Author: Art Diamond

Why Most Economists Oppose the Gas Tax Holiday

(p. A31) Most economists oppose the Clinton-McCain gas tax holiday because they can’t see how consumers will benefit. In fact, “most” is an understatement; when challenged to name one economist willing to back her plan, Mrs. Clinton’s response was to disparage the whole profession.
Why are economists so opposed? In the short run, the supply of gasoline is basically fixed; it takes a while to build a new refinery. The demand for gasoline, in contrast, is more responsive to price; we’re already seeing greater use of public transportation and brisk sales of fuel-efficient cars. When you combine fixed supply with flexible demand, it’s suppliers, not demanders, who pocket the tax cut. That’s Econ 101.
. . .
When the public rejects the mundane explanations for high gas prices — big boring facts like rapid Asian growth — politicians aren’t going to correct them. The best we can expect is for Washington to try to channel the public’s misconceptions in relatively harmless directions. We could do a lot worse than the gas tax holiday; in fact, we usually do.

For the full commentary, see:
BRYAN CAPLAN. “The 18-Cent Solution.” The New York Times (Thurs., May 8, 2008): A31.
(Note: ellipsis added.)

For Happiness, “Income Does Matter”

SatisfactionPerCapitaGDPgraph.jpg Source of graph: online version of the NYT article quoted and cited below.

(p. C7) . . . , Betsey Stevenson and Justin Wolfers argue that money indeed tends to bring happiness, even if it doesn’t guarantee it. They point out that in the 34 years since Mr. Easterlin published his paper, an explosion of public opinion surveys has allowed for a better look at the question. “The central message,” Ms. Stevenson said, “is that income does matter.”
To see what they mean, take a look at the map that accompanies this column. It’s based on Gallup polls done around the world, and it clearly shows that life satisfaction is highest in the richest countries. The residents of these countries seem to understand that they have it pretty good, whether or not they own an iPod Touch.
If anything, Ms. Stevenson and Mr. Wolfers say, absolute income seems to matter more than relative income. In the United States, about 90 percent of people in households making at least $250,000 a year called themselves “very happy” in a recent Gallup Poll. In households with income below $30,000, only 42 percent of people gave that answer. But the international polling data suggests that the under-$30,000 crowd might not be happier if they lived in a poorer country.
. . .
Economic growth, by itself, certainly isn’t enough to guarantee people’s well-being — which is Mr. Easterlin’s great contribution to economics. In this country, for instance, some big health care problems, like poor basic treatment of heart disease, don’t stem from a lack of sufficient resources. Recent research has also found that some of the things that make people happiest — short commutes, time spent with friends — have little to do with higher incomes.
But it would be a mistake to take this argument too far. The fact remains that economic growth doesn’t just make countries richer in superficially materialistic ways.
Economic growth can also pay for investments in scientific research that lead to longer, healthier lives. It can allow trips to see relatives not seen in years or places never visited. When you’re richer, you can decide to work less — and spend more time with your friends.
Affluence is a pretty good deal. Judging from that map, the people of the world seem to agree. At a time when the American economy seems to have fallen into recession and most families’ incomes have been stagnant for almost a decade, it’s good to be reminded of why we should care.

For the full commentary, see:
DAVID LEONHARDT. “Economic Scene; Money Doesn’t Buy Happiness. Well, on Second Thought . . . .” The New York Times (Weds., April 16, 2008): C1 & C7.
(Note: ellipses in text added; ellipsis in title in original; the title in the online version was “Economic Scene; Maybe Money Does Buy Happiness After All.” )

SmileyMoneyFace.jpg

Source of graphic: online version of the NYT article quoted and cited above.

United States Making More Output with Less Physical Input: An Almost Lighter Economy


(p. 492) The long-standing trend away from value produced by manual labor and natural resources and toward the intangible value-added we associate with the digital econnomy can be expected to continue. Today it takes a lot less physical material to produce a unit of output than it did in generations past. Indeed, the physical amount of materials and fuels either consumed in the production of output or embodied in the output has increased very modestly over the past half century. The output of our economy is not quite literally lighter, but it is close.
Thin fiber-optic cable, for instance, has replaced huge tonnages of copper wire. New architectural, engineering, and materials technologies have enabled the construction of buildings enclosing the same space with far less physical material than was required fifty or one hundred years ago. Mobile phones have not only downsized but also morphed into multipurpose communication devices. The movement over the decades toward production of services that require little physical input has also been a major contributor to the marked rise in the ratio of constant dollars of GDP to tons of input.



Source:
Greenspan, Alan. The Age of Turbulence: Adventures in a New World Economic Flexibility. New York: Penguin Press, 2007.
(Note: italics in original.)

