Books – Page 181 – artdiamondblog.com

“a jobs program for people who couldn’t make it in the private sector”

Source of book image: http://www.amazon.com/gp/product/1400065526/sr=8-1/qid=1153368329/ref=sr_1_1/104-2835260-2878345?ie=UTF8

The levees are built by the Army Corps of Engineers, with the Orleans Levee District enjoying local control. It is instructive to learn that the former president of the levee district bought himself an inflatable rubber craft a decade ago. As Mr. Horne writes, some levees gave way "even before water reached the heights the walls were meant to contain and, in some cases, after it had begun to ebb."

Beset by outsourcing, brain drains and budget cuts, the Army Corps has been skimping for years. This spring, its commanding officer conceded that there had been problems with flood-wall engineering. But the government hardly has a monopoly on blame. As Mr. Horne notes, the corps had intended to build a flood barrier at the mouth of Lake Pontchartrain on the city’s northern border ("an idea that would, after Katrina, suddenly seem like the highest sort of wisdom"), but the plan was scrapped when environmentalists sued.

By the mid-1970s, "the completion date for the upgraded flood defense that Congress had mandated for New Orleans had already been pushed back thirteen years," Mr. Horne writes, and one section was still unfinished as Katrina hit. Apathy and indifference "turned government work into a jobs program for people who couldn’t make it in the private sector or who couldn’t be bothered to try."

Government handouts of a different sort followed the hurricane: After a slow start with its relief effort, FEMA helped countless hurricane victims who were truly in need, but the agency also began cutting checks for almost anyone who asked. "An initial $2000 would turn up in the mail within a few days of registering online or placing a call," Mr. Horne writes. In fact, the agency "rolled over for millions in fraudulent or duplicate claims without checking to see that the applicant had offered a vacant lot or a nonexistent address as his or her residence." Perhaps that was easier than risking further accusations of bias.

For the full review, see:

TOM BETHELL. "Books; Levying the Blame; Nearly a year after a hurricane ravaged a city and the finger-pointing began, two books dissect the destruction and the government’s response." The Wall Street Journal (Sat., July 15, 2006): P8.

The citation for the Horne book is:

Horne, Jed. Breach of Faith. Random House, 2006. (412 pages, $25.95)

Environmental Bureaucrats Ignore Local Knowledge

Source of book image: http://yalepress.yale.edu/yupbooks/book.asp?isbn=0300106211

From a useful review of a book on environmental policy:

(p. D8) The striking aspect of his new book is the story he tells of his own journey from supporter to critic of the Spaceship Earth theory of environmental law. His first step toward disenchantment was seeing, as an NRDC lawyer, the EPA’s personnel up close. "The EPA had not come from Starfleet Academy," he notes, "but rather was an amalgam of the federal government’s preexisting environmental programs," then part of the Department of Health, Education and Welfare. In short, the bureaucrats were real people with real incentives, just like politicians and voters—but unanswerable to the public.

The next educational step, for him, was the decision to buy a farm in upstate New York. Mr. Schoenbrod was surprised by the wisdom of his rural neighbors. He movingly describes how a local logger changed his mind about forestry practices by showing him, among much else, that sometimes cutting down particular trees can benefit the forest. (It sounds like a simple observation, but it is the kind of thing that bureaucrats, with their sweeping mandates, often don’t allow for.) Mr. Schoenbrod also looks at the local reaction to a number of environmental decisions, such as the EPA’s ordered dredging of the Hudson River because of the small risk of PCBs. The intent was to protect the health of local communities, but upstate landowners opposed the dredging by a ratio of more than 2 to 1.

For the full review, see:

John Berlau. "Bookshelf; A Law Unto Themselves." The Wall Street Journal (Thurs., August 18, 2005): D8.

The full reference to the Schoenbrod book:

Schoenbrod, David. Saving Our Environment from Washington: How Congress Grabs Power, Shirks Responsibility, and Shortchanges the People. Yale University Press, 2005.

