Category: Economic Growth

Still Plenty of Fruit to Pick from the Tree of Science

Some pessimists have argued for imminent economic stagnation on the grounds that technological progress depends on new scientific knowledge and that we already pretty much know all there is to know about science. One way in which they are wrong is that the process of scientific discovery still has a long way to go before we fully understand the world. (If C.S. Peirce was right in saying that truth is the result of infinite inquiry, then we will never fully understand the world.)

(p. A1) Evidence is mounting that a tiny subatomic particle seems to be disobeying the known laws of physics, scientists announced on Wednesday, a finding that would open a vast and tantalizing hole in our understanding of the universe.

The result, physicists say, suggests that there are forms of matter and energy vital to the nature and evolution of the cosmos that are not yet known to science. The new work, they said, could eventually lead to breakthroughs more dramatic than the heralded discovery in 2012 of the Higgs boson, a particle that imbues other particles with mass.

“This is our Mars rover landing moment,” said Chris Polly, a physicist at the Fermi National Accelerator Laboratory, or Fermilab, in Batavia, Ill., who has been working toward this finding for most of his career.

The particle célèbre is the muon, which is akin to an electron but far heavier, and is an integral element of the cosmos. Dr. Polly and his colleagues — an international team of 200 physicists from seven countries — found that muons did not behave as predicted when shot through an intense magnetic field at Fermilab.

The aberrant behavior poses a firm challenge to the Standard Model, the suite of equations that enumerates the fundamental particles in the universe (17, at last count) and how they interact.

“This is strong evidence that the muon is sensitive to something that is not in our best theory,” said Renee Fatemi, a physicist at the University of Kentucky.

. . .

(p. A19) For decades, physicists have relied on and have been bound by the Standard Model, which successfully explains the results of high-energy particle experiments in places like CERN’s Large Hadron Collider. But the model leaves many deep questions about the universe unanswered.

Most physicists believe that a rich trove of new physics waits to be found, if only they could see deeper and further. The additional data from the Fermilab experiment could provide a major boost to scientists eager to build the next generation of expensive particle accelerators.

For the full story, see:

Dennis Overbye. “A Particle’s Tiny Wobble Could Upend the Known Laws of Physics.” The New York Times (Friday, April 16, 2021): A1 & A19.

(Note: ellipsis, and bracketed year, added.)

(Note: the online version of the article was updated April 9, 2021, and has the title “A Tiny Particle’s Wobble Could Upend the Known Laws of Physics.”)

My point at the start of this entry is directly relevant to my argument in the first half of the last chapter of:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

Mundell and Laffer Agreed High Taxes Hurt Poor

(p. A12) Robert A. Mundell began to make his name in the 1960s as a maverick economist eager to challenge his more orthodox colleagues. He ended up influencing mainstream economic policy in the U.S. and Europe in profound ways that few of his peers could have imagined.

. . .

Dr. Mundell’s influence on U.S. economic policy also dates to the 1960s. He was teaching at the University of Chicago when he met Arthur Laffer in 1967. Dr. Laffer, a Stanford-educated economist, later recalled their first meeting as a shock. “In walked a sallow, tousle-headed, pipe-smoking figure wearing a faded trench coat belted with a clothesline cord,” Dr. Laffer wrote.

The disheveled Dr. Mundell and the buttoned-down Dr. Laffer agreed that steeply progressive taxes were deterring investment and employment in ways that hurt the poor.

In the 1970s, Dr. Mundell argued that the U.S. should defy conventional economic wisdom by raising interest rates to protect the dollar’s value while reducing taxes to stimulate the economy. “I knew I was in the minority,” he said in an 1988 interview. “But I thought my vote should count much more than the others because I understood the subject.”

Dr. Laffer introduced Dr. Mundell and his ideas to Jude Wanniski and Robert Bartley of The Wall Street Journal editorial pages, whose work influenced Republican politicians including Jack Kemp and Mr. Reagan.