Franklin Roosevelt Exposed in The Forgotten Man

ForgottenManBK.jpg

Source of book image: http://blog.syracuse.com/shelflife/forgotten.jpg

Amity Shlaes’s new history of the Great Depression is at once depressing and encouraging. It is depressing in showing how vulnerable human progress is to the threat from a dishonest, slick orator, who has not a clue about how the economy works. It is encouraging in that it shows so clearly that the length and depth of the Great Depression was due to easily avoidable mistakes in policy, rather than due to some fundamental flaw in capitalism, as has occasionally been claimed.
Although the book does not shy away from pointing out the flaws of Coolidge, Hoover and Willke, it mainly shows how F.D.R.’s routine whimsical policy reversals and double-dealings, alienated not only his original opponents, but many of his early friends and allies.
The New Deal policies to seize business profits, reduced business incentives to take risks: if the risks turned out badly, the business would lose the investment, while if the risks turned out well, the profits would be taxed away by the federal government.
In addition, the sheer unpredictability of New Deal policies further led the prudent to delay investments, thereby further impeding recovery.
The book is well-written, and should be equally well-read.

The reference for the book is:
Shlaes, Amity. The Forgotten Man: A New History of the Great Depression. New York: HarperCollins, 2007.

“Nature” Article Forecasts Cooler Europe and North America Over Next Decade

The journal Nature (along with the journal Science) is often viewed as one of the two most prestigious journals in science. The NYT article below reports that a recent Nature article forecasts that temperatures in Europe and North America will be cooler over the next decade.
After the portion quoted below, the NYT article goes on to reassure global warming true-believers that a decade of cooling would in no way be evidence against the global warming maintained hypothesis.

(p. A10) After decades of research that sought, and found, evidence of a human influence on the earth’s climate, climatologists are beginning to shift to a new and similarly daunting enterprise: creating decade-long forecasts for climate, just as meteorologists routinely generate weeklong forecasts for weather.
One of the first attempts to look ahead a decade, using computer simulations and measurements of ocean temperatures, predicts a slight cooling of Europe and North America, probably related to shifting currents and patterns in the oceans.
The team that generated the forecast, whose members come from two German ocean and climate research centers, acknowledged that it was a preliminary effort. But in a short paper published in the May 1 issue of the journal Nature, they said their modeling method was able to reasonably replicate climate patterns in those regions in recent decades, providing some confidence in their prediction for the next one.

For the full story, see:
ANDREW C. REVKIN. “Scientists Work on Decade-Based Forecast for the Climate.” The New York Times (Thurs., May 1, 2008): A10.

Will Smith’s ‘I Am Legend’ Performance Earns the Academy Award that Matters

SmithWill_I_Am_Legend.jpg

Will Smith in I Am Legend. Source of photo: http://blogs.bet.com/news/newsyoushouldknow/?p=1398

Will Smith’s remake of Charleton Heston’s The Omega Man, is a pretty good movie. It shows a lone scientist struggling to cure a terrible disease in a world where he has lost almost everything that he valued. The Will Smith character exemplifies the motto of the marines: semper fi.
But I think I still like the Heston version a bit better, even though its special effects are dated, and Heston may have been a bit old for the role.
Why, then? After some thought, I think there is one main reason I like the Heston version better: the villains in The Omega Man, have ideas, while the villains in I Am Legend are subhuman, idealess vampires. The battle of good against evil in The Omega Man is both physical and intellectual, and that makes it easier to care more deeply about the outcome.
Still, I Am Legend is a good movie, showing a heroic man’s lonely struggle to remain true to his mission.
(And his canine companion should have received some sort of award too.)

(p. 2E) West Point, N.Y. (AP) — Will Smith wasn’t nominated for an Oscar this year, but his role in “I Am Legend” has earned a different “academy” award — from the cadets at the U.S. Military Academy.
Smith was named the first winner of the Cadet Choice Movie Award, de­signed to honor the character that best per­sonifies West Point leadership qualities on the silver screen.

For the full story, see:
“People; Cadets vote Will Smith a winner.” Omaha World-Herald (Mon., Feb. 25, 2008): 2E.

Creative Destruction Brings Triumph of Brain Over Brawn in the Labor Market

(p. 435) . . . , the inexorable growth in the proportion of our GDP that is conceptual, especially technological, has increased the value of intellectual power relative to the value of human brawn many times over many generations. I am old enough to remember when physical prowess on the job was the source of legend and reverence. A large statue of Paul Bunyan, the mythical logger, still oversees the northern Minnesota lake country. Stevedores of a century ago were extolled for their brute strength. Today, the activities once carried out by stevedores are often run by young women at a computer console.

Source:
Greenspan, Alan. The Age of Turbulence: Adventures in a New World Economic Flexibility. New York: Penguin Press, 2007.

