Stories of Heroic Entrepreneurs

The great idealists of our economy are not the socialists, but the heroic entrepreneurs of innovative dynamism. One of the goals of my book Openness to Creative Destruction, and some of my other writings, is to tell their stories to a wider audience. Gonzalo Schwarz has let me know that his Archbridge Institute is also telling some of these stories under the heading American Originals at:

Improved Stoves, Pushed by Social Entrepreneurs, Do Not Improve Health or Environment

(p. 80) Laboratory studies suggest that improved cooking stoves can reduce indoor air pollution, improve health, and decrease greenhouse gas emissions in developing countries. We provide evidence, from a large-scale randomized trial in India, on the benefits of a common, laboratory-validated stove with a four-year follow-up. While smoke inhalation initially falls, this effect disappears by year two. We find no changes across health outcomes or greenhouse gas emissions. Households used the stoves irregularly and inappropriately, failed to maintain them, and usage declined over time. This study underscores the need to test environmental technologies in real-world settings where behavior may undermine potential impacts.


Hanna, Rema, Esther Duflo, and Michael Greenstone. “Up in Smoke: The Influence of Household Behavior on the Long-Run Impact of Improved Cooking Stoves.” American Economic Journal: Economic Policy 8, no. 1 (Feb. 2016): 80-114.

Lack of Property Rights in Land Keep Chinese Farmers Poor

(p. A6) XIAOXIHE, China — Every year, the message is the same: the government will fix China’s left-behind countryside through a raft of reforms. This year was no different, with measures meant to help farmers move to cities, educate their children, and invest in improving their land.

But every year, the gap between village and city remains stubbornly wide. Many blame this on the fact that farmers are not allowed to own land, a policy that goes back to one of the founding decisions of the Communist revolution.

In Xiaoxihe, a rolling eastern Chinese region of rice paddies and fishponds, farmers speak of land ownership as something so improbable that it defies imagination.

Dai Jialiang, a 69-year-old farmer, grows rice and vegetables on a small plot of land his family leases from the government. That means that Dai’s family has made a modest living off toiling the land but their gains are limited.

“Ownership is not possible in China,” Mr. Dai said. “Socialism doesn’t allow that.”

. . .

The party has long argued that one of traditional China’s main problems was that land was concentrated in the hands of landlords. After taking power in 1949 it introduced a violent campaign that killed up to two million farmers labeled “landlords.” State ownership of land became a nonnegotiable policy and farmers had to work in state-run collectives.

What farmers in this area came up with in the late 1970s was a plan to break the collectives back into the old family plots of land. Ownership stayed with the state but farmers were allowed to farm their plots as they saw fit as long as they paid a tax, usually in grain, to the government. Anything else they produced was theirs.

Suddenly motivated, farmers set records in grain production, while opening up orchards, vegetable plots and fishponds. Starvation, always a risk during the Communists’ first 30 years in power, disappeared.

National leaders endorsed this system but made sure that land stayed in the state’s hands. Farmers eventually got 30-year contracts over their land. When that ran out about a decade ago, they were extended another 30 years.

. . .

According to popular accounts of Chinese economic history, the nearby village of Xiaogang is where the household-contract system began in 1978. There, a large museum features dioramas showing how farmers almost starved to death under the Communists until they secretly subverted their policies — the unwitting implication being that only civil disobedience can effect change.

For the full story, see:

Ian Johnson. “Barred From Owning Land, Chinese Farmers Miss Spoils of Growth.” The New York Times (Friday, September 27, 2019): A6.

(Note: ellipses added.)

(Note: the online version of the story was last updated on September 28 [sic], 2019, and has the title “Barred From Owning Land, Rural Chinese Miss Spoils of Country’s Success.”)

“These Guys Are Selling Things to Better Their Lives”

(p. A20) The colorful bottles have popped up every summer in black and Hispanic communities — from the bodegas of Washington Heights to the stoops of Fort Greene — since the early 1990s. On beach boardwalks, at neighborhood basketball courts and block parties, New Yorkers are drinking nutcrackers, boozy homespun cocktails made from a blend of alcohol and fruit juices.

But this year, the New York Police Department is cracking down on the illegal drinks and the vendors who sell them, vendors and customers said.

. . .

But sellers and customers who believe there is a crackdown are alarmed, saying vital financial lifelines are threatened and raising the issue of which infractions police choose to focus on and which communities are scrutinized.

“It’s just another way to target us,” Dee said. “If I don’t sell nutcrackers, I can’t make my rent. I don’t have a choice.”

