Category: Economics

Japan Records Fewest Births Since 1874

(p. A6) Japan has 512,000 fewer people this year than last, according to an estimate released on Tuesday by the country’s welfare ministry. That’s a drop of more than the entire population of the city of Atlanta.

The numbers are the latest sign of Japan’s increasing demographic challenges.

Births in the country — which are expected to drop below 900,000 this year — are at their lowest figure since 1874, when the population was about 70 percent smaller than its current 124 million.

The total number of deaths, on the other hand, is increasing. This year, the figure is expected to reach almost 1.4 million, the highest level since the end of World War II, a rise driven by the country’s increasingly elderly population.

For the full story, see:

Ben Dooley. “Japan Shrank by 500,000 People in 2019, as Births Hit Lowest Point Since 1874.” The New York Times (Wednesday, December 25, 2019): A6.

(Note: the online version of the story has the date Dec. 24, 2019, and has the title “Japan Shrinks by 500,000 People as Births Fall to Lowest Number Since 1874.”)

Communist China Building “a Digital Totalitarian State”

(p. A1) ZHENGZHOU, China — China is ramping up its ability to spy on its nearly 1.4 billion people to new and disturbing levels, giving the world a blueprint for how to build a digital totalitarian state.

Chinese authorities are knitting together old and state-of-the-art technologies — phone scanners, facial-recognition cameras, face and fingerprint databases and many others — into sweeping tools for authoritarian control, according to police and private databases examined by The New York Times.

Once combined and fully operational, the tools can help police grab the identities of people as they walk down the street, find out who they are meeting with and identify who does and doesn’t belong to the Communist Party.

For the full story, see:

Paul Mozur and Aaron Krolik. “China’s Blueprint for a Digital Totalitarian State.” The New York Times (Wednesday, December 18, 2019): A1 & A10.

(Note: the online version of the story has the date Dec. 17, 2019, and has the title “A Surveillance Net Blankets China’s Cities, Giving Police Vast Powers.”)

Greta Thunberg “Brushed Off” Need to Know Economics

(p. A7) DAVOS, Switzerland — Greta Thunberg, the 17-year-old Swedish climate activist, spent this week inside the halls of power at the World Economic Forum, . . .

. . .

Speaking to reporters just before the march set off, Ms. Thunberg and four youth activists from Europe and Africa rebuked business and government leaders at the World Economic Forum for not taking climate action and warned that they would continue to press them to stop investing in fossil fuels. Those demands, Ms. Thunberg noted, “have been completely ignored.”

Asked about a suggestion by Treasury Secretary Steven Mnuchin that she learn economics in college before calling for divestment, Ms. Thunberg brushed off such criticisms as irrelevant. “If we care about that, we wouldn’t be able to do what we do,” she said.

For the full story, see:

Somini Sengupta. “Teenage Activist Joins Climate March on Last Day at Forum.” The New York Times (Saturday, January 25, 2020): A7.

(Note: ellipses added.)

(Note: the online version of the story has the date Jan. 24, 2020, and has the title “Greta Thunberg Joins Climate March on Her Last Day in Davos.”)

French Labor Law Reduces Firm Innovation

I heard an intriguing paper at the January 2020 AEA meetings in San Diego. It shows that a French labor market regulation discourages firm innovation. The abstract of the working paper version of the paper appears below.

We study the impact of labor regulation on innovation. We exploit the threshold in labor market regulations in France which means that when a firm reaches 50 employees, costs increase substantially. We show theoretically and empirically that the prospect of these regulatory costs discourages firms just below the threshold from innovating (as measured by patent counts). This relationship emerges when looking nonparametrically at patent density around the regulatory threshold and also in a parametric exercise where we examine the heterogeneous response of firms to exogenous market size shocks (from export market growth). On average, firms innovate more when they experience a positive market size shock, but this relationship significantly weakens when a firm is just below the regulatory threshold. Using information on citations we also show suggestive evidence (consistent with our model) that regulation deters radical innovation much less than incremental innovation. This suggests that with size-dependent regulation, companies innovate less, but if they do try to innovate, they “swing for the fence.”

