Category: Economics

Lower Cost LEDs Will Reduce Light Prices, and Increase Quantity Consumed (Yes, Virginia, There Really Is a Law of Demand)

(p. A29) The growing evidence that low-cost efficiency often leads to faster energy growth was recently considered by both the Intergovernmental Panel on Climate Change and the International Energy Agency. They concluded that energy savings associated with new, more energy efficient technologies were likely to result in significant “rebounds,” or increases, in energy consumption. This means that very significant percentages of energy savings will be lost to increased energy consumption.
. . .
That’s not a bad thing. Most people in the world, still struggling to achieve modern living standards, need to consume more energy, not less. Cheap LED and other more efficient energy technologies will be overwhelmingly positive for people and economies all over the world.

For the full commentary, see:
MICHAEL SHELLENBERGER and TED NORDHAUS. “The Problem With Energy Efficiency.” The New York Times (Thurs., OCT. 9, 2014): A29.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date OCT. 8, 2014.)

“It Is the Individual Who Is the Agent of the Action”

(p. C6) Mr. Mischel begins by describing how, in the late 1960s, he and his colleagues devised a straightforward experiment to measure self-control at the Bing Nursery School at Stanford University. In its simplest form, children between the ages of 4 and 6 were given a choice between one marshmallow now or two marshmallows if they waited 15 minutes. Some kids ate the marshmallow right away, but most would engage in unintentionally hilarious attempts to overcome temptation.
. . . About a third of the original subjects, the researchers reported, deferred gratification long enough to get the second treat.
. . . in 2006, . . . Mr. Mischel published a new paper in the prestigious journal Psychological Science. The researchers had done a follow-up study with the students they had tested 40 years before, examining the sort of adults they had grown into. They found that the children who were able to delay gratification had higher SAT scores entering college, higher grade-point averages at the end of college and made more money after college. Perhaps not surprisingly, they also tended to have a lower body-mass index.
. . .
In his commencement address, Adm. McRaven explained his final life lesson with an anecdote: “In SEAL training there is a bell,” he explained. “A brass bell that hangs in the center of the compound for all the students to see. All you have to do to quit–is ring the bell. Ring the bell and you no longer have to wake up at 5 o’clock. Ring the bell and you no longer have to do the freezing cold swims. Ring the bell and you no longer have to do the runs, the obstacle course, the PT–and you no longer have to endure the hardships of training. Just ring the bell.” To ring the bell is to give up.
Interestingly, one of Mr. Mischel’s lesser-known marshmallow experiments had a similar setup, with a bell that the children could ring to call back the experimenter and save them from themselves. For the children, though, ringing the bell was not giving up but calling in the cavalry. His book is an encouraging reminder that, despite all the factors that urge us to indulge, “at the end of that causal chain, it is the individual who is the agent of the action and decides when to ring the bell.” You are ultimately in control of your self.

For the full review, see:
MICHAEL SHERMER. “Willpower and Won’t Power; To resist the tempting treat, kids looked away, squirmed, sang or simply pretended to take a bite.” The Wall Street Journal (Sat., Sept. 20, 2014): C6.
(Note: ellipses added.)
(Note: the online version of the review has the date Sept. 19, 2014, and has the title “Book Review: ‘The Marshmallow Test’ by Walter Mischel; To resist the tempting treat, kids looked away, squirmed, sang or simply pretended to take a bite.”)

The book under review is:
Mischel, Walter. The Marshmallow Test: Mastering Self-Control. New York: Little, Brown and Company, 2014.

