Economics – Page 171 – artdiamondblog.com

The Costs of Green Jobs Policies

Source of book image: http://javelindc.com/home/wp-content/uploads/2012/11/regulating_to_disaster.jpg

I caught part of a C-SPAN presentation on the Regulating to Disaster book. It sounded plausible and intriguing—consistent with other evidence I have seen that “green” jobs have been over-hyped and under-delivered.
Perhaps more important, there are the high opportunity costs of the tax dollars devoted to the “green” jobs, in terms of the non-green jobs that would have been created by entrepreneurs if less of their income had been taxed away.
I hope to look at the book in the near future.

Book discussed:
Furchtgott-Roth, Diana. Regulating to Disaster: How Green Jobs Policies Are Damaging America’s Economy. New York: Encounter Books, 2012.

Analytical Solutions Require Unrealistic Assumptions that Make Models Useless for Policy

Source of book image: http://www.anderson.ucla.edu/faculty/edward.leamer/images/COVER%209120_jkt_Rev1.jpg

(p. 190) When I was a younger man, I and all of my cohort were apprehensive if we saw Ed Leamer in the audience when we were presenting a paper. His comments were blunt, incisive, and often negative. But what truly terrified us was that he was almost always right. . . .

Leamer has produced a highly original little book, with big insights and lessons for us all. He explores the tension between economics that is mathematically sophisticated and complex but often vacuous, versus economics that may be vague but which is useful and carries a message. It is frankly a remarkable work, full of insights and persuasive arguments that need to be read, debated, and taken seriously.
. . .
(p. 191) But this is no rant of an old guy. Leamer gets very specific about his notions of usefulness versus rigor. A good drum to bang on is Samuelson, an important “mathematizer.” I would strongly encourage all young trade economists and perhaps all graduate students who have been subjected to a traditional international trade course at any level, to read the section on factor-price equalization. This is beautifully done and even exciting and funny at times. As told by Leamer, the young Samuelson excoriates Ohlin for largely dismissing the possibility of factor-price equalization and then presents his (Samuelson’s) “proof” of factor-price equalization. The latter, of course, is a theorem that is mathematically correct given the assumptions, but Ohlin is talking about its usefulness in understanding the world and constructing policy. The factor-price-equalization theorem is indeed a prime example of something that is valid but not useful.
. . .
Yet at the same time, I have thought long and hard about exactly what message should be given to graduate students and assistant professors without much success. The journal publishing business puts a huge premium on rigor over usefulness and few referees or editors are inclined to take the chance inherent in accepting papers that are a bit loose in their analytical or econometric structures, no matter how exciting they might be. If you accept that, then the profession as a whole has to rethink our view of what is an important scientific contribution: I cannot simply tell graduate students to think more broadly and worry less about elegance. Some will of course deny that there is any tension, but I side with Leamer. Over and over again, I hear, read, and/or referee papers (p. 192) where, in order to get an analytical solution to a model, the author has to assume away almost every interesting feature of the problem to the point that the remaining model is uninteresting and uninformative. But that at least qualifies the paper for possible publication in Econometrica, RESTud, or JET.

For the full review, see:
Markusen, James R. “Book Review of Ed Leamer’s the Craft of Economics.” Journal of Economic Literature 51, no. 1 (2013): 190-92.
(Note: ellipses added; italics in original.)

The book under review is:
Leamer, Edward E. The Craft of Economics, Ohlin Lectures. Cambridge, MA: The MIT Press, 2012.

“The French Work Force Gets Paid High Wages But Works Only Three Hours”

(p. B1) PARIS — “How stupid do you think we are?”
With those choice words, and several more similar in tone, the chief executive of an American tire company touched off a furor in France on Wednesday as he responded to a government plea to take over a Goodyear factory slated for closing in northern France.
“I have visited the factory a couple of times,” Maurice Taylor Jr., the head of Titan International, wrote to the country’s industry minister, Arnaud Montebourg, in a letter published in French newspapers on Wednesday.
“The French work force gets paid high wages but works only three hours. They have one hour for their breaks and lunch, talk for three and work for three.”
“I told this to the French unions to their faces and they told me, ‘That’s the French way!’ “

For the full story, see:
LIZ ALDERMAN. “Quel Brouhaha! A Diatribe on Unions Irks the French.” The New York Times (Thurs., February 21, 2013): B1 & B6.
(Note: the online version of the story has the date February 20, 2013.)

