Taxpayers Likely to Pay Hilton Bills."  Omaha World-Herald (Sunday, November 19, 2006):  1A & 4A.

(Note:  The online version has a slightly different title:  "Taxpayer to get handed Hilton bills.")

 

“Nebraskans Preparing for the Imminent Arrival of Several Million New York Refugees”

(p. 12) HOUSING prices are falling on both coasts, and bubble panic is around the corner.  The financial magazines are already grabbing their readers by the throat and taunting them with headlines like:  ”U.S. Housing Crash Continues!” ”Where Will Housing Prices Fall the Most?” ”Is It Time to Cash Out?”

What if it is time to cash out?  Where do you go?  If you sell on either coast, then you need to find real estate somewhere that the housing bubble missed.  Guam?  American Samoa?  Wait, how about eastern Nebraska?  Downright frothless when it comes to housing:  the median home price here usually chugs along at the annual rate of inflation and never goes down (up 4 percent last year, up 22 percent over the last five years).

Before you recoil in horror at the thought of living in Omaha, a city of 414,000 souls, consider that this year Money magazine ranked it seventh of the nation’s 10 best big cities to live in, ahead of New York City, which ranked 10th.  O.K., now you may recoil in horror.

These compelling statistics have Nebraskans preparing for the imminent arrival of several million New York refugees (victims of post-traumatic bubble anxiety disorder), who will need emergency real estate and housing triage services.

 

For the full commentary, see:

Richard Dooling.  "Sweet Home Omaha."  The New York Times, Section 4 (Sunday, October 29, 2006):  12.

Distinguished Physician: “I Hate Hospitals”

Dr. James Armitage is a leading lymphoma physician.  His honesty in the passage below, is refreshing.  But instead of it being viewed as a personality quirk of the physician, it should be viewed as one more reason to reform how our medical system is organized.

 

"I hate hospitals. I like working in them; I just don’t like being a patient."

 

Armitage, as quoted in:

MICHAEL KELLY.  "Michael Kelly: Doc lacks patience for being a patient."  Omaha World-Herald  (Thursday November 16, 2006):    1B. 

Jeffrey Sachs “Has Apparently Spent More Time Studying the Economic Thinking of Salma Hayek than that of Friedrich”


  Salma Hayek.  Source of image: http://www.imdb.com/gallery/granitz/0273-spe/Events/0273-spe/hayek_sa.lma?path=pgallery&path_key=Hayek,%20Salma

 

(p. A18) Scientific American, in its November 2006 issue, reaches a "scientific judgment" that the great Nobel Prize-winning economist Friedrich Hayek "was wrong" about free markets and prosperity in his classic, "The Road to Serfdom."  The natural scientists’ favorite economist — Prof. Jeffrey Sachs of Columbia University — announces this new scientific breakthrough in a column, saying "the evidence is now in."  To dispel any remaining doubts, Mr. Sachs clarifies that anyone who disagrees with him "is clouded by vested interests and by ideology."

This sounds like one of those moments in which the zeitgeist of mass confusion about national poverty, world poverty and prosperity comes together in one mad tragicomic brew.

. . .  

Mr. Sachs, who is currently best known for his star-driven campaign to end world poverty, has apparently spent more time studying the economic thinking of Salma Hayek than that of Friedrich. 

. . .

Mr. Sachs’s empirical analysis purports to show that Nordic welfare states are outperforming those states that follow the "English-speaking" tradition of laissez-faire, like the U.K. or the U.S. Poverty rates are indeed lower in the Nordic countries, although the skeptical reader (probably an ideologue) might wonder if the poverty outcome in, say, the U.S., with its tortured history of a black underclass and its de facto openness to impoverished but upwardly mobile immigrants, is really comparable to that of Nordic countries.

Then there is the big picture, where those laissez-faire Anglophones in, first, the U.K. and, then, the U.S., just happened to have been the leaders of the ongoing global industrial revolution that abolished far more poverty over the past two centuries than a few modest Scandinavian redistribution schemes.  Mr. Sachs apparently thinks the industrial revolution was led by IKEA.  Lastly, let’s hear from the Nordics themselves, who have been busily moving away from the social welfare state back toward laissez-faire.  According to the English-speaking ideologues that composed the Heritage Foundation/Wall Street Journal Index of Economic Freedom, Denmark, Finland and Sweden were all included in the 20 countries classified as "free" in 2006 (with Denmark actually ranked ahead of the U.S.).  Only Norway missed the cut — barely.

Mr. Sachs is wrong that Hayek was wrong.  In his own global antipoverty work, he is unintentionally demonstrating why more scientists, Hollywood actors and the rest of us should go back and read "The Road to Serfdom" if we want to know what will not work to achieve "The End of Poverty."  Hayek gave the best exposition ever of the unpopular ideas of economic freedom that somehow triumph anyway, alleviating far more national and global poverty than more fashionable Scandinavia-envy and grandiose plans to "make poverty history."

 

For the full commentary, see:

WILLIAM EASTERLY.  "Dismal Science."  Wall Street Journal  (Weds., November 15, 2006):  A18.

(Note:  ellipses added.) 

 

Hayek’s courageous masterpiece is:

Hayek, Friedrich A. Von. The Road to Serfdom. Chicago: Univ of Chicago Press, 1944.

 

Easterly’s great book on how to encourage economic development in poor countries, is:

Easterly, William. The Elusive Quest for Growth: Economists’ Adventures and Misadventures in the Tropics. Cambridge, MA: The MIT Press, 2002.