January 2009 – Page 3 – artdiamondblog.com

French Entrepreneur Fourneau Was Against Law, But Used It

The existence and details of patent laws can matter for creating incentives for invention and innovation. The patent laws in Germany and France in the 1930s reduced the incentives for inventing new drugs.

(p. 141) German chemical patents were often small masterpieces of mumbo jumbo. It was a market necessity. Patents in Germany were issued to protect processes used to make a new chemical, not, as in America, the new chemical itself; German law protected the means, not the end. . . .
. . .
(p. 166) Fourneau decided that if the French were going to compete, the nation’s scientists would either have to discover their own new drugs and get them into production before the Germans could or find ways to make French versions of German compounds before the Germans had earned back their research and production costs—in other words, get French versions of new German drugs into the market before the Germans could lower their prices. French patent laws, like those in Germany, did not protect the final product. “I was always against the French law and I thought it was shocking that one could not patent one’s invention,” Fourneau said, “but the law was what it was, and there was no reasons not to use it.”

Source:
Hager, Thomas. The Demon under the Microscope: From Battlefield Hospitals to Nazi Labs, One Doctor’s Heroic Search for the World’s First Miracle Drug. New York: Three Rivers Press, 2007.
(Note: ellipses added.)

Kantrowitz Failed at Fusion for Lack of Funding

“Arthur Kantrowitz, the “father” of laser propulsion, with a cone-shaped model in 1989, first suggested the use of ground based lasers to launch vehicles into orbit.” Source of the caption and photo: the online version of the somewhat different December 9th version of the obituary at http://www.nytimes.com/2008/12/09/science/09kantrowitz.html?scp=1&sq=Kantrowitz&st=cse

(p. B13) Arthur R. Kantrowitz, a physicist and engineer whose research on the behavior of superhot gases and fluid dynamics led to nose cones for rockets, heart-assist pumps and the idea of nuclear fusion in magnetic bottles, among many other things, died in Manhattan on Nov. 29. He was 95.
. . .
After receiving bachelor’s and master’s degrees in physics from Columbia in 1936, he went to work for the National Advisory Committee for Aeronautics, or NACA, the precursor to NASA, at Langley Field in Virginia. It was there, in 1938, that he and Eastman N. Jacobs, his boss, did an experiment that might have changed the world, had they succeeded.
The idea was to harness the energy source that powers the sun, the thermonuclear fusion of hydrogen into helium, by heating hydrogen with radio waves while squeezing the gas with a magnetic field. At the time, nobody had tried to produce a fusion reaction; the Manhattan Project and other attempts to create nuclear fission were still in their infancy.
Knowing that their superiors would disapprove of anything as outlandish as atomic energy, they labeled their machine the Diffusion Inhibitor, and worked on it only at night. The experiment failed, and before the experimenters could figure out why, their director found out about the project and canceled it. Physicists unaware of the Langley experiment later reinvented the idea of thermonuclear fusion in a magnetic bottle, and they are still trying to make it work.
”It was a heartbreaking experience,” Dr. Kantrowitz recalled. ”I had just built a whole future around this; I wanted to make it a career.”

For the full obituary, see:

DENNIS OVERBYE. “Arthur R. Kantrowitz, 95, Is Dead; Physicist Who Helped Space Program.” The New York Times (Weds., December 10, 2008): B13.
(Note: ellipsis added.)

In Geology, Economic Growth Caused Scientific Progress

(p. 130) . . . , the major problem inhibiting England’s industrial development was the state of the roads. So the introduction of waterborne transportation on the new canals triggered massive economic expansion because these waterways transported coal (and other raw materials) much faster and cheaper than by packhorse or wagon. In 1793 a surveyor called William Smith was taking the first measurements in preparation for a canal that was to be built in the English county of Somerset, when he noticed something odd. (p. 131) Certain types of rock seemed to lie in levels that reappeared, from time to time, as the rock layer dipped below the surface and then re-emerged across a stretch of countryside. During a journey to the north of England (to collect more information about canal-construction techniques), Smith saw this phenomenon happening everywhere. There were obviously regular layers of rock beneath the surface which were revealed as strata where a cliff face of a valley cut into them. In 1796 Smith discovered that the same strata always had the same fossils embedded in them. In 1815, after ten years of work, he compiled all that he had learned about stratification in the first proper colored geological map, showing twenty-one sedimentary layers. Smith’s map galvanized the world of fossil-hunting.

Source:
Burke, James. The Pinball Effect: How Renaissance Water Gardens Made the Carburetor Possible – and Other Journeys. Boston: Back Bay Books, 1997.
(Note: ellipsis added.)