As with Airplanes, Lives Must Be Risked to Achieve Routine Safety in Spaceships

(p. A21) SEATTLE — ONE clear winter day in 1909, in Hampshire, England, a young man named Geoffrey de Havilland took off in a twin-propeller motorized flying machine of his own design, built of wood, piano wire and stiff linen hand-stitched by his wife. The launch was flawless, and soon he had an exhilarating sensation of climbing almost straight upward toward the brilliant blue sky. But he soon realized he was in terrible trouble.
The angle of ascent was unsustainable, and moments later de Havilland’s experimental plane crashed, breaking apart into a tangled mass of shards, splinters and torn fabric, lethal detritus that could easily have killed him even if the impact of smashing into the ground did not. Somehow, he survived and Sir Geoffrey — he was ultimately knighted as one of the world’s great aviation pioneers — went on to build an astonishing array of military and civilian aircraft, including the world’s first jet airliner, the de Havilland Comet.
I thought immediately of de Havilland on Friday when I heard that Virgin Galactic’s SpaceShipTwo, a rocket-powered vehicle designed to take well-heeled tourists to the edge of space, had crashed on a flight over the Mojave Desert, killing one test pilot and seriously injuring the other.
. . .
Certainly the Wright brothers and others like de Havilland were involved in what we now view as an epic quest, but many experts of the day were certain that flight, however interesting, was destined to be not much more than a rich man’s hobby with no practical value.
“The public has greatly over-estimated the possibilities of the aeroplane, imagining that in another generation they will be able to fly over to London in a day,” said a Harvard expert in 1908. “This is manifestly impossible.” Two other professors patiently explained that while laymen might think that “because a machine will carry two people another may be constructed that will carry a dozen,” in fact “those who make this contention do not understand the theory of weight sustentation in the air.”
. . .
There will be tragedies like the crash of SpaceShipTwo and nonlethal setbacks such as the fiery explosion, also last week, of a remote-controlled rocket intended for a resupply mission to the International Space Station. There will be debates about how to improve regulation without stifling innovation. Some will say private industry can’t do the job — though it’s not as if the NASA-sponsored Apollo or space shuttle missions went off without a hitch (far from it, sadly).
But at the heart of the enterprise there will always be obsessives like Sir Geoffrey, who forged ahead with his life’s work of building airplanes despite his own crash and, incredibly, the deaths of two of his three sons while piloting de Havilland aircraft, one in an attempt to break the sound barrier. Getting to routine safety aloft claimed many lives along the way, and a hundred years from now people will agree that in that regard, at least, spaceships are no different from airplanes.

For the full commentary, see:
SAM HOWE VERHOVEK. “Not a Flight of Fancy.” The New York Times (Tues., NOV. 4, 2014): A21.
(Note: ellipses added.)
(Note: the online version of the commentary has the date NOV. 3, 2014.)

Obamacare Advisor Says Obscure Law Passed Due to “Stupidity of the American Voter”

(p. A4) Jonathan Gruber, the economist at the heart of a fresh debate about the Affordable Care Act, has had more than a dozen appointments to visit the White House since Democrats began drafting the health law in 2009, records show.
The visits included at least one group meeting with President Barack Obama , as well as appointments with senior administration officials who helped shape the 2010 law that expanded health insurance to millions of Americans.
The White House in recent days has tried to distance itself from Mr. Gruber, a 49-year-old Massachusetts Institute of Technology economist, since a 2013 video surfaced last week in which he said the law passed because of the “huge political advantage” of the legislation’s lacking transparency. He also referred to the “stupidity of the American voter.”
Republicans have seized on the comments as evidence that supporters of the law purposely misled the public about its costs.
“It is amusing to watch Washington liberals discount Mr. Gruber’s truth-telling as a gaffe and disown” his involvement in the law, said Sen. Orrin Hatch (R., Utah).

For the full story, see:
STEPHANIE ARMOUR and COLLEEN MCCAIN NELSON. “Health Adviser Gruber Logged Regular White House Visits.” The Wall Street Journal (Tues., Nov. 18, 2014): A4.
(Note: the online version of the story has the date Nov. 17, 2014.)

