Sam Peltzman Offers Advance Praise for Openness to Creative Destruction

We are told that robots are about to make us superfluous and that the giants of Silicon Valley will swallow the economy. Art Diamond’s “openness to creative destruction” provides a healthy antidote to all this gloom and doom. He gives us the necessary historical perspective: we owe our comfort and even our lives to generations of disruptive innovation. Yet each disruption bred apocalyptic portents like those we hear today. These did not come to pass because of new disruptions down the road. Diamond ably documents this process of “creative destruction” and its enormous historical benefit. He also provides a timely warning against heeding the pessimists of the moment by imposing legal and regulatory shackles on the innovators. “Openness to Creative Destruction” is a most valuable addition to the public discussion of innovation.

Sam Peltzman, Professor Emeritus of Economics, University of Chicago; Director Emeritus of the George J. Stigler Center for the Study of the Economy and the State. Author of Political Participation and Government Regulation, and other works.

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

Tech Entrepreneurs Know Innovation Thrives in Flexible Labor Markets

(p. B1) A politically awakened Silicon Valley, buttressed by the tech industry’s growing economic power, could potentially alter politics long after President Trump has left the scene. But if the tech industry becomes a political force, what sort of policies will it push?
(p. B6) A new survey by political scientists at Stanford University suggests a mostly straightforward answer — with one glaring twist. The study is the first comprehensive look at the political attitudes of wealthy technologists, whose views have long been misunderstood to the point of caricature by many outside the industry.
. . .
Over all, the study showed that tech entrepreneurs are very liberal — among some of the most left-leaning Democrats you can find. They are overwhelmingly in favor of economic policies that redistribute wealth, including higher taxes on rich people and lots of social services for the poor, including universal health care.
. . .
Now for the twist. The study found one area where tech entrepreneurs strongly deviate from Democratic orthodoxy and are closer to most Republicans: They are deeply suspicious of the government’s efforts to regulate business, especially when it comes to labor. They said that it was too difficult for companies to fire people, and that the government should make it easier to do so. They also hope to see the influence of both private and public-sector unions decline.
. . .
. . . if they’re not libertarians, what accounts for techies’ opposition to regulation? One idea might be that it’s driven by self-interest. A large fraction said they opposed regulating car-sharing services as if they were taxis, for instance; to the extent that the tech elite have a lot of money riding on the sharing economy, they may worry that regulation of such companies could hurt their wallets.
. . .
To tease out whether self-interest was at play in their views on regulation, surveyors asked a question about Uber’s surge-pricing policy, which increases prices during periods of peak demand. But the researchers disguised it with a business unrelated to tech: “On a holiday, when there is a great demand for flowers, sellers usually increase their prices. Do you think it is fair for them to raise their prices like this?”
A majority of Democrats and Republicans said it would be unfair for a florist to do that. But 96 percent of the tech elite thought it would be fair.
“My guess is there’s an underlying principle to their views,” Dr. Broockman said. “They see an entrepreneur trying to do what they want in the marketplace, and they see nothing unfair about that.”

For the full commentary, see:
Farhad Manjoo. “Tech’s Giants Skew Liberal.” The New York Times (Thursday, Sept. 7, 2017): B1 & B6.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Sept. 6, 2017, and has the title “STATE OF THE ART; Silicon Valley’s Politics: Liberal, With One Big Exception.”)

The Stanford study, discussed above, has been published online in advance of print publication:
Broockman, David E., Gregory Ferenstein, and Neil Malhotra. “Predispositions and the Political Behavior of American Economic Elites: Evidence from Technology Entrepreneurs.” American Journal of Political Science published online on Nov. 19, 2018, https://doi.org/10.1111/ajps.12408.

Jack Ma Worries that Heavier Chinese Government Regulations Risk “Destroying Innovation”

(p. B3) SHANGHAI–Chinese e-commerce tycoon Jack Ma used a government-sponsored forum to suggest regulators take a lighter touch in dealing with technology companies, saying the market should be allowed to decide how new industries such as artificial intelligence develop.
“I personally think that the government has to do what the government should do, and the companies do what companies should do,” Mr. Ma said at the World Artificial Intelligence Conference in Shanghai on Monday, recalling a conversation he said he had last year with U.S. Secretary of Transportation Elaine Chao about self-driving cars.
“Protecting the backward forces who are crying out loud will be the most important factor in destroying innovation,” Mr. Ma said.

