artdiamondblog.com – Page 599 – Art Diamond's web log

Preventing Creative Destruction Slows Economic Growth

Source of graphic: online version of the NYT article cited below.

It would be interesting to explore why the gap in growth rates was smaller last year than previously. Was it a statistical fluke? Or did the U.S. labor market become somewhat less flexible? Or maybe the job market in Europe and Japan became somewhat more flexible?

FOR more than a decade, many American economists have pointed to Europe and Japan as prima facie evidence that layoffs in the United States are a good thing. The economies in those countries were not nearly as robust as this country’s. And the reason? Too much job security in Europe and Japan, the economists said.

American employers, in sharp contrast, have operated with much more “flexibility.” Hiring and firing at will, they shift labor from where it is not needed to where it is needed. If Eastman Kodak is struggling to establish itself in digital photography, then Kodak downsizes and labor moves to industries and companies that are thriving — software, for example, or health care, or Wal-Mart Stores or Caterpillar.

This shuffling out of one job and into another shows up in the statistics as nearly full employment. Never mind that the shuffling does not work as efficiently as the description implies or that many of the laid-off workers find themselves earning less in their next jobs, an income roller coaster that is absent in Europe and Japan. A dynamic economy leaves no alternative, or so the reasoning goes among mainstream economists.

“Trying to prevent this creative destruction from happening is a recipe for less economic growth and less productivity,” said Barry Eichengreen, an international economist at the University of California, Berkeley.

For the full commentary, see:

LOUIS UCHITELLE. "ECONOMIC VIEW; Job Security, Too, May Have a Happy Medium." The New York Times, Section 3 (Sun., February 25, 2007): 5.

For Better Jobs, Immigrants Voluntarily Line Up to Learn English

In Mount Vernon, New York, Maria de Oliveira (center) waited three months for an opening in this English class. Source of photo: online version of the NYT article quoted and cited below.

In the United States, other things equal, those who speak English earn more than those who do not. So there is a substantial incentive for immigrants to learn English, even in the absence of the much-debated proposed laws to mandate English in various ways. Consider the evidence in the article excerpted below:

(p. A1) MOUNT VERNON, N.Y. — Two weeks after she moved here from her native Brazil, Maria de Oliveira signed up for free English classes at a squat storefront in this working-class suburb, figuring that with an associate’s degree and three years as an administrative assistant, she could find a good job in America so long as she spoke the language.

The woman who runs the classes at Mount Vernon’s Workforce and Career Preparation Center added Ms. Oliveira’s name to her pink binder, at the bottom of a 90-person waiting list that stretched across seven pages. That was in October. Ms. Oliveira, 26, finally got a seat in the class on Jan. 16.

“I keep wondering how much more I’d know if I hadn’t had to wait so long,” she said in Portuguese.

. . .

Luis Sanchez, 47, a Peruvian truck driver for a beer distributor in New Brunswick, has been in this country (p. C14) 10 years — and on the waiting list for English classes in Perth Amboy five months. “You live from day to day, waiting to get the call that you can come to class,” Mr. Sanchez said in Spanish, explaining that he knew a little English but wanted to improve his writing skills so he could apply for better jobs. “I keep on waiting.”

. . .

In Newburgh, N.Y., an Orange County town where one in five of the 29,000 residents are immigrants, Blanca Saravia has amassed an impressive portfolio of odd jobs since arriving from Honduras in 2004: gas station attendant, office janitor, cook’s helper, and, for the last 14 months, packager at a local nail-polish factory. Speaking in her native Spanish, Ms. Saravia said that she has been able to get by with co-workers’ translating, but that “when the boss gives orders, I don’t understand.”

. . .

. . . Ahmed Al Saidi, 49, who works at a gas station and moved from Yemen in 1994, said in halting English that he wants to learn the language “for better work and to talk to people when I go to the store.”

Ms. Oliveira, the immigrant from Brazil, said she still knows too little English to venture into the marketplace; her husband, who is American born and supports the couple financially, encouraged her to enroll in the classes, held five mornings a week.

“I hope that when I’m speaking a little better, I’ll be able to find a job where I can use the English I learned here and the skills I have from back home,” she said in Portuguese. “When I was on the waiting list, there were times I thought this time would never come.”

For the full story, see:

FERNANDA SANTOS. "Demand for English Lessons Outstrips Supply." The New York Times (Tues., February 27, 2007): A1 & C14.

(Note: ellipses added.)

