Strong Global Support for Free Markets

 

FreeMarketsPositiveViewTable.gif   Source of table:  "World Publics Welcome Global Trade — But Not Immigration." Pew Global Attitudes Project, a project of the PewResearchCenter. Released: 10.04.07 dowloaded from: http://pewglobal.org/reports/display.php?ReportID=258

 

(p. A10) WASHINGTON, Oct. 4 — Buoyed and battered by globalization, people around the world strongly view international trade as a good thing but harbor growing concerns about its side effects: threats to their cultures, damage to the environment and the challenges posed by immigration, a new survey indicates.

In the Pew Global Attitudes Project survey of people in 46 countries and the Palestinian territories, large majorities everywhere said that trade was a good thing. In countries like Argentina, which recently experienced trade-based growth, the attitude toward trade has become more positive.

But support for trade has decreased in recent years in advanced Western countries, including Germany, Britain, France and Italy — and most sharply in the United States. The number of Americans saying trade is good for the country has dropped by 19 percentage points since 2002, to 59 percent.

“G.D.P. growth hasn’t been as dramatic in these places as in Latin America or Eastern Europe,” said Andrew Kohut, president of the Pew Research Center, referring to gross domestic product, the total value of the goods and services produced in a country. “But worldwide, even though some people are rich and some are poor, support for the basic tenet of capitalism is pretty strong.”

 

For the full story, see: 

BRIAN KNOWLTON. "Globalization, According to the World, Is a Good Thing. Sort Of."  The New York Times   (Fri., October 5, 2007):  A10. 

 

Pulling Teeth Slowly

 

   Source of book image:  http://mitpress.mit.edu/images/products/books/0262113023-f30.jpg

 

Many years ago, I read János Kornai’s The Road to the Free Market, which gave Kornai’s advice on how Eastern Europe could best make the transition from communism to the free market.  What I remember most from the book, is his discussion of whether it is more humane for the transition to be quick or gradual.  He answers the question by asking another:  if you need to have a tooth pulled, is it more humane for it to be pulled quickly or gradually?

 

(p. B15) . . .,  Mr. Kornai’s books and lectures in Europe, North America and Asia established him as one of the leading scholars of socialist economics and an expert on the difficult transitions that many countries face when they move from socialism to a more democratic and capitalist system.   . . .

At one point in 1974, under the more relaxed rule of János Kádár, when Hungary was the "most cheerful barrack in the camp," Mr. Kornai and his wife decided to build their own home. Over the course of several months, they personally confronted the corruption, endemic shortages and shoddy construction materials that were so common in Eastern Europe. A year later, on a trip to India, Mr. Kornai was faced by idealistic young Maoists whose concern for the desperately poor reinforced their support for socialism. Mr. Kornai responded to them by arguing, as he puts it here, that "rationing systems that spread misery equally may assuage feelings of injustice for a while, but they will not solve anything."

 

For the full review, see:

JOSHUA RUBENSTEIN.  "BOOKS; Critic Behind the Curtain."  The Wall Street Journal  (Tues., January 30, 2007):  B15.

(Note: ellipses added.)

 

The book reviewed, is: 

János Kornai.  By Force of Thought.  (MIT Press, 461 pages, $40)

 

The earlier book by Kornai, that I read and liked, is:

Kornai, Janos. The Road to a Free Economy: Shifting from a Socialist System, the Example of Hungary. New York: W.W. Norton, 1990.

 

United States Cotton Subsidies Hurt Poor African Farmers

 

Dan Sumner did his dissertation many years ago under T.W. Schultz, a great economist, and a great human being.  (Dan was a friend of mine in grad school–we were members of a club that gathered once a month to discuss the works of Bertrand Russell.) 

 

Eliminating billions of dollars in federal subsidies to American cotton growers each year would reduce American cotton production and exports, raise world prices by about 10 percent and modestly improve the incomes of millions of poor cotton farmers in Africa, according to a new study by Oxfam, the aid group.

Agricultural economists at the University of California, Davis, who conducted the study for Oxfam, found that a typical farm family of 10 in Chad, Benin, Burkina Faso or Mali — Africa’s major cotton producers — that now earns $2,000 a year would have an extra $46 to $114 a year to spend if American subsidies were removed.

“Fifty to a hundred bucks is a lot of money to these people,” said Daniel Sumner, chairman of the Department of Agricultural and Resource Economics at the university. “It’s not right to think that changing U.S. subsidies will turn very poor people into middle-class households by our standards. That’s a generational process. But it’s money in their pocket.”

. . .

Dani Rodrik, an economist at Harvard who is skeptical of the importance of reduced agricultural subsidies, said he found Oxfam’s new estimates credible, but said the gains forecast were relatively small.  . . .

