Economics – Page 204 – artdiamondblog.com

Economic Importance of Inarticulate Knowledge Undermines Case for Central Planning

(p. 78) . . . the intelligence of humans, though immensely strengthened by articulation, nonetheless contains a large component of tacit understanding by individuals who know more than they can say. If this is also true with respect to the sorts of knowledge relevant to our economic activities, then no comprehensive planning agency could obtain the sort of knowledge necessary for economic planning, for it would lie buried deep in the minds of millions of persons.

Source:
Lavoie, Don. National Economic Planning: What Is Left? Washington, DC: Cato Institute, 1985.
(Note: ellipsis added.)

What Motivated Paterno to Win 400 Games—“Gettin’ Paid”

Source of image: screen capture from YouTube clip referenced below.

What motivates employees? Economists have emphasized pay as the primary incentive, while recognizing that there may be “compensating differentials” for aspects of the work that are pleasant or unpleasant.
In recent years many non-economists, such as Daniel Pink in Drive, have emphasized non-pecuniary incentives.
Joe Paterno entered the debate at age 83, after he became the first major college coach to win 400 games on November 6, 2010.
Right after the victory, he was interviewed on the field by “Heather” of ESPN. Starting at 1:33 seconds into the clip referenced below, here is the key dialogue:

Heather: “Coach Paterno, what has motivated you to get to this point?”

Paterno: “Oh geez, I don’t know—gettin’ paid.”

Source: YouTube clip at http://www.youtube.com/watch?v=jQzdVeYtm5w
(Note: the clip was posted on 11/6/10 by shellymic and has the title “Joe Pa FIRST to 400 Wins!”)

Artisan’s Skills Were Still Required for Kay’s Flying Shuttle

(p. 223) Kay’s flying shuttle made it possible for weavers to produce a wider product, which they called “broadloom,” but doing so was demanding. Weaving requires that the weft threads be under constant tension in order to make certain that each one is precisely the same length as its predecessor; slack is the enemy of a properly woven cloth. Using a flying shuttle to carry weft threads through the warp made it possible to weave a far wider bolt of cloth, but the required momentum introduced the possibility of a rebound, and thereby a slack thread. Kay’s invention still needed a skilled artisan to catch the shuttle and so avoid even the slightest bit of bounce when it was thrown across the loom.

Source:
Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.

UNESCO Condemns Africans to Live in a Poorer Past: More on Why Africa is Poor

“As a World Heritage site, Djenné, Mali, must preserve its mud-brick buildings, from the Great Mosque, in the background, to individual homes.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. 4) DJENNÉ , Mali — Abba Maiga stood in his dirt courtyard, smoking and seething over the fact that his 150-year-old mud-brick house is so culturally precious he is not allowed to update it — no tile floors, no screen doors, no shower.

“Who wants to live in a house with a mud floor?” groused Mr. Maiga, a retired riverboat captain.
With its cone-shaped crenellations and palm wood drainage spouts, the grand facade seems outside time and helps illustrate why this ancient city in eastern Mali is an official World Heritage site.
But the guidelines established by Unesco, the cultural arm of the United Nations, which compiles the heritage list, demand that any reconstruction not substantially alter the original.
“When a town is put on the heritage list, it means nothing should change,” Mr. Maiga said. “But we want development, more space, new appliances — things that are much more modern. We are angry about all that.”
. . .
Mahamame Bamoye Traoré, the leader of the powerful mason’s guild, surveyed the cramped rooms of the retired river boat captain’s house, naming all the things he would change if the World Heritage rules were more flexible.
“If you want to help someone, you have to help him in a way that he wants; to force him to live in a certain way is not right,” he said, before lying on the mud floor of a windowless room that measured about 6 feet by 3 feet.
“This is not a room,” he said. “It might as well be a grave.”

For the full story, see:
NEIL MacFARQUHAR. “Ancient City in Mali Rankled by Rules for Life in Cultural Spotlight.” The New York Times, First Section (Sun., January 9, 2011): 4.
(Note: ellipsis added.)
(Note: the online version of the article is dated January 8, 2011 and had the title “Mali City Rankled by Rules for Life in Spotlight.”)

“Many residents of Djenné say they long for more modern homes, but Unesco preservation guidelines limit alterations to original structures.” Source of caption and photo: online version of the NYT article quoted and cited above.

Cornucopians Win Another Bet with Malthusians

(p. D1) Five years ago, Matthew R. Simmons and I bet $5,000. It was a wager about the future of energy supplies — a Malthusian pessimist versus a Cornucopian optimist — and now the day of reckoning is nigh: Jan. 1, 2011.

