Falling commodity prices

Trying to predict commodity prices isn't dissimilar to trying to catch a falling knife - but it shouldn't surprise anyone how quickly neo malthusians were once again proven wrong (Reason):

Plunging oil prices have been big news over the past year. Since mid-summer 2014, the price for benchmark West Texas Intermediate (WTI) crude has fallen from $105 to $48 per barrel. But it's not just the price of petroleum that has plummeted. The prices of lots of other industrially important commodities have also been dropping.

Erten and Ocampo also point out, "The magnitude of cumulative decline during the downward trend is 47 percent for the non-fuel commodity prices, with recent increases of around 8 percent far from compensating for this long-term cumulative deterioration." The recent upswing phase of the current super-cycle did not boost commodity prices to nearly what they were a few cycles back.

However, Erten and Ocampo report that metals have been an exception—the mean of the last cycle was higher than the preceding one. Still, they note, "The contraction phase of this cycle has not even begun yet, which can lower the mean of the whole cycle in the upcoming years." It now appears that commodity prices were just reaching their pinnacles when Erten and Ocampo were writing up their results back in 2011. Instead of peak resource production we are most likely now past peak commodity prices—and heading lower for at least for the next ten to fifteen years.

Bridge International Academies: privatized mass education in developing countries

Developing countries need more entrepreneurs and business selling solutions that people want and need vs bureaucrats forcing interventions down their throats 'for their own good.' This is exciting. From the WSJ - "For-profit Bridge International Academies is challenging the assumption that governments and charities should lead education programs in impoverished countries":

Bridge’s founders are challenging the long-held assumption that governments rather than companies should lead mass education programs. The company’s goal is to eventually educate 10 million children and make money by expanding its standardized, Internet-based education model across Africa and Asia.

The Internet and Barnes & Noble Inc. Nook tablets are used to deliver lesson plans, which are then used by teachers. The tablets also are used to collect test results from students scattered across hundreds of towns and villages and serve as a means of monitoring their progress.

“It’s like running Starbucks,” said Greg Mauro, a partner at California-based venture-capital firm Learn Capital LLC, the largest shareholder in Bridge with a 15% stake, likening it to the coffee chain with standardized systems and procedures that can be replicated across new locations. If all goes to plan, the American-run, Nairobi-based education startup will seek a stock-market listing in New York in 2017, according to Mr. Mauro.

The endgame of Chinese communist rule?

Cautiously optimistic... an even bigger question is what comes after (WSJ):

The endgame of Chinese communist rule has now begun, I believe, and it has progressed further than many think. We don’t know what the pathway from now until the end will look like, of course. It will probably be highly unstable and unsettled. But until the system begins to unravel in some obvious way, those inside of it will play along—thus contributing to the facade of stability.

Communist rule in China is unlikely to end quietly. A single event is unlikely to trigger a peaceful implosion of the regime. Its demise is likely to be protracted, messy and violent. I wouldn’t rule out the possibility that Mr. Xi will be deposed in a power struggle or coup d’état. With his aggressive anticorruption campaign—a focus of this week’s National People’s Congress—he is overplaying a weak hand and deeply aggravating key party, state, military and commercial constituencies.

Piketty: About that inequality? Nevermind.

Piketty's correction (WSJ):

Though his formula helps explain extreme and persistent wealth inequality before World War I, Mr. Piketty maintains, it doesn’t say much about the past 100 years. “I do not view r>g as the only or even the primary tool for considering changes in income and wealth in the 20th century,” he writes, “or for forecasting the path of inequality in the 21st century.”

Instead, Mr. Piketty argues in his new paper that political shocks, institutional changes and economic development played a major role in inequality in the past and will likely do so in the future.

When he narrows his focus to what he calls “labor income inequality”—the difference in compensation between front-line workers and CEOs—Mr. Piketty consigns his famous formula to irrelevance. “In addition, I certainly do not believe that r>g is a useful tool for the discussion of rising inequality of labor income: other mechanisms and policies are much more relevant here, e.g. supply and demand of skills and education.” He correctly distinguishes between income and wealth, and he takes a long historic perspective: “Wealth inequality is currently much less extreme than a century ago.”

More here (WSJ): "Why Thomas Piketty’s Revisions Don’t Fix His Book."

How automation will wipe out (private sector) unions...

It's pretty basic economics (Reason):

Forecasts differ on the specifics, but they generally point to automation being disruptive as far as traditional workplace roles are concerned. A recent Oxford University study put nearly half (47 percent) of all jobs at risk of replacement by automation in two decades. A Wired article puts the number at 70 percent by the end of this century.

Computers are getting smarter and stronger while employees, with their health insurance, pensions, and vacation time are becoming increasingly expensive. The writing is on the wall; plenty of jobs, at least as performed by humans, aren't long for this world.

I think the more interesting question will be how long we will tolerate the public sector unions who earn far more than their private sector peers and the politicians who have been beholden to them.

Turning beehives into honey on tap

This is cool (wired):

Beekeepers Cedar Anderson and his father Stuart have, essentially, hacked the honeycomb—a nearly flawless geometric and structural achievements—to make it more mechanically efficient. In a nutshell, Flow frames have a partially formed honeycomb matrix within a transparent frame. Bees complete the comb, fill the cells with honey and cap them. To harvest the honey, the beekeeper inserts a tool into the top of each frame and twists, a move that splits each cell in the honeycomb vertically, allowing the honey to flow freely. It is collected at the bottom through a tube. Presto! Honey on tap. [...]

“There’s more to bees than harvesting honey. Over one third of the food we eat is dependent on bees for pollination,” Cedar says. Without the help of bees, our crops would suffer devastating consequences, and with available areas for natural bee habitats disappearing each year, systems that make it easier for humans to look after bees are crucial.

Crossfit is great for entrepreneurs...

6 reasons why, according to Entrepreneur. I confess I require a bit of the external motivation that Crossfit provides (that is when I drag myself out of bed at 440am...).

Responding to hypothetical crises: "what happened to the rare earths crisis?"

Instapundit appropriately and sarcastically responds: "shockingly, markets." From MIT's Tech Review:

Demand appears to have fallen mainly because companies stockpiled these materials in anticipation of shortages, says Hatch. As it turned out, China’s lower export quotas—which were deemed unfair by the World Trade Organization—didn’t constrain the world’s supply, and China recently stopped imposing those limits on rare earths. Hatch notes that while the prices for some rare earth materials remain above 2010 levels and could go up again, a price spike like the one seen in 2011 is unlikely.

As it turns out, net neutrality is another hypothetical crisis that American politicians have decided to take a different approach on: regulation. I predict the phrase "unintended consequences" is going to be used - that were very much and vocally predicted before hand (Reason).

How landlocked Botswana found economic growth

Through 'economic liberty'. Remarkable for a country once the third poorest in the world (dailysignal):

Whither the Greeks...

The entire Greek situation is bizarre... but in the midst of the Greek government demanding that they receive new loans, an oddly lucid piece of journalism (NYT - yes, oddly, the NYT):

Businesses are still stymied by labor rules and tax policies that under the previous government often changed week to week — 2,200 new tax regulations in the last two years alone.

Firms like Mr. Stamatiou’s, as well as investors and start-ups, face high administrative costs and bureaucratic inefficiency that Greek business associations say jeopardize jobs and leach about €14 billion a year from the economy. Corruption remains widespread, and vested interests have fought against opening swaths of the economy to competition.

“The removal of austerity is all fine and well,” said Constantine Mihalos, president of the Athens Chamber of Commerce. “But it will only be the right solution if it is followed by the necessary structural reforms in the public and private sector creating conditions for growth.”

Et tu, Stimulus?

Any excuse to spend money? Even better when you get to spend gobs of it? Nevermind, of course, the consequences (Boston Review via Instapundit)

Before the recession, the Congressional Budget Office (CBO) projected we would have 5 million more jobs at the end of 2014 than we actually do. It also projected that the GDP would be more than 11 percent higher in 2014 than it is now. This translates into a difference in annual output of roughly $2 trillion or more than $6,000 per person. They predicted that wage and salary income would be roughly 20 percent higher than it is today. Many economists had similar projections.

What about "national socialist" suggests the Nazis were 'right-wingers'?

It's kind of still befuddling why socialism is still considered socially acceptable when Nazis are not...

Related: Well annotated rant on the issue (monsterhunternation).

Where have the entrepreneurs gone?

Not America (LATimes) - "Countries such as Hungary, Denmark, Finland, New Zealand, Sweden, Israel and Italy all have higher startup rates than America does." (Investors.com)

Related: According to Popular Mechanics (via Instapundit), these are the 14 top startup cities, none of which are in Silicon Valley.

Kinda like Rock & Roll and the fall of the USSR?