Freeing Medical Entrepreneurship Could Speed Cures

HaroldTomScyFIX.jpg

Medical entrepreneur Tom Harold.    Source of photo:   http://www.scyfix.org/management.php

(p. 1D) ScyFix, a Chanhassen, Minn., startup, has developed a device it claims treats diseases such as glaucoma and macular degeneration by shooting electric currents into the eye. The company, which is conducting clinical trials in India and the United States, hopes to sell the first device approved by the Food and Drug Administration designed to restore eyesight.
“To me, this is the pacemaker for the eye,” said Dr. Darrell DeMello, ScyFix president and a former executive at Boston Scientific Corp.
ScyFix hopes to eventually raise $60 million to $70 million to finish its clinical trials.
. . .
(p. 2D) Thomas Harold first came up with the idea for ScyFix in 2002. An Internet entrepreneur and a former executive at General Mills, Harold became interested in studies that showed electricity could restore sight. Drugs, however, could only slow the effects of some diseases.
. . .
Specifically, the studies showed electricity could stimulate the production of neurotrophins, a family of proteins that can instruct optic nerve, retinal neurons and photoreceptor cells not to die. In addition, neuromodulation can also repair cell membranes, allowing cells to absorb nutrients, release wastes, improve blood flow to the eye and rewire faulty nerve connections.
Working with doctors and engineers, Harold, who has no medical background, developed a device that releases low-intensity electric currents into the eyelids through electrodes. A complex mathematical equation programmed into the device controls the amount and frequency of the electricity. Patients can administer the treatment at home twice a day for 20 minutes.
Harold says he is encouraged by the results so far: Since 2002, the device has halted progression of diseases in 95 percent of the 1,000 patients tested in 29 countries, according to ScyFix.
“Everything stopped getting worse,” Harold said. “That was a win in itself.”
In addition, 80 percent of the patients reported vision improvement. There were no side effects, the company said.

For the full story, see:
Lee, Thomas (The Star Tribune). “‘Pacemaker’ for eyes shows initial promise.” Omaha World-Herald (Sunday, March 9, 2008): 1D & 2D.
(Note: ellipses added.)

Below I have pasted a couple of paragraphs from the ScyFIX web site. Note that Europeans are free to try the therapy, if they so desire. But citizens of the United States are not free to try the therapy, due to the regulations of the Food and Drug Admininstration (FDA) of the U.S. government.

Buy ScyFIX 600 and Accessories on-line!
Welcome to ScyFIX international web shop where you can order products, choose payment method, including a secure on-line credit card payment service (SSL), and check your delivery status on-line. Buying on-line is safe and easy and you will be guided all the way. All prices are in € (Euro). Place your order and your credit card company will convert the amount in € to your own currency. We accept Visa, Master Card, EuroCard and most bank cards connected to VISA or Master Card. Follow the instructions to take you through the pages, and then onto a secure site in which you will input your credit card and shipping details. When bank authorization has been attained, you will get a confirmation on-line, as well as a confirming e-mail. If at any stage you wish to change your order, just click the “Remove”-button.
Please note that ScyFIX can not ship devices to US addresses, until the ongoing FDA trials have resulted in an approval to market the product in the USA. US customers who mistakenly order and pay for a therapy kit over the web, will be contacted and refunded. However, ScyFIX will deduct 100€ (Euros) covering banking fees and handling costs. If you are a US resident and want to know more about our therapy, please send an inquiry by e-mail to our European office support@scyfix.org, or fill in your personal information in our Clinical Trial & Purchase Interest Form by clicking here www.scyfix.org/clinical_trial_form.htm.

The paragraphs were accessed on 3/9/08 from:
http://www.scyfix.org/shop/

Have You Hugged Your Venture Capitalist Today?

JobsHugsDoerr.jpg

“Apple’s chief executive, Steven P. Jobs, left, and the venture capitalist John Doerr at Apple headquarters in Cupertino, Calif.” Source of caption and photo: online version of the NYT article cited below.

(p. C3) CUPERTINO, Calif. — Steven P. Jobs, Apple’s chief executive, is hoping to expand the iPhone’s appeal by luring software developers to create programs for it.
John Doerr, the venture capitalist, is adding an incentive: his firm is putting up $100 million to invest in the work of those programmers.
At an event Thursday at Apple headquarters, Mr. Jobs announced a low-cost software development kit that outside programmers can use to create programs for the iPhone, much as they now write the vast majority of the programs created for the Macintosh. Until now, iPhones have officially been able to run only the limited assortment of applications that Apple includes. (Some buyers have modified the phones to add unauthorized software.)
“We’re very excited about this,” said Mr. Jobs, who also announced that the company was adding features to make the iPhone more appealing to business users. “We think a lot of people, after understanding where we are going, are going to want to become an iPhone developer.”
Sharing the stage with Mr. Jobs, Mr. Doerr announced that his firm, Kleiner Perkins Caufield & Byers, had established a $100 million venture capital fund for iPhone entrepreneurs. Called the iFund, it is the largest fund the company has created for a specific technology.
“The potential for iPhone is huge,” Mr. Doerr said.