For a similar account, see:
GABRIELE PARUSSINI. “U.S. CEO to France: “How Stupid Do You Think We Are?” The Wall Street Journal (Thurs., February 21, 2013): B1.
(Note: the online version of the story has the date February 20, 2013, and has the title “U.S. CEO Blasts French Work Habits.”)

New Technology Allows Maple Syrup Farms to Adapt and Thrive with Global Warming

“Tom Morse, left, and his father, Burr, at work on their maple farm in Vermont.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 11) Scientists say the tapping season — the narrow window of freezing nights and daytime temperatures over 40 degrees needed to convert starch to sugar and get sap flowing — is on average five days shorter than it was 50 years ago. But technology developed over the past decade and improved in recent years offers maple farmers like Mr. Morse a way to offset the effects of climate change with high-tech tactics that are far from natural.

Today, five miles of pressurized blue tubing spider webs down the hillside at Morse Farm, pulling sap from thousands of trees and spitting it into tubs like an immense, inverse IV machine. Modern vacuum pumps are powerful enough to suck the air out of a stainless steel dairy tank and implode it, and they help producers pull in twice as much sap as before.
“You can make it run when nature wouldn’t have it run,” Mr. Morse said.
His greatest secret weapon is a reverse-osmosis machine that concentrates the sap by pulling it through sensitive membranes, greatly increasing the sugar content before it even hits the boiler. The $8,000 instrument with buttons and dials looks like it belongs in a Jetsons-era laboratory more than in a Vermont sugarhouse. But it saves more fuel and money than every other innovation combined. With it Mr. Morse can process sap into syrup in 30 minutes, something that used to take two hours.
. . .
The biggest United States maple farmers have expanded their production acreage and are tapping more trees than ever before: the total was 5.5 million taps last year, compared with slightly over 4 million taps 10 years earlier.
As a result, United States maple syrup production hit a new high in 2011. In Vermont, the top-producing state, sap yield per tap has risen over the past decade.

For the full story, see:
JULIA SCOTT. “Maple Syrup: Old-Fashioned Product, Newfangled Means of Production.” The New York Times, First Section (Sun., March 31, 2013): 11.
(Note: ellipsis added.)
(Note: the online version of the story has the date March 30, 2013, and has the title “High-Tech Means of Production Belies Nostalgic Image of Maple Syrup.”)

Tax Rates Have Big Effect on Labor Supply and Rate of Entrepreneurial Start-Ups

(p. A23) Higher taxes will produce long-term changes in social norms, behavior and growth. Edward Prescott, a winner of the Nobel Memorial Prize in economics, found that, in the 1950s when their taxes were low, Europeans worked more hours per capita than Americans. Then their taxes went up, reducing the incentives to work and increasing the incentives to relax. Over the next decades, Europe saw a nearly 30 percent decline in work hours.
The rich tend to be more sensitive to tax-rate changes because they’ve got advisers who are paid to be. Martin Feldstein, an economics professor at Harvard, looked into tax changes in the 1980s and concluded that raising rates causes people to shift compensations to untaxed fringe benefits and otherwise suppresses their economic activity. A study last year by the economists Michael Keane and Richard Rogerson found that tax rates can have a surprisingly large influence on how much people invest in education, how likely they are to create businesses and which professions they go into.

For the full commentary, see:
DAVID BROOKS. “The Progressive Shift.” The New York Times (Tues., March 19, 2013): A23.
(Note: the online version of the commentary has the date March 18, 2013.)

