Books – Page 172 – artdiamondblog.com

Buchanan on Hayek, Rawls and Nozick

Sandy Peart talking to James Buchanan. Source of photo: me.

In an earlier blog entry, I mentioned a comment on disagreeing with journal referees, made by James Buchanan in conversation at the closing dinner of the 2007 Summer Institute for the Preservation of the History of Economics.

Hayek also came up at the dinner with Buchanan. Buchanan mentioned that he was not as enthused about Hayek’s later work, including The Fatal Conceit, and Law, Legislation and Liberty—he thought the best might have been The Constitution of Liberty.

He mentioned that some foundation had funded a couple of conferences in Europe of top free market scholars to offer advice to Hayek. They told Hayek that his manuscript was a mess, and that it would be an embarrassment to him to publish it. But he said he was already under contract. (I think this comment referred to The Fatal Conceit.) So someone (Bruce Bartlett?) helped Hayek clean it up.

Buchanan also spoke highly about Rawls. I think I mentioned that Hayek had said that his approach was similar to Rawls. I think Buchanan said he did not think that comment was surprising.

I also believe I remember Buchanan saying that he thought more highly of Rawls than of Nozick.

David Warsh on Paul Romer’s ‘Triumph of Formalism’

David Warsh prepares to speak as Sandra Peart introduces him at the HES meetings at George Mason. Source of photo: me.

David Warsh in his plenary address to the History of Economics Society on June 9, 2007, recounted a version of the account that he gives in his 2006 book Knowledge and the Wealth of Nations. (A key part of this story was also told in an article in the Sunday magazine section of The New York Times.)

Here I concentrate on the plenary lecture presentation.

Warsh said that he is the first to give Romer his due; that Romer has managed to alienate the economists both at Chicago and at MIT. (Well, maybe, but Tom Friedman sure gives Romer a lot of attention and praise in his best-selling The World is Flat.) Warsh also said that he (Warsh) has been accused of writing a hagiography of Romer.

Warsh identifies the key contribution of Romer as being that he identifies the key properties of knowledge, namely that it is nonrivalrous and nonexcludible. He claims that Romer was the first to see this, and so is responsible for beginning the crucial field of the economics of knowledge.

Further, Warsh claims that the economics profession only achieved this insight when Romer found a way to incorporate knowledge in his formal models.

This story, Warsh says, is a triumph of formalism; only through formalism could such an important advance have been made.

At this point in the presentation, I became rather annoyed—I had my hand up during most of the question session, but Warsh chose not to call on me. (In fairness, I was seated on his far left, though at the front, so it is possible that he did not see me.)

What I told Warsh afterwards was that the lesson from this episode is the exact opposite of the one he claims—it is not an example of the triumph of formalism, but rather an example of the shame of formalism.

Long before Romer, others had pointed out the nonrivalry and nonexcludibility of knowledge. E.g., Arrow briefly in a famous essay (1962), and Harry Johnson at greater length in an obscure essay (1972).

The requirement that serious knowledge requires formalization before it is taken seriously, meant that economists ignored for several decades, what had been nonformally known. It is to the shame of formalism that for decades useful issues were ignored.

And even more strongly, to say that Romer is responsible for founding the economics of knowledge is to add insult to injury to the economists who had actually founded this field: economists such as Richard Nelson, Nathan Rosenberg, Zvi Griliches and Edwin Mansfield.

Not only was their work largely ignored for decades, but a leading advocate and exemplar of the formalist methodology responsible for the ignorance, is himself given credit for their achievements.

The reference to Warsh’s book, is:

Warsh, David. Knowledge and the Wealth of Nations: A Story of Economic Discovery. New York: W. W. Norton & Co., 2006.

For further information on the founders of the economics of science and technology, one could consult:

"Economics of Science." In Steven N. Durlauf and Lawrence E. Blume, The New Palgrave Dictionary of Economics, 2nd ed., forthcoming, 2008, Basingstoke and New York: Palgrave Macmillan, reproduced with permission of Palgrave Macmillan. This article is taken from the author’s original manuscript and has not been reviewed or edited. The definitive published version of this extract may be found in the complete New Palgrave Dictionary of Economics in print and online, forthcoming, 2008.

"The Economics of Science." Knowledge and Policy 9, nos. 2/3 (Summer/Fall 1996): 6-49.

