Category: Economics

Unknown Theodore Judah Mattered More Than Famous Leland Stanford in the Success of the Central Pacific

(p. A15) . . . Mr. De Wolk insists that his subject paved the way to a postindustrial revolution. “The way virtually every man, woman, and child in the world would live would be altered permanently,” the author writes. “All because of Leland Stanford’s life.” Nonsense.

The story that Mr. De Wolk tells is of an undistinguished man who had no success on his own as a young adult. But he did have the good fortune of having brothers who set him up with a wholesale grocery shop in Sacramento, Calif. More good luck came his way when Huntington, at the time a fellow shopkeeper, and two other local merchants hatched a railroad company—even though none of them had any railroad experience—and invited Stanford to join as a partner. The vast sums of capital that they would need would be mostly supplied by 30-year bonds issued by the federal government, which also awarded enormous grants of land, gratis.

. . .

The most important person in the company’s founding was altogether excluded from the quintet at the top: Theodore Judah, a young man in his early 30s and the only one among the leadership who had any real experience building railroads. Judah’s surveys of the Sierra Nevada led to the discovery of a feasible passage at Donner Pass. It was Judah’s presentation to prospective investors that emboldened the Sacramento shopkeepers to go into the railroad business.

For the full review, see:

Randall Stross. “BOOKSHELF; Leland Stanford: Life and Myth.” The Wall Street Journal (Monday, October 28, 2019): A15.

(Note: ellipses added.)

(Note: the online version of the review has the date October 27, 2019, and has the title “BOOKSHELF; ‘American Disruptor’ Review: The Life and Myth of Leland Stanford.”)

The book under review is:

De Wolk, Roland. American Disruptor: The Scandalous Life of Leland Stanford. Oakland, California: University of California Press, 2019.

In 2020, After Deploring “Dark Money,” Democrats Spend $600 Million More Dark Money Than Republicans

(p. 1) For much of the last decade, Democrats complained — with a mix of indignation, frustration and envy — that Republicans and their allies were spending hundreds of millions of difficult-to-trace dollars to influence politics.

“Dark money” became a dirty word, as the left warned of the threat of corruption posed by corporations and billionaires that were spending unlimited sums through loosely regulated nonprofits, which did not disclose their donors’ identities.

Then came the 2020 election.

Spurred by opposition to then-President Trump, donors and operatives allied with the Democratic Party embraced dark money with fresh zeal, pulling even with and, by some measures, surpassing Republicans in 2020 spending, according to a New York Times analysis of tax filings and other data.

The analysis shows that 15 of the most politically active nonprofit organizations that generally align with the Democratic Party spent more than $1.5 billion in 2020 — compared to roughly $900 million spent by a comparable sample of 15 of the most politically active groups aligned with the G.O.P.

For the full story, see:

Kenneth P. Vogel and Shane Goldmacher. “Denouncing Dark Money, Then Deploying It in 2020.” The New York Times, First Section (Sunday, January 30, 2022): 1 & 22.

(Note: the online version of the story has the date January 29, 2022, and has the title “Democrats Decried Dark Money. Then They Won With It in 2020.”)

Mamet Was Opened to Friedman, Hayek, and Sowell by a Guy Who “Wasn’t Strident or Arrogant”

I often wonder what sort of person, making what sort of argument, is most able to convince those who start out disagreeing. My mentors Ben Rogge and Deirdre McCloskey exemplify the attitude that impressed David Mamet in the passage quoted below. (On the other hand, Murray Rothbard, Karl Marx, and Ayn Rand convinced a lot of people, and each of them could sometimes be strident. I wonder still.)

(p. A11) . . . I received a galley copy of the playwright David Mamet’s “Recessional: The Death of Free Speech and the Cost of Free Lunch,” published Tuesday. The book is a collection of essays written over the past two years on an array of cultural and political topics: pandemic zealotry, Donald Trump, terrorism, California’s punitive tax code, Christianity and Judaism, Broadway and the movies. The essays are by turns witty, insightful, affecting and cryptic. What struck me most about the book, though, was how superbly out of place its author must be in the eminent environs of his chosen industry.

. . .

Mr. Mamet announced a turn to the political right in a 2008 essay for the Village Voice, “Why I Am No Longer a ‘Brain-Dead Liberal,’ ” but he was a black sheep long before then. His 1992 play “Oleanna,” for instance, features a male academic whose life and career are ruined by a calculating female student’s spurious accusation of sexual harassment.