Most every Thursday in the summer, Dee clocks out from her job as an exterminator with the city and begins work on her illegal private enterprise.

After spending $600 or so at the liquor store nearby, she will lug her ingredients — cases of vodkas, rums, tequilas and cognacs — to her two-bedroom public housing apartment and into a dim, cramped back room where she will get to work making batches of her best sellers like Tropical Punch, Henny Colada and the Fort Greene Lean.

Dee’s concoctions will be poured into dozens, sometimes hundreds, of stubby plastic bottles and peddled all weekend to her longtime customers: old-timers playing dominoes in Bedford-Stuyvesant, basketball tournament crowds at Gersh Park in East New York, neighbors and friends in her old Flatbush neighborhood. They will all be waiting for her, she said.

On a good weekend, Dee will earn around $1,400 from nutcracker sales, enough to cover her rent, which has risen nearly $700 since 2015, she said.

. . .

“They always trying to beat us down,” said Jay, another nutcracker seller who preferred that his last name be withheld. Jay said he decided to venture into the business this summer as a way to get his music management business off the ground.

“This is going to buy studio time for my artist,” he said, nodding to the cooler he wheeled down the Coney Island boardwalk at sunset. “Ice-cold water,” he said loudly to passers-by, followed by a softer, more subtle “(Nutcrackers.)”

“Ice cold water!”


“These guys are selling things to better their lives,” said Sandra Anguiz, 30, after buying a cream-soda-flavored nutcracker from Jay. “Why are police worried about that?”

For the full story, see:

Aaron Randle. “Cracking Down on the Sweet, Boozy Staple of a City Summer.” The New York Times (Saturday, August 17, 2019): A20.

(Note: ellipses added.)

(Note: the online version of the story has the same date as the print version, and has the title “Banned on the Beach? It’s Still Nutcracker Summer.” In the passages quoted above, the sometimes slightly longer online version is followed.)

Tesla’s Process Innovation May Be Low-Defect, Fast-Assembly

(p. A13) Tesla became a darling of government handouts, with tax credits and public funding galore. It quickly grew into a sales phenom with high prices but low volume. Then, this year, its production numbers started to match those of the other major manufacturers. How Mr. Musk achieved this—and whether he should be considered a visionary or a charlatan—is the subject of “Ludicrous: The Unvarnished Story of Tesla Motors,” by the automotive journalist Edward Niedermeyer.

. . .

The book hits its stride when the author details Mr. Musk’s attempts to revolutionize the way cars are built. DeLorean and others faltered due to their inability to roll out large numbers of vehicles at a decent level of quality. Likewise the assembly line has been Tesla’s biggest obstacle. For a generation, automakers have cleaved to Toyota’s system of production, which emphasizes reducing waste and defects, slowing down the assembly line to achieve these goals. Mr. Musk, in contrast, feels Teslas should be assembled with a fast-moving line, deploying robots where other carmakers have employed workers.

Many observers bet that fast assembly won’t work. But this year Tesla delivered an impressive 158,000 cars to customers in the first two quarters, about the same number of Lexus models sold in the U.S. during that same period. Low-defect assembly was the major innovation of the automotive industry a generation ago; fast-line assembly may be the next. If Tesla’s fast-produced vehicles turn out to be reliable, Mr. Musk will deserve plaudits.

. . .

The portrait of Elon Musk that emerges from this book is one of a social-media obsessive who is constantly overpromising, playing the role of the self-sufficient business person while relying on government favors. Still, Tesla facilities produce lots of actual cars, which is more than what most other one-man marques have achieved. The accomplishment may not be as grand as Mr. Musk would like us to believe: He couldn’t have built his cars without subsidies from taxpayers who cannot afford Teslas and were given no choice in funding playthings for the rich. But his is an achievement, nonetheless.

For the full review, see:

Gregg Easterbrook. “BOOKSHELF; A Revolutionary Old Product.” The Wall Street Journal (Wednesday, Aug. 28, 2019): A13.

(Note: ellipses added.)

(Note: the online version of the review has the date Aug. 27, 2019, and has the title ” BOOKSHELF; ‘Ludicrous’ Review: A Revolutionary Old Product.”)

The book under review is:

Niedermeyer, Edward. Ludicrous: The Unvarnished Story of Tesla Motors. Dallas, TX: BenBella Books, Inc., 2019.