From Reason.tv: Bollywood vs. Bin Laden (YouTube): Why radical Islam fears pop culture

When it comes to the oil, why it's not the 80s anymore

The Saudis are betting against American innovation - which generally isn't a good bet to make. From the WSJ:

Today, the discovery and development of oil from shale rocks means that oil output is faster paced and near at hand—in Texas and North Dakota, Colorado, Oklahoma, Wyoming, even Ohio. Drilling and hydraulically fracturing a well takes weeks, not years. An expensive well costs $10 million, compared with the billions needed to drill offshore wells and build associated infrastructure. Moreover, expenditure of both time and money are falling fast.

The oil field investment cycle has shortened. Wildcatters in Texas discovered the Eagle Ford Shale in 2008. Within five years, it was pumping a million barrels a day—thanks to an influx of capital that paid for drilling thousands of new wells. Each well roars into life and then drops off fast. Without constantly drilling new wells, these oil fields will peter out. [...]

Companies like EOG Resources Inc. are drilling better wells faster. EOG said recently it takes 4.3 days to drill its average well in the Eagle Ford Shale in South Texas, down from 14.2 days in 2012. What’s more, as it drills more of them, it has figured out how to locate wells to get the highest oil output.

Combining lowering costs and increasing output means that EOG says it can drill wells at $40 per barrel in North Dakota, South Texas and West Texas, while still earning a 10% return. We “pride ourselves on being a very efficient operator,” Billy Helms, EOG’s head of exploration, said at a recent industry conference.

Since oil prices began to fall, many companies have cut their capital spending plan for 2015 and the number of drilling rigs in the U.S. has fallen. But output has continued to increase.

Quote of the day

Michael Cannon at Cato: "People who pay for their own consumption don’t have the luxury of being able to pretend that tradeoffs don’t exist."

'Je suis Charlie'

I think this response from the New Yorker framed it remarkably well:

But the murders in Paris were so specific and so brazen as to make their meaning quite clear. The cartoonists died for an idea. The killers are soldiers in a war against freedom of thought and speech, against tolerance, pluralism, and the right to offend—against everything decent in a democratic society. So we must all try to be Charlie, not just today but every day.

A note of optimism...

If it bleeds, it leads... and probably why this kind of stuff doesn't often reach our monitors - with much of this good news directly as a result of the proliferation and hard won gains of markets and capitalism (Cato): 26 charts and maps that show the world is getting much, much better (Vox)

Missing in the US: young entrepreneurs

The irony is that I would have thought the opposite especially with the emergence of the young tech companies... but the trend is even more troubling as there hasn't even been a shift in increasing entrepreneurship amongst older Americans - this despite the fact that technology makes it easier than ever to start a business (WSJ):

The decline in young entrepreneurs is part of a broader drop in private business ownership over the past 25 years. Between 2000 and 2012, new business formation slowed even in such high-growth sectors as technology, according to economists John Haltiwanger and Ryan Decker of the University of Maryland and Javier Miranda of the Census Bureau.

Slowing U.S. population growth since the early 1980s has reduced the supply of potential entrepreneurs of all ages, and lessened demand for new goods and services, said Mr. Litan of the Brookings Institution. Meanwhile, business consolidation has led to more formidable competition for startups, making it harder for new entrants to gain a spot in the market, he said.

Overall, the U.S. “startup rate”—new firms as a portion of all firms—fell by nearly half between 1978 and 2011, according to an analysis by Mr. Litan and his research partner, economist Ian Hathaway.

Building a sustainable business model for primary healthcare

With the turbulence in the US healthcare system while Canada's healthcare system frays at the seams, keeping up with the Qliance model for affordable concierge medicine is fascinating (Time):

Since then, they’ve signed up previously undreamed-of populations: big private employers like Expedia and Comcast, public and industry employee unions like the one for Seattle firefighters and–most radical of all–at least 15,000 Medicaid patients.

The private company’s results so far suggest that the model is scaling up nicely. Qliance now serves some 35,000 patients; the cost of about half of them is paid by the government through traditional and expanded Medicaid programs. Treating a wide variety of patients–young and old, healthy and chronically sick, well-off and poor–Qliance claims to be saving approximately 20% on the average cost of care compared with traditional fee-for-service providers. The company’s staff has tripled over the past year, and Qliance is looking to expand beyond Washington.

SpaceX: A launch towards affordable space travel to watch for January 6th

This is pretty exciting... SpaceX will attempt to land a rocket after launch (PopSci):

Landing on such a small platform that isn’t completely stationary won’t be easy, and Musk estimates a 50 percent chance of success on January 6. Plus, the landing will occur after the first stage separates from the second stage -- the part of the rocket that will take the cargo capsule the rest of the way to the ISS. That means not all of the rocket will be saved, as the second stage will never be recovered. (However, Musk plans to recover the second stage in future launches.)

Still, the fact that SpaceX is attempting such an endeavor instills hope for a cheaper commercial spaceflight industry. According to Quartz, the cost to build a Falcon 9 rocket is $54 million, but the cost of its fuel is only $200,000. If launching a rocket in the future only required refueling and other servicing costs on the ground, that could bring down the price of going to space by millions of dollars.

George Deeks; "In order not to be reduced to sorrow and bitterness, we must look forward."

I found this speech remarkable in a number of ways. While probably an oversimplification, I think that it encapsulates a fundamental difference in approaches one can take to, and ultimately overcome, adversity/tragedy: look forward, and "secure the future" instead of dwelling on the past. George Deeks is a Christian Arab and Israel's Deputy Consul to Norway:

Office politics are unavoidable

...it's all in how you manage them and prevent them from becoming toxic (HBR):

The best managers recognize the psychological underpinnings of office politics and do two things in response: they manage the way they themselves behave, and they are careful about how they motivate others. People who are perceived as apolitical display high levels of congruence between what they say and what they do, and they are also good at rewarding others for what they were required to do, while holding them accountable for what they fail to deliver.

As such, good leaders focus on the bright-side personality characteristics associated with their ability to navigate office politics: social skills, emotional intelligence, and intuition. They recognize that the more secretive, selfish, hypocritical, hierarchical, and incompetent they appear in the eyes of employees, the more political the organization will become. So they are driven to come across as competent, transparent, approachable and altruistic.

And in motivating their employees to try harder, they avoid pitting employees against one another and instead focus on out-performing common adversaries: the company’s competitors. They do this through articulating a meaningful mission — a vision that resonates and motivates people to achieve a collective goal. This keeps the team focused on beating their competitors, rather than each other.

"The final nail in the Keynesian coffin?"

I'll say no. Have politicians ever let evidence stand in their way of consolidating power and increasing spending? Cato's Dan Mitchell is also skeptical but points to one academic - Professor John Cochrane of the University of Chicago:

The tide also changed in economic ideas. The brief resurgence of traditional Keynesian ideas is washing away from the world of economic policy. …Why? In part, because even in economics, you can’t be wrong too many times in a row. …Our first big stimulus fell flat, leaving Keynesians to argue that the recession would have been worse otherwise. George Washington’s doctors probably argued that if they hadn’t bled him, he would have died faster. With the 2013 sequester, Keynesians warned that reduced spending and the end of 99-week unemployment benefits would drive the economy back to recession. Instead, unemployment came down faster than expected, and growth returned, albeit modestly. The story is similar in the U.K.

I'm betting on technology, American entrepreneurs and human ingenuity

I suspect that the WSJ article even underestimates the value of technology here that will keep driving costs of production lower. If I'm right, the world of hurt couldn't be happening to nicer people... (WSJ)

Saudi Arabia is taking a risk by letting oil prices plunge, said Arab, American and European officials. Saudi officials have said their economy can survive at least two years with low prices, thanks partly to the kingdom’s $750 billion foreign-exchange reserves. Arab officials believe many less-efficient producers will be driven out of the market.

Still, some oil-industry executives said, Riyadh and Mr. Naimi may underestimate how technology and the shale-oil boom have fundamentally altered energy markets. Many U.S. companies, they said, can make money or break even with oil below $40.

Not so shocking: trade leads to development

Again reinforcing that what's needed for economic development is trade, not aid - when a random group of small rug producers was given the opportunity to export handmade carpets to high-income markets (study by Atkin, Khandelwal and Osman, via Chris Blattman):

Treatment firms report 15-25 percent higher profits and exhibit large improvements in quality alongside reductions in output per hour relative to control firms.

These findings do not simply reflect firms being offered higher margins to manufacture high-quality products that take longer to produce. Instead, we find evidence of learning-by-exporting whereby exporting improves technical efficiency.

First, treatment firms have higher productivity and quality after accounting for rug specifications. Second, when asked to produce an identical domestic rug using the same inputs, treatment firms receive higher quality assessments despite no difference in production time. Third, treatment firms exhibit learning curves over time.

