August 2005 – artdiamondblog.com

The Abuse of Power

From a review of a promising book:

Most African countries have been atrociously governed in the past half-century. A lack of institutional checks has allowed an array of incompetent strongmen to rule as they pleased until the money ran out, at which point northern donors often tossed them an extra bundle of cash.
. . .
Kwame Nkrumah, for example, is widely revered. The founding father of independent Ghana, he was also an eloquent advocate of a united Africa. Africans tend to recall him as a man of great personal integrity who strove mightily to drag his country into the industrial age. Mr. Meredith lays out the facts. Nkrumah paid for his grand (and uniformly loss-making) industrial projects by squeezing money out of Ghana’s poorest citizens, the peasants, and by borrowing recklessly. He was utterly clueless about money. When his finance minister told him in 1963 that the national reserves were less than $1.4 million, he “sat in silence for fifteen minutes, then broke down and wept.”
He not only wrecked the Ghanaian economy; he also snuffed out such political freedoms as the country had enjoyed at independence. He had a law passed in 1958 allowing him to jail anyone suspected of subversive intentions. Twelve parliamentarians objected, on the ground that such a power was sure to be abused. Eleven of them were jailed, which rather proved their point.

ROBERT GUEST. “So Badly Misled.” The Wall Street Journal (Weds., August 31, 2005): D10. (A review of: Meredith, Martin. The Fate of Africa. PublicAffairs, 2005.)

Editorial Wisdom on High Gas Prices

The market rules
. . . higher prices have a beneficial side. They encourage an increase in supply. They also encourage alternatives. And they encourage convervation, teaching users to operate more efficiently.
. . . However unpleasant the workings of the market may be in the short term, no system has been devised that constitutes an improvement.

From the unsigned, lead editorial in: Omaha World-Herald (Mon., Aug. 29, 2005): 6B.
See also, the KETV report posted March 4, 2005: ConsumerWatch: High Gas Prices Can Be Good; Economist Says Prices Aren’t As High As ’80s When Adjusted For Inflation

The Creative Destruction of New York City

. . . the eyes of the city are focused firmly on its future, not on its history, and as a result, it subscribes to what the economist Joseph Schumpeter has called “creative destruction.” New York is constantly remaking and reinventing itself, both in its physical structures and in its population.

From the preface of:
Kenneth Jackson and David Dunbar. Empire City: New York Through the Centuries. New York: Columbia University Press, 2002.
(Note: ellipsis added.)

Incentives Matter: Piracy Will End Big-Event Films

Source of image: the online version of the The New York Times article quoted and cited below.
Peter Jackson was the director of the financially risky “Lord of the Rings” film trilogy, and is currently directing a remake of “King Kong.” Property rights protection is primarily a moral issue. But it also has economic consequences. Property rights permit those who take risks to make money, which provides an incentive for them and others to take risks in the future. It also makes it more likely that large amounts of capital will be in the hands of those who have shown they know how to use it.

(p. 1) “Piracy has the very real potential of tipping movies into becoming an unprofitable industry, especially big-event films. If that happens, they will stop being made,” said Mr. Jackson in an e-mail message from New Zealand, where he is putting the final touches on his version of “King Kong.” “No studio is going to finance a film if the point is reached where their possible profit margin goes straight into criminals’ pockets.”

For the full story, see:
O’Brien, Timothy L. “King Kong vs. the Pirates of the Multiplex.” The New York Times, Section 3 (Sunday, Aug. 28, 2005): p. 1 & 7.

Infinite Jobs to Be Done

Marc Andreesen was the cofounder of Netscape.

“If you believe human wants and needs are infinite,” said Andreeseen (sic), “then there are infinite industries to be created, infinite businesses to be started, and infinite jobs to be done, and the only limiting factor is human imagination. The world is flattening and rising at the same time. And I think the evidence is overwhelmingly clear: If you look over the sweep of history, every time we had more trade, more communications, we had a big upswing in economic activity and standard of living.” (p. 231)

Friedman, Thomas L. The World Is Flat: A Brief History of the Twenty-First Century. New York: Farrar, Straus and Giroux, 2005.