Was there a moment when he decided to break ranks altogether? “I met a guy at my synagogue here maybe 20 years ago,” he says. “He was talking about Milton Friedman and [Friedrich] Hayek and Thomas Sowell. It didn’t make any sense to me, but I was impressed by his attitude. He wasn’t strident or arrogant. It was that guy’s attitude that impressed me.”

The man lent Mr. Mamet some books by these authors. “I said to him, ‘Good, I’ll read them. But,’ I said, ‘when my friends come over, I’ll have to hide them.’ He said: ‘I don’t.’ And that changed my life. What was I saying? Did I really think I had to hide books from my friends? How sick was I? It was a Road to Damascus moment.”

. . .

Woke signaling, blind compliance with public-health authoritarianism, deference to theater critics and tyrannical city officials—Mr. Mamet doesn’t play along. I’m reminded of the line spoken by Richard Roma, the aggressive and highly successful real-estate salesman in “Glengarry Glen Ross” played by Al Pacino in the 1992 film adaptation. “I subscribe to the law of contrary public opinion,” Roma says. “If everyone thinks one thing, then I say bet the other way.”

For the full interview, see:

Barton Swaim, interviewer. “THE WEEKEND INTERVIEW; A Defiant Scribe in the Age of Conformity.” The Wall Street Journal (Saturday, April 9, 2022): A11.

(Note: ellipses added.)

(Note: the online version of the interview has the date April 8, 2022, and has the title “THE WEEKEND INTERVIEW; Opinion: David Mamet Is a Defiant Scribe in the Age of Conformity.”)

Mamet’s recent book, mentioned in the interview above, is:

Mamet, David. Recessional: The Death of Free Speech and the Cost of a Free Lunch. New York: Broadside Books, 2022.

Chair of Obama’s Council of Economic Advisers Worries that the Huge Covid Stimulus Spending Is Causing “Permanently Higher Inflation”

Jason Furman, quoted below, was the Chair of President Obama’s Council of Economic Advisors. He is now a professor of economics at Harvard.

(p. B1) The United States spent more aggressively to protect its economy from the pandemic than many global peers, a strategy that has helped to foment more rapid inflation — but also a faster economic rebound and brisk job gains.

Now, though, America is grappling with what many economists see as an unsustainable worker shortage that threatens to keep inflation high and may necessitate a firm response by the Federal Reserve. Yet U.S. employment has not recovered as fully as in Europe and some other advanced economies. That reality is prodding some economists to ask: Was America’s spending spree worth it?

. . .

“I’m worried that we traded a temporary growth gain for permanently higher inflation,” said Jason Furman, an economist at Harvard University and a former economic official in the Obama administration. His concern, he said, is that “inflation could stay higher, or the Fed could control it by lowering output in the future.”

For the full story, see:

Jeanna Smialek and Ben Casselman. “Same Relief Goal, Different Costs.” The New York Times (Wednesday, April 27, 2022): B1 & B3.

(Note: ellipsis added.)

(Note: the online version of the story has the date April 25, 2022, and has the title “Rapid Inflation, Lower Employment: How the U.S. Pandemic Response Measures Up.”)

Locking Down Against “Out of Control” COVID in China Is “Not Worth Sacrificing . . . Our Freedom”

(p. A7) After Leona Cheng tested positive for the coronavirus late last month, she was told to pack her bags for a hospital stay. When the ambulance came to her apartment in central Shanghai to pick her up two days later, no one said otherwise.

So Ms. Cheng was surprised when the car pulled up not to a hospital but to a sprawling convention center. Inside, empty halls had been divided into living areas with thousands of makeshift beds. And on exhibition stall partitions, purple signs bore numbers demarcating quarantine zones.

Ms. Cheng, who stayed at the center for 13 days, was among the first of hundreds of thousands of Shanghai residents to be sent to government quarantine and isolation facilities, as the city deals with a surge in coronavirus cases for the first time in the pandemic. The facilities are a key part of China’s playbook of tracking, tracing and eliminating the virus, one that has been met with unusual public resistance in recent weeks.

Footage circulating on Chinese social media on Thursday [April 14, 2022] showed members of one Shanghai community protesting the use of apartment buildings in their complex for isolating people who test positive for the virus. Police officers in white hazmat suits could be seen physically beating back angry residents, some of whom pleaded with them to stop.

. . .

Ms. Cheng said she had once admired the government’s goal of keeping the virus out of China. It meant that for more than two years, she could live a normal life, even as cities and countries around the world had to lock down.

Now, she’s not so sure.

“This time I feel it is out of control and it’s not worth controlling the cases because it is not so dangerous or deadly,” she said, referring to the highly contagious Omicron variant. “It’s not worth sacrificing so many resources and our freedom.”