Global Warming Ranked at Bottom of World Priorities by Economists and Ambassadors

Bjorn Lomborg. Source of image: online version of WSJ article cited below.

(p. A10) Bjorn Lomborg busted — and that is the only word for it — onto the world scene in 2001 with the publication of his book "The Skeptical Environmentalist." A one-time Greenpeace enthusiast, he’d originally planned to disprove those who said the environment was getting better. He failed. And to his credit, his book said so, supplying a damning critique of today’s environmental pessimism. Carefully researched, it offered endless statistics — from official sources such as the U.N. — showing that from biodiversity to global warming, there simply were no apocalypses in the offing. "Our history shows that we solve more problems than we create," he tells me. For his efforts, Mr. Lomborg was labeled a heretic by environmental groups — whose fundraising depends on scaring the jeepers out of the public — and became more hated by these alarmists than even (if possible) President Bush.

Yet the experience left Mr. Lomborg with a taste for challenging conventional wisdom. In 2004, he invited eight of the world’s top economists — including four Nobel Laureates — to Copenhagen, where they were asked to evaluate the world’s problems, think of the costs and efficiencies attached to solving each, and then produce a prioritized list of those most deserving of money. The well-publicized results (and let it be said here that Mr. Lomborg is no slouch when it comes to promoting himself and his work) were stunning. While the economists were from varying political stripes, they largely agreed. The numbers were just so compelling: $1 spent preventing HIV/AIDS would result in about $40 of social benefits, so the economists put it at the top of the list (followed by malnutrition, free trade and malaria). In contrast, $1 spent to abate global warming would result in only about two cents to 25 cents worth of good; so that project dropped to the bottom.

"Most people, average people, when faced with these clear choices, would pick the $40-of-good project over others — that’s rational," says Mr. Lomborg. "The problem is that most people are simply presented with a menu of projects, with no prices and no quantities. What the Copenhagen Consensus was trying to do was put the slices and prices on a menu. And then require people to make choices."

Easier said than done. As Mr. Lomborg explains, "It’s fine to ask economists to prioritize, but economists don’t run the world." . . .

So all the more credit to Mr. Lomborg, who several weeks ago got his first big shot at reprogramming world leaders. His organization, the Copenhagen Consensus Center, held a new version of the exercise in Georgetown. In attendance were eight U.N. ambassadors, including John Bolton. (China and India signed on, though no Europeans.) They were presented with global projects, the merits of each of which were passionately argued by experts in those fields. Then they were asked: If you had an extra $50 billion, how would you prioritize your spending?

Mr. Lomborg grins and says that before the event he briefed the ambassadors: "Several of them looked down the list and said ‘Wait, I want to put a No. 1 by each of these projects, they are all so important.’ And I had to say, ‘Yeah, uh, that’s exactly the point of this exercise — to make you not do that.’" So rank they did. And perhaps no surprise, their final list looked very similar to that of the wise economists. At the top were better health care, cleaner water, more schools and improved nutrition. At the bottom was . . . global warming.

For the full interview, see:

KIMBERLEY A. STRASSEL. "The Weekend Interview with Bjorn Lomborg; Get Your Priorities Right." The Wall Street Journal (Sat., July 8, 2006): A10.

(Note: first ellipsis is added; the second ellipsis is in the original.)

