Category: Economics

Butterworth Made “Steady Forward Progress” an “Ingenious” Business Model for Tractor Success

(p. A15) The story of Ford’s dream of perfecting an affordable, all-purpose tractor—or, as Ford later imagined it, a gasoline-powered “automobile plow”—is seldom told. Neil Dahlstrom’s “Tractor Wars” tells it well.

. . .

By 1918 there were many competitors in America’s great tractor pull. Most were small or mid-sized firms, including the Gas Traction Co. of Minneapolis, and the Moline (Ill.) Plow Co. and the Waterloo (Iowa) Gasoline Engine Co. Two ultimately broke out of the pack with loud, gas-guzzling chugs.

. . .

Early attempts by International Harvester to develop a gas-powered tractor were only moderately successful, but in 1920 its engineers made a breakthrough, converting the two front wheels into “traction wheels,” moving the engine from the rear to the middle, and adding three reverse speeds. All of this, plus enhancements to compatible cultivating attachments, made Harvester’s Farmall tractor competitive with the Fordson.

Ford’s other chief rival was the John Deere Co. Its earliest claim to fame was becoming the “world’s largest manufacturer of steel plows.” The company shifted course in 1907 when William Butterworth, the son-in-law of Charles Deere, took control. According to Mr. Dahlstrom, Butterworth was “cautious with the family money that still financed the company, pushing for long-term gains in a cyclical, low-margin, weather-dependent business.” While some outsiders “mistook Butterworth’s preference for steady forward progress as indecision,” his business model turned out to be ingenious.

. . .

Mr. Dahlstrom, to his credit, has written a superb history of the tractor and this long-forgotten period of capitalism in U.S. agriculture.

For the full review, see:

Michael Taube. “BOOKSHELF; American Power Pull.” The Wall Street Journal (Thursday, December 30, 2021): A15.

(Note: the online version of the review has the date December 29, 2021, and has the title “BOOKSHELF; ‘Tractor Wars’ Review: American Power Pull.”)

The book under review is:

Dahlstrom, Neil. Tractor Wars: John Deere, Henry Ford, International Harvester, and the Birth of Modern Agriculture. Dallas, TX: Matt Holt Books, 2022.

The “Adventure” and “Fun” of Driving Cars

(p. B6) For one Monday in early December, the New York Stock Exchange played the role of vintage car museum. At one end of Broad Street, outside the exchange, sat a high-roofed and stately 1921 Duesenberg coupe. At the other, a fearsome 1966 Ford GT40 racecar. Between them, encased in a glass vitrine, was an imperturbably cheery 1967 Porsche 911S.

Shaking hands by the coffee stand was McKeel Hagerty. The chief executive of the classic car insurance company that bears his name, Mr. Hagerty was there to ring the opening bell, and celebrate the first day of trading for his newly public company (HGTY). Later, at a brunch in the Big Board’s boardroom, Mr. Hagerty wielded a ceremonial gavel and said, “This is only just the beginning.”

The origins of Hagerty, the company, are far humbler. It was founded by his parents, Frank and Louise, in 1984, in their basement in Traverse City, Mich., as a boutique insurer of wooden boats.

In the early 1990s, the company began insuring collectible cars. With Mr. Hagerty at the helm, it has become one of the largest indemnifiers of vintage vehicles, with over two million classics on its rolls. The actuarial data necessary to determine repair and replacement costs on these cars has also made it a foremost authority on their valuation.

. . .

Hagerty went public via a SPAC, or special-purpose acquisition company, raising roughly $265 million in the process with a goal of expanding. So, what are Hagerty’s ambitions now? And why did it need to become a publicly traded company in order to achieve them?

“The purpose of the company is to save driving and car culture,” Mr. Hagerty said flatly, as we piloted a zippy, Hagerty-insured 1972 BMW 2002 tii toward the tip of Lower Manhattan. “If we’re going to save car culture, we have to make investments outside of the core business, and really help create a whole ecosystem.” Achieving this lofty goal required hundreds of millions of dollars in additional investment, he said: “That would have been tough for us to afford just as a private company.”

. . .

Outside experts agreed with this assessment of Mr. Hagerty’s vocation. “They encourage driving. Their tag lines all the time are, ‘Drive your cars,’” Mr. Gross said. “In some ways, you think, that’s a little strange for an insurance company. You think they’d want you to drive as little as possible to minimize the risk.” He laughed.