Finally, we document knowledge transfers with quality increasing most along the specific dimensions that the knowledge pertained to.

New Orleans: A successful experiment in school choice and the unintended consequences of regulation

The Japanese economic recovery that wasn't

Inspired by the acolytes of Keynesian economics, Abenomics doesn't appear to be working out so well (Cato):

The government spending of tens of billions of dollars into public works projects — “investments,” as President Obama calls them–caused the Japanese debt burden to catapult from 19 percent of GDP, among the lowest in the industrialized world, to over 142 percent, among the highest.

Meanwhile Japan keeps printing money, as if it can devalue its way out of the crisis. From the late 1980s through 2000, the central bank’s balance sheet more than doubled — a precursor to the “quantitative easing” carried out by the U.S. Federal Reserve. And since 2000, the balance sheet has doubled once again.

But where is the promised recovery?

The expected Keynesian “multiplier effect” from spending and a flood of yen into the market never arrived.

Housing starts in Japan are still lower than the level nearly 25 years ago. Unemployment is still low by international standards, but wages have been flat.

It’s all a tragic story of economic playmaking that has gone all wrong. But don’t tell that to Paul Krugman of the New York Times, who predicted Japan “may end up showing the rest of us the way out” of stagnation.

Joseph Stiglitz, a fellow Nobel laureate of the Keynesian variety, advised American politicians to use the same strategy: “What we really need in the U.S. is expansionary policies that Abenomics is bringing into Japan.”

Differentiating between democracy and freedom

A useful quote (FoxNews):

Real freedom means doing what you choose as an individual, not waiting for the rest of society to vote on whether you can.

What comparing the growth of students from India and China says about their respective development

From WSJ:

China’s rise to the top—it had 200,000 more students last year to the U.S. than it did just eight years earlier—reflects the growing incomes and increasing globalization of the country’s citizens, analysts say.

Chinese students were much more likely to go to the states for undergraduate studies than Indian students. Only around 12% of Indians that study in the U.S. were there for undergraduate studies during the past school year, compared to 40% of Chinese students, the IIE study showed.

It makes sense, said Akhil Daswani, chief operating officer of OnCourse Vantage, an education consulting company in India, an undergraduate degree is a luxury few Indians can afford.

“If you are going to spend $250,000 over four years you have to have a considerable amount of disposable income,” Mr. Daswani said. “Undergraduate schools are marketing heavily (in China). It is the first place they want to go because they are getting so much business.”

When they go for an international degree, Indians prefer to get more bang for their rupee, they tend to go for two-year graduate courses that lead to high-paying jobs.

Estonia's e-residency: the end of the nation state?

Estonia's new e-residency (Australian broadcasting corporation):

For 50 euro - about $70 - you can apply for the digital ID card with a couple of PIN codes that will make you an e-resident of the country.

With a population of just 1.3 million people, they're looking at allowing up to 10 million 'e-Estonians'. An experiment to watch. Compare and contrast (Reuters).

Introverts and Extroverts

Apparently one is better than the other (Time).  Not terribly surprising - though that's speaking as an introvert who sometimes tries to emulate extroverts.

"The White Savior Industrial Complex"

For the record, despite a history of failures, I don't think the problem is "trying to save the world" (New Republic via Alan L. on FB). It's the arrogance and preconceptions but also the ignorance of how to make small innovations scale:

This isn’t a criticism of the projects themselves. This is how social policy works, in baby steps and trial-and-error and tweaks, not in game changers. Leave the leaps and bounds to computing power. If a 49-cent deworming treatment really does produce a $30 increase in wages for some of the poorest people on Earth, we are assholes for not spending it.

And this is where I landed after a year of absorbing dozens of books and articles and speeches about international development: The arguments against it are myriad, and mostly logistical and technical. The argument for it is singular, moral, and, to me anyway, utterly convincing: We have so much, they have so little.

If we really want to fix development, we need to stop chasing after ideas the way we go on fad diets. Successful programs should be allowed to expand by degrees, not digits (direct cash payments, which have shown impressive results in Kenya and Uganda, are a great candidate for the kind of deliberate expansion I’m talking about). NGOs need to be free to invest in the kinds of systems and processes we’re always telling developing countries to put in place. And rich countries need to spend less time debating how to divide up the tiny sliver of our GDP we spend on development and more time figuring out how to leverage our vast economic and political power to let it happen on its own.

Hitting the point a bit more aggressively - a hilarious parody (mic.com):

From outcast to CEO: Gabriel Bristow, Intelicare Direct

A remarkable story (inc):

It was 1989. He was 19, freezing on the streets of Lansing, Michigan, giving blood for money. A runaway. Homeless.

[...] "Throw the faggot in the river!" shouted one boy. Several other kids chimed in, and two boys grabbed Bristol. Before they could finish the job, he struggled free. Traumatized by the episode, Bristol stopped going to school shortly thereafter. Following a particularly bad fight with his parents, he got on a Greyhound bus to the first big city he could think of: Lansing.

[...] In 2012, he replied to a listing for a call center manager job at Instant Checkmate, a background-check website that, for a monthly subscription fee, lets users perform public records searches. The site, created by San Diego entrepreneurs Joey Rocco and Kris Kibak, already had a call center, but "it was poorly managed," says Kibak. "The quality control was not there."

Bristol came into the interview and promised to fix those problems. "He was very much a salesman," says Rocco. "I remember smirking in the interview, like, wow, he's good." They all agreed that he should run the customer service department as a standalone company and bring in his own clients and revenue.

And so, for the first time, Bristol was running the show. He leased new office space in Las Vegas and built another location in San Diego. He'd build call centers the way he thought his people deserved.

Jonathan Rothberg's chip that could disrupt medical imaging

Not sure whether it's bravado and whether Rothberg can deliver, but given his track record, this is something to watch which could also significantly reduce the cost of healthcare (Wired):

Rothberg says he has raised $100 million to create a medical imaging device that’s nearly “as cheap as a stethoscope” and will “make doctors 100 times as effective.” The technology, which according to patent documents relies on a new kind of ultrasound chip, could eventually lead to new ways to destroy cancer cells with heat, or deliver information to brain cells.

[...]Rothberg says he got interested in ultrasound technology because his oldest daughter, now a college student, has tuberous sclerosis. It is a disease that causes seizures and dangerous cysts to grow in the kidneys. In 2011 he underwrote an effort in Cincinnati to test whether high-intensity ultrasound pulses could destroy the kidney tumors by heating them.

What he saw led Rothberg to conclude there was room for improvement. The setup—an MRI machine to see the tumors, and an ultrasound probe to heat them—cost millions of dollars, but wasn’t particularly fast, more like a “laser printer that takes eight days to print and looks like my kids drew it in crayon,” he says. “I set out to make a super-low-cost version of this $6 million machine, to make it 1,000 times cheaper, 1,000 times faster, and a hundred times more precise.”

The problem with central planning: "the information problem"

It doesn't really matter if it's socialism, communism or fascism... the problem is the same - but it's also why even in a perfect world, socialism can't work (reason.com):

In order for us to have cooperation on a massive scale-cooperation on a scale of millions or tens of millions-we need some sort of signal that tells us what's going on in the economy. It turns out we get that signal in market societies and it's in the form of prices. We're all making all these private decisions and it modifies prices a little bit and then we respond appropriately. We don't know what's causing scarcity. We don't know what other peoples' desires are or demands are, we can just see that the price of strawberries is cheap over here and it's expensive over here and that tells me everything I need to know as a consumer about what to do. The problem with socialism on a mass scale is that they don't have a substitute for prices.

[...] In principle, there are cases where an omni-benevolent, omniscient dictator could come in and fix the market and make it better. It's rarely going to be the case in actuality that a person knows when and how to intervene. Given the limits of human knowledge, given the limits of peoples' ability, and also just given their biases and so on and the fact that they're likely to use this power selfishly rather than for our own good, I think it's better not to empower them to do these things.

Why is New York trying to contain school choice?

In a world that's becoming increasingly global, with the persistent rhetoric on the importance of giving kids the best possible education, New York is going to close the doors to any new charter schools that parents are clamouring for, despite a few facts:

Of the city public school system’s 717 high-poverty public schools enrolling a large number of black and Hispanic students, only 3.6% of them have a proficiency rate in either math or English that is above 50% (and seven of those high achievers select their students). In contrast, fully one-third of similarly situated charter schools meet that bar, a rate almost 10 times higher.

When charter schools are compared to district schools in the three areas in which they are concentrated — Harlem, Central Brooklyn and the South Bronx — charters once again far outpace their district counterparts in both subject areas, with proficiency rates more than double in math, and in English higher by between seven and 14 points.

