Month: March 2018

Free Trade Increases Economic Growth

(p. 3) When President Trump imposed tariffs on imported solar panels and washing machines, I was reminded of a line from George Orwell: “We have now sunk to a depth at which the restatement of the obvious is the first duty of intelligent men.”
. . . , my subject is economics, and to most people in my field, the benefits of an unfettered system of world trade are obvious.
. . .
. . . , economists have emphasized how trade affects productivity. In a model pioneered by my Harvard colleague Marc Melitz, when a nation opens up to international trade, the most productive firms expand their markets, while the least productive are forced out by increased competition. As resources move from the least to the most productive firms, overall productivity rises.
. . .
A skeptic might say that all this is just theory. Where’s the evidence?
One approach to answering this question is to examine whether countries that are open to trade enjoy greater prosperity. In a 1995 paper, the economists Jeffrey D. Sachs and Andrew Warner studied a large sample of nations and found that open economies grew significantly faster than closed ones.
. . .
Trade restrictions often accompany other government policies that interfere with markets. Perhaps these other policies, rather than trade restrictions, impede growth.
To address this problem, a third approach to measuring the effects of trade, proposed by the economists Jeffrey A. Frankel of Harvard and David C. Romer of the University of California, Berkeley, focuses on geography. Some countries trade less because of geographic disadvantages.
For example, New Zealand is disadvantaged compared with Belgium because it is farther from other populous countries. Similarly, landlocked nations are disadvantaged compared with nations with their own seaports. Because these geographic characteristics are correlated with trade, but arguably uncorrelated with other determinants of prosperity, they can be used to separate the impact of trade on national income from other confounding factors.
After analyzing the data, Mr. Frankel and Mr. Romer concluded that “a rise of one percentage point in the ratio of trade to G.D.P. increases income per person by at least one-half percent.”

For the full commentary, see:
N. GREGORY MANKIW. ”Economic View; Reviewing the Tenets of Free Trade.” The New York Times, SundayBusiness Section (Sun., February 18, 2018): 3.
(Note: ellipses added.)
(Note: the online version of the commentary has the date FEB. 16, 2018, and has the title ”Economic View; Why Economists Are Worried About International Trade.”)

The Melitz article mentioned above, is:
Melitz, Marc. “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity.” Econometrica 71, no. 6 (Nov. 2003): 1695-1725.

The Sachs and Warner article mentioned above, is:
Sachs, Jeffrey D., and Andrew Warner. “Economic Reform and the Process of Global Integration ” Brookings Papers on Economic Activity 26, no. 1 (1995 ): 1-95.

The Frankel and Romer article mentioned above, is:
Frankel, Jeffrey A., and David H. Romer. “Does Trade Cause Growth?” American Economic Review 89, no. 3 (June 1999): 379-99.

Politicians Build Costly Megaprojects to Burnish Their Legacy

(p. 14) Petroski, a professor of both engineering and history at Duke and the author of such books as “The Pencil” and “The Evolution of Useful Things,” brings an eye for the little things: what kinds of guardrails are best, how roads can be made safer through better signage, which paving materials last longest. One of his key lessons is that small thinking can be a virtue, because the history of infrastructure is a series of experimental and incremental improvements.
Local governments tried endless variations of asphalt and concrete before developing paving surfaces that didn’t produce excess dust or deteriorate quickly under rain and snow. They gradually built longer bridges, learning from earlier designs that worked, and that didn’t. They tried out different paint colors for lane markings, finding the ones that drivers could see best.
This little-things perspective is needed at a time when America’s infrastructure agenda is simultaneously characterized by grandiose ambitions and limited budgets. Money is tight, and infrastructure needs are going unaddressed. At the same time, despite funding limitations, politicians have a tendency to fall in love with novel, pathbreaking, expensive projects that frequently go astray, resulting in arguments against spending more on infrastructure.
. . .
Politicians aren’t drawn to megaprojects just because they believe the initial rosy cost projections and therefore underestimate the risk of complications. They also see an opportunity to build their legacy: It’s more fun to say “I built that bridge” than “I retrofitted that bridge.”