For the full story, see:

Alexandra Stevenson. “Covid Patient In Shanghai Describes Life In Isolation.” The New York Times (Saturday, April 16, 2022): A7.

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

(Note: the online version of the story has the date April 15, 2022, and has the title “‘Too smelly to sleep’: Thirteen days in a Shanghai isolation facility.”)

Sugarman Spent $500,000 in a Losing Fight Against a $100,000 FTC Fine

(p. A12) Though many of his wackier ideas bombed, Mr. Sugarman came up with a big winner now and then, including pocket calculators in the early 1970s and his BluBlocker sunglasses, designed to filter out ultraviolet and blue light waves, starting in the 1980s.

. . .

Trouble came in 1979 when the Federal Trade Commission accused him of violating a rule requiring firms to send out mail-order items promptly or notify customers of delays. Mr. Sugarman said the delays were caused by blizzards and a computer breakdown. The FTC proposed a $100,000 fine.

Mr. Sugarman counterattacked with a pamphlet, “The Monster That Eats Business,” an indictment of the FTC illustrated with cartoons in the style of Mad magazine. He accused FTC officials of hounding him over trivial lapses. After six years of fighting, he agreed to a settlement requiring him to pay a fine of $115,000 over four years. Mr. Sugarman said he had spent $500,000 on legal fees and added that “we are completely innocent of the charges.”

The success of BluBlocker sunglasses dug him out of that hole. Mr. Sugarman had a home on Maui, where he published a weekly newspaper. He flew small airplanes. He drove a Ferrari Testarossa. He looked dapper in his BluBlockers.

For the full obituary, see:

James R. Hagerty. “Marketing Guru Survived His Flops and Found Hits.” The Wall Street Journal (Saturday, April 2, 2022): A12.

(Note: ellipsis added.)

(Note: the online version of the obituary has the date March 29, 2022, and has the title “Marketing Maverick Survived Flops, Found Hits.”)

Stewart Brand Read Rand and Koestler, and Inspired Steve Jobs

At the end of Steve Jobs’s famous commencement address at Stanford, he quoted Stewart Brand’s famous advice at the end of his Last Whole Earth Catalog: “Stay hungry. Stay foolish.”

(p. A15) When I first met Stewart Brand at an upscale ideas festival, I expected to engage with an aging beatnik or hippie, the tree-hugging, whale-saving environmentalist I associated with the “Whole Earth Catalog”—that ’60s-era collectanea of books, resources, tools, technologies and assorted products that became the bible of a techno-utopia DIY movement focused on self-sufficiency, education and ecology. But I found Mr. Brand more like Elon Musk than Timothy Leary, and was astonished to witness him make the best argument I’d ever heard for including nuclear power in plans to replace fossil fuels.

. . .

Although many contemporaries dropped acid for the pure experience, Mr. Brand said he took LSD (and other psychedelics) because he hoped they would accentuate his appreciation of beauty, especially that found in the photographic skills he was developing. For him psychedelics were a tool of creativity: “When you design a tool,” he wrote in 1971, “the best you can do is fashion a prototype and hand it over to the local evolutionary system: ‘Here, try this.’ ”

His model was Arthur Koestler’s “bisociation,” the blending of unrelated concepts into something new. Mr. Brand’s ability to discern unlikely complements, along with the organizational skills he’d honed in the military, helped bring numerous projects to fruition: His imagination had him bounce from one to the next; his pragmatic propensities put them into effect. Decades after the “Whole Earth Catalog” project, for example, Mr. Brand published “Whole Earth Discipline,” which proposed integrating nuclear power, geoengineering, genetic engineering, wildlife restoration, species protection and other environmental technologies aimed at creating a sustainable future for life on Earth. He’s a solutions guy, not a New Age guru—his ability to convene like-minded innovators has resulted in the WELL (Whole Earth ’Lectronic Link), the Global Business Network for futurists and business leaders, the Long Now Foundation, and Revive & Restore, a project to bring back extinct species like passenger pigeons and woolly mammoths.

As for Mr. Brand’s politics, he’s off the spectrum, mostly identifying as a small-l libertarian (he read Ayn Rand at Stanford), committed to bottom-up democracy, with an aversion to orthodoxy of any sort, which means he must adapt when the marginal becomes the mainstream, as in his shift from environmentalism to conservationism, from organic foods to GMOs, and from anti- to pro-nuclear power.

For the full review, see:

Michael Shermer’. “BOOKSHELF; A Man In Whole.” The Wall Street Journal Tuesday, March 29, 2022): A15.

(Note: ellipsis added.)

