Category: Economic Growth

Cooking with Cow Shit Adds to Global Warming (and Would Be Ended by Economic Growth)

SootFromCookingIndia.jpg“Cooking in Kohlua, India. Soot from tens of thousands of villages in developing countries is responsible for 18 percent of the planet’s warming, studies say.” Source of photo and caption: online version of the NYT article quoted and cited below.

Economic growth is sometimes seen as increasing pollution. But the article quoted below shows that primitive cooking methods, which occur in the absence of economic growth, cause one of the most damaging forms of pollution: black carbon.

(p. A1) KOHLUA, India — “It’s hard to believe that this is what’s melting the glaciers,” said Dr. Veerabhadran Ramanathan, one of the world’s leading climate scientists, as he weaved through a warren of mud brick huts, each containing a mud cookstove pouring soot into the atmosphere.
As women in ragged saris of a thousand hues bake bread and stew lentils in the early evening over fires fueled by twigs and dung, children cough from the dense smoke that fills their homes. Black grime coats the undersides of thatched roofs. At dawn, a brown cloud stretches over the landscape like a diaphanous dirty blanket.
In Kohlua, in central India, with no cars and little electricity, emissions of carbon dioxide, the main heat-trapping gas linked to global warming, are near zero. But soot — also known as black carbon — from tens of thousands of villages like this one in developing countries is emerging as a major and previously unappreciated source of global climate change.
While carbon dioxide may be the No. 1 contributor to rising global temperatures, scientists say, black carbon has emerged as an important No. 2, with recent studies estimating that it is responsible for 18 percent of the (p. A12) planet’s warming, compared with 40 percent for carbon dioxide. Decreasing black carbon emissions would be a relatively cheap way to significantly rein in global warming — especially in the short term, climate experts say. Replacing primitive cooking stoves with modern versions that emit far less soot could provide a much-needed stopgap, while nations struggle with the more difficult task of enacting programs and developing technologies to curb carbon dioxide emissions from fossil fuels.
. . .
Better still, decreasing soot could have a rapid effect. Unlike carbon dioxide, which lingers in the atmosphere for years, soot stays there for a few weeks. Converting to low-soot cookstoves would remove the warming effects of black carbon quickly, while shutting a coal plant takes years to substantially reduce global CO2 concentrations.
. . .
Mark Z. Jacobson, professor of environmental engineering at Stanford, said that the fact that black carbon was not included in international climate efforts was “bizarre,” but “partly reflects how new the idea is.”

For the full story, see:
ELISABETH ROSENTHAL. “By Degrees; Black Carbon; Soot From Third-World Stoves Is New Target in Climate Fight.” The New York Times (Thurs., April 16, 2009): A1, A12.
(Note: ellipses added; the title of the online version is “By Degrees – Third-World Stove Soot Is Target in Climate Fight.” )

BlackCarbonMap.jpg

Source of maps: online version of the NYT article quoted and cited above.

Major Advances Seldom Come from Big Incumbent Firms

(p. 109) Most of today’s Fortune 500 were not there fifty years ago. All of the private sector’s net new jobs in the United States during the past twenty years were added by companies not on the Fortune 1000 twenty years ago: two thirds of the net new jobs came from companies with fewer than twenty employees twenty years ago. Ten years ago our automobile giants seemed invincible. Today we wonder whether more than one will survive.

In 1960, Theodore Levitt of Harvard wrote an article in the Harvard Business Review, “Marketing Myopia,” in which he pointed out that every industry was once a growth industry. Perversely, a vicious cycle sets in. After experiencing continued growth for a while, managers in the industry come to believe that continuing growth is assured. They persuade themselves that there is no competitive substitute for their product, and develop too much faith in (p. 110) the benefits of mass production and the inevitable steady cost reduction that results as output rises. Managements become preoccupied with products that lend themselves to carefully controlled improvement and the benefits of manufacturing cost reduction. All of these forces combine to produce an inevitable stagnation or decline.
In Dynamic Economics, the economist Burton Klein puts forward a carefully researched and very similar view: “Assuming that an industry has already reached the stage of slow history, the advances will seldom come from the major firms in the industry. In fact, of some fifty inventions [fifty key twentieth-century breakthrough innovations that he studied] that resulted in new S-shaped curves [major new growth patterns] in relatively static industries, I could find no case in which the advance in question came from a major firm in the industry.” George Gilder elaborates on Klein’s work “The very process by which a firm becomes most productive in an industry tends to render it less flexible and inventive.”
It appears that evolution is continuously at work in the marketplace; that adaptation is crucial; and that few big businesses, if any, pull it off. Many of our excellent companies most probably will not stay buoyant forever. We would merely argue that they’ve had a long run–a much longer and more successful run than most–and are coming much closer than the rest to maintaining adaptability and size at the same time.

Source:
Peters, Thomas J., and Robert H. Waterman. In Search of Excellence: Lessons from America’s Best-Run Companies. New York: HarperCollins, 2004.
(Note: italics and brackets in original.)

