Category: Economics

“The Stigma of Being ‘Drivers'”

(p. 6) They were arrested, suspended from jobs, shunned by relatives and denounced by clerics as loose women out to destroy society. Their offense? They did what many in Saudi Arabia considered unthinkable: getting in cars and driving.
Their protest in 1990 against the kingdom’s ban on women driving failed, and the women paid dearly for it, with the stigma of being “drivers” clinging to them for years.
So last month, when King Salman announced that the ban on women driving would be lifted next June, few were happier than the first women to demonstrate for that right — almost three decades ago.
. . .
Many restrictions on women remain, including so-called guardianship laws that give Saudi men power over their female relatives on certain matters. But the original protesters are overjoyed that their daughters and granddaughters will have freer lives than they did, thanks to the automobile.
“That I am driving means that I know where I am going, when I’m coming back and what I’m doing,” said Ms. Alaboudi, the social worker.
“It is not just driving a car,” she said, “it is driving a life.”

For the full story, see:
BEN HUBBARD. “27 Years After Protest, a Victory Lap for Saudi Women.” The New York Times, First Section (Sunday, October 8, 2017): 6.
(Note: ellipsis added.)
(Note: the online version of the story has the date OCT. 7, 2017, and has the title “‘Once Shunned as ‘Drivers,’ Saudi Women Who Fought Ban Now Celebrate.”)

Lean Supply Chains Fail to Scale Quickly

(p. A1) American factories are running short of parts.
Suppliers of everything from engines to electronic components aren’t keeping up with a boom in U.S. manufacturing, which has lifted demand in markets such as energy, mining and construction. As a result, some manufacturers are idling production lines and digesting higher costs.
. . .
(p. A4) Years spent making supply chains as lean and efficient as possible are hurting big customers now as demand climbs, industry consultants said.
“Suppliers have not been willing to jump on adding capacity because they’ve been burned badly before,” said Shiv Shivaraman, a managing director at consultant AlixPartners LLC who advises auto and machinery makers on supply chains and production processes. “You will see many people limping for a while.”
Some companies are stockpiling parts to head off future challenges, potentially exacerbating the supply pressures.
“We built some inventory last quarter because we had seen the lead times extend and we are trying protect our customers,” said Andrew Silvernail, CEO of Idex Corp. , a maker of pumps, valves and meters that is based in Lake Forest, Ill.

For the full story, see:
Doug Cameron and Austen Hufford. “Parts Makers’ Shortages Tap Brakes on Industrial Boom.” The Wall Street Journal (Saturday, Aug. 11, 2018): A1 & A4.
(Note: ellipsis added.)
(Note: the online version of the story has the date Aug. 10, 2018, and has the title “Parts Shortages Crimp U.S. Factories.”)

Jason Potts Offers Advance Praise for Openness to Creative Destruction

What explains innovative dynamism? Art Diamond has written a fantastic book exploring how strong property rights, not innovation systems, should be the basis of modern innovation policy. He has done a great job in setting out the case for a classical liberal approach to innovation and technology policy, and carefully counters many of the common arguments supporting interventionist policy models. The book is full of lucid and compelling case studies and will be popular among innovation scholars and policy-makers.

Jason Potts, Professor of Economics, Royal Melbourne Institute of Technology (RMIT), Director of Blockchain Innovation Hub at RMIT. Author of The New Evolutionary Economics, and other works.

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

Bezos Richer than Rockefeller in Real Wealth

(p. A2) With a fortune exceeding $150 billion, Amazon founder Jeff Bezos was recently declared the richest person in modern history.
But is he?
The answer depends on how you account for the wealth of past contenders for the title.
There are at least five ways to do that, and each provides a different result, according to Samuel H. Williamson, an economist and president of the website Measuring Worth.
Real wealth, the most familiar yardstick, accounts for the relative purchasing power of a particular sum by adjusting it for inflation based on the Consumer Price Index.
Using that measure, the fortune of John D. Rockefeller, America’s first billionaire and Mr. Bezos’ stiffest competition among latter day aristocrats, would equal only $24 billion today.
Working in reverse, Mr. Bezos’ fortune would amount to about $6.5 billion in 1916, when Rockefeller’s riches first hit the $1 billion mark.