Instead, Mr. Hagerty said he sincerely wants to help people find the pleasure in “the experiential sides” of the automobile, those organized around adventure, preservation, culture and legacy. “I think that if we can help steward along the reasons that people drive and love cars, other than to get from Point A to Point B, then we win.”

Mr. Gross concurred with this plan. “I don’t know how many companies there are that take the long way around. And that’s what Hagerty is doing here. They’re not only selling insurance. They’re trying to make sure that the reason you need that insurance is viable and fun, and lots of people are doing it,” he said. “As a business strategy, it’s pretty smart.”

For the full commentary, see:

Brett Berk. “A Classic Car Insurer’s Vision to ‘Save Driving’.” The New York Times (Friday, Dec. 17, 2021): B6.

(Note: ellipses added.)

(Note: the online version of the commentary has the date December 16, 2021, and has the title “A Classic Car Giant With a Lofty Mission: Save Driving.”)

Scientists Should Not Censor Contrarian Conjectures from Outsiders

On Nov. 3, 2021 I presented my paper “Galilean Science: The Impediment to Progress When Science as Doctrine Wins Over Science as Process” at Day 3 of the Organisation [sic] for Economic Co-operation and Development (OECD) “Workshop on AI and the Productivity of Science.” The OECD has 38, mainly European, governments as members and has the objective of finding policies to advance the economic progress of the world.

The link above is to OECD’s recently posted YouTube Zoom recording of all of Day 3. My presentation starts at about 1:23.

In the session where I presented my paper, we were asked to answer one of a couple of questions. I chose to focus on the question: “What is the most important impediment to raising the productivity of science, and why?” My answer, in brief, was that science is impeded when authorities require adherence to the dominant doctrines, censoring rather than permitting the contrarian conjectures from outsiders who advance us toward truth.

Galilean science is also discussed on p. 129 of my Openness book:

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

Concentrating at the Office Can Be Harder than Concentrating at Home

(p. A4) Many people returning to offices are starting to wonder how they ever managed to be productive in a place with so many distractions. On top of standard interruptions to the workday that have long existed—say, small talk while making a fresh cup of coffee—there are now new temptations and annoyances (depending on whom you ask) spawned by staggered schedules, hybrid work, and the pandemic-induced realization that socializing can be exhausting.

. . .

Valerie Warshaw, 40, an interior designer with an architecture firm in Richmond, Va., also has trouble focusing with people chatting near her desk, but for different reasons.

“I get distracted just from hearing other people’s conversation and then I’m like, ‘Ooh! I want to chime in on that,’ ” she said. “The group that I’m in is very social.”

. . .

Her noise-canceling AirPods can help but have a downside: she gets startled when people come up behind her desk without warning. Ms. Warshaw has learned the best way to get anything done is to barricade herself in a conference room.

“People don’t disturb you because they think you’re on a call,” she said.

For the full story, see:

Katherine Bindley. “Working From Work Can Be Hard.” The Wall Street Journal (Saturday, Dec. 18, 2021): A1 & A4.

(Note: ellipses added.)

(Note: the online version of the story was updated December 17, 2021, and has the title “Working From Work Is Harder Than It Sounds.”)

E-Mobility Devices Offer Consumers “Lower Virus Risk” and More Convenience Than Public Transit

(p. A9) A boom in electric-powered mobile devices is bringing what is likely to be a lasting change and a new safety challenge to New York’s vast and crowded street grid.

The devices have sprouted up all over. Office workers on electric scooters glide past Manhattan towers. Parents take electric bikes to drop off their children at school. Young people have turned to electric skateboards, technically illegal on city streets, to whiz through the far corners of New York.

Though many of these riders initially gave up their subway and bus trips because of the lower virus risk of traveling outdoors, some say they are sticking with their e-mobility devices even as the city begins to move beyond the pandemic.

“I use the scooter for everything, it’s really convenient,” said Shareese King, 41, a Bronx resident who deleted the Uber app from her phone after she started running her errands on an electric scooter.

Electric bikes, scooters and other devices are in many cases made for urban life because they are affordable, better for the environment, take up little, if any, street space for parking and are just fun to use, said Sarah M. Kaufman, the associate director of the Rudin Center for Transportation Policy and Management at New York University.