For the full review, see:
JOSH BARRO. “Getting There.” The New York Times Book Review (Sunday, March 20, 2016): 14.
(Note: ellipsis added.)
(Note: the online version of the review has the date MARCH 18, 2016, and has the title “‘The Road Taken,’ by Henry Petroski.”)

The Petroski book under review, is:
Petroski, Henry. The Road Taken: The History and Future of America’s Infrastructure. New York: Bloomsbury USA, 2016.

The Only Duty of a Firm “Is to Produce Profits”

(p. B1) On Tuesday [January 16, 2018], the chief executives of the world’s largest public companies will be receiving a letter from one of the most influential investors in the world. And what it says is likely to cause a firestorm in the corner offices of companies everywhere and a debate over social responsibility that stretches from Wall Street to Washington.
Laurence D. Fink, founder and chief executive of the investment firm BlackRock, is going to inform business leaders that their companies need to do more than make profits — they need to contribute to society as well if they want to receive the support of BlackRock.
. . .
(p. B3) Companies often talk about contributing to society — sometimes breathlessly — but it is typically written off as a marketing gimmick aimed at raising profits or appeasing regulators.
Mr. Fink’s declaration is different because his constituency in this case is the business community itself. It pits him, to some degree, against many of the companies that he’s invested in, which hold the view that their only duty is to produce profits for their shareholders, an argument long espoused by economists like Milton Friedman.
“What does it mean to say that ‘business’ has responsibilities? Only people can have responsibilities,” Friedman wrote, almost rhetorically, back in 1970 in this very newspaper. “Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.”

For the full commentary, see:
Sorkin, Andrew Ross. ”DEALBOOK; A Demand For Change Backed Up By $6 Trillion.” The New York Times (Tues., JAN. 16, 2018): B1 & B3.
(Note: ellipsis, and bracketed date, added.)
(Note: the online version of the commentary has the date JAN. 15, 2018, and has the title ”DEALBOOK; BlackRock’s Message: Contribute to Society, or Risk Losing Our Support.”)

The Milton Friedman classic article mentioned above by Sorkin, is:
Friedman, Milton. “The Social Responsibility of Business Is to Increase Its Profits.” The New York Times Magazine (Sun., Sept. 13, 1970): 32-33, 122, 124 & 126.

Russian Movie Director Bravely Criticizes Putin

(p. A8) MOSCOW — While shooting “Loveless,” an Oscar nominee this year for best foreign film, Andrey Zvyagintsev repeated virtually every scene again and again — 12 takes on average, according to his cinematographer, sometimes as many as 28.
The differences between takes often proved undetectable to others, said the cinematographer, Mikhail Krichman — even to the core crew that has worked on all five of his films. But the director sought some fleeting “magic.”
It might be several leaves fluttering off a tree in the background, Mr. Krichman said, or the angle at which snowflakes struck a window. “These kinds of things deliver the magic of the scene, and he uses them to decide to take it or not for the movie,” Mr. Krichman said of Mr. Zvyagintsev. “That makes him very different from other directors.”
. . .
His role as social critic, . . . , is another reason the art-house crowd tends to respect Mr. Zvyagintsev. He is one of the few high-profile artists still brave enough to openly criticize the Russian government.
He has disparaged the recent crackdown on the arts, including the house arrest of a prominent theater director and the use of censorship for the first time in years to ban a foreign movie, “The Death of Stalin.”
“We believed that in 1991 that we were present for the burial of the C.P.S.U.,” he said referring to the one-party state of the Soviet Union. “The burial did not take place. Instead, the corpse rose from the coffin and is walking around and frightening us once again.”

For the full story, see:
NEIL MacFARQUHAR. “A Master of Depicting Russia’s Underbelly on Film.” The New York Times (Saturday, Feb. 24, 2018): A8.
(Note: ellipses added.)
(Note: the online version of the story has a date of Feb. 23, 2018, and has the title “A Russian Master of the ‘Dark Side’ in Film.”)

