Category: Economics

Miami Mayor Welcomes Private Enterprise with Public Safety, Low Taxes, and Few Regulations

(p. A15) On one side, we have the socialist model: high taxes, high regulation, less competition and declining public services with government imposing itself as the solver and arbiter of all social problems. On the other side, we have the Miami model: low taxes, low regulation and a commitment to public safety and private enterprise. The models present a stark choice on issues ranging from personal freedom, economic opportunity, public safety and the role of government.

. . .

In Miami, many residents have personally experienced the socialist model along with its symptoms of hyperinflation, class resentment and stagnant growth. Four years ago Miami residents elected me to pursue a different path. We reduced taxes dramatically, and our revenue base doubled. We invested in our police, and our crime rate dropped. And last week we reduced taxes to their lowest level in history—cutting costs for residents and promoting economic growth.

Miami is a place where you can keep what you earn, invest what you save, and own what you build. We are meeting the high demand of rent costs by encouraging public-private partnerships, activating underutilized land through zoning reforms, and harnessing free-market forces to build more. It works, and our new residents from New York and California can confirm it.

For the full commentary see:

Francis X. Suarez. “Miami Takes On the Socialist Model.” The Wall Street Journal (Monday, Aug. 22, 2022): A15.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date August 21, 2022, and has the same title as the print version.)

Wittgenstein Center’s Scenario Has Global Population Peak in 2050 at 8.7 Billion

(p. A2) Since the 1960s, when the global number of people first hit three billion, it has taken a bit over a decade to cross each new billion-person milestone, and so it might seem natural to assume that nine billion humans and then 10 billion are, inexorably, just around the corner. That is exactly what the latest population projections from the U.N. and the U.S. Census Bureau have calculated.

. . .

The U.N.’s projections are the best known. But an alternate set of projections has been gaining attention in recent years, spearheaded by the demographer Wolfgang Lutz, under the auspices of the Wittgenstein Centre for Demography and Global Human Capital at the University of Vienna, of which Mr. Lutz is founding director.

. . .

“There’s two big questions,” Mr. Lutz explains, that determine whether his forecasts or the U.N.’s end up closer to the mark. “First, how rapidly fertility will decline in Africa…. The other question is China, and countries with very low fertility, if they will recover and how fast they will recover.”

. . .

The Wittgenstein forecasts, by contrast, look not only at historical patterns, but attempt to ask why birthrates rise and fall. A big factor, not formally included in the U.N.’s models, is education levels. Put simply: As people, especially women, have greater opportunities to pursue education, they have smaller families.

. . .

The U.N. projects Africa’s population will grow from 1.3 billion today to 3.9 billion by century’s end.

Once education is accounted for, Wittgenstein’s baseline scenario projects Africa’s population will rise to 2.9 billion during that time period. In another scenario from Wittgenstein, which it calls the “rapid development” scenario, the population of Africa will only reach 1.7 billion by century’s end.

Wittgenstein’s phrase “rapid development” is revealing: This isn’t a forecast of doom and decline, but rather one in which health and education simply improve, a world with better human well-being, lower mortality, and medium levels of immigration.

. . .

Wittgenstein’s rapid-development scenario has the global population topping out at 8.7 billion in 2050.

For the full commentary see:

Josh Zumbrun. “THE NUMBERS; As Population Nears 8 Billion, Some See Peak.” The Wall Street Journal (Tuesday, Aug. 13, 2022): A2.

(Note: ellipses added.)

(Note: the online version of the commentary has the date August 12, 2022, and has the title “THE NUMBERS; Global Population Is About to Hit 8 Billion—and Some Argue It Is Near Its Peak.”)

A.I. Cannot Learn What 4-Year-Old Learns From Trial-And-Error Experiments

(p. C3) A few weeks ago a Google engineer got a lot of attention for a dramatic claim: He said that the company’s LaMDA system, an example of what’s known in artificial intelligence as a large language model, had become a sentient, intelligent being.

Large language models like LaMDA or San Francisco-based Open AI’s rival GPT-3 are remarkably good at generating coherent, convincing writing and conversations—convincing enough to fool the engineer. But they use a relatively simple technique to do it: The models see the first part of a text that someone has written and then try to predict which words are likely to come next. If a powerful computer does this billions of times with billions of texts generated by millions of people, the system can eventually produce a grammatical and plausible continuation to a new prompt or a question.

. . .

