Category: Books

Container Ships Revolutionized Shipment of Goods

Source of book image:  http://www.pupress.princeton.edu/titles/8131.html

 

Virginia Postrel’s periodic column in the New York Times over the past six years, was a beacon of optimism, clarity and fresh insights on how the economy works.  The excerpt below is from her last column.  Presumably she is moving on to other worthy challenges, but her column in the Times will be missed.

 

”Low transport costs help make it economically sensible for a factory in China to produce Barbie dolls with Japanese hair, Taiwanese plastics and American colorants, and ship them off to eager girls all over the world,” writes Marc Levinson in the new book ”The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger” (Princeton University Press).

For consumers, this results in lower prices and more variety.  ”People now just take it for granted that they have access to an enormous selection of goods from all over the world,” Mr. Levinson said in an interview.  That selection, he said, ”was made possible by this technological change.”

. . .  

The idea of containerization was simple:  to move trailer-size loads of goods seamlessly among trucks, trains and ships, without breaking bulk.  But turning that idea into real-life business practice required many additional innovations.

New equipment, from dockside cranes to the containers themselves, had to be developed.  Carriers and shippers had to settle on standard container sizes.  Ports had to strengthen their wharves, create connections to rail lines and highways, build places to store containers and strike new deals with their unions.

Along the way, even the most foresighted people made mistakes and lost millions.  Malcom McLean himself bought fast fuel-guzzling ships right before the 1973 oil crisis and slow, economical ships just as fuel prices turned down.  ”Almost everybody who was concerned with containerization in any way at some point got the story wrong,” Mr. Levinson said.

It is a classic tale of trial and error, and of creative destruction.

 

For the full commentary, see: 

Virginia Postrel.  "ECONOMIC SCENE; The Container That Changed the World."  The New York Times  (Thursday, March 23, 2006):  C3.

 

The full reference to Levinson’s book is:

Levinson, Marc.  The Box:  How the Shipping Container Made the World Smaller and the World Economy Bigger.  Princeton University Press, 2006.

 

Reagan on the Bureau of Indian Affairs

Source of book image:  http://www.amazon.com/gp/product/0060957573/ref=ed_oe_p/104-5180402-9681554?%5Fencoding=UTF8

 

Michael Deaver, longtime aide to Ronald Reagan, has written an interesting memoir that documents that in most important respects, Reagan was his own boss, worked hard, and had a focused intellect.  

He also documents what most grant:  Reagan was a great communicator.  One element in his success as a communicator is illustrated below:

 

(p. 71)  . . . he would often recount a fictitious yarn of a sobbing bureaucrat he encountered at the Bureau of Indian Affairs.  The man was at his desk, crying into his folded arms when Reagan touched him on the shoulder and asked him what was wrong.  "My Indian died, that’s what’s wrong," came the response.  "What the hell am I supposed to do now?"

 

The citation for Deaver’s book is:

Deaver, Michael K.  A Different Drummer:  My Thirty Years with Ronald Reagan.  Reprint ed:  Harper Paperbacks, 2003.

 

“life is too short”

Source of book image:  http://www.amazon.com/gp/product/customer-reviews/0738204315/ref=cm_cr_dp_2_1/104-9985403-1047968?%5Fencoding=UTF8&customer-reviews.sort%5Fby=-SubmissionDate&n=283155

The Cluetrain Manifesto is a thought-provoking, entertaining, uneven, overly-mystical, somewhat dated classic on the impact of the internet on business and life.  Here is the book’s startling start:

WE DIE.

You will never hear those words spoken in a television ad.  Yet this central fact of human existence colors our world and how we perceive ourselves within it.  "Life is too short," we say, and it is.  Too short for office politics, for busywork and pointless paper chases, for jumping through hoops and covering our asses, for trying to please, to not offend, for constantly struggling to achieve some ever-receding definition of success.  (p. 1)

Locke, Christopher, Rick Levine, Doc Searls, and David Weinberger. The Cluetrain Manifesto: The End of Business as Usual. Cambridge, Mass.:  Perseus Books Group, 2001.

 

 

Louis Rukeyser: Optimistic, Witty, Defender of Free Markets; RIP

Louis Rukeyser. Source of image: http://www.reviewjournal.com/lvrj_home/2002/Apr-06-Sat-2002/business/18455995.html

 

Louis Rukeyser, long-time host of PBS’s Friday night "Wall Street Week," died May 2, 2006, at the age of 73.  (JAMES GRANT.  "Louis Rukeyser, Television Host, Dies at 73."  The New York Times  (Weds., May 3, 2006).)