Leading Computability Expert Says Humans Can Do What Computers Cannot

(p. B4) What does Turing’s research tell us?
“There is some scientific basis for the view that humans are doing something that a machine isn’t doing–and that we don’t even want our machine to do,” says S. Barry Cooper, a mathematician at Leeds and the foremost scholar of Turing’s work.
The math behind this is deep, but here’s the short version: Humans seem to be able to decide the validity of statements that should stump us, were we strictly computers as Turing described them. And since all modern computers are of the sort Turing described, well, it seems that we’ve won the race against the machines before it’s even begun.
. . .
The future of technology isn’t about replacing humans with machines, says Prof. Cooper–it’s about figuring out the most productive way for the two to collaborate. In a real and inescapable way, our machines need us just as much as we need them.

For the full commentary, see:
Mims, Christopher. “KEYWORDS; Why Humans Needn’t Fear the Machines All Around Us; Turing’s Heirs Realize a Basic Truth: The Machines We Create Are Not, Indeed Cannot Be, Replacements for Humans.” The Wall Street Journal (Tues., DEC. 1, 2014): B4.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date Nov. 30, 2014, and has the title “KEYWORDS; Why We Needn’t Fear the Machines; A Basic Truth: Computers Can’t Be Replacements for Humans.”)

One of the major books by the Turing and computability expert quoted in the passages above, is:
Cooper, S. Barry. Computability Theory, Chapman Hall/CRC Mathematics Series. Boca Raton, Florida: Chapman and Hall/CRC Mathematics, 2003.

Bezos Devices Aim to Create a Virtuous Cycle ‘Flywheel’

(p. B1) Amazon now makes four different kinds of devices. There are dedicated e-readers, multipurpose tablets and, starting this year, a TV streaming device and a smartphone, the Fire Phone. Just this week, Amazon introduced another streaming machine, the Fire TV Stick, a $39 gadget that is the size of a USB stick and promises to turn your television into an Amazon-powered video service.
. . .
(p. B9) What is Amazon’s endgame with all these devices? Mr. Bezos has always said that his mission, with hardware, is to delight users with devices that are priced fairly. The devices also contribute to Mr. Bezos’s famous “flywheel,” the virtuous cycle by which greater customer satisfaction leads to more sellers in his store, which leads to more products, greater efficiencies, lower prices and, in turn, more customers.
“Everything is about getting that flywheel spinning, and it isn’t necessarily about building a big and successful tablet business of their own,” said Benedict Evans, an analyst who works at the investment firm Andreessen Horowitz and has studied Amazon closely. “Whether they actually drive meaningful commerce isn’t entirely clear, but Amazon is rigorously focused on data, so if they’re doing it, you can trust that there must be data that justifies it.”
And if this year’s devices don’t take off, you can bet that Mr. Bezos will try a slightly different tack next year.

For the full commentary, see:
Farhad Manjoo. “STATE OF THE ART; Amazon’s Grand Design for Devices.” The New York Times (Thurs., OCT. 30, 2014): B1 & B9.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date OCT. 29, 2014, and has the title “STATE OF THE ART; Amazon’s Grand Design in Devices.”)

Bezos’s enthusiasm for Jim Collins’s “flywheel” idea is discussed in:
Stone, Brad. The Everything Store: Jeff Bezos and the Age of Amazon. New York: Little, Brown and Company, 2013.

Solution to Problems of Retirement: Don’t Retire

(p. A13) Unsurprisingly, one response to the retirement challenge is: Don’t do it. Not, at least, until you really must. As Mr. Farrell argues (with plenty of supporting evidence), there is no magic element of personal doom attached to one’s 65th birthday or whatever age is believed to separate honest labor from a twilight of idleness. If you like what you do well enough, can perform your tasks competently and could use the income, why not keep working? The satisfactions of work are too often unrecognized in the popular imagination. Without it, a lot people wouldn’t know what to do.
And the longer you work, of course, the more money you will have when you eventually do retire, a strategy that works to the good of society too, since your paychecks will be contributing to FICA and will help keep the system running.

