Category: Economics

Economic Hope Cures Terrorism

(p. C1) As the U.S. moves into a new theater of the war on terror, it will miss its best chance to beat back Islamic State and other radical groups in the Middle East if it doesn’t deploy a crucial but little-used weapon: an aggressive agenda for economic empowerment. Right now, all we hear about are airstrikes and military maneuvers–which is to be expected when facing down thugs bent on mayhem and destruction.
But if the goal is not only to degrade what President Barack Obama rightly calls Islamic State’s “network of death” but to make it impossible for radical leaders to recruit terrorists in the first place, the West must learn a simple lesson: Economic hope is the only way to win the battle for the constituencies on which terrorist groups feed.
I know something about this. A generation ago, much of Latin America was in turmoil. By 1990, a Marxist-Leninist terrorist organization called Sendero Luminoso, or Shining Path, had seized control of most of my home country, Peru, where I served as the president’s principal adviser. Fashionable opinion held that the people rebelling were the impoverished or underemployed wage slaves of Latin America, that capitalism couldn’t work outside the West and that Latin cultures didn’t really understand market economics.
The conventional wisdom proved to be wrong, however. Reforms in Peru gave indigenous entrepreneurs and farmers control over their assets and a new, more accessible legal framework in which to run businesses, make contracts and borrow–spurring an unprecedented rise in living standards.

For the full commentary, see:
HERNANDO DE SOTO. “The Capitalist Cure for Terrorism; Military might alone won’t defeat Islamic State and its ilk. The U.S. needs to promote economic empowerment and entrepreneurship to give the Arab world another path.” The Wall Street Journal (Sat., Oct. 11, 2014): C1-C2.
(Note: italics in original.)
(Note: the online version of the commentary has the date Oct. 10, 2014, and the title “The Capitalist Cure for Terrorism; Military might alone won’t defeat Islamic State and its ilk. The U.S. needs to promote economic empowerment.”)

Soto’s masterpiece is:
Soto, Hernando de. The Other Path: The Invisible Revolution in the Third World. New York: Basic Books, 1989.

Churchill Was More than an Epiphenomenon

(p. C2) It is easy to see why so many historians and historiographers have taken the Tolstoyan line, that the story of humanity isn’t the story of great people and shining deeds. It has been fashionable to say that those so-called great men and women are just epiphenomena, meretricious bubbles on the vast tides of social history. The real story, on this view, is about deep economic forces, technological advances, changes in the price of sorghum, the overwhelming weight of an infinite number of mundane human actions.
The story of Winston Churchill is a pretty withering retort to all that malarkey.

For the full essay, see:
BORIS JOHNSON. “He Still Stands Alone.” The Wall Street Journal (Sat., Nov. 8, 2014): C1-C2.
(Note: the online version of the essay has the date Nov. 7, 2014, and has the title “Churchill Still Stands Alone.”)

The passage quoted above is related to Johnson’s book:
Johnson, Boris. The Churchill Factor: How One Man Made History. New York: Riverhead, 2014.

Consumers Cannot Count on Regulators for Safety

(p. A1) WASHINGTON — The nation’s top auto regulator faced withering criticism across Capitol Hill on Tuesday over its failure to identify a deadly defect in General Motors cars — even as its top official tried again and again to shift the blame back to the automaker.
Hours after a House committee released a scathing report about the agency’s yearslong failure to spot the ignition-stalling defect that has now been linked to 19 deaths, a Senate subcommittee hearing turned angry and tense. Lawmakers from both parties accused the agency, the National Highway Traffic Safety Administration, of overlooking evidence that could have saved lives and of deferring to the auto industry rather than standing up to it.
The agency was “more interested in singing ‘Kumbaya’ with the manufacturers than being a cop on the beat,” said Senator Claire McCaskill, the subcommittee’s chairwoman, in sharp questioning reminiscent of her interrogation of G.M.’s chief executive, Mary T. Barra, in a hearing before the same panel in the spring.
. . .
(p. B2) “You want to obfuscate responsibility, rather than take responsibility,” Ms. McCaskill, a Missouri Democrat, said, her voice rising. “We’ve all said shame on G.M.” She added, “You’ve got to take some responsibility that this isn’t being handled correctly.”
. . .
Watching from a seat just behind Mr. Friedman [deputy administrator of the N.H.T.S.A.] was Laura Christian, the birth mother of Amber Rose, a teenager who was killed in 2005 when her Cobalt ran off the road, into a tree, and the air bags did not deploy.
As Mr. Friedman continued to speak, Ms. Christian said she could feel herself getting flushed and increasingly upset over the agency’s lack of remorse.
“It was extremely frustrating to hear David Friedman go on about how his agency was this wonderful thing,” she said. “All along they missed the glaringly obviously defects.”

