When Labor Markets Are Flexible, Workers Need Not Fear New Technology

(p. 6) Driverless vehicles and drone aircraft are no longer science fiction, and over time, they may eliminate millions of transportation jobs. Many other examples of automatable jobs are discussed in “The Second Machine Age,” a book by Erik Brynjolfsson and Andrew McAfee, and in my own book, “Average Is Over.” The upshot is that machines are often filling in for our smarts, not just for our brawn — and this trend is likely to grow.
How afraid should workers be of these new technologies? There is reason to be skeptical of the assumption that machines will leave humanity without jobs. After all, history has seen many waves of innovation and automation, and yet as recently as 2000, the rate of unemployment was a mere 4 percent. There are unlimited human wants, so there is always more work to be done. The economic theory of comparative advantage suggests that even unskilled workers can gain from selling their services, thereby liberating the more skilled workers for more productive tasks.
. . .
Labor markets just aren’t as flexible these days for workers, especially for men at the bottom end of the skills distribution.
. . .
Across the economy, a college degree is often demanded where a high school degree used to suffice.
. . .
The law is yet another source of labor market inflexibility: The number of jobs covered by occupational licensing continues to rise and is almost one-third of the work force. We don’t need such laws for, say, barbers or interior designers, although they are commonly on the books.
. . .
Many . . . labor market problems were brought on by the financial crisis and the collapse of market demand. But it would be a mistake to place all the blame on the business cycle. Before the crisis, for example, business executives and owners didn’t always know who their worst workers were, or didn’t want to engage in the disruptive act of rooting out and firing them. So long as sales were brisk, it was easier to let matters lie. But when money ran out, many businesses had to make the tough decisions — and the axes fell. The financial crisis thus accelerated what would have been a much slower process.
Subsequently, some would-be employers seem to have discriminated against workers who were laid off in the crash. These judgments weren’t always fair, but that stigma isn’t easily overcome, because a lot of employers in fact had reason to identify and fire their less productive workers.

For the full commentary, see:
TYLER COWEN. “Economic View; Automation Alone Isn’t Killing Jobs.” The New York Times, SundayBusiness Section (Sun., APRIL 6, 2014): 6.
(Note: ellipses added.)
(Note: the online version of the commentary has the date APRIL 5, 2014.)

The Brynjolfsson and McAfee book mentioned is:
Brynjolfsson, Erik, and Andrew McAfee. The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. New York: W. W. Norton & Company, 2014.

The Cowen book that Cowen mentions is:
Cowen, Tyler. Average Is Over: Powering America Beyond the Age of the Great Stagnation. New York: Dutton Adult, 2013.

Young Inca Woman Was Probably Murdered

MurderedIncanYoungWoman2014-04-28.jpg “The Incan mummy.” Source of caption and photo: online version of the NYT article quoted and cited below.

Hobbes famously wrote that for most of human existence, life has been “poor, nasty, brutish, and short.” Further evidence:

(p. D4) Scientists who have examined the mummy of a young Inca say that her death was most likely a homicide and that it was not because of Chagas disease, the tropical parasitic infection that she had.

For the full story, see:
“Observatory; A Verdict of Murder.” The New York Times (Tues., MARCH 4, 2014): D4.
(Note: the online version of the story has the date MARCH 3, 2014.)

The famous Hobbes quote can be found on p. 70 of:
Hobbes, Thomas. Leviathan, Dover Philosophical Classics. Mineola, New York: Dover Publications, Inc., 2006 [first published 1651].

In Bringing Us Electricity, Westinghouse Rejected the Precautionary Principle

(p. 180) The defensive position that Westinghouse found himself in is illustrated by the way he contradicted himself as he tried to defend overhead wires. The wires that were supposedly safe were also the same wires that he had to admit, yes, posed dangers, yes, but dangers of various kinds had to be accepted throughout the modern city. Westinghouse said, “If all things involving the use of power were to be prohibited because of the danger to life, then the cable cars, which have already killed and maimed a number of people, would have to be abolished.” Say good-bye to trains, too, he added, because of accidents at road crossings.

Source:
Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.

