Category: Economics

Central Planning Elitism Leads to Rule by the Corrupt or the Incompetent

(p. A23) . . . the underlying faith of the Green New Deal is a faith in the guiding wisdom of the political elite. The authors of the Green New Deal assume that technocratic planners can master the movements of 328 million Americans and design a transportation system so that “air travel stops becoming necessary.” (This is from people who couldn’t even organize the successful release of their own background document.)
They assume that congressional leaders have the ability to direct what in effect would be gigantic energy firms and gigantic investment houses without giving sweetheart deals to vested interests, without getting corrupted by this newfound power, without letting the whole thing get swallowed up by incompetence. (This is a Congress that can’t pass a budget.)
. . .
The impulse to create a highly centralized superstate recurs throughout American history. There were people writing such grand master plans in the 1880s, the 1910s, the 1930s. They never work out. As Richard Weaver once put it, the problem with the next generation is that it hasn’t read the minutes of the last meeting.

For the full commentary, see:
Brooks, David. “How the Left Embraced Elitism; The progressives’ Green New Deal centralizes power.” The New York Times (Tuesday, Feb. 12, 2019): A23.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Feb. 11, 2019.)

Hybrid Jobs Are Less Likely to Become Obsolete

(p. R14) Jobs that tap both technical and creative thinking include mobile-app developers and bioinformaticians, and represent some of the fastest-growing and highest-paying occupations, according to a new report from Burning Glass Technologies, a labor-market analytics firm in Boston.
The company analyzed millions of job postings to better understand the skills employers are seeking. What they discovered was that many employers want workers with experience in such new capabilities as big-data gathering and analytics, or design using digital technology. Such roles often require not only familiarity with advanced computer programs but also creative minds to make use of all the data.
. . .
People who fail to update their skills will qualify for fewer jobs. In 2013, Burning Glass found, one in 20 ads for design, media and writing jobs requested analysis skills. In 2018, one in 13 postings did. In 2013, one in 500 ads for marketing and public-relations pros asked for data-visualization skills. By 2018, the ratio had increased to one in 59.
People in hybrid jobs are also less likely to become professionally obsolete. Highly hybridized jobs have only 12% risk of being automated, compared with a 42% risk for jobs overall, says Burning Glass.

For the full story, see:
Lauren Weber. “The ‘Hybrid’ Skills That Tomorrow’s Jobs Will Require.” The Wall Street Journal (Tuesday, Jan. 22, 2019): R14.
(Note: ellipsis added.)
(Note: the online and print versions have the same dates and titles.)

The Burning Glass Technologies report mentioned in the passages above, is:

Sigelman, Matthew, Scott Bittle, Will Markow, and Benjamin Francis. “The Hybrid Job Economy: How New Skills Are Rewriting the DNA of the Job Market.” Boston, MA: Burning Glass Technologies, Jan. 2019.

Firms Find Humans More Flexible Than Robots

(p. B2) JACKSON CENTER, OHIO–Airstream’s factory here is racing to fill a backlog of orders for its retro, high-end travel trailers that spans well into next year. The company is hiring, adding dealers and spending $50 million to build a bigger plant.
I counted eight workers climbing through an Airstream to bolt a hulking aluminum shell to a steel chassis, and snake fluid lines and wires through walls. To finish the shiny, silver capsule off, workers will need to install 3,000 rivets by hand.
There’s not a robot in sight. They may speed production, but the machines require a substantial investment that risks being wasted if the economy slumps
. . .
“We see in U.S. manufacturing a race between technology and human capital,” Stanford University economist Nicholas Bloom said. While some companies like electric-car maker Tesla Inc. are racing to automate almost every process on the factory floor, he said many executives are reluctant to sink investments in equipment that “will be hard to reverse.”
. . .
Robotics spending is forecast to equal $90 billion in 2018, according to researcher International Data Corp., with a hefty chunk of that investment aimed at industrial or manufacturing uses. That is a considerable increase compared to prior years, but it is only a sliver of the nearly $3 trillion committed to capital investment.
John Van Reenen, a Massachusetts Institute of Technology economics professor and Mr. Bloom’s research partner, said executives in many industries –including health care and retailing–aren’t sold on the technical revolution. “There is a big debate on whether robots are really delivering on the productivity benefits they might promise.”
At an event to commemorate the revamp of a factory west of Detroit last month, Ford Motor Co.’s president of global operations, Joe Hinrichs, said a lot of industrial automation happened several decades ago. Now companies are trying to “optimize how they use people” rather than install more machines.
Ford spent nearly $1 billion converting the factory to go from making small cars to producing pickup trucks. Much of that went toward new tooling for stamping out body parts, but relatively little went toward adding automation, Mr. Hinrichs said. Artificial intelligence is now integrated into the final inspection lines to boost quality. But skilled workers are needed to interact with the AI tools.
Mr. Bloom said incremental efforts like this are helping boost worker productivity, even if at a lower rate than was experienced during the decadelong boom that started in the mid-1990s. He said economists may need to get comfortable with 1% annual productivity gains, particularly because it takes a lot of investment just to maintain that modest rate.