For the full story, see:
HILARY STOUT and AARON M. KESSLER. “Congress Castigates Auto Regulator Over a Deadly G.M. Defect.” The New York Times (Weds., SEPT. 17, 2014): A1 & B2.
(Note: ellipses, and bracketed words, added.)
(Note: the online version of the story has the date SEPT. 16, 2014, and has the title “Senators Take Auto Agency to Task Over G.M. Recall.” In the Midwest edition that I receive, this article started on p. A1; according to the indexes, and the online edition, in the New York edition, the article started on p. B1.)

Lippmann Attacked FDR’s Socialist National Industrial Recovery Act

(p. A13) . . . Duke economic historian Craufurd D. Goodwin employs the writings of the once-famous newspaper columnist Walter Lippmann to describe the fervid U.S. debates that began with the 1929 stock-market crash.
. . .
Lippmann established his intellectual credentials in the 1920s, writing several well-received books. They included “Public Opinion,” which excoriated the press for sloppy coverage of government policies and actions. The book is often seen as a call for top-down rule by experts, but Mr. Goodwin argues that Lippmann had something else in mind–that he was eager for expert opinion and “reasoned study” to be widely disseminated so that self-government would be more fully informed and the citizenry less easily manipulated.
. . .
At first, Lippmann embraced the Keynesian argument that government could ameliorate downswings in business cycles through deficit spending, but he later had second thoughts about economic engineering and became more attuned to the free-market ideas of Friedrich Hayek, whom he knew and consulted.   . . .    Lippmann attacked as ill-conceived the most ambitious New Deal brainstorm, the 1933 National Industrial Recovery Act, which attempted to organize all business and industry into cartels to boost prices.

For the full review, see:
GEORGE MELLOAN. “BOOKSHELF; The Umpire of American Public Debate; Certain that a return of investment confidence would restore prosperity, Lippmann criticized those that blamed Wall Street for the malaise.” The Wall Street Journal (Tues., Oct. 14, 2014): A13.
(Note: ellipses added.)
(Note: the online version of the review has the date Oct. 13, 2014, and has the title “BOOKSHELF; Walter Lippmann: Umpire of American Public Debate; Certain that a return of investment confidence would restore prosperity, Lippmann criticized those that blamed Wall Street for the malaise.”)

The book under review, is:
Goodwin, Craufurd D. Walter Lippmann: Public Economist. Cambridge, MA: Harvard University Press, 2014.

Esther Dyson Sees a Lot of Silicon Valley as Just Motivated to Make Money

(p. C11) The U.S. Commerce Department recently said that it plans to relinquish its oversight of Icann, handing that task to an international body of some kind. The details are still being worked out, but Ms. Dyson hopes that governments won’t be the new regulators. . . .
For now, she thinks there are many Silicon Valley Internet companies with inflated market values. “There is the desire to make money that motivates a lot of that in Silicon Valley, and yes, I think it’s totally a bubble,” she says. “It’s not like the last bubble in that there are a lot of real companies there [now], but there are a lot of unreal companies and…many of them will disappear.” She thinks too many people are starting similar companies. “You have people being CEOs of teeny little things who would be much better as marketing managers of someone else’s company,” she says.
And though her work often takes her to California, she’s happy to stay in New York. These days, she finds Silicon Valley “very fashionable,” she says, “and I don’t really like fashion.”

For the full interview, see:
ALEXANDRA WOLFE, interviewer. “WEEKEND CONFIDENTIAL; Esther Dyson’s Healthy Investments; The investor is hoping to produce better health through technology with a new nonprofit.” The Wall Street Journal (Sat., May 3, 2014): C11.
(Note: first ellipsis added; second ellipsis in original.)
(Note: the online version of the interview has the date May 2, 2014, and has the title “WEEKEND CONFIDENTIAL; Esther Dyson’s Healthy Investments; The investor is hoping to produce better health through technology with a new nonprofit.”)