In what’s known as the classic “Turing test,” Alan Turing in 1950 suggested that if you couldn’t tell the difference in a typed conversation between a person and a computer, the computer might qualify as intelligent. Large language models are getting close. But Turing also proposed a more stringent test: For true intelligence, a computer should not only be able to talk about the world like a human adult—it should be able to learn about the world like a human child.

In my lab we created a new online environment to implement this second Turing test—an equal playing field for children and AI systems. We showed 4-year-olds on-screen machines that would light up when you put some combinations of virtual blocks on them but not others; different machines worked in different ways. The children had to figure out how the machines worked and say what to do to make them light up. The 4-year-olds experimented, and after a few trials they got the right answer. Then we gave state-of-the-art AI systems, including GPT-3 and other large language models, the same problem. The language models got a script that described each event the children saw and then we asked them to answer the same questions we asked the kids.

We thought the AI systems might be able to extract the right answer to this simple problem from all those billions of earlier words. But nobody in those giant text databases had seen our virtual colored-block machines before. In fact, GPT-3 bombed. Some other recent experiments had similar results. GPT-3, for all its articulate speech, can’t seem to solve cause-and-effect problems.

If you want to solve a new problem, googling it or going to the library may be a first step. But ultimately you have to experiment, the way the children did. GPT-3 can tell you what the most likely outcome of a story will be. But innovation, even for 4-year-olds, depends on the surprising and unexpected—on discovering unlikely outcomes, not predictable ones.

For the full commentary see:

Alison Gopnik. “What AI Still Doesn’t Know How To Do.” The Wall Street Journal (Saturday, July 16, 2022): C3.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date July 15, 2022, and has the same title as the print version.)

Increasing Tax Rates Will Reduce Venture Funding for Cancer Research

(p. A17) In his last year as vice president, Joe Biden launched a “cancer moonshot” to accelerate cures for the disease. It was short-lived, but he did help negotiate an agreement in Congress easing regulation of breakthrough drugs and medical devices.

In February [2022], President Biden revived the initiative, setting a goal of reducing cancer death rates by at least 50% over the next 25 years. It’s ambitious but may be achievable given how rapidly scientific knowledge and treatments are advancing. Other Biden policies, however, are at odds with the goals of this one.

Two pharmaceutical breakthroughs were announced only last week that could save tens of thousands of lives each year and redefine cancer care. Yet the tax hikes and drug-price controls that the Biden administration is pitching would discourage the private investment that has delivered these potential cures.

. . .

Oncologists were blown away by the results reported last week in the New England Journal of Medicine: All 12 patients receiving the drug achieved complete remission after six months of treatment. None needed surgery, chemotherapy or radiation. Although some may relapse, the 100% success rate is unprecedented even for a small trial.

. . .

Last week AstraZeneca in partnership with Daiichi Sankyo reported that Enhertu reduced the risk of death by 36% in patients with metastatic breast cancer with low HER2 and by half for the subset who were hormone-receptor negative. These results blow the outcomes for other metastatic breast-cancer therapies out of the water.

. . .

These treatment breakthroughs aren’t happening because of government programs. They’re happening because pharmaceutical companies have invested decades and hundreds of billions of dollars in drug research and development. It typically takes 10.5 years and $1.3 billion to bring a new drug to market. About 95% of cancer drugs fail.

This is important to keep in mind as Mr. Biden and Democrats in Congress push for Medicare to “negotiate”—i.e., cap—drug prices and raise taxes on corporations and investors. The large profits that drugmakers notch from successful drugs are needed to reward shareholders for their investment risk and encourage future investment. Capital is mobile.

Mr. Biden’s proposal to increase the top marginal individual income-tax rates, including on capital gains, would punish venture capitalists who seed biotech startups, which do most early-stage research on cancer drugs and are often acquired by large drugmakers. At the same time, his proposed corporate global minimum tax would raise costs of intellectual property, which is often taxed at lower rates abroad.

There aren’t many things to celebrate nowadays, but biotech innovation is one. Let’s hope the president doesn’t kill his own cancer moonshot.

For the full commentary see:

Allysia Finley. “Biden May Stop His Cancer Moonshot’s Launch.” The Wall Street Journal (Thursday, June 16, 2022): A17.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the commentary has the date June 15, 2022, and has the same title as the print version.)

Feds Requiring EV Chargers in Desolate Parts of the West That Are Off the Electric Grid

(p. B1) The U.S. government wants fast EV-charging stations every 50 miles along major highways. Some Western states say the odds of making that work are as remote as their rugged landscapes.