For the full obituary, see:

James R. Hagerty. “Canadian Economist Inspired U.S. Tax Cuts.” The Wall Street Journal (Saturday, April 6, 2021): A12.

(Note: ellipsis added.)

(Note: the online version of the obituary has the date April 9, 2021, and has the title “Robert Mundell Helped Inspire U.S. Tax Cuts and the Euro.” In the last paragraph quoted above, the online version mentions Jack Kemp. The print version did not.)

Clean-Energy Requires More Transmission Lines Which Requires More Use of Eminent Domain to Seize Private Property

(p. B12) President Biden’s infrastructure plan proposes some tried-and-trusted methods to spur clean-energy development such as a 10-year extension of existing tax credits for solar and wind energy. More interestingly, it introduces an investment tax credit for high-voltage transmission lines.

. . .

The administration is certainly looking in the right direction: To reach President Biden’s net-zero emissions goal by 2050, the U.S. will need to expand electricity transmission systems by 60% by 2030 and may need to triple it by 2050, according to research published by Princeton University in December [2020]. That is because renewable energy-rich places such as the windiest regions aren’t necessarily close to population centers, where electricity demand is.

While the clean-energy industry probably won’t complain about a new subsidy, the tax-credit proposal is a bit of a head scratcher given that the real roadblocks to transmission lines have to do with permitting, much of which is in the hands of state and local authorities.

A shift toward e-commerce should push up productivity by eliminating workers needed in bricks-and-mortar stores, Mr. Gordon said. Videoconferencing should also help, though the public-transit sector could offset some of the gains because buses and rail transit will carry fewer riders, he said.

“For most transmission we need in the country, it’s not a cost issue or an access-to-capital issue, although transmission can be delayed because of cost allocation debates,” said George Bilicic, global head of power, energy and infrastructure at Lazard.

. . .

The proposed plan also calls for a so-called Grid Deployment Authority within the Energy Department to “better leverage existing rights of way” along roads and railways. That would be a good first step, though eminent domain—the power of the government to take private property and convert it for public use—remains largely within state regulators’ hands. While the Federal Energy Regulatory Commission has authority to grant natural-gas pipelines the right of eminent domain under the Natural Gas Act, there is no equivalent authority for electricity transmission under the Federal Power Act and little momentum in Congress to grant that provision.

For the full commentary, see:

Jinjoo Lee. “Productivity Looks Ready to Pick Up.” The Wall Street Journal Tuesday, April 6, 2021): B12.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the commentary has the date April 4, 2021, and has the title “Biden’s Grid Proposal May Be a Square Peg in a Round Hole.”)

The Princeton research mentioned above is:

Larson, Eric, Chris Greig, Jesse Jenkins, Erin Mayfield, Andrew Pascale, Chuan Zhang, Joshua Drossman, Robert Williams, Steve Pacala, Robert Socolowi, Ejeong Baik, Rich Birdsey, Rick Duke, Ryan Jones, Ben Haley, Emily Leslie, Keith Paustian, and Amy Swan. “Net-Zero America: Potential Pathways, Infrastructure, and Impacts, Interim Report.” Princeton, NJ: Princeton University, Dec. 15, 2020.

Chinese Chip Central Planning Creates “Stunning Absurdities That Defy Logic and Common Sense”

(p. B1) Liu Fengfeng had more than a decade under his belt at one of the world’s most prominent technology companies before he realized where the real gold rush in China was taking place.

Computer chips are the brains and souls of all the electronics the country’s factories crank out. Yet they are mostly designed and produced overseas. China’s government is lavishing money upon anyone who can help change that.

. . .

(p. B2) In a way, China is hoping to achieve the same kind of liftoff that helped it progress from making plastic toys to crafting solar panels.

With semiconductors, though, “the model starts to break down a little bit,” said Jay Goldberg, a tech industry consultant and former Qualcomm executive. The technology is eye-wateringly expensive to develop, and established players have spent decades accumulating know-how. Europe, Mr. Goldberg noted, once had many “incredible” chip companies. Japan’s chip makers are leaders in certain specialized products, but few would call them bold innovators.

