Labor Economics – Page 85 – artdiamondblog.com

Samuel Johnson Saw Benefits of Free Markets

(p. A19) In “A Journey to the Western Islands of Scotland,” an account of his travels with James Boswell through the Hebrides in 1773, Johnson vividly described the desolation of a feudal land, untouched by commercial exuberance. He was struck by the utter hopelessness in a country where money was largely unknown, and the lack of basic material improvements–the windows, he noticed, did not operate on hinges, but had to be held up by hand, making the houses unbearably stuffy.

He was even more struck by the contrast between places where markets thrived and those where they didn’t. In Old Aberdeen, where “commerce was yet unstudied,” Johnson found nothing but decay, whereas New Aberdeen, which “has all the bustle of prosperous trade,” was beautiful, opulent, and promised to be “very lasting.”
Johnson also understood that what Smith would later call the division of labor was instrumental for human happiness and progress. “The Adventurer 67,” which he wrote in 1753 at the height of a commercial boom (and 23 years before Smith published “The Wealth of Nations”), delights in the sheer number of occupations available in a commercial capital like London.

For the full commentary, see:
ELIZA GRAY. “Samuel Johnson and the Virtue of Capitalism; The great 18th century writer on commerce and human happiness.” The Wall Street Journal (Fri., Sept. 11, 2009): A19.

Happy Entrepreneur: “Even When Things Get Tough, I’m Still in Control”

“‘Roger the Plumber’ owns his own business and is excited to go to work every day.” Source of caption and photo: online version of the WSJ article quoted and cited below.

(p. D1) By economic yardsticks, Roger the Plumber should be feeling pretty low. Roger Peugeot, owner of the 14-employee Overland Park, Kan., plumbing company that bears his name, is part of a sector hit hard by shrunken credit and slumping sales. He has been forced to reduce staff and is battling new competition from other plumbers fleeing the construction industry.

So why is Mr. Peugeot so happy? He genuinely likes fixing plumbing messes, for one thing, and despite the worst recession he has seen, “I’m still excited to get up and go to work every day,” he says. He relishes running into people at the local hardware store whom he has helped in the past. And in hard times, he says, his fate is in his own hands, rather than those of a manager. “Even when things get tough, I’m still in control,” he says.
In the broadest, most-comprehensive survey yet of how occupation affects happiness, business owners outrank 10 other occupational groups in overall well-being, based on the landmark survey of 100,826 working adults set for release today. Defined as self-employed store or factory owners, plumbers and so on, business owners surpassed 10 other occupational groups on a composite measure of six criteria of contentment, including emotional and physical health, job satisfaction, healthy behavior, access to basic needs and self-reports of overall life quality.
This puts Roger the Plumber well ahead of movers and shakers typically regarded as the top of the heap in society–professionals such as doctors or lawyers, who ranked second, and executives and managers in corporations or government, who came in third–according to the Gallup-Healthways Well-Being Index, a collaboration between Gallup and Healthways, a Franklin, Tenn., health-management concern. This is despite business owners ranking below those more-prestigious occupations in physical health and access to basic needs, such as health care.
. . .
“Despite the recession, it still pays to be your own boss,” says Frank Newport, editor in chief of the Gallup Poll. The survey, adds John Howard, director of the National Institute for Occupational Safety and Health, “reaffirms my view that the more control you have over your work, the happier you are.”

For the full story, see:
SUE SHELLENBARGER. “Plumbing for Joy? Be Your Own Boss.” The Wall Street Journal (Weds., SEPTEMBER 15, 2009): D1-D2.
(Note: ellipsis added.)

Doctors Seek to Regulate Retail Health Clinic Competitors

“A nurse practitioner with a patient at a retail clinic in Wilmington, Del.” Source of caption and photo: online version of the WSJ article quoted and cited below.

Clayton Christensen, in a chapter of Seeing What’s Next, and at greater length in The Innovator’s Prescription, has persuasively advocated the evolution of nurse practitioners and retail health clinics as disruptive innovations that have the potential to improve the quality and reduce the costs of health care.
An obstacle to the realization of Christensen’s vision would be government regulation demanded by health care incumbents who would rather not have to compete with nurse practitioners and retail health clinics. See below for more:

(p. B1) Retail health clinics are adding treatments for chronic diseases such as asthma to their repertoire, hoping to find steadier revenue, but putting the clinics into greater competition with doctors’ groups and hospitals.

