Books – Page 93 – artdiamondblog.com

The Process Innovation Called “Fracking”

(p. B1) I have come to North Dakota to observe the fracking of the Irene Kovaloff 11-18H, a well on the southern edge of the Bakken Shale. It is one of one hundred wells that will be fracked in the U.S. on this particular day in October 2012, 10 in North Dakota alone.
. . .
(p. B2) The hydraulic heart of fracking is the liquid pumped into the well. Almost all of it is water: snowmelt from the upper Rockies. In the Bakken and elsewhere, companies transform the water into a viscous liquid designed to carry sand deep into the new fractures. As it heats up underground, the gel reverts to a watery state. This change allows the sand to drop out and remain in the fractures, holding them open like pillars in a coal mine. The water flows back out.
. . .
Water and guar make up about 99.1% of the liquid; the chemicals are the rest.
. . .
The next night, the 30th frack of the Irene Kovaloff is completed. It takes three hours longer than expected, but otherwise the well is a success. Soon came light, sweet Bakken crude mixed with the water. On its first full day, it produced 800 barrels of crude–a good, but not great, result. By early 2013, Marathon had pulled 20,000 barrels of crude from the well. Considering that the oil had been locked away until the frack, it was good enough.

For the full article, see:
RUSSELL GOLD. “Book Excerpt: A Look Inside America’s Fracking Boom.” The Wall Street Journal (Tues., April 8, 2014): B1-B2.
(Note: ellipses added.)
(Note: the online version of the article has the date April 7, 2014, and has the title “Book Excerpt: A Look Inside America’s Fracking Boom.”)

Gold’s article was excerpted from his book:
Gold, Russell. The Boom: How Fracking Ignited the American Energy Revolution and Changed the World. New York: Simon & Schuster, 2014.

Political Entrepreneurs Can Find Ways to Overcome Vested Interests

[p. 202] In their recent book, Leighton and López (2013) place special emphasis on political entrepreneurship in making policy reform possible. For new ideas to overcome vested interests, they write (p. 134), it must be the case that “entrepreneurs notice and exploit those loose spots in the structure of ideas, institutions, and incentives.” They provide four case studies of this process: spectrum license auctions, airline deregulation, welfare reform, and housing finance. In their words (p. 178): “[T]he public face of political change may be that of a madman, an intellectual, or an academic scribbler. But whatever form these leaders may take, they are political entrepreneurs–people whose ideas and actions are focused on producing change.” As these authors stress, political entrepreneurship can be socially harmful, as when the pursuit of individual rents comes at the expense of overall inefficiency. But the returns from shifting the political transformation frontier out can be very large as well.
. . .
(p. 206) I owe a special debt to the recent book by Edward López and Wayne Leighton (2012 sic) for stimulating me to put down on paper a number of ideas I had been mulling over for some time.

Source:
Rodrik, Dani. “When Ideas Trump Interests: Preferences, Worldviews, and Policy Innovations.” Journal of Economic Perspectives 28, no. 1 (Winter 2014): 189-208.
(Note: the bracketed page number refers to the Rodrik article; the page number in parentheses refers to the Leighton and López book; ellipsis added; italics, and the bracketed letter, in the original.)

The book Rodrik discusses is:
Leighton, Wayne A., and Edward J. López. Madmen, Intellectuals, and Academic Scribblers: The Economic Engine of Political Change. Stanford, CA: Stanford University Press, 2013.

Salutati Imitated Antiquity “in Order to Produce Something New”

(p. 124) ” I have always believed,” Salutati wrote . . . , that “I must imitate antiquity not simply to reproduce it, but in order to produce something new. . . .”

Source:
Greenblatt, Stephen. The Swerve: How the World Became Modern. New York: W. W. Norton & Company, 2011.
(Note: first ellipsis added, second ellipsis in original.)