Psychological Theorizing Based on False Facts

KittyGenoveseBK2014-04-29.jpg

Source of book image:
http://media.npr.org/assets/bakertaylor/covers/k/kitty-genovese/9780393239287_custom-113f9b45a7b76ac664f82c62c6604fd07d7ad5f9-s6-c30.jpg

(p. C7) The Kitty Genovese myth has turned out to be as enduring an urban legend as the tale of alligators prowling the New York sewers. In March 1964 the young Queens bar manager was stabbed to death at three in the morning outside her Kew Gardens apartment while 38 neighbors watched from their windows and did nothing to save her–or so the tale has gone for the past half-century.

In fact, hardly anything about the Genovese story is what it first appeared to be, although it has calcified into a metaphor of urban alienation and prompted research into a psychological phenomenon that has come to be known as the “Genovese syndrome.” As Kevin Cook writes in his heavily padded but provocative new book, “Kitty Genovese: The Murder, the Bystanders, the Crime That Changed America,” the tale is as much about the alchemy of journalism as urban pathology.
. . .
. . . , as it turns out, only a few neighbors understood the attack for what it was and failed to respond.
. . .
Journalism is a blunt instrument, and allowances must be made. Even so, it’s plain that the original story was more hype than first draft of history.

For the full review, see:
EDWARD KOSNER. “BOOKS; What the Neighbors Didn’t See; A woman was stabbed and raped steps from her door. Did no one call the police?” The Wall Street Journal (Sat., March 1, 2014): C7.
(Note: ellipses added.)
(Note: the online version of the review has the date Feb. 28, 2014, and has the title “BOOKSHELF; Book Review: ‘Kitty Genovese’ by Kevin Cook; A woman was stabbed and raped steps from her door. Did no one call the police?”)

The book under review is:
Cook, Kevin. Kitty Genovese: The Murder, the Bystanders, the Crime That Changed America. New York: W. W. Norton & Company, Inc., 2014.

Warren Buffett Lately Low on Alpha

(p. 3) Warren Buffett is probably the most famous investor of his generation, and for good reason: His track record over the long term is a thing of beauty.
He has beaten the market by a wide margin over 49 years, a record so impressive that it’s used in finance classes as a textbook example of “alpha.”
Alpha is an elusive quality. Very simply put, it is the ability to beat an index fund without adding risk to a portfolio. Investment managers are always seeking it. If it exists, Warren Buffett surely has had it.
A new statistical analysis of Mr. Buffett’s long-term record at Berkshire Hathaway has just been done, and it’s come up with some fascinating insights about his abilities, past and present, and about the chances that the rest of us have for beating the market. Using a series of statistical measures, the study suggests that Mr. Buffett has indeed been blessed with an impressively big dose of alpha over a very long career.
But it also reveals something that isn’t impressive at all: For four of the last five years, Mr. Buffett has been doing worse than the typical, no-frills Standard & Poor’s 500-stock index fund — so much worse that it’s unlikely to be a matter of a string of bad luck. Mr. Buffett has begun to behave like an investor with no alpha at all.
. . .
A vast majority of individuals, including most people now working in finance, do not have alpha, Mr. Mehta says. It doesn’t matter whether they have studied finance or have prodigious math skills; the statistics show that they are unlikely to have the ability to beat the market.
That has a serious implication for individual investors, he says: True investing skill is so rare that the rest of us shouldn’t even try to emulate those who have it. In addition, he says, we probably shouldn’t bother trying to hire the few outperformers to invest our money. Why? Because we aren’t likely to be able to identify them.

For the full commentary, see:
JEFF SOMMER. “Strategies; The Oracle of Omaha, Lately Looking a Bit Ordinary.” The New York Times, SundayBusiness Section (Sun., APRIL 6, 2014): 3.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date APRIL 5, 2014.)

Crispr Molecular System Allows Scientists to Edit Genes

CrisprEditsGenes2014-04-28.jpgSource of graph: online version of the NYT article quoted and cited below.