Walgreen Co.’s Take Care retail clinic recently started a pilot program in Tampa and Orlando offering injected and infused drugs for asthma and osteoporosis to Medicare patients. At some MinuteClinics run by CVS Caremark Corp., nurse practitioners now counsel teenagers about acne, recommend over-the-counter products and sometimes prescribe antibiotics.
. . .
As part of their efforts to halt losses at the clinics, the chains are lobbying for more insurance coverage, and angling for a place in pending health-care reform legislation, while trying to temper calls for regulations.
. . .
(p. B2) But such moves are raising the ire of physicians’ groups that see the in-store clinics as inappropriate venues for treating complex illnesses. In May, the Massachusetts Medical Society urged its members to press insurance companies on co-payments to eliminate any financial incentive to use retail clinics.
. . .
The clinics are helping alter the practice of medicine. Doctors are expanding office hours to evenings and weekends. Hospitals are opening more urgent-care centers to treat relatively minor health problems.

For the full story, see:
AMY MERRICK. “Retail Health Clinics Move to Treat Complex Illnesses, Rankling Doctors.” The Wall Street Journal (Thurs., SEPTEMBER 10, 2009): B1-B2.
(Note: ellipses added.)

A brief commentary by Christensen (and Hwang) on these issues, can be found at:

CLAYTON CHRISTENSEN and JASON HWANG. “How CEOs Can Help Fix Health Care.” The Wall Street Journal (Tues., July 28, 2009).

For the full account, see:
Christensen, Clayton M., Jerome H. Grossman, and Jason Hwang. The Innovator’s Prescription: A Disruptive Solution for Health Care. New York: NY: McGraw-Hill, 2008.

Source of graph: online version of the WSJ article quoted and cited above.

Empathetic Judges Are Unjust to Bastiat’s “Unseen”

(p. A15) . . . , a compassionate judge would tend to base his or her decisions on sympathy for the unfortunate; an empathetic judge on how the people directly affected by the decision would think and feel. What could be wrong with that?

Frederic Bastiat answered that question in his famous 1850 essay, “What is Seen and What is Not Seen.” There the economist and member of the French parliament pointed out that law “produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.” Bastiat further noted that “[t]here is only one difference between a bad economist and a good one: The bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.”
This observation is just as true for judges as it is for economists. As important as compassion and empathy are, one can have these feelings only for people that exist and that one knows about — that is, for those who are “seen.”
One can have compassion for workers who lose their jobs when a plant closes. They can be seen. One cannot have compassion for unknown persons in other industries who do not receive job offers when a compassionate government subsidizes an unprofitable plant. The potential employees not hired are unseen.

For the full commentary, see:
JOHN HASNAS. “The ‘Unseen’ Deserve Empathy, Too.” The Wall Street Journal (Fri., MAY 29, 2009): A15.
(Note: ellipsis added.)

“How Do We Get on the Special Interests, Special Treatment Bandwagon?”

Uncreative destruction. “Jose Luis Garcia pours sodium silicate into a junkyard car engine to render it inoperable at a lot in Sun Valley, Calif., on Tuesday. The process destroys the car’s engine in a matter of minutes.” Source of photo and part of caption: online version of the WSJ article quoted and cited below.

(p. A4) WASHINGTON — Who doesn’t like the government’s “cash for clunkers” program? Your mechanic, for one.

Owners of automotive repair shops say the program to help invigorate sales of new cars is succeeding at their expense.
Bill Wiygul, whose family owns four repair shops in Virginia, said he has already had five or six customers decide against repairs. A man who sits on the board of Mr. Wiygul’s bank traded in his car rather than repair it. “He’d been a customer at our Reston store since it opened,” Mr. Wiygul said.
The clunkers program, formally known as the Car Allowance Rebate System, offers subsidies of as much as $4,500 to consumers who trade in older vehicles and buy new, more fuel-efficient models. The program was initially given $1 billion. That money was spent in one week.
The Senate reached a deal to extend the clunkers program Wednesday night, agreeing to vote on a measure Thursday that would add $2 billion to the program, the Associated Press reported.
The House approve a $2 billion extension last week.
For Mr. Wiygul and other mechanics, until now the recession has brought them more customers as people fixed cars rather than go into debt for new ones. He has hired five people and is expanding one of the shops.
Auto dealers who offer the rebates on new cars in exchange for clunkers must agree to “kill” the old models by disabling the engines and shipping the dead vehicle to a junkyard.
The loss of such potential work — as many as 250,000 vehicles will be destroyed in the program’s first round — prompted Mr. Wiygul to question the federal program’s focus on dealers and big business at the expense of the little guy.
“How do we get on the special interests, special treatment bandwagon? How much is it going to cost me and to whom shall I send the check?” he said. “Who picks the winners in this game ’cause obviously the game is fixed.”