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

“You Have to Keep On Trying New Things”

Stewart Brand with his prototype for a computer-clock that he hopes will continue to tell time for 10,000 years. Source of photo: online version of the NYT article cited below.

Decades ago, I really enjoyed the spirit, and sometimes the usefulness, of Stewart Brand’s refreshing, libertarian, over-the-top Whole Earth Catalog. From the article excerpted below, I learned that Brand, and his spirit, are still alive:

(p. D1) Stewart Brand has become a heretic to environmentalism, a movement he helped found, but he doesn’t plan to be isolated for long. He expects that environmentalists will soon share his affection for nuclear power. They’ll lose their fear of population growth and start appreciating sprawling megacities. They’ll stop worrying about “frankenfoods” and embrace genetic engineering.

He predicts that all this will happen in the next decade, which sounds rather improbable — or at least it would if anyone else had made the prediction. But when it comes to anticipating the zeitgeist, never underestimate Stewart Brand.

He divides environmentalists into romantics and scientists, the two cultures he’s been straddling and blending since the 1960s. He was with the Merry Pranksters and the Grateful Dead at their famous Trips Festival in San Francisco, directing a multimedia show called “America Needs Indians.” That’s somewhere in the neighborhood of romantic.

But he created the shows drawing on the cybernetic theories of Norbert Wiener, the M.I.T. mathematician who applied principles of machines and electrical networks to social institutions. Mr. Brand imagined replacing the old technocratic hierarchies with horizontal information networks — a scientific vision that seemed quaintly abstract until the Internet came along.

. . .

(p. D3) Mr. Brand’s latest project, undertaken with fellow digerati, is to build the world’s slowest computer, a giant clock designed to run for 10,000 years inside a mountain in the Nevada desert, powered by changes in temperature. The clock is an effort to promote long-term thinking — what Mr. Brand calls the Long Now, a term he borrowed from the musician Brian Eno.

Mr. Brand is the first to admit his own futurism isn’t always prescient. In 1969, he was so worried by population growth that he organized the Hunger Show, a weeklong fast in a parking lot to dramatize the coming global famine predicted by Paul Ehrlich, one of his mentors at Stanford.

The famine never arrived, and Professor Ehrlich’s theories of the coming “age of scarcity” were subsequently challenged by the economist Julian Simon, who bet Mr. Ehrlich that the prices of natural resources would fall during the 1980s despite the growth in population. The prices fell, just as predicted by Professor Simon’s cornucopian theories.

Professor Ehrlich dismissed Professor Simon’s victory as a fluke, but Mr. Brand saw something his mentor didn’t. He considered the bet a useful lesson about the adaptability of humans — and the dangers of apocalyptic thinking.

“It is one of the great revelatory bets,” he now says. “Any time that people are forced to acknowledge publicly that they’re wrong, it’s really good for the commonweal. I love to be busted for apocalyptic proclamations that turned out to be 180 degrees wrong. In 1973 I thought the energy crisis was so intolerable that we’d have police on the streets by Christmas. The times I’ve been wrong is when I assume there’s a brittleness in a complex system that turns out to be way more resilient than I thought.”

He now looks at the rapidly growing megacities of the third world not as a crisis but as good news: as villagers move to town, they find new opportunities and leave behind farms that can revert to forests and nature preserves. Instead of worrying about population growth, he’s afraid birth rates are declining too quickly, leaving future societies with a shortage of young people.

Old-fashioned rural simplicity still has great appeal for romantic environmentalists. But when the romantics who disdain frankenfoods choose locally grown heirloom plants and livestock, they’re benefiting from technological advances made by past plant and animal breeders. Are the risks of genetically engineered breeds of wheat or cloned animals so great, or do they just ruin the romance?

Mr. Brand would rather take a few risks.

“I get bored easily — on purpose,” he said, recalling advice from the co-discoverer of DNA’s double helix. “Jim Watson said he looks for young scientists with low thresholds of boredom, because otherwise you get researchers who just keep on gilding their own lilies. You have to keep on trying new things.”

That’s a good strategy, whether you’re trying to build a sustainable career or a sustainable civilization. Ultimately, there’s no safety in clinging to a romanticized past or trying to plan a risk-free future. You have to keep looking for better tools and learning from mistakes. You have to keep on hacking.

For the full story, see:

JOHN TIERNEY. "FINDINGS; An Early Environmentalist, Embracing New ‘Heresies’." The New York Times (Tues., February 27, 2007): D1 & D3.