Some 50,000 parents applied to a charter school and did not get in because there simply aren’t enough charter-school seats. Those parents are sitting on waiting lists and too often their children are sitting in struggling public schools where their future is slowly disappearing before them.

Opponents imply that charters are selective, that they gin up their test scores by systematically cherry-picking the most motivated students and forcing out kids who don’t measure up.

That’s wrong. Not only is admission by open lottery, but over the past several years, charter schools have taken important steps to enroll populations of students that more closely reflect their neighborhoods.

The number of special-needs students and English Language Learners now attending charters has gone up. And what’s more, the results show many charter schools are having tremendous success in not just enrolling but educating them.

Is Amazon really like ISIS?

You have to hate competition a lot in order to make stupid pronouncements like this. Book agent Andrew Wylie Calls Amazon An "ISIS-Like Distribution Channel" (TechCrunch).

The fears entrepreneurs have

Yep (inc.).

What developing countries need, but the West can't give...

Economic liberty (JewishWorldReview):

Poverty is not a cause but a result of Africa's problems. What African countries need the West cannot provide. They need personal liberty. That means a political system in which there are guarantees of private property rights, free markets, honest government and the rule of law. Africa's poverty is, for the most part, self-inflicted. Some people might disagree because their college professors taught them that the legacy of colonialism explains Third World poverty. That's nonsense. Canada was a colony. So were Australia, New Zealand and Hong Kong. In fact, the richest country in the world, the United States, was once a colony. By contrast, Third World countries such as Ethiopia, Liberia, Nepal and Bhutan were never colonies, yet they are home to some of the world's poorest people.

Other than this tendency to lump all of Africa in as a group, I'd wholeheartedly agree.

A more accurate depiction of the US Commerce Department's attack on Mexican Sugar

... and American consumers in a letter to the WSJ by Don Boudreaux (Cafe Hayek). More on the flawed policy here (DailySignal).

Minimally invasive surgery through a patient's cheeks

This is amazing - using a robot to perform corrective epilepsy brain surgery in a way that takes less time, reduces risk and reduces recovery time (cnet):

The working prototype involved the development of a shape-memory alloy needle -- that is, an alloy that can remember its original shape and return to it when heated after being deformed -- that can operate along a curving path. The robot also needed to be able to operated from inside an MRI machine, which creates a strong magnetic field.

The resultant needle is created from nickel titanium, also known as nitinol, an alloy that has both shape memory and is non-ferromagnetic, making it compatible with MRI machines. The 1.14mm needle operates like a mechanical pencil, consisting of a series of concentric tubes, some of which are curved so as to allow the tip to follow a curved path to the brain.

It is inserted in tiny, millimetre steps that allow the surgeon to track its position by taking MRI scans every step of the way, and its accuracy, the team said, is better than 1.18mm.

The best day to buy airline tickets has now changed... to Sunday

Useful to know... (WSJ):

One factor behind the change: Airline executives come into work Monday looking to raise fares, not discount them with sales to fill seats. Just this week airlines put through a $2 each-way across-the-board fare hike, even though prices for oil—the largest expense for airlines—have been plunging. Prices are still going up due to increasing demand for the limited number of available seats.

The lower Sunday and Saturday prices also result from the ability social media has given airlines to throw discounts in front of consumers at any time. That turns vacation shoppers surfing the Web on weekends into ticketed passengers without discounting tickets business travelers might buy while at work. And the findings reflect the lack of corporate sales over the weekend, since business travelers typically fly on more expensive tickets than vacation buyers.

When searching for the lowest fare, don’t give up on Tuesdays. It’s the day with the most frequent price drops, leaving the door open for good deals.

Using markets to regulate scarce resources like water

Governments have a significant role to play to ensure property rights support markets and competition (WSJ):

A major overhaul of Western water law is overdue, but implementing such reform would take years. In the near term, states should authorize short-term leases of water, build basic market institutions, deploy risk-mitigation tools such as dry-year options, and implement basic controls such as regulating how much water can be pumped. The current absence of viable market opportunities and incentives is producing perverse results.

[...] Even though federal and state policy fosters the export of agricultural commodities, Western water law generally inhibits trade in the water used to grow the commodities. States should open up the market by eliminating or streamlining legal barriers that effectively block transfers of water.

A market in water would encourage efficiency by stimulating innovation, promoting specialization and allowing water to move from lower-value to higher-value uses. Farmers who have an opportunity to trade a portion of their water have an incentive to take measures, such as installing more efficient irrigation systems, to free up water for trade. It would also create opportunities to deploy market-based tools, such as dry-year options, to help mitigate water risks to farms and cities.

For example, under a dry-year option, a water user with a low tolerance for water shortages—such as an almond farmer whose trees would quickly die without water—can contract with a seasonal agricultural user, such as a broccoli grower. In dry years, the almond producer would have the right to use the broccoli grower’s water. The almond producer pays a yearly premium to guard against times when water shortages would result in the loss of his orchard. The proceeds from the option give the broccoli grower a guaranteed revenue stream and thereby provide a hedge against a drought that might destroy his annual crop—mitigating risk for both parties.

What happens when you serve McDonald's to food snobs and tell them it's organic

Heh (Slate via Instapundit). I'm not ashamed to say it's one of my favorite restaurants... I think it's objectively delicious and it's practically a comfort food for me!

Of course not, jobs are created by the job fairy...

According to Hillary Clinton, "don’t let anybody tell you it’s corporations and businesses that create jobs." (RealClearPolitics) More: from Cafe Hayek.

India: How not to revive an economy...

I suppose progress is made incrementally, but I was hoping for more with India's new PM Narendra Modi. Maybe what's sadder is that this potentially is a step forward from the previous state of these government owned factories:

At British India Corporation’s textile factory in northern India, four men sit in a control room watching computerised gauges eight hours a day. When they are done, another group takes over, and then another, for 24 hours a day - much as they might at any major industrial plant.

The problem is, nothing is produced there.

The strange tale of British India Corporation is an example of how political patronage and India’s strict labour laws keep publicly owned companies going long after they are insolvent.

Now Prime Minister Narendra Modi, who campaigned in this year’s general election on a promise of “minimum government, maximum governance”, is preparing to invest more taxpayer money in ailing state-owned factories in a bid to turn them around.

While the government has announced the closure of six publicly owned companies, Minister for Heavy Industries and Public Enterprises Anand Geete said last month that about two-thirds of 64 loss-making firms can be revived with more money.

Interview with Marc Andreessen

Interesting interview with a storied entrepreneur/venture capitalist at New York Magazine. One highlight on education:

The one other thing that people are really underestimating is the impact of entertainment-industry economics applied to education. Right now, with MOOCS,11 the production values are pretty low: You’ll film the professor in the classroom. But let’s just project forward. In ten years, what if we had Math 101 online, and what if it was well regarded and you got fully accredited and certified? What if we knew that we were going to have a million students per semester? And what if we knew that they were going to be paying $100 per student, right? What if we knew that we’d have $100 million of revenue from that course per semester? What production budget would we be willing to field in order to have that course?

Walmart: Bringing price competition to primary healthcare?

Something to watch - Walmart delivers low cost primary healthcare to the poor (WSJ):

Wal-Mart Stores Inc. pushed down prices for some generic prescription drugs to just $4 eight years ago, setting a new industry standard. Now it is trying to do the same for seeing a doctor.

Wal-Mart now operates a dozen clinics in rural Texas, South Carolina and Georgia and has increased its expectation for openings this year to 17. On Friday, a Walmart Care Clinic opened in Dalton, Ga., six months after Walmart U.S., the retailer’s biggest unit, entered the business of providing primary health care.

An office visit costs $40, which Walmart U.S. says is about half the industry standard, and just $4 for Walmart U.S. employees and family members with the company’s insurance. A pregnancy test costs just $3, and a cholesterol test $8. A typical retail clinic offers acute care only. But a Walmart Care Clinic also treats chronic conditions such as diabetes. (Walmart U.S. also leases space in its stores to 94 clinics owned by others that set their own pricing.)

“It was very important to us that we establish a retail price in the health-care industry because price leadership matters to us,” said Jennifer LaPerre, a Walmart U.S. senior director responsible for health and wellness, in an interview.

Walmart U.S. hasn’t yet decided whether to roll out the clinics nationally. It so far has limited itself to markets where people are uninsured or underinsured, have a high rate of chronic diseases or struggle to get access to medical care, as well as places where it has a large number of employees. About 40% of the patients seen at the clinics so far don’t have a primary-care provider, Ms. LaPerre said.

The unintended consequences of self driving cars?

