Below, I provide some comments on a recent article concerning an anthropology conference concerning the work of geographer Jared Diamond, author of "Guns, Germs, and Steel" and "Collapse."
The New York Times / December 25, 2007
A Question of Blame When Societies Fall
By GEORGE JOHNSON
The author mixes travelogue with journalism, so you have to be patient.
As I pulled out of Tucson listening to an audiobook of Jared Diamond's "Collapse: How Societies Choose to Fail or Succeed," the first of a procession of blue-and-yellow billboards pointed the way to Arizona's strangest roadside attraction, "The Thing?"
The come-ons were slicker and brighter than those I remembered from childhood trips out West. But the destination was the same: a curio store and gas station just off the highway at a remote whistle stop called Dragoon, Ariz.
Dragoon is also home to an archaeological research center, the Amerind Foundation, where a group of archaeologists, cultural anthropologists and historians converged in the fall for a seminar, "Choices and Fates of Human Societies."
What the scientists held in common was a suspicion that in writing his two best-selling sagas of civilization -- the other is "Guns, Germs and Steel" -- Dr. Diamond washed over the details that make cultures unique to assemble a grand unified theory of history.
"Collapse" doesn't present a GUTH. On the other hand, "Guns, Germs and Steel" (GGS) gets a bit closer to that description. Even that theory isn't supposed to apply to industrialized societies.
"A big-picture man," one participant called him. For anthropologists, who spend their lives reveling in minutiae -- the specifics and contradictions of human culture -- the words are not necessarily a compliment.
This suggests that there