Category: Economic Growth

Sears Democratized the Washing Machine

(p. 301) The pieces of a new dream had finally been drawn in–big, diverse businesses that could combine as a sum greater than the proverbial parts. Now Sears could continue to “democratize” products that were previously too expensive or sophisticated for everyday people.
The automatic washing machine was an artifact owned only by the rich until Sears democratized the machine in 1942: $37.95–three bucks down and four more a month on time. The process was at the core of the entire industrial revolution-the humbling of products: buckles, buttons, and beer–and the efficient distribution of previously unattainable things to the huge pools of human desire called markets. Now the possibility stood before them of starting the cycle all over again.
Sears could spin a grand, gilded net for the people that included housing, mortgages, all manner of insurance, variations on banking sources, investment services, and, of course, consumer goods. People could get a house from Sears again. When the system was up and running, they could even get the money to buy the house; get the stuff that goes in the house; and the services that ensure the sustenance of the house if something unforeseen happens.

Source:
Katz, Donald R. The Big Store: Inside the Crisis and Revolution at Sears. New York: Viking Adult, 1987.

Voters Want Texas-Style Economic Dynamism

(p. A23) Surveys and interviews give us some sense of what’s going on. Voters have a lot of economic anxieties. But they also have a template in their heads for what economic dynamism looks like.
That template does not include a big role for government. Polls show that faith in government is near all-time lows. In a Gallup survey, voters listed dysfunctional government as the nation’s No. 1 problem. In fact, American voters’ traditional distrust has morphed and hardened. They used to think it was bloated and ineffective. Now they think it is bloated and ineffective and rigged to help those who need it least.
When many of these voters think of economic dynamism, they think of places like Texas, the top job producer in the nation over the past decade, and, especially, places like Houston, a low-regulation, low-cost-of-living place. In places like Wisconsin, voters in the middle class private sector support candidates who cut state pensions and pass right-to-work laws, so that economic governance can be more Texas-style.

For the full commentary, see:
David Brooks. “The Field Is Flat.” The New York Times (Fri., MARCH 27, 2015): A23.

Economic Growth Depends on the Talented Becoming Entrepreneurs Instead of Rent Seekers

(p. 6) In an influential paper, the economists Kevin M. Murphy and Robert W. Vishny, both at the University of Chicago Booth School of Business, and Andrei Shleifer at Harvard University argue that countries suffer when talented people become what we economists call “rent seekers.” Instead of creating wealth, rent seekers simply transfer it — from others to themselves.
Job titles don’t tell you whether someone is primarily a rent seeker. A lawyer who helps draft precise contracts may actually be helping the wheels of commerce turn, and so creating wealth. But trial lawyers in a country with poorly functioning tort systems may simply be extracting rents: They can make money by pursuing frivolous lawsuits.

For the full commentary, see:
SENDHIL MULLAINATHAN. “Economic View; Maximizing the Social Returns to a Career in Finance.” The New York Times, SundayBusiness Section (Sun., APRIL 12, 2015): 6.
(Note: the online version of the commentary has the date APRIL 10, 2015, and has the title “Economic View; Why a Harvard Professor Has Mixed Feelings When Students Take Jobs in Finance.”)

The paper praised and summarized above, is:
Murphy, Kevin M., Andrei Shleifer, and Robert W. Vishny. “The Allocation of Talent: Implications for Growth.” Quarterly Journal of Economics 106, no. 2 (May 1991): 503-30.

Hamilton Fostered the Preconditions for Capitalism

(p. 345) In a nation of self-made people, Hamilton became an emblematic figure because he believed that government ought to promote self-fulfillment, self-improvement, and self-reliance. His own life offered an extraordinary object lesson in social mobility, and his unstinting energy illustrated his devout belief in the salutary power of work to develop people’s minds and bodies. As treasury secretary, he wanted to make room for entrepreneurs, whom he regarded as the motive force of the economy. Like Franklin, he intuited America’s special genius for business: “As to whatever may depend on enterprise, we need not fear to be outdone by any people on earth. It may almost be said that enterprise is our element.”
Hamilton did not create America’s market economy so much as foster the cultural and legal setting in which it flourished. A capitalist society requires certain preconditions. Among other things, it must establish a rule of law through enforceable contracts; respect private property; create a trustworthy bureaucracy to arbitrate legal disputes; and offer patents and other protections to promote invention. The abysmal failure of the Articles of Confederation to provide such an atmosphere was one of Hamilton’s principal motives for promoting the Constitution. “It is known,” he wrote, “that the relaxed conduct of the state governments in regard to property and credit was one of the most serious diseases under which the body politic laboured prior to the adoption of our present constitution and was a material cause of that state of public opinion which led to its adoption.” He converted the new Constitution into a flexible instrument for creating the legal framework necessary for economic growth. He did this by activating three still amorphous clauses–the necessary-and-proper clause, the general-welfare clause, and the commerce clause–making them the basis for government activism in economics.

