Young Back Choi Offers Advance Praise for Openness to Creative Destruction

In this excellent book, Arthur Diamond offers a spirited defense of open and free market system, saying that much of the complaints against capitalism is based on (1) mistakenly conflating free market competition with cronyism, and (2) grossly under-appreciating the innovative entrepreneur’s ability to solve problems in all sorts of areas–in the past and in the future. One of the central claims of the author, based on his understanding of the epistemology of innovation, namely, the necessity of self-funding of all breakthrough entrepreneurs, underlines the need for open and competitive markets if we are to enjoy in the future benefits of innovative dynamism, as we have in the past.

Young Back Choi, Professor of Economics and Finance, St. John’s University. Author of Paradigms and Conventions: Uncertainty, Decision Making, and Entrepreneurship.

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

Chinese Entrepreneurs Anxious Over Growing Government Control of Private Enterprise

(p. A15) HONG KONG — The comments were couched in careful language, but the warning about China’s direction was clear.
China grew to prosperity in part by embracing market forces, said Wu Jinglian, the 88-year-old dean of pro-market Chinese economists, at a forum last month. Then he turned to the top politician in the room, Liu He, China’s economic czar, and said “unharmonious voices” were now condemning private enterprise.
“The phenomenon,” Mr. Wu said, “is worth noting.”
Mr. Wu gave rare official voice to a growing worry among Chinese entrepreneurs, economists and even some government officials: China may be stepping back from the free-market, pro-business policies that transformed it into the world’s No. 2 economy. For 40 years, China has swung between authoritarian Communist control and a freewheeling capitalism where almost anything could happen — and some see the pendulum swinging back toward the government.
. . .
China’s leadership turned to entrepreneurs in the late 1970s, after the government had led the economy to the brink of collapse. Officials gave them special economic zones where they could open factories with fewer government rules and attract foreign investors. The experiment was an unparalleled success. When extended to the rest of the country, it created a growth machine that helped make China second only to the United States in terms of economic heft.
Today, the private sector contributes nearly two-thirds of the country’s growth and nine-tenths of new jobs, according to the All-China Federation of Industry and Commerce, an official business group. So pressures on private businesses could create serious ripples.
“The private sector is experiencing great difficulties right now,” wrote Mr. Hu, the retired minister, who as the son of a former top Communist Party leader is often a voice for reform in China, in an essay posted online last Thursday. “We should try our best not to replicate the nationalization of private enterprise in the 1950s and the state capitalism.”
. . .
Private entrepreneurs are loath to speak out for fear of attracting official condemnation. But signs of distress aren’t hard to find.
Last month, Chen Shouhong, the founder of an investment research firm, asked a group of executive M.B.A. students — many of whom already owned publicly listed companies — to choose between panic and anxiety to describe how they feel about the economy. An overwhelming majority chose panic, according to a transcript. Mr. Chen declined to be interviewed.
. . .
Xiao Han, an associate law professor in Beijing, cited one of Aesop’s fables, of a man trying and failing to stop a donkey from going over a cliff.
“Before long,” Mr. Xiao said, “we’ll probably find a body of a China donkey under the cliff.”

For the full story, see:
Li Yuan. “China Muscles In on Its Free-Market Prosperity.”The New York Times (Thursday, Oct. 4, 2018): A1 & A12.
(Note: ellipses added.)
(Note: the online version of the story has the date Oct. 3, 2018, and has the title “Private Businesses Built Modern China. Now the Government Is Pushing Back.”)

Free Trade Benefits Harley-Riding Econometricians (and All Other Consumers Too)

Roughly 40 years ago, I completed a very useful econometrics course at the University of Chicago taught by the author of the commentary quoted below. Life is hard to predict, with or without econometrics. Who could have predicted that Eddie Lazear would end up on a Harley?

(p. A15) When I served in the George W. Bush administration, a group of Harley-Davidson -riding cabinet members and White House principals led the 2008 Memorial Day Rolling Thunder motorcycle parade. I own a 100th Anniversary Year Road King Classic. I am disappointed to see President Trump singling out the iconic American motorcycle company for harassment–a precedent that could inflict long-run damage on the U.S. economy.