(Note: ellipsis added.)

Better than Socialism, but Not Free Market Enough: More on Why Africa is Poor

Voters in line to vote for President in Senegal on 2/25/07. Source of photo: online version of the NYT article quoted and cited below.

My old Wabash professor Ben Rogge used to say that rulers liked to build pyramids to proclaim their glory. He mentioned the Egyptian pyramids, and he mentioned the whole government-created capital city of "Brasilia" in Brazil.

When rulers in a poor country invest a lot of tax money in infrastructure, such as roads, how much of that is due to their belief in mistaken economic theories, and how much to their wanting to build their own version of the pyramids?

In either case, at least it can be said that the people probably benefit more from their taxes being used to build roads, than from their taxes being used to build pyramids. At least the roads can be complementary to transporting goods, and to the mobility of labor.

But the people would benefit even more if they could keep the tax money to use for their own purposes.

(p. A3) DAKAR, Senegal, Feb. 25 — Moudou Gueye was confident that Senegal’s presidential election on Sunday would turn around his fortunes, at least in the short term.

Seven years ago he voted for Abdoulaye Wade, a rabble-rousing professor who, after decades in opposition to Socialist Party rule, sailed into office buoyed by the votes of frustrated young people like Mr. Gueye, who is now 32. They hoped that Mr. Wade, a free-market liberal, would transform this impoverished nation’s economy, which had been stunted by generations of ineffective central planning.

. . .

. . . Senegal has had relatively robust economic growth that has hovered at around 5 percent over several years (it was lower last year, owing in part to high fuel prices, according to government officials), compared with the 1 percent achieved during much of the Socialist era, and dozens of huge public works projects.

While in some ways the country is better off, economic growth and a building binge have not produced large numbers of jobs in a country struggling to make the transition from an agrarian society based largely on peanut farming to one that harnesses the wealth of a global economy.

. . .

Countering criticism that Mr. Wade is too old to serve another term — his official age is given as 80, but many people suspect he is older — his daughter, Sindiély, who has worked as a special assistant to the president, said he was as sharp and agile as ever.

“It is not a question of age,” Ms. Wade said as she waited to cast her vote in downtown Dakar. “It is a question of dynamism and ideas and what you have planned for your country.”

Along Dakar’s seaside roadway, young men marveled at the cars whizzing below a brand-new overpass, one of Mr. Wade’s long-anticipated public works projects.

Pap Ndiaye, an 18-year-old street vendor who sells baby clothes to people stalled in traffic, said the newly completed road was a sign that the country was moving in the right direction.

“Wade has done a lot for this country,” Mr. Ndiaye said. “Our hope is that he will stay and finish his work.”

Less than a mile away, the road abruptly ends with a bright yellow sign that says “déviation,” or detour. With a hard turn to the right, drivers pour off the broad new highway, and back into the tangled, chaotic streets of one of Dakar’s oldest and poorest neighborhoods.

For the full story, see:

LYDIA POLGREEN. "Senegalese Vote Hinges on Views of Economic Growth." The New York Times (Mon., February 26, 2007): A3.

(Note: ellipses added.)

UNO Economics RA Talks Personal Finance

Molly McGrath. Soure of photo: online version of the Omaha World-Herald article cited below.

Molly was one of our Research Assistants last year in the UNO economics department:

(p. 1D) Miss Nebraska Molly McGrath has driven more than 25,000 miles since being crowned in June, mostly to schools as she talks about personal finance issues like avoiding debt and using money as a tool to realize dreams.

"There is a drastic need for economic and financial education with all people, but especially in low-income communities and especially among our youth," McGrath told about a dozen people at a recent meeting of the Rotary Club of Omaha-North.

McGrath knows about making ends meet. Her parents could not help her pay for college, so she has used more than $20,000 in scholarships won through the Miss America program. She also cleaned toilets, dorm rooms and apartments as she earned her undergraduate degree at New York University in New York.

"I was known right away at NYU as the girl from Nebraska," McGrath said. "And after I started this cleaning business I was known as the girl from Nebraska who cleans toilets."

For the full story, see:

JOE RUFF. "Miss Nebraska teaches dollars and sense." Omaha World-Herald (Monday, February 26, 2007): 1D & 2D.

For New Orleans “a Dwindling Chance at Redemption”

Dylan Langlois (facing camera) and his fiancé Kasandra Larsen telling a friend goodbye before they leave New Orleans. Source of photo: online version of the NYT article cited below.