Source:
Chernow, Ron. Alexander Hamilton. New York: The Penguin Press, 2004.

Hamilton “Was the Clear-Eyed Apostle of America’s Economic Future”

(p. 344) The American Revolution and its aftermath coincided with two great transformations in the late eighteenth century. In the political sphere, there had been a repudiation of royal rule, fired by a new respect for individual freedom, majority rule, and limited government. If Hamilton made distinguished contributions in this sphere, so did Franklin, Adams, Jefferson, and Madison. In contrast, when it came to the parallel economic upheavals of the period–the industrial revolution, the expansion of global trade, the growth of banks and stock exchanges–Hamilton was an American prophet without peer. No other founding father straddled both of these revolutions–only Franklin even came close–and therein lay Hamilton’s novelty and greatness. He was the clear-eyed apostle of America’s economic future, setting forth a vision that many found enthralling, others unsettling, but that would ultimately prevail. He stood squarely on the modern side of a historical divide that seemed to separate him from other founders. Small wonder he aroused such fear and confusion.

Source:
Chernow, Ron. Alexander Hamilton. New York: The Penguin Press, 2004.

New Evidence on the Antikythera Mechanism

The Antikythera Mechanism was recovered in about 1901 and is believed to date from about 200 BC. Its complicated gear mechanism is believed to have been used to generate calendars or predict astronomical events. The technology never spread to benefit ordinary people. It was forgotten and mechanical gears had to be re-invented.
The Antikythera Mechanism raises a question: how is it that technologies with the potential to benefit humankind can fail to be adopted? This issue of the causes of technology adoption is an important issue for economic growth.

(p. D3) A riddle for the ages may be a small step closer to a solution: Who made the famed Antikythera Mechanism, the astronomical calculator that was raised from an ancient shipwreck near Crete in 1901?
. . .
. . . a new analysis of the dial used to predict eclipses, which is set on the back of the mechanism, provides . . . another clue to one of history’s most intriguing puzzles. Christián C. Carman, a science historian at the National University of Quilmes in Argentina, and James Evans, a physicist at the University of Puget Sound in Washington, suggest that the calendar of the mysterious device began in 205 B.C., just seven years after Archimedes died.
. . .
Starting with the ways the device’s eclipse patterns fit Babylonian eclipse records, the two scientists used a process of elimination to reach a conclusion that the “epoch date,” or starting point, of the Antikythera Mechanism’s calendar was 50 years to a century earlier than had been generally believed.
. . .
. . . Archimedes was killed by a Roman soldier in 212 B.C., while the commercial grain ship carrying the mechanism is believed to have sunk sometime between 85 and 60 B.C. The new finding suggests the device may have been old at the time of the shipwreck, but the connection to Archimedes now seems even less likely.
An inscription on a small dial used to date the Olympic Games refers to an athletic competition that was held in Rhodes, according to research by Paul Iversen, a Greek scholar at Case Western Reserve University.
“If we were all taking bets about where it was made, I think I would bet what most people would bet, in Rhodes,” said Alexander Jones, a specialist in the history of ancient mathematical sciences at New York University.

For the full story, see:
JOHN MARKOFF. “On the Trail of an Ancient Mystery.” The New York Times (Tues., NOV. 25, 2014): D3.
(Note: ellipses added.)
(Note: the online version of the story has the date NOV. 24, 2014.)

Is There “a Fortune to Be Made” in Selling to the Poor?