. . .

But the authors of the report said that removing American subsidies would permanently shift the price of cotton upward, with prices subsequently fluctuating around a higher average. 

 

For the full story, see: 

CELIA W. DUGGER.  "Oxfam Suggests Benefit in Africa if U.S. Cuts Cotton Subsidies."  The New York Times  (Thurs., June 21, 2007):  A12.

(Note:  ellipses added.)

 

A Nuts and Bolts Example of Economies of Scale (or the Lack Thereof)

 

  Source of graphic:  online version of the WSJ article cited below.

 

Mr. Bair said Boeing is working closely with its primary fastener supplier, Alcoa Inc., to get enough high-quality titanium bolts to put the plane together in a logical fashion. Nevertheless, major components, such as the wings, arrived from Japan and other locations such as Italy and South Carolina held together by thousands of temporary fasteners.

The unexpected lack of fasteners marks the sort of test Boeing will face in coming years as it moves to fill a press of orders for the 787 and other aircraft amid an aerospace boom.  . . .

. . .

Unlike previous airplanes, the Dreamliner is made largely of futuristic composites, which can’t be held together with traditional aluminum rivets. Instead, the major sections are bolted together with specially coated bolts that fit into brackets at each joint. Each bolt must be individually made on a lathe — a process that can’t be hurried. Because it takes time to set up the lathe, Alcoa would prefer to make thousands of one type of fastener before breaking the machine down and resetting it.

"Problem is, we don’t need thousands of bolts right now. We might need 10 of one kind," Mr. Bair said. 

 

For the full story, see: 

J. LYNN LUNSFORD and PAUL GLADER.  "Boeing’s Nuts-and-Bolts Problem Shortage of Fasteners Tests Ability to Finish Dreamliners."  The Wall Street Journal  (Tues., June 19, 2007):  A8. 

(Note:  ellipses added.)

 

UNO Protects Students from Cupcakes (Whether They Want to Be Protected, or Not)

 

Many years ago, I went along with a group of Exec MBA students to Germany.  Among them was Bill Swanson.  Bill had a sense of humor.

At some point in the trip, I spilled ketchup on my tie.  Bill’s response was that normally a ruined tie would be sad, but given my tie, the ketchup was an improvement.

Yes, Bill has a sense of humor; so I’m hoping the story below is a joke.

That’s what I hope, but what I fear is that the story below is one more example of the inefficient, sometimes painful (like when an 8th grader can’t take aspirin to middle school), and sometimes funny, things that we are driven to do to protect ourselves from being sued, in an economy where congress has empowered personal injury lawyers to frequently sue for huge and unpredictable compensatory and punitive damages.  (When Joe Ricketts, Ameritrade founder, spoke to my Exec MBA class a few years ago, he said that the biggest threat facing the U.S. economy was the proliferation of tort law suits.)

So it’s either a bad joke; or (most likely) it’s UNO protecting itself against every potential law suit; or it’s a third, and worse, alternative—which would be if the story below is to be taken at face value. 

In that case we would have to conclude that some UNO staff have nothing better to do with their time than to paternalistically ‘protect’ young adults from a minuscule risk of illness from freely choosing to purchase and eat cupcakes being sold by fellow students to raise money for good causes.

 

Here is an excerpt from the page one, lead story, of the Sat., Oct. 6, 2007, Omaha World-Herald:

 

(p. 1A)  Guns. Drugs. Bake sales.

What do these things have in common?

All have been banned at the University of Nebraska at Omaha campus.

Citing safety and health concerns, UNO last week prohibited selling homemade food items at campus fundraisers.

Officials said the prevalence of serious food allergies and the potential for contaminated food — either by accident or deliberately — led UNO to adopt the policy, which then drew complaints from student groups.

"The primary issue is the health of the students and the safety of the students," said Bill Swanson, assistant to the vice chancellor in the Career Exploration and Outreach Office.

No one on the UNO campus has reported problems with contaminated food purchased at a bake sale, Swanson said.

But there have been incidents around the country, he said, and those were enough to prompt a discussion among officials.

The decision has come under fire from students who say the restriction cuts off small student (p. 2A) groups from their primary fundraising source.

The Public Relations Student Society of America traditionally held bake sales once a month to raise money for national conferences, local business luncheons and volunteer work, said the group’s president, Katie Dowd.

The group raised about $1,500 a year hawking homemade baked goods donated by members.

"It’s a big blow to us," said Dowd, who called the potential for food contamination from her group’s offerings "very unlikely."

 

For the full story, see: 

ELIZABETH AHLIN.  "Goodies ban half-baked, UNO students say." Omaha World-Herald  (Saturday, October 6, 2007):  1A & 2A.