NEW ORLEANS, Feb. 15 — After nearly a decade in the city of their dreams, Kasandra Larsen and her fiancé, Dylan Langlois, climbed into a rented moving truck on Marais Street last Sunday, pointed it toward New Hampshire, and said goodbye.

Not because of some great betrayal — they had, after all, come back after losing everything in Hurricane Katrina — but a series of escalating indignities: the attempted carjacking of a pregnant friend; the announced move to Nashville by Ms. Larsen’s employer; the human feces deposited on their roof by, they suspect, the contractors next door; the two burglaries in the space of a week; and, not least, the overnight wait for the police to respond.

A year ago, Ms. Larsen, 36, and Mr. Langlois, 37, were hopeful New Orleanians eager to rebuild and improve the city they adored. But now they have joined hundreds of the city’s best and brightest who, as if finally acknowledging a lover’s destructive impulses, have made the wrenching decision to leave at a time when the population is supposed to be rebounding.

Their reasons include high crime, high rents, soaring insurance premiums and what many call a lack of leadership, competence, money and progress. In other words: yes, it is still bad down here. But more damning is what many of them describe as a dissipating sense of possibility, a dwindling chance at redemption for a great city that, even before the storm, cried out for great improvement.

For the full story, see:

SHAILA DEWAN. "Fed-Up New Orleans Residents Are Giving Up." The New York Times (Fri., February 16, 2007): A1 & A17.

Kasandra Larsen cleans up before she and Dylan Langlois depart New Orleans. Source of photo: online version of the NYT article cited above.

Medical Insurance Battle Wastes $20 Billion a Year

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

(p. A1) Four years ago, Paluxy Valley Physicians of Glen Rose, Texas, was struggling to recoup more than $500,000 in denied or unpaid claims from insurers. Two of its eight doctors left the practice, while three others had to borrow $100,000 to keep it afloat.

To turn things around, the medical practice turned to Boston-based athenahealth Inc., one of the biggest of hundreds of companies in a lucrative niche: helping doctors wring payments from health plans. Athenahealth’s software flagged and corrected the complex coding for thousands of claims, preventing them from getting hung up in insurers’ Byzantine rules. Today, Paluxy Valley has whittled its claims outstanding to $179,000 and repaid the bank loan. No longer in a revenue crunch, its doctors have stopped moonlighting in the emergency room to make money.

"The insurers outcode us, they outsmart us and they have more manpower," says Shari Reynolds, the administrator at Paluxy Valley, which pays athenahealth a little over 3% of the $2.5 million it collects annually from insurers. "Now at least we have a fighting chance."

Doctors increasingly complain that the insurance industry uses complex, opaque claims systems to confound their efforts to get paid fairly for their work. Insurers say their systems are designed to counter unnecessary charges and help keep down soaring health-care costs. Like many tug-of-wars over the health-care money pot, the tension has spawned a booming industry of intermediaries.

It’s called "denial management." Doctors, clinics and hospitals are investing in software systems costing them each hundreds of thousands of dollars to help them navigate insurers’ systems and head off denials. They’re also hiring legions of firms that dig through past claims in search of shortchanged payments and tussle with insurers over rejected charges. "Turn denials into dollars," promises one consultant’s online advertisement.

The imbroglio is costing medical providers and insurers around $20 billion — about $10 billion for each side — in unnecessary administrative expenses, according to a 2004 report by the Center for Information Technology Leader-(p. A18)ship, a nonprofit health-technology research group based in Boston.

For the full story, see:

VANESSA FUHRMANS. "BILLING BATTLE; Fights Over Health Claims Spawn a New Arms Race; Insurers and Doctors Try for Upper Hand; Firms Help Both Sides." The Wall Street Journal (Weds., February 14, 2007): A1 & A18.

(Note: I noticed some minor differences between the titles and texts of the print and online versions. My excerpt gives the online version.)

“Work Hard at Work Worth Doing”

We went to see "The Bridge to Tarabithia" this afternoon (2/25/07), which I thought was a sad, but good, movie aimed at older children, but with enough plot and enough characters to care about, to be of interest to adults too.

I heard a quote in the movie that I liked and I don’t remember having heard before. It’s source was given as Teddy Roosevelt, who is not one of my favorite presidents, because of his efforts to increase the size and power of government. But he wasn’t all bad, and he sometimes spoke well:

Far and away the best prize that life offers is the chance to work hard at work worth doing.