(p. D1) In the late 1980s, scientists at Osaka University in Japan noticed unusual repeated DNA sequences next to a gene they were studying in a common bacterium. They mentioned them in the final paragraph of a paper: “The biological significance of these sequences is not known.”
Now their significance is known, and it has set off a scientific frenzy.
The sequences, it turns out, are part of a sophisticated immune system that bacteria use to fight viruses. And that system, whose very existence was unknown until about seven years ago, may provide scientists with unprecedented power to rewrite the code of life.
In the past year or so, researchers have discovered that the bacterial system can be harnessed to make precise changes to the DNA of humans, as well as other animals and plants.
This means a genome can be edited, much as a writer might change words or fix spelling errors. It allows “customizing the genome of any cell or any species at will,” said Charles Gersbach, an assistant professor of biomedical engineering at Duke University.

For the full story, see:
ANDREW POLLACK. “A Powerful New Way to Edit DNA.” The New York Times (Tues., MARCH 4, 2014): D1 & D5.
(Note: the online version of the story has the date MARCH 3, 2014.)

Entrepreneurial Consumer J.P. Morgan “Handled Setbacks with Equanimity”

Schumpeter wrote that the entrepreneur is the one who overcomes obstacles to get the job done (1950, p. 132). Obstacles come in many forms. One of them is consumer resistance to change. So one key contributor to the technological progress is the “entrepreneurial consumer” who is willing to invest in new, buggy, possibly dangerous technologies at an early stage. (Paul Nodskov, a student in my spring 2014 Economics of Technology seminar suggested using the phrase “entrepreneurial consumer.”)
Alexis de Tocqueville observed that in contrast to Europeans, Americans were “restless in the midst of their prosperity” (2000 [first published 1835], Ch. 13). Perhaps even that early, America had more entrepreneurial consumers?

(p. 131) Morgan prized being ahead of everyone else, and the next year was concerned that his plant was already less than state of the art, a suspicion that was confirmed when he persuaded Edison to send Edward Johnson to the house for an evaluation. Johnson was instructed to upgrade the equipment and also to devise a way to provide an electric light that would sit on Morgan’s desk in his library. At a time when the very concept of an electrical outlet and detachable electrical appliances had yet to appear, this posed a significant challenge. Johnson’s solution was to run wires beneath the floor to metal plates that were installed in different places beneath the rugs. One of the legs of the desk was equipped with sharp metal prongs, designed to make contact with one of the plates when moved about the room.

In conception, it was clever; in implementation, it fell short of ideal. On the first evening when the light was turned on, there was a flash, followed by a fire that quickly engulfed the desk and spread across the rug before being put out. When Johnson was summoned to the house the next morning, he was shown into the library, where charred debris was piled in a heap. He expected that when Morgan appeared, he would angrily announce that the services of Edison Electric were no longer needed.
(p. 132) “Well?” Morgan stood in the doorway, with Mrs. Morgan standing behind him, signaling Johnson with a finger across her lips not to launch into elaborate explanations. Johnson cast a doleful eye at the disaster in the room and remained silent.
“Well, what are you going to do about it?” Morgan asked. Johnson said the fault was his own and that he would personally reinstall everything, ensuring that it would be done properly.
“All right. See that you do.” Morgan turned and left. The eager purchaser of first-generation technology handled setbacks with equanimity. “I hope that the Edison Company appreciates the value of my house as an experimental station,” he would later say. A new installation with second-generation equipment worked well, and Morgan held a reception for four hundred guests to show off his electric lights. The event led some guests to place their own orders for similar installations. Morgan also donated entire systems to St. George’s Church and to a private school, dispatching Johnson to oversee the installation as a surprise to the headmistress. The family biographer compared Morgan’s gifts of electrical power plants to his sending friends baskets of choice fruit.

Source:
Stross, Randall E. The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. New York: Crown Publishers, 2007.

Schumpeter’s book is:
Schumpeter, Joseph A. Capitalism, Socialism and Democracy. 3rd ed. New York: Harper and Row, 1950.

The other book I mention, is:
de Tocqueville, Alexis. Democracy in America. Chicago: University of Chicago Press, 2000 [first published in two volumes in 1835 and 1840].