. . .
Mr. Trump may genuinely believe his trade tactics will pressure other countries to reduce their tariffs, resulting in freer trade overall. This is unlikely. In the meantime his policies impose steep costs on American firms, like Harley-Davidson, and the people who want to buy from them. The best way to get others to buy American is to produce high-quality goods inexpensively. Those American products that do well abroad, Harley-Davidson motorcycles among them, succeed because consumers value them, not because tariffs and trade-war threats force them to buy American.

For the full commentary, see:
Edward Lazear. “Keep Your Tariffs off My Harley.” The Wall Street Journal (Tuesday, Aug. 28, 2018): A15.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date Aug. 27, 2018.)

Anthony Bourdain “Let the Locals Shine”

(p. A15) People are mourning celebrity chef Anthony Bourdain all over the world–from Kurdistan to South Africa, from Gaza to Mexico. That may surprise American social-justice warriors who have turned food into a battlefield for what they call “cultural appropriation.”
“When you’re cooking a country’s dish for other people,” an Oberlin College student wrote last year, “you’re also representing the meaning of the dish as well as its culture. So if people not from that heritage take food, modify it and serve it as ‘authentic,’ it is appropriative.” This was prompted by a dining-hall menu that included sushi and banh mi. Celebrity alumna Lena Dunham weighed in on the side of the social-justice warriors.
. . .
Bourdain was a frequent target of similar criticism. When he declared Filipino food the next big thing, a writer for London’s Independent newspaper complained that his “well-meaning” comments were “the latest from a Western (usually white) celebrity chef or food critic to take a once scoffed at cuisine, legitimize it and call it a trend.”
Bourdain took it in stride. Asked on his CNN show, “Anthony Bourdain: Parts Unknown,” what he thought about culinary cultural appropriation, he said: “Look, the story of food is the story of appropriation, of invasion and mixed marriages and war and, you know . . . it constantly changes. You know, what’s authentic anyway?”
. . .
When Bourdain took us to places like Libya and Venezuela and West Virginia, he let the locals shine. His vocation was about more than food. It was about people–understanding their cultures and their lives, lifting them up and making their dishes.

For the full commentary, see:
Elisha Maldonado. “Bourdain vs. the Social-Justice Warriors; The celebrity chef scoffed at the notion of opposing ‘cultural appropriation.'” The Wall Street Journal (Tuesday, June 12, 2018): A15.
(Note: ellipses added.)
(Note: the online version of the commentary has the date June 11, 2018.)

Firms Transship to Avoid Tariffs

(p. B1) SHANGHAI — Want to avoid American tariffs? In China, a company called Settle Logistics says it knows a way.
Specifically, that way goes through Malaysia — a 4,600-mile diversion compared with sending a shipping container from China straight across the Pacific to the United States. But when those Chinese products arrive at an American port, they will look as if they had come from Malaysia, according to the company, and will be spared tariffs aimed at Chinese goods.
“For those unfair trade barriers targeting our industries from certain countries,” Settle Logistics says on its website, “we can adopt other approaches to bypass those trade tariffs in order to expand markets.”
Such zigzagging routes are called transshipments, and President Trump has used them to justify the trade fight he has picked with a number of countries. They could also take on new relevance should the United States and China carry out their threats to levy a total of more than $200 billion in tariffs against each other.
. . .
(p. B6) Stamping out such transshipments could prove difficult. The United States made a big effort in the late 1990s to address the relabeling in Hong Kong of garments that had been made in mainland China, said Patrick Conway, a textiles trade specialist.
But after American officials gathered enough evidence to put companies on a watch list, the companies quickly disappeared, said Mr. Conway, who is the chairman of the economics department at the University of North Carolina at Chapel Hill. Some of the same people involved emerged later, but at other companies.
“We can anticipate a game of Whac-a-Mole,” Mr. Conway said.

For the full story, see:
Keith Bradsher. “Dodging Tariffs With a Handy Detour.” The New York Times (Monday, April 23, 2018): B1 & B6.
(Note: ellipsis added.)
(Note: the online version of the story has the date April 22, 2018, and has the title “Tariff Dodgers Stand to Profit Off U.S.-China Trade Dispute.”)

