February 2007 – artdiamondblog.com

Listen to Ralph Raico on the Industrial Revolution

Historian and libertarian Ralph Raico. Source of photo: http://en.wikipedia.org/wiki/Ralph_Raico

If you’re looking for a wise, witty, erudite, and thought-provoking discussion of a variety of historical issues from a broadly libertarian perspective, then Ralph Raico is your man. (The flavor of libertarianism is neo-Austrian, but not dogmatically so.)

Several of his lectures can be purchased on CD or cassette from the Ludwig von Mises Institute. Or you can listen to streaming versions on your computer for free.

I particularly like his lecture on "The Industrial Revolution" in which he persuasively argues that ordinary people benefited from the Industrial Revolution, and that the benefit would have been clearer sooner, had it not been for the coincidental costs being imposed on ordinary people by the Napoleonic wars and by the corn laws.

The link for the free streaming version of the lecture is:

http://www.mises.org/media.aspx

Guns Deter Crime

Knoxville, Tenn.

IT’S a phenomenon that gives the term “gun control” a whole new meaning: community ordinances that encourage citizens to own guns.

Last month, Greenleaf, Idaho, adopted Ordinance 208, calling for its citizens to own guns and keep them ready in their homes in case of emergency. It’s not a response to high crime rates. As The Associated Press reported, “Greenleaf doesn’t really have crime … the most violent offense reported in the past two years was a fist fight.” Rather, it’s a statement about preparedness in the event of an emergency, and an effort to promote a culture of self-reliance.

. . .

Criminals, unsurprisingly, would rather break into a house where they aren’t at risk of being shot. As David Kopel noted in a 2001 article in The Arizona Law Review, burglars report that they try to avoid homes where armed residents are likely to be present. We see this phenomenon internationally, too, with the United States having a lower proportion of “hot” burglaries — break-ins where the burglars know the home to be occupied — than countries with restrictive gun laws.

Likewise, in the event of disasters that leave law enforcement overwhelmed, armed citizens can play an important role in stanching crime. Armed neighborhood watches deterred looting in parts of Houston and New Orleans in the aftermath of Hurricanes Katrina and Rita.

For the full commentary, see:

GLENN REYNOLDS. "A Rifle in Every Pot." The New York Times (Tues., January 16, 2007): A31.

Glenn Reynolds is a professor of law at the University of Tennessee, and is the blogger of Instapundit.com. In 2006, he published:

Reynolds, Glenn. An Army of Davids: How Markets and Technology Empower Ordinary People to Beat Big Media, Big Government, and Other Goliaths. Nashville, TN: Nelson Current, 2006.

Source of book image: http://ec1.images-amazon.com/images/P/1595550542.01._SS500_SCLZZZZZZZ_V1136930360_.jpg

Labor is “Responsible for the Consequences of Their Choice”

An early free-market economist claims that in a free-market economy, a worker’s happiness depends mainly on her own actions:

But whenever property is secure, industry free, and the public burdens moderate, the happiness or misery of the labouring classes depends almost wholly on themselves. Government has there done for them all that it should, and all in truth that it can do. It has given them security and freedom. But the use or abuse of these inestimable advantages is their own affair. They may be either provident or improvident, industrious or idle; and being free to choose, they are alone responsible for the consequences of their choice.

The passage was brought to my attention by an HES Posting from Michael Perelman. The thread was continued by Torsten Schmidt, and the final information on the pages where the passage may be found, was added by Masazumi Wakatabe.

The reference for the source of the passage is:

McCulloch, J.R. A Treatise on the Circumstances which Determine the Rate of Wages and the Condition of the Labouring Classes, second edition, corrected and improved, 1854, 16-17.

“Good to Great” is Good, but Not Quite Great

Source of book image: http://images.barnesandnoble.com/images/7770000/7775266.jpg

When Ameritrade founder Joe Ricketts spoke to my Executive MBA class a few years ago, I mentioned to him that I had heard from Bob Slezak that Ricketts was a fan of Clayton Christensen’s The Innovator’s Dilemma. Ricketts said that was true, but that the recent business book that he was most enthused about was Jim Collin’s Good to Great.

Ricketts is not alone. Good to Great has become a business classic since it came out. Recently I finally got around to reading it.

Well, I think it’s good, but not quite great. I like the empirical, inductive methodology mapped out at the beginning. And some of the conclusions ring true. For example the importance of facing the "brutal facts." And the importance of developing a thought-out "hedgehog" concept. And the importance of getting the right people on the bus. And the importance of slowly, consistently building momentum.