(p. B1) For years, multinational companies had little interest in lower-end consumers, figuring no money was to be made. Now, they are increasingly attractive to all types of industries, from consumer product makers to technology businesses. Google just announced plans to sell a stripped-down, cheaper version of its Android phone in India.
A decade ago, C. K. Prahalad, a University of Michigan business professor, in his book “The Fortune at the Bottom of the Pyramid,” detailed the potential, contending that such households were every bit as discriminating and aspirational as their counterparts at the other end of the income spectrum.
Mr. Prahalad, now dead, estimated there were four billion such consumers in a market worth $13 trillion. “People were saying, ‘There’s a fortune to be made. Let’s go,’ ” said Mark B. Milstein, director of the Cen-(p. B6)ter for Sustainable Global Enterprise at Cornell University.
But many of the first efforts failed. “There was not much thinking about what those consumers needed or wanted or how they might be different from consumers with more disposable income,” Mr. Milstein said.

For the full story, see:
STEPHANIE STROM. “Billions of Buyers.” The New York Times (Thurs., Sept. 18, 2014): B1 & B6.
(Note: the online version of the story has the date SEPT. 17, 2014, and has the title “Multinational Companies Court Lower-Income Consumers.”)

The book highlighted in the passage quoted is:
Prahalad, C. K. Fortune at the Bottom of the Pyramid Eradicating Poverty through Profits. Revised ed. Philadelphia, PA: Wharton School Publishing, 2009.

Moral Progress Accelerated in the 18th Century

(p. A11) For hundreds of years, people flocked to public hangings as a form of entertainment. Onlookers crowded into town squares and brought their families, reveling in the carnival atmosphere. Today most people are sickened at the idea of merriment at an execution. (Many are disturbed that executions take place at all.) We recoil from other once-common practices, too: slavery, the mistreatment of children, animal cruelty. Such shifts in attitude or belief surely constitute a form of moral progress and suggest, for once, that civilization is advancing and not receding.
. . .
Mr. Shermer defines moral progress as an “increase in the survival and flourishing of sentient beings,” which he illustrates with graphs and charts that reveal, among other things, a decline in war-related deaths, the expansion of the food supply, the reduction in major epidemics, the growth of world GDP and the spread of democracy.
Humanitarian achievements in the West, Mr. Shermer notes, began in earnest [in] the 18th century. Yet the ability to reason ethically is not a product of the Enlightenment. A moral instinct seems to be present at birth: Even infants possess innate intuitions about fairness and reciprocity, as Mr. Shermer explains. All societies punish free riders. The Golden Rule and Babylon’s Code of Hammurabi (advocating proportionate punishment) predate the ancient Greeks. So why did we need an Enlightenment to jump-start our moral progress?

For the full review, see:
SALLY SATEL. “BOOKSHELF; Getting Better All the Time; Crowds once flocked to watch executions. Now we recoil at the idea. What causes such transformations of ethical standards?” The Wall Street Journal (Tues., Jan. 20, 2015): A11.
(Note: ellipsis, and bracketed word, added.)
(Note: the online version of the review has the date Jan. 19, 2015.)

The book under review is:
Shermer, Michael. The Moral Arc: How Science and Reason Lead Humanity toward Truth, Justice, and Freedom. New York: Henry Holt and Co., 2015.