Louis Rukeyser was a pun-loving, urbane, optimistic analyzer of Wall Street and defender of the free market.  His weekly "Wall Street Week" was the first show my daughter Jenny watched at home after we brought her home from her birth at Children’s Hospital. 

I never met him, though I remember once being on the same airplane with him.  He was the narrator for my audio book:  Frank Knight and the Chicago School.

PBS, true to form, fired Rukeyser from the show he created.  I never watched it again, and the ratings for the Rukeyser-less version tanked:  sometimes there is justice in the world.

 

FrankKnightAndTheChicagoSchool.gif Source of image: http://www.audioclassics.net/html/econ_files/knight.cfm

 

Remembrances of Galbraith (and Buckley and Demsetz and Drucker)


John Kenneth Galbraith passed away a couple of days ago, on Sat., April 29, 2006 at the age of 97.   (see:  "Economist, Writer Galbraith Dies at 97."  Omaha World-Herald (Sun., April 30, 2006):  11A)

I remember at a Republican Convention in Miami (1968 I think) when one of the networks had the late Frank Reynolds sitting with Galbraith and William F. Buckley, Jr., to provide occasional commentary on the scene.  On this occasion, Galbraith was going on and on about how all of the Republicans had arrived at the convention in their yachts.  Buckley sat by, nodding, in uncharacteristic silence.  Finally, with a few seconds until they needed to break away, Buckley slowly and deliberately drawled at Galbraith something like the following:  ‘And John, when you visit your friends in Hyannis Port, I trust that you find the accommodations adequate?’   As they cut to commercial, you could hear Reynolds, and others in the background, convulsed in laughter.

Actually Buckley and Galbraith were friends, for several years skiing together in Europe.  Apparently Galbraith was an indifferent and very slow skier, leading Buckley to observe that Galbraith looked as though he was skiing up the slope backwards.   (I read this many years ago, but, alas, do not remember where.)

 

David Levy and I once wrote a paper in which we measured the writing quality of articles by many important economists.  When we presented the paper to the meetings of the American Economic Association, Galbraith was the discussant of our paper.  For his comments, he basically recycled an old paper he had written on writing economics, and showed no signs of having read our paper.  But he did seem to enjoy our mentioning that by our measures, he turned out to be one of the best writers in the profession.  My memory is that at one point, just before or just after the formal proceedings, he actually patted me on the back.

 

Galbraith wrote many books.  One that I enjoyed, and learned from, was his account of the stock market crash of 1929.

 

Perhaps his most famous book was The New Industrial State, in which he argues that some of the larger firms in the United States form what he called the "technostructure."  The technostructure firms were widely held, by many stock owners, few of whom had the incentive or power, to closely monitor whether the firms’ managers were serving the stock owners by maximizing profits.  As a result, the technostructure firms’ managers were free to pursue other goals, such as their own power.  (Galbraith was OK with the assumption that firms outside the technostructure were maximizing profits.)  

Harold Demsetz tested this hypothesis by comparing the rate of profit of firms in and out of the technostructure, reasoning that if technostructure firms were not maximizing profits, we would expect their profits to be lower than those of other firms.  He found that there was no difference between the rate of profits of the so-called ‘technostructure’ firms, and the non-technostructure firms.  Demsetz’s conclusion was that there was no distinguishable technostructure, and no new industrial state. 

I tell my classes that if we don’t throw entrepreneurs such as Michael Milken in prison, they can provide us with the means to keep CEOs pursuing shareholder value (profits) as their goal.  The way it would work would be that if CEOs start pursuing something else, their firm’s stock price falls, and the firm becomes an attractive take-over target for someone like Milken.

I also point out that if firms maximize profits, a lot of rich people benefit, but that a lot of average people benefit too—Drucker emphasized that roughly half of the value of stock equity in the United States is held by worker pension funds.

 

I did not agree with Galbraith’s efforts to grow the government, but he was witty, and urbane, and intelligent.  The intellectual scene was more interesting, and fun, with him than without him.  He will be missed. 

 

Some references to publications mentioned in, or supporting, the discussion above:

Demsetz, Harold. "Where Is the New Industrial State?" Economic Inquiry 12, no. 1 (1974): 1-12.

Diamond, Arthur M., Jr., and David M. Levy. "The Metrics of Style: Adam Smith Teaches Efficient Rhetoric." Economic Inquiry 32, no. 1 (1994): 138-45.

Drucker, Peter Ferdinand. The Unseen Revolution:  How Pension Fund Socialism Came to America. 1st ed: Harpercollins, 1976.