"Edwin Mansfield’s Contributions to the Economics of Technology." Research Policy 32, no. 9 (Oct. 2003): 1607-1617.

"Zvi Griliches’s Contributions to the Economics of Technology and Growth." Economics of Innovation and New Technology 13, no. 4 (June 2004): 365-397.

The full reference on the Arrow article, is:

Arrow, Kenneth J. "Economic Welfare and the Allocation of Resources for Inventions." In Richard R. Nelson, ed., (National Bureau of Economic Research), The Rate and Direction of Inventive Activity: Economic and Social Factors. Princeton: Princeton University Press, 1962, pp. 609-625.

The full reference on the Harry Johnson article, is:

Johnson, Harry G. "Some Economic Aspects of Science." Minerva 10, no. 1 (January 1972): 10-18.

Searching for Schumpeter in Amazon

Econ Journal Watch, a fresh innovative online journal, just published a paper of mine where I document the large number of books included in Amazon.com’s "Search Within the Book" feature, that mention Schumpeter. The nature of the mentions vary, but many relate to Schumpeter’s process of creative destruction. The focus on creative destruction is especially pronounced in business books.

The fact that many business practitioners find "creative destruction" to be a fruitful concept in understanding capitalism, speaks well of the concept, and speaks well of Schumpeter.

The citation for my paper is:

Diamond, Arthur M., Jr. "Thriving at Amazon: How Schumpeter Lives in Books Today." Econ Journal Watch 4, no. 3 (September 2007): 338-44.

My paper has been highlighted at:

http://organizationsandmarkets.com/2007/09/10/content-analysis-using-amazoncom/

(Thanks to Kevin Rollins for alerting me to this blog entry.)

Dinner with Hayek

Recently (6/10/07) at dinner with a group of foreign graduate students at George Mason University, I learned that one of the students was from Venezuela, and so I mentioned to her that one of my friends during my graduate student days at the University of Chicago had been from Venezuela, and that he had been responsible for bring F.A. Hayek to speak at the University. When I said his name was “Cartea,” she said that she had had a professor named Cartea who was an admirer of Hayek, but who had unfortunately died in an accident a few years ago.

This was surprising and distressing news.

Cartea had charisma, and was not afraid to use it. He was not always a model of responsible behavior, but he had such child-like enthusiasm, that it was hard to be mad at him for long. One of his main weaknesses is that he loved books. Often he would bring me his latest purchase from the Seminary Co-op Bookstore, hold it up, and say in his inimitable accent and cadence: “Pure Gold!”

In Chicago, I had a car, and Cartea did not. He asked if I would drive him to pick up Hayek and Hayek’s wife at the airport. When we got to the airport, Cartea was hungry and wanted to stop and get a hamburger. I thought it was not prudent to take the time to do this, but Cartea was insistent, and we stopped.

We ended up getting to the gate just barely by the time of the Hayeks’ scheduled arrival (these were the innocent pre-terrorism days when you could actually meet guests at their gate). But to our dismay, we learned that the flight at arrived early, and apparently Hayek had grabbed a cab to the University.

So we drove to the Center for Continuing Education where the Hayeks were staying. There we learned that they had headed to the then-best restaurant in Hyde Park, called something like the “Courtyard.”

At some point along the way, while still in the airport I think, Cartea purchased a single rose. We walked into the restaurant, and found the Hayeks. And then, with a charm that I could admire, but not imitate, he flamboyantly presented the rose to Mrs. Hayek, to her obvious delight. (I do not remember what he said, or how he explained-away our absence from at the airport—I do remember that the word “hamburger” did not pass his lips.

The pleased Hayek invited us to join them for dinner. We did. It was just me, Cartea, and the Hayeks, and it stuns me to think that of the four, only I am still alive.

I would like to be able to report that some deep issues of classical liberal political theory were discussed, but if they were, I have no memory of that. My memory is that the discussion was mainly of a personal, small-talk variety. For example, one or both of the Hayeks had long wanted to view a solar eclipse, so they had recently flown to somewhere in the world where such an eclipse had occurred.

And I remember Hayek teasing Mrs. Hayek for delaying their being together by marrying someone else before Hayek, and I remember her teasing him back that he should have made his intentions clear earlier. (This was the second Mrs. Hayek; at some point I learned that he had divorced the first Mrs. Hayek.)

