Author: Art Diamond

“You Escaped China, but Now You’re Supporting Them”

(p. A6) HONG KONG — The tapioca pearls at Fred Liu’s bubble teahouse are springy and fresh, just like the fish balls at Elaine Lau’s noodle shop. But that is not the only reason customers flock to these eateries in Hong Kong’s bustling Causeway Bay shopping district.

Both are members of the so-called yellow economy, shops that openly support the democracy movement remaking Hong Kong as it strives to protect the freedoms differentiating the territory from the rest of China.

After seven months of street protests against Beijing’s assault on these liberties, Hong Kong is color-coded — and bitterly divided. The yellow economy refers to the hue of umbrellas once used to defend demonstrators against pepper spray and streams of tear gas. That is in contrast to blue businesses, which support the police.

. . .

As the protests gathered force last year, Rocky Siu watched as an orderly column of demonstrators, miles long, marched past one of his ramen restaurants. When the police cracked down, he opened his doors, offering half-price bowls of noodles and free saline solution to wash the tear gas from protesters’ eyes.

“I’m losing money, but that’s not the point,” he said. “We have to support our young people.”

Mr. Siu’s father was born in China and came to Hong Kong to seek a better life. But he owns a jewelry factory on the mainland and is, as Mr. Siu puts it, “deep blue.”

“I tell him, ‘I don’t understand. You escaped China, but now you’re supporting them,’” Mr. Siu said. “To me, it’s not yellow or blue. It’s black and white, right and wrong.”

For the full story, see:

Hannah Beech. “Hong Kong Businesses Taking Stands on Either Side of the Beijing Rift.” The New York Times (Monday, January 20, 2020): A6.

(Note: ellipsis added.)

(Note: the online version of the story has the date Jan. 19, 2020, and has the title “Yellow or Blue? In Hong Kong, Businesses Choose Political Sides.”)

A.I. Makes Surgeons More Efficient, but Does Not Replace Them

(p. B6) Brain surgeons are bringing artificial intelligence and new imaging techniques into the operating room, to diagnose tumors as accurately as pathologists, and much faster, according to a report in the journal Nature Medicine.

The new approach streamlines the standard practice of analyzing tissue samples while the patient is still on the operating table, to help guide brain surgery and later treatment.

The traditional method, which requires sending the tissue to a lab, freezing and staining it, then peering at it through a microscope, takes 20 to 30 minutes or longer. The new technique takes two and a half minutes. Like the old method, it requires that tissue be removed from the brain, but uses lasers to create images and a computer to read them in the operating room.

. . .

Some types of brain tumor are so rare that there is not enough data on them to train an A.I. system, so the system in the study was designed to essentially toss out samples it could not identify.

Over all, the system did make mistakes: It misdiagnosed 14 cases that the humans got right. And the doctors missed 17 cases that the computer got right.

“I couldn’t have hoped for a better result,” Dr. Orringer said. “It’s exciting. It says the combination of an algorithm plus human intuition improves our ability to predict diagnosis.”

In his own practice, Dr. Orringer said that he often used the system to determine quickly whether he had removed as much of a brain tumor as possible, or should keep cutting.

“If I have six questions during an operation, I can get them answered without having six times 30 or 40 minutes,” he said. “I didn’t do this before. It’s a lot of burden to the patient to be under anesthesia for that long.”

Dr. Bederson said that he had participated in a pilot study of a system similar to the one in the study and wanted to use it, and that his hospital was considering acquiring the technology.

“It won’t change brain surgery,” he said, “but it’s going to add a significant new tool, more significant than they’ve stated.”

For the full story, see:

Denise Grady. “Speedy and Unerring, A.I. Comes to the Operating Room.” The New York Times (Tuesday, January 7, 2020): B6.

(Note: ellipsis added.)

(Note: the online version of the story has the date Jan. 6, 2020, and has the title “A.I. Comes to the Operating Room.”)