Regenerative Farming Practices “Could Soak Up Half to 100% of All the Carbon Dioxide Emitted”

(p. A2) AINSWORTH, Iowa—What if there was a way to combat climate change that didn’t require technological breakthroughs, carbon taxes or eliminating all fossil fuels?

Such a solution might lie here in an Iowa cornfield beneath the feet of Mitchell Hora, a seventh-generation farmer. Mr. Hora experiments with “regenerative growing practices” that improve soil health, boost yields, reduce water and fertilizer use, and carry a significant collateral benefit: they sequester in the soil carbon released from burning fossil fuels.

Mr. Hora could soon be rewarded for providing this social benefit. Indigo Ag Inc., a Boston-based company specializing in agricultural technology and management, is setting up a market for carbon credits. Companies and consumers with voluntary or compulsory commitments to reduce their carbon footprint can, rather than reduce emissions themselves, pay farmers to do it for them. Via the Indigo Carbon marketplace, they can pay farmers like Mr. Hora $15 to sequester one metric ton of carbon dioxide in the soil.

. . .

David Perry, Indigo’s chief executive, is almost messianic about the potential: “We could soak up half to 100% of all the carbon dioxide emitted since the industrial revolution,” or roughly one trillion tons.

The Rodale Institute, a think tank that promotes organic agriculture and has partnered with Indigo, cites trials that suggest through regenerative growing practices, an acre of agricultural land can sequester one to 2.6 tons of carbon dioxide a year. Extrapolating to the world, that equals the about 37 billion metric tons of carbon dioxide released globally through fossil fuel use each year.

For the full commentary, see:

Greg Ip. “CAPITAL ACCOUNT; Carbon Emissions Get a Fix on the Farm.” The Wall Street Journal (Saturday, Sept. 12, 2019): A2.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date Sept. 11, 2019, and has the title “CAPITAL ACCOUNT; How to Get Rid of Carbon Emissions: Pay Farmers to Bury Them.”)

Rent Control Reduces Landlord Investment in Apartments

(p. A11) New York Gov. Andrew Cuomo signed a law in June expanding the state’s damaging and counterproductive rent regulations.

. . .

In response to the new law, New York property owners immediately began making decisions that, when played out across tens of thousands of apartments, will add up to a disaster for everyone—not only landlords.

I spoke with one of those landlords over breakfast not long ago. He owns a medium-size portfolio of older buildings in middle- and lower-middle-class New York neighborhoods. Among his properties is a large building in northern Manhattan. For more than 40 years, one of the building’s apartments—a two-bedroom—was occupied by a tenant paying about $800 a month.

. . .

The tenant recently died. After four decades of wear and tear, the apartment needs some work.

. . .

A bathroom upgrade costs about $10,000 and a kitchen about $15,000. My friend could have invested another $10,000 or so to repair damage, replace doors and finishes, and upgrade electrical circuits. Those investments could have brought the rent to about $1,700. The apartment’s next tenant could have moved into an improved, not fancy, two-bedroom with a somewhat below-market lease, still protected from increases by rent stabilization.

The new law ensures that won’t happen. It gives property owners no vacancy-bonus increase. For every $15,000 my friend spends on improvements, he can raise the rent by only $83.33 a month. Even that shrunken rent increase will go away after 30 years. If he makes any investment in the apartment exceeding $15,000 in any 15-year period, it will be money he isn’t legally allowed to recoup. He won’t be allowed to raise the rent further. Whoever lucks into that apartment will pay only about $900 a month, half the market rate.

. . .

Here come the unintended consequences: My friend now says he won’t invest a penny in the apartment, because doing so makes no economic sense. Instead, he plans to hold it vacant and wait for better days. Maybe Albany will figure out it made a huge mistake and reverse course. Maybe the courts will recognize that rent regulation represents a taking of private property without compensation and violates the Constitution. Maybe my landlord friend will accumulate adjacent vacant apartments and combine or reconfigure them.

For the full commentary, see:

Joshua Stein. “CROSS COUNTRY; How to Kill a Housing Market.” The Wall Street Journal (Saturday, Sept. 28, 2019): A11.

(Note: ellipses added.)

(Note: the online version of the commentary has the date Sept. 27, 2019, and has the same title as the print version.)

Elizabeth Warren Started Out as a Student of Henry Manne’s Libertarian Law and Economics Ideas

(p. A1) Never one to shy away from a fight, Elizabeth Warren had found a new sparring partner. She had only recently started teaching at the University of Texas School of Law, but her colleague Calvin H. Johnson already knew her well enough to brace for a lively exchange as they commuted to work.

