Author: Art Diamond

Global Warming May Give U.S. Access to Big Deposits of Oil, Gas and Minerals

 

   The icebreaker Healy finished a new survey of the seafloor off the northern coast of Alaska.  Source of photo:  online version of the NYT article quoted and cited below.

 

(p. A16)  A new survey by American oceanographers of the seafloor north of Alaska, completed last month aboard the Coast Guard icebreaker Healy, provides fresh evidence that the United States has much at stake in the region. The sonar studies found hints that thousands of square miles of additional seafloor could potentially be under American control. That floor might yield important deposits of oil, gas or minerals in coming decades, government studies have concluded.

So far did the sea ice pull back this summer that the expedition was able to scan the bottom several hundred miles farther north than in previous surveys, said the project’s director, Larry Mayer, an oceanographer at the University of New Hampshire. The team found long sloping extensions 200 miles beyond previous estimates.

Though more surveys will be needed to firm up any American claim, countries have a right to expand their control of seabed resources well beyond the continental shelves bordering their coasts if they can find such sloping extensions.

 

For the full story, see: 

MATTHEW L. WALD and ANDREW C. REVKIN.  "New Task for Coast Guard In Arctic’s Warming Seas."  The New York Times   (Fri., October 19, 2007):  A16.

 

Perverse Incentives Undemine Air-Travel Efficiency

 

SmallPlanesBigDelaysTable.gif   Source of graph:  online version of the WSJ article quoted and cited below.

 

Why not solve the problem discussed below by privatizing airports, which would then have a profit-maximizing incentive to reduce congestion by charging more for landing rights?  And if the prices were bid high enough, that, in turn would provide an incentive to build more airports. 

 

(p. A1)  The nation’s air-travel system approached gridlock early this summer, with more than 30% of June flights late, by an average of 62 minutes. The mess revved up a perennial debate about whether billions of dollars should be spent to modernize the air-traffic control system. But one cause of airport crowding and flight delays is receiving scant attention. Airlines increasingly bring passengers into jammed airports on smaller airplanes. That means using more flights — and increasing the congestion at airports and in the skies around them.

At La Guardia, half of all flights now involve smaller planes: regional jets and turboprops. It’s the same at Chicago’s O’Hare, which is spending billions to expand runways. At New Jersey’s Newark Liberty and New York’s John F. Kennedy, 40% of traffic involves smaller planes, according to Eclat Consulting in Reston, Va. Aircraft numbers tell the tale: U.S. airlines grounded a net 385 large planes from 2000 through 2006 — but they added 1,029 regional jets — says data firm Airline Monitor.

As air-travel woes have spread, some aviation officials and regulators, including the head of the Federal Aviation Administration, have begun saying delays could be eased if airlines would consolidate some of their numerous flights on larger planes.

Just two problems with that. One is that airlines like having more flights with smaller jets. The other is that passengers like it, too.

. . .

Former American Airlines boss Robert Crandall says Congress should let the FAA go back to controlling slots, matching scheduling to capacity. Airport overcrowding is "fixable, but it’s not fixable without major policy change," the former AMR Corp. CEO said at a recent conference.

Another proposal: Change the structure of landing fees. Airports now set them by weight. A small jet pays a smaller landing fee than a large plane, even though its use of the runway is the same. Why not charge a flat fee per landing, suggest some economists — or even charge the small jets more, to encourage airlines to shift to fewer flights on larger jets?

Yet another idea is to tie landing fees to the level of demand through the day, so they’d cost more at peak hours. This would encourage airlines to spread out flights and use bigger planes, says Dorothy Robyn, a consultant at Brattle Group and former aviation adviser in the Clinton administration. She says the current system "guarantees overuse of the air-traffic-control system because airlines aren’t charged the true cost."

 

For the full story, see: 

SCOTT MCCARTNEY.  "FREQUENT FLYING; Small Jets, More Trips Worsen Airport Delays FAA Likes Bigger Craft But Passengers, Airlines Prefer Busy Schedules."  The Wall Street Journal  (Mon., August 13, 2007):  A1 & A13.

(Note:  ellipsis added.)

 

Subsidized Bread Leads to Long Lines, and Corruption

 

   "A vendor sold bread on Wednesday in a poor section of Cairo, where lines are long and customers pushy."  Source of caption and photo:  online version of the NYT article quoted and cited below. 

 

(p. A4)  Much of what ails Egypt seems to converge in the story of subsidized bread. It speaks to a state that is in many ways stuck in the past, struggling to pull itself into the future, unable, or unwilling, to conquer corruption or even to persuade people to care about one another.