Einthoven Tried to Share Prize Money with His Assistant

(p. 194) One event that occurred after Einthoven received the Nobel Prize in Physiology or Medicine in 1924 speaks volumes about his integrity. In the construction of his string galvanometer and laboratory experiments over many years, Einthoven was rather clumsy with his hands and relied very much on the collaboration of his chief assistant K. F. L. van der Woerdt. Years later, when he received the $40,000 in Nobel Prize money, Einthoven wished to share it with his assistant but soon learned that the man had died. He sought out the man’s two surviving sisters, who were living in genteel poverty in a kind of almshouse. He journeyed there by train and gave them half of the award money.

Source:
Meyers, Morton A. Happy Accidents: Serendipity in Modern Medical Breakthroughs. New York: Arcade Publishing, 2007.

When Pirates Were More Enlightened than Most Governments

(p. A11) While slaves were oppressed by the social order, Mr. Rediker argues, pirates on the high seas were remaking it. An estimated 2,500 buccaneers prowled the Atlantic and the Caribbean at any given time during the first half of the 18th century. The great majority were former merchant seamen, or deserters from the Royal Navy. They were aged between 14 and 50, though most were in their 20s. Married men were not welcome for fear that they might desert and compromise an entire pirate crew.
Here, Mr. Rediker suggests, egalitarianism was being practiced at sea half a century before it became a catch-cry of the French Revolution. And, he adds, there was a striking uniformity of rules and customs on all pirate vessels. At the start of each voyage, or whenever a new captain was chosen, a wide-ranging social compact would be drawn up listing rights and responsibilities. The articles would allocate authority, deal with the distribution of plunder, and set the rules of punishment to enforce discipline. Booty was usually allocated according to skills and duties–the captain might be given two shares; gunners, boatswains, mates, carpenters and medics one and a half shares; and the rest of the crew a share each. In times of battle, the crew gave the captain unquestioned authority whether fighting, chasing or being chased. What perhaps set the pirates most apart from their former colleagues in the Merchant Navy and the Royal Navy was punishment. The lash, for example, was rarely used. Fighting was not allowed on board and disputes between crew had to be settled ashore by sword or pistol. This brought an unusual degree of harmony to the pirate ship. Incorrigible trouble makers were unceremoniously dumped and left behind on deserted islands. Vengeance was also freely taken upon captives, and woe betide any ship’s captain who had tyrannized and abused his crew.

For the full review, see:
MICHAEL FATHERS. “BOOKSHELF; Motley Crew at the Helm; Egalitarianism was being acted out at sea by pirates half a century before it became a catch-cry of the French Revolution. The Wall Street Journal (Fri., Aug. 22, 2014): A11.
(Note: ellipsis in original.)
(Note: the online version of the review has the date Aug. 21, 2014, and has the title “BOOKSHELF; Book Review: ‘Outlaws of the Atlantic’ by Marcus Rediker; Egalitarianism was being acted out at sea by pirates half a century before it became a catch-cry of the French Revolution.”)

Book under review:
Rediker, Marcus. Outlaws of the Atlantic: Sailors, Pirates, and Motley Crews in the Age of Sail. Boston, MA: Beacon Press, 2014.

Robotic Milkers Are Less Costly, Easier to Manage and More Humane to Cows

(p. A1) EASTON, N.Y. — Something strange is happening at farms in upstate New York. The cows are milking themselves.
Desperate for reliable labor and buoyed by soaring prices, dairy operations across the state are charging into a brave new world of udder care: robotic milkers, which feed and milk cow after cow without the help of a single farmhand.
Scores of the machines have popped up across New York’s dairy belt and in other states in recent years, changing age-old patterns of daily farm life and reinvigorating the allure of agriculture for a younger, tech-savvy — and manure-averse — generation.
. . .
The cows seem to like it, too.
Robots allow the cows to set their own hours, lining up for automated milking five or six times a day — turning the predawn and late-afternoon sessions (p. A19) around which dairy farmers long built their lives into a thing of the past.
With transponders around their necks, the cows get individualized service. Lasers scan and map their underbellies, and a computer charts each animal’s “milking speed,” a critical factor in a 24-hour-a-day operation.
. . .
The Bordens and other farmers say a major force is cutting labor costs — health insurance, room and board, overtime, and workers’ compensation insurance — particularly when immigration reform is stalled in Washington and dependable help is hard to procure.
The machines also never complain about getting up early, working late or being kicked.
“It’s tough to find people to do it well and show up on time,” said Tim Kurtz, who installed four robotic milkers last year at his farm in Berks County, Pa. “And you don’t have to worry about that with a robot.”
The Bordens say the machines allow them to do more of what they love: caring for animals.
“I’d rather be a cow manager,” Tom Borden said, “than a people manager.”