Jobs Return to “Creative Destruction Parts of the Country”

(p. B5) “If you look, there are a heck of a lot of successful manufacturing parts of the country right now,” Kevin Hassett, the departing chairman of the White House Council of Economic Advisers, said in an interview. “But look at where they’re being created.”

Mr. Hassett drew a distinction between “creative destruction” parts of the country, where the Great Recession wiped out jobs but others sprung up to replace them, and “destruction-destruction” parts, where jobs have been slow to return. Recent factory job growth, he said, was “not necessarily disproportionately in the destruction-destruction places.”

For the full story, see:

Jim Tankersley. “Growth in Factory Jobs Skips Traditional Hubs.” The New York Times (Friday, June 14, 2019): B1 & B5.

(Note: the online version of the story has the date June 13, 2019, and has the title “In the Race for Factory Jobs Under Trump, the Midwest Isn’t Winning.”)

Japan Records Fewest Births Since 1874

(p. A6) Japan has 512,000 fewer people this year than last, according to an estimate released on Tuesday by the country’s welfare ministry. That’s a drop of more than the entire population of the city of Atlanta.

The numbers are the latest sign of Japan’s increasing demographic challenges.

Births in the country — which are expected to drop below 900,000 this year — are at their lowest figure since 1874, when the population was about 70 percent smaller than its current 124 million.

The total number of deaths, on the other hand, is increasing. This year, the figure is expected to reach almost 1.4 million, the highest level since the end of World War II, a rise driven by the country’s increasingly elderly population.

For the full story, see:

Ben Dooley. “Japan Shrank by 500,000 People in 2019, as Births Hit Lowest Point Since 1874.” The New York Times (Wednesday, December 25, 2019): A6.

(Note: the online version of the story has the date Dec. 24, 2019, and has the title “Japan Shrinks by 500,000 People as Births Fall to Lowest Number Since 1874.”)

Communist China Building “a Digital Totalitarian State”

(p. A1) ZHENGZHOU, China — China is ramping up its ability to spy on its nearly 1.4 billion people to new and disturbing levels, giving the world a blueprint for how to build a digital totalitarian state.

Chinese authorities are knitting together old and state-of-the-art technologies — phone scanners, facial-recognition cameras, face and fingerprint databases and many others — into sweeping tools for authoritarian control, according to police and private databases examined by The New York Times.

Once combined and fully operational, the tools can help police grab the identities of people as they walk down the street, find out who they are meeting with and identify who does and doesn’t belong to the Communist Party.

For the full story, see:

Paul Mozur and Aaron Krolik. “China’s Blueprint for a Digital Totalitarian State.” The New York Times (Wednesday, December 18, 2019): A1 & A10.

(Note: the online version of the story has the date Dec. 17, 2019, and has the title “A Surveillance Net Blankets China’s Cities, Giving Police Vast Powers.”)

Greta Thunberg “Brushed Off” Need to Know Economics

(p. A7) DAVOS, Switzerland — Greta Thunberg, the 17-year-old Swedish climate activist, spent this week inside the halls of power at the World Economic Forum, . . .

. . .

Speaking to reporters just before the march set off, Ms. Thunberg and four youth activists from Europe and Africa rebuked business and government leaders at the World Economic Forum for not taking climate action and warned that they would continue to press them to stop investing in fossil fuels. Those demands, Ms. Thunberg noted, “have been completely ignored.”

Asked about a suggestion by Treasury Secretary Steven Mnuchin that she learn economics in college before calling for divestment, Ms. Thunberg brushed off such criticisms as irrelevant. “If we care about that, we wouldn’t be able to do what we do,” she said.

For the full story, see:

Somini Sengupta. “Teenage Activist Joins Climate March on Last Day at Forum.” The New York Times (Saturday, January 25, 2020): A7.

(Note: ellipses added.)

(Note: the online version of the story has the date Jan. 24, 2020, and has the title “Greta Thunberg Joins Climate March on Her Last Day in Davos.”)