Nah. The unintended consequences of the commons - ie subsidizing public roads. From Wired:

As driving becomes less onerous and computer-controlled systems reduce traffic, some experts worry that will eliminate a powerful incentive—commuting sucks—for living near cities, where urban density makes for more efficient sharing of resources. In other words, autonomous vehicles could lead to urban sprawl.

It’s simple, says Ken Laberteaux, a senior scientist at Toyota. If you make transportation faster, easier and perhaps cheaper, then people won’t mind commuting. “What a consumer is expected to do is see what they can gain by moving a little further from the job centers or the cultural centers,” he says. That’s bad news: Urban sprawl is linked to economic, environmental, and health hardships.

As usual though, it's elites who seem to be wringing their hands over the poor(er) improving their lives in tangible ways.

Will autonomous driving start with transport trucks?

It would make sense as a path to consumer adoption (Wired):

Autonomous driving is nothing new for trucks in agricultural and military applications, and should be available for passenger cars by 2020. But trucks that share our highways are tempting candidates for shedding their human component: Highway driving is easy for computers but dangerous for us, especially when big machines are involved. In 2012, according to NHTSA, 333,000 large trucks were in crashes in the US. Those accidents killed nearly 4,000 people, the vast majority of whom were riding in passenger vehicles. Regulators have trouble ensuring that drivers get adequate rest, and the trucking industry has fought back against regulation.

With the idea that humans who drive less cause less trouble, Mercedes equipped the Future Truck 2025 with the “Highway Pilot” automated system. “It never gets tired. It’s always 100 percent and sharp. It’s never angry; it’s never distracted,” says Dr. Wolfgang Bernhard, the Daimler board member for trucks and buses. “So this is a much safer system.”

Mark Cuban: Fix the economy by putting a $10k cap on university loan guarantees

This would accelerate some of the radical changes in education that are happening already (but given the entrenched interests I can't see it happening any time soon) - from Inc.com:

The best way to get the economy back on track, according to Cuban, involves solving the student loan bubble that has saddled millions of recent grads with loans that will take decades to pay back. One of the reasons reversing this trend is so important is that college tuition has been skyrocketing for years.

"It’s easy for the colleges to ask for more, because then the potential students just take out bigger loans," Cuban said at Inc.'s GrowCo conference, adding that rising tuition costs have resulted in more than $1 trillion in student loan debt.

"That’s the same money that, when you graduated, you used to move out of the house or you went out and spent money that improved the economy and helped companies grow. It created more revenue and spending power. Instead, it’s going to build a better fitness center at your school."

So what's Cuban's plan to stem this problem?

"If Mark Cuban is running the economy, I'd go and say, 'Sallie Mae, the maximum amount that you’re allowed to guarantee for any student in a year is $10,000, period, end of story,'" he said.

Multitasking makes your brain smaller apparently

There's a mental note that I should be making on this (Inc.com) as I post this while I play Clash of Clans on the side...

Disintermediating healthcare insurers: more on a primary care healthcare model that works

From Reason.com:

Good MD, a primary care office set up this year, charges patients a single, flat monthly fee for unlimited visits. Monthly charges are based on age, and extra services—whether stitches or strep throat tests—are provided for an additional fee, posted online and in the office. The practice doesn't accept private insurance at all. The result is a system that benefits not third-party payers, but doctors and patients, Good MD founder Dr. Thuc Huynh, told local TV station WROC. "Insurance isn't who reimburses me or dictates what we do together in terms of our treatment. So, it's a direct financial relationship."

More here.

Because entrepreneurship is one of the best paths for wealth advancement

Inc. presents the 10 wealthiest entrepreneurs in the US.

Does discrimination thrive in the absence of regulations to prevent it?

No (ASI):

It is a commonplace to the point of boringness among advocates of free markets that they make people pay to discriminate based on their tastes. A factory owner who restricts employment to whites only will face a narrower talent pool—likely paying higher wages for lower skills in total or on average. [...]

Employers cannot observe an employee’s productivity directly, at least before they employ them. But they can observe some things about them that signal productivity—using statistics. For example, if on average south Asians or Polish migrants tend to work harder than white Brits, they can use this fact about them to help make their employment decision. This isn’t racist—they don’t prefer employing south Asians, and they would be equally happy to pay a white Brit £6.50 an hour to produce £7 of stuff—it’s just that on average south Asians produce £7 of stuff an hour (say), whereas white Brits produce £6.40.

Which one is actually in place? We can test this. The answer is a resounding ‘statistical discrimination’. For example, minorities in France did worse when a large randomised study made them anonymous in job applications—so firms couldn’t see their names and thus ethnicities—implying that the reason they were called back and employed less was because their resumes/CVs were less attractive.

In Germany, job applicants with Turkish-sounding names got less callbacks than those with German-sounding names—unless both applicants had a favourable employment history reference. Then, for a given quality of reference, employers didn’t care whether they were Turkish or German. On eBay, white sellers receive lower prices selling stereotypically black products and black sellers receive lower prices selling stereotypically white products, but these differences go away when sellers build up credible reputations.

How far computer graphics has come...

Stunning (via TechCrunch):

Conquering hunger, revolutionizing agriculture, and profiting... with bugs

Inc. profiles Glen Courtright and his company EnviroFlight:

His first idea: Launch a biodiesel business. He would make fuel out of oil from local restaurants and food-processing plants. But after researching the idea, raising capital, and building a production facility, Courtright pulled the plug in 2008, when availability of the oil proved unreliable.

But Courtright kept turning the idea over in his mind. What else on the planet makes fats and oils for biodiesel? "I looked at enzymes," he recalls. "Nah, too hard. I'm not a bacteriologist. I looked at algae. That was probably a 20-minute no-go decision. Then it hit me: bugs. They're easy to grow. At least, I thought they were." But after toying with the notion of using bugs for fuel, Courtright got a better idea: Use the protein and fat in bugs to feed the planet, not power it.

Making generosity profitable?

Inc has a quick blurb about generosity 'being good for business' riffing off of Adam Grant's Give and Take (Amazon) and for as much as all the warm and fuzzies this generates, I think I'd hypothesize this approach gets the most mileage taking two guidelines into account (above some of the positive publicity it generates):

1. That generosity is consistent with the core values and more importantly "purpose" of the organization.
2. The generosity demonstrates loyalty to employees (if you aren't loyal to your employees, why should they be loyal to you?)

Using a 'surprise journal' to make better decisions?

It's an interesting idea - and not sure if the act of recording cognitive dissonance and other surprises will necessarily help in making better decisions but it makes sense (FastCompany):

Galef set out on a personal quest to identify her wrong assumptions. The outcome: the Surprise Journal. She keeps this journal with her at all times, writing down when something surprises her and why. For example, she noticed she was surprised that both older and younger people were attending her workshops, because she assumed people would self-segregate by age. She was surprised that her students would mention a concept from one of her colleague’s classes, because she didn’t expect that idea to be very memorable. “I started thinking about surprise as a cue that my expectations were wrong,” she says.

Many behavioral psychology and cognitive science studies demonstrate that humans find it difficult to change their opinions. In what is known as the “bias blind spot,” it is much easier for us to see other people’s biases than our own. The “confirmation bias” reveals that we seek out feedback from people who are likely to agree with us: We read newspapers and watch TV talk shows that are probably going to tells us things we already agree with. Galef says that there is much more research about how biased humans are than how to change these biases. “I really wanted to get better at changing my mind,” she tells me. “This is not a perfect solution, but it has gone a long way to making me more open and less defensive about when I’m wrong.”

Sometimes the surprises she stumbles upon are major shockers--a friend she thought was loyal betrays her, or a scientific belief is disproven. But the everyday moments of surprise are actually more exciting to Galef. It surprised her, for instance, that her teaching ratings were sometimes lower than the ratings of colleagues. This signaled to her that she had been over-confident about her teaching abilities and had perhaps not been open to feedback that could have improved her skills. Sometimes, it surprises her when audience members seem enthusiastic about one of her talks. Rather than just being flattered by the positive feedback, Galef takes this as an opportunity to assess her own understanding of what makes a topic useful or exciting: Perhaps her pre-suppositions about what other people find interesting is due for a change?

Quote of the Day

I want this to be true... and I suspect it is because companies that have purpose are more likely to energize and rally staff to do great things - Scott Dietzen at TechCrunch:

The missionaries make more money than the mercenaries

Eric Schmidt: Jobs require disruption

Ironic given some of the things Schmidt supports when it comes to regulation - from Wired:

Schmidt blames Europe’s rampant unemployment on the inability to attract investors and innovators. In 2013, Europe’s unemployment rate was climbing above 12 percent, while in the U.S. it was drifting steadily downward below 7.5 percent. “Perhaps Europe’s most pressing problem is its high unemployment rate,” concluded Schmidt.