For the full story, see:
LAURIE J. FLYNN. “Apple to Encourage iPhone Programmers.” The New York Times (Fri., March 07, 2008): C3.

Nanotechnology Extends the Life of Moore’s Law

EdelsteinDaniel-IBM.jpg “Daniel Edelstein of I.B.M. Research is leading a team’s work in the use of self-assembling nanotechnology.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 4) Until now, as chips became smaller, they also became faster in about the same proportion. It’s still true for transistors, but it’s no longer true for the wires used to connect transistors — and that slows performance gains. Daniel Edelstein, a program manager and fellow at I.B.M. Research, says, “We’re running out of steam.”
Mr. Edelstein is leading a team of researchers from inside and outside I.B.M. in developing a new way to solve the problem: using “self assembling” nanotechnology to make better insulators, raising performance. In this case, self-assembly involves creating so-called airgaps, vacuums a few nanometers wide that keep the billions of tiny copper wires in a chip from touching one another, instead of putting down a layer of insulating material and trying to align it effectively at the nanoscale. It’s more efficient, and it means that I.B.M. won’t need to spend $50 million on photolithographic equipment.
. . . While the technique is not quite done being tested, John E. Kelly III, I.B.M.’s senior vice president for research, says that “there is no question in our minds this is going to work,” and that I.B.M. will move to it by 2009, first for an existing high-end processor or a next-generation chip, then across its fabs.
Mr. Kelly says Mr. Edelstein has a “unique” ability to solve problems and work across the company to commercialize new technologies. In the last decade, he has led two other important breakthroughs, most notably the use of copper for the wires inside chips, replacing aluminum.
Each time, Mr. Edelstein has done it by working with a small group of two or three scientists to explore out-of-the-mainstream approaches to problems. He also goes beyond research, getting to know the manufacturing team to help him understand what it takes to get a novel technique into I.B.M.’s existing manufacturing process.

For the full story, see:
MICHAEL FITZGERALD. “PROTOTYPE; Trying to Put New Zip Into Moore’s Law.” The New York Times Company, SundayBusiness section (Sun., February 24, 2008): 4.
(Note: ellipsis added.)

Hoosiers Were Right to Be Behind the Times

I am a Hoosier by birth and upbringing, and I am not ashamed to admit it, in spite of the fact that “hoosier” is a pejorative in some circles.
Until recently, in Indiana we swam against the tide, in rejecting Daylight Savings Time. It never made sense to me that in order to take advantage of sunlight, the government needed to mandate that the clocks be changed twice a year.
Why couldn’t those who want to use the hours of sunlight differently, simply adjust their own schedules, for example, by getting up earlier or later?
Well the article quoted below, suggests that us Hoosiers may have been wiser than we knew.

(p. D1) For decades, conventional wisdom has held that daylight-saving time, which begins March 9, reduces energy use. But a unique situation in Indiana provides evidence challenging that view: Springing forward may actually waste energy.
Up until two years ago, only 15 of Indiana’s 92 counties set their clocks an hour ahead in the spring and an hour back in the fall. The rest stayed on standard time all year, in part because farmers resisted the prospect of having to work an extra hour in the morning dark. But many residents came to hate falling in and out of sync with businesses and residents in neighboring states and prevailed upon the Indiana Legislature to put the entire state on daylight-saving time beginning in the spring of 2006.
Indiana’s change of heart gave University of California-Santa Barbara economics professor Matthew Kotchen and Ph.D. student Laura Grant a unique way to see how the time shift affects energy use. Using more than seven million monthly meter readings from Duke Energy Corp., covering nearly all the households in southern Indiana for three years, they were able to compare energy consumption before and after counties began observing daylight-saving time. Readings from counties that had already adopted daylight-saving time provided a control group that helped them to adjust for changes in weather from one year to the next.
Their finding: Having the entire state switch to daylight-saving time each year, rather than stay on standard time, costs Indiana households an additional $8.6 million in electricity bills. They conclude that the reduced cost of lighting in afternoons during daylight-saving time is more than offset by the higher air-conditioning costs on hot afternoons and increased heating costs on cool mornings.
“I’ve never had a paper with such a clear and unambiguous finding as this,” says Mr. Kotchen, who presented the paper at a National Bureau of Economic Research conference this month.

For the full story, see:
JUSTIN LAHART. “Daylight Saving Wastes Energy, Study Says.” The Wall Street Journal (Weds., February 27, 2008): D1 & D4.