For the full review, see:
GEOFFREY NORMAN. “BOOKSHELF; Second Acts After 65; People who could be playing golf and doting on their grandchildren are starting businesses. One senior launched a coffee house in Detroit.” The Wall Street Journal (Weds., Sept. 24, 2014): A13.
(Note: the online version of the review has the date Sept. 23, 2014, and has the title “BOOKSHELF; Book Review: ‘Unretirement’ by Chris Farrell; People who could be playing golf and doting on their grandchildren are starting businesses. One senior launched a coffee house in Detroit.”)

The book under review is:
Farrell, Chris. Unretirement: How Baby Boomers Are Changing the Way We Think About Work, Community, and the Good Life. New York: Bloomsbury Press, 2014.

Inequality Much Less If You Count Government Transfers as Part of Income

Despite the gratuitous jab contained in the “fanciful assumptions” phrase, what is notable about the passages quoted below is that Porter is mainly, though grudgingly, granting Burkhauser’s main point: including government transfers reduces allegedly high inequality.

(p. B1) Washington already redistributes income from the rich to the poor. Richard Burkhauser and Philip Armour from Cornell and Jeff Larrimore from the Joint Committee on Taxation have become heroes to the right by trying to establish that government redistribution has, in fact, erased the trend of increasing inequality.

While these claims rest on fanciful assumptions about what counts as income, their analysis of taxes and government programs does support the argument that the government does more than it has in a long time to protect lower-income Americans from the blows of the market economy.
. . .
(p. B5) “Substantial changes in tax and transfer policies during the Bush and Obama administrations have increased dramatically the resources available at the middle of the distribution and at the bottom more so,” Professor Burkhauser told me.
. . .
Research by Leslie McCall of Northwestern University finds that . . . American voters remain lukewarm about government interventions to reduce income inequality, . . .

For the full commentary, see:
Eduardo Porter. “Seeking New Tools to Address a Wage Gap.” The New York Times (Weds., NOV. 5, 2014): B1 & B5.
(Note: ellipses added.)
(Note: the online version of the commentary has the date NOV. 4, 2014.)

The Burkhauser co-authored paper summarized above, is:
Armour, Philip, Richard V. Burkhauser, and Jeff Larrimore. “Levels and Trends in U.S. Income and Its Distribution: A Crosswalk from Market Income Towards a Comprehensive Haig-Simons Income Approach.” Southern Economic Journal 81, no. 2 (Oct. 2014): 271-93.

I believe that the research being to referred to by McCall is in her book:
McCall, Leslie. The Undeserving Rich: American Beliefs About Inequality, Opportunity, and Redistribution. New York: Cambridge University Press, 2013.

French Entrepreneurs Protest Government Crushing Them with Taxes and Regulations

FrenchBossesProtest2014-12-26.jpg “Protesting business owners in Paris brandished locks and chains to signify the constraints they said the government imposed on French businesses.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B3) PARIS — They jammed the boulevards, blowing whistles, tossing firecrackers, wearing locks and chains around their necks, and shouting into megaphones: “Enough is enough!”

In France, where protest marches are a well-practiced tradition, it is usually workers who take to the streets. But in a twist on Monday, thousands of French bosses demonstrated in Paris and Toulouse, the opening act in a weeklong revolt against government regulations and taxes that they say are straitjacketing companies, discouraging hiring and choking the economy.
“We feel like we’re being taken hostage,” said Laurence Manabre, owner of a home-maintenance business that has 28 workers — but could employ many more, she said, if not for onerous government-imposed labor rules.
Ms. Manabre marched with the throng toward the Finance Ministry, brandishing a bronze lock, a symbol that hundreds of other bosses wore to signify the constraints they said the Socialist government imposed on French businesses. “Between regulations, taxes, new laws, and razor-thin margins,” she said, “we’re being crushed little by little.”
. . .
. . . there are . . . entrenched parts of the French labor code, which employers say make it a difficult, lengthy process to lay off employees, and make bosses reluctant to take on new workers, especially with permanent contracts.
“France has high unemployment,” Ms. Manabre said. “But the French labor code is incomprehensible, and it just keeps getting more complex. How can I possibly hire more people?”
. . .
Mr. Roland has 35 employees, and his son is supposed to take over the business when he retires. But now his son is thinking of leaving the country, Mr. Roland said, because “France doesn’t seem to have a future, and the conditions for entrepreneurs are difficult.”
Mr. Roland said he did not plan to hire more workers, out of concern that coming regulations would menace his already-thin profit margins.

