artdiamondblog.com – Page 479 – Art Diamond's web log

Russia Boldly Seeks Oil in Arctic

“The Prirazlomnaya oil platform was brought to the Arctic seaport of Murmansk, 906 miles north of Moscow, to be adjusted.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B1) MOSCOW — The Arctic Ocean is a forbidding place for oil drillers. But that is not stopping Russia from jumping in — or Western oil companies from eagerly following.

Russia, where onshore oil reserves are slowly dwindling, last month signed an Arctic exploration deal with the British petroleum giant BP, whose offshore drilling prospects in the United States were dimmed by the Gulf of Mexico disaster last year. Other Western oil companies, recognizing Moscow’s openness to new ocean drilling, are now having similar discussions with Russia.

For the full story, see:
ANDREW E. KRAMER and CLIFFORD KRAUSS. “Russia Embraces Arctic Drilling.” The New York Times (Weds., February 16, 2011): B1-B2.
(Note: the online version of the article was dated February 15, 2011 and had the title “Russia Embraces Offshore Arctic Drilling.”)

Source of map: online version of the NYT article quoted and cited above.

Better Rails Were Needed Before Train Would “Work”

(p. 300) The other weight problem was the one that licked Trevithick at Penydarren: The tracks on which the locomotive ran were just not able to survive the tonnage traveling over them. Driving a five-ton steam locomotive over rails designed for horse-drawn carts was only slightly more sensible than driving a school bus over a bridge made of wet ice cubes. In both cases, it’s a close call whether the vehicle will skid before or after the surface collapses.

. . .
(p. 301) Two years later, Stephenson, in collaboration with the ironmonger William Losh of Newcastle, produced, and in September 1816 jointly patented, a series of’ improvements in wheels, suspension, and–most important–the method by which the rails and “chairs” connected one piece of track to another. Stephenson’s rails seem mundane next to better-known eureka moments, but as much as any other innovation of the day they underline the importance of such micro-inventions in the making of a revolution. For it was the rails that finally made the entire network of devices–engine, linkage, wheel, and track–work.

Source:
Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.
(Note: ellipsis added.)

What a Picture Is Worth

“In Cairo, Egyptian youths used laptops to post video they had shot earlier Tuesday in Tahir Square. The group has been collecting accounts of the demonstrations and voices of the protesters, putting them on social networking sites like Facebook and Twitter.” Source of caption and photo: online version of the NYT article quoted and cited below.

The photo above was at the top of the first page of the New York Times on Weds., Feb. 9, 2011. You have a group of lively, engaged, young people intoxicated with the idea that they may be helping to bring their country freedom. And in the center of the dark picture, amidst the conversations, is one youth looking with concentration at an Apple laptop, the sole source of color and illumination.
If I was Steve Jobs, I would value this one photo at more than a whole hour’s worth of Superbowl ads.

The photo above was placed above the following story on the front page of the NYT:
DAVID D. KIRKPATRICK. “As Egypt Protest Swells, U.S. Sends Specific Demands.” The New York Times (Weds., February 9, 2011): A1 & A12.
(Note: the online version of the article is dated February 8, 2011.)

Caballero Worries about the Relevance of Mainstream Macro Modeling

In the past, I have found some of MIT economist Ricardo Caballero’s research useful because he takes Schumpeter’s process of creative destruction seriously.
In a recent paper, he joins a growing number of mainstream economists who worry that the recent and continuing economic crisis has implications for the methodology of economics:

In this paper I argue that the current core of macroeconomics–by which I mainly mean the so-called dynamic stochastic general equilibrium approach–has become so mesmerized with its own internal logic that it has begun to confuse the precision it has achieved about its own world with the precision that it has about the real one. This is dangerous for both methodological and policy reasons. On the methodology front, macroeconomic research has been in “fine-tuning” mode within the local-maximum of the dynamic stochastic general equilibrium world, when we should be in “broad-exploration” mode. We are too far from absolute truth to be so specialized and to make the kind of confident quantitative claims that often emerge from the core. On the policy front, this confused precision creates the illusion that a minor adjustment in the standard policy framework will prevent future crises, and by doing so it leaves us overly exposed to the new and unexpected.

Source:
Caballero, Ricardo J. “Macroeconomics after the Crisis: Time to Deal with the Pretense-of-Knowledge Syndrome.” NBER Working Paper # w16429, October 2010.

The paper has been published as:
Caballero, Ricardo J. “Macroeconomics after the Crisis: Time to Deal with the Pretense-of-Knowledge Syndrome.” Journal of Economic Perspectives 24, no. 4 (Fall 2010): 85-102.

The “Golden Age” When Enemy Blood Was Sipped from Skull-Cups

“Skull-cups found in Somerset, England, were worked with flint tools 14,700 years ago.” Source of caption and photo: online version of the NYT article quoted and cited below.

If you are one of those who longs nostalgically for the “Golden Age” of our hunter-gatherer paleolithic past, read on:

(p. D3) The three human braincases, two from adults and one from a child, were carefully skinned and cleaned with flint tools. The soft tissue was removed and probably consumed, leaving a well-shaped cup, perhaps made for use in some sort of ritual.