Galbraith, John Kenneth. The Great Crash 1929. Houghton Mifflin Co., 1961.

Galbraith, John Kenneth. The New Industrial State. Houghton Mifflin, 1967.

Kornbluth, Jesse. Highly Confident: The Crime and Punishment of Michael Milken. William Morrow & Co., 1992.

 

 NewIndustrialStateBK.jpg     Source of book image: http://www.whatihaveread.net/biblio/book_1458.html


“Damn it Fidel! What are you going to do about this lousy, piece-of-**** island of yours?”

 

   Source of image of book:  http://www.amazon.com/gp/product/1586483242/qid=1145298612/sr=2-1/ref=pd_bbs_b_2_1/104-9985403-1047968?s=books&v=glance&n=283155

 

Fernando Cardosa is the former Brazilian President who is best known for having temporarily tamed Brazil’s runaway inflation.  Although not a principled believer in the free market, Cardoso made some efforts to reduce the damage the Brazilian government was doing to the economy.  The following startling passage is from a useful review of a new memoir by Cardoso:

 

. . . ,  Mr. Cardoso mentions a telling moment at a 1999 summit meeting in Havana.  When the heads of state were alone at a luncheon, one said to Castro:  "Damn it Fidel!  What are you going to do about this lousy, piece-of-**** island of yours?   We’re sick of apologizing for you all the time, Fidel.  It’s getting embarrassing."   The anecdote shows how disingenuous Latin governments can be when they remain silent about the Cuban dictatorship.

 

For the full review, see:

MARY ANASTASIA O’GRADY.  "A Leader Who Got Real."  The Wall Street Journal  (Thurs., April 6, 2006):  D8.

(Note:  ellipsis added.)

 

Here is the full reference to Cardoso’s memoir:

Cardoso, Fernando Henrique.  The Accidental President of Brazil:  A Memoir.  PublicAffairs, 2006.  [with Brian Winter;  291 pages;  $26.95]

 

Chernobyl Accident Cannot Occur In U.S. Type Reactors


Twenty years ago (April 25, 1986), the Chernobyl nuclear accident sent a plume of radiation into the air above Ukraine.  The word "Chernobyl" remains the most emotionally charged argument used by the opponents of nuclear energy.  But if examined carefully, the main lesson from Chernobyl may be that what happened there cannot occur in the better designed light water reactors used in the United States, and most of the rest of the world.  William Sweet, the author of the commentary below, has also authored Kicking the Carbon Habit:  Global Warming and the Case for Renewable and Nuclear Energy.

 

(p. A23) . . . , though it went unnoticed at the time and has been inadequately appreciated since, Chernobyl also cast into relief the positive features of the reactors used in the United States and most other advanced industrial countries.

The reactor at Chernobyl belonged to a class that was especially vulnerable to runaway reactions.  When operating at low power, if such reactors lost water, their reactivity could suddenly take off and very rapidly reach a threshold beyond which they could only explode.  Making matters worse, surprisingly little more pressure than normal in the machine’s water channels would lift its lid, snapping the vital control rods and fuel channels that entered the reactor’s core.

On the night of April 25, 1986, poorly trained and supervised plant operators conducted an ill-conceived experiment, putting the machine into the very state in which reactivity was most likely to spike.  Within a fraction of a second, the reactor went from being barely on to power levels many times higher than the maximum intended.

This kind of accident cannot happen in the so-called light water reactors used in the United States and most of Western Europe and Asia.  In these reactors, the water functions not only as a coolant but as a "moderator": self-sustaining nuclear chain reactions cannot take place in its absence.  This is a very useful passive safety feature.  If coolant runs low, there is still a danger of a core meltdown, because the fuel retains heat; but the reactor will have automatically and immediately turned itself off.

 

For the full commentary, see:

WILLIAM SWEET.  "The Nuclear Option."  The New York Times  (Weds., April 26, 2006):  A23.

 

The reference to Sweet’s related book is:

Sweet, William.  Kicking the Carbon Habit:  Global Warming and the Case for Renewable and Nuclear Energy.  Columbia University Press, 2006.