For the full story, see:

Winnie Hu and Chelsia Rose Marcius. “As Personal E-Mobility Spreads, Safety Challenges Grow.” The New York Times (Tuesday, October 28, 2021): A9.

(Note: the online version of the story was updated Nov. [sic] 8, 2021, and has the title “As E-Scooters and E-Bikes Proliferate, Safety Challenges Grow.”)

Small Modular Reactors Are Safer and Cheaper Than Older Reactors and Generate More Predictable Carbon-Free Energy Than Can Wind and Sun

(p. B13) Nuclear energy is a rare thing—a carbon-free energy source that isn’t hyped and enjoys bipartisan support in Washington. The big question now is whether new technologies that might lower the costs actually work.

Governments are reconsidering nuclear power, given its ability to provide predictable carbon-free energy.

. . .

“Modular” nuclear fission plants are where the real promise lies. Simpler designs, standardized components and passive safety features all help reduce costs. Being smaller can make it easier to find sites and integrate into a grid with intermittent renewables. Proponents estimate that modular reactors could more than halve the cost and build time associated with traditional ones.

One approach uses existing technologies to build small modular reactors, known as SMRs. They generate anything from a few megawatts to 500, compared with around 1,000 or more for a typical conventional reactor. The controlled fission reaction splits uranium, which heats water into steam, driving a turbine to generate electricity. Water also cools the reactor. SMRs use passive safety features, such as placement underground or in a pool of water, to reduce the need for some more expensive measures. It makes them cheaper to build, but opponents worry it could be a recipe for more disasters.

. . .

Others are trying to build modular reactors with new technology, such as novel nuclear fuels or cooling systems involving gas or salt instead of water. These advanced designs are intended to reduce the risk of accidents and build in more flexibility for intermittent power.

. . .

In 2020, the U.S. Department of Energy’s Advanced Reactor Demonstration Program co-founded two advanced nuclear reactor demonstration plants to be completed by 2027. The first is designed by Bill Gates-backed TerraPower in partnership with GE-Hitachi. It will feature a 345 MW sodium-cooled fast reactor with integrated energy storage on the site of a retiring coal plant in Wyoming. The second will be built in Washington state by X-Energy using four of its 80 MW helium gas-cooled reactors fueled by special uranium pebbles.

. . .

There is also innovation in nuclear fusion—combining atoms to generate energy—which comes with fewer safety and waste concerns. This month, Commonwealth Fusion Systems secured $1.8 billion in funding with promises to build reactors in the 2030s. But many think commercially viable fusion remains a very long shot.

For the full commentary, see:

Rochelle Toplensky. “Nuclear Power’s Second Chance.” The Wall Street Journal (Tuesday, Dec. 21, 2021): B13.

(Note: ellipses added.)

(Note: the online version of the commentary has the date December 20, 2021, and has the title “Nuclear Power Has a Second Chance to Prove Itself.”)

Wisconsin Hospitals Increasingly Sue Patients

(p. A8) Hospitals in Wisconsin have sued patients over medical debt at a rate that amounts to one out of every 1,000 residents a year, especially people in low-income areas and who are Black, a new study found.

The study, published Monday [Dec. 6, 2021] in the health-policy journal Health Affairs, found some hospitals were more likely than others to take patients to court and low-income and Black patients were disproportionately sued.

The findings highlight how the financial and legal jeopardy that patients face depends on which hospital they go to. The findings also add to mounting research on the consequences of medical debt, a problem that research shows is more acute among people who are uninsured.

Medical-bill lawsuits “are not a fait accompli,” said Zack Cooper, an economist with the Yale University School of Public Health and an author of the new lawsuit analysis. “This is very much a choice that these hospitals are making.”

. . .

Hospitals were suing people more for unpaid bills, the study also found. The rate increased to 1.53 lawsuits for every 1,000 residents in 2018, up from 1.12 lawsuits per 1,000 residents in 2001.

. . .

Dr. Cooper called for more data to better understand potential factors driving the disproportionate number of lawsuits among Black patients.

“First, Black patients could have a higher burden of unpaid medical bills, which leads them to get sued more on a per-capita basis,” he said. “Second, Black patients could have a similar amount of debt, but were more likely targeted by hospitals.”

For the full story, see:

Melanie Evans and Tom McGinty. “Hospital Debt-Collection Practices Vary.” The Wall Street Journal (Tuesday, Dec. 07, 2021): A8.