For the full story, see:
Yoko Kubota. “Jack Ma Urges Beijing to Ease Up.” The Wall Street Journal (Tuesday, September 18, 2018): B3.
(Note: the online version of the story has the date Sept. 17, 2018, and has the title “Alibaba’s Jack Ma Says Government Should Stick to Governing.”)

“Outsider Status” of Surgeons “Permitted Greater Risks and Leaps of Faith”

(p. A19) . . . as Arnold van de Laar reminds us in “Under the Knife: A History of Surgery in 28 Remarkable Operations,” a collection of hypervivid anecdotes and oddities, it was only recently that surgeons were considered the equals of what we would now call internists–doctors who diagnose, prescribe medicine and prognosticate.
. . .
. . . , it has been both the bane and the secret glory of surgery as a vocation that it was relegated for so long to the margins of “decent” intellectual or professional life. Its dodgy, outsider status perhaps permitted greater risks and leaps of faith than were available to nonsurgical physicians, who still found themselves making inchworm progress from the dictates of Hippocrates and Galen. Surgeons worked fast to beat pain and gangrene (so fast that in one case, Scottish surgeon Robert Liston cut off a man’s testicles in a rush to amputate his leg). They used whatever materials seemed to make sense–in some cases gold thread, costly but long-lasting; in other cases branding irons.

For the full review, see:
Laura Kolbe. “The Kindest Cuts.” The Wall Street Journal (Saturday, November 15, 2018): A19.
(Note: ellipses added.)
(Note: the online version of the review has the date Nov. 14, 2018, and has the title “BOOKSHELF; ‘Under the Knife’ Review: The Kindest Cuts.”)

The book under review, is:
van de Laar, Arnold. Under the Knife: A History of Surgery in 28 Remarkable Operations. New York: St. Martin’s Press, 2018.

Musk Jabs the SEC as “the Shortseller Enrichment Commission”

(p. B1) Elon Musk risked reigniting a battle with federal securities regulators on Thursday when he appeared to openly mock the Securities and Exchange Commission only days after the Tesla Inc. chief executive settled fraud charges with the agency.
Seemingly without prompt, Mr. Musk sent a tweet in the early afternoon that suggested the SEC was enriching investors betting against the electric-car maker. “Just want to [say] that the Shortseller Enrichment Commission is doing incredible work,” Mr. Musk tweeted. “And the name change is so on point!”

For the full story, see:
Tim Higgins and Gabriel T. Rubin. “Tweet by Elon Musk Takes Jab at the SEC.” The Wall Street Journal (Saturday, October 5, 2018): B1 & B4.
(Note: the online version of the story has the date Oct. 4, 2018, and has the title “Elon Musk Tweet Mocks the Securities and Exchange Commission.”)

“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.”)

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.)

Barcelona Fines 136-Year-Old Basilica for Lack of Building Permit

(p. A4) The Sagrada Familia basilica in Barcelona has worldwide fame as an architectural treasure, the dreamlike masterpiece of the Catalan architect Antoni Gaudí, which draws millions of visitors a year though it is still under construction, 136 years after work began.
What it has not had for more than a century, according to the city, is a valid building permit.
The Sagrada Familia basilica has agreed to pay city authorities 36 million euros, or about $41 million, over 10 years to settle the dispute over the legality of the work and help pay for transportation improvements around the basilica.
. . .
The Sagrada Familia’s board had denied any wrongdoing, saying that it had a building permit — one issued in 1885 by Sant Martí de Provençals, which was an independent town at the time. Barcelona officials contend that after Sant Martí was absorbed into the city several years later, the construction required a Barcelona permit; the board says that for more than a century, no one asked for any such thing.

For the full story, see:
Raphael Minder. “A Barcelona Gem, And a Scofflaw?” The New York Times (Saturday, Oct. 20, 2018): A4.
(Note: ellipsis added.)
(Note: the online version of the story has the date Oct. 19, 2018, and has the title “Sagrada Familia, a Barcelona Masterpiece, and Scofflaw?”)

New York City Wrongly Believes Destroying Ivory Saves Elephants

As I explain to my micro principles students each semester, if New York wants to save elephants, they would keep ivory on the market, increasing its supply and reducing its price, thereby reducing the incentive for poachers to kill elephants. [I first saw this argument made in the Baumol and Blinder text that I used many of years ago in my micro principles classes.]