For the full story, see:
JESSE McKINLEY. “With Farm Robotics, the Cows Decide When It’s Milking Time.” The New York Times (Weds., APRIL 23, 2014): A1 & A19.
(Note: ellipses added.)
(Note: the online version of the story has the date APRIL 22, 2014.)

Affordable Care Act Reduces GDP, Employment and Labor Income

(p. A17) Whether the Affordable Care Act lives up to its name depends on how, or whether, you consider its consequences for the wider economy.
. . .
I estimate that the ACA’s long-term impact will include about 3% less weekly employment, 3% fewer aggregate work hours, 2% less GDP and 2% less labor income. These effects will be visible and obvious by 2017, if not before. The employment and hours estimates are based on the combined amount of the law’s new taxes and disincentives and on historical research on the aggregate effects of each dollar of taxation. The GDP and income estimates reflect lower amounts of labor as well as the law’s effects on the productivity of each hour of labor.
. . .
The Affordable Care Act is weakening the economy. And for the large number of families and individuals who continue to pay for their own health care, health care is now less affordable.

For the full commentary, see:
CASEY B. MULLIGAN. “OPINION; The Myth of ObamaCare’s Affordability; The law’s perverse incentives will have the nation working fewer hours, and working those hours less productively.” The Wall Street Journal (Tues., SEPTEMBER 9, 2014): A17.
(Note: ellipses added.)
(Note: the online version of the commentary has the date SEPTEMBER 8, 2014.)

Mulligan’s research on the effects of Obamacare is detailed in his Kindle e-book:
Mulligan, Casey B. Side Effects: The Economic Consequences of the Health Reform. Flossmoor, IL: JMJ Economics, 2014.

Socialist Price Setting Causes Shortages of Corn Flour, Car Batteries and Toilet Paper

(p. B1) Venezuela’s prices on everything from butter to flat-screen TVs are set without warning by the government, which also caps corporate profits at 30%. Any profits evaporate quickly, however, because inflation is almost double that.
And expanded price controls imposed by Venezuelan President Nicolas Maduro, who succeeded late leftist firebrand Hugo Chávez in April 2013, have exacerbated shortages of basic items such as corn flour, car batteries and toilet paper, triggering violent street protests since early February.

For the full story, see:
MAXWELL MURPHY and KEJAL VYAS. “CFO JOURNAL; Currency Chaos in Venezuela Portends Write-Downs.” The Wall Street Journal (Tues., May 27, 2014): B1 & B6.
(Note: the online version of the story has the date May 26, 2014.)

Japanese Try to Sell the iPhone of Toilets in United States

(p. B8) TOKYO–Yoshiaki Fujimori wants to be the Steve Jobs of toilets.
Like iPhones, app-packed commodes are objects of desire in Mr. Fujimori’s Japan. The lids lift automatically. The seats heat up. Built-in bidets make cleanup a breeze. Some of them even sync with users’ smartphones via Bluetooth so that they can program their preferences and play their favorite music through speakers built into the bowl.
Three-quarters of Japanese homes contain such toilets, most of them made by one of two companies: Toto Ltd., Japan’s largest maker of so-called sanitary ware, or Lixil Corp., where Mr. Fujimori is the chief executive.
Now Mr. Fujimori is leading a push to bring them to the great unwashed. In May, Lixil plans to add toilets with “integrated bidets” to the lineup of American Standard Brands, which Lixil acquired last year for $542 million, including debt.
. . .
Few people realized they needed smartphones until Apple’s iPhone came along. So it will be in the U.S. with American Standard’s new toilets, Mr. Fujimori said.
“Industry presents iPhone–industry presents shower toilet,” Mr. Fujimori said in an interview at Lixil’s headquarters in Tokyo. “We can create the same type of pattern.”
. . .
Mr. Fujimori maintained that once American consumers try such toilets, they won’t go back.
“This improves your standard of living,” he said. “It doesn’t hurt you. People like comfort, they like ease, they like automatic. And people like clean.”

For the full story, see:
ERIC PFANNER and ATSUKO FUKASE. “Smart Toilets Arrive in U.S.” The Wall Street Journal (Tues., May 27, 2014): B8.
(Note: ellipses added.)
(Note: the online version of the story has the date May 26, 2014.)