How do you take a broken system that somehow helps feed 80 million people and fix it without causing social disorder? That is a challenge for Egypt at large, and for this little bakery where Mr. Muhammad ekes out a living, with a cigarette hanging from his lips and an angry crowd demanding his bread.

. . .

“The most corrupt sector in the country is the provisions sector,” said a government inspector who asked not to be identified for fear of punishment. His job is to go to bakeries to ensure they are actually using the cheap government flour to produce cheap bread that is sold at the proper price.

The inspector explained why the system was so open to abuse. The government sells bakeries 25-pound bags of flour for 8 Egyptian pounds, the equivalent of about $1.50. The bakeries are then supposed to sell the flatbread at the subsidized rate, which gives them a profit of about $10 from each sack. Or the baker can simply sell the flour on the black market for $15 a bag.

If the inspector, who said he was paid $42 a month, certifies that after three months the baker has faithfully used the flour to bake bread, the baker gets a refund of about $1 a bag. A baker who goes through 40 sacks a day over the three-month period gets back 18,000 pounds (around $3,300) — a nice sum, this inspector said, which could easily be shared with an underpaid inspector.

. . .

Over the course of an hour one recent day, 14-year-old Mahmoud Ahmed managed four trips to the counter. His job, he said, was to ensure a steady stream of bread for a nearby food vendor, who then resold it in sandwiches. It appeared that the baker let him push his way to the front to get bread before others. Was there a deal going? Mahmoud would not say.

Down the road, five blocks away, a 12-year-old, Muhammad Abdul Nabi, was selling bread, the same kind of bread, from a makeshift table for more than double the price at the bakery. But there were no lines.

 

For the full story, see: 

MICHAEL SLACKMAN.  "CAIRO MEMO; Egypt’s Problem and Its Challenge: Bread Corrupts."   The New York Times  (Thurs.,  January 17, 2008):  A4.

(Note:  ellipses added.) 

 

   "Fresh baked for less than a penny, and that’s just the start of the complications."  Source of caption and photo:  online version of the NYT article quoted and cited above. 

 

Alaska Air Used Skunk Works to Develop Check-In Innovation

 

AlaskaAirDeparturesTable.gif   Source of graphic:  online version of the WSJ article cited below.

 

The innovation described in the article excerpted below is credited as arising from a ‘skunk works’ project.  There’s a neat book called Skunk Works that describes how Lockheed set up an autonomous unit to develop the first stealth air force technology.  (Their plant was in a smelly part of town, so it was dubbed the ‘Skunk Works.’)

Clayton Christensen has recommended that established incumbent companies set up skunk works operations in order to develop disruptive technologies that would not survive if they were developed within the main corporate culture and infrastructure. 

(In the article excerpted below, it is puzzling to read that Alaska Air went to the trouble to take out a patent, even though they apparently have no intention of enforcing it.) 

 

(p. B1)  ANCHORAGE, Alaska — When the Ted Stevens Anchorage International Airport was planning a new concourse, prime tenant Alaska Airlines insisted on a counterintuitive design: "The one thing we don’t want is a ticket counter," said Ed White, the airline’s vice president of corporate real estate.

So the 447,000-square-foot Concourse C, which opened in 2004, has only one small, traditional ticket counter, even though the carrier’s 1.2 million Anchorage passengers checked in through that area last year. This unconventional approach — which uses self-service check-in machines and manned "bag drop" stations in a spacious hall that looks nothing like a typical airport — has doubled Alaska’s capacity here, halved its staffing needs and cut costs, while speeding travelers through the building in far less time.

. . .

(p. B4)  Alaska’s design in Anchorage has turned heads in the industry, and in 2006 the airline was awarded a U.S. patent for the check-in process, something it calls the two-step flow-through. Mr. White says his company isn’t trying to keep competitors from going down the same path, but pursued the patent more to reward the many employees who helped to bring the idea to fruition.

Other airlines quickly sent scouts up to Anchorage to check out the new concourse, including a team from Delta Air Lines Inc., Mr. White says. A few months ago, Delta completed a $26 million renovation of its check-in hall at Hartsfield-Jackson Atlanta International Airport, and the finished product looks remarkably similar to that of Alaska Airlines. Greg Kennedy, Delta’s vice president for customer service there, says the new layout has enabled the airline to process passengers checking in during the peak spring break travel period in 20 to 30 minutes at most, compared with two or three hours three years ago — and all in the same amount of square footage but 50% more usable space. Mr. Kennedy says he isn’t aware of a visit to Anchorage but doesn’t dispute it.

. . .  

Alaska, the nation’s ninth-largest carrier by traffic, started a "skunk works" lab a decade ago to figure out how to use technology to make air travel less of a hassle for passengers. Out of that effort came the airline’s ground-breaking ability to sell tickets on the Internet and allow fliers to check in online, developments other carriers quickly followed.