Uber is a fascinating case study in the types of employment that Americans are willing to accept. It’s easy for Uber to attract tens of thousands of new drivers because they’re all on freelance contract. Uber assumes very little liability and there’s no guarantee of wages.

“Uber stands for a particularly extreme form of wage dumping, which refuses to allow for any minimum wage,” said Dieter Schlenker of Germany’s Taxi Deutschland. “We hope that politicians will steer the taxi clearly into the future and won’t let the U.S. firms put any ideas in their heads.”

The best case scenario for the Chinese economy?

A kind of scary if fascinating read by Michael Pettis, mapping out the challenges China faces:

GDP growth must drop every year for the next five or six years by at least 1 percentage point a year. If it drops faster, the period of low growth will be shorter. If it drops more slowly, the period of low growth will be stretched out. On average, GDP growth during President Xi’s administration will not exceed 3-4%.

[...]If investment growth falls sharply, especially investment in the real estate sector, it should cause unemployment to surge, which of course puts downward pressure on household income growth as well as on consumption growth, potentially pushing China into a self-reinforcing downward spiral. This, I think, is one of the biggest risks to an orderly adjustment. The good news is that if large initial wealth transfers to households can kick start a rise in consumption, growth driven by household consumption, especially growth in services, tends to be much more labor intensive than the capital-intensive investment growth that too-low interest rates have forced onto China. A transfer of domestic demand from investment to consumption implies, in other words, that employment growth can be maintained at much lower levels of GDP growth.

One emerging and successful healthcare model post 'Obamacare'

It's thriving specifically because of Obamacare - unintentionally. This may be the good news of the failing Affordable Care Act (aka 'Obamacare') that it may pave the way for models that are sustainable (Xeniagazette):

The Surgery Center of Oklahoma (SCO) has been open for 17 years, but 5 years ago decided to publish online the fees charged for various operations. Drs. Keith Smith and Steven Lantier, both anesthesiologists, felt the need to provide quality healthcare at reasonable prices. They contact local specialists and negotiate the fees charged. They include a reasonable fee for their services and add in a fair profit."

There are no hidden fees or charges.

They do not accept government funding for anything; your medical history and information are therefore not available online to the federal government – or anyone else. Most doctors agreed to computerize patient medical records and make them available online to the federal government, in return for reimbursements of the approximately $100,000 it cost them to do so.

Best of all, SCO’s maintains a zero or near-zero infection rate. Dr. Smith, CEO and managing partner of SCO believes their unbelievable low infection rate is due to their near-zero turnover rate in personnel. He commented, “Many of the people – in fact all of the people that worked for me 17 years ago – are either [still] working here, or they’re completely retired…. They just feel like it’s the best job they’ve ever had. People that are working in the same environment every day know the routine.”

Not sure what your purpose is in life? Pivot

It's not just for startups. Useful advice from Barking Up the Wrong Tree.

Delaying self driving cars: How regulations kill

Human error causes the large majority of accidents. While this isn't to say that computers can't be worse than humans (the buggy nature of most software being emblematic of this), this isn't to say technology can't also be a lot better and a lot more robust. So why won't regulators let car makers at least try?

Federal regulators are also putting the brakes on self-driving cars, which are closely related to the Uber innovation—enabling riders to order a car service using their smartphone app. If fast-moving technology hadn't collided with slow-moving regulators, this might have been the last summer you'd have to drive your own car.

Self-driving technology is reaching the limits of what U.S. regulators will allow. The 2014 Mercedes Benz S-Class sedan uses digital technology to be the first car most of the way to being self-driving. The S-Class combines active cruise control, automatic braking and lane-keeping technologies to offer what an industry analyst calls "70% autonomous driving." The car steers, accelerates and brakes on its own in congested traffic up to 40 miles an hour. On the highway, it uses numerous cameras and radars to remain centered in its lane at a safe distance from the car ahead, up to 120 miles an hour.

But U.S. regulators won't let car manufacturers go much beyond what Mercedes now offers. That means car makers can't roll out technologies they already have, and auto makers in Europe, which has fewer regulations limiting technology, have surpassed their U.S. competitors.

Why Britain is poorer than any US state, other than Mississippi

A story that's somewhat disruptive to a few narratives out there (TheSpectator):

It’s not surprising that America’s best-paid 10 per cent are wealthier than top 10 per cent. That fits our general idea of America: a country where the richest do best while the poorest are left to hang. The figures just don’t support this. As the below chart shows, middle-earning Americans are better-off than Brits. Even lower-income Americans, those at the bottom 20 per cent, are better-off than their British counterparts. The only group actually worse-off are the bottom 5 per cent.

Update: Maybe the Brits are poorer than even Mississippi (Forbes)

Wired's profile of Stewart Butterfield, Founder of Slack

An interesting profile of Stewart Butterfield and how he accidentally developed Flickr and now Slack which were both offspring of failed gaming projects (Wired).

Emerging consumer/market based healthcare in the US?

For the record, I think the Affordable Care Act (ACA), aka 'Obamacare' is a disaster and things will get worse before before it gets better but there are still a number of interesting experiments emerging.

While VentureBeat credits the ACA for "li[ghting] a fire under the movement to rethink they way we deliver and pay for healthcare," the examples they cite seem to show that this is despite - not because of the Act.

Cato recently highlighted the Direct Primary Care model:

“Direct primary care” is a rapidly growing alternative to the traditional “fee-for-service” model of paying for medical care. Instead of the patient or his insurance plan paying the doctor separately for each visit or service, the patient pays the physician a set monthly fee. In exchange, the physician is available to consult with and treat the patient as necessary.

For patients, the benefits of direct primary care are greater access to their doctors and more convenient and personalized care. Under direct primary care, patients can generally expect “all primary care services covered, including care management and care coordination…seven-day-a-week, around the clock access to doctors, same-day appointments, office visits of at least 30 minutes, basic tests at no additional charge, and phone and email access to the physician.” Some practices may offer additional services under the arrangement, such as EKGs or medications at wholesale cost.

In fact, studies are showing that a number of doctors abandoning the onerous demands of filing to get insurance claims in favor of cash (Forbes). Interestingly, the very first company that VentureBeat cites - Evolent Health, supports doctors who move towards a direct pay/subscription model. Healthgrades, another company cited, rates and ranks hospitals - further empowering consumers. The others - Doximity, a Linked-In for Doctors, MindForce, a CRM for health and wellness firms, and Best Doctors, a service providing expert opinions for the employees of compaanies, all operate outside the ACA. If the business models of Evolent and Healthgrades thrive, this could be the positive legacy of the Affordable Care Act.

How tax inversions have helped the US economy

A contrarian opinion from Diana Furchtgott-Roth, considering some prominent liberals have called for corporations to take a loyalty oath (TheDailyBeast) in light of recent tax inversions:

U.S.-based multinationals face a federal corporate tax rate of 35% on worldwide income, not just income generated in the United States. State taxes are extra. America is one of only seven Organisation for Economic Cooperation and Development countries that taxes companies on worldwide income, and the others have significantly lower corporate tax rates.

The United States, in fact, charges the highest tax rate in the developed world. The average of OECD countries is 24%. Some countries, such as Ireland, have corporate tax rates that are closer to half that.

If a foreign-based multinational had headquarters in Ireland, and wanted to bring back $100 million to invest in its plant in Detroit, then all the $100 million would be invested. None would go to the Treasury. Residents of Detroit would be better off, and the shareholders of the company would be better off. America would grow because companies generally spend money more effectively than does the government.

Since inverting to Panama in 1982, McDermott International MDR +2.22% has created American jobs by constructing pipelines and oil platforms in the Gulf of Mexico and across the country. Panama’s lower corporate income tax rate, 25%, leaves McDermott with more funds to hire the workers to complete those projects.

Was Argentina bullied? Why does it matter?

So first off, anyone who reads/watches/listens to the CBC for actual business analysis deserves the returns they get. I'm not sure what is so difficult to understand: when you borrow money, the people you borrow the money from expect to be paid back in full. It doesn't seem like an unreasonable expectation that you should repay those who you owed money to first (so long as they are of the same class of debt holders) - and that is more or less what a New York court decided in the case of Argentina.

Argentina used to be incredibly wealthy. So what happened? Governments spent money it didn't have to effectively bribe their own electorate. This was their own doing (Cato). Argentina is a sovereign nation with a democratically elected government. No matter how much the CBC wants to paint them as an underdog (presumably as a historical defense of their own largesse off the backs of Canadians?), this was their own doing. Other countries should take note.

"Austerity" in the European Union

Nope, these governments couldn't possibly make any further cuts... (Cato):

What if public transit didn't need to be... well, public?