Process Innovations, Allowed by Deregulation, Creatively Destroyed Railroads

(p. A11) In “American Railroads: Decline and Renaissance in the Twentieth Century,” transportation economists Robert E. Gallamore and John R. Meyer provide a comprehensive account of both the decline and the revival. . . . They point to excessive government regulation of railroad rates and services as the catalyst for the industry’s decay.
. . .
. . . deregulation, Mr. Gallamore and Meyer demonstrate, was a process of creative destruction. Conrail was created by the government in 1976 in a risky, last-ditch attempt to rescue Penn Central and other bankrupt Eastern railroads. It was quickly losing $1 million a day, and its plight helped make the case for the major revamp of railroad regulation that came in 1980. A wave of mergers followed, and the new companies slashed routes and employees on the way to profitability. The shrinking of the national rail system helped, too, as freight companies consolidated traffic on a smaller (and therefore cheaper) network. Freight-train crews were cut to two or three people from four or five. Cabooses were replaced by electronic gear at the end of freight trains.

For the full review, see:
DANIEL MACHALABA. “BOOKSHELF; Long Train Runnin’; Track conditions got so bad in the 1970s that stationary freight cars were falling off the rails thanks to rotting crossties.” The Wall Street Journal (Weds., July 9, 2014): A11.
(Note: ellipses added.)
(Note: the online version of the review has the date July 8, 2014, and has the title “BOOKSHELF; Book Review: ‘American Railroads’ by Robert E. Gallamore and John R. Meyer; Track conditions got so bad in the 1970s that stationary freight cars were falling off the rails thanks to rotting crossties.”)

The book under review is:
Gallamore, Robert E., and John R. Meyer. American Railroads: Decline and Renaissance in the Twentieth Century. Cambridge, MA: Harvard University Press, 2014.

“In the Name of God and of Profit”

Writing of the period of the mid to late 1300s in the area of Florence:

(p. 114) The surviving archive of a single great merchant of this period, Francesco di Marco Datini of nearby Prato–not, by any means, the greatest of these early capitalists–contains some 150,000 letters, along with 500 account books or ledgers, 300 deeds of partnership, 400 insurance policies, several thousand bills of lading, letters of advice, bills of exchange, and checks. On the first pages of Datini’s ledgers were inscribed the words: “In the name of God and of profit.”

Source:
Greenblatt, Stephen. The Swerve: How the World Became Modern. New York: W. W. Norton & Company, 2011.

The “Miasmic Smog” of Europe’s Nostalgia “Stifled the Imaginations of Those Who Stayed”

(p. D12) Most people remember Mr. Drucker, a longtime contributor to the Journal who died in 2005, as the most influential management consultant of the 20th century. What they may not know is that, like Mr. Zweig, he was born in Austria and fled from the Nazis when Hitler came to power. What’s more, Mr. Drucker’s memories of prewar Vienna, which he compared in “Adventures of a Bystander” to Atlantis, Plato’s imaginary island paradise that fell from favor with the gods and disappeared into the Atlantic Ocean, are no less richly evocative than those in “The World of Yesterday.”
. . .
Born in 1909, three decades after Mr. Zweig, [Drucker] concluded as a young man that Europe’s nostalgia for its prewar past was a “miasmic smog” that stifled the imaginations of those who stayed there. So he emigrated to the U.S., where he found an open society that was bumptiously naive but also vital and forward-looking: “Unlike Europe, where it was felt that ‘the center cannot hold,’ the ‘center’ held in America. Society and community were sound, hale, indeed triumphant.” And whereas Mr. Zweig succumbed at last to despair, Mr. Drucker unhesitatingly embraced America’s democratic culture and flourished, building a new career for himself.

For the full essay/review, see:
TERRY TEACHOUT. “SIGHTINGS; One War, Two Fates.” The Wall Street Journal (Fri., June 6, 2014): D12.
(Note: ellipsis, and bracketed name, added.)
(Note: the online version of the essay/review has the date June 5, 2014.)