Indeed, on this morning in 1981, Ms. Warren again wanted to debate, this time arguing on the side of giant utilities over their customers.

Her position was “savagely anti-consumer,” Mr. Johnson recalled recently, adding that it wasn’t unusual for her to espouse similar pro-business views on technical legal issues.

Then something changed. He calls it Ms. Warren’s “road to Damascus” moment.

“She started flipping — ‘I’m pro-consumer,’” Mr. Johnson said.

That something, as Ms. Warren often tells the story, was her deepening academic research into consumer bankruptcy, its causes, and lenders’ efforts to restrict it. Through the 1980s, the work took her to courthouses across the country. There, she said in a recent interview, she found not only the dusty bankruptcy files she had gone looking for but heart-wrenching scenes she hadn’t imagined — average working Americans, tearful and humiliated, admitting they were failures:

(p. A10) “People dressed in their Sunday best, hands shaking, women clutching a handful of tissues, trying to stay under control. Big beefy men whose faces were red and kept wiping their eyes, who showed up in court to declare themselves losers in the great American game of life.”

. . .

The revelations from her bankruptcy research, by her account, became the seeds of her worldview, laid out in her campaign plans for everything from a new tax on the wealthiest Americans to a breakup of the big technology companies.

. . .

In 1979, Ms. Warren recruited her parents from her native Oklahoma to her home in the Houston suburbs to help babysit her two young children.

Then a professor at the University of Houston, she would be spending several weeks at a luxury resort near Miami, one of 22 law professors selected to study an increasingly popular discipline known as “law and economics.’’ One of its central ideas is that markets perform more efficiently than courts.

Mr. Johnson, Ms. Warren’s former Texas commuting partner, believes that it was an important influence on her early thinking.

“Before Liz converted, she came to us from the decidedly anti-government side of law and economics,” he said.

The summer retreat was colloquially known as a “Manne camp,” after its organizer, the libertarian legal scholar Henry G. Manne. With financial support from industry and conservative foundations, Mr. Manne had formed a Law and Economics Center at the University of Miami. (He would later move operations to Emory University and then to George Mason University.)

The mission of the retreat was to spread the gospel of free-market microeconomics among law professors. One participant, John Price, a former dean of the law school at the University of Washington, described it as “sort of pure proselytizing on the part of dedicated, very conservative law and economics folks,” with an emphasis on an anti-regulatory agenda. One faculty member, he recalled, suggested eliminating the Consumer Product Safety Commission.

. . .

While some in the group have said Ms. Warren expressed skepticism at the libertarian ideology, Ms. Blumberg remembers someone very much developing the early stages of her career, who was “far more captivated than I” with the theories.

. . .

Ms. Warren . . . wrote to Mr. Manne in 1981, attaching a copy of her latest published article. She was sending him one article a summer, she wrote, and each “increasingly reflects my time at LEC.”

. . .

“This is really hard-core law & econ analysis,” Todd J. Zywicki, a law professor at George Mason who formerly served as executive director of the Manne Center, wrote in an email. “If you had given me this article with the author anonymized and asked me who wrote it, I would have answered that it was one of the leading scholars in the law & economics of commercial and contract law. Never, in a million years, would I have thought this article was written by EW.”

For the full story, see:

Stephanie Saul. “THE LONG RUN; Warren’s Awakening to a World of Desperation.” The New York Times (Monday, Aug. 26, 2019): A1 & A10.

(Note: ellipses added.)

(Note: the online version of the story has the same date as the print version, and has the title “THE LONG RUN; The Education of Elizabeth Warren.”)

Netflix Flourished by “Unplanned” Leaps

(p. A17) Starting a business is tough enough. Why would any sane person choose to start a business in a dying industry?

One answer to that question can be found in “That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea,” a charming first-person account of the early days of one of the most successful tech startups ever.

. . .

Most of Netflix’s early business came from sales of DVDs, not rentals. The struggling company even considered selling to Amazon in 1998, but passed on the offer.

In desperation, Netflix tested monthly subscriptions. To its surprise, customers eagerly forked over their credit-card details. The little company turned on a dime, dropping sales and one-off rentals almost immediately. “If you had asked me on launch day to describe what Netflix would eventually look like, I never would have come up with a monthly subscription service,” Mr. Randolph claims. Netflix’s innovation with a subscription model would point many other internet-based companies to a reliable source of revenue.