 

For the full story, see: 

SUSAN CAREY.  "Case of the Vanishing Airport Lines; Alaska Air Speeds Up Flow Of Passengers by Jettisoning Traditional Ticket Counters."  The Wall Street Journal  (Thurs., August 9, 2007):  B1 & B4.

 

  Source of graphic:  online version of the WSJ article cited above.

 

Inventor’s House Had Tunnel to Escape Luddites who Smashed His Invention

 

HeathcoteBoltHole.jpg    "The bolt hole was designed to hide from angry textile workers."  Source of caption and photo:  the BBC article quoted and cited below, and viewable at   http://news.bbc.co.uk/1/hi/england/leicestershire/4791069.stm

  

A series of secret rooms and a tunnel have been discovered under a building in Loughborough. The secret living quarters belonged to John Heathcote, a man who invited the fury of the Luddites after inventing a lace-making machine in the early 1800s.

 . . .

Keeper of Charnwood Museum Susan Cooke added: "We don’t know if (John Heathcote) did actually hide down there because he fled Loughborough and went to Devon."

 . . .

Activists smashed Heathcote’s lacemaking machine in Loughborough in 1816.

 

For the full story, see:

"Workmen discover secret chambers."  BBC News online. Last updated: Tuesday, 15 August 2006.

(Note:  ellipses added.)

 

(Note: Wikipedia spells the name as “Heathcoat.”)

Qaddafi’s Nomadic Defense of Socialism

 

   Inside a nomad tent near Kabul.  Source:  online version of the NYT article quoted and cited below. 

 

(p. A4)  In some instances, politicians seek to use nomadic traditions to justify their policies, just as American politicians try to exploit nostalgia for America’s rural past to justify farm subsidies, said Robert Rotberg, a professor at the John F. Kennedy School of Government at Harvard, who studies failed states in Africa and Asia.  “Take Qaddafi in Libya,” he said, referring to Col. Muammar el-Qaddafi.  “He would say, you Westerners don’t understand us because we have a nomadic ethos that is essentially socialist, and so we have to nationalize our country’s oil industry to be true to our tradition.”

 

For the full story, see: 

ILAN GREENBERG.  "Memo From Almaty; Ancient Nomads Offer Insights to Modern Crises."  The New York Times   (Weds., August 8, 2007):   A4. 

 

“Freedom and Prosperity Are Highly Correlated”

 

    Source of graph:  http://www.heritage.org/Press/ALAChart/images/ALC_017_index_econ_freedom_3col_c.jpg

 

(p. A13)  . . .  the evidence is piling up that neither government nor multilateral spending on education and infrastructure are key to development. To move out of poverty, countries instead need fast growth; and to get that they need to unleash the animal spirits of entrepreneurs.

Empirical support for this view is presented again this year in The Heritage Foundation/The Wall Street Journal Index of Economic Freedom, released today. In its 14th edition, the annual survey grades countries on a combination of factors including property rights protection, tax rates, government intervention in the economy, monetary, fiscal and trade policy, and business freedom.

The nearby table shows the 2008 rankings but doesn’t tell the whole story. The Index also reports that the freest 20% of the world’s economies have twice the per capita income of those in the second quintile and five times that of the least-free 20%. In other words, freedom and prosperity are highly correlated.

 

For the full commentary, see: 

MARY ANASTASIA O’GRADY.  "The Real Key to Development."  The Wall Street Journal  (Tues., January 15, 2008):  A13. 

(Note:  ellipsis added.)

 

IndexOfEconomicFreedom2008.gif     Source of table:  online version of the WSJ article quoted and cited above.

 

“More Effective Economics Training Would Yield Enormous Dividends”

 

Economics101cartoon.jpg   Source of the cartoon:  online version of the NYT commentary cited below.

 

I agree with Franks, in the commentary excerpted below, that there is much room for improvement in the teaching of principles of economics.  But I doubt that economics is alone in the dismal performance of students, six months after having completed the course.

My own views on improving the principles course, by including more content related to innovation and entrepreneurship, can be found in my article referenced at the end of this entry. 

 

WHEN I began teaching economics in the 1970s, I noticed that people were generally disappointed when they learned what I did for a living. When I began asking why, many said something like this: “I took Econ 101 years ago, and there were all those horrible equations and graphs.”

Their unpleasant memories were apparently justified. Studies have shown that when students are tested about their knowledge of basic economic principles six months after completing an introductory economics course, they score no better, on average, than those who never took the course.

In other sectors of the economy, such dismal performance might provoke malpractice suits. But in the university system, students and their parents put up with this situation year after year.

. . .