“My point is, there is a ladder — China’s moving up it,” Mr. Goldberg said. But it’s “unclear which outcome they go to.”

. . .

At a top-level meeting on the economy last week, the Communist Party’s leaders enshrined technological self-reliance as one of the country’s “Five Fundamentals” for economic development.

Complete self-sufficiency in chips, however, would mean recreating every part of the lengthy supply chains for some of the most complex technology on earth — a mission that would seem to lead, if not to madness, at least to waste.

. . .

“Up until very recently — this year — the goal had been: With state backing, move up the value chain, specialize where China has a comparative advantage, but don’t really try and fall down the rabbit hole of trying to build everything yourself,” said Jimmy Goodrich, the vice president for global policy at the Semiconductor Industry Association, a group that represents American chip companies.

Now, “it’s very clear that Xi Jinping is calling for a redundant domestic supply chain,” Mr. Goodrich said. “And so the rules of economics, comparative advantage and the supply-chain efficiencies have basically been thrown out the door.”

The government is conscious of the dangers. State-run news outlets have amply covered the recent semiconductor flameouts. The message to other upstarts: Don’t mess it up.

When the state broadcaster China Central Television visited one stalled project in the eastern city of Huai’an recently, it found dozens of giant machines idling on the factory floor, many of them still sheathed in plastic.

“There have been some stunning absurdities that defy logic and common sense,” China Economic Weekly said.

. . .

“There is definitely a bubble in China,” he said. “But you can’t overgeneralize.”

. . .

“Something is bound to accumulate, whether it’s equipment, talent or factories, right?” Mr. Liu said. “If not you or the other guy, then it will be someone else who ends up using it. I think this might be the government’s logic.”

For the full story, see:

Raymond Zhong and Cao Li. “China’s Frenzy to Master Chip Manufacturing.” The New York Times (Monday, December 28, 2020): B1-B2.

(Note: ellipses added.)

(Note: the online version of the story has the date Dec. 24, 2020, and has the title “With Money, and Waste, China Fights for Chip Independence.”)

In the Early Fight Against COVID-19 in China “Front-Line Bureaucrats Were Consumed With Paperwork”

(p. A15) After Chinese leader Xi Jinping ordered rural poverty eliminated by 2020, bureaucrats in the southwestern city of Mianyang got busy—with paperwork.

Instructed to devote 70% of their time to the campaign, they diligently filled out forms certifying compliance, a practice known as “leaving marks,” said Pang Jia, a local judicial clerk who joined the effort. When higher-ups demanded photographic proof of their home visits, some aid workers made up for missing winter photos by posing in cold-weather clothing during summer house calls, Ms. Pang said.

Since taking power in late 2012, Mr. Xi has realigned Chinese politics with his domineering style and a top-down drive to forge a centralized state under the Communist Party. But his efforts are running into an old foe: bureaucracy.

Party observers say the drive for centralization in a sprawling nation too often fosters bureaucratic inertia, duplicity and other(p. A10)unproductive practices that are aimed at satisfying Beijing and protecting careers but threaten to undermine Mr. Xi’s goals.

Indeed, some local officials have become so focused on pleasing Mr. Xi and fulfilling party mandates that they can neglect their basic duties as public servants, sometimes with dire results.

As the new coronavirus spread in Wuhan in late 2019, for instance, local authorities were afraid to share bad news with Beijing. That impeded the national response and contributed to the death toll, according to a Wall Street Journal investigation.

Mr. Xi and other senior officials publicly lamented how front-line bureaucrats were consumed with paperwork instead of fighting the contagion. Officials dedicated hours each day to filling out multiple documents for agencies making overlapping requests for information, including residents’ body temperatures and symptoms.

For the full story, see:

Chun Han Wong. “Xi Jinping’s Eager Minions Snarl His China Plans.” The Wall Street Journal (Monday, March 8, 2021): A15.