Government Pressure Led Fannie Mae and Freddie Mac to Increase Their Subprime Loans

“Former heads of Fannie Mae and Freddie Mac testified in the House Tuesday: left to right, Richard Syron, Daniel Mudd, Leland Brendsel and Franklin Raines.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B3) Fannie Mae and Freddie Mac engaged in “an orgy of junk mortgage development” that turned the two mortgage-finance giants into vast repositories of subprime and similarly risky loans, a former Fannie executive testified on Tuesday.
. . .
And in March 2006, Enrico Dallavecchia, Fannie Mae’s chief risk officer, wrote to Mr. Mudd to say, “Dan, I have a serious problem with the control process around subprime limits.”
Despite the concerns, Fannie Mae further increased its purchases of subprime loans, according to a January 2007 internal presentation.
Freddie Mac’s senior executives ignored similar warnings. Donald J. Bisenius, a senior vice president, wrote in April 2004 to a colleague that “we did no-doc lending before, took inordinate losses and generated significant fraud cases.”
“I’m not sure what makes us think we’re so much smarter this time around,” he wrote.
Housing analysts say that the former heads of Fannie Mae and Freddie Mac increased their nonprime business because they felt pressure from the government and advocacy groups to meet goals for affordable housing as well as pressure to compete with Wall Street.

For the full story, see:
LYNNLEY BROWNING. “Ex-Executive Faults Fannie and Freddie for Nonprime Loans.” The New York Times (Weds., December 10, 2008): B3.
(Note: ellipsis added.)

Christian Care “Replaced Roman Hygiene with Frequent Prayers and Infrequent Baths”

Hager discusses the medical practices of Paris’ Hôtel Dieu lying-in maternity hospital in the 17th century, that led to widespread, and often fatal, childbed fever:

(p. 114) Every day the senior doctors would arrive on their rounds followed closely by a gaggle of students. They would pull the women’s covers down, pass hands over their abdomens, point, prod, and discuss. Although the physicians’ wigs were carefully powdered, their hands were generally unwashed. Christian care, which emphasized purity of the soul over that of the body, had replaced Roman hygiene with frequent prayers and infrequent baths. In Paris the privies and slaughterhouses (as well as the hospital wards of the Hôtel Dieu) dumped their waste into the Seine, then drew drinking and washing water from the same source. Bedding was washed infrequently. Lice and fleas abounded.

Mackerel Money: “If a Dog Eats It, It’s Dog Food”

Mackerel on left; Larry Levine on right. Source of photo and image: online version of the WSJ article quoted and cited below.

In discussing the nature of money, my Wabash College economics professor, Ben Rogge, used to say “if a dog eats it, it’s dog food.” (The moral being that, if people use it as money, it’s money.)
There are many examples of unusual money: large stones, cigarettes, and now mackerel (see the article quoted below).
P.S. In an earlier entry, I worried that Rupert Murdoch would kill the WSJ‘s quirky trademark front-page article. Score one for Rupert’s ability to change his mind for the better, when it matters.

(p. A1) When Larry Levine helped prepare divorce papers for a client a few years ago, he got paid in mackerel. Once the case ended, he says, “I had a stack of macks.”

Mr. Levine and his client were prisoners in California’s Lompoc Federal Correctional Complex. Like other federal inmates around the country, they found a can of mackerel — the “mack” in prison lingo — was the standard currency.
“It’s the coin of the realm,” says Mark Bailey, who paid Mr. Levine in fish. Mr. Bailey was serving a two-year tax-fraud sentence in connection with a chain of strip clubs he owned. Mr. Levine was serving a nine-year term for drug dealing. Mr. Levine says he used his macks to get his beard trimmed, his clothes pressed and his shoes shined by other prisoners. “A haircut is two macks,” he says, as an expected tip for inmates who work in the prison barber shop.
There’s been a mackerel economy in federal prisons since about 2004, former inmates and some prison consultants say. That’s when federal prisons prohibited smoking and, by default, the cigarette pack, which was the earlier gold standard.
Prisoners need a proxy for the dollar because they’re not allowed to possess cash. Money they get from prison jobs (which pay a maximum of 40 cents an hour, according to the Federal Bureau of Prisons) or family members goes into commissary accounts that let them buy things such as food and toiletries. After (p. A16) the smokes disappeared, inmates turned to other items on the commissary menu to use as currency.
. . .
Mr. Muntz says he sold more than $1 million of mackerel for federal prison commissaries last year. It accounted for about half his commissary sales, he says, outstripping the canned tuna, crab, chicken and oysters he offers.
Unlike those more expensive delicacies, former prisoners say, the mack is a good stand-in for the greenback because each can (or pouch) costs about $1 and few — other than weight-lifters craving protein — want to eat it.
So inmates stash macks in lockers provided by the prison and use them to buy goods, including illicit ones such as stolen food and home-brewed “prison hooch,” as well as services, such as shoeshines and cell cleaning.
The Bureau of Prisons views any bartering among prisoners as fishy. “We are aware that inmates attempt to trade amongst themselves items that are purchased from the commissary,” says bureau spokeswoman Felicia Ponce in an email. She says guards respond by limiting the amount of goods prisoners can stockpile. Those who are caught bartering can end up in the “Special Housing Unit” — an isolation area also known as the “hole” — and could lose credit they get for good behavior.