The bet was occasioned by a cover article in August 2005 in The New York Times Magazine titled “The Breaking Point.” It featured predictions of soaring oil prices from Mr. Simmons, who was a member of the Council on Foreign Relations, the head of a Houston investment bank specializing in the energy industry, and the author of “Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy.”
I called Mr. Simmons to discuss a bet. To his credit — and unlike some other Malthusians — he was eager to back his predictions with cash. He expected the price of oil, then about $65 a barrel, to more than triple in the next five years, even after adjusting for inflation. He offered to bet $5,000 that the average price of oil over the course of 2010 would be at least $200 a barrel in 2005 dollars.
I took him up on it, not because I knew much about Saudi oil production or the other “peak oil” arguments that global production was headed downward. I was just following a rule learned from a mentor and a friend, the economist Julian L. Simon.
As the leader of the Cornucopians, the optimists who believed there would always be abundant supplies of energy and other resources, Julian figured that betting was the best way to make his argument. Optimism, he found, didn’t make for cover stories and front-page headlines.
. . .
(p. D3) When I found a new bettor in 2005, the first person I told was Julian’s widow, Rita Simon, a public affairs professor at American University. She was so happy to see Julian’s tradition continue that she wanted to share the bet with me, so we each ended up each putting $2,500 against Mr. Simmons’s $5,000.
. . .
The past year the price has rebounded, but the average for 2010 has been just under $80, which is the equivalent of about $71 in 2005 dollars — a little higher than the $65 at the time of our bet, but far below the $200 threshold set by Mr. Simmons.
What lesson do we draw from this? I’d hoped to let Mr. Simmons give his view, but I’m very sorry to report that he died in August, at the age of 67. The colleagues handling his affairs reviewed the numbers last week and declared that Mr. Simmons’s $5,000 should be awarded to me and to Rita Simon on Jan. 1, . . .

For the full commentary, see:
JOHN TIERNEY. “Findings; Economic Optimism? Yes, I’ll Take That Bet.” The New York Times (Tues., December 28, 2010): D1 & D3.
(Note: ellipses added.)
(Note: the online version of the article is dated December 27, 2010.)

Higher Cancer Rates Due More to Longer Life Spans than to Modern Life Styles

“DIAGNOSIS. Evidence of tumors in the skull of a male skeleton exhumed from an early medieval cemetery in Slovakia. Often thought of as a modern disease, cancer has always been with us.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. D1) When they excavated a Scythian burial mound in the Russian region of Tuva about 10 years ago, archaeologists literally struck gold. Crouched on the floor of a dark inner chamber were two skeletons, a man and a woman, surrounded by royal garb from 27 centuries ago: headdresses and capes adorned with gold horses, panthers and other sacred beasts.

But for paleopathologists — scholars of ancient disease — the richest treasure was the abundance of tumors that had riddled almost every bone of the man’s body. The diagnosis: the oldest known case of metastasizing prostate cancer.
The prostate itself had disintegrated long ago. But malignant cells from the gland had migrated according to a familiar pattern and left identifiable scars. Proteins extracted from the bone tested positive for PSA, prostate specific antigen.
Often thought of as a modern disease, cancer has always been with us.
. . .
(p. D7) . . . , Tony Waldron, a paleopathologist at University College London, analyzed British mortality reports from 1901 to 1905 — a period late enough to ensure reasonably good records and early enough to avoid skewing the data with, for example, the spike in lung cancer caused in later decades by the popularity of cigarettes.
Taking into account variations in life span and the likelihood that different malignancies will spread to bone, he estimated that in an “archaeological assemblage” one might expect cancer in less than 2 percent of male skeletons and 4 to 7 percent of female skeletons.
Andreas G. Nerlich and colleagues in Munich tried out the prediction on 905 skeletons from two ancient Egyptian necropolises. With the help of X-rays and CT scans they diagnosed five cancers — right in line with Dr. Waldron’s expectations. And as his statistics predicted, 13 cancers were found among 2,547 remains buried in an ossuary in southern Germany between A.D. 1400 and 1800.
For both groups, the authors wrote, malignant tumors “were not significantly fewer than expected” when compared with early-20th-century England. They concluded that “the current rise in tumor frequencies in present populations is much more related to the higher life expectancy than primary environmental or genetic factors.”
. . .
“Cancer is an inevitability the moment you create complex multicellular organisms and give the individual cells the license to proliferate,” said Dr. Weinberg of the Whitehead Institute. “It is simply a consequence of increasing entropy, increasing disorder.”
He was not being fatalistic. Over the ages bodies have evolved formidable barriers to keep rebellious cells in line. Quitting smoking, losing weight, eating healthier diets and taking other preventive measures can stave off cancer for decades. Until we die of something else.
“If we lived long enough,” Dr. Weinberg observed, “sooner or later we all would get cancer.”