For the full commentary, see:
Jo Craven McGinty. “THE NUMBERS; Bezos vs. Rockefeller, a Rich History Lesson.” The Wall Street Journal (Saturday, Aug. 11, 2018): A2.
(Note: the online version of the commentary has the date Aug. 10, 2018, and has the title “THE NUMBERS; Is Jeff Bezos Really the Richest of Them All?”)

Deregulation Can Revive 3% Economic Growth

(p. A17) Growth deniers are declaring that America’s economy has lost its ability to grow at 3% above inflation. If that’s the case, maybe we should go back to where we lost 3% growth and retrace our steps until we find it. For only with 3% or higher growth does America experience measurable progress in poverty reduction, strong job creation and income growth. If 3% growth is irretrievably lost, so is the American Dream.
Did America actually experience 3% real growth to start with? Yes. In the postwar era, the U.S. averaged 3.4% annual growth from 1948 through 2008. We averaged 3% growth for half of the George W. Bush presidency (2003-06). From 2009-12, the Obama administration, the Congressional Budget Office and the Federal Reserve all thought they saw 3% growth just around the corner. If the possibility of 3% growth is gone forever, it hasn’t been gone very long.
. . .
While Obama apologists like to claim that labor-productivity and labor-supply factors preclude 3% growth, most of the growth constraints we face today are directly attributable to Mr. Obama’s policies.
. . .
A tidal wave of new rules and regulations across health care, financial services, energy and manufacturing forced companies to spend billions on new capital and labor that served government and not consumers. Banks hired compliance officers rather than loan officers. Energy companies spent billions on environmental compliance costs, and none of it produced energy more cheaply or abundantly. Health-insurance premiums skyrocketed but with no additional benefit to the vast majority of covered workers.
In a world of higher costs, productivity plummeted. Productivity measures the production of things the market values that flow from the employment of labor and capital. Try listing the Obama-era regulatory requirements that generated the employment of labor and capital in ways that actually produced something you buy.
. . .
Bad policies–not bad luck or a loss of God’s favor–have driven down labor productivity and the labor supply. We can change those policies.
. . .
With 3% growth, the American dream is achievable and virtually anybody willing to work hard can live it. Let 3% growth die and a lot of what we love most about our country will die with it.

For the full commentary, see:
Phil Gramm and Michael Solon. “Finding America’s Lost 3% Growth; If the country can’t grow like it once did, then the American Dream really is irretrievably lost.” The Wall Street Journal (Monday, Sept. 11, 2017): A17.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Sept. 10, 2017.)

Mirrlees Found that a Flat Tax Would Encourage the Wealthy to Earn More, and Pay More Taxes

(p. B15) James A. Mirrlees, who taught himself calculus as a teenager, became a college professor when he was 32 and received a Nobel award for solving one of government’s greatest economic challenges — how to get taxpayers to pony up their fair share — died on Aug. 29 [2018] at his home in Cambridge, England.
. . .
Professor Mirrlees suggested that too many progressive taxes imposed at the highest income levels could discourage the wealthy from earning even more, reducing the revenue available to pay for government services and assist lower-income households.
He concluded as early as 1970 in the journal The Review of Economic Studies and in subsequent studies with Peter Diamond, an economist and fellow Nobel laureate at the Massachusetts Institute of Technology, that “the income tax is a much less effective tool for reducing inequalities than has often been thought” and that an “approximately linear” — or flattened — tax schedule would be more desirable.
“I must confess that I had expected the rigorous analysis of income-taxation in the utilitarian manner to provide an argument for high tax rates,” Professor Mirrlees wrote. “It has not done so.”
Politically, he was regarded as a social democrat, but his economic model became a rationale, embraced by many conservatives, for flattening tax rates — leading him to reconcile the two positions by saying that his heart was on the left, but that his head was on the right.
. . .
His research on “Optimum Income Taxation,” dating from the late 1960s, was peppered with arcane equations and graphs, but he maintained that much of economics is “in a way quite simple.”
“It is simple to be wrong as well as to be right,” he added, “and it is none too easy to distinguish between the two.”