I only have a couple of other memories of this visit of Hayek to Chicago. One was when (the next day?) Cartea had me drive Hayek to a press conference downtown. Hayek thought I was going the wrong way, and was annoyed. I was pretty sure I was going the right way (and it turned out I was right), but it was stressful for a graduate student to be disagreeing with an insistent, and highly admired, Nobel-prize-winner.

Another disjointed memory is that sometime during the visit I asked him to sign my copy of the first volume of Law, Legislation, and Liberty. This he did with a disdainful frown, seeming to be annoyed that I would bother him with such a foolish request.

(Note one: I do not remember when the dinner described above occurred, although it could be learned; I bet David Theroux of the Independent Institute would remember. I was at the University of Chicago from the fall of 1974 through the spring of 1981; and I think the Hayek visit occurred sometime during the latter half of this period.)

(Note two: this was not the first time I had encountered Hayek. I drove down to St. Louis with Joe Cobb and another libertarian Chicago student whose name I regrettably cannot remember. I believe that it was on this occasion that I had a good talk with Phylis Schlafly’s son, who made an articulate economic argument against patents; I think he even gave me an article by someone to bolster his case. Ben Rogge introduced Hayek. What I remember about the introduction was that in part of it, Rogge made a polite, but strong, swipe at Ayn Rand, saying I think, that Hayek’s thinking was a much sounder grounding for a libertarian philosophy. Rogge knew I was a strong Rand enthusiast, so I imagined that he was making the comment mainly for my benefit. Before the introduction, Rogge offered to take me over to introduce me to Murray Weidenbaum, who was at the event. I regret that out of some temporary shyness, I declined the offer. Anyway, on the way back from St. Louis, the discussion was so intense and interesting that I neglected to attend to the gasoline indicator, and we ran out of gas in some small town in Illinois. I managed to get us to the town gas station, but it was closed because the owner, and all employees, were attending some local social function. We ended up having to stay overnight in this God-forsaken berg. Joe was very mad at me.)

(Note three: the blog entry above was written on 6/11/07.)

Beebe’s “Colleagues Reacted Coolly”

Photos of strange deep sea creatures. Source of photos: online version of the NYT article cited below.

When, more than 70 years ago, William Beebe became the first scientist to descend into the abyss, he described a world of twinkling lights, silvery eels, throbbing jellyfish, living strings as “lovely as the finest lace” and lanky monsters with needlelike teeth.

“It was stranger than any imagination could have conceived,” he wrote in “Half Mile Down” (Harcourt Brace, 1934). “I would focus on some one creature and just as its outlines began to be distinct on my retina, some brilliant, animated comet or constellation would rush across the small arc of my submarine heaven and every sense would be distracted, and my eyes would involuntarily shift to this new wonder.”

Beebe sketched some of the creatures, because no camera of the day was able to withstand the rigors of the deep and record the nuances of this cornucopia of astonishments.

Colleagues reacted coolly. Some accused Beebe of exaggeration. One reviewer suggested that his heavy breathing had fogged the window of the submarine vessel, distorting the undersea views.

Today, the revolution in lights, cameras, electronics and digital photography is revealing a world that is even stranger than the one that Beebe struggled to describe.

The images arrayed here come from “The Deep: The Extraordinary Creatures of the Abyss” (University of Chicago Press, 2007), by Claire Nouvian, a French journalist and film director.

. . .

Beebe, who ran the tropical research department at the New York Zoological Society, surely had intimations of what lay beyond the oceanic door he had opened. “The Deep” brings much of that dark landscape to light, even while noting that a vast majority of the planet’s largest habitat remains unexamined, awaiting a new generation of explorers.

For the full story, see:

WILLIAM J. BROAD. "Mysteries to Behold in the Dark Down Deep: Seadevils and Species Unknown." The New York Times (Tues., May 22, 2007): D3.

(Note: ellipsis added.)

"A Ping-Pong tree sponge." Source of caption and photo: online version of the NYT article cited above.

Hispanic Immigrants May Help Rejuvinate Aging Workforce

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

The article excerpted below sketches one solution to the "problem" of the aging boomer workforce. Michael Milken has suggested that the problem itself may be bogus, because aging, healthy, boomers will just keep on trucking a lot longer and stronger than is usually believed.

The quality of life for some 80 million graying baby boomers in the U.S. may depend in large part on the fortunes of another high-profile demographic group: millions of mostly Hispanic immigrants and their children.