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

(Note: the online version of the story was updated December 6, 2021, and has the title “Hospitals in Wisconsin Pursued Medical Debt Collection Widely but Unevenly, Study Finds.” The online version says that the title of the New York print version is “Hospitals Faulted on Medical-Debt Suits.” The title of my National edition of the print version is “Hospital Debt-Collection Practices Vary.”)

The article co-authored by Cooper, and discussed above, is:

Cooper, Zack, James Han, and Neale Mahoney. “Hospital Lawsuits over Unpaid Bills Increased by 37 Percent in Wisconsin from 2001 to 2018.” Health Affairs 40, no. 12 (Dec. 2021): 1830-35.

“Overwhelmed” Volunteers Struggle to Fix Log4j Bug in Open Source Software

In Openness to Creative Destruction, I argue that open source software has severe drawbacks, compared to a system where firms receive higher profits for selling better software. The severe Log4j bug, discussed in the quoted passages below, is an example that strongly supports my argument. Blog entries posted on Dec. 17 and on Dec. 25 also discussed the Log4j bug.

(p. B6) Gary Gregory, a volunteer for the Apache Software Foundation, is spending time off from his day job glued to his computer, striving to help contain the harm from a security flaw in the Log4j tool underpinning much of the digital economy.

. . .

Mr. Gregory, who works from the dining-room table in his Ocala, Fla., home, fueled by black coffee and accompanied by his hound-pit-bull mix, Bella, said he is overwhelmed with hundreds of requests for help from businesses. While Apache is trying to assist companies in updating their systems, he said, the nonprofit’s resources are limited.

“This puts to the forefront the whole issue with open-source [software] and commercial users,” said Mr. Gregory, who is on the Apache Logging Services Project Management Committee of 16 elected members who vote on changes to the software. “The expectations are somewhat out of whack.”

. . .

Many developers rely on the free Log4j framework to help record data such as users’ behavior and applications’ activity in software built with the Java programming language. Cybersecurity experts say the inclusion of the open-source logging tool within so much interconnected software—often embedded without developers’ knowledge—yields a threat that spans economic sectors and national borders.

. . .

Cybersecurity firm Mandiant Inc. said it has observed Chinese government hackers trying to exploit the flaw.

After Apache released its planned patch on Friday, Mr. Gregory said he worked through the weekend on a new update along with other volunteer software developers in Japan, New Zealand, Virginia and Arizona. Unveiled Monday, the new version disabled a problematic software module by default and removed a message-lookup feature that could be used to exploit the flaw.

The Apache volunteers are designing another update to Log4j for users who rely on an older version of the Java programming language, meaning more work for Mr. Gregory while he is on vacation from his day job.

“That translates to me getting five hours of sleep last night,” he said of his time off. “Some of the other guys got two or three.”

For the full story, see:

David Uberti. “Fight Against Bug Relies on Volunteers.” The Wall Street Journal (Thursday, December 16, 2021): B6.

(Note: ellipses added.)

(Note: the online version of the story was updated Dec. 15, 2021, and has the title “Global Fight Against Log4j Vulnerability Relies on Apache Volunteers.”)

My book, mentioned above, is:

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

High Inflation Most Hurts the Poor

(p. B2) Inflation has become central to the American zeitgeist in 2021 in a way that it hadn’t been for decades. Google searches are up. Supply chain issues feature into popular Instagram posts. The satire website The Onion warned in a recent headline that “higher prices may force Americans to eat reasonable portions on Thanksgiving.”

Even as inflation hits its highest level since 1982 and inserts itself as a topic of popular discussion, trying to understand it can be a mind-bending task.

. . .

High or unpredictable inflation that isn’t outmatched by wage gains can be especially hard to shoulder for poor people, simply because they have less wiggle room.

Poor households spend a bigger chunk of their budgets on necessities — food, housing and especially gas, which is often a contributor to bouts of high inflation — and less on discretionary expenditures. If rich households face high inflation and their wages do not keep up, they may have to cut back on vacations or dining out. A poor family may be forced to cut back on essentials, like food.

“For lower income households, price increases eat up more of their budget,” said Laura Rosner-Warburton, a senior economist at MacroPolicy Perspectives, pointing out that some research suggests that poor people may even end up paying comparatively more for the same products. That may be partly because they lack the free cash to take advantage of temporary discounts.