For the full obituary, see:

Sam Roberts. “‘James Mirrlees, Who Earned a Nobel By Solving a Tax Riddle, Is Dead at 82.” The New York Times (Thursday, Sept. 6, 2018): B15.
(Note: ellipses, and bracketed year, added.)
(Note: the online version of the obituary has the date Sept. 4, 2018, and has the title “‘James Mirrlees, Whose Tax Model Earned a Nobel, Dies at 82.”)

Stephen Moore Offers Advance Praise for Openness to Creative Destruction

An invaluable reminder that all human progress derives from innovation, entrepreneurship and inventiveness. Wealth creation depends on creative destruction.

Stephen Moore, economist at the Heritage Foundation, economics commentator on CNN. Co-author of It’s Getting Better All the Time, and other works.

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

Scarcity of Workers Increases Use of Robots

(p. B1) PRAGUE — When Zbynek Frolik needed new employees to handle surging orders at his cavernous factories in central Bohemia, he fanned advertisements across the Czech Republic. But in a prosperous economy where nearly everyone had work, there were few takers.
Raising wages didn’t help. Nor did offers to subsidize housing.
So he turned to the robots.
“We can’t find enough humans,” said Mr. Frolik, whose company, Linet, makes state-of-the art hospital beds sold in over 100 countries. “We’re trying to replace people with machines wherever we can.”
Such talk usually conjures visions of a future where employees are no longer needed. In many major economies, companies are experimenting with replacing factory workers, truck drivers and even lawyers with artificial intelligence, raising the specter of a mass displacement of jobs.
But in Eastern Europe, robots are being enlisted as the solution for a shortage of workers. Often they are helping to create new types of jobs as businesses in the Czech Republic, Hungary, Slovakia and Poland try to stay agile and competitive. Growth in these countries, which became low-cost manufacturing hubs for Europe after the fall of Communism, has averaged 5 percent in recent years, buoyed by the global recovery..

For the full story, see:
Alderman, Liz. “Humans Wanted, But Robots Work.” The New York Times (Tuesday, April 17, 2018): B1 & B8.
(Note: the online version of the story has the date April 16, 2018, and has the title “Robots Ride to the Rescue Where Workers Can’t Be Found.”)

“The Ultimate Resource” Is the Human Mind

(p. A13) Fifty years ago this month, Mr. Ehrlich published “The Population Bomb.” In it he portended global cataclysm–unless the world could be persuaded to stop producing so many . . . well . . . people. The book sketched out possible scenarios of the hell Mr. Ehrlich believed imminent: hundreds of millions dying from starvation, England disappearing by the year 2000, India doomed, the average American’s lifespan falling to 42 by 1980, and so on.
Mr. Ehrlich’s book sold three million copies, and his crabbed worldview became an unquestioned orthodoxy for the technocratic class that seems to welcome such scares as an opportunity to boss everyone else around.
. . .
Enter Julian Lincoln Simon.
Simon was a professor of business and economics at the University of Illinois at Urbana-Champaign. In 1981, when this columnist first met him, Julian would smile and say the doom-and-gloomers had a false understanding of scarcity that led them to believe resources are fixed and limited.
. . .
In 1981 he put his findings together in a book called “The Ultimate Resource.” It took straight aim at Mr. Ehrlich. In contrast to the misanthropic tone of “The Population Bomb” (its opening sentence reads, “The battle to feed all humanity is over”), Julian was optimistic, recognizing that human beings are more than just mouths to be fed. They also come with minds.
. . .
. . . , human beings constantly find new and creative ways to take from the earth, increase the bounty for everyone and expand the number of seats at the table of plenty. Which is one reason Paul Ehrlich is himself better off today than he was when he wrote his awful book–notwithstanding all those hundreds of millions of babies born in places like China and India against his wishes.

For the full commentary, see:
William McGurn. “MAIN STREET; The Population Bomb Was a Dud; Paul Ehrlich got it wrong because he never understood human potential.” The Wall Street Journal (Tuesday, May 1, 2018): A13.
(Note: ellipses in first quoted paragraph, in original; ellipses in rest of quotes, added.)
(Note: the online version of the commentary has the date April 30, 2018.)

The Julian Simon book, mentioned above, is:
Simon, Julian L. The Ultimate Resource. Princeton, NJ: Princeton University Press, 1981.