Given the importance of the economic choices we confront, both as individuals and as a society, more effective economics training would yield enormous dividends. And in light of the low bar established by traditional courses, there seems little risk in trying something different.  

 

For the full commentary, see: 

ROBERT H. FRANK.  "Economic View; The Dismal Science, Dismally Taught."  The New York Times, SundayBusiness Section  (Sun., August 12, 2007):  4.

(Note:  ellipsis added.)

 

For my article on how to improve the principles course, see:

"The Neglect of Creative Destruction in Micro-principles Texts."  History of Economic Ideas 15, no. 1 (2007):  197-210.

 

Scientists at Private Firms Publish More Research Than Expected

 

KealeyTerence.jpg   Dr. Terence Kealey is currently Vice-Chancellor at England’s only private university, the University of Buckingham.  Source of photo:  http://www.buckingham.ac.uk/publicity/academics/vc.html

 

Terence Kealey argues that science would be better done if it were all privately done, without government support.  As you might expect, Kealey has not won any popularity contests among those receiving government support. 

At the January American Economic Association (AEA) meetings in New Orleans, I heard a paper by Belenzon and Patacconi that presented evidence that scientists at private firms publish more research than Belenzon and Patacconi had expected to find.

Sounds like a bit of grist for Kealey’s mill?

 

The reference to the AEA paper is:

Belenzon, Sharon, and Andrea Patacconi. "Firm Size and Innovation: Evidence from European Panel Data." Presented at meetings of the American Economic Association. New Orleans, Jan., 4, 2008.

 

The reference to Kealey’s book is:

Kealey, Terence. The Economic Laws of Scientific Research. New York: St. Martin’s Press, 1996.

 

Environmentalists Find Something Else for Us to Feel Guilty About

 

  Source of the cartoon:  online version of the NYT article cited below. 

 

(p. 1)  In the last few months, bottled water — generally considered a benign, even beneficial, product — has been increasingly por-(p. 10)trayed as an environmental villain by city leaders, activist groups and the media. The argument centers not on water, but oil. It takes 1.5 million barrels a year just to make the plastic water bottles Americans use, according to the Earth Policy Institute in Washington, plus countless barrels to transport it from as far as Fiji and refrigerate it.

. . .

But even the noblest of intentions can wilt in the heat.

Dave Byers, 65, from Silver Spring, Md., discussed the issue with his wife, Pat, on the steps of the Metropolitan Museum of Art on a 90-degree Saturday. “I think it should be banned, actually,” he said of bottled water.

As he spoke, he and his wife shared a bottle of Poland Spring. They said they felt bad about it, but it was hot. 

 

For the full story, see: 

ALEX WILLIAMS.  "Water, Water Everywhere, but Guilt by the Bottleful."  The New York Times, SundayStyles Section  (Sun., August 12, 2007):  1 & 10. 

(Note:  ellipsis added.)

 

More Choice Produces More Happiness

 

ModernizationCulturalChangeAndDemocracyBK.jpg   Source of book image:  http://www.cambridge.org/catalogue/catalogue.asp?isbn=0521846951

 

At the AEA meetings in New Orleans I heard an excellent luncheon address on entrepreneurship by R. Glenn Hubbard, the former chair of Bush’s Council of Economic Advisers, and the current Dean of the Columbia Business School.

My ears especially perked up near the end, when he mentioned some survey research that showed that people have higher job satisfaction when they have more choice.  He thought that this suggested that a society with more entrepreneurs would be one with higher job satisfaction, and suggested further, that this was a topic begging for further research.

The printed version of his talk, that he graciously sent me, does not have any full references to the survey research.  But I’ve done some digging, and think that it’s highly likely that he’s referring to the extensive research of Ronald Inglehart and his colleagues. 

I’m going to look into this more.  In the meantime, an image of one of Inglehart’s most recent books appears above, and a relevant quote from that book appears below.

 

(p. 288)  As we demonstrated in Chapter 6, opportunities for making autonomous choices are closely linked with human happiness.  This association holds true in a systematic way that operates across cultures:  in all cultural zones, societies that offer their people more room for choice produce higher levels of overall life satisfaction and happiness.  A society’s level of subjective well-being is a strong indicator of the human condition, and it is systematically linked with freedom of choice.

 

Source:

Inglehart, Ronald, and Christian Welzel.  Modernization, Cultural Change, and Democracy: The Human Development Sequence.  New York:  Cambridge University Press, 2005.

 

Reference to Hubbard luncheon address: 

Hubbard, R. Glenn. "Nondestructive Creation: Entrepreneurship and Management Research in the Study of Growth." Paper presented at the Joint American Economic Association/American Finance Association Luncheon, New Orleans, Jan. 4, 2008.