For the full commentary, see:
GARY FIELDS. “Clunkers Plan Deflates Mechanics.” The Wall Street Journal (Thurs., AUGUST 6, 2009): A4.

Success Came Late to Author of Wizard of Oz

Source of book image: online version of the WSJ review quoted and cited below.

I remember a conversation with the late labor economist Sherwin Rosen on the substantial decline in research productivity of economists as they age. My memory is that he said the decline usually wasn’t because of inability, but because, at some point, the older economists stop trying.
I think there’s some truth to that. The belief that it is too late to succeed, can lead people to stop trying, and thereby make the prediction self-fulfilling.
Fortunately, L. Frank Baum kept trying:

(p. A15) If L. Frank Baum had been listed on the stock exchange in 1900, his shares would have been trading near historic lows. The soon-to-be famous author of “The Wonderful Wizard of Oz” had at that point failed at a long series of energetic attempts to find a career. At 44, Baum had already been a chicken farmer, an actor, a seller of machinery lubricants, a purveyor of novelty goods and a newspaper publisher. All his life he’d written lively prose — plays, ads, columns — but most of it seemed to go nowhere.

Then, suddenly, it did. The story of a girl named Dorothy who with her little dog, Toto, travels to the wondrous land of Oz burst from Baum’s pencil, almost taking him by surprise. “The story really seemed to write itself,” he told his publisher. “Then, I couldn’t find any regular paper, so I took anything at all, including a bunch of old envelopes.” Turned into a proper book with defining illustrations by W.W. Denslow, the story most of us know as “The Wizard of Oz” was an immediate sensation in 1900. In a review, the New York Times commended it, saying that it was “ingeniously woven out of commonplace material.” Baum would produce 13 sequels, though none had quite the sparkle of the first.

For the full review, see:
JOHN STEELE GORDON. “Books; Inventing a New World; The men who engineered the astonishing emergence of the modern age.” Wall Street Journal (Sat., April 11, 2009): W8.

The book being reviewed, is:
Schwartz, Evan I. Finding Oz: How L. Frank Baum Discovered the Great American Story. Boston, MA: Houghton Mifflin Harcourt, 2009.

People Do Not Appreciate the Entrepreneur’s Accomplishment

(p. A17) Bertrand de Jouvenel, writing in 1951 about popular attitudes toward income inequality in “The Ethics of Redistribution”:

The film-star or the crooner is not grudged the income that is grudged to the oil magnate, because the people appreciate the entertainer’s accomplishment and not the entrepreneur’s, and because the former’s personality is liked and the latter’s is not. They feel that consumption of the entertainer’s income is itself an entertainment, while the capitalist’s is not, and somehow think that what the entertainer enjoys is deliberately given by them while the capitalist’s income is somehow filched from them.

Source:
“Notable & Quotable.” The Wall Street Journal (Thurs., MARCH 5, 2009): A17.
(Note: italics in original.)

Original source of de Jouvenel quote:
Jouvenel, Bertrand de. The Ethics of Redistribution. Indianapolis, IN: Liberty Fund Inc., 1990 (originally published by Cambridge University Press in 1951).

“Build a Wall Around the Welfare State”

For a long time, I’ve been meaning to post a pithy comment on immigration policy from the Cato Institutes’s Bill Niskanen.
The comment was related to the proposal to erect a wall between the United States and Mexico, in order to reduce illegal immigration. Some libertarians favor open immigration. Others believe that so long as we have a large welfare state, open immigration would impose high costs on the taxpayer, and thereby reduce economic growth. (I believe that I read Milton Friedman supporting this latter position, in the year or two before he died in 2006.)
In this context, Niskanen’s pithy comment has appeal:

“Build a wall around the welfare state, not around the country.”

Source:
William A. Niskanen on 11/19/07 at the meetings of the Southern Economic Association in New Orleans.

Time Diary Studies Show Most Work Fewer Hours than Reported

Source of caricature: online version of the WSJ article quoted and cited below.

(p. W13) Sociologists have been studying how Americans spend their time for decades. One camp favors a simple approach: if you want to know how many hours someone works, sleeps or vacuums, you ask him. Another camp sees a flaw in this method: People lie. We may not do so maliciously, but it’s tough to remember our exact workweek or average time spent dishwashing, and in the absence of concrete memories, we’re prone to lie in ways that don’t disappear into the randomness of thousands of answers. They actually skew results.