For the full commentary, see:
John D. Stoll. “ON BUSINESS; Humans Are Winning the Battle With Robots.” The Wall Street Journal (Saturday, Nov. 3, 2018): B2.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Nov. 1, 2018.)

92-Year-Old American Airline Mechanic

(p. A19) Azriel Blackman, an airline mechanic for American Airlines, is not allowed to climb ladders, drive on the airfield at Kennedy International Airport or even use any tools.
That’s understandable — Mr. Blackman turns 92 next month.
But those constraints have not stopped him from showing up to work at a job he started in an era when trans-Atlantic commercial flights were novel feats.
“He loves coming to work,” said Robert Needham, Mr. Blackman’s boss and the station manager for the airline’s New York maintenance base. “His work ethic is something I’d love every one of my 368 mechanics here to have.”
Five days a week, Mr. Blackman drives himself from his home in Queens Village to the airport long before sunup and well before his 5 a.m. start time. His job as crew chief is to review paperwork detailing what maintenance has been completed and what remains to be done on 17 jetliners that are kept overnight at the airport. Then, wearing a lime-green vest and clutching a paper containing a list of planes and service requests, he starts his walk through a massive hangar, often passing below an enormous mural on the wall featuring his portrait surrounded by four types of aircraft flown by American.
. . .
“Every day the job is different,” Mr. Blackman said. “You’re not doing the same thing repetitively, and that’s good. If in my journey around the hangar I see something I can help on, I do that.”

For the full story, see:
Christine Negroni. “For 75 Years, Helping to Keep Planes Aloft.” The New York Times (Tuesday, June 18, 2017): A19.
(Note: ellipsis added.)
(Note: the online version of the story has the date June 17, 2017, and has the title “For 75 Years, a Mechanic Has Helped Keep Planes Aloft.” The online version identifies the page number of the New York edition as A18. The page number in my copy of the National edition was A19.)

“Protectionist Trade Policies Can Backfire” on Those They Are Intended to Protect

(p. B1) You may not have appreciated it at the time — golden eras have a habit of coming and going like that — but a five-year stretch that started in 2013 was a pretty great time to buy a washing machine.
Inflation for home laundry equipment, as measured by the Labor Department, fell steadily during that time, which meant you could buy the same washer your neighbor bought last year for less money. Or you could buy a better one at the same price. Great news for your clothes, though maybe bad news for your friendship, if your neighbor was the covetous type.
That stretch of laundry deflation ended last year, shortly after President Trump imposed tariffs, starting at 20 percent, on imported washers. The move was a response to a complaint filed by Whirlpool, a Michigan-based manufacturer.
. . .
A year after Mr. Trump announced the tariffs, washing machine prices were up, as many analysts had expected. But that has not been a boon to the makers of washers because fewer Ameri-(p. B4)cans are investing in new laundry equipment, exposing how protectionist trade policies can backfire on the very companies they are meant to safeguard.
Tariffs of two varieties have pushed prices up
The washer-specific tariffs raised costs for importers like LG and Samsung. But another tariff issued by Mr. Trump, on imported steel, raised costs for some domestic manufacturers like Whirlpool, which took those companies by surprise.
Many manufacturers passed those higher costs on to consumers. Once stores worked their way through models that had been imported before tariffs hit, deflation gave way to sharp price increases.
After years of steady growth, sales reversed in 2018
A basic rule of economics is that when the price of something goes up, people buy less of it. That’s just what happened to washing machines.

For the full story, see:
Jim Tankersley. “Tariffs Tossed a Market Right Into a Spin Cycle.” The New York Times (Saturday, Jan. 26, 2019): B1 & B4.
(Note: ellipsis added; bold and larger font in original.)
(Note: the online version of the story has the date Jan. 25, 2019, and has the title “‘How Tariffs Stained the Washing Machine Market.”)