Technology may drive public transit out of business. Uber has launched a service similar to Hitch (TechCrunch) that aims to help commuters carpool/pool cab money when they're going to similar places.

It doesn't seem like a far leap to imagine a day that you could have small mini buses or even driverless cars/buses that have the capacity to pick up more people while competing against each other (and maybe what governments should do is just create pick up points?). Market driven technology tends to save time and/or money - and in this case, it promises to do both.

Given how expensive and slow moving most public transit systems are - not to mention probably bad for the environment (Freakonomics), that may be a good thing.

More companies are still closing than opening in the US

Troubling (WSJ):

Especially because it's not small businesses that are the biggest creators of jobs in the US - it's new businesses (Kauffman).

A reminder that being pro-business isn't the same as being pro-markets

At least in this case, the good guys won - Justin Amash wins against opponent heavily funded by crony capitalists at the US Chamber of Commerce (DailyCaller). From Adam Smith's Wealth of Nations:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice.

But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary. A regulation which obliges all those of the same trade in a particular town to enter their names and places of abode in a public register, facilitates such assemblies. . . . A regulation which enables those of the same trade to tax themselves in order to provide for their poor, their sick, their widows, and orphans, by giving them a common interest to manage, renders such assemblies necessary. An incorporation not only renders them necessary, but makes the act of the majority binding upon the whole.

When you think of the innovation economy, think rotisserie chicken

I have to say that I love getting rotisserie chicken particularly from Costco - from Megan McArdle (Bloomberg):

The rotisserie chickens were actually cheaper than buying and roasting my own. [...]

Grocery stores make them out of unsold chicken that is about to pass its expiration date. It’s an elegant way to make a profit out of food that would otherwise be a net loss. And it’s not just chicken -- according to Vasko, the ever-expanding prepared-foods section of the supermarket uses up all sorts of unsold produce and meat. It is, as she says, a bit like hunter-gatherers using every inch of the animal.

This is the sort of thing that no one talks about when they talk about innovation --and yet, it’s a major way in which our economy has become more efficient over the last few decades. Reducing spoilage means grocery stores can sell us raw chickens at lower prices -- and that we can get fresh, delicious prepared food at even lower prices. It’s a win for the grocer and the consumer.

Study: Charter school students smarter, earn more

While I have little doubt that this is the case in the long run, I also don't doubt that in the short run, there are public schools or schooling systems that can leave students better off. Charters are in effect experiments and actual markets where individual schools can do much better or even more poorly than their publicly run counterparts.

I think the difference in charter schools is that there's a virtuous feedback loop - that the best survive and thrive while poorly performing public schools tend to live on to deliver immense harm to students. I think this an even more important moral argument to make. Reason.com quoting the study:

Comparing [National Assessment of Education Progress] achievement obtained in public charter schools versus TPS for 21 states and DC, we find the public charter school sector delivers a weighted average of an additional 17 NAEP points per $1000 invested in math, representing a productivity advantage of 40% for charters; In reading, the public charter sector delivers an additional 16 NAEP points per $1000 invested, representing a productivity advantage of 41% for charters.

... The analyses we present in this report indicate that charter schools are more productive than TPS, either because they produce higher student gains at a lower cost or because they produce similar or only slightly lower student outcomes at a significantly lower cost.

Prioritizing aid

An op-ed from Matt Ridley, the author of The Rational Optimist, on Born Lomborg's Copenhagen Consensus (WSJ):

The Copenhagen Consensus Center process has won world-wide respect for its scrupulously fair methods and startling conclusions. Its 2012 report, published in book form as "How to Spend $75 Billion to Make the World a Better Place," came to the conclusion that the top five priorities should be nutritional supplements to combat malnutrition, expanded immunization for children, and redoubled efforts against malaria, intestinal worms and tuberculosis.

Their point wasn't that these are the world's biggest problems, but that these are the problems for which each dollar spent on aid generates the most benefit. Enabling a sick child to regain her health and contribute to the world economy is in the child's interest—and the world's.

The numbers produced by this exercise are eye-catching. Every dollar spent to alleviate malnutrition can do $59 of good; on malaria, $35; on HIV, $11. As for fashionable goals such as programs intended to limit global warming to less than two degrees Celsius in the foreseeable future: just 2 cents of benefit for each dollar spent.

Figuring out the best way to help the world's poor isn't like solving a math problem. There are not right and wrong answers. But there are better and worse answers, and the only way to assign those priorities is to set aside our sentimental commitments and do the hard work of assessing costs and benefits.

Using property rights to protect local forests

Some environmentalists discover the power of property rights (NewScientist):

The best way to protect rainforests is to keep people out, right? Absolutely not. The best way to keep the trees, and prevent the carbon in them from entering the atmosphere, is by letting people into the forests: local people with the legal right to control what happens there.

Given the chance, most communities protect rather than plunder their forests, says a new study by the World Resources Institute and Rights and Resources Initiative, both in Washington DC. The forests provide food, water, shelter, medicines and much else.

The report, Securing Rights, Combating Climate Change collates many existing studies. It concludes that forest communities only have legal control over one-eighth of the world's forests. The rest is mostly controlled by governments or leased for logging or mining, often in defiance of community claims.

But community-owned forests are often the best-protected. In the Amazon rainforest, deforestation rates in community-owned areas are far lower than outside.

Shockingly, jobs that depend on government subsidies aren't sustainable

Britain's bursting green jobs bubble (WalterRussellMead via Instapundit).

Surprise! Tech makes us happier

Peter Diamandis (Chairman/CEO of X-Prize Foundation) via Instapundit:

Regardless of what the naysayers believe about human interaction and social media, the data shows us that the abundance of technology is actually increasing the abundance of happiness all over the world.

Related: Is Silicon Valley Funding the Wrong Stuff? (TechCrunch)

Uber/Lyft: The best regulators are consumers

Except it means giving up control for actual regulators. Mark Perry via Instapundit:

As I’ve noted before, it’s important to remember that Uber and Lyft are already very heavily regulated ride-sharing services, and in some ways they are regulated even more intensely than traditional taxis by a very ruthless group of regulators – the consumers who use their services. The issue really isn’t regulated versus unregulated ride services; the issue really is who is the primary regulator: a) government bureaucrats and legislators who are often captured by the regulated taxi cartels or b) consumers. And there’s no question that captured regulators almost always put the special interests of the well-organized, concentrated groups of regulated producers like the taxi cartel over the public interest of the dis-organized, dispersed thousands/millions of consumers.

In defense of usury, part xxx

The US Obama Administration is attempting to decimate the pay day lending industry through regulation and coercion. Lawyer, Ronald L. Rubin argues in the WSJ why this is misguided - and these attacks hurt those they are most supposed to help:

The CFPB should only create programs to educate consumers about payday loans, pass regulations to ensure that lenders follow existing laws and prosecute businesses that don't treat borrowers honestly. The Dodd-Frank law requires these actions, and no more. The CFPB wasn't created to protect consumers from themselves.

Informed consumers who take out a loan have calculated that they are better off with that loan than without it. A borrower's desperation does not alter this equation. A man whose car is about to be repossessed may calculate that he is better off taking out a payday loan than losing his job because he lacks transportation. The government is blind to such motivations, and it can harm consumers by substituting its judgment for theirs. It is better to help consumers make good decisions than to make decisions for them.

China's looming bad debt crisis

Something to keep an eye on. From Michael Pettis:

[...] we cannot simply put the bad debt behind us once the economy is “reformed” and project growth as if nothing happened. Earlier losses are still unrecognized and hidden in the country’s various balance sheets. These losses will either be explicitly recognized or they will be implicitly amortized. The only interesting question, as I see it, is which sector will effectively be assigned the losses. This is a political question above all, and its answer will tell us a great deal about how the newly-constituted, “reformed” China will grow over the next few decades.

Too many entrepreneurs not enough factory workers?

While the article is provocatively titled "Please do not teach this woman to fish", Daniel Altman at ForeignPolicy asks if the microfinance industry is overfunded:

Along with them came the microfinance programs -- as well as many other aid schemes designed to promote entrepreneurship -- which were often based in rural villages where repayment would be enforced primarily by peer pressure among the members. These programs tended to target women, who were viewed as more reliable stewards of the groups' money. Some women did manage to start their own businesses with the loans they received, but the verdict of research into microfinance's ability to reduce poverty was decidedly mixed.

There was a simple reason for this. By trying to make microfinance less risky and more sustainable, the program managers also made it less effective. To understand why, consider a common-sense question: How big can a business be in a rural village? There aren't many customers there, and incomes aren't very high either. A business would have to serve several villages to start creating jobs in any significant numbers. Now, consider rural women with families. They may be reliable repayers of loans, but they're much less mobile than single men. Single men can move to cities, or at least cover a lot of ground in the countryside, in an effort to win new customers. By contrast, even women without children face constraints on their movements in plenty of countries.