“Some Things Are True Even if Donald Trump Believes Them!”

(p. A21) One of the hardest things to accept for all of us who want Donald Trump to be a one-term president is the fact that some things are true even if Donald Trump believes them! And one of those things is that we have a real trade problem with China. Imports of Chinese goods alone equal two-thirds of the global U.S. trade deficit today.
. . .
. . . , I sat down with David Autor, the M.I.T. economist who’s done some of the most compelling research on the impacts of China trade. The first problem he raised has to do with the “shock” that China delivered to U.S. lower-tech manufacturers in the years right after Beijing joined the World Trade Organization in 2001, when it gained more open access to the U.S. and other world markets.
. . .
Autor and his colleagues David Dorn and Gordon Hanson found in a 2016 study that roughly 40 percent of the decline in U.S. manufacturing between 2000 and 2007 was due to a surge in imports from China primarily after it joined the W.T.O. And it led to the sudden loss of about one million factory jobs in Ohio, Michigan, Wisconsin and Pennsylvania. Trump won all of those states.
This “China shock,” said Autor, led not only to mass unemployment but also to social disintegration, less marriage, more opioid abuse and more people dropping out of the labor market and requiring government aid. “International trade creates diffuse benefits and concentrated costs,” he added. “China’s rapid rise, while enormously positive for world welfare, has created identifiable losers in trade-impacted industries and the labor markets in which they are located.”
The second problem has to do with access to China’s market for the goods U.S. companies sell. There, noted Autor, “China has not only taken our lunch, they’ve opened a restaurant that’s serving it to their citizens.”
. . . China kept a 25 percent tariff on new cars imported from the U.S. (our tariff is 2.5 percent) and similarly steep tariffs on imported auto parts.

For the full commentary, see:

Friedman, Thomas L.. “Trump’s Right About China, To a Point.” The New York Times (Wednesday, March 14, 2018): A21.

(Note: ellipses added; italics in original.)
(Note: the online version of the commentary has the date March 13, 2018, and has the title “Some Things Are True Even if Trump Believes Them.” My print edition is in this case, and is almost always, the National Edition. I have discovered that sometimes the page number, and even the title and date, differ between the National and the New York print editions.)

The Autor co-authored paper mentioned above, is:

Autor, David H., David Dorn, and Gordon H. Hanson. “The China Shock: Learning from Labor Market Adjustment to Large Changes in Trade.” Annual Review of Economics (2016): 205-40.

Macron Gives France Hope That “Tomorrow Can Be Better Than Today”

(p. A27) PARIS — When people used to ask me what I missed about America, I would say, “The optimism.” I grew up in the land of hope, then moved to one whose catchphrases are “It’s not possible” and “Hell is other people.” I walked around Paris feeling conspicuously chipper.
But lately I’ve had a kind of emotional whiplash. France is starting to seem like an upbeat, can-do country, while Americans are less sure that everything will be O.K.
. . .
The French haven’t become magically cheerful, but there’s a creeping sense that hope isn’t idiotic, and life can actually improve. As is common with a new president, there was a jump in optimism after Emmanuel Macron was elected last year. But this time, optimism has remained strong, and in January it hit an eight-year high.
It helps that France’s economy is finally growing more and that Mr. Macron has made good on promises ranging from overhauling the labor laws to shrinking class sizes at kindergartens in disadvantaged areas.
. . .
“The France of the optimists has won, and is dragging the other part of France toward its own side,” said Claudia Senik, an economist who heads the Well-Being Observatory, an academic think tank here.
The French are even taking an intellectual interest in this alien idea. There are optimism clubs, conferences and school programs, scholars of positivity and books like “50+1 Good Reasons to Choose Optimism.” In September Mr. Macron was a patron of the Global Positive Forum, a study group of “positive initiatives” in business and government. (“Tomorrow can be better than today,” the forum’s website insists.)

For the full commentary, see:
Druckerman, Pamela. “The New French Optimism.” The New York Times (Friday, March 23, 2018): A27.
(Note: ellipses added.)
(Note: the online version of the commentary has the date March 22, 2018, and has the title “Are the French the New Optimists?”)