The Drucker book discussed by Teachout is:
Drucker, Peter F. Adventures of a Bystander. New York: Harper & Row, 1979.

McCloskey’s “Great Fact” of “the Ice-Hockey Stick”

Source of image: http://www.bombayharbor.com/productImage/Ice_Hockey_Stick/Ice_Hockey_Stick.jpg

(p. 2) Economic history has looked like an ice-hockey stick lying on the ground. It had a long, long horizontal handle at $3 a day extending through the two-hundred-thousand-year history of Homo sapiens to 1800, with little bumps upward on the handle in ancient Rome and the early medieval Arab world and high medieval Europe, with regressions to $3 afterward–then a wholly unexpected blade, leaping up in the last two out of the two thousand centuries, to $30 a day and in many places well beyond.
. . .
(p. 48) The heart of the matter is sixteen. Real income per head nowadays exceeds that around 1700 or 1800 in, say, Britain and in other countries that have experienced modern economic growth by such a large factor as sixteen, at least. You, oh average participant in the British economy, go through at least sixteen times more food and clothing and housing and education in a day than an ancestor of yours did two or three centuries ago. Not sixteen percent more, but sixteen multiplied by the old standard of living. You in the American or the South Korean economy, compared to the wretchedness of former Smiths in 1653 or Kims in 1953, have done even better. And if such novelties as jet travel and vitamin pills and instant messaging are accounted at their proper value, the factor of material improvement climbs even higher than sixteen–to eighteen, or thirty, or far beyond. No previous episode of enrichment for the average person approaches it, not the China of the Song Dynasty or the Egypt of the New Kingdom, not the glory of Greece or the grandeur of Rome.
No competent economist, regardless of her politics, denies the Great Fact.

Source:
McCloskey, Deirdre N. Bourgeois Dignity: Why Economics Can’t Explain the Modern World. Chicago: University of Chicago Press, 2010.
(Note: ellipsis added.)

20 Years Before Fall of Rome, Ammianus Described “a World Exhausted by Crushing Taxes”

(p. 48) . . . ghosts surged up from the Roman past. An ancient literary critic who had flourished during Nero’s reign and had written notes and glosses on classical authors; another critic who quoted extensively from lost epics written in imitation of (p. 49) Homer; a grammarian who wrote a treatise on spelling that Poggio knew his Latin-obsessed friends in Florence would find thrilling. Yet another manuscript was a discovery whose thrill might have been tinged for him with melancholy: a large fragment of a hitherto unknown history of the Roman Empire written by a high-ranking officer in the imperial army, Ammianus Marcellinus. The melancholy would have arisen not only from the fact that the first thirteen of the original thirty-one books were missing from the manuscript Poggio copied by hand–and these lost books have never been found–but also from the fact that the work was written on the eve of the empire’s collapse. A clearheaded, thoughtful, and unusually impartial historian, Ammianus seems to have sensed the impending end. His description of a world exhausted by crushing taxes, the financial ruin of large segments of the population, and the dangerous decline in the army’s morale vividly conjured up the conditions that made it possible, some twenty years after his death, for the Goths to sack Rome.

Source:
Greenblatt, Stephen. The Swerve: How the World Became Modern. New York: W. W. Norton & Company, 2011.
(Note: ellipsis added.)

Lack of Innovation, Not Globalization, Killed U.S. Furniture Industry

The following is from a review by Marc Levinson, one of our leading experts on process innovation. I’m guessing that there is more wisdom in the review than in the book being reviewed:

(p. C6) . . . it was not by chance that the U.S. furniture industry provided easy pickings for foreign manufacturers.