For the full story, see:
GEORGE JOHNSON. “Unearthing Prehistoric Tumors, and Debate.” The New York Times (Tues., December 28, 2010): D1 & D7.
(Note: ellipses added.)
(Note: the online version of the article is dated December 27, 2010.)

Witch Tax Rebellion in Romania: “We Do Harm to Those Who Harm Us”

(p. 16A) MOGOSOIA, Romania–Everyone curses the tax man, but Romanian witches angry about having to pay up for the first time are planning to use cat excrement and dead dogs to cast spells on the president and government.

Also among Romania’s newest taxpayers are fortune tellers–but they probably should have seen it coming.
. . .
Romanian witches from the east and west will head to the southern plains and the Danube River on Thursday to threaten the government with spells and spirits because of the tax law, which came into effect Jan. 1.
A dozen witches will hurl the poisonous mandrake plant into the Danube to put a hex on government officials “so evil will befall them,” said a witch named Alisia. She identified herself with one name–customary among Romania’s witches.
. . .
. . . spiritualism has long been tolerated by the Orthodox Church in Romania, and the late Communist dictator Nicolae Ceausescu and his wife, Elena, had their own personal witch.
Queen witch Bratara Buzea, 63, who was imprisoned in 1977 for witchcraft under Ceausescu’s repressive regime, is furious about the new law.
Sitting cross-legged in her villa in the lake resort of Mogosoaia, just north of Bucharest, she said Wednesday she planned to cast a spell using a particularly effective concoction of cat excrement and a dead dog, along with a chorus of witches.
“We do harm to those who harm us,” she said. “They want to take the country out of this crisis using us? They should get us out of the crisis because they brought us into it.”

For the full story, see:
ALISON MUTLER. “Witches Curses Over Paying Tax.” The Denver Post (Thurs., January 6, 2011): 16A.
(Note: ellipses added.)
(Note: the online version of the article has the title “Curses! Romania’s witches forced to pay income tax.”)

If you prefer a briefer version of the witch story, you may consult:
The Associated Press. “A Tax on Witches? A Pox on the President.” The New York Times (Fri., January 7, 2011): A9.
(Note: the online version of the NYT article is dated January 6, 2011.)

Mutual Benefits from Ending Labor Market Mismatch

(p.6) This is the Mark Twain people love to quote (“Clothes make the man. Naked people have little or no influence in society.” “A man who carries a cat by the tail learns something he can learn in no other way”), and whenever he hits his stride in the “Autobiography,” you feel happy for him — e.g., writing about Virginia City, Nev., in 1863:

“I secured a place in a nearby quartz (p. 7) mill to screen sand with a long-handled shovel. I hate a long-handled shovel. I never could learn to swing it properly. As often as any other way the sand didn’t reach the screen at all, but went over my head and down my back, inside of my clothes. It was the most detestable work I have ever engaged in, but it paid ten dollars a week and board — and the board was worthwhile, because it consisted not only of bacon, beans, coffee, bread and molasses, but we had stewed dried apples every day in the week just the same as if it were Sunday. But this palatial life, this gross and luxurious life, had to come to an end, and there were two sufficient reasons for it. On my side, I could not endure the heavy labor; and on the Company’s side, they did not feel justified in paying me to shovel sand down my back; so I was discharged just at the moment that I was going to resign.”

For the full review, see:
GARRISON KEILLOR. “Riverboat Rambler.” The New York Times Book Review (Sun., December 19, 2010): 1, 6-7.
(Note: the online version of the review has the date December 16, 2010, and had the title “Mark Twain’s Riverboat Ramblings.” )

The book under review, is:
Smith, Harriet Elinor, ed. Autobiography of Mark Twain, Vol. 1. Berkeley: University of California Press, 2010.

