artdiamondblog.com – Page 570 – Art Diamond's web log

California’s Unreliable Power Supply

(p. A11) . . . consider the story of the Rancho Seco Nuclear Generating Station. Opened in 1975, it was capable of generating over 900 megawatts (MW) of electricity, enough to power upward of 900,000 homes. Fourteen years after powering up, the nuclear reactor shut down, thanks to fierce antinuclear opposition. Eventually, the facility was converted to solar power, and today generates a measly four MW of electricity. After millions of dollars in subsidies and other support, the entire state has less than 250 MW of solar capacity.
. . .
. . . : California now imports lots of energy from neighboring states to make up for having too few power plants. Up to 20% of the state’s power comes from coal-burning plants in Nevada, New Mexico, Utah, Colorado and Montana. Another significant portion comes from large-scale hydropower in Oregon, Washington State and the Hoover Dam near Las Vegas.
“California practices a sort of energy colonialism,” says James Lucier of Capital Alpha Partners, a Washington, D.C.-area investment group. “They leave those states to deal with the resulting pollution.”
. . .
The unreliable power grid is starting to rattle some Silicon Valley heavyweights. Intel CEO Craig Barrett, for instance, vowed in 2001 not to build a chip-making facility in California until power supplies became more reliable. This October, Intel opened a $3 billion factory near Phoenix for mass production of its new 45-nanometer microprocessors. Google has chosen to build the massive server farms that will fuel its expansion anywhere but in California.

For the full commentary, see:
MAX SCHULZ. “California’s Energy Colonialism.” The Wall Street Journal (Sat., May 3, 2008): A11.
(Note: ellipses added.)

Innovation More Likely When Society Open to Forming New Enterprises

(p. 258) It is entirely safe to generalize: innovation is more likely to occur in a society that is open to the formation of new enterprises than in a society that relies on its existing organizations for innovation.

Source:
Rosenberg, Nathan, and L.E. Birdzell, Jr. How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books, 1986.

Competition in an Ice Cream Duopoly

“Jose Martinez parked his Good Humor truck Tuesday at an Upper West Side corner that is said to be Mister Softee territory.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. C13) On Tuesday afternoon, new battle lines were drawn on the Upper West Side at the corner of Columbus Avenue and 83rd Street, where Ceasar Ruiz, 50, the Mister Softee man, said he had been selling ice cream without any competition for more than eight years.
He said his routine was the same every season. He arrives at the corner by about 2:30 each afternoon, mostly to catch the students getting out of Public School 9 and the Anderson School, just a few yards from the corner. He stays for about an hour and a half, then moves to his next location, he said.
But Tuesday afternoon was different. When he arrived, there sat the freshly painted Good Humor truck and Mr. Martinez, decked out in a crisp uniform, ringing his bell.
“I sell Good Humor, too,” Mr. Ruiz said. “But his is more cheap. I sell bar for $2. He might sell for $1.50. Not good. Not good.”
Over the din of children clamoring for Dora the Explorer ice cream bars and Mega Missile Pops (red, white and blue rocket-shaped popsicles), Mr. Martinez rang his bell louder, openly competing for customers.
“I’m trying to make a dollar just like he is,” said Mr. Martinez, his voice rising loud enough for the other driver to hear. “He’s telling me I have to go. But he doesn’t own this spot.”
. . .
About five minutes before 4 o’clock, Mr. Ruiz leaned out of his Mister Softee truck, looking over at Mr. Martinez.
“Tomorrow, I’m going to beat him here,” he said. “I’ll be the first one here.”

For the full story, see:
TRYMAINE LEE. “It’s Still Spring, but the Ice Cream Truck War Revs Up.” The New York Times (Weds., May 14, 2008): C13.
(Note: ellipsis added.)