States including Utah, Wyoming, Montana, New Mexico and Colorado are raising concerns about rules the Biden administration has proposed for receiving a share of the coming $5 billion in federal funding to help jump-start a national EV-charging network. The states say it will be difficult, if not impossible, to run EV chargers along desolate stretches of highway.

“There are plenty of places in Montana and other states here out West where it’s well more than 50 miles between gas stations,” said Rob Stapley, an official with the Montana Department of Transportation. “Even if there’s an exit, or a place for people to pull off, the other big question is: Is there anything on the electrical grid at a location or even anywhere close to make that viable?”

. . .

(p. B2) Some Western states are unhappy over the federal determination of which U.S. highways should have the chargers, which is a carry-over from 2015 legislation for alternative-fuels roadways.

Mr. De La Rosa of New Mexico said it could result in a disproportionate number of charging stations in the southeast part of the state, and none in the northwest. “It’s not apparent here in New Mexico how those decisions were made,” he said.

Utah’s population is largely clustered in cities along the Wasatch Front and Interstate-15 in the northern and southern parts of the state, and there are concerns that spending on remote locations could skip serving the routes most delivery drivers and residents use, said Kim Frost, executive director of the Utah Clean Air Partnership.

For the full story see:

Jennifer Hiller. “Plan for EV Chargers Meets Skepticism in West.” The Wall Street Journal (Tuesday, June 14, 2022): B1-B2.

(Note: ellipsis added.)

(Note: the online version of the story has the date June 13, 2022, and has the title “Biden Plan for EV Chargers Meets Skepticism in Rural West.”)

The “Intellect” and “Bravado” Behind the Success of Thiel, Musk, and the “PayPal Mafia”

(p. C7) Next week marks the 20th anniversary of PayPal becoming a publicly traded company. The IPO valued the online payments processor at nearly $1 billion—an eye-opening sum at the time. Back in the day, technology firms marked such occasions with glitzy celebrations. PayPal took a different path. Its youthful employees gathered in the parking lot of their Palo Alto, Calif., office building, where the company’s enigmatic chief executive, Peter Thiel, performed a keg stand and then played 10 simultaneous games of speed chess, winning nine of them.

Jimmy Soni tells that story and many others in “The Founders,” a gripping account of PayPal’s origins and a vivid portrait of the geeks and contrarians who made its meteoric rise possible. His richly reported narrative includes corporate intrigue, workplace hijinks, breakthrough innovation and first-class nerdiness.

. . .

Julie Anderson, one of X.com’s early employees, dropped the company’s California-based telephone customer-service provider and relaunched the service in Nebraska. Why there? Because many of her relatives lived there.

. . .

Confirming a cliché, staffers do spend all night at the office—sometimes sleeping under their desks, though not always. “There’s this massive value that you harness when you’re doing an all-nighter,” says Mr. Levchin, “when you’ve gone for presumably seven or eight hours of work, and you’re really getting up to a point when something’s about to be born—and then you go for eight more hours! And instead of stopping to go to sleep and letting these ideas dissipate, you actually focus on the findings you’ve made in the last few hours, and you just go crazy and do some more of that.”

. . .

Why did PayPal thrive when others—eMoneyMail, PayPlace, c2it—failed? One key was limiting the losses from fraud. If the company had taken a traditional approach, observes a member of the fraud-analytics team, it “would have hired people who had been building logistic regression models for banks for twenty years but never innovated.” Instead it turned to young, open-minded engineers who devised unorthodox methods.

. . .

. . . “The Founders” makes crystal-clear that PayPal’s human capital—a potent cocktail of intellect, bravado and competitiveness, complemented by the occasional keg stand—laid the foundation for success.

For the full review, see:

Matthew Rees. “Making the Future Click.” The Wall Street Journal (Saturday, Feb. 12, 2022): C7.

(Note: ellipses added.)

(Note: the online version of the review has the date February 11, 2022, and has the title “‘The Founders’ Review: Making the Future Click.”)

The book under review is:

Soni, Jimmy. The Founders: The Story of PayPal and the Entrepreneurs Who Shaped Silicon Valley. New York: Simon & Schuster, 2022.

The Poor of Dharnai Want the Cheap Plentiful Electricity From the Coal-Powered Grid

(p. A17) Consider the experience of Dharnai, an Indian village that Greenpeace in 2014 tried to turn into the country’s first solar-powered community.

Greenpeace received glowing global media attention when it declared that Dharnai would refuse “to give into the trap of the fossil fuel industry.” But the day the village’s solar electricity was turned on, the batteries were drained within hours. One boy remembers being unable to do his homework early in the morning because there wasn’t enough power for his family’s one lamp.