For the full story, see:
JUSTIN SCHECK. “Mackerel Economics in Prison Leads to Appreciation for Oily Fillets; Packs of Fish Catch On as Currency, Former Inmates Say; Officials Carp.” The Wall Street Journal (Thurs., OCTOBER 2, 2008): A1 & A16.
(Note: ellipsis added.)

The classic article on cigarette money, is:
Radford, R.A. “The Economic Organization of a P.O.W. Camp.” Economica, New Series 12, no. 48 (Nov. 1945): 189-201.

Vulcanized Rubber Due to Serendipitous Entrepreneurial Alertness

(p. 46) The problem with rubber was that it wasn’t a very versatile material. Macintosh found, for example, that in very hot weather his raincoats would “sweat,” and in freezing conditions they would crack. The solution to this particular problem came, as ever with innovation, by accident. In 1839 a young American working in the Roxbury India Rubber Company in Roxbury, Massachusetts, was experimenting with his raw materials one day when he accidentally let a mixture of rubber and sulfur drop onto a hot stove. The next morning he saw that the rubber had charred, like leather, instead of melting. He correctly inferred that if he could stop the charring at the right point, he’d have rubber that might behave like waterproof leather. The sulfur had vulcanized (he coined the word) the rubber in such a way that it would retain its shape and elasticity over a wide range of temperatures. So now rubber could be hard or elastic, as required.

Source:
Burke, James. The Pinball Effect: How Renaissance Water Gardens Made the Carburetor Possible – and Other Journeys. Boston: Back Bay Books, 1997.
(Note: italics in original.)

Economist Arrested for Speaking the Truth

Detained Latvian economist Dmitrijs Smirnovs. Source of image: online version of the WSJ article quoted and cited below.

(p. A1) RIGA, Latvia — Hammered by economic woe, this former Soviet republic recently took a novel step to contain the crisis. Its counterespionage agency busted an economist for being too downbeat.

“All I did was say what everyone knows,” says Dmitrijs Smirnovs, a 32-year-old university lecturer detained by Latvia’s Security Police. The force is responsible for hunting down spies, terrorists and other threats to this Baltic nation of 2.3 million people and 26 banks.
Now free after two days of questioning, Mr. Smirnovs hasn’t been charged. But he is still under investigation for bad-mouthing the stability of Latvia’s banks and the national currency, the lat. Investigators suspect him of spreading “untruthful information.” They’ve ordered him not to leave the country and seized his computer.
Finance is a highly touchy subject in Latvia, one that the state tries, with unusual zeal, to shield from loose tongues. It is a criminal offense here to spread “untrue data or information” about the country’s financial system. Undermining it is outlawed as subversion.
So, when the global financial system began to buckle this autumn, Latvia’s Security Police mobilized to combat destabilizing chatter about banks and exchange rates. Agents directed their attention to Inter-(p. A19)net chat rooms, newspaper articles, cellphone text messages and even rock concerts. A popular musician was taken in for questioning after he cracked a joke about unstable Latvian banks at a performance.
Just one problem: Much of the speculative buzz now turns out to ring true.
. . .
In Latvia’s Soviet past, officials routinely blamed their problems on saboteurs or other scapegoats. “This is part of our political culture,” says Sergei Kruks, a media-studies lecturer. “If the state doesn’t have a solution, it has to find someone to blame.”

For the full story, see:
ANDREW HIGGINS. “How to Combat a Banking Crisis: First, Round Up the Pessimists; Latvian Agents Detain a Gloomy Economist; ‘It Is a Form of Deterrence’.” The Wall Street Journal (Mon., DECEMBER 1, 2008): A1 & A19.
(Note: ellipsis added.)

Industrialist Duisberg Made Domagk’s Sulfa Discovery Possible

(p. 65) . . . Domagk’s future would be determined not only by his desire to stop disease but also by his own ambition, his family needs, and the plans of a small group of businessmen he had never met. He probably had heard of their leader, however, one of the preeminent figures in German business, a man the London Times would later eulogize as “the greatest industrialist the world has yet had.” His name was Carl Duisberg.

Duisberg was a German version of Thomas Edison, Henry Ford, and John D. Rockefeller rolled into one. He had built an empire of science in Germany, leveraging the discoveries of dozens of chemists he employed into one of the most profitable businesses on earth. He knew how industrial science worked: He was himself a chemist. At least he had been long ago. Now, in the mid-1920s, in the twilight of his years, his fortunes made, his reputation assured, he often walked in his private park alone—still solidly built, with his shaved head and a bristling white mustache, still a commanding presence in his top hat and black overcoat—through acres of forest, fountains, classical statuary, around the pond in his full-scale Japanese garden by the lacquered teahouse, over his steams, and across his lawns.