Fishing with Mosquito Nets, Where Food Is the Binding Constraint

(p. 1) BANGWEULU WETLANDS, Zambia — Out here on the endless swamps, a harsh truth has been passed down from generation to generation: There is no fear but the fear of hunger.
With that always weighing on his mind, Mwewa Ndefi gets up at dawn, just as the first orange rays of sun are beginning to spear through the papyrus reeds, and starts to unclump a mosquito net.
Nets like his are widely considered a magic bullet against malaria — one of the cheapest and most effective ways to stop a disease that kills at least half a million Africans each year. But Mr. Ndefi and countless others are not using their mosquito nets as global health experts have intended.
Nobody in his hut, including his seven children, sleeps under a net at night. Instead, Mr. Ndefi has taken his family’s supply of anti-malaria nets and sewn them together into a gigantic sieve that he uses to drag the bottom of the swamp ponds, sweeping up all sorts of life: baby catfish, banded tilapia, tiny mouthbrooders, orange fish eggs, water bugs and the occasional green frog.
“I know it’s not right,” Mr. Ndefi said, “but without these nets, we wouldn’t eat.”
Across Africa, from the mud flats of Nigeria to the coral reefs off Mozambique, mosquito-net fishing is a growing problem, an unintended consequence of one of the biggest and most celebrated public health campaigns in recent years.
The nets have helped save millions of lives, but scientists worry about the collateral damage: Africa’s fish.
. . .
“The nets go straight out of the bag into the sea,” said Isabel Marques da Silva, a marine biologist at Universidade Lúrio in Mozambique. “That’s why the inci-(p. 10)dence for malaria here is so high. The people don’t use the mosquito nets for mosquitoes. They use them to fish.”
But the unsparing mesh, with holes smaller than mosquitoes, traps much more life than traditional fishing nets do. Scientists say that could imperil already stressed fish populations, a critical food source for millions of the world’s poorest people.
. . .
In many places, fish are dried for hours in direct sunlight on treated mosquito nets. Direct sunlight can break down the insecticide coating. Anthony Hay, an associate professor of environmental toxicology at Cornell University, said fish could absorb some of the toxins, leaving people to ingest them when they eat the fish.
“It’s just another one of these ‘white man’s burdens,’ ” Mr. Hay said, referring to William Easterly’s well-known book critical of foreign aid by the West. “We think we have a solution to everybody’s problems, and here’s an example of where we’re creating a new problem.”
. . .
For Mr. Ndefi, it is a simple, if painful, matter of choice. He knows all too well the dangers of malaria. His own toddler son, Junior, died of the disease four years ago. Junior used to always be there, standing outside his hut, when Mr. Ndefi came home from fishing.
Mr. Ndefi hopes his family can survive future bouts of the disease. But he knows his loved ones will not last long without food.

For the full story, see:
JEFFREY GETTLEMAN. “Meant to Keep Mosquitos Out, Nets Are Used to Haul Fish In.” The New York Times, First Section (Sun., JAN. 25, 2015): 1 & 10.
(Note: ellipses are added.)
(Note: the online version of the story has the date JAN. 24, 2015, and has the title “Meant to Keep Malaria Out, Mosquito Nets Are Used to Haul Fish In.”)

The book referenced by Professor Hay, is:
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. New York: The Penguin Press, 2006.

Progress Depends on Removing Barriers to Innovation

In the quotation below, Bill Gates is referring to the late, and way-under-appreciated, economist Julian Simon.

(p. A3) “. . . Simon’s view was that humans would have to change to innovate,” Mr. Gates said. Innovation, in other words, is not preordained. Indeed, it’s happened much more in some societies than in others. And it has happened, Mr. Gates was arguing, because people and institutions took steps to remove the barriers to progress.
. . .
. . . , much of the world is enjoying one of history’s most rapid increases in prosperity. Life expectancy has risen more than six years just since 1990. The world, to quote the title of a book by the economist Charles Kenny, is “Getting Better.” As Mr. Gates says: “The world is actually improving a lot. We’re trying to deliver both the good news on the progress and the possibility to do more.”

For the full commentary, see:
David Leonhardt. “Africa’s Economy Is Rising, and Focus Turns to Food.” The New York Times (Thurs., JAN. 22, 2015): A3.
(Note: ellipses added.)
(Note: the online version of the commentary has the title “Africa’s Economy Is Rising. Now What Happens to Its Food?”)

The book mentioned by Charles Kenny is:
Kenny, Charles. Getting Better: Why Global Development Is Succeeding–and How We Can Improve the World Even More. Philadelphia, PA: Basic Books, 2011.

One of the great books by Julian Simon is:
Moore, Stephen, and Julian L. Simon. It’s Getting Better All the Time: 100 Greatest Trends of the Last 100 Years. Washington, D.C.: Cato Institute, 2000.

The “Miracle Machines” of Farming

(p. 75) Nobody had washing machines, vacuum cleaners, or incandescent light bulbs. But the farmers did have their miracle machines. In fifteen years, the Lucas family had gone from a walking plow pulled along behind a mule, to a riding plow, in which horses carried the blade through the soil, to a fine-tuned internal combustion plow.
“Machinery is the new Messiah,” said Henry Ford, and though that sounded blasphemous to a devout sodbuster, there was something to it. Every ten seconds a new car came off Ford’s factory line, and some of them were now parked next to dugouts in No Man’s Land.

Source:
Egan, Timothy. The Worst Hard Time: The Untold Story of Those Who Survived the Great American Dust Bowl. Boston: Houghton Mifflin, 2006.