The Keane and Rogerson paper summarized by Brooks is:
Keane, Michael, and Richard Rogerson. “Micro and Macro Labor Supply Elasticities: A Reassessment of Conventional Wisdom.” Journal of Economic Literature 50, no. 2 (June 2012): 464-76.

Confident Winner Studied Economics at Cambridge and Directed Bronson in “Death Wish”

“Michael Winner, left, and Charles Bronson on the set of the 1974 film “Death Wish.” The two collaborated on several films.” Source of caption and photo: online version of the NYT obituary quoted and cited below.

(p. B8) Michael Winner, the brash British director known for violent action movies starring Charles Bronson including “The Mechanic” and the first three “Death Wish” films, died on Monday [January 21, 2013] at his home in London. He was 77.
. . .
Mr. Winner’s films viscerally pleased crowds, largely ignored artistic pretensions and often underwhelmed critics. He directed many major stars in more than 30 films over more than four decades.
. . .
Mr. Bronson played Paul Kersey, a New York City architect who becomes a vigilante after his wife is murdered and his daughter is sexually assaulted by muggers.
. . .
Michael Robert Winner was born in London on Oct. 30, 1935. The son of a well-to-do business owner, Mr. Winner graduated from Cambridge, having studied law and economics.
. . .
He was confident on set, sometimes bordering on the dictatorial. “You have to be an egomaniac about it. You have to impose your own taste,” he said. “The team effort is a lot of people doing what I say.”

For the full obituary, see:
DANIEL E. SLOTNIK. “Michael Winner, 77, ‘Death Wish’ Director.” The New York Times (Tues., January 22, 2013): B8.
(Note: the online version of the obituary has the slightly different title “Michael Winner, ‘Death Wish’ Director, Dies at 77.”)
(Note: ellipses and bracketed date were added.)

Kevin Kelly Explains and Criticizes Amish Attitude toward Technology

Source of book image: http://thesocietypages.org/cyborgology/files/2012/02/kevin-kelly-book_rdax_620x349-300×285.jpg

Kevin Kelly’s book has received a lot of attention, sometimes in conjunction with Steven Johnson’s Where Good Ideas Come From, with which it shares some themes. I found the Kelly book valuable, but frustrating.
The valuable part includes the discussion of the benefits of technology, and the chapter detailing Amish attitudes and practices related to technology. On the latter, for instance, I learned that the Amish do not categorically reject new technology, but believe that it should be adopted more slowly, after long community deliberation.
What frustrated me most about the book is that it argues that technology has a life of its own and that technological progress is predetermined and inevitable. (I believe that technological progress depends on enlightened government policies and active entrepreneurial initiative, neither of which is inevitable.)
In the next several weeks, I will be quoting some of the more important or thought-provoking passages in the book.

The reference for Kelly’s book, is:
Kelly, Kevin. What Technology Wants. New York: Viking Adult, 2010.

The Johnson book mentioned above, is:
Johnson, Steven. Where Good Ideas Come From: The Natural History of Innovation. New York: Riverhead Books, 2010.

Driving to MobileIron Job Interview in $100,000 Car, Tells CEO Tinker You Are Not Hungry Enough

“Above, Robert Tinker, the chief executive of MobileIron, at its offices in Mountain View, Calif.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B2) “There are disruptions everywhere,” said Robert Tinker, the chief executive of MobileIron, which makes software for companies to manage smartphones and tablets. “Mobile disrupts personal computers, a market worth billions. Cloud disrupts computer servers and data storage, billions of dollars more. Social may be one of those rare things that is totally new.”

Relative to the size of the markets that mobile devices, cloud computing and social media are toppling, he says, the valuations are reasonable.
But most of these chief executives are also veterans of the Internet bubble of the late ’90s, and confess to worries that maybe things are not so different this time. Mr. Tinker, 43, drives a 1995 Ford Explorer that has logged 265,000 miles.
“If somebody comes to a job interview here in a $100,000 car, I know he’s not hungry,” he said. “The reality is, I’ve taken $94 million in investors’ money, and we haven’t gone public yet. I feel that responsibility every day.”