(Note: the online version of the review has the date March 28, 2022, and has the title “BOOKSHELF; ‘Whole Earth’ Review: A Man in Whole.”)

The book under review is:

Markoff, John. Whole Earth: The Many Lives of Stewart Brand. New York: Penguin Press, 2022.

“Seems Ethernet Does Not Work in Theory, Only in Practice”

(p. A21) David Boggs, an electrical engineer and computer scientist who helped create Ethernet, the computer networking technology that connects PCs to printers, other devices and the internet in offices and homes, died on Feb. 19 [2022] in Palo Alto, Calif.

. . .

In the spring of 1973, just after enrolling as a graduate student at Stanford University, Mr. Boggs began an internship at Xerox PARC, a Silicon Valley research lab that was developing a new kind of personal computer. One afternoon, in the basement of the lab, he noticed another researcher tinkering with a long strand of cable.

The researcher, another new hire named Bob Metcalfe, was exploring ways of sending information to and from the lab’s new computer, the Alto. Mr. Metcalfe was trying to send electrical pulses down the cable, and he was struggling to make it work. So Mr. Boggs offered to help.

Over the next two years, they designed the first version of Ethernet.

“He was the perfect partner for me,” Mr. Metcalfe said in an interview. “I was more of a concept artist, and he was a build-the-hardware-in-the-back-room engineer.”

. . .

Before becoming the dominant networking protocol, Ethernet was challenged by several other technologies. In the early 1980s, Mr. Metcalfe said, when Mr. Boggs took the stage at a California computing conference, at the San Jose Convention Center, to discuss the future of networking, a rival technologist questioned the mathematical theory behind Ethernet, telling Mr. Boggs that it would never work with large numbers of machines.

His response was unequivocal. “Seems Ethernet does not work in theory,” he said, “only in practice.”

For the full obituary, see:

Cade Metz. “David Boggs, Co-Inventor of Ethernet, Dies at 71.” The New York Times (Tuesday, March 1, 2022): A21.

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

(Note: the online version of the obituary has the date Feb. 28, 2022, and has the same title as the print version.)

John List Shows Limitations of Randomized Controlled Trials (RCTs)

(p. A15) John List’s “The Voltage Effect” is marketed as a generic business title on how and whether to scale up an idea or product. Mr. List, an economics professor at the University of Chicago, explores why some ideas attain “voltage” and catch fire while others die out. This angle suggests that it will be another book about how to turn that great invention in your garage into the next Hewlett-Packard. But Mr. List is far too thoughtful to write something gimmicky or simple.

. . .

“The Voltage Effect” is a fine business book, though in many ways it works better as a meditation on the shortcomings of our increasingly data-driven world. The business community and academia have been taken over by data science. Mr. List seemingly argues that good and helpful data analysis may not scale well. It takes tremendous skill and talent to distinguish a scalable idea from one that is doomed to flop when you are working with a limited set of data and have an incentive to overhype your results. Data is the new currency; companies are presumed to have an unfair advantage if they have access to more of it. What gets less attention is the shortage of people who know how to make sense of statistical experiments and generalize them to a larger population.

The fields of business, policy and economics have all become enthralled with Randomized Control Trials. These are statistical experiments in which researchers take two populations: a “treatment” group that may be given cash or some other incentive and a “control” group that is not given anything. Researchers then observe any difference in outcomes from the experiment to make policy recommendations. RCTs can be a useful tool. But taking Mr. List’s lessons to heart, you see how limited they are.

Even the best-designed experiment may not give you insights that scale. For example, studies have found that it is more effective to give people cash in Kenya than to distribute aid through arcane development programs. The mantra in the development community has become “just give people money.” But just because cash is better than aid in Kenya, it doesn’t necessarily mean that a Universal Basic Income will work well in California.

For the full review, see:

Allison Schrager. “BOOKSHELF; Do We Have a Winner?” The Wall Street Journal (Monday, March 28, 2022): A15.

(Note: ellipsis added.)

(Note: the online version of the review has the date March 27, 2022, and has the title “BOOKSHELF; ‘The Voltage Effect’ Review: Do We Have a Winner?”)

The book under review is:

List, John A. The Voltage Effect: How to Make Good Ideas Great and Great Ideas Scale. New York: Currency, 2022.

Buffalo Stadium Subsidy Is Corporate and Union Welfare Pork

(p. A11) It’s bad enough that the budget agreement announced Thursday night by New York Gov. Kathy Hochul will shower more than $1 billion of the public’s money on a new stadium for the Buffalo Bills, a billionaire-owned football franchise that competes in the world’s most profitable sports league. But Ms. Hochul has attached conditions to the deal that will drive up the construction cost by roughly 20% and assure that a big chunk of the subsidy will be wasted. That contradicts her claim that she sought to negotiate the “best deal for taxpayers.”