Innovation More Likely When There Are Many Decision Centers

The dry wit of Rosenberg and Birdzell is illustrated in this justified jab at the idea that technology can be centrally planned:

(p. 258) The advantage of having proposals for innovations considered by many decision centers is illustrated by the microcomputer, which was not undertaken by any of the leading American computer manufacturers, nor by the Soviet Union, nor by the French Commissariat du Plan, nor by MITI in Japan, but which has nevertheless proved widely useful.

Source:
Rosenberg, Nathan, and L.E. Birdzell, Jr. How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books, 1986.
(Note: italics in original.)

Stark Artistic Depiction of Chinese Communism

“Zhang Xiaogang’s “Bloodline: The Big Family No. 3.”” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B1) BEIJING — Sotheby’s sold $51.77 million worth of Chinese contemporary art in three auctions in Hong Kong on Wednesday, allaying concerns that the global economic slowdown would depress the prices.
. . .
The star of that auction was a 1995 painting by Zhang Xiaogang, one of China’s most prominent artists, which sold for just over $6 million, the highest price ever paid for a painting by a Chinese contemporary artist.
That oil on canvas, “Bloodline: Big Family No. 3,” depicts a family of three during the tumultuous Cultural Revolution in China, when children were sometimes led to denounce their parents. Three collectors bid feverishly for the piece, which sold for far above its high estimate, about $3.4 million.

For the full story, see:
DAVID BARBOZA. “Chinese Art Continues To Soar at Sotheby’s.” The New York Times (Thurs., April 10, 2008): B1 & B5.
(Note: ellipsis added.)

How Chemists Improved the Rails

The following passage provides some evidence of the importance of information from science (viz., chemistry) in process improvement. Speaking of chemists:

(p. 247) . . ., with their aid, the life of a rail increased from two years to ten, and the car weight it could bear from eight tons to seventy in the forty years between the Civil War and 1905. Only a very few new technologies have had equal significance.

Source:
Rosenberg, Nathan, and L.E. Birdzell, Jr. How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books, 1986.
(Note: ellipsis added.)

Key to Government Revenue is Economic Growth, Not High Tax Rates

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

(p. A23) Kurt Hauser is a San Francisco investment economist who, 15 years ago, published fresh and eye-opening data about the federal tax system. His findings imply that there are draconian constraints on the ability of tax-rate increases to generate fresh revenues. I think his discovery deserves to be called Hauser’s Law, because it is as central to the economics of taxation as Boyle’s Law is to the physics of gases. Yet economists and policy makers are barely aware of it.
. . .
The data show that the tax yield has been independent of marginal tax rates over this period, but tax revenue is directly proportional to GDP. So if we want to increase tax revenue, we need to increase GDP.
. . .
What makes Hauser’s Law work? For supply-siders there is no mystery. As Mr. Hauser said: “Raising taxes encourages taxpayers to shift, hide and underreport income. . . . Higher taxes reduce the incentives to work, produce, invest and save, thereby dampening overall economic activity and job creation.”

For the full commentary, see:
DAVID RANSON. “You Can’t Soak the Rich.” The Wall Street Journal (Tues., May 20, 2008): A23.
(Note: ellipses added.)

Andrew Carnegie on the Value of a Chemist in Making Steel

(p. 246) We found . . . a learned German, Dr. Fricke, and great secrets did the doctor open up to us. [Ore] from mines that had a high reputation was now found to contain ten, fifteen, and even twenty per cent less iron than it had been credited with. Mines that hitherto had a poor reputation we found to be now yielding superior ore. The good was bad and the bad was good, and everything was topsy-turvy. Nine-tenths of all the uncertainties of pig iron making were dispelled under the burning sun of chemical knowledge.
What fools we had been! But there was this consolation: we were not as great fools as our competitors . . . Years after we had taken chemistry to guide (p. 247) us [they] said they could not afford to employ a chemist. Had they known the truth then, they would have known they could not afford to be without one.

Andrew Carnegie as quoted in:
Rosenberg, Nathan, and L.E. Birdzell, Jr. How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books, 1986.
(Note: brackets and ellipses were in the original.)