For the full story, see:
QUENTIN HARDY. “A Billion-Dollar Club, and Not So Exclusive.” The New York Times (Weds., February 5, 2013): B1 & B2.
(Note: the online version of the story has the date February 4, 2013.)

Many Corporations Refused to Finance Semiconductors

“Shown in 1960, the eight engineers who founded Fairchild Semiconductor and revolutionized world technology in “Silicon Valley,” an “American Experience” documentary, . . . .” Source of caption and photo: online version of the NYT review quoted and cited below.

(p. C4) “Silicon Valley” is a deceptively grand title for the new “American Experience” documentary Tuesday night on PBS. “Fairchild Semiconductor” would be more accurate.
. . .
One startling image shows a handwritten list of the many corporations that declined to bankroll the eight pioneers before Fairchild Camera and Instrument said yes. If any of them had possessed more foresight, the silicon chip might have belonged to National Cash Register, Motorola, Philco, BorgWarner, Chrysler, General Mills or United Shoe.

For the full review, see:
MIKE HALE. “Men Who Took Silicon to Silicon Valley.” The New York Times (Tues., February 5, 2013): C4.
(Note: ellipses in caption, and in quoted passage, added.)
(Note: the online version of the review has the date February 4, 2013.)

The “Silicon Valley” program first aired on PBS on 2/5/13 and can be viewed at:
http://video.pbs.org/video/2332168287

“The Ante for Being in the Room” at Apple Was Brutal Honesty

The following passage is Steve Jobs speaking, as quoted by Walter Isaacson.

(p. 569) I don’t think I run roughshod over people, but if something sucks, I tell people to their face. It’s my job to be honest. I know what I’m talking about, and I usually turn out to be right. That’s the culture I tried to create. We are brutally honest with each other, and anyone can tell me they think I am full of shit and I can tell them the same. And we’ve had some rip-roaring arguments, where we are yelling at each other, and it’s some of the best times I’ve ever had. I feel totally comfortable saying “Ron, that store looks like shit” in front of everyone else. Or I might say “God, we really fucked up the engineering on this” in front of the person that’s responsible. That’s the ante for being in the room: You’ve got to be able to be super honest. Maybe there’s a better way, a gentlemen’s club where we all wear ties and speak in this Brahmin language and velvet codewords, but I don’t know that way, because I am middle class from California.

I was hard on people sometimes, probably harder than I needed to be. I remember the time when Reed was six years old, coming home, and I had just fired somebody that day, and I imagined what it was like (p. 570) for that person to tell his family and his young son that he had lost his job. It was hard. But somebody’s got to do it. I figured that it was always my job to make sure that the team was excellent, and if I didn’t do it, nobody was going to do it.

Source:
Isaacson, Walter. Steve Jobs. New York: Simon & Schuster, 2011.

Unemployment Increases Risk of Heart Attack

As a defender of the process of innovation through creative destruction, I try to be alert to evidence on creative destruction’s benefits and costs. The highest cost is usually viewed as technological unemployment. The evidence below will have to be examined and, if sound, added to the costs.

(p. D6) Unemployment increases the risk of heart attack, a new study reports, and repeated job loss raises the odds still more.
. . .
After adjusting for well-established heart attack risks — age, sex, smoking, income, hypertension, cholesterol screening, exercise, depression, diabetes and others — the researchers found that being unemployed also increased the risk of a heart attack, by an average of 35 percent.

For the full story, see:
NICHOLAS BAKALAR. “Job Loss Raises Threat of Heart Attack.” The New York Times (Tues., November 27, 2012): D6.
(Note: ellipsis added.)
(Note: the online version of the story has the date November 26, 2012.)

The Dupre article mentioned above, is:
Dupre, Matthew E., Linda K. George, Guangya Liu, and Eric D. Peterson. “The Cumulative Effect of Unemployment on Risks for Acute Myocardial Infarction.” Archives of Internal Medicine 172, no. 22 (Dec. 10, 2012): 1731-37.
(Note: the Archives of Internal Medicine has been re-named JAMA Internal Medicine.)