Ms. Hochul is the first New York governor to hail from Buffalo since Grover Cleveland. Her husband is general counsel of Delaware North, the chief concessionaire at Highmark Stadium, the Bills’ current home in suburban Orchard Park. The new 60,000-seat facility is to be erected nearby, on the site of an existing stadium parking lot. Ms. Hochul says it’s a good deal for residents, who are rightly suspicious. So too are economists, whose strong consensus is that taxpayers almost always come out losers in publicly funded stadium projects, which chiefly enrich owners.

In this case, the corporate welfare pork is greased with a costly handout to unionized labor. That’s because of the state’s so-called prevailing-wage law, which effectively mandates that contractors on public construction projects such as schools, roads, bridges and subways pay union-level wages and benefits. Last year, a “source familiar with the negotiations” told the Buffalo News that the project’s $1.4 billion price tag was driven in part by “prevailing wage and union workforce requirements, among other rules.” Exactly how much the prevailing-wage law adds to the stadium deal is hard to know, but it’s likely in the hundreds of millions.

For the full commentary, see:

Peter Warren. “CROSS COUNTRY; The Buffalo Bills’ Stadium Subsidy Is a Hand-Off to Unions.” The Wall Street Journal (Saturday, April 9, 2022): A11.

(Note: the online version of the commentary has the date April 8, 2022, and has the same title as the print version.)

Gary Becker Foresaw a Cure for Obesity that Daniel Kahneman Wrote Was “Implausible”

I have found much of value in Daniel Kahneman’s Thinking, Fast and Slow. But the following passage is not included in what I value.

A famous example of the Chicago approach is titled A Theory of Rational Addiction; it explains how a rational agent with a strong preference for intense and immediate gratification may make the rational decision to accept future addiction as a consequence. I once heard Gary Becker, one of the authors of that article, who is also a Nobel laureate of the Chicago school, argue in a lighter vein, but not entirely as a joke, that we should consider the possibility of explaining the so-called obesity epidemic by people’s belief that a cure for diabetes will soon become available. He was making a valuable point: when we observe people acting in ways that seem odd, we should first examine the possibility that they have a good reason to do what they do. Psychological interpretations should only be invoked when the reasons become implausible—which Becker’s explanation of obesity probably is.

Source: Kahneman, Daniel. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux, 2011, p. 412.

Gary Becker is vindicated again:

(p. A16) An experimental drug has enabled people with obesity or who are overweight to lose about 22.5 percent of their body weight, about 52 pounds on average, in a large trial, the drug’s maker announced on Thursday.

The company, Eli Lilly, has not yet submitted the data for publication in a peer-reviewed medical journal or presented them in a public setting. But the claims nonetheless amazed medical experts.

“Wow (and a double Wow!)” Dr. Sekar Kathiresan, chief executive of Verve Therapeutics, a company focusing on heart disease drugs, wrote in a tweet. Drugs like Eli Lilly’s, he added, are “truly going to revolutionize the treatment of obesity!!!”

Dr. Kathiresan has no ties to Eli Lilly or to the drug.

. . .

The Eli Lilly study lasted 72 weeks and involved 2,539 participants. Many qualified as obese, while others were overweight but also had such risk factors as high blood pressure, high cholesterol levels, cardiovascular disease or obstructive sleep apnea.

They were divided into four groups. All received diet counseling to reduce their calorie intake by about 500 a day.

One group was randomly assigned to take a placebo, while the other three received doses of tirzepatide ranging from 5 milligrams to 15 milligrams. Patients injected themselves with the drug once a week.

. . .

The medications are among a new class of drugs called incretins, which are naturally occurring hormones that slow stomach emptying, regulate insulin and decrease appetite. The side effects include nausea, vomiting and diarrhea. But most patients tolerate or are not bothered by these effects.

For the full story, see:

Gina Kolata. “Experimental Obesity Drug Produces 20% Weight Loss.” The New York Times (Friday, April 29, 2022): A16.

(Note: ellipses added.)

(Note: the online version of the story was updated May 1, 2022, and has the title “Patients Taking Experimental Obesity Drug Lost More Than 50 Pounds, Maker Claims.” Where there is a slight difference in wording between the online and the print versions, the passages quoted above follow the online version.)

Kahneman’s book is:

Kahneman, Daniel. Thinking, Fast and Slow. New York: Farrar, Straus and Giroux, 2011.