Theodore Roosevelt, Speech in New York, September 7, 1903 [26th president of US (1858 – 1919)]

Source of quote, and information about quote: http://www.quotationspage.com/quote/2056.html

Beaver Returns to Bronx: More Evidence of Environmental Improvement

A beaver whose discoverers call "José" is the first beaver to make a home in the Bronx in 200 years. Source of photo: online version of the NYT article quoted and cited below.

(p. A12) A crudely fashioned lodge perched along the snow-covered banks of the Bronx River — no more than a mound of twigs and mud strewn together in the shadow of the Bronx Zoo — sits steps away from an empty parking lot and a busy intersection.

Scientists say that the discovery of this cone-shaped dwelling signifies something remarkable: For the first time in two centuries, the North American beaver, forced out of town by agricultural development and overeager fur traders, has returned to New York City.

The discovery of a beaver setting up camp in the Bronx is a testament to both the animal’s versatility and to an increasingly healthy Bronx River.

For the full story, see:

O’CONNOR, ANAHAD. "After 200 Years, a Beaver Is Back in New York City." The New York Times (Fri., February 23, 2007): A21.

Bush Should Take Lab Coat Off

Decisions about which new technologies to develop should be left to the market, not the government. One reason is that markets generally make the more efficient choice. Another reason is that when technological risks are taken in the market, they are taken with voluntary private money; when risks are taken by the government, they are taken with your money that has been coerced from you through taxation.

With all due respect, President Bush should take the lab coat off.

(p. A16) FRANKLINTON, N.C., Feb. 22 — President Bush put on a white coat and visited a laboratory here Thursday to promote his goals for making alternative fuels from switch grass, woodchips and other plant waste.

After touring the laboratory, which is developing enzymes to make cellulosic ethanol, fuel distilled from plant byproducts, Mr. Bush spoke buoyantly about new technologies that may reduce the nation’s thirst for foreign oil.

For the full story, see:

EDMUND L. ANDREWS. "Bush Makes a Pitch for Amber Waves of Homegrown Fuel." The New York Times (Fri., February 23, 2007): A16.

Instead of Shrugging, Atlas Sometimes Moves to the United States

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

(p. A10) CARACAS, Venezuela — Oil-rich Venezuela has experienced the kind of economic boom in recent years that should be flush with job opportunities. But an increasing number of professionals, many of them from the oil industry, are looking abroad for work, driven away by President Hugo Chávez’s effort to extend state control over the economy, and by inflation verging on 20%.

Since his re-election in December, Mr. Chávez has pursued an agenda of "21st Century Socialism," painting a future of "communal cities" and state-run cooperatives dedicated to production, not profit.

. . .

Still, at the U.S. Embassy call center for visas in Caracas, the lines have been jammed since Mr. Chávez announced in early January the nationalization of the electricity industry and Venezuela’s largest telecommunications firm. "It doubled practically overnight," said a U.S. diplomat.

The number of Venezuelans receiving U.S. legal permanent residence more than doubled from 2000 to 2005, when 10,870 got their green cards. In that period the overall number of green cards increased by a third. During that period the number of Venezuelan-born U.S. residents increased 42%, to 151,743, according to the U.S. Census Bureau.

. . .

Any opposition-minded oil workers still left at PdVSA face a difficult environment. During the presidential campaign last year, PdVSA President Rafael Ramirez told company executives to join Mr. Chávez’s political movement or hit the road. In 2003, Mr. Chávez sacked around 20,000 PdVSA staffers — about half the company’s work force — for walking off the job, calling them "terrorists." A majority of them were the managers, accountants and field engineers who turned the state oil venture into a world-class oil company during a period of robust expansion in the 1990s.

Many found work elsewhere, including in Mexico, Canada and Saudi Arabia, at a time of high demand for experienced oil workers.

The lost expertise has taken a toll on PdVSA, the country’s largest single employer. Its share of the global market for crude oil supply is shrinking, and accidents and outages are on the rise. Analysts say the cost to PdVSA of producing a barrel of oil has nearly doubled in the past five years to more than $4.50.

For the full story, see:

PETER MILLARD. "Professionals Exit Venezuela; Chávez’s Grip on Power Drives Out Oil Experts; Support Hugo or You Go." The Wall Street Journal (Thurs., February 15, 2007): A10.

(Note: ellipses added.)