The Sheer Openness of American Society

While these are the core secrets of America’s sauce, there are others that need to be preserved and nurtured. Sometimes you have to talk to outsiders to appreciate them, such as Indian-born Vivek Paul of Wipro. “I would add three to your list,” he said to me. “One is the sheer openness of American society.” We Americans often forget what an incredibly open, say-anything-do-anything-start-anything-go-bankrupt-and-start-anything-again society the United States is. There is no place like it in the world, and our openness is a huge asset and attraction to foreigners, many of whom come from countries where the sky is not the limit.
Another, said Paul, is the “quality of American intellectual property protection,” which further enhances and encourages people to come up with new ideas.
. . .
The United States also has among the most flexible labor laws in the world. The easier it is to fire someone in a dying industry, the easier it is to hire someone in a rising industry that no one knew would exist five years earlier.

Friedman, Thomas L. The World Is Flat: A Brief History of the Twenty-First Century. New York: Farrar, Straus and Giroux, 2005, p. 246.

Bill Clinton’s Brief Presentation on Schumpeter

(p. 173) We read all the books, but each week a student would lead off the discussion with a ten-minute pesentation about the book of the week. You could do what you wanted with the ten minutes–summarize the book, talk about its central idea, or discuss an aspect of particular interest–but you had to do it in these ten minutes. Sharabi believed that if you couldn’t, you didn’t understand the book, and he strictly enforced the limit. He did make one exception, for a philosophy major, the first person I ever heard use the word “ontological”–for all I knew, it was a medical specialty. He ran on well past the ten-minute limit, and when he finally ran out of gas, Sharabi stared at him with his big, expressive eyes and said, “If I had a gun, I would shoot you.” Ouch. I made my presentation on Joseph Schumpeter’s Capitalism, Socialism, and Democracy. I’m not sure how good it was, but I used simple words and, believe it or not, finished in just over nine minutes.

Source:
Bill Clinton. My Life. Random House Large Print Edition, 2004.

Trash It Without Guilt

Simply put, operators of garbage dumps are stuffing more waste than anyone expected into the giant plastic-lined holes, keeping disposal prices down and making the construction of new landfills largely unnecessary.
The clearest winner in this development is the City of New York, which exports 25,000 tons of trash a day to other cities and states, making it the waste industry’s biggest customer. But the benefits stretch coast to coast and will continue for years to come.
The productivity leap is the second major economic surprise from the trash business in the last 20 years. First, it became clear in the early 1990’s that there was a glut of disposal space, not the widely believed shortage that had drawn headlines in the 1980’s. Although many town dumps had closed, they were replaced by fewer, but huge, regional ones. That sent dumping prices plunging in many areas in the early 1990’s and led to a long slump in the waste industry.
Since then, the industry and its followers have been relying on time – about 330 million tons of trash went into landfills in the United States last year alone, according to Solid Waste Digest, a trade publication – to fill up some of those holes, erase the glut and send disposal prices skyward again. Instead, dump capacity has kept growing, and rapidly, even as only a few new dumps were built.
How could that be? Waste companies and municipalities have fit much bigger dumps than originally permitted onto existing acreage, piling trash deeper and steeper, and vastly expanding permitted capacity. They are burying trash more tightly, so that each ton takes up less space, increasingly using giant 59-ton compacting machines guided by global positioning systems that show the operator when he has rolled over a section of the dump enough times. They cover trash at the end of the day, to keep it from blowing away, with tarps or foam or lawn clippings instead of the thick layers of soil that formerly ate up dump capacity.
Some operators are blowing water and air into landfills to hasten rotting and thus the shrinkage of buried garbage piles, creating more capacity.
Each practice is fairly prosaic, and many operators have yet to adopt the improved methods, but taken together the waste industry is in the early stages of the kind of increase in efficiency more typically seen in technologies like computer chips and turbines that generate electricity.

Jeff Bailey. “Waste Yes, Want Not: Rumors of a Shortage of Dump Space Were Greatly Exaggerated.” New York Times (Fri., Aug. 12, 2005): C1 & C3.

Benjamin Franklin “Stealing God’s Thunder”

From a delightful review of a promising new book:

In Franklin’s day, lightning destroyed homes, barns and livestock, not to mention human beings. To 18th-century Americans, though, it was not merely an occurrence in nature but a form of judgment sent down by a disapproving God. The only way to appease divine wrath — and avoid lightning’s destructive effects — was to pray during thunderstorms or to ring specially “baptized” church bells whose sound might keep the lightning away.
After his kite experiment, Franklin realized that lightning was a form of electricity. He also discovered that electric current would surge through metal and follow its path downward to the ground. In the summer of 1752, he installed the world’s first lightning rods at the Pennsylvania State House and the Pennsylvania Academy. In 1753, he used the pages of “Poor Richard’s Almanack” to make the case for his invention, describing how a pointed iron rod situated atop a tall structure could draw lightning to it, making storms less dangerous. “Poor Richard’s” sold 10,000 copies, earning Franklin instantaneous fame.
But not everyone embraced his claim. By inventing the lightning rod, he was playing God, at least in the view of some of his contemporaries. They saw God’s handiwork in all aspects of life, from the divine-right monarchies that governed men to the storms that crashed overhead. Franklin’s invention, according to Mr. Dray, raised questions “of reason and faith, liberty and tyranny, science and superstition.” The French scientist and clergyman Jean Antoine Nollet was among the most vocal detractors. He contended that it was “as impious to ward off Heaven’s lightnings as for a child to ward off the chastening rod of its father.”
New Englanders, though, started to come around, especially as the authority of their early clergy began to wane in the mid-18th century. They became dubious of the notion that providence controlled nature in every detail. Some people, Mr. Dray notes, “favored the idea that, although God no longer gave daily attention to the world, he had at Creation pre-programmed natural catastrophes to occur throughout time as a way of reminding humanity of its frailty.”
In 1755, humanity seemed frail indeed. A massive earthquake hit Boston, sending tremors from Nova Scotia to South Carolina. An even greater earthquake in Lisbon a few days later killed tens of thousands. A renewed debate erupted over the cause of such destruction. Thomas Prince, a pastor of Boston’s South Church (who believed that he had saved Boston from a French attack in 1746 by calling on God for a sea storm), insisted that lightning rods played a part, sending electricity down into the ground, where it joined the large quantity already there and built up “subterranean tension.” John Winthrop, a professor of science at Harvard, argued that a “kind of undulatory motion” in the Earth, beneath the surface, caused earthquakes and that lightning rods had nothing to do with it. John Adams even joined the fray, siding with Winthrop.
In the end, Prince won in the court of public opinion, though Winthrop’s arguments had the virtue of being true. The use of lightning rods in Boston declined for many years thereafter. Luckily, a technological development in Europe — the increased size of field artillery — led to the acceptance of lightning rods on the Continent. Vaults under churches and other high buildings housed the gunpowder for such war machines. When lightning struck, the results were disastrous. But a lightning rod, it was discovered, kept nature’s spark away. St. Mark’s Basilica in Venice got one in 1766.
. . .
Mr. Dray’s book boasts a delightful secondary theme: the parallels between Franklin’s invention and America’s revolutionaries. Both were using reason to thwart what many perceived to be the natural order of things. Both were battling entrenched superstitions and dogmatic faith. Both were, in a sense, “playing God.”

Rachel DiCarlo. “Books: Block That Bolt.” The Wall Street Journal. (August 16, 2005): D8. (A review of: Philip Dray. Stealing God’s Thunder. Random House, 2005.)

No Known Upper Bound for Economic Growth

Given the limited state of our knowledge of the process of technological change, we have no way to estimate what the upper bound on the feasible rate of growth for an economy might be. If economists had tried to make a judgment at the end of the 19th century, they would have been correct to argue that there was no historical precedent that could justify the possibility of an increase in the trend rate of growth of income per capita to 1.8% per year. Yet this increase is what we achieved in the 20th century. (p. 226)

Romer, Paul M. “Should the Government Subsidize Supply or Demand in the Market for Scientists and Engineers?” In Innovation Policy and the Economy, vol. 1, Cambridge, MA: MIT Press, 2001, pp. 221-252.

Evidence Matters: The Ivory-Billed Woodpecker

Science doesn’t always work this way, but sometimes it does, and it would be good if it did more often.

The phonex had nothing on the ivory-billed woodpecker.
It is hard to keep track of how many times this near-mythic bird, the largest American woodpecker and a poignant symbol of extinction and disappearing forests, has been lost, and then found. Now it is found again.
Even the most skeptical ornithologists now agree. They say newly presented recordings show that at least two of the birds are living in Arkansas
Richard O. Brum, an ornithologist at Yale University and one of several scientists who had challenged the most recently claimed rediscovery of the ivory bill, said Monday after listening to the tape recordings that he was not “strongly convinced that there is at least a pair of ivory bills out there.”
Mark B. Robbins, an ornithologist at the University of Kansas, who had also been a skeptic, listened to the same recordings with a graduate students and said, “We were absolutely stunned.”

James Gorman and Andrew C. Revkin. “Vindication For a Bird And Its Fans.” New York Times (Tuesday, August 2, 2005): A10.
See also, the earlier: James Gorman. “Woodpecker Flies By and the Critics Soon Follow.” New York Times Section 1 (Sun., July 24, 2005): 1 & 21.