Common Measures Aid Transparent Transactions

Source of book image: http://www.amazon.com/gp/product/customer-reviews/0743216768/ref=cm_cr_dp_2_1/104-9985403-1047968?%5Fencoding=UTF8&customer-reviews.sort%5Fby=-SubmissionDate&n=283155
The Measure of All Things is an interesting book for several reasons. It shows how hard it is to stay focused on noble pursuits in the face of revolution, war, disease, and peasant ignorance. It raises questions about where common standards of measurement should and do come from; and makes useful points about the value of common standards of measurement for free trade. It tells us how hard it was to do science 200 years ago, and tells us of the devotion of those who tried.
Here is a useful passage on why common standards of measurement matter for the free market:

(p. 137) Prieur believed that uniform measures would make France a great nation, smoothly administered from the center and united through trade. The metric system would transform France into “a vast market, each part exchanging its surplus.” It would make exchanges “direct, healthy, and rapid,” diminishing the “frictions” which impeded the wheels of commerce. These frictions included anything that masked the true price of an item, such as the variable measures of the Ancien Regime. The price of an item, Prieur argued, necessarily depended on many factors: its scarcity, the work necessary to produce it, the quality of the product. But in the final analysis, price was whatever people agreed it should be. This meant that when people agreed on a price they needed to know what they were getting, not be baffled by secret shifts in the quantity being exchanged. Those who claimed that differences in measures aided commerce were just talking about their personal profits. “The French Republic,” he wrote, “can no longer tolerate men who earn their living by mystery.” Worse, those who profited from the diversity of measures, said Prieur, corrupted those who tried to conduct honest and transparent exchanges by “complicating commerce, spoiling good faith, and sowing error and fraud among the nations.” Until commerce was carried out with complete probity, the common people would doubt the advantages of free trade. Only if price were the sole variable in exchange would these exchanges be based on clear understanding between parties.

Alder, Ken. The Measure of All Things: The Seven-Year Odyssey and Hidden Error That Transformed the World. Paperback Reprint ed: Free Press, 2003.

Evidence for Darwin’s Claim that Small Changes Can Accumulate Into Bigger Changes

By reconstructing ancient genes from long-extinct animals, scientists have for the first time demonstrated the step-by-step progression of how evolution created a new piece of molecular machinery by reusing and modifying existing parts.
The researchers say the findings, published today in the journal Science, offer a counterargument to doubters of evolution who question how a progression of small changes could produce the intricate mechanisms found in living cells.
. . .
The researchers found the modern equivalent of the stress hormone receptor in lampreys and hagfish, two surviving jawless primitive species. The team also found two modern equivalents of the receptor in skate, a fish related to sharks.
After looking at the genes that produced them, and comparing the genes’ similarities and differences among the genes, the scientists concluded that all descended from a single common gene 450 million years ago, before animals emerged from oceans onto land, before the evolution of bones.
The team recreated the ancestral receptor in the laboratory and found that it could bind to the kidney regulating hormone, aldosterone and the stress hormone, cortisol.
Thus, it turned out that the receptor for aldosterone existed before aldosterone. Aldosterone is found just in land animals, which appeared tens of millions of years later.

For the full story, see:
KENNETH CHANG. “Study, in a First, Explains Evolution’s Molecular Advance.” The New York Times (Fri., April 7, 2006): A19.

Teachers’ Unions Fight Innovation, Customization, and Variety

(p. A27) Washington – A Wisconsin court rejected a high-profile lawsuit by the state’s largest teachers’ union last month seeking to close a public charter school that offers all its courses online on the ground that it violated state law by depending on parents rather than on certified teachers to educate children. The case is part of a national trend that goes well beyond virtual schooling: teachers’ unions are turning to the courts to fight virtually any deviation from uniformity in public schools.

. . .

There is a universal American desire for customization and variety in goods and services, and education must respond to that demand, whether the unions like it or not.
. . .

This debate, like the ones over many other education issues, is fundamentally about who gets to have power. Yet the power the teachers’ unions now wield will be fleeting if public schools do not become more responsive to parents.
An industry cannot survive by rushing to court every time a new idea threatens even a small slice of its market share. Instead, maintaining, and even broadening, support for public schools means embracing more diversity in how we provide public education and who provides it.

For the full commentary, see:
Andrew J. Rotherham. “Virtual Schools, Real Innovation.” The New York Times (Friday, April 7, 2006): A27.
(Note: ellipses added.)

World Bank Fights Fraud in Antipoverty Projects

The World Bank president, Paul D. Wolfowitz, laid out a broad strategy yesterday to help developing countries combat rampant corruption, as well as to halt fraud in antipoverty projects supported by billions of dollars in World Bank money.
In a speech in Jakarta, Indonesia, Mr. Wolfowitz described for the first time his plans to make fighting corruption a pervasive issue in the bank’s operations. The new efforts will range from intensified monitoring of projects in the field to an increased focus on reforming institutions that can hold governments accountable.
Mr. Wolfowitz also seems to be trying to change the culture of the bank. In remarks after the speech, he said he wanted bank managers to understand that they would be rewarded “as much for saying no to a bad loan as for getting a good one out the door.”