Economist of Science Babbage Invented a Computer

“Modern construction, Difference Engine No. 2, 2005” Source of caption and photo: http://www.computerhistory.org/babbage/overview/

Charles Babbage is best known as the inventor of an early computer, but he also made some early, stimulating contributions to the economics of science.

(p. C6) The oldest computer has landed in Silicon Valley, where they design the newest computers.
The Science Museum in London has built two replicas from Charles Babbage’s original design for the Difference Engine No. 2. Planned from 1847 to 1849, the five-ton, 8,000-part system for calculating the mathematical expressions known as polynomials was finally built in 2002 by a team of engineers that took 17 years to complete the entire project. The machine includes a remarkable printing component that almost certainly would have been the world’s first automated typesetter had Babbage built one from his original design during his lifetime.
The all-mechanical Difference Engine can handle numbers to 31 digits of accuracy. The printer produces an ink printout but also has the capability of making a mold for a printing plate. It automatically typesets results in columns and employs two separate font sizes.

For the full story, see:
JOHN MARKOFF. “BITS; 1800s-Style Computer Comes to U.S.” The New York Times (Mon., May 5, 2008): C6.

Factory Work Was Better than the “Abysmal” Alternatives

Levy and Murnane show that the computer has, on average, benefitted the situation of labor. After I presented a similar example at the Summer Institute in 2007, Dave Mitch asked me if this was in general true of advances in technology, or if it might be an exceptional case.
If computers represent one example of creative destruction, another example, in the process variety, would be the advent of factory production. In the following passage, Rosenberg and Birdzell suggest that factories also benefitted the situation of labor:

The low wages, long hours, and oppressive discipline of the early factories are shocking in that the willingness of the inarticulate poor to work on such terms bespeaks, more forcefully than the most eloquent words, the even more abysmal character of the alternatives they had endured in the past. But this was not the way the romantics of the nineteenth century read the message of the factories. (R & B 1986, p. 173)

In the above passage, Rosenberg and Birdzell suggest that the abysmal alternatives to factory work, that the poor faced, may partly have been the result of the enclosure movement having worsened the situation of the lowest agricultural workers, by denying them access to the fallow lands for animal grazing. But, in the passage below, they also imply that to some extent it may just have been due to the secularly persistent suffering that had long characterized much rural life.

Neither the entrepreneurs who built the factories nor anyone else supposed that they were engaged in a work of charity or an exercise of social conscience. But whatever the moral quality of their intentions, their actions advanced the interests of a down-trodden subproletariat—a subproletariat in part, perhaps, characteristic of pre-industrial societies and, in part, drawn from an agricultural work force hard pressed by the enclosure movement and a high rate of growth in agricultural productivity. (R & B 1986, p. 174)

They further point out that, although everyone was supposed to be compensated for losses from enclosure, the interests of the poorest were not well-represented in the decision-making bodies:

In theory, the acts compensated the cottagers for the loss of their common rights by giving them some of the enclosed land. But the cottagers were not effectively represented in Parliament, and there is much reason to believe that the compensation was in practice inadequate. (R & B 1986, p. 171)

DeLong and Summers note enclosure as one of the major institutional/policy actions that enabled a past episode of creative destruction to create a past ‘new economy.’ But the fact (if it is a fact) that a majority of farm labor was hurt by the enclosure, does not imply that this had to have been the case. It may in fact illustrate one of the major pints of DeLong and Summers, namely that it is extremely important to try to get institutions and policies right.
Sources mentioned above:
DeLong, J. Bradford, and Lawrence H. Summers. “The “New Economy”: Background, Questions and Speculations.” Federal Reserve Bank of Kansas City Economic Review (2001): 29-59.
Levy, Frank, and Richard J. Murnane. The New Division of Labor: How Computers Are Creating the Next Job Market. Princeton, NJ: Princeton University Press, 2004.
Rosenberg, Nathan, and L.E. Birdzell, Jr. How the West Grew Rich: The Economic Transformation of the Industrial World. New York: Basic Books, 1986.