The source of the abstract quoted above, is:

Aghion, Philippe, Antonin Bergeaud, and John Van Reenen. “The Impact of Regulation on Innovation.” 2019.

Clayton Christensen Wrote Well on Innovation

Clayton Christensen’s The Innovator’s Solution (co-authored with Michael Raynor) was packed with insights and examples on how entrepreneurs and incumbent firms innovate. He wrote several other thought-provoking and useful books, starting with his now-famous The Innovator’s Dilemma. Just a few days ago, I told one of my students from Africa that he should read Christensen’s latest book, which gives wonderful examples of how entrepreneurial innovation in developing countries can help them prosper.

This evening (Thurs., Jan. 24, 2020) I was discouraged to receive an email alert from the Wall Street Journal saying that Christensen died today.

A year or so ago, I sent him a late draft of my Openness to Creative Destruction, which references his work several times. He never responded. Maybe he already was too ill to look at it, or maybe he didn’t like it. I’ll never know. But either way, I thank him for all that his books taught me about innovation.

Christensen’s best book is:

Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

Christensen’s best-known book is:

Christensen, Clayton M. The Innovator’s Dilemma: The Revolutionary Book That Will Change the Way You Do Business. New York: Harper Books, 2000.

Christensen’s most recent book is:

Christensen, Clayton M., Efosa Ojomo, and Karen Dillon. The Prosperity Paradox: How Innovation Can Lift Nations out of Poverty. New York: HarperBusiness Press, 2019.

Flying Cars Face “a Long Road to Regulatory Approval”

(p. B3) Curtiss Autoplane. Fulton Airphibian. Taylor Aerocar.

Businesses and entrepreneurs have been promising a mass-produced flying car for more than a century. None have succeeded, but that hasn’t stopped Hyundai and Uber from wanting in on the action.

. . .

. . . there is a long road to regulatory approval. According to Morgan Stanley, air taxis will probably be used first in package delivery, which has fewer technical and regulatory barriers.

For the full story, see:

Niraj Chokshi. “Hail a Flying Car? Soon, Hyundai and Uber Say.” The New York Times (Wednesday, January 8, 2020): B3.

(Note: ellipses added.)

(Note: the online version of the story has the date Jan. 7, 2020, and has the title “Where’s Your Flying Car? Hyundai and Uber Say They’re Working on It.”)

Facebook’s “Lord of the Rings” Defense of Free Speech

(p. B1) On Dec. 30, [2019] Andrew Bosworth, the head of Facebook’s virtual and augmented reality division, wrote on his internal Facebook page that, as a liberal, he found himself wanting to use the social network’s powerful platform against Mr. Trump. But citing the “Lord of the Rings” franchise and the philosopher John Rawls, Mr. Bosworth said that doing so would eventually backfire.

“I find myself desperately wanting to pull any lever at my disposal to avoid the same result,” he wrote. “So what stays my hand? I find myself thinking of the Lord of the Rings at this moment.

“Specifically when Frodo offers the ring to Galadrial and she imagines using the power righteously, at first, but knows it will eventually corrupt her,” he said, misspelling the name of the character Galadriel. “As tempting as it is to use the tools available to us to change the outcome, I am confident we must never do that or we will become that which we fear.”

For the full story, see:

Kevin Roose, Sheera Frenkel and Mike Isaac. “Agonizing at Facebook Over Trump.” The New York Times (Wednesday, January 8, 2020): B1 & B7.

(Note: bracketed year added.)

(Note: the online version of the story has the date Jan. 7, 2020, and has the title “Don’t Tilt Scales Against Trump, Facebook Executive Warns.”)