Around the world, poor people historically have reported greater concern around inflation, and that is also the case in the United States in the current episode.

For the full story, see:

Jeanna Smialek. “Inflation 101: Stark Facts And Nuance.” The New York Times (Saturday, December 25, 2021): B1-B2.

(Note: ellipsis added.)

(Note: the online version of the story has the date Dec. 24, 2021, and has the title “Inflation Has Arrived. Here’s What You Need to Know.”)

No Clear Evidence That Tornadoes Are More Frequent or Intense Than 40 to 60 Years Ago

Damage from tornadoes depends on the strength of buildings, which depends on broad economic growth. To reduce harm, the level of economic growth matters as much or more than the frequency and intensity of tornadoes.

(p. A12) Some studies have concluded that as global warming advances, driven by the burning of fossil fuels, favorable conditions for severe storms in the United States will increase this century.

. . .

It remains less certain as to whether those increasingly severe storms might lead to more tornadoes. These complex events are harder to model, and so far there doesn’t appear to be clear evidence that, for instance, tornadoes have changed in frequency or intensity over the past 40 to 60 years.

. . .

“We might not know exactly how climate change is going to affect tornadoes going forward, but we do know that there are lot of things we can do to protect people today,” said Stephen Strader, a disaster scientist at Villanova University.

. . .

“There are always two sides of the coin when it comes to disasters,” Dr. Strader said. “There’s the climate itself, but there’s also society vulnerability. We can work to address climate change, but we shouldn’t lose focus on what we can do today to improve survivability against these extreme events.”

For the full story, see:

Brad Plumer, Winston Choi-Schagrin and Hiroko Tabuchi. “As World Warms, Bracing for More Extreme Weather.” The New York Times (Saturday, December 18, 2021): A12.

(Note: ellipses added.)

(Note: the online version of the story has the date Dec. 17, 2021, and has the title “Examining the Role of Climate Change in a Week of Wild Weather.”)

Hackers from China Seek to Exploit the Open Source Log4j Software Bug

In Openness to Creative Destruction, I argue that open source software has severe drawbacks, compared to a system where firms receive higher profits for selling better software. The severe Log4j bug, discussed in the quoted passages below, is an example that strongly supports my argument. A blog entry posted on Dec. 17 also discussed the Log4j bug.

(p. B1) Hackers linked to China and other governments are among a growing assortment of cyberattackers seeking to exploit a widespread and severe vulnerability in computer server software, according to cybersecurity firms and Microsoft Corp.

The involvement of hackers whom analysts have linked to nation-states underscored the increasing gravity of the flaw in Log4j software, a free bit of code that logs activity in computer networks and applications.

Cybersecurity researchers say it is one of the most dire cybersecurity threats to emerge in years and could enable devastating attacks, including ransomware, in both the immediate and distant future. Government-sponsored hackers are often among the best-resourced and most capable, analysts say.

“The effects of this vulnerability will reverberate for months to come—maybe even years—as we try to close these doors and try to hunt down all the actors who made their way in,” said John Hultquist, vice president of intelligence analysis at the U.S.-based cybersecurity firm Mandiant Inc.

. . .

(p. B6) Researchers find the Log4j flaw particularly worrying because the free Java-based software is used in a broad range of products. It can be found in everything from security software to networking tools to videogame servers. The exact number of users of Log4j is impossible to know, but the software has been downloaded millions of times, according to the organization that builds it, the Apache Software Foundation.

The attack works reliably and is trivial to exploit, security researchers say. Although downloadable patches have already been made available, experts and U.S. officials said they expected the flaw to remain a problem for the long haul because some organizations will be slow to update their systems or might neglect to do so entirely.

“It’s a surprise it’s not more widespread,” said Adam Meyers, senior vice president of intelligence with CrowdStrike, a U.S.-based cybersecurity firm, which said they had detected Iranian actors leveraging the Log4j flaw. “The question that everyone is asking is, ‘What aren’t we seeing?’”

For the full story, see:

Robert McMillan and Dustin Volz. “Hackers Leap on Flaw in Log4j Software.” The Wall Street Journal (Thursday, December 16, 2021): B1 & B6.

(Note: ellipsis added.)

(Note: the online version of the story was updated Dec. 15, 2021, and has the title “Hackers Backed by China Seen Exploiting Security Flaw in Internet Software.”)

My book, mentioned above, is:

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