London’s Albion Mills Was “Likely” Destroyed By Millers’ Arson

(p. 187) The Albion Mills, as it would be called, was built on a scale hitherto unimagined. The largest flour mill in London in 1783 used The Albion Mills, as it would be called, was built on a scale hitherto unimagined. The largest flour mill in London in 1783 used four pairs of grinding stones; Albion was to have thirty, driven by three steam engines, each with a 34-inch cylinder. Within months after its completion, in 1786, those engines were driving mills that produced six thousand bushels of flour every week–which both fed a lot of Londoners and angered a lot of millers.

The Albion Mills was London’s first factory, and its first great symbol of industrialization; its construction inaugurated not only great age of steam-driven factories, but also the doomed though poignant resistance to them. That resistance took the shape of direct action–no one knows how the fire that destroyed the Albion Mills in 1791 began, but arson by millers threatened by its success seems likely– . . .

Source:
Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.
(Note: ellipsis added.)

U.S. Sets Capital Requirement Too High for Entrepreneurs’ Visas

“Brian Wong, above at his company’s office in San Francisco, is a Canadian citizen hoping for a rule change that would ease U.S. visa restrictions.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. B7) San Francisco entrepreneur Brian Wong has already hired two employees and secured $300,000 in funding for his start-up, and hopes to have a staff of 40 or more full-time workers by this time next year.

But there’s at least one red flag in his business plan: Mr. Wong isn’t American; he’s Canadian.
. . .
. . . foreign entrepreneurs have long played an outsized role in the U.S. start-up sector, especially in the tech industry. Immigrants are nearly 30% more likely to start a business than nonimmigrants, the Small Business Administration says. University of California researchers estimate about a third of Silicon Valley technology firms were started by Indian or Chinese entrepreneurs, while a joint study with Duke University found at least one immigrant founder in over a quarter of all engineering and technology firms launched in the U.S. since the mid 1990s, together generating nearly 450,000 jobs by 2005. Google Inc., Intel Corp., Yahoo Inc. and eBay Inc. all had at least one immigrant founder.
Yet many of these companies were also started on a shoestring, leading some tech industry insiders to say the bill’s capital requirements are far too high.
. . .
. . . , the start-up visa’s high capital requirement is certain to filter out sole-proprietorships, while ensuring it attracts innovative, mostly tech-savvy entrepreneurs, says Bob Litan, a researcher at the Kauffman Foundation. The downside, he says, is that only a handful of immigrant entrepreneurs will qualify.
“Hardly any businesses get venture capital in a given year,” Mr. Litan says. “This isn’t going to have much of an impact on the U.S. economy and I suspect that’s why so few people are opposed to it.”
. . .
Without a visa, Mr. Wong says he’ll be forced to launch his start-up back in Canada, taking the new jobs with him.

For the full story, see:
ANGUS LOTEN. “New Pitch for Start-Up Visas; Senate Bill Would Make for Smoother U.S. Entry for Foreign Entrepreneurs .” The Wall Street Journal (Thurs., December 16, 2010): B7.
(Note: ellipses added.)

Trade Stats Count iPhone as Chinese Export, Despite Only 3.6% of iPhone Costs from China

Source of graph: online version of the WSJ article quoted and cited below.

(p. B1) . . . two academic researchers estimate that Apple Inc.’s iPhone–one of the best-selling U.S. technology products–actually added $1.9 billion to the U.S. trade deficit with China last year.

How is this possible? The researchers say traditional ways of measuring global trade produce the number but fail to reflect the complexities of global commerce where the design, manufacturing and assembly of products often involve several countries.
“A distorted picture” is the result, they say, one that exaggerates trade imbalances between nations.
Trade statistics in both countries consider the iPhone a Chinese export to the U.S., even though it is entirely designed and owned by a U.S. company, and is made largely of parts produced in several Asian and European countries. China’s contribution is the last step–assembling and shipping the phones.
So the entire $178.96 estimated wholesale cost of the shipped phone is credited to China, even though the value of the work performed by the Chinese workers at Hon Hai Precision Industry Co. accounts for just 3.6%, or $6.50, of the total, the researchers calculated in a report published this month.

For the full story, see:
ANDREW BATSON. “Not Really ‘Made in China’; The iPhone’s Complex Supply Chain Highlights Problems With Trade Statistics.” The Wall Street Journal (Thurs., December 16, 2010): B1 & B2.
(Note: ellipsis added.)
(Note: the online version of the article is dated DECEMBER 15, 2010nd that were not in the print version.)

The research report breaking down iPhone costs by country is:

Xing, Yuqing, and Neal Detert. “How the Iphone Widens the United States Trade Deficit with the People’s Republic of China.” ADBI Working Paper Series, no. 257, December 2010.