(Note: the online version of the story has the date March 7, 2021, and has the title “Xi Jinping’s Eager-to-Please Bureaucrats Snarl His China Plans.”)

In North Equatorial Africa, Air Pollution Declines with Economic Growth

(p. A9) LAGOS, Nigeria — Rapidly growing countries generally see sharp increases in air pollution as their populations and economies expand. But a new study of air quality in Africa published on Monday [Feb. 8, 2021] has found the opposite: One of the continent’s most vibrant regions is becoming less polluted.

The study, published in Proceedings of the National Academy of Sciences, found that levels of dangerous nitrogen oxides, a byproduct of combustion, in the northern part of sub-Saharan Africa have declined sharply as wealth and population in the area have increased.

. . .

The reason, according to researchers, is that an increase in pollution from industry and transportation in the area studied — from Senegal and Ivory Coast in the west to South Sudan, Uganda and Kenya in the east — appears to have been offset by a decline in the number of fires set by farmers.

For the full story, see:

Shola Lawal. “As Economies Get Bigger, Air Pollution Falls in Africa.” The New York Times (Tues., February 9, 2021): A9.

(Note: ellipsis, and bracketed date, added.)

(Note: the online version of the story has the date Feb. 8, 2021, and has the title “A Surprise in Africa: Air Pollution Falls as Economies Rise.”)

The National Academy of Sciences study mentioned above is:

Hickman, Jonathan E., Niels Andela, Kostas Tsigaridis, Corinne Galy-Lacaux, Money Ossohou, and Susanne E. Bauer. “Reductions in No≪Sub≫2≪/Sub≫ Burden over North Equatorial Africa from Decline in Biomass Burning in Spite of Growing Fossil Fuel Use, 2005 to 2017.” Proceedings of the National Academy of Sciences 118, no. 7 (2021): e2002579118.

Communist Dictator Kim Jong-un Is “Really Sorry” for North Koreans’ Economic Suffering

(p. A10) “Our five-year economic development plan has fallen greatly short of its goals in almost all sectors,” Mr. Kim said in his opening speech to the ruling Workers’ Party’s eighth congress that began in Pyongyang, the capital, on Tuesday [Jan. 5, 2021].

. . .

. . . he had little to show on the economic front. He apologized to his people for failing to live up to their expectations. “I am really sorry for that,” he said, appearing to fight back tears. “My efforts and sincerity have not been sufficient enough to rid our people of the difficulties in their life.”

For the full story, see:

Choe Sang-Hun. “Kim Admits That He’s Failed In His 5-Year-Plan to Rebuild North Korea’s Feeble Economy.” The New York Times (Thursday, January 7, 2021): A10.

(Note: ellipses, and bracketed date, added.)

(Note: the online version of the story was updated Jan. 15, 2021, and has the title “North Korea Party Congress Opens With Kim Jong-un Admitting Failures.”)

Communist Dictatorship Was Not Inevitable in Russia in 1917

(p. 14) A professor at Bard College, McMeekin argues that one of the seminal events of modern history was largely a matter of chance. Well-written, with new details from archival research used for vivid descriptions of key events, “The Russian Revolution” comes nearly three decades after Richard Pipes’s masterpiece of the same name.

. . .

Far from the hopeless backwater depicted in most histories, McMeekin argues, Russia’s economy was surging before the war, with a growth rate of 10 percent a year — like China in the early 21st century. “The salient fact about Russia in 1917,” he writes, “is that it was a country at war,” yet he adds that the Russian military acquitted itself well on the battlefield after terrible setbacks in 1915, with morale high in early 1917. “Knowing how the story of the czars turns out, many historians have suggested that the Russian colossus must always have had feet of clay,” he writes. “But surely this is hindsight. Despite growing pains, uneven economic development and stirrings of revolutionary fervor, imperial Russia in 1900 was a going concern, its very size and power a source of pride to most if not all of the czar’s subjects.”