Deirdre McCloskey Offers Advance Praise for Openness to Creative Destruction

Astoundingly rich in ideas and stories, Diamond’s sweet and beautiful book is more: an open-handed guide to what really matters in explaining, and sustaining, the Great Enrichment of 3,000 percent per person 1800 to the present. Diamond assuages the ancient fear of betterment, recently haunting us with spooks of AI and technological unemployment. He shows conclusively that an “innovative dynamism” enriches us all, materially and spiritually. The poor are bettered. The jobs are bettered. Read the book and be bettered, freed from specious and politically poisonous worries about economic change.

Deirdre McCloskey, UIC Distinguished Professor of Economics and of History Emerita. Author of Bourgeois Equality and many other works.

McCloskey’s advance praise is for:
Diamond, Arthur M., Jr. Openness to Creative Destruction: Sustaining Innovative Dynamism. New York: Oxford University Press, forthcoming June 2019.

Government Fiscal Stimulus Does Not Speed Job Growth

DebtAndEmploymentGrowthGraph2019-02-17.jpgSource of graph: online version of the WSJ article quoted and cited below.

(p. A17) . . . is there evidence that stimulus was behind America’s recovery–or, for that matter, the recoveries in Germany, Switzerland, Sweden, Britain and Ireland? And is there evidence that the absence of stimulus–a tight rein on public spending known as “fiscal austerity”–is to blame for the lack of a full recovery in Portugal, Italy, France and Spain?
A simple test occurred to me: The stimulus story suggests that, in the years after they hit bottom, the countries that adopted relatively large fiscal deficits–measured by the average increase in public debt from 2011-17 as a percentage of gross domestic product–would have a relatively speedy recovery to show for it. Did they?
As the accompanying chart shows, the evidence does not support the stimulus story. Big deficits did not speed up recoveries. In fact, the relationship is negative, suggesting fiscal profligacy led to contraction and fiscal responsibility would have been better.

For the full commentary, see:
Phelps, Edmund. “The Fantasy of Fiscal Stimulus; It turns out Keynesian policies are correlated with slower, not faster, economic growth.” The Wall Street Journal (Tuesday, Oct. 30, 2018): A17.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date Oct. 29, 2018.)

“The Market Doesn’t Care If You’re Indigenous or Not”

(p. A8) MELBOURNE, Australia — It was a disempowering experience at a large corporate organization that prompted Morgan Coleman to become an entrepreneur.
Initially, he was proud to work there. But soon, as one of the few Indigenous employees, he felt patronized and unwelcome by some, and worried that his manager resented him because of his Torres Strait Islander background.
Now, as part of a growing number of Indigenous Australians finding success in the entrepreneurial world even as the rate of non-Indigenous business ownership has fallen, he feels his future rides solely on his merit.
“Whether I succeed or not, it’s entirely up to me,” Mr. Coleman, 28, said in a recent interview at the Melbourne offices of Vets on Call, the app he left his corporate job to start. “The market doesn’t care if you’re Indigenous or not.”

For the full story, see:

Kenneth Chang. “For Indigenous Australians, Defining a Destiny Through Entrepreneurship.” The New York Times (Monday, Feb. 4, 2019): A8.

(Note: the online version of the story has the date Jan. 30 [sic], 2019, and has the title “”It’s Entirely Up to Me’: Indigenous Australians Find Empowerment in Start-Ups.”)