For the full story, see:
CELIA W. DUGGER. “World Bank Chief Outlines a War on Fraud.” The New York Times (Weds., April 12, 2006): A7.

Successful Society Requires Moral Courage to Sanction Others

Sociologists have long known that communes and other cooperative groups usually collapse into bickering and disband if they do not have clear methods of punishing members who become selfish or exploitative.
Now an experiment by a team of German economists has found one reason punishment is so important: Groups that allow it can be more profitable than those that do not.
. . .
”The bottom line of the paper is that when you have people with shared standards, and some who have the moral courage to sanction others, informally, then this kind of society manages very successfully,” said the study’s senior author, Bettina Rockenbach, who was joined in the research by Bernd Irlenbusch, now at the London School of Economics, and Ozgur Gurek.
Switching groups frequently prompted remarkable behavioral changes in the students. Many of those who had been free riders in the laissez-faire group eagerly began penalizing other selfish players upon switching. Dr. Rockenbach compares these people to heavy smokers who are insistent on their right to light up, until they quit. ”Then they become the most militant of the antismokers,” she said.
Being exploited appeared to cause deep frustration and anger in most students, she said.

For the full story, see:
BENEDICT CAREY. “Study Links Punishment To an Ability To Profit.” The New York Times (Friday, April 7, 2006): A22.

Becker on Goals of Economics: Understand the World, and Improve It

 

Becker.jpg   Gary Becker at April 7, 2006 tribute dinner.  Source of image:  online press release cited below.

 

Gary Becker has made enormous contributions to economic theory, most notably in convincing the profession of the importance of human capital and the family.  A new center has been established at the University of Chicago in Gary Becker’s honor.

 

Becker’s brief remarks concluded the evening.  Economics will change over time, but one constant—whatever the tools or techniques—is the goal of economics, he said.   “It is judged ultimately by how well it helps us understand the world, and how well we can help improve it.”

 

For the full story, see:

Goddu, Jenn Q.  "Gift Names the Becker Center on Chicago Price Theory, Founded by Richard O. Ryan."  University of Chicago News Office, 2006.

 

J.K. Rowling on What Matters

Writing on her Web site after reading a magazine featuring photographs of a thin woman who was ”either seriously ill or suffering from an eating disorder,” Ms. Rowling expressed concern that her daughters, Jessica, 12, and Mackenzie, 1, might become overly conscious about their weight, Agence France-Presse reported. ”I don’t want them to be empty-headed, self-obsessed, emaciated clones,” she said. ”I’d rather they were independent, interesting, idealistic, kind, opinionated, funny — a thousand things, before ‘thin.’ ”

LAWRENCE VAN GELDER. “Arts, Briefly; J. K. Rowling Speaks Out.” The New York Times (Friday, April 7, 2006): B5.

Jhontelle Johnson on public schools: “you can’t make me go”

FransoirWilliamLarge.jpg
Fransoir William. Source of image: http://www.nytimes.com/2006/04/06/education/06voucher.html?pagewanted=1&ei=5094&en=d2a47406ed1f9127&hp&ex=1144382400&partner=homepage

(p. A1) WASHINGTON, April 5 – As a student at Shaw Junior High School here, Amie Fuwa strained to shut out the distractions of friends cutting up. She struggled through math, and used photocopies or the library when textbooks were scarce.
Now Amie, 14, a child of immigrants from Nigeria and the Dominican Republic, attends Archbishop Carroll High School, a Catholic school near a verdant hill of churches nicknamed the Little Vatican. When algebra confounds Amie, her teacher stays with her after school to help, and a mentor keeps her on course.
”It’s a lot of people behind my back now,” Amie said.
Before, she said, she ”felt like it didn’t really matter to different people I know, like my teachers, if I failed.”
Amie is one of about 1,700 low-income, mostly minority students in Washington who at taxpayer expense are attending 58 private and parochial schools through the nation’s first federal voucher program, now in its second year.
Last year, parents appeared lukewarm toward the program, which was put in place by Congressional Republicans as a five-year pilot program, But this year, it is attracting more participation, illustrating how school-choice programs are winning over minority parents, traditionally a Democratic constituency.
Washington’s African-American mayor, Anthony A. Williams, joined Republicans in supporting the program, prompted in part by a concession from Congress that pumped more money into public and charter schools. In doing so, Mr. Williams ig- (p. A16) nored the ire of fellow Democrats, labor unions and advocates of public schools.
. . .
Like many other voucher students, Breanna Walton, 8, rises before dawn for the long bus ride from Northeast Washington, ”amongst the crime and drugs and all that,” in the words of her mother, April Cole Walton, to Rock Creek International, near Georgetown University. There, she learns Spanish with the children of lawyers and diplomats.
Ms. Walton said that her neighborhood school ”has broken down,” and that she would have done just about anything to keep Breanna from going there. ”Every child here should be able to say I’m going to set my sights high,” she said. ”I refuse to let my child be cheated.”
Patricia William, a single mother, said that at first she liked her son Fransoir’s public school, John Quincy Adams Elementary School, a tall sprawling building in the Adams Morgan neighborhood. Teachers seemed good, but overwhelmed. It was other parents, not teachers, Ms. William said, who told her that Fransoir was hyperactive. ”I was not getting quality information from them on time,” she said. ”For some reason, it was not working.”
Fransoir is one of 62 students with vouchers attending Sacred Heart Elementary, a Catholic school of 210 students, where he learns prayers along with five-digit multiplication and long division. He takes medication for his hyperactivity. Last year, he teamed up with another child to research the sinking of the Titanic. This year, he is interested in reptiles. Ms. William said her son today has nothing in common with the boy who once lay on the floor, turning in circles like a clock wound too tight. Now she is learning from him, about more than just math or reading or a sinking ship.
”All the effort he’s making every night makes me want to sit with him and study,” said Ms. William, a high-school dropout. ”I’m learning academically, but also about making an effort.”
. . .
. . . the pressure of competition is inescapable. In one sixth-grade classroom, two of six students said they would probably go to charter schools next year, unless Adams could get its seventh grade started.
”I’ll probably go to Washington Latin,” said Jhontelle Johnson, setting her sights on a new charter school opening in August. If not, she said, ”I’d probably be home-schooled.”
A teacher’s aide, Sheonna Griffin, looked askance. ”You don’t like public schools?” she asked the child.
Jhontelle turned back, her young eyes flashing. ”You can’t make me go,” she said.