But I’ve got some big bones to pick, too.

Maybe the biggest "bone" is Collins’ assumption that our goal should be the survival and greatness of a firm. Instead of almost viewing firms as ends in themselves, why can’t we view firms as vehicles for getting great things done?

Maybe great things can be done through firms that last and are lastingly great. Or maybe great things can be done by shooting star firms, that are glorious while they last, but don’t last long. Collins says it must be the former. But either way works for me.

A smaller "bone" is the conclusion that "level 5" leaders tend to be modest. Well maybe. But some of that conclusion is derived from Collins’ defining "great" in terms of high growth of stock value. A modest leader will be unappreciated by Wall Street, and her company’s stock value will show higher growth when she succeeds. But has she thereby accomplished more than if she had built exactly the same company, but been more transparent and enthused about the company’s future prospects, and hence generated more realistic expectations from Wall Street? Remember, the value of a stock grows, not by the company doing well, but by it doing better than investors expected. (On this issue, Collins should read the first couple of chapters of Christensen and Raynor’s The Innovator’s Solution.)

But don’t get me wrong: this is a very good book. Those interested in how the capitalist system works, should read it, as should those who want to manage well.

The book is:

Collins, Jim. Good to Great: Why Some Companies Make the Leap. And Others Don’t. New York: HarperCollins Publishers, Inc., 2001.

Paying for Congestion “with Time, Unreliability, Psychological Hell”

Source of graphic: online version of the WSJ article cited below.

Congestion pricing "is a lot cheaper than the way we’re paying now … with time, unreliability, psychological hell," said Tyler Duvall, DOT’s assistant secretary for policy.

. . .

Even a 5% reduction in traffic jams can increase traffic speeds by as much as 50%, says Mr. Duvall. DOT officials figure a typical big-city traffic jam can be cleared with tolls of as little as $2 to $2.50 a day, if all lanes on a big highway are charged. But on some Southern California highways where fees are charged only for the former high-occupancy lanes, prices at the peak of rush hour have reached $8.50.

Congestion pricing has already taken hold in Europe, and the success of a congestion pricing system for London’s roads three years ago motivated U.S. officials and major businesses to consider the idea. Voters in Stockholm approved a similar plan in September, after a test run during the summer.

For the full story, see:

JOHN D. MCKINNON. "Bush Plays Traffic Cop in Budget Request; President Suggests ‘Congestion’ Tolls To Ease Rush Hour." The Wall Street Journal (Mon., February 5, 2007): A6.

(Note: the ellipsis in the Duvall quote was in the original; the other ellipsis was added.)

New Book on Wiki (Quick) Process

Source of book image: http://ec2.images-amazon.com/images/P/1591841380.01._SS500_SCLZZZZZZZ_V37439749_.jpg

A new book is out on the wiki ("quick") phenomenon. Chris Anderson has some stimulating comments on this phenomenon in his The Long Tail. The Wikinomics book appears to be less profound, but may still be of interest. (It appears to be a quick-read, management guru-jargon type book.)

The wiki issue that interests me is how wiki collaboration processes might substitute for rigorous editing and peer-review, as a way to get a lot of high-quality information out there fast. (This is what Anderson claims, and the more I use the Wikipedia, the more plausible I find the claim.)

The reference to the book is:

Tapscott, Don, and Anthony D. Williams. Wikinomics: How Mass Collaboration Changes Everything. Portfolio, 2006.

Pay Rebounds in Silicon Valley

Source of graphic: online version of the WSJ article cited below.

Silicon Valley’s nascent economic recovery gathered steam last year, with the nation’s technology capital adding more than 30,000 jobs and showing gains in areas such as average annual wages and household income.

That was the conclusion of an annual report from Joint Venture Silicon Valley, a nonprofit group representing businesses and government agencies in the San Francisco and San Jose, Calif., area.

"Silicon Valley is back and it’s rebooting," said Russell Hancock, Joint Venture’s president and chief executive. "This is familiar since the Valley has already done it five or six times over its history. It regroups, then reboots."

The report comes as Silicon Valley, which prospered during the dot-com frenzy in the late 1990s, has struggled to remake itself in the wake of the tech crash in 2000. In the years since, the region has experienced job losses and a slowdown in growth at many tech companies. The area began to turn the corner in 2005 when a net gain of 2,000 jobs was recorded, the first time since 2001 that there had been an overall increase in jobs. Start-up activity has also become widespread again, with Internet firms specializing in online video, social networking and "clean technology" springing up.