Silicon Valley’s Intolerance of Intellectual Diversity

(p. B4) Billionaire venture capitalist Peter Thiel has said he plans to leave Silicon Valley in part because of its perceived cultural uniformity. He isn’t the only one.
Several tech workers and entrepreneurs also have said they left or plan to leave the San Francisco Bay Area because they feel people there are resistant to different social values and political ideologies. Groupthink and homogeneity are making it a worse place to live and work, these workers said.
. . .
Tim Ferriss, the tech investor and best-selling author of the “4 Hour Workweek,” moved to Austin, Texas, in December, after living in the Bay Area for 17 years, partly because he felt people there penalized anyone who didn’t conform to a hyper liberal credo.
People in Silicon Valley “openly lie to one another out of fear of losing their jobs or being publicly crucified,” said Mr. Ferriss in a recent discussion on Reddit.
. . .
Preethi Kasireddy said she wasn’t surprised when she heard the news that Mr. Thiel is moving to Los Angeles from San Francisco. Ms. Kasireddy, a 27-year-old startup entrepreneur, said she made the same move last November because, like Mr. Thiel, she felt surrounded by people who shared identical beliefs, particularly about how to build a successful company.
Sometimes Silicon Valley venture-capital investors and startup founders “have a certain way of thinking, and if you don’t fit into that way of thinking you’re not in the cool club,” said Ms. Kasireddy, who declined to state her political beliefs but said they didn’t influence her decision to move. She also said she realized many of the resources she needed to build her next project–a blockchain startup–didn’t require her to be in Silicon Valley.

For the full story, see:
Douglas MacMillan. “‘Thiel Isn’t Alone In Tech Departure.” The Wall Street Journal (Tuesday, February 20, 2018): B4.
(Note: ellipses added.)
(Note: the online version of the story has a date of Feb. 18, 2018, and has the title “Like Peter Thiel, Tech Workers Feel Alienated by Silicon Valley ‘Echo Chamber’.”)

Clarence Darrow Did Not Always Defend Working People

(p. 12) Kersten frames Darrow’s penchant for representing murderers and other criminals, for instance, as the only way he could underwrite his political work. And he doesn’t even mention some of Darrow’s more unseemly efforts, like the case of the good ship Eastland, when labor’s beloved lawyer mounted a defense of the steamboat’s chief engineer, whose negligence had been a cause of the drowning deaths of 844 working people out for a day of fun on the Chicago River.
Farrell has no such compunctions. He agrees that Darrow had core principles. “He was Jefferson’s heir,” he says, “his time’s foremost champion of personal liberty,” raging against the concentration of wealth and power that had accompanied the nation’s industrialization. But Darrow also thought of the law as blood sport. He shamelessly seduced juries with his common man routine — the rumpled suits and suspenders, the gentle country drawl — and his extraordinary closing statements, which he packed with philosophy, poetry and cheap emotions meant to make men cry. Those were the benign manipulations, Farrell argues. In some of his biggest cases Darrow bought the testimony he needed. And when he was apparently caught in the act in 1911, he hired as his counsel the most ruthless criminal lawyer he could find — a flashy-dressing, hard-drinking, anti-union conservative — because there was no point in confusing means and ends.
A similarly callous streak ran through Darrow’s personal life. He divorced his first wife because she wasn’t sophisticated enough; married his second because she doted on him; then took a mistress 21 years his junior. He cheated on his law partners too, handing them work he didn’t want to do and pocketing fees they were supposed to share. And for all his radicalism, Darrow loved a big payday: according to Farrell, he took on Leopold and Loeb, two sons of privilege, primarily because their parents offered him a $65,000 retainer.

For the full review, see:
KEVIN BOYLE. “Equal Opportunity Defender.” The New York Times Book Review (Sunday, July 10, 2011): 12.
(Note: the online version of the review has the date JULY 8, 2011, and has the title “Clarence Darrow, Equal Opportunity Defender.”)

The books under review, are:
Farrell, John A. Clarence Darrow: Attorney for the Damned. New York: Doubleday, 2011.
Kersten, Andrew E. Clarence Darrow: American Iconoclast. New York: Hill and Wang, 2011.