For the full story, see:
DIANA JEAN SCHEMO. “Federal Program on Vouchers Draws Strong Minority Support.” The New York Times (Thurs., April 6, 2006): A1 & A16.
FransoirWilliam2Large.jpg
Fransoir William. Source of image: http://www.nytimes.com/2006/04/06/education/06voucher.html?pagewanted=2&ei=5094&en=d2a47406ed1f9127&hp&ex=1144382400&partner=homepage

Labor Market Flexibility Increases Employment and Prosperity

“France is definitely behind,” says William Keylor, professor of International Relations and history at Boston University. “If France were to create a more-flexible labor market it would eventually increase productivity and prosperity, but the short-term transition would be difficult and people just aren’t thinking long term.”
There have been labor changes across continental Europe recently. Denmark’s measures to liberalize hiring and firing have helped the country cut its unemployment rate in half from about 10% in the early 1990s to under 5%. Spain, too, has introduced short-term employment contracts which have helped cut its unemployment rate by more than half from 20% a decade ago.
But elsewhere, attempts at change have met with staunch opposition, often resulting in watered-down measures. Italy passed changes to its labor laws in 2004, introducing an extension of temporary-work contracts that were introduced in 1997 and were credited with helping cut Italy’s overall unemployment rate to 7.1% from 12% when the contracts began. Yet many economists say Italy, which recorded zero growth last year, hasn’t gone far enough.
In Germany, where unemployment stands at 11%, a coalition government headed by conservative leader Angela Merkel has promised to reduce unemployment by introducing similar measures to those hotly debated in France. The government had to settle on compromise measures that can extend a current probation period for workers to 24 months, from the current six. But companies don’t have the right to terminate contracts within those two years without giving just cause. Other, more difficult, provisions, are still on hold.
The new measures that will be introduced in Parliament as early as today are targeted at “disadvantaged” youths, which refer to people between 18 and 25 who have left school without any qualifications and who are unemployed. The provisions include increasing financial incentives to employers to hire people under 26 who face the most difficulties.
It would apply to some 160,000 young people currently hired under government-subsidized job contracts, according to an interview with Employment Minister Jean-Louis Borloo in an interview with Le Monde newspaper. The cost to the government would be around €150 million ($180 million) in the second half of 2006, Mr. Borloo was quoted as saying.
But economists said the change of tack was a bad signal. “The real problem is that the results obtained by opponents of the new law…show that it is very difficult to introduce reforms in France,” Dominique Barbet, economist at BNP Paribas, wrote in a research note. “This will give opponents of reform confidence for future actions.”

For the full story, see:
ALESSANDRA GALLONI. “Bowing to Protesters, Chirac Abandons Youth-Labor Law; Reversal Highlights Europe’s Difficulties With Painful Reforms.” The Wall Street Journal (Tues., April 11, 2006): A3 & A10.
(Note: the title and version of the article quoted here are from the online version. The title and content of the version in the printed paper was a little different in a couple of places.)

Wage Security Inversely Related to GDP Per Capita



Source of graph: Siems, Thomas F. “Beyond the Outsourcing Angst: Making America More Productive.” Economic Letter 1, no. 2 (2006): 1-8.
Schumpeter’s theory of creative destruction implies that more flexible labor markets will result in greater productivity per worker. The above recently published evidence, supports the implication.