Villagers were told not to use refrigerators or televisions because they would exhaust the system. They couldn’t use cookstoves and had to continue burning wood and dung, which creates air pollution as dangerous for a person’s health as smoking two packs of cigarettes a day, according to the World Health Organization. Across the developing world, millions die prematurely every year because of this indoor pollution.

In August 2014, Greenpeace invited one of the Indian’s state’s top politicians, who soon after become its chief minister, to admire the organization’s handiwork. He was met by a crowd waving signs and chanting that they wanted “real electricity” to replace this “fake electricity.”

When Dharnai was finally connected to the main power grid, which is overwhelmingly coal-powered, villagers quickly dropped their solar connections. An academic study found a big reason was that the grid’s electricity cost one-third of what the solar energy did. What’s more, it was plentiful enough to actually power such appliances as TV sets and stoves. Today, Dharnai’s disused solar-energy system is covered in thick dust, and the project site is a cattle shelter.

For the full commentary see:

Bjorn Lomborg. “The Rich World’s Climate Hypocrisy.” The Wall Street Journal (Tuesday, June 21, 2022): A17.

(Note: the online version of the commentary has the date June 20, 2022, and has the title “Opinion: The Rich World’s Climate Hypocrisy.”)

A.I. Remains Useful Mainly for “Uncinematic Back-Office Logistics”

(p. B4) After years of companies emphasizing the potential of artificial intelligence, researchers say it is now time to reset expectations.

With recent leaps in the technology, companies have developed more systems that can produce seemingly humanlike conversation, poetry and images. Yet AI ethicists and researchers warn that some businesses are exaggerating the capabilities—hype that they say is brewing widespread misunderstanding and distorting policy makers’ views of the power and fallibility of such technology.

“We’re out of balance,” says Oren Etzioni, chief executive of the Allen Institute for Artificial Intelligence, a Seattle-based research nonprofit.

. . .

The belief that AI is becoming—or could ever become—conscious remains on the fringes in the broader scientific community, researchers say.

In reality, artificial intelligence encompasses a range of techniques that largely remain useful for a range of uncinematic back-office logistics like processing data from users to better target them with ads, content and product recommendations.

. . .

The gap between perception and reality isn’t new. Mr. Etzioni and others pointed to the marketing around Watson, the AI system from International Business Machines Corp. that became widely known after besting humans on the quiz show “Jeopardy.” After a decade and billions of dollars in investment, the company said last year it was exploring the sale of Watson Health, a unit whose marquee product was supposed to help doctors diagnose and cure cancer.

. . .

Elizabeth Kumar, a computer-science doctoral student at Brown University who studies AI policy, says the perception gap has crept into policy documents. Recent local, federal and international regulations and regulatory proposals have sought to address the potential of AI systems to discriminate, manipulate or otherwise cause harm in ways that assume a system is highly competent. They have largely left out the possibility of harm from such AI systems’ simply not working, which is more likely, she says.

For the full story see:

Karen Hao and Miles Kruppa. “AI Hype Doesn’t Match Reality.” The Wall Street Journal (Thursday, June 30, 2022): B4.

(Note: ellipses added.)

(Note: the online version of the story was updated July 5, 2022, and has the title “Tech Giants Pour Billions Into AI, but Hype Doesn’t Always Match Reality.”)

Brynjolfsson Made “Long Bet” with Gordon that A.I. Will Increase Productivity

(p. B1) For years, it has been an article of faith in corporate America that cloud computing and artificial intelligence will fuel a surge in wealth-generating productivity. That belief has inspired a flood of venture funding and company spending. And the payoff, proponents insist, will not be confined to a small group of tech giants but will spread across the economy.

It hasn’t happened yet.

Productivity, which is defined as the value of goods and services produced per hour of work, fell sharply in the first quarter this year, the government reported this month. The quarterly numbers are often volatile, but the report seemed to dash earlier hopes that a productivity revival was finally underway, helped by accelerated investment in digital technologies during the pandemic.

The growth in productivity since the pandemic hit now stands at about 1 percent annually, in line with the meager rate since 2010 — and far below the last stretch of robust improvement, from 1996 to 2004, when productivity grew more than 3 percent a year.

. . .

(p. B6) The current productivity puzzle is the subject of spirited debate among economists. Robert J. Gordon, an economist at Northwestern University, is the leading skeptic. Today’s artificial intelligence, he says, is mainly a technology of pattern recognition, poring through vast troves of words, images and numbers. Its feats, according to Mr. Gordon, are “impressive but not transformational” in the way that electricity and the internal combustion engine were.