Musk Poured PayPal Money into SpaceX and Tesla

(p. A15) Mr. Musk’s first success was X.com, an email payment company. It merged with Peter Thiel’s Confinity to form PayPal–and avoid competition. They had the market to themselves for a long time because fraud, especially from Eastern Europe, was so rampant on early internet payment platforms. They solved the fraud problem and enjoyed an uncontested market, eventually selling for $1.5 billion to eBay .
Then Mr. Musk headed further into the future. He took the nine-figure payout from PayPal and pushed ahead with SpaceX, Tesla and Solar City. Literally his last $20 million went to Tesla in 2008. “I was tapped out. I had to borrow money for rent after that,” he later recalled.
. . .
[Google’s Larry] Page reportedly once told a venture capitalist, “You know, if I were to get hit by a bus today, I should leave all of it to Elon Musk.” He later explained to Charlie Rose he liked Mr. Musk’s idea of going to Mars “to back up humanity.” Good luck with that. But then again, I would love to see them try.

For the full commentary, see:
Andy Kessler. ”Elon Musk’s Uncontested 3-Pointers; What does the Tesla and SpaceX founder have in common with Stephen Curry?” The Wall Street Journal (Mon., Feb. 26, 2018): A15.
(Note: ellipsis, and bracketed words, added.)
(Note: the online version of the commentary has the date Feb. 25, 2018.)

Stronger Labor Market May Increase Productivity

(p. B3) . . . the provocative conclusion of new research from the McKinsey Global Institute, the in-house think tank of the consulting giant, . . . suggests we should change how we think about the advancements that make society richer over time. It implies that as the economy returns to full employment, an outburst of faster growth in productivity — and hence economic growth — is a real possibility.
. . .
For years, McKinsey researchers have tried to understand what drives productivity growth from the ground up. They’ve studied how innovations that enable a company to make more goods and services per hour of labor spread across the economy.
The latest wrinkle is that the researchers now believe that productivity growth depends not just on the supply side of the economy — what companies produce and what technologies they use to do it — but also significantly on the demand side. That is to say, productivity advancements don’t happen in a vacuum just because technology is available. They also happen because companies need to increase production to match demand for their goods, and a shortage, either of workers or of materials, forces them to think creatively about how to do so.
. . .
. . . consider how this dynamic might apply in the restaurant industry (or retail, or tourism).
The basic technology for self-serve kiosks has been around for years. But when the unemployment rate was at its post-crisis highs, employers could have their pick of good workers at relatively low prices. Now, with the jobless rate at 4.1 percent, good workers are harder to find. And, perhaps unsurprisingly, companies have been more open to installing technology that may have a significant upfront cost and require reworking how a restaurant is organized, but allow more sales without hiring more workers.

For the full commentary, see:
Neil Irwin. “Why Researchers Believe a Productivity Boom Is Now a Real Possibility.” The New York Times (Thursday, Feb. 22, 2018): B3.
(Note: ellipses added.)
(Note: the online version of the commentary has a date of Feb. 21, 2018, and has the title “The Economy Is Getting Hotter. Is a Productivity Boom Next?”)

The McKinsey report discussed above, is:
Remes, Jaana, James Manyika, Jacques Bughin, Jonathan Woetzel, Jan Mischke, and Mekala Krishnan. “Solving the Productivity Puzzle.” Report McKinsey Global Institute, Feb. 2018.

Regulations Threaten Precision Medicine Innovations Against Cancer

(p. A15) The federal government is threatening to limit treatment options for doctors fighting cancer.
. . .
At issue is whether reimbursements will be available to most physicians, hospitals and patients for a diagnostic technology known as next-generation sequencing. A cornerstone of the emerging field of precision medicine, NGS tests analyze molecular changes that occur in cancerous tumors and show up in biopsies.
. . .
Under the proposed policy, only one of hundreds of laboratories that currently offer NGS testing would meet all the new reimbursement requirements. The policy would in effect force clinicians and institutions to send all NGS testing to a single vendor, Foundation Medicine .
This is unfair to cancer patients. The proposal would result in a monopoly, allowing price manipulations, decreasing quality, and potentially contributing to market failure. It would turn the entire genomic-testing industry upside-down. The FDA is already unable to keep up with advances in precision medicine. Restricting access to cutting-edge molecular testing would stifle growth in precision medicine at approved testing sites nationwide. The limits could prevent desperately needed innovation, setting back progress in genomic testing and oncology by at least a decade.

For the full commentary, see:
Olivier Elemento. ”A New Regulatory Threat to Cancer Patients; Washington may impose needless limits on genetic testing.” The Wall Street Journal (Mon., Feb. 26, 2018): A15.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Feb. 25, 2018.)