With a major part of the nation’s population entering its retirement years and birth rates falling domestically, the shortfall in the work force will be filled by immigrants and their offspring, experts say. How that group fares economically in the years ahead could have a big impact on everything from the kind of medical services baby boomers receive to the prices they can get for their homes.

Immigrants and baby boomers are two groups whose destinies are converging in the next 20 years," says Dowell Myers, a demographer at the University of Southern California. "Baby boomers will surrender their economic role to this generation of immigrants and their children," who will evolve into a critical pool of laborers and taxpayers, he says.

Prof. Myers, author of the recent book "Immigrants and Boomers: Forging a New Social Contract for the Future of America," is among a crop of academics studying the link between the giant generation born between 1946 and 1964 and newcomers to the U.S., mainly Latin American immigrants.

For the full commentary, see:

MIRIAM JORDAN. "Boomers’ Good Life Tied To Better Life for Immigrants." The Wall Street Journal (Mon., May 7, 2007): A2.

Sturm und Drang Schumpeterianism

I am conflicted about how to evaluate Zachary’s Schumpeterian article in a recent Sunday New York Times. On the one hand he says much that is true and useful about Schumpeter and capitalism. On the other hand he seems to relish the destructive side of creative destruction, extending it beyond what Schumpeter intended, to include disasters such as war and environmental crises.

My view, on the other hand, is that the destructive side is usually over-estimated, can be reduced further, and is an unfortunate cost of innovation and progress.

Here is a part of the Zachary op-ed piece that I like:

An Austrian economist who taught at Harvard, Mr. Schumpeter in 1942 coined the term ”creative destruction” to describe what he viewed as the engine of capitalism: how new products and processes constantly overtake existing ones. In his classic work, ”Capitalism, Socialism and Democracy,” he described how unexpected innovations destroyed markets and gave rise to new fortunes.

The historian Thomas K. McCraw writes in his new biography of Schumpeter, ”Prophet of Innovation” (Belknap Press): ”Schumpeter’s signature legacy is his insight that innovation in the form of creative destruction is the driving force not only of capitalism but of material progress in general. Almost all businesses, no matter how strong they seem to be at a given moment, ultimately fail and almost always because they failed to innovate.”

Mr. Schumpeter’s concept of creative destruction is justly celebrated. The economics writer David Warsh calls it the most memorable economic phrase since Adam Smith’s ”invisible hand.” Peter Drucker, the late business guru, went so far as to declare Mr. Schumpeter the most influential economist of the last century.

Clearly, any quick survey of technological change validates Mr. Schumpeter’s essential insight. The DVD destroyed the videotape (and the businesses around it). The computer obliterated the typewriter. The automobile turned the horse and buggy into an anachronism.

Today, the Web is destroying many businesses even as it gives rise to others. Though the compact disc still lives, downloadable music is threatening to make the record album history.

”Schumpeter’s central idea is just as important now as ever,” says Louis Galambos, a business historian at Johns Hopkins University. ”The heart of capitalism and its claim as an efficient economic system over the long term is the role that innovation plays.”

For the full commentary, see:

G. PASCAL ZACHARY. "PING; The Silver Lining to Impending Doom." The New York Times, Section 3 (Sun., May 6, 2007): 3.

The Legacy of Rachel Carson

Al Gore dreams of Rachel Carson. Source of image: online version of the WSJ article cited below.

. . . The World Health Organization now estimates that there are between 300 and 500 million cases of malaria annually, causing approximately one million deaths. About 80% of those are young children, millions of whom could have been saved over the years with the regular application of DDT to their environments.

Carson cannot be blamed directly for these deaths. She didn’t urge total bans in "Silent Spring." Instead, on the single page obliquely acknowledging DDT as an anti-malarial agent, she writes, "Practical advice should be ‘Spray as little as you possibly can’ rather than ‘Spray to the limit of your capacity.’"

In the National Archives exhibit, Carson is described as "a passionate voice for protecting the environment and human health." Her concerns about the effects of insect death on bird populations were well-founded. But threats to human health were central to her argument, and Carson was wrong about those. Despite massive exposure in many populations over several decades, there is no decisive evidence that DDT causes cancer in people, and it is unforgivable that she overlooked the enormous boon of DDT for malaria control in her own time.

. . .