 

Thales of Miletus Lives

 

   Source of book image:  http://store.43folders.com/books-3-1400063515-The_Black_Swan_The_Impact_of_the_Highly_Improbable

 

This is part entertaining rant and part serious epistemology.  I’ve finished 9 of 19 chapters so far–almost all of my reading time spent smiling. 

Historians of Greek philosophy used to tell the story of one of the first philosophers, Thales of Miletus, that he once was watching the stars, and fell into a well.  The citizens of Miletus made fun of him being an impractical philosopher.  To prove them wrong, he used his knowledge to corner the market in something, and made a fortune. 

Not a very plausible story, but appealing to us philosophers.  (Like Thales, we like to think we could all be rich, if we didn’t have higher goals.)

Well apparently Taleb is the real Thales.  He wanted to be a philosopher, got rich on Wall Street using his epistemological insights, and is now using his wealth to finance his musings on whatever he cares to muse on.

Beautiful!

 

Here’s an amusing sentence that broadened my grin.  (It was even more amusing, and profound, in context, but I don’t have time to type in the context for you.)

(p. 87)  If you are a researcher, you will have to publish inconsequential articles in "prestigious" publications so that others say hello to you once in a while when you run into them at conferences.

 

Reference for the book:

Taleb, Nassim Nicholas. The Black Swan: The Impact of the Highly Improbable. New York: Random House, 2007.

 

Buchanan on Hayek, Rawls and Nozick

 

  Sandy Peart talking to James Buchanan.  Source of photo:  me. 

 

In an earlier blog entry, I mentioned a comment on disagreeing with journal referees, made by  James Buchanan in conversation at the closing dinner of the 2007 Summer Institute for the Preservation of the History of Economics.

Hayek also came up at the dinner with Buchanan. Buchanan mentioned that he was not as enthused about Hayek’s later work, including The Fatal Conceit, and Law, Legislation and Liberty—he thought the best might have been The Constitution of Liberty.

He mentioned that some foundation had funded a couple of conferences in Europe of top free market scholars to offer advice to Hayek.  They told Hayek that his manuscript was a mess, and that it would be an embarrassment to him to publish it. But he said he was already under contract. (I think this comment referred to The Fatal Conceit.) So someone (Bruce Bartlett?) helped Hayek clean it up.

Buchanan also spoke highly about Rawls.  I think I mentioned that Hayek had said that his approach was similar to Rawls.  I think Buchanan said he did not think that comment was surprising.

I also believe I remember Buchanan saying that he thought more highly of Rawls than of Nozick.

 

Mugabe Driven by Quest for Power, More than from Paranoia, or Marxism: More on Why Africa is Poor

 

No one outside of Mr. Mugabe’s inner circle, of course, can say with certainty why he has pursued policies since 2000 that have produced economic and social bedlam. For his part, Mr. Mugabe says Zimbabwe’s chaos is the product of a Western plot to reassert colonial rule, while he is simply taking steps to fight that off.

Among many outside that circle, however, the growing conviction is that Zimbabwe’s descent is neither the result of paranoia nor the product of Mr. Mugabe’s longstanding belief in Marxist economic theory. Instead, they say, Zimbabwe is fast becoming a kleptocracy, and the government’s seemingly inexplicable policies are in fact preserving and expanding it.

. . .

Mr. Mugabe’s government declares currency trading illegal, but regularly dumps vast stacks of new bills on the black market, still wrapped in plastic, to raise foreign exchange for its own needs, business leaders and economists say.

The nation’s extraordinary hyperinflation, last pegged by analysts at 10,000 percent a year, is an economic disaster that, by all accounts, the government needs to address. Yet after it ordered merchants in July to slash their prices, cadres of policemen and soldiers moved into shops to enforce the new controls, scoop up bargains and give friends and political heavyweights preferential access to cheap goods.

. . .

Mr. Mugabe’s 25-bedroom mansion in Borrowdale, the gated high-end suburb of Harare, the capital, is the locus of a boomlet that has spawned luxury homes for government and party officials. (Mr. Mugabe said his mansion was built with goods and labor donated by foreign governments.)

Mr. Mugabe arrived to open Zimbabwe’s Parliament this month in a Rolls-Royce. Equally telling, the legislature’s parking lot was crammed with luxury cars.

Such riches have been accompanied by a steep decline in living standards for just about everyone else. The death rate for Zimbabweans under the age of 5 grew by 65 percent from 1990 to 2005, even as the rate for the world’s poorest nations dropped. Average life expectancy here is among the world’s lowest, according to the United Nations.