Source of book image: http://www.amazon.com/gp/product/customer-reviews/0521010683/ref=cm_cr_dp_2_1/104-0101568-2686373?ie=UTF8&customer-reviews.sort%5Fby=-SubmissionDate&n=283155

Toffler Fear of Future Changes to “worry that the future will arrive too late”

Source of book image: http://www.randomhouse.com/catalog/display.pperl?isbn=9780307265555

The titular wealth they speak of comes from substituting "ever-more-refined knowledge for the traditional factors of industrial production — land, labor and capital." The United States is producing more stuff than ever with fewer workers. The Tofflers write that only 20 percent of the work force is now in the manufacturing sector, while some 56 percent (and growing) is engaged in what they call "knowledge work" — managerial, financial, sales-related, clerical and professional tasks. Even activities like agriculture have gone high-tech, through biotechnology and increasingly sophisticated use of global-positioning satellites to customize irrigation and fertilization down to the individual acre. Knowledge-based wealth, they argue, is revolutionary not just because it gets more output from fewer inputs. Unlike such physical resources as oil, knowledge can be shared by an infinite number of people, and its value and benefits are generally increased by wider circulation. (A network, after all, is only as powerful as the number of participants.) Just as important, the Third Wave wealth system "demassifies production, markets and society," creating space for unending experimentation, innovation and individuation.

. . .

Despite visionary passages about nanotechnology (the manipulation of objects at the atomic level) and potential moon-based helium energy, "Revolutionary Wealth" is less interesting for its specifics (most of which will be familiar to readers of publications like Wired, The Economist and Red Herring) than for its evidence of how far we’ve come since the 70’s, when politics, economics and culture all seemed as played out as Richard Nixon’s denials of criminality. In "Future Shock," the Tofflers warned that many people "will find it increasingly painful to keep up with the incessant demand for change that characterizes our time. For them, the future will have arrived too soon." These days, from Baghdad to Bangalore to Boston, it seems more likely that people worry that the future will arrive too late. That’s no small change, and it’s one on which the Tofflers have been shining a light for years.

For the full review, see:

NICK GILLESPIE. "The Future Is Now." The New York Times Book Review, Section 7 (Sun., May 14, 2006): 9.

The full reference to the Toffler book is:

Toffler, Alvin, and Heidi Toffler. Revolutionary Wealth. Alfred A. Knopf, 2006.

Middle Class Living Standards Have Risen

(p. C1) ONE of the most influential political books of the last few years has been ”What’s the Matter With Kansas?” by Thomas Frank. Published during the 2004 campaign, it neatly captured the Republicans’ success in using social issues to attract blue-collar Kansans who don’t really benefit from Republican economic policies.

”All they have to show for their Republican loyalty,” Mr. Frank writes, ”are lower wages, more dangerous jobs, dirtier air, a new overlord class that comports itself like King Farouk,” and a culture in ”moral free fall.”

The book was a New York Times best seller for 35 weeks.

But close inspection uncovers a big problem with Mr. Frank’s economic analysis. Wages haven’t been falling in Kansas. Up and down the economic spectrum, they have been higher in the last few years than they were at any point in the 1980’s or 90’s, according to inflation-adjusted numbers from the Economic Policy Institute. The median Kansas worker made $13.43 an hour in 2004, 11 percent more than in 1979, which might help explain why many people don’t vote on bread-and-butter issues anymore.

Now, an 11 percent raise over the course of a generation — which is similar to the national increase — is (p. C10) not especially impressive. It’s certainly smaller than the increase workers received in the 25 years leading up to 1979, and for the last few years, wages have not risen at all. But they did rise during the 1990’s boom, and pretending otherwise does not jibe with most people’s experiences.

More to the point, some other improvements have accelerated recently. In just the last 15 years, the murder rate has been cut almost in half. Many big cities are far more vibrant places than they used to be. About 33 percent of young adults get a bachelor’s degree these days, up from 25 percent in the early 1990’s. The gap between men’s and women’s pay reached its lowest ever last year. The divorce rate has stopped rising.

Many luxuries of earlier generations — owning a three-bedroom house, flying across the country, calling relatives who live overseas — are staples of middle-class life. If all this doesn’t add up to a rise in living standards, I’m not sure what the phrase means.

For the full commentary, see:

DAVID LEONHARDT. "This Glass Is Half Full, Probably More." The New York Times (Wednesday, May 24, 2006): C1 & C10.

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.

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.

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]