Nicholas II — rightly characterized as an incompetent reactionary in most histories — is partly rehabilitated here. His fundamental mistake, McMeekin says, was to trust his liberal advisers, who urged him to go to war, then conspired to remove him from power after protests over bread rations led to a military mutiny. Even the royal family’s trusted faith healer Rasputin, the ogre of conventional wisdom, largely gets a pass for sagely advising the czar that war would prompt his downfall.

Although McMeekin agrees the real villains are the ruthless Bolsheviks, he reserves most criticism for the hapless liberals.

. . .

Having taken power, the Bolsheviks turned on the unwitting soldiers and peasants who were among their most fervent supporters, unleashing a violent terror campaign that appropriated land and grain, and that turned into a permanent class war targeting ever-larger categories of “enemies of the people.” Unconcerned about Russia’s ultimate fate, they were pursuing their greater goal of world revolution.

For the full review, see:

Gregory Feifer. “The Best-Laid Plans.” The New York Times Book Review (Sunday, June 11, 2017): 14-15.

(Note: ellipses added.)

(Note: the online version of the review has the date June 6, 2017, and has the title “A New History Recalibrates the Villains of the Russian Revolution.”)

The book under review is:

McMeekin, Sean. The Russian Revolution: A New History. New York: Basic Books, 2017.

Least-Well-Off Were Gaining Before Pandemic

(p. A3) U.S. families’ income and wealth rose in the years heading into the coronavirus pandemic, with those in lower-income and lower-wealth categories reaping relatively large gains, the Federal Reserve said in a report on household finances.

. . .

The distribution of wealth between low- and high-income households narrowed slightly in the latest survey period, Fed economists said, a shift from the 2010-to-2016 period when incomes largely stagnated for all but the most well-off after the 2007-2009 recession.

Families in the lowest two income groups recorded large percentage increases in median net worth, suggesting the decadelong expansion benefited a wide swath of society. Net worth rose 37% to $9,800 for the lowest earners, and increased 40% to $44,000 for the second-lowest group. The median net worth of the highest and second-highest groups declined 8% and 9%, respectively.

For the full story, see:

Harriet Torry. “Household Wealth Rose Before Crisis.” The Wall Street Journal (Tuesday, September 29, 2020): A3.

(Note: ellipsis added.)

(Note: the online version of the story was updated Sep. 28, 2020, and has the title “Household Wealth Rose in Years Before Pandemic, Fed Says.”)

Before Covid-19, Poverty and Unemployment Were Lowest in 50 Years

(p. B8) WASHINGTON — A record-low share of Americans were living in poverty, incomes were climbing, and health insurance coverage was little changed in 2019, a government report released on Tuesday showed — though the circumstances of many have deteriorated as pandemic lockdowns and industry disruptions have thrown millions out of work.

The share of Americans living in poverty fell to 10.5 percent in 2019, the Census Bureau reported, down 1.3 percentage points from 2018. That rate is the lowest since estimates were first published in 1959.

Household incomes increased to their highest level on record dating to 1967, at $68,700 in inflation-adjusted terms. That change came as individual workers saw their earnings climb and as the total number of people working increased.

. . .

Unemployment was hovering at around 3.5 percent before the crisis took hold, the lowest in 50 years, and wages were steadily rising.

For the full story, see:

Jeanna Smialek, Sarah Kliff and Alan Rappeport. “Census Shows Record-Low Poverty in U.S. Before Virus Struck.” The New York Times (Wednesday, September 16, 2020): B8.

(Note: ellipsis added.)

(Note: the online version of the story has the date Sept. 15, 2020, and has the title “U.S. Poverty Hit a Record Low Before the Pandemic Recession.”)

Jim Pethokoukis Asks Art Diamond How to Increase Innovative Dynamism

Jim Pethokoukis recently posted an abbreviated transcript of our conversation on his Political Economy podcast about my Openness to Creative Destruction: Sustaining Innovative Dynamism book.

Posted by Arthur Diamond on Thursday, August 6, 2020