 

For the full commentary, see: 

MICHAEL WINES.  "News Analysis; Zimbabwe’s Chaos: The Powerful Thrive."  The New York Times (Fri., August 3, 2007):  A8. 

(Note:  ellipses added.)

 

An Innovative Way to Reduce Global Warming, If We Need One

 

(p. B1) What if we wait too long to act on global warming? What if nothing we do is enough? Already, scientists are working up plans of last resort: stratospheric sprays of sulfur, trillions of orbiting mirrors and thousands of huge off-shore saltwater fountains.

Each is designed to counteract global warming by deliberately deflecting sunlight, rather than by retooling the world’s economy to eliminate carbon-rich oil, coal and natural gas.

Some scientists argue that such actions might be easier and relatively cheaper. Until recently though, whenever University of Maryland economist Thomas Schelling, recipient of a 2005 Nobel Prize, raised such geo-engineering ideas, "half the audience thought I was crazy and the other half thought I was dangerous," he said. As global temperatures rise and greenhouse-gas emissions accelerate, however, even wild ideas are becoming respectable.

. . .

Earlier this month, researchers at the Carnegie Institution of Washington, D.C., released the most precise computer studies yet evaluating the controversial sunshade idea. Their findings, reported in the journal Proceedings of the National Academy of Sciences, revealed that a last-ditch engineering effort to block sunlight could reverse global warming — at least temporarily. Indeed, it could lower average temperatures to levels not seen since 1900. "Every study we do seems to indicate it would work," said Carnegie climate modeler Ken Caldeira.

. . .

For Nobel laureate Schelling, the political advantages of geo-engineering outweigh its technical risks. It may be easier to launch a climate-control project than to persuade people all over the world to stop using fossil fuels. "It drastically converts the whole subject of climate change from one of regulation involving six billion people to a simple matter of a budgetary agreement about how to manage the modest cost," Prof. Schelling said. "I think geo-engineering is going to be the deus ex machina that will save the day."

 

For the full story, see: 

ROBERT LEE HOTZ.  "SCIENCE JOURNAL; In Case We Can’t Give Up the Cars — Try 16 Trillion Mirrors."  The Wall Street Journal   (Fri., June 22, 2007):  B1.

(Note:  ellipses added.)

 

Florence in Its Prime: Ghiberti’s “Gates of Paradise”

In my work on the labor economics of the process of creative destruction, I make use of the competition between Ghiberti and Brunelleschi over who would do the bronze door panels.  Brunelleschi withdrew, after a "tie" decision from the judges.  He then retooled, and bult the marvelous dome that is still one of the world’s architectural marvels.

 

If Michelangelo’s "David" heads the "must see" list of Renaissance masterpieces for most visitors to Florence, then I suspect "The Gates of Paradise," Lorenzo Ghiberti’s monumental doors of the Baptistery of San Giovanni, rank a close second. The 20-foot-tall portal — 10 exquisitely articulated gilt bronze reliefs of Old Testament scenes, framed by standing prophets, foliage and projecting heads — has mesmerized viewers since its completion in 1452. Michelangelo himself is supposed to have given the doors the name by which they are still known.

. . .

Next year, visitors to Florence will again see "The Gates" restored to their full splendor, permanently installed in the Museo dell’Opera del Duomo.  

 

For the full commentary, see: 

KAREN WILKIN.  "Ghiberti’s Doors Are Heavenly Again."   The Wall Street Journal  (Tues., June 5, 2007):  D5.

(Note:  ellipsis added.)

 

Congestion Pricing in NYC Will Reduce Traffic and Pollution

 

   Traffic congestion on Ninth Avenue in New York City.  Source of photo:  online version of the NYT article cited below.

 

(p. A1)  ALBANY, June 7 — Mayor Michael R. Bloomberg’s plan to reduce traffic by charging people who drive into the busiest parts of Manhattan received significant support on Thursday as Gov. Eliot Spitzer endorsed the idea and the Bush administration indicated that New York stood to gain hundreds of millions of dollars if the plan were enacted.

If the measure is approved by the Legislature, New York will become the first city in the United States to impose a broad system of congestion pricing, which was introduced in London in 2003 and has been credited with reducing traffic there.

Governor Spitzer said he would work to ensure passage of the plan, which is a major part of the mayor’s blueprint for improving air quality and traffic flow for the next several decades. The Bloomberg administration has estimated that it could put the program into effect within 18 months of legislative approval.

 

For the full story, see:

DANNY HAKIM and RAY RIVERA.  "New York Bid on Traffic Pricing Draws State and U.S. Support." The New York Times  (Fri., June 8, 2007): A1 & A29.

(Note: the online version of the article has the title "City Traffic Pricing Wins U.S. and Spitzer’s Favor.")