Another unplanned leap soon followed: a predictive algorithm that offered to each user individualized recommendations based on reviews by customers with similar preferences. This feature helped hook customers, but it had a less obvious benefit for Netflix: By directing the user to a less popular film that happened to be in Netflix’s inventory, it allowed the company to buy fewer of the most popular DVDs. Yet profits were elusive. Video-store giant Blockbuster, unconvinced about the online business model, turned down a chance to buy the company in 2000, and the dot-com meltdown short-circuited a public offering. In September 2001, Netflix had its first layoffs, cutting costs and steadying the ship.

Mr. Randolph himself left in 2003, not long after Netflix finally went public. By then, he says, he had figured out that he loved starting companies, not running them. “I missed the late nights and early mornings, the lawn chairs and card tables. I missed the feeling of all hands on deck, and the expectation that every day you’d be working on a problem that wasn’t strictly tied to your job description,” he writes. The chaos of a startup enthralls him. A company with hundreds of employees and the demands of quarterly reports to investors is not his thing.

For the full review, see:

Marc Levinson. “BOOKSHELF; Streaming Ahead.” The Wall Street Journal (Monday, Sept. 23, 2019): A17.

(Note: ellipsis added.)

(Note: the online version of the review has the date Sept. 22, 2019, and has the title “BOOKSHELF; ‘That Will Never Work’ Review: Streaming Ahead.”)

The book under review is:

Randolph, Marc. That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea. New York: Little, Brown and Company, 2019.

STEM Skills Are Quickly Obsolete

(p. B8) In a recent working paper with a Harvard doctoral student, Kadeem Noray, I calculated how much the skills required for different jobs changed over time. Help-wanted ads for jobs like software developer and engineer were more likely to ask for skills that didn’t exist a decade earlier. And the jobs of 10 years ago often required skills that have since become obsolete. Skill turnover was much higher in STEM fields than in other occupations.

We can also see this by looking at changes in college course catalogs. One of the largest and most popular courses in the Stanford computer science department is CS229 — Machine Learning, taught by the artificial intelligence expert and entrepreneur Andrew Ng. This course did not exist in its current form until 2003, when Professor Ng taught it for the first time with 68 students, and very little like it existed anywhere on college campuses 15 years ago. Today, the machine learning courses at Stanford enroll more than a thousand students.

. . .

Liberal arts advocates often argue that education should emphasize the development of the whole person, and that it is much broader than just job training. As an educator myself, I agree wholeheartedly.

But even on narrow vocational grounds, a liberal arts education has enormous value because it builds a set of foundational capacities that will serve students well in a rapidly changing job market.

For the full commentary, see:

David Deming. “Engineers Start Fast, but Poets Can Catch Up.” The New York Times, SundayBusiness Section (Sunday, September 22, 2019): B8.

(Note: ellipsis added.)

(Note: the online version of the commentary was last updated on Oct. [sic] 1, 2019, and has the title “In the Salary Race, Engineers Sprint but English Majors Endure.”)

The working paper referred to above, is:

Deming, David J., and Kadeem L. Noray. “Stem Careers and Technological Change.” National Bureau of Economic Research, Inc, NBER Working Paper # 25065, June 2019.

Tropical Socialist Paradise Rations Basic Food Items

(p. A7) Cuba will ration sales of basic goods, officials said, as tighter U.S. sanctions and the economic implosion of key ally Venezuela puts further pressure on the Communist regime to import food staples.

Commerce Minister Betsy Díaz on Friday [May 10, 2019] said the government would ration items including eggs, cooking oil, chicken, sausage and soap amid widespread shortages that have caused anxiety and panic buying.

Cuban officials blame the shortages on the Trump administration’s hardening of the trade embargo, but economists say the island’s economy has also been hit hard by reduced shipments of subsidized oil from Venezuela. The island’s agriculture sector has long been inefficient, some analysts said.

The rationing plans come as the country’s Cuba’s authoritarian regime cracks down on civil-society groups. Over the weekend, security officers blocked an unauthorized parade in Havana by gay-rights activists. Several activists were detained, Cubans said on social media.

Cuban officials acknowledged that the government had failed to meet production targets for food staples including eggs and pork, and said limits will be put on the amount of chicken and other products individuals could purchase. They urged Cubans to avoid panic buying.

For the full story, see:

José de Córdoba. “Cuba to Ration Sales of Basic Food Items.” The Wall Street Journal (Monday, May 13, 2019): A7.

(Note: bracketed date added.)

(Note: the online version of the story has the date May 12, 2019, and has the title “Cuba Plans to Ration Sales of Basic Food Items.”)