Source of book image:  http://www.amazon.com/gp/product/0231137109/sr=8-1/qid=1146071688/ref=sr_1_1/104-5668094-9083929?%5Fencoding=UTF8



Common Measures Aid Transparent Transactions

Source of book image: http://www.amazon.com/gp/product/customer-reviews/0743216768/ref=cm_cr_dp_2_1/104-9985403-1047968?%5Fencoding=UTF8&customer-reviews.sort%5Fby=-SubmissionDate&n=283155
The Measure of All Things is an interesting book for several reasons. It shows how hard it is to stay focused on noble pursuits in the face of revolution, war, disease, and peasant ignorance. It raises questions about where common standards of measurement should and do come from; and makes useful points about the value of common standards of measurement for free trade. It tells us how hard it was to do science 200 years ago, and tells us of the devotion of those who tried.
Here is a useful passage on why common standards of measurement matter for the free market:

(p. 137) Prieur believed that uniform measures would make France a great nation, smoothly administered from the center and united through trade. The metric system would transform France into “a vast market, each part exchanging its surplus.” It would make exchanges “direct, healthy, and rapid,” diminishing the “frictions” which impeded the wheels of commerce. These frictions included anything that masked the true price of an item, such as the variable measures of the Ancien Regime. The price of an item, Prieur argued, necessarily depended on many factors: its scarcity, the work necessary to produce it, the quality of the product. But in the final analysis, price was whatever people agreed it should be. This meant that when people agreed on a price they needed to know what they were getting, not be baffled by secret shifts in the quantity being exchanged. Those who claimed that differences in measures aided commerce were just talking about their personal profits. “The French Republic,” he wrote, “can no longer tolerate men who earn their living by mystery.” Worse, those who profited from the diversity of measures, said Prieur, corrupted those who tried to conduct honest and transparent exchanges by “complicating commerce, spoiling good faith, and sowing error and fraud among the nations.” Until commerce was carried out with complete probity, the common people would doubt the advantages of free trade. Only if price were the sole variable in exchange would these exchanges be based on clear understanding between parties.

Alder, Ken. The Measure of All Things: The Seven-Year Odyssey and Hidden Error That Transformed the World. Paperback Reprint ed: Free Press, 2003.

Contrasting Planners with Searchers in Economic Development



Source of book image: http://www.amazon.com/gp/product/1594200378/sr=8-1/qid=1143511279/ref=pd_bbs_1/102-0403843-7507349?%5Fencoding=UTF8

A professor at New York University and a senior fellow at the Center for Global Development, Easterly spent most of his career as an economist at the World Bank. He had to leave that job after publishing his iconoclastic 2001 book, “The Elusive Quest for Growth,” which skillfully combined a history of economists’ growth theories with a devastating empirical analysis of the failure of international efforts to spur third world development. The book’s theme was “incentives matter.”
In “The White Man’s Burden,” Easterly turns from incentives to the subtler problems of knowledge. If we truly want to help the poor, rather than just congratulate ourselves for generosity, he argues, we rich Westerners have to give up our grand ambitions. Piecemeal problem-solving has the best chance of success.
He contrasts the traditional “Planner” approach of most aid projects with the “Searcher” approach that works so well in the markets and democracies of the West. Searchers treat problem-solving as an incremental discovery process, relying on competition and feedback to figure out what works.
. . .
“The White Man’s Burden” does not match “The Elusive Quest for Growth” as a tour de force. Easterly is doing something harder here: not merely cataloging past failures but trying to suggest a more promising approach. Unfortunately, his alternative is still underdeveloped, devolving at times into slogans.
After all, Searchers plan, too. The question is not whether to plan, but who makes the plans, how they are changed and where feedback comes from. “The White Man’s Burden” underplays the essential role of competition, not only in markets but between political jurisdictions.

For the full review, see:
VIRGINIA POSTREL. “The Poverty Puzzle.” The New York Times, Section 7 (Sun., March 19, 2006): 12.
For Easterly’s latest book, see:
Easterly, William. The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. The Penguin Press, 2006. 436 pp. $27.95.

“The world we have lost was ripe for rejection”

   The source for the image of the book cover is: http://img.textbookx.com/images/large/91/0521633591.jpg

 

Roche delineates minimal light and exiguous fires, chilblains and miasmas, the distinction of white linen, the rare treat of sweetness, the still rarer taste of coffee that made its drinkers sparkle, and the hankerings they inspired. Limited access to water affected drinking habits, cooking, hygiene, and sartorial practices. Housewives and laundresses coped with mountains of dirty linen by river or by pond; the great sent their laundry to the American islands for a whiter wash; the poor rioted for soap as well as bread. Society moved from an economy of scarcity and salvation to one of plenty and prodigality. But the move was slow and spotty. The world we have lost was ripe for rejection.

 

For the full review, see:

Weber, Eugen. "Recommended Reading." The Key Reporter 67, no. 2 (Winter 2002): 12.

 

The reviewed book is:

Roche, Daniel. A History of Everyday Things: The Birth of Consumption in France, 1600-1800. Cambridge University Press, 2000.