Erik Brynjolfsson, director of Stanford University’s Digital Economy Lab, is the leader of the optimists’ camp. He confesses to being somewhat disappointed that the productivity pickup is not yet evident, but is convinced it is only a matter of time.

“Real change is happening — a tidal wave of transformation is underway,” Mr. Brynjolfsson said. “We’re seeing more and more facts on the ground.”

It will probably be years before there is a definitive answer to the productivity debate. Mr. Brynjolfsson and Mr. Gordon made a “long bet” last year, with the winner determined at the end of 2029.

For the full story see:

Steve Lohr. “Why Isn’t A.I. Increasing Productivity?” The New York Times (Wednesday, May 25, 2022): B1 & B6.

(Note: ellipsis added.)

(Note: the online version of the story was updated May 27, 2022, and has the title “Why Isn’t New Technology Making Us More Productive?”)

Log4j Open Source Bug Created “Endemic” Risk for “a Decade or Longer”

Continuing worries about the Log4j software bug are consistent with my skepticism of open source software, Openness to Creative Destruction. You can find a brief discussion in the chapter defending patents.

(p. A6) WASHINGTON—A major cybersecurity bug detected last year in a widely used piece of software is an “endemic vulnerability” that could persist for more than a decade as an avenue for hackers to infiltrate computer networks, a U.S. government review has concluded.

. . .

“The Log4j event is not over,” the report said. “The board assesses that Log4j is an ‘endemic vulnerability’ and that vulnerable instances of Log4j will remain in systems for many years to come, perhaps a decade or longer. Significant risk remains.”

. . .

Security researchers uncovered last December a major flaw in Log4j, an open-source software logging tool. It is a widely used piece of free code that logs activity in computer networks and applications.

For the full story, see:

Dustin Volz. “‘Endemic’ Risk Seen In Log4j Cyber Bug.” The Wall Street Journal (Friday, July 15, 2022): A6.

(Note: ellipses added.)

(Note: the online version of the story has the date July 14, 2022, and has the title “Major Cyber Bug in Log4j to Persist as ‘Endemic’ Risk for Years to Come, U.S. Board Finds.”)

My book, mentioned above, is:

Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, 2019.

Insurers Claim Curing Obesity Is “Vanity”

(p. A17) Maya Cohen’s entree into the world of obesity medicine came as a shock.

In despair over her weight, she saw Dr. Caroline Apovian, an obesity specialist at Brigham and Women’s Hospital, who prescribed Saxenda, a recently approved weight-loss drug. Ms. Cohen, who is 55 and lives in Cape Elizabeth, Maine, hastened to get it filled.

Then she saw the price her pharmacy was charging: $1,500 a month. Her insurer classified it as a “vanity drug” and would not cover it.

“I’m being treated for obesity,” she complained to her insurer, but to no avail.

. . .

More than 40 percent of Americans have obesity, and most have tried repeatedly to lose weight and keep it off, only to fail. Many suffer from medical conditions that are linked to obesity, including diabetes, joint and back pain and heart disease, and those conditions often improve with weight loss.

“The evidence is now overwhelming that there are physical changes in weight regulating pathways that make it difficult for people to lose weight and maintain their weight loss,” said Dr. Louis Aronne, an obesity medicine specialist who directs the comprehensive weight control center at Weill Cornell Medicine. “It’s not that they don’t have willpower. Something physical is holding them back.”

. . .

“Access to medicines for the treatment of obesity is dismal in this country,” said Dr. Fatima Cody Stanford, an obesity medicine specialist at Massachusetts General Hospital and Harvard Medical School.

. . .

Douglas Langa, an executive vice president at Novo Nordisk, . . . said that diabetes and obesity were “separate categories, separate marketplaces” to explain the difference in price between the companies’ two drugs that were based on the same medicine, semaglutide. He said Wegovy’s price “reflects efficacy and clinical value in this area of unmet need.”

Dr. Stanford was appalled.

“It’s unbelievable,” she said, adding that it was a gross inequity to charge people more for the same drug because of their obesity. She finds herself in an untenable situation: getting excited when her patients with obesity also have diabetes because their insurers pay for the drug.

For the full story, see:

Gina Kolata. “Many Insurers Won’t Cover New Weight Loss Drugs.” The New York Times (Wednesday, June 1, 2022): A17.

(Note: ellipses added.)

(Note: the online version of the story has the date May 31, 2022, and has the title “The Doctor Prescribed an Obesity Drug. Her Insurer Called It ‘Vanity.’.”)