For the full story, see:
LIZ ALDERMAN. “In Twist on French Tradition, Bosses Take to Streets in Protest.” The New York Times (Tues., DEC. 2, 2014): B3.
(Note: ellipses added.)
(Note: the online version of the story has the date DEC. 1, 2014,)

Pentagon Bureaucracy “Hindered Progress” on Drones

(p. A13) Compared with, say, a B-2 Bomber, drones are simple things. An empty B-2 weighs 158,000 pounds. The largest version of the Predator–the unmanned aerial vehicle now playing a critical role in every theater where the American military is engaged–weighs just under 5,000. Yet these small aircraft are revolutionizing warfare. Given the simplicity of drones, why did it take so long to put them into operation?
. . .
The most alarming take-away from Mr. Whittle’s history is the persistent opposition of officials in the Pentagon who, for bureaucratic reasons, hindered progress at every step of the way.
A case in point: Two months after 9/11, the Predator was employed to incinerate one of al Qaeda’s senior operatives, Mohammed Atef. The same blast also incinerated–metaphorically–a study released two weeks earlier by the Pentagon’s office of operational testing and evaluation. The study had declared Predator “not operationally effective or suitable” for combat. If one seeks to understand why the drone revolution was late in coming–too late to help avert 9/11–the hidebound mentality behind that Pentagon document is one place to start.

For the full review, see:
Gabriel Schoenfeld. “BOOKSHELF; Building Birds of Prey; Red tape at the Pentagon prevented the development of a drone that could have helped avert the attacks of Sept. 11, 2001.” The Wall Street Journal (Tues., Sept. 16, 2014): A13.
(Note: ellipsis added.)
(Note: the online version of the review has the date Sept. 15, 2014, and has the title “BOOKSHELF; Book Review: ‘Predator’ by Richard Whittle; Red tape at the Pentagon prevented the development of a drone that could have helped avert the attacks of Sept. 11, 2001.”)

The book under review is:
Whittle, Richard. Predator: The Secret Origins of the Drone Revolution. New York, NY: Henry Holt and Co., 2014.

Netflix Proved TV Programs Can Be Delivered on Web

(p. B1) Netflix pointed a way forward by not only establishing that programming could be reliably delivered over the web, but showing that consumers were more than ready to make the leap. The reaction of the incumbents has been fascinating to behold.
As a reporter, I watched as newspapers, books and music all got hammered after refusing to acknowledge new competition and new consumption habits. They fortified their defenses, doubled down on legacy approaches and covered their eyes, hoping the barbarians would recede. That didn’t end up being a good idea.
Television, partly because its files are so much larger and tougher to download, was insulated for a time, and had the benefit of having seen what happens when you sit still — you get run over.
. . .
For any legacy business under threat of disruption, the challenge is to get from one room — the one with the tried and true profitable approach — to another, (p. B5) where consumers are headed and innovators are setting up shop. To get there, you have to enter a long, dark hallway, a scary place.

For the full commentary, see:
David Carr. “The Stream Finally Cracks the Dam of Cable TV.” The New York Times (Mon., OCT. 20, 2014): B1 & B5.
(Note: bolded words, and last ellipsis, in original; other ellipses, and bracketed date, added.)
(Note: the online version of the commentary has the date OCT. 19, 2014.)