Microfinance may have given a lot of people a little, but it was never designed to give anyone a lot. Unlike the microenterprises founded in rural villages, businesses that serve lots of customers take advantage of economies of scale in production and distribution. These economies of scale are essential for economic growth. After all, which economy is more productive -- one in which every single person is an entrepreneur, or one in which a minority of entrepreneurs employ the majority of people?

In fact, poor countries already have many more entrepreneurs per capita than rich countries. More entrepreneurship is not what they need; economies of scale are. Indeed, the most productive economies are the ones that balance economies of scale with the benefits of competition. Too many businesses, and workers will fall short of their maximum productivity. Too few businesses, and monopolists will gouge consumers, quash innovation, and fail to serve the entire market.

I don't think the problem is with entrepreneurship though - or even subsidies that are reducing the risk of 'subsistence entrepreneurship', but red tape/quagmire that bogs down successful entrepreneurs and an inability to access capital at the same costs as some of their smaller competitors thereby preventing them from scaling.

Chris Blattman: "Development must be seized, through struggle. It cannot be given."

Great quote. Blattman also quotes Owen Barder:

Too often we think of scaling up in development like rolling a new product line across an existing series of shops. That’s the wrong model. Scaling up in development is more like building a series of separate businesses from scratch, each in a different market.

…Instead of thinking that creating capable organisations will deliver results effectively, perhaps successful organisations are the consequence, not the cause, of success. Capability in formal organisations is what happens when successful folk practices, which evolve out of years of struggle and adaptation, are consolidated into formal processes.

Who does "Fairtrade" help?

Guild ridden liberals in the west? Because apparently it's not the low paid workers in developing countries (SOAS).

"Why does doomsaying dominate discussions about new technologies?"

From GMOs to plastics to energy it's a familiar pattern - I think the most important takeaway here is that the doomsaying is nothing new (Techliberation):

Clive Thompson notes that “dystopian predictions are easy to generate” and “doomsaying is emotionally self-protective: if you complain that today’s technology is wrecking the culture, you can tell yourself you’re a gimlet-eyed critic who isn’t hoodwinked by high-tech trends and silly, popular activities like social networking. You seem like someone who has a richer, deeper appreciation for the past and who stands above the triviality of today’s life.”

[...]Put simply, there exists a wide variety of explanations for why our collective first reaction to new technologies often is one of dystopian dread. In my work, I have identified several other factors, including: generational differences; hyper-nostalgia; media sensationalism; special interest pandering to stoke fears and sell products or services; elitist attitudes among intellectuals; and the so-called “third-person effect hypothesis,” which posits that when some people encounter perspectives or preferences at odds with their own, they are more likely to be concerned about the impact of those things on others throughout society and to call on government to “do something” to correct or counter those perspectives or preferences.

Some combination of these factors ends up driving the initial resistance we have see to new technologies that disrupted long-standing social norms, traditions, and institutions. In the extreme, it results in that gloom-and-doom, sky-is-falling disposition in which we are repeatedly told how humanity is about to be steam-rolled by some new invention or technological development.

No, pro-business really is not the same as pro-markets

Just like crony capitalism isn't the same as well, capitalism - Export-Import Bank edition (WashingtonExaminer):

Sen. Chuck Schumer explained: “The Tea Party is moving the Republican Party so far to the right on important issues like the Export-Import Bank, that the business community is now farther from the Republican Party and closer to Democrats.”

[...]Politico’s MJ Lee explains what these two are up to: “Democrats have formed a united front in support of the bank, seizing on an opening to appeal to the hearts and wallets of the business community ahead of the November elections.”

People respond to incentives: unemployment benefits edition

Charles Krauthammer (via Instapundit):

While liberals hail new job numbers as a vindication of President Obama’s economic policies, it is conservatives who should feel vindicated, said Charles Krauthammer on Thursday’s Special Report. Citing a recent National Review Online post on The Corner by economist Robert Stein, Krauthammer noted that the sharp drop in unemployment has coincided with the end of emergency unemployment benefits. Obama and the Democrats, who insisted that the benefits be extended, wrongly predicted that their expiration would come as a calamity to the poor. Instead, their end has demonstrably had “precisely the opposite effect.”

“These six months coincide with a decrease in the medium length of unemployment from 17 weeks to 13 weeks — the largest six-month decline in the length of unemployment ever measured,” he said. “Which means the real problem of long-term unemployment was a function of this anomaly of emergency-extended unemployment, which should never have happened, and whose end has contributed to this excellent result. The debate on that extension is over, and the conservatives were right.”

Rethinking charity: a reading list

A thoughtful list that doesn't centre around 'spending other people's money' from from TED.

Regulations save lives?

They also take them, and can make existing ones more miserable than they need to be. On the EPA's proposed loosening of radiation limits (Reason):

Other skeleton in the EPA’s closet are environmental limits caused by its policy of “chasing the last molecule.” If EPA could be forced to modify its radiations limits, what about its other extremes? Take sulfur, for example. Its prevalence has already been reduced by 90 percent. Still, using its now discredited LNT theory, EPA is has ordered refiners to eliminate the last 10 percent. This will add between 6 and 9 cents per gallon to the cost of gasoline.

There is another major implication. Many if not most of the EPA's other limits on pollutants and carcinogens are also deduced from the faulty LNT theory. Eliminating 90 percent of some chemical or dust is often easily accomplished, however, eliminating the last 10 percent can cost billions more than the first 90 percent. For example, a Wall Street Journal report on ozone explains that new EPA limits reducing ozone from today’s 75 parts per billion to 60 to 70 ppb would cost industry some $90 billion, according to the EPA itself. These are the costs that many industries are howling about and a real reason that Americans’ standard of living has stopped increasing. Much analysis, beyond the scope of this report, needs to be researched for dozens of other excessive limits imposed by Washington, D.C.

The yearly cost of unnecessary EPA regulations is in the many hundreds of billions of dollars, reducing wages and hurting the world's standard of living.

The science behind building great teams

An interesting paper from HBR:

With remarkable consistency, the data confirmed that communication indeed plays a critical role in building successful teams. In fact, we’ve found patterns of communication to be the most important predictor of a team’s success. Not only that, but they are as significant as all the other factors—individual intelligence, personality, skill, and the substance of discussions—combined.

Should regulation correct ignorance?

ASI makes the case that it was regulations designed to protect the banking system resulted in the underestimation of risk by much of the market.

"Encourage people to do something for its own sake, not for its benefits"

Incentives matter - particularly the right incentives. From Amy Wrzesniewski and Barry Schwartz (NYT):

Whenever a person performs a task well, there are typically both internal and instrumental consequences. A conscientious student learns (internal) and gets good grades (instrumental). A skilled doctor cures patients (internal) and makes a good living (instrumental). But just because activities can have both internal and instrumental consequences does not mean that the people who thrive in these activities have both internal and instrumental motives.

Our study suggests that efforts should be made to structure activities so that instrumental consequences do not become motives.

Personally, I'm of the view that in an ideal world, instrumental consequences reinforce internal consequences. Instrumental consequences can and should, however, guide how you effect internal motivations.

People respond to incentives: North Carolina Unemployment Benefits edition

From the WSJ: Unemployment in the Tar Heel State dropped by 17% in the second half of 2013 after extended benefits expired.

Makers Who Are Reinventing the American Dream

I think a better descriptor for it is democratizing the American Dream (PopularMechanics via Instapundit). The companies include Kickstarter, AutoCAD and Stratasys.

Scott Adams explains the pivot

Scott Adams of Dilbert fame, but recent co-founder of startup CalendarTree.com explains what it means to pivot and why it matters:

So imagine if you will, some of the smartest, most rational humans the world has ever created, wallowing around in the absurdity of Silicon Valley, where success is mostly based on luck. How does one feel good about that? And what is the solution?

Answer: You institutionalize the pivot.

In other words, you move from a goal-oriented approach to a systems-oriented approach. The system involves assembling a team around a starting idea and then pivoting until something lucky happens. No one pretends to know where it will all end up.

Here's the system:

1. Form a team
2. Slap together an idea and put it on the Internet.
3. Collect data on user behavior.
4. Adjust, pivot, and try again.

Thanks to Google Analytics, Optimizely, Bitly, and other tools for measuring customer behavior in real time, a smart team can try different approaches and different products until something works out. A start-up in 2014 is a guess- testing machine.

Update: More here: Five successful tech pivots (TechCrunch)

The arbitrage opportunities a bit of marketing creates...

Well, marketing and user experience I suppose... "people will pay twice as much for an artfully composed salad" (PopSci via Instapundit).