Which Economic System Protects Us from ‘Natural’ Disasters?

“Jiang Guohua, the Communist Party boss of Mianzhu, knelt Sunday to ask parents of earthquake victims to abandon their protest.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A10) One man shouted, “Was this a natural disaster or a man-made disaster?” In unison, the parents shouted back: “Man-made!”

For the full story, see:
JAMES T. AREDDY. “Reporter’s Notebook; Tears and Anger Flow as Parents Cast Blame in Children’s Deaths.” The Wall Street Journal (Tues., May 20, 2008): A10.

(p. A1) DUJIANGYAN, China — Bereaved parents whose children were crushed to death in their classrooms during the earthquake in Sichuan Province have turned mourning ceremonies into protests in recent days, forcing officials to address growing political repercussions over shoddy construction of public schools.
Parents of the estimated 10,000 children who lost their lives in the quake have grown so enraged about collapsed schools that they have overcome their usual caution about confronting Communist Party officials. Many say they are especially upset that some schools for poor students crumbled into rubble even though government offices and more elite schools not far away survived the May 12 quake largely intact.
On Tuesday, an informal gathering of parents at Juyuan Middle School in Dujiangyan to commemorate their children gave way to unbridled fury. One of the fathers in attendance, a quarry worker named Liu Lifu, grabbed the microphone and began calling for justice. His 15-year-old daughter, Liu Li, was killed along with her entire class during a biology lesson.
“We demand that the government severely punish the killers who caused the collapse of the school building,” he shouted. “Please, everyone sign the petition so we can find out the truth.”
The crowd grew more agitated. Some parents said local officials had known for years that the school was unsafe but refused to take action. Others recalled that two hours passed before rescue workers showed up; even then, they stopped working at 10 p.m. on the night of the earthquake and did not resume the search until 9 a.m. the next day.
Although there is no official casualty count, only 13 of the school’s 900 students came out alive, parents said. “The people responsible for this should be brought here and have a bullet put in their head,” said Luo Guanmin, a farmer who was cradling a photo of his 16-year-old daughter, Luo Dan.
Sharp confrontations between protesters and officials began over the weekend in several towns in northern Sichuan. Hundreds of parents whose children died at the Fuxin No. 2 Primary School in the city of Mianzhu staged an impromptu rally on Saturday. They surrounded an official who tried to assure them that their complaints were being taken seriously, screaming and yelling in her face until she fainted.
The next day, the Communist (p. A10) Party’s top official in Mianzhu came out to talk with the parents and to try to stop them from marching to Chengdu, the provincial capital, where they sought to prevail on higher-level authorities to investigate. The local party boss, Jiang Guohua, dropped to his knees and pleaded with them to abandon the protest, but the parents shouted in his face and continued their march.
Later, as the crowd surged into the hundreds, some parents clashed with the police, leaving several bleeding and trembling with emotion.
The protests threaten to undermine the government’s attempts to promote its response to the quake as effective and to highlight heroic rescue efforts by the People’s Liberation Army, which has dispatched 150,000 soldiers to the region. Censors have blocked detailed reporting of the schools controversy by the state-run media, but a photo of Mr. Jiang kneeling before protesters has become a sensation on some Web forums, bringing national attention to the incident.
. . .
. . . all at once the women doubled over in agony, a chorus of 100 mothers wailing over the loss of sons and daughters who, because of China’s population control policy, were their only children. The husbands wept in silence, paralyzed by the storm of emotion.

For the full story, see:
ANDREW JACOBS. “Parents’ Grief Turns to Rage at Chinese Officials.” The New York Times (Weds., May 28, 2008): A1 & A10.
(Note: ellipses added.)

“A memorial service for hundreds of students of Juyuan Middle School in Dujiangyan, where a mother held a picture of her son, turned into an angry protest.” Source of caption and photo: online version of the NYT article quoted and cited above.