. . . DDT remains the cheapest and most powerful tool for stopping malaria. When sprayed on interior walls, it has virtually zero interaction with wild ecosystems. Yet when the topic of relaxing restrictions in order to save millions of lives comes up, someone inevitably brandishes a copy of "Silent Spring" and opposition is silenced so completely that you could hear a mosquito buzzing in the next room.

For the full commentary, see:

KATHERINE MANGU-WARD. "Suffering in Silence." The Wall Street Journal (Fri., April 20, 2007): W13.

(Note: ellipses added.)

“The Individual Dominates the Story of American Innovation and Is Insufficiently Honored”

When an innovator is overlooked or an innovation misrepresented it is not simply a question of equity; it distorts our perception of the essence of innovation and the essential qualities of an innovator. It clouds our perception of what it takes to survive in global competition.

The individual dominates the story of American innovation and is insufficiently honored in our histories — to say nothing of the abysmal history courses in schools and colleges. Only recently did Columbia University honor Armstrong with a plaque in his laboratory, and Rutgers University is still short of funds to catalog properly the immeasurable riches of Thomas Edison’s papers — all five million pages of them.

The research departments of major corporations have not been unproductive — one thinks of the Bell Labs for the transistor and today Monsanto in biotechnology — but can anyone have had more impact on our world than the 23-year-old trucker who got frustrated at the day he spent on the noisy pier in Hoboken, N.J., waiting to have his cotton bales unloaded from his truck, loaded onto the cargo ship, and then unloaded and loaded again at the other end?

For nearly 20 years, Malcom McLean did nothing about his inspiration that it would have saved everyone a lot of time and trouble if he had just been able to drive his truck on to the ship. Why didn’t anybody facilitate that before he organized the sailing of the Ideal X from Port Newark, N.J., on April 26, 1956? Might as well ask why it took us so long to put wheels on luggage.

For the full commentary, see:

HAROLD EVANS. "The American Way." The Wall Street Journal (Sat., February 17, 2007): A9.

Evans is the author of a huge, very interesting book:

Evans, Harold. They Made America: Two Centuries of Innovators from the Steam Engine to the Search Engine. New York: Little, Brown and Co., 2004.

“The Least Hospitable Environment on Earth”

Source of the book image: http://images.usatoday.com/money/_photos/2007/03/26/cubicle-bookx-large.jpg

Office humor is an oxymoron. At least that was the prevailing view until Scott Adams’s "Dilbert" comic strip and, more recently, British television import "The Office" opened up this fertile ground for mainstream ridicule. The latest entry in the growing corpus of workplace-whacking is "The Cubicle Survival Guide: Keeping Your Cool in the Least Hospitable Environment on Earth," by first-time author and Web-site production coordinator James F. Thompson.

Mr. Thompson’s target: the cubicle, or "cube," as it is not so fondly known. It’s surprising to learn that this ubiquitous steel-and-fabric prison was not invented until the 1960s, the dubious brainstorm of a Colorado fine-arts professor named Bob Probst. His goal, according to Mr. Thompson, was to encourage co-workers to "freely exchange ideas and inspiration" — and not, as commonly believed, to breed a legion of the undead who feel they are somehow unworthy of, say, a door.

For the full review, see:

MARTIN KIHN. "BOOKS; The Best Way to Labor Away in Our Little Boxes." The Wall Street Journal (Weds., March 14, 2007): D9.

The reference to the book, is:

James F. Thompson. THE CUBICLE SURVIVAL GUIDE. (Villard, 216 pages, $12.95)

Neglect of the Important Issues, Is the Opportunity Cost of Pursuing the Cutely Clever

The Wall Street Journal summarizes an April 2, 2007 article by Noam Scheiber in The New Republic:

A new generation of economists has become so addicted to cleverness that dull but genuinely useful research is under threat.

"Freakonomics," the 2005 best seller that sought to explain the mysteries of everyday life through economics, is only partly to blame, writes Noam Scheiber. The deeper roots lie in a 1980s crisis of faith over economists’ ability to reliably crunch numbers. Influential economist H. Gregg Lewis kicked it off by demonstrating that a host of broad, worthwhile empirical surveys of unions’ impact on wages came to opposite conclusions, mostly thanks to the differing original assumptions by the studies’ authors.

As a result, some economists retrenched, opting to focus on finding "solid answers to modest questions."

For the full summary, see:

"Informed Reader; Economics; How ‘Freakonomics’ Quashes Real Debates." The Wall Street Journal (Weds., March 28, 2007): B11.