This is not a scene from a horror film. British paleoanthropologists report the discovery of these 14,700-year-old skull-cups in the journal PLoS One. They were found in Gough’s Cave in Somerset, England, and are the oldest directly dated skull-cups known, based on radiocarbon analysis.
. . .
Historical accounts hold that other human societies, like the Scythians, nomadic Indo-European warriors, used skull-cups to sip the blood of enemies. And as late as the 19th century, skull-cups were reportedly used in Fiji and other islands in Oceania.

For the full story, see:
Bhanoo, Sindya N. “Observatory; Skull-Cups in British Cave Conjure an Ancient Rite.” The New York Times (Tues., February 22, 2011): D3.
(Note: ellipsis added.)
(Note: the online version of the article was dated February 16 (sic), 2011.)

The scholarly article summarized is:
Bello, Silvia M., Simon A. Parfitt, and Chris B. Stringer. “Earliest Directly-Dated Human Skull-Cups.” PLoS ONE 6, no. 2 e17026 (Feb. 2011).

France Lacked Good Patent Laws; Great French Inventors “Died Penniless”

(p. 367) If one secret to sustaining an inventive culture was making inventors into national heroes, it was a secret that didn’t translate well into French. Between 1740 and 1780, the French inclination to reward inventors not by enforcing a natural right but by the grant of pensions and prizes resulted in the award of nearly 7 million livres–approximately $600 million today–to inventors of largely forgot-(p. 268)ten devices, but Claude-François Jouffroy d’Abbans (inventor of one of the first working steamboats), Barthélemy Thimonnier (creator of the first sewing machine), and Airné Argand (a partner of Boulton and friend of Watt whose oil lamp became the world’s standard) all died penniless.

Source:
Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.

Occupational Licensing Adds Billions a Year to Cost of Services

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

(p. A1) . . . economists–and workers shut out of fields by educational requirements or difficult exams–say licensing mostly serves as a form of protectionism, allowing veterans of the trade to box out competitors who might undercut them on price or offer new services.

“Occupations prefer to be li-(p. A16)censed because they can restrict competition and obtain higher wages,” said Morris Kleiner, a labor professor at the University of Minnesota. “If you go to any statehouse, you’ll see a line of occupations out the door wanting to be licensed.”
While some states have long required licensing for workers who handle food or touch others–caterers and hair stylists, for example–economists say such regulation is spreading to more states for more industries. The most recent study, from 2008, found 23% of U.S. workers were required to obtain state licenses, up from just 5% in 1950, according to data from Mr. Kleiner. In the mid-1980s, about 800 professions were licensed in at least one state. Today, at least 1,100 are, according to the Council on Licensure, Enforcement and Regulation, a trade group for regulatory bodies. Among the professions licensed by one or more states: florists, interior designers, private detectives, hearing-aid fitters, conveyor-belt operators and retailers of frozen desserts.
. . .
Mr. Kleiner, of the University of Minnesota, looked at census data covering several occupations that are regulated in some states but not others, including librarians, nutritionists and respiratory therapists. He found that employment growth in those professions was about 20% greater, on average, in the unregulated states between 1990 and 2000.
Licensing can also drive up costs to consumers. Licensed workers earn, on average, 15% more than their unlicensed counterparts in other states–a premium that may be reflected in their prices, according to a study published by the National Bureau of Economic Research and conducted by Mr. Kleiner and Alan Krueger, an economist at Princeton University.
Mr. Kleiner estimates that across the U.S. economy, occupational licensing adds at least $116 billion a year to the cost of services, which amounts to about 1% of total consumer spending. In a look at dentistry, Mr. Kleiner found that the average price of dental services rose 11% when a state made it more difficult to get a dental license.

For the full story, see:

STEPHANIE SIMON. “A License to Shampoo: Jobs Needing State Approval Rise.” The Wall Street Journal (Mon., February 7, 2011): A1 & A16.
(Note: ellipses added.)

“Some of the jobs that require licensing in one or more states.” Source of caption and table: online version of the WSJ article quoted and cited above.

Property Rights Arise When Labor Creates Scarce Value

Marking snow-cleared parking spaces is a wonderful example of Demsetz’s theory of how property rights tend to emerge when the efficiency gains are large enough.
I remember when I was a graduate student in Chicago sometime in the mid-to-late 1970s, there were a couple of very snowy winters in which Chicagoans would similarly claim spaces from which they had cleared the snow.
I remember, but alas did not save, an article (probably in the Chicago Tribune) documenting how someone “stole” a marked space, and later returned to find that a garden hose had been used to cover their car in a considerable layer of ice.

(p. 8A) CHICAGO (AP) — A blizzard that dumped nearly 2 feet of snow on Chicago last week has revived a city tradition: Break out the patio furniture. Or, if none is available, suitcases, garbage cans, strollers, bar stools and milk crates work, too.