Entrepreneurs, Not MITI, Decided Japan Outcomes in ’60s, ’70s and ’80s

(p. 164) Ishibashi’s regime was followed in the early 1960s by the “income-doubling campaign” of his associate Hayato Ikeda, who assumed power in 1961 and continued the supply-side thrust. The result was a steady upsurge of domestic growth, with firms and industries rapidly gaining experience in intense rivalries at home before entering the global arena as low-cost producers, and with government cutting taxes and increasing revenues and savings.

It is from this domestic crucible of intense competition with normal rates of bankruptcy far above those in the United States, with scores of rivals in every field, that the great Japanese companies have emerged. At various times during the last three decades, for example, there have been 58 integrated steel firms, 50 motorbike companies, 12 auto firms, 42 makers of hand-held calculators, 13 makers of facsimile machines, and 250 producers of robots. Overlooking this welter are always the crested bureaucrats of MITI, sometimes offering useful aid and guidance–but at the center, deciding outcomes, have always been the entrepreneurs.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

“Dynamism Has Been Leached From Our System,” But Not from Our Brains or Our Hearts

Sometimes one of Peggy Noonan’s columns reminds us that she was once one of Ronald Reagan’s best speech writers:

(p. A11) I heard a man named Nathan Myhrvold speak of a thing called Microsoft. I saw a young man named Steve Jobs prowl a New York stage and unveil a computer that then we thought tiny and today we’d call huge. A man named Steve Wozniak became a household god as my son reported his visionary ways. It was a time so full of genius and dynamism that it went beyond words like “breakthrough” and summoned words like “revolution.” If you were paying attention, if you understood you were witnessing something great, the invention of a new age, the computer age, it caught at your throat. It was like hearing great music. People literally said what had been said in the age of Thomas Edison: “What will they think of next?” What a buoyant era.
. . .
And for a moment, as I sent and received my first airborne Wi-Fi emails, I was back there. And I was moved because I realized how much I missed it, how much we all do, that “There are no walls” feeling. “Think different.” “On January 24th, Apple Computer will introduce Macintosh. And you’ll see why 1984 won’t be like ‘1984.’ ” That was 25 years ago. The world was on fire.
It has cooled. And the essential problem with the crash we’re in is no one can imagine quite feeling that way again. People can remember it, but they can’t quite resummon it.
. . .
I end with a hunch that is not an unhappy one. Dynamism has been leached from our system for now, but not from the human brain or heart. Just as our political regeneration will happen locally, in counties and states that learn how to control themselves and demonstrate how to govern effectively in a time of limits, so will our economic regeneration. That will begin in someone’s garage, somebody’s kitchen, as it did in the case of Messrs. Jobs and Wozniak. The comeback will be from the ground up and will start with innovation. No one trusts big anymore. In the future everything will be local. That’s where the magic will be. And no amount of pessimism will stop it once it starts.

For the full commentary, see:
PEGGY NOONAN. “Remembering the Dawn of the Age of Abundance; Times are hard, but dynamism isn’t dead.” Wall Street Journal (Sat., Feb. 21, 2009): A11.
(Note: ellipses added.)

Economic Freedom Map

EconomicFreedomPoster.JPG Source of image: http://divisionoflabour.com/archives/EFWposter.JPG

I heard a useful presentation by John Morton on the Fraser Institute’s Economic Freedom Map at the April 2009 Association of Private Enterprise Education meetings in Guatemala City. Using data developed by Jim Gwartney, Robert Lawson, and their associates, the map provides striking visual evidence of the relationship between economic freedom and economic growth.

For additional information, and to purchase a copy of the map, visit: http://www.freetheworld.com/ef_map.html

Stagnation Caused by “Depriving Creative Individuals of Financial Power”

(p. 164) The key to growth is quite simple: creative men with money. The cause of stagnation is similarly clear: depriving creative individuals of financial power. To revive the slumping nations of social democracy, the prime need is to reverse the policies of entrepreneurial euthanasia. Individuals must be allowed to accumulate disposable savings and wield them in the economies of the West. The crux is individual, not corporate or collective, wealth.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

System of Capitalism without Capitalists Is Failing in Europe

(p. 164) The reason the system of capitalism without capitalists is failing throughout most of Europe is that it misconceives the essential nature of growth. Poring over huge aggregations of economic data, economists see the rise to wealth as a slow upward climb achieved through the marginal productivity gains of millions of workers, through the slow accumulation of plant and machinery, and through the continued improvement of “human capital” by advances in education, training, and health. But, in fact, all these sources of growth are dwarfed by the role of entrepreneurs launching new companies based on new concepts or technologies. These gains generate the wealth that finances the welfare state, that makes possible the long-term investments in human capital that are often seen as the primary source of growth.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

Frazer Institute Seeks Better Measures of Policy Variables

George Gilder emphasizes that the importance of entrepreneurship to economic growth has been missed by many economists, in part because of the difficulty of measuring both the inputs of entrepreneurship (e.g., courage, persistence, creativity, etc.) and the outputs of entrepreneurship (e.g., happiness from more challenging work, greater variety of products, etc.).
Unfortunately this is not just an academic problem, because economists’ policy advice is based on their models, and their models focus on what they can measure. If they can’t measure entrepreneurship, then policies to encourage entrepreneurship are neglected.
Now the Frazer Institute, is seeking proposals to improve the measurement of important poorly measured policy-relevant variables. This initiative is in the spirit of the good work that the Frazer Institute has done in correlating measures of economic freedom with measures of economic growth.
I have been asked to publicize this initiative, and am pleased to do so:

Dear Art Diamond,

The Fraser Institute is launching a new contest to identify economic and public policy issues which still require proper measurement in order to facilitate meaningful analysis and public discourse. We hope you can help promote this contest by posting it on your weblog, artdiamondblog.
The Essay Contest for Excellence in the Pursuit of Measurement is an opportunity for the public to comment on an economic or public policy issue that they feel is important and deserves to be properly measured.
A top prize of $1,000 and other cash prizes can be won by identifying a vital issue that is either not being measured, or is being measured inappropriately. Acceptable entry formats include a short 500-600 word essay, or a short one-minute video essay.
Complete details and a promotional flyer are available at: http://www.fraserinstitute.org/programsandinitiatives/measurement_center.htm.
Entry deadline is Friday, May 15th, 2009.
Sponsored by the R.J. Addington Center for the Study of Measurement.

Enquiries may be directed to:
Courtenay Vermeulen
Education Programs Assistant
The Fraser Institute
Direct: 604.714.4533
courtenay.vermeulen@fraserinstitute.org

The Fraser Institute is an independent international research and educational organization with offices in Canada and the United States and active research ties with similar independent organizations in more than 70 countries around the world. Our vision is a free and prosperous world where individuals benefit from greater choice, competitive markets, and personal responsibility. Our mission is to measure, study, and communicate the impact of competitive markets and government interventions on the welfare of individuals.

An important source of Gilder’s views, obliquely referred to in my comments above, is:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

The Most Fertile Margins of the Economy Are Always in People’s Minds

(p. 151) The most fertile margins of the economy are always in people’s minds: thoughts and plans and projects yet unborn to business. The future emerges centrifugally and at first invisibly, on the fringes of existing companies and industries. The fastest-growing new firms often arise through defections of restive managers and engineers from large corporations or through the initiatives of (p. 152) immigrants and outcasts beyond the established circles of commerce. All programs that favor established companies, certified borrowers, immobile forms of pay, pensions, and perquisites, institutionally managed savings and wealth, against mobile capital, personal earnings, disposable savings, and small business borrowing, tend to thwart the turbulent, creative, and unpredictable processes of innovation and growth.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.

Entrepreneurs Are the Main Source of Economic Growth

(p. 144) The reason the system of capitalism without capitalists is failing throughout most of Europe is that it misconceives the essential nature of growth. Poring over huge aggregations of economic data, economists see the rise to wealth as a slow upward climb achieved through the marginal productivity gains of millions of workers, through the slow accumulation of plant and machinery, and through the continued improvement of “human capital” by advances in education, training, and health. But, in fact, all these sources of growth are dwarfed by the role of entrepreneurs launching new companies based on new concepts or technologies. These gains generate the wealth that finances the welfare state, that makes possible the long-term investments in human capital that are often seen as the primary source of growth.

Source:
Gilder, George. The Spirit of Enterprise. 1 ed. New York: Simon and Schuster, 1984.

Vaclav Klaus: The Czech Republic’s Free Market Crusader

KlausVaclav2009-02-15.jpg “President Vaclav Klaus of the Czech Republic is known for his economic liberalism.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A6) To supporters, Mr. Klaus is a brave, lone crusader, a defender of liberty, the only European leader in the mold of the formidable Margaret Thatcher. (Aides say Mr. Klaus has a photo of the former British prime minister in his office near his desk.)
. . .
As a former finance minister and prime minister, he is credited with presiding over the peaceful 1993 split of Czechoslovakia into two states and helping to transform the Czech Republic into one of the former Soviet bloc’s most successful economies.
But his ideas about governance are out of step with many of the European Union nations that his country will lead starting Jan. 1.
While even many of the world’s most ardent free marketeers acknowledged the need for the recent coordinated bailout of European banks, Mr. Klaus lambasted it as irresponsible protectionism. He blamed too much — rather than too little — regulation for the crisis.
A fervent critic of the environmental movement, he has called global warming a dangerous “myth,” arguing that the fight against climate change threatens economic growth.
. . .
Those who know Mr. Klaus say his economic liberalism is an outgrowth of his upbringing. Born in 1941, he obtained an economics degree in 1963 and was deeply influenced by free market economists like Milton Friedman.
Mr. Klaus’s son and namesake, Vaclav, recalled in an interview that when he was 13, his father told him to read Aleksandr Solzhenitsyn to better understand Communism’s oppressiveness.
“If you lived under communism, then you are very sensitive to forces that try to control or limit human liberty,” he said in an interview.

For the full story, see:
DAN BILEFSKY. “A Fiery Czech Is Poised to Be the Face of Europe.” The New York Times (Tues., November 25, 2008): A6.
(Note: ellipses added.)