Bay Area Californians Moving to Where Living Costs Less

(p. A1) SAN FRANCISCO — Christine Johnson, a public-finance consultant with an engineering degree, was running for a seat on the San Francisco Board of Supervisors.

She crisscrossed her downtown district talking about her plans to stimulate housing construction, improve public transit and deal with the litter of “needles and poop” that have become a common sight on the city’s sidewalks.

Today, a year after losing the race, Ms. Johnson, who had been in the Bay Area since 2004, lives in Denver with her husband and 4-year-old son. In a recent interview, she spoke for millions of Californians past and present when she described the cloud that high rent and child-care costs had cast over her family’s savings and future.

“I fully intended San Francisco to be my home and wanted to make the neighborhoods better,” she said. “But after the election we started tallying up what life could look like elsewhere, and we didn’t see friends in other parts of the country experiencing challenges the same way.”

. . .

(p. A12) Greg Biggs is adding more machines and moving jobs to cheaper locations. Mr. Biggs is the chief executive of Vander-Bend Manufacturing, a company in San Jose that makes metal products including surgical components and racks where data centers store computer servers. Vander-Bend has doubled its head count over the past five years, to about 900 employees, and pays $17 to $40 an hour for skilled technicians who need training but not a college degree.

This is precisely the sort of middle-income job needed in the Bay Area, which like many urban areas is bifurcating into an economy of high-wage knowledge jobs and low-wage service jobs.

The problem is he can’t find enough workers. The unemployment rate in San Jose is around 2 percent, and many of Vander-Bend’s employees already commute two or more hours to work. To compensate, Mr. Biggs has bought several van-size robot arms that pull metal panels from a pile then stamp them flush, bend their edges and assemble them into racks. He has opened a second location 75 miles away in Stockton, where labor and housing costs are a lot lower.

This is in most ways a success story. Vander-Bend is raising wages and training workers. The machines aren’t replacing jobs but instead make them more efficient, and the company is bringing higher-wage positions to a region that needs more of them. But for workers, even substantial income gains are being offset by rising costs.

For the full story, see:

Conor Dougherty. “True, California Is Booming. Also True: California’s a Mess.” The New York Times (Monday, December 30, 2019): A1 & A12.

(Note: ellipsis added.)

(Note: the online version of the story has the date December 29, 2019, and has the title “California Is Booming. Why Are So Many Californians Unhappy?”)

Art Carden Praises “Openness to Creative Destruction”

Economist Art Carden has written a fine review of my Openness book under the title “New Ideas Are the Key to Economic Development.” The review is fair, mostly positive, and well-written. His main reservation is that he sides with many other distinguished libertarians, but against me, on my argument that the patent system should be reformed rather than abolished.

Here is the final paragraph of Carden’s review:

I am glad to see Openness to Creative Destruction appear in print. It strikes a fine balance between detail and a big-picture perspective that, I think, can be read profitably by specialists and students alike. Anyone who wants to understand how the world grew rich and, importantly, what will sustain our enrichment would do well to have this book on the shelf.

Boudreaux Names “Openness” as One of Seven “Superb” Books Published in 2019

George Mason economics professor Donald Boudreaux, in his essay “Some Great Books for Stuffing Stockings” says “I offer here a list of seven superb books published in 2019 that your open-minded friends and family members are sure to love.”

I am honored that he included my Openness to Creative Destruction as one of the seven:

Arthur Diamond, Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. As does George Will, Diamond emphasizes the vital role played by individual entrepreneurs in helping to create modern mass prosperity. (The accounts of the challenges and efforts of flesh-and-blood entrepreneurs through the years is alone worth the price of this book.) And as does Deirdre McCloskey, Diamond recognizes also the importance of widespread respect for innovators and businesspeople. Making clear that modernity’s prosperity is the result of creative destruction, this book offers an unusually effective and powerful explanation of genuine market competition and a brilliant brief for its indispensability and for its goodness.