For the full story, see:

PUI-WING TAM. "No Longer Down in Silicon Valley Jobs, Wages Show Gains As Bust Fades Further; Small Firms Fuel Rebound." The Wall Street Journal (Mon., January 29, 2007): B5.

“Remarkable Entrepreneur” Bob Chitester

Bob Chitester. Source of image: online version of the WSJ article cited below.

I was in the audience for the discussion portion of a couple of the episodes of the original "Free to Choose." On January 29, PBS broadcast a sort of coda to the series entitled "The Power of Choice: The Life and Times of Milton Friedman."

As much as the show is a celebration of Friedman’s life and work, it also showcases the remarkable entrepreneur who made it and "Free to Choose" possible. Bob Chitester produced the original series while serving as the only public-TV station manager in the country who didn’t believe in government subsidies. A tireless promoter, he raised the equivalent of $8 million today for the series — entirely from private sources, an achievement that delighted Friedman.

Mr. Chitester came to the project with an unusual background. In 1966, he became the general manager of the PBS station in Erie, Pa., at age 29. An opponent of the Vietnam War, he handed out literature for George McGovern in 1972 and admits he knew nothing about economics. Then, in 1976, he met with economist W. Allen Wallis, who gave him a copy of Friedman’s "Capitalism and Freedom." Mr. Chitester soaked it up, became a believer in markets, and immediately began pursuing Friedman to do a series that would provide a counterpoint to one by liberal economist John Kenneth Galbraith that PBS was airing.

After all these years, Mr. Chitester is still surprised by how easily Friedman’s cooperation came. "I was a bearded, leather-jacketed, small-town TV executive, yet he treated me as competent and honorable, as he did everyone he met, until you proved otherwise," he recalls.

Surprisingly, Friedman insisted on not writing a script in advance of filming. The points that would be made in each scene were discussed, but his commentary was extemporaneous. This resulted in such gems as the economist sitting in a sweatshop in New York’s Chinatown, where he recalled the days when his mother worked in a similar environment. "Life was hard," Friedman noted, "but opportunity was real." He then transports the audience to a junk floating in the harbor of Hong Kong, "the freest market in the world," where Friedman discusses how the then-British colony’s leaders refused to collect some economic statistics because they feared they would be used as an excuse for government intervention in the booming economy.

. . .

This week’s PBS special pays tribute to the many achievements of Milton Friedman. One that is often underappreciated is the extent to which he demonstrated how visual images could influence and shape public debate. As his most ardent electronic disciple, Bob Chitester deserves the free-market community’s equivalent of an Oscar.

For the full commentary, see:

JOHN H. FUND. "TV’s Evangelist for Capitalism." The Wall Street Journal (Weds., January 31, 2007): D10.

(Note: ellipsis added.)

Privatized Moscow Greenhouses Prosper

Privatized Moscow greenhouses provide greens to grocery stores during the winter. Source of the photo: online version of the NYT article cited below.

Much of the country’s agricultural infrastructure is in disrepair, and across many rural regions farm production and labor are in disarray. The government has made reviving the agricultural sector one of its so-called national projects, a target for investment and recovery.

But the sights in Agrikombinat Moskovsky show that such problems are not universal. The business, now privatized, claims to have registered more than $75 million in sales in 2006. Its managers point to the crowded produce shelves in Moscow’s supermarkets and dare an unlikely boast.

“People remember when it was hard to find greens in Moscow, but today you can find them in every single decent supermarket,” said Yevgeny G. Sidorov, the general director. “Moscow has the freshest green plants in the world.”

That last claim, unverifiable, is nonetheless no longer absurd.

Moscow’s food stores, formerly famed for bare shelves and long lines, are now kept stocked with fresh champignons and greens — even in the freeze a year ago that almost paralyzed much of the capital, with temperatures from 6 below zero to 22 below for more than a week.

For the full story, see:

C. J. CHIVERS. "MOSCOW JOURNAL; A Soviet Agricultural Success: Vast Greenhouse Complex." The New York Times (Weds., January 31, 2007): A4.

Oyster mushrooms being picked in one of the greenhouses in January. Source of the photo: online version of the NYT article cited above.

A Case Against “Network Neutrality”

Today there is much praise for YouTube, MySpace, blogs and all the other democratic digital technologies that are allowing you and me to transform media and commerce. But these infant Internet applications are at risk, thanks to the regulatory implications of "network neutrality." Proponents of this concept — including Democratic Reps. John Dingell and John Conyers, and Sen. Daniel Inouye, who have ascended to key committee chairs — are obsessed with divvying up the existing network, but oblivious to the need to build more capacity.