Some Democrats Trying to Restrict “Zoning, Environmental, and Procedural Laws” that “Thwart” New Housing

(p. A1) SACRAMENTO — A full-fledged housing crisis has gripped California, marked by a severe lack of affordable homes and apartments for middle-class families. The median cost of a home here is now a staggering $500,000, twice the national cost. Homelessness is surging across the state.
In Los Angeles, booming with construction and signs of prosperity, some people have given up on finding a place and have moved into vans with makeshift kitchens, hidden away in quiet neighborhoods. In Silicon Valley — an international symbol of wealth and technology — lines of parked recreational vehicles are a daily testimony to the challenges of finding an affordable place to call home.
Heather Lile, a nurse who makes $180,000 a year, commutes two hours from her home in Manteca to the San Francisco hospital where she works, 80 miles away. “I make really good money and it’s frustrating to me that I can’t afford to live close to my job,” said Ms. Lile.
. . .
Now here in Sacramento, lawmakers are considering extraordinary legislation to, in effect, crack down on communities that have, in their view, systematically delayed or derailed housing construction proposals, often at the behest of local neighborhood groups.
The bill was passed by the Senate last month and is now part of a broad package of housing proposals under negotiation that Gov. Jerry Brown and Democratic legislative leaders announced Monday was likely to be voted on in (p. A13) some form later this summer.
“The explosive costs of housing have spread like wildfire around the state,” said Scott Wiener, a Democratic senator from San Francisco who sponsored the bill. “This is no longer a coastal, elite housing problem. This is a problem in big swaths of the state. It is damaging the economy. It is damaging the environment, as people get pushed into longer commutes.”
. . .
The bill sponsored by Mr. Wiener, one of 130 housing measures that have been introduced this year, would restrict one of the biggest development tools that communities wield: the ability to use zoning, environmental and procedural laws to thwart projects they deem out of character with their neighborhood.

For the full story, see:

Adam Nagourney and Conor Dougherty. “Housing Costs Put California In Crisis Mode.” The New York Times (Tuesday, July 18, 2017): A1 & A13.
(Note: ellipses added.)
(Note: the online version of the story has the date July 17, 2017, and has the title “The Cost of a Hot Economy in California: A Severe Housing Crisis.”)

Some Brain Traits Ease Music Learning

(p. C2) A study published in Cerebral Cortex in July [2015] shows that unusual activity in specific neural areas can predict how easily musicians learn their chops.
. . .
The data . . . point to a distinct starting advantage in some people–and where that advantage might reside in the brain. A retroactive examination of the first fMRI images predicted who would be the best learners.
Those with a hyperactive Heschl’s gyrus (part of the cerebral cortex that is associated with musical pitch) and with lots of reactivity in their right hippocampus (an area linked to auditory memory) turned out to be more likely to remember tunes they had heard before and, after some practice, play them well.
The “kicker,” said Dr. Zatorre, was finding that neural head start. “That gives you an advantage when you’re learning music, and it’s a completely different system from the parts of the brain that show learning has taken place. It speaks to the idea of 10,000 hours.” In his book “Outliers,” Malcolm Gladwell called 10,000 hours of practice “the magic number of greatness.” Dr. Zatorre disagrees, saying, “Is it really fair to say that everyone’s brain is structured the same way, and that if you practice, you will accomplish the same thing?”

For the full commentary, see:
Susan Pinker. “Practice Makes Some Perfect, Others Maybe Not.” The Wall Street Journal (Saturday, Aug. 29, 2015): C2.
(Note: ellipses, and bracketed year, added.)
(Note: the online version of the commentary has the date Aug. 26, 2015.)

The print version of the Cerebral Cortex article discussed above, is:
Herholz, Sibylle C., Emily B. J. Coffey, Christo Pantev, and Robert J. Zatorre. “Dissociation of Neural Networks for Predisposition and for Training-Related Plasticity in Auditory-Motor Learning.” Cerebral Cortex 26, no. 7 (July 1, 2016): 3125-34.

The Gladwell book mentioned above, is:
Gladwell, Malcolm. Outliers: The Story of Success. New York, NY: Little, Brown, and Co., 2008.