That’s the theory behind the American Time Use Survey, conducted annually by the Bureau of Labor Statistics. The ATUS, like a handful of previous academic surveys, is a “time diary” study. For these studies, researchers either walk respondents through the previous day, asking them what they did next and reminding them of the realities of time and physics, or in some cases giving them a diary to record the next day or week.
Time-diary studies are laborious, but in general they are more accurate. Aggregated, they paint a different picture of life than the quick-response surveys featured in the bulk of America’s press releases. For instance, the National Sleep Foundation claims that Americans sleep 6.7 hours (weekdays) to 7.1 hours (weekends) per night. The ATUS puts the average at 8.6 hours. The first number suggests rampant sleep deprivation. The latter? Happy campers.
The numbers are equally striking with work. Back in the 1990s, using 1985 data, researchers John Robinson and his colleagues compared people’s estimated workweeks with time-diary hours. They found that, on average, people claiming to work 40 to 44 hours per week were working 36.2 hours — not far off. But then, as estimated work hours rose, reality and perception diverged more sharply. You can guess in which direction. Those claiming to work 60- to 64-hour weeks actually averaged 44.2 hours. Those claiming 65- to 74-hour workweeks logged 52.8 hours, and those claiming workweeks of 75 hours or more worked, on average, 54.9 hours. I contacted Prof. Robinson recently to ask for an update. His 2006-07 comparisons were tighter — but, still, people claiming to work 60 to 69 hours per week clocked, on average, 52.6 hours, while those claiming 70-, 80-hour or greater weeks logged 58.8. As Mr. Robinson and co-author Geoffrey Godbey wrote in their 1997 book “Time for Life,” “only rare individuals put in more than a 55-60 hour workweek.”

For the full commentary, see:
LAURA VANDERKAM. “Overestimating Our Overworking.” Wall Street Journal (Sat., May 29, 2009): W13.

Justice Department is Creating Barriers to Companies Trying to Create New Technologies

Intel CEO Craig Barrett. Source of caricature: online version of the WSJ article quoted and cited below.

(p. A9) Craig Barrett is spending the last days of his tenure as Intel chairman the same way he spent his previous 35 years at the corporation: moving at a superhuman pace that leaves exhausted subordinates in his wake.

Mr. Barrett has maintained this lifestyle since he replaced Andrew Grove as CEO of Intel in 1998. “Was it hard to follow a legend?” he asks himself in his typical blunt way, adding, “What do you think?” Mr. Barrett barely broke pace when he became chairman in 2005, and shows no sign of slowing even now, at age 69, as he faces retirement.
. . .
The latest thing that has him animated is the record $1.45 billion antitrust fine levied against Intel by the European Union this week. Mr. Barrett shakes his head and says, “The antitrust rules and regulations seem designed for a different era. When you look at high-tech companies, with the high R&D budgets, specialization and market creation they need to hold their big market shares, it’s so very different from the old world of oil companies and auto makers that the antitrust regulations were designed for. They are out of sync with reality.
“And how do you reconcile European regulators, who don’t believe that any company should have more than 50% market share — even a market that company created — with the way we operate here? Of course, now it seems as if our Justice Department is preparing to march in lock-step behind Europe. In the end, all they are going to do is create barriers to companies growing, entering into new markets, and bringing new technologies into those markets. And when we stop being the land of opportunity, all of those smart immigrant kids getting their Ph.D.s here are going to start heading home after they graduate. Then watch what happens to our competitiveness.”

For the full story, see:
MICHAEL S. MALONE. “OPINION: THE WEEKEND INTERVIEW with Craig Barrett; From Moore’s Law to Barrett’s Rules; Intel’s chairman on antitrust silliness and the secrets of high-tech success.” Wall Street Journal (Sat., MARCH 16, 2009): A9.
(Note: ellipsis added.)

Small Companies Created 80% of Net New Jobs in 1970s

(p. 298) David L. Birch and his associates at MIT gained a glimpse of this topsy-turvy domain during the late 1970s when they themselves entered the statistical skunkworks of the economy by conducting the most comprehensive and detailed analysis ever performed on the facts of American small business. Using records from a Dun & Bradstreet sample of 5.6 million firms, the Birch team reached the highly publicized conclusion that companies with fewer than 100 employees created 80 percent of the net new jobs in the U.S. economy during the 1970s. Data from the early 1980s confirmed these findings. In launching jobs, the last were manifestly first in U.S. capitalism.

Source:
Gilder, George. Recapturing the Spirit of Enterprise: Updated for the 1990s. updated ed. New York: ICS Press, 1992.