Chicagoans use all these items in a time-honored yet controversial system of preserving parking spots, a system known as “dibs.”
. . .
Actually, a city ordinance makes the practice illegal.
. . .
Even the city’s top police officer sympathizes with those who do it.
“Think about it, you spend a couple hours clearing a spot, and somebody from another block takes it?” Superintendent Jody Weis said Friday.
. . .
“This is my spot because I worked hard to dig my car out,” said Max Rosario, 27, just before he put his patio chair on the street. It joined 16 chairs, one slab of plywood, a plastic kids table, three bar stools and a TV dinner tray, among other things.

For the full story, see:
AP. “Chicagoans calling dibs after digging out; Chairs and other objects save precious parking spots that have been shoveled.” Omaha World-Herald (Sun., FEBRUARY 6, 2011): 8A.
(Note: ellipses added.)

The Demsetz paper is:
Demsetz, Harold. “Toward a Theory of Property Rights.” American Economic Review 57, no. 2 (May 1967): 347-59.

Kappos Says Private Company Would Have Run Patent Office Better

“David Kappos of the Patent Office, with an Edison bulb.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) “There is no company I know of that would have permitted its information technology to get into the state we’re in,” David J. Kappos, who 18 months ago became director of the Patent and Trademark Office and undersecretary of commerce for intellectual property, said in a recent interview. “If it had, the C.E.O. would have been fired, the board would have been thrown out, and you would have had shareholder lawsuits.”

Once patent applications are in the system, they sit — for years. The patent office’s pipeline is so clogged it takes two years for an inventor to get an initial ruling, and an additional year or more before a patent is finally issued.
The delays and inefficiencies are more than a nuisance for inventors. Patentable ideas are the basis for many start-up companies and small businesses. Venture capitalists often require start-ups to have a patent before offering financing. That means that patent delays cost jobs, slow the economy and threaten the ability of American companies to compete with foreign businesses.

For the full story, see:

EDWARD WYATT. “U.S. Sets 21st-Century Goal: Building a Better Patent Office.” The New York Times (Mon., February 21, 2011): A1 & A3.
(Note: the online version of the article is dated February 20, 2011.)

Patent Importance Survives the Results of Moser’s Worlds Fairs Data Analysis

(p. 264) Petra Moser, now a professor at MIT’s Sloan School of Management, spent four years examining more than 15,000 different inventions exhibited at nineteenth-century worlds fairs, and their equivalents, and discovered a fact that seems at first glance to discredit the idea that patent protection was essential for innovation: Nations without patent laws were in many cases just as inventive as those with them. Or even more inventive; some of the nations best represented at those industrial fairs actively discouraged the patenting of inventions.

The reason seems to be that whether or not they enforced a patent law, smaller nations or domains, such as the Netherlands and Switzerland, were vulnerable to the theft of their innovations by competitors in larger nations. The bargain of patent protection runs two ways: The state, in return for making an idea public, offers legal recourse to its creator should someone within the state steal the idea. Since making one’s invention public in a nation with patent protection offered protection against theft only up to its own borders, only a large nation offered a large enough market to make the deal a good one, and (in Moser’s words) the small nations “would have been silly to patent [their] innovations.”
This logic inhibited investment in entire categories of innovation. Those nations that relied on secrecy rather than patent tended to specialize in the sort of inventions that cannot be easily reverse–engineered, such as chemicals or dyes.

Source:
Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.
(Note: italics and bracketed word in original.)

How Bacardi Fought Predatory Taxation in Pre-Castro Cuba

Source of book image: http://www.nytimes.com/2008/09/21/business/21shelf.html?_r=1

(p. W6) When it comes to chronicling the Bacardi rum dynasty, the best model may be “Buddenbrooks” or some other novelistic attempt to capture the experience of a family business trying to survive across generations. Tom Gjelten’s “Bacardi and the Long Fight for Cuba” — though fact-driven history and far more upbeat that Thomas Mann’s tale of dynastic decline — feels very much in this literary tradition.
. . .
Perhaps the most fascinating figure in the Bacardi tale is José Bosch, called Pepín, a young businessman who also married into the Bacardi family and was an early opponent of Gerardo Machado’s corrupt rule in the 1920s. Machado made Bacardi, one of Cuba’s most successful companies, a target of predatory taxation, but a proposed rum tax was more than the distiller could stand. Bacardi opened new facilities in Mexico and threatened to move its operations there if the tax was enacted. The Cuban legislature dropped the idea — and Bacardi soon found itself with a Mexican distillery it didn’t need, trying to sell a liquor to tequila- quaffing public that didn’t want it.
Bosch was dispatched in 1933 to shut down the Mexican facility, but instead he saved it. “Noticing that Mexicans drank a lot of Coca-Cola,” Mr. Gjelten writes, Bosch urged the company to promote Bacardi-and-Coke cocktails. Observing the rich tradition of Mexican handicrafts, he also suggested that the locals would be more inclined to drink rum if it was sold in the sort of wicker-covered jugs often used for it in Cuba. Sales in 1934 doubled.

For the full review, see:
ALVARO VARGAS LLOSA. “The Family Spirit.” The Wall Street Journal (Fri., September 12, 2008): W6.
(Note: ellipsis added.)

The book being reviewed, is:
Gjelten, Tom. Bacardi and the Long Fight for Cuba: The Biography of a Cause. New York: Viking Penguin, 2008.