In the 1990s, U.S. furniture making was a backward industry. Its productivity–the efficiency with which capital and labor are put to use–grew only one-third as fast as in manufacturing overall. While firms in other industries were investing in laser cutters and five-axis milling machines, furniture makers were devoting only 2.6% of their revenue to capital investment. Instead, they relied heavily on cheap labor, paying their average worker 29% less than the average in all manufacturing.
Nor was there much innovation. When Ikea’s flat-pack furniture, designed to minimize shipping costs and leave assembly to the purchaser, arrived in the United States in 1985, American manufacturers had nothing like it. Ms. Macy reports that Universal Furniture cut costs by designing for efficient production at high volume; U.S. manufacturers did not. Similarly, when JBIII countered the distant Chinese by guaranteeing that Vaughan-Bassett would deliver orders within a week, his own company’s credit and delivery departments couldn’t cope.
Globalization takes the blame for many ills these days. But the implosion that Ms. Macy chronicles owes less to import competition than to executives in a sheltered industry who failed to keep up with a changing world.

For the full, largely negative, review, see:
MARC LEVINSON. “Made in America; It’s not easy to copyright a furniture design–and somebody will always come along and make it for less.” The Wall Street Journal (Sat., July 19, 2014): C5-C6.
(Note: ellipsis added.)
(Note: the online version of the review has the date July 18, 2014, and has the title “Book Review: ‘Factory Man’ by Beth Macy; It’s not easy to copyright a furniture design–and somebody will always come along and make it for less.”)

The book being mainly panned is:
Macy, Beth. Factory Man: How One Furniture Maker Battled Offshoring, Stayed Local – and Helped Save an American Town. New York: Little, Brown and Company, 2014.

Nobel-Prize-Winner Views Success as Rigged (Except for Nobel Prizes)

(p. 245) . . . , Solow interprets the evidence on intergenerational mobility as showing that the economy is not very meritocratic. (Oddly, he exempts the economics profession. He seems to believe that lack of success is often the result of bad luck or a rigged system, unless you are an economist, in which case it’s your own fault.) Although I noted in my article that those born into extreme poverty face particularly difficult obstacles, I view the rest of the economy as more meritocratic than Solow does. In addition to the Kaplan and Rauh study, I recommend a popular book called The Millionaire Next Door (Stanley and Danko 1996). Written by two marketing professors who extensively surveyed high net worth individuals, the book reports that the typical millionaire is not someone who was born into wealth but rather is someone who has worked hard and lived frugally.

Source:
Mankiw, N. Gregory. “Correspondence: Response from N. Gregory Mankiw.” Journal of Economic Perspectives 28, no. 1 (Winter 2014): 244-45.
(Note: ellipsis added; italics in original.)

The Stanley and Danko book that Mankiw praises (and I use in my Economics of Entrepreneurship seminar) is:
Stanley, Thomas J., and William D. Danko. The Millionaire Next Door: The Surprising Secrets of America’s Wealthy. First ed. Atlanta: Longstreet Press, 1996.

“A Unique Moment in History . . . When Man Stood Alone”

(p. 71) . . . , something noted in one of his letters by the French novelist Gustave Flaubert: “Just when the gods had ceased to be, and the Christ had not yet come, there was a unique moment in history, between Cicero and Marcus Aurelius, when man stood alone.” No doubt one could quibble with this claim. For many Romans at least, the gods had not actually ceased to be–even the Epicureans, sometimes reputed to be atheists, thought that gods existed, though at a far remove from the affairs of mortals–and the “unique moment” to which Flaubert gestures, from Cicero (106-43 BCE) to Marcus Aurelius (121-180 CE), may have been longer or shorter than the time frame he suggests. But the core perception is eloquently borne out by Cicero’s dialogues and by the works found in the library of Herculaneum. Many of the early readers of those works evidently lacked a fixed repertory of beliefs and practices reinforced by what was said to be the divine will. They were men and women whose lives were unusually free of the dictates of the gods (or their priests). Standing alone, as Flaubert puts it, they found themselves in the peculiar position of choosing among sharply divergent visions of the nature of things and competing strategies for living.

Source:
Greenblatt, Stephen. The Swerve: How the World Became Modern. New York: W. W. Norton & Company, 2011.
(Note: ellipsis added.)