(p. A19) A loud rumble and giant billows of dust interrupted an otherwise serene day in Central Park on Thursday as hundreds of cream-colored carvings of dragons, Buddhas and horses awaited their public execution.

Onlookers waved paper fans reading “Protect their home.” They cheered as sculptures and jewelry made from elephant tusks were carried on a conveyor belt and dropped in a pulverizer.
Brian Hackett, an animal-welfare activist from New Jersey, patiently awaited his turn to choose a carving from a table to be destroyed. For him, the mood was solemn.
“Every piece, no matter how polished, represents a beautiful animal that was slaughtered,” Mr. Hackett said.
The carvings were confiscated in recent ivory busts in New York. They once belonged on the faces of a least 100 slaughtered elephants. Nearly two tons of ivory worth about $8 million was destroyed at the “Ivory Crush” event, which was timed to precede World Elephant Day on Aug. 12 [2017].
. . .
Rachel Karr, 48, the owner of Hyde Park Antiques on the Lower East Side, who specializes in 18th-century antiques, said the ivory-crushing events upset her and other antique collectors because some of the ivory found in bona fide antiques could be 300 to 400 years old and could have religious and historic value. For example, in teapots from the 18th century, the handles were carved from ivory to protect hands from burns, because ivory does not conduct heat.
“Even with my love of nature, I simply cannot understand what good it does to destroy things that were worked on 300, 400 years ago before conservation was part of daily language,” Ms. Karr said.
“Face it, we’re the original recyclers, antique dealers,” she said. “We have no interest in using new ivory at all. We are willing to say we aren’t willing to use it to repair old ivory.”
Sam Wasser, a professor at the University of Washington who has performed forensic analysis on seized ivory for the last 13 years and analyzed the ivory that was crushed, said it was unlikely the destroyed carvings were more than 100 years old. The results are pending.
Iris Ho, who is the wildlife campaigns manager at Humane Society International, said the existing law does enough to protect antiques. The law provides exceptions for antiques that are determined to be at least 100 years old with only a small amount of ivory.

For the full story, see:
Hannah Alani. “Ivory Is Destroyed to Save Elephants.” The New York Times (Friday, Aug. 4, 2017): A19.
(Note: ellipses, and bracketed year, added.)
(Note: the online version of the story has the date Aug. 3, 2017, and has the title “About $8 Million of Elephant Ivory Destroyed in Central Park.” The online version says that the article appeared on p. A21 of the New York edition. It appeared on p. A19 of my copy of the National Edition.)

When Government Mandates a Technology

(p. A20) In 2011, after a lengthy competition among automakers, Mayor Michael R. Bloomberg announced that the Nissan NV200 would become the “Taxi of Tomorrow” with most yellow cab owners required to purchase the boxy, bright yellow van. Eventually, the vehicle was expected to make up 80 percent of New York City’s fleet of over 13,000 cabs.
At the time, city officials touted the NV200’s increased leg room, USB charging ports and sunroof as amenities that would be attractive to riders who had long complained about cramped travel in less than spotless back seats.
But it turns out that tomorrow lasted only seven years.
Last week, the Taxi and Limousine Commission reversed the requirement, expanding the option for drivers beyond the Nissan NV200 to a smorgasbord of over 30 vehicles, including popular, fuel efficient models like the Toyota Camry.
. . .
. . . there are drivers like Sergio Cabrera, 60, who owns his vehicle and the expensive medallion needed to have it on the road, who said the NV200 has given him many headaches.
. . .
“There hasn’t been a worse car for the taxi industry than the NV200,” he said. “It’s not easy for older people to get into. Mechanically it’s one of the worst made cars I’ve ever owned.”
Mr. Cabrera complained that owning the Nissan has been expensive, in part because of regulations that he and other yellow cabdrivers say subjects them to more maintenance rules than drivers for ridesharing apps.
The Taxi and Limousine Commission requires yellow taxis to undergo a 200-point inspection every four months. Each time his Nissan has been inspected, Mr. Cabrera said he has had to shell out at least $1,500 in repairs in order to pass.

For the full story, see:
Tyler Blint-Welsh. “Time Is Up for ‘Taxi of Tomorrow’.” The New York Times (Wednesday, June 13, 2018): A20.
(Note: ellipses added.)
(Note: the online version of the story has the date June 12, 2018, and has the title “It Was Billed as the ‘Taxi of Tomorrow.’ Tomorrow Didn’t Last Long.”)

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.”)