French Labor Law Reduces Firm Innovation

I heard an intriguing paper at the January 2020 AEA meetings in San Diego. It shows that a French labor market regulation discourages firm innovation. The abstract of the working paper version of the paper appears below.

We study the impact of labor regulation on innovation. We exploit the threshold in labor market regulations in France which means that when a firm reaches 50 employees, costs increase substantially. We show theoretically and empirically that the prospect of these regulatory costs discourages firms just below the threshold from innovating (as measured by patent counts). This relationship emerges when looking nonparametrically at patent density around the regulatory threshold and also in a parametric exercise where we examine the heterogeneous response of firms to exogenous market size shocks (from export market growth). On average, firms innovate more when they experience a positive market size shock, but this relationship significantly weakens when a firm is just below the regulatory threshold. Using information on citations we also show suggestive evidence (consistent with our model) that regulation deters radical innovation much less than incremental innovation. This suggests that with size-dependent regulation, companies innovate less, but if they do try to innovate, they “swing for the fence.”

The source of the abstract quoted above, is:

Aghion, Philippe, Antonin Bergeaud, and John Van Reenen. “The Impact of Regulation on Innovation.” 2019.

Clayton Christensen Wrote Well on Innovation

Clayton Christensen’s The Innovator’s Solution (co-authored with Michael Raynor) was packed with insights and examples on how entrepreneurs and incumbent firms innovate. He wrote several other thought-provoking and useful books, starting with his now-famous The Innovator’s Dilemma. Just a few days ago, I told one of my students from Africa that he should read Christensen’s latest book, which gives wonderful examples of how entrepreneurial innovation in developing countries can help them prosper.

This evening (Thurs., Jan. 24, 2020) I was discouraged to receive an email alert from the Wall Street Journal saying that Christensen died today.

A year or so ago, I sent him a late draft of my Openness to Creative Destruction, which references his work several times. He never responded. Maybe he already was too ill to look at it, or maybe he didn’t like it. I’ll never know. But either way, I thank him for all that his books taught me about innovation.

Christensen’s best book is:

Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

Christensen’s best-known book is:

Christensen, Clayton M. The Innovator’s Dilemma: The Revolutionary Book That Will Change the Way You Do Business. New York: Harper Books, 2000.

Christensen’s most recent book is:

Christensen, Clayton M., Efosa Ojomo, and Karen Dillon. The Prosperity Paradox: How Innovation Can Lift Nations out of Poverty. New York: HarperBusiness Press, 2019.

Incumbent Italian Firms Invest in Cronyism, Not Innovation

I heard an intriguing paper at the January 2020 AEA meetings in San Diego. It shows that, at least in Italy, big incumbent firms protect their position more through investment in cronyism than through investment in innovation. The abstract of the NBER working paper version of the paper appears below.

Do political connections affect firm dynamics, innovation, and creative destruction? We study Italian firms and their workers to answer this question. Our analysis uses a brand-new dataset, spanning the period from 1993 to 2014, where we merge: (i) firm-level balance sheet data; (ii) social security data on the universe of workers; (iii) patent data from the European Patent Office; (iv) the national registry of local politicians; and (v) detailed data on local elections in Italy. We find that firm-level political connections are widespread, especially among large firms, and that industries with a larger share of politically connected firms feature worse firm dynamics. We identify a leadership paradox: When compared to their competitors, market leaders are much more likely to be politically connected, but much less likely to innovate. In addition, political connections relate to a higher rate of survival, as well as growth in employment and revenue, but not in productivity – a result that we also confirm using a regression discontinuity design. We build a firm dynamics model, where we allow firms to invest in innovation and/or political connection to advance their productivity and to overcome certain market frictions. Our model highlights a new interaction between static gains and dynamic losses from rent-seeking in aggregate productivity.

The abstract quoted above is from:

Akcigit, Ufuk, Salome Baslandze, and Francesca Lotti. “Connecting to Power: Political Connections, Innovation, and Firm Dynamics.” NBER Working Paper #25136, National Bureau of Economic Research, Inc., Oct. 2018.