Neuroscience Maverick Funds His Own Research

(p. B4) Mr. Hawkins has been following his own, all-encompassing idea for how the brain works. It is a step beyond the projects of most neuroscientists, like understanding the brain of a fruit fly or exploring the particulars of human sight.
His theory starts with cortical columns. Cortical columns are a crucial part of the neocortex, the part of the brain that handles sight, hearing, language and reason. Neuro-(p. B4)scientists don’t agree on how the neocortex works.
Mr. Hawkins says cortical columns handle every task in the same way, a sort of computer algorithm that is repeated over and over again. It is a logical approach to the brain for a man who spent decades building new kinds of computing devices.
All he has to do is figure out the algorithm.
A number of neuroscientists like the idea, and some are pursuing similar ideas. They also praise Mr. Hawkins for his willingness to think so broadly. Being a maverick is not easily done in academia and the world of traditional research. But it’s a little easier when you can fund your own work, as Mr. Hawkins has.
. . .
In 1979, with an article in Scientific American, Francis Crick, a Nobel Prize winner for his DNA research, called for an all-encompassing theory of the brain, something that could explain this “profoundly mysterious” organ.
Mr. Hawkins graduated from Cornell in 1979 with a degree in electrical engineering. Over the next several years, he worked at Intel, the computer chip giant, and Grid Systems, an early laptop company. But after reading that magazine article, he decided the brain would be his life’s work.
He proposed a neuroscience lab inside Intel. After the idea was rejected, he enrolled at the University of California, Berkeley. His doctoral thesis proposal was rejected, too. He was, suffice to say, an outlier.
. . .
U.S. Robotics acquired Palm in 1996 for $44 million. About two years later, Mr. Hawkins and Ms. Dubinksy left to start Handspring. Palm, which became an independent company again in 2000, acquired Handspring for $192 million in stock in 2003.
Around the time of the second sale, Mr. Hawkins built his own neuroscience lab. But it was short-lived. He could not get a lab full of academics focused on his neocortical theory. So, along with Ms. Dubinsky and an A.I. researcher named Dileep George, he founded Numenta.
The company spent years trying to build and sell software, but eventually, after Mr. George left, it settled into a single project. Funded mostly by Mr. Hawkins — he won’t say how much he has spent on it — the company’s sole purpose has been explaining the neocortex and then reverse engineering it.

For the full story, see:
Cade Metz. “A New View of How We Think.” The New York Times (Monday, Oct. 15, 2018): B1 & B4.
(Note: ellipses added.)
(Note: the online version of the story has the date Oct. 14, 2018, and has the title “Jeff Hawkins Is Finally Ready to Explain His Brain Research.”)

Tariffs Evaded by Misclassification and Transshipment

(p. A1) One day in June [2018] , seven months after the U.S. imposed stiff tariffs on plywood from China, a wood importer in Oregon got a call from a supplier asking if he would like to get some Chinese plywood tariff-free.
How would that work, asked importer David Visse. The products carry an identification code that is checked by U.S. Customs agents.
“Don’t worry about it,” Mr. Visse says the supplier told him. The plywood would be stripped of its Chinese markings, and “we’ll ship it under some other code.”
Every product imported into the U.S. carries a 10-digit designation called an HTS code, of which there are 18,927 in all. Like a taxonomic version of Noah’s Ark, the code provides a common language to bridge disparate markets and identify products in all their variety.
In a world of increasing tariffs, the code has another function: evading those levies. The business of code-fudging is expanding in step with tariff increases, undermining U.S. efforts to shield American business from foreign competition, according to importers, customs officials, trade attorneys and shipping brokers.
As trade conflict grows between the two largest economies, these professionals say, code misclassification is starting to compete (p. A10) with transshipment–the rerouting of goods through third countries–as a way to duck tariffs.

For the full story, see:
Chuin-Wei Yap. “Trade Fight Spurs Tariff Dodges, With 18,927 Options.” The Wall Street Journal (Tuesday, Oct. 9, 2018): A1 & A10.
(Note: bracketed year added.)
(Note: the online version of the story has the date Oct. 8, 2018, and has the title “The U.S.-China Trade Battle Spawns a New Era of Tariff Dodges.”)

Bureaucratic FDA Delays Approvals for Fear “We’ll Be Toast”

(p. A21) Oct. 30 [2018] marks the 36th anniversary of the FDA’s approval of human insulin synthesized in genetically engineered bacteria, the first product made with “gene splicing” techniques. As the head of the FDA’s evaluation team, I had a front-row seat.
. . .
My team and I were ready to recommend approval after four months’ review. But when I took the packet to my supervisor, he said, “Four months? No way! If anything goes wrong with this product down the road, people will say we rushed it, and we’ll be toast.” That’s the bureaucratic mind-set. I don’t know how long he would have delayed it, but when he went on vacation a month later, I took the packet to his boss, the division director, who signed off.
That anecdote is an example of Milton Friedman’s observation that to understand the motivation of an individual or organization, you need to “follow the self-interest.” A large part of regulators’ self-interest lies in staying out of trouble. One way to do that, my supervisor understood, is not to approve in record time products that might experience unanticipated problems.

For the full commentary, see:
Miller, Henry I. “Follow the FDA’s Self-Interest; While approving a new form of insulin, I saw how regulators protect themselves.” The Wall Street Journal (Monday, Oct. 29, 2018: A21.
(Note: ellipsis, and bracketed year, added.)
(Note: the online version of the commentary has the date Oct. 28, 2018.)