To understand, let’s take a step back. In 1999, Yahoo acquired Broadcast.com for $5 billion. Broadcast.com had little revenue, and although its intent was to stream sports and entertainment video to consumers over the Internet, two-thirds of its sales at the time came from hosting corporate video conferences. Yahoo absorbed the start-up — and little more was heard of Broadcast.com or Yahoo’s video ambitions.

. . .

. . . Broadcast.com failed precisely because the FCC’s "neutral" telecom price controls and sharing mandates effectively prohibited investments in broadband networks and crashed thousands of Silicon Valley business plans and dot-com dreams. Hoping to create "competition" out of thin air, the Clinton-Gore FCC forced telecom providers to lease their wires and switches at below-market rates. By guaranteeing a negative rate of return on infrastructure investments, the FCC destroyed incentives to build new broadband networks — the kind that might have allowed Broadcast.com to flourish.

. . .

Messrs. Lessig, Dingell and Conyers, and Google, now want to repeat all the investment-killing mistakes of the late 1990s, in the form of new legislation and FCC regulation to ensure "net neutrality." This ignores the experience of the recent past — and worse, the needs of the future.

. . .

Without many tens of billions of dollars worth of new fiber optic networks, thousands of new business plans in communications, medicine, education, security, remote sensing, computing, the military and every mundane task that could soon move to the Internet will be frustrated. All the innovations on the edge will die. Only an explosion of risky network investment and new network technology can accommodate these millions of ideas.

For the full commentary, see:

BRET SWANSON. "COMMENTARY; The Coming Exaflood." The Wall Street Journal (Sat., January 20, 2007): A11.

(Note: ellipses added.)

In Health Care the “Zeal to Treat and Spend May Actually Hurt Patients”

Source of graphic: online version of the NYT article cited below.

EXPERTS have long been puzzled by the existence of large regional disparities in medical care in the United States. Even for diseases for which the appropriate treatment is widely accepted, doctors across the country take vastly different approaches, often leading to enormous expense without making any appreciable improvement in their patients’ health.

Consider heart attacks. Prescribing beta blockers immediately after a heart attack is a well-established, cheap and efficient treatment. In Iowa, nearly 80 percent of victims in 2000 received the drugs within 24 hours of a heart attack. In Alabama or Georgia, by contrast, fewer than 6 out of 10 patients received the drugs.

“What makes the lag in beta-blocker adoption puzzling is that the clinical benefits have been understood for years,” wrote Jonathan S. Skinner and Douglas O. Staiger, economists at Dartmouth, in a recent study about these regional patterns.

Congress has decided that some treatment decisions may be best taken out of doctors’ hands. In one of their last acts this year before adjourning, lawmakers passed a bill entitling doctors to a bonus from Medicare if they report data on the quality of their care, using criteria like whether they prescribe aspirin or beta blockers to heart attack victims. In the future, this data would permit Medicare to reward doctors who followed government guidelines.

. . .

. . . , much spending on health care provides enormous benefits. A study published this year by Mr. Skinner, Mr. Staiger and Dr. Elliott S. Fisher of Dartmouth Medical School found that Medicare spending on hospital care for heart attack victims surged two-thirds from 1986 to 1996, after accounting for inflation. But the percentage of victims who were alive a year after their attacks also increased, though by just 10 percentage points, to roughly 68 percent.

The relationship — rising costs bringing increased benefits — has broken down recently. From 1996 to 2002, Medicare spending on treatments for heart attack victims increased about 14 percent, after inflation. But there was virtually no improvement in survival rates.

There is mounting evidence that the zeal to treat and spend may actually hurt patients. The study by Mr. Skinner, Mr. Staiger and Dr. Fisher found that hospitals in regions where spending grew fastest from 1986 to 2002 had some of the worst practices, in terms of providing tried-and-true therapies, and recorded the smallest gains in survival rates.

Treatment of heart disease underscores the deeply idiosyncratic nature of many choices made by America’s doctors and hospitals. Coupled with a fee-for-service system that encourages aggressive treatment, these choices stimulate health spending that provides little benefit to patients. “A lot of the innovation and spending growth are going into gray areas that are not helping people that much,” Mr. Skinner said.

For the full commentary, see:

EDUARDO PORTER. "ECONOMIC VIEW; The More You Pay, the Better the Care? Think Twice." The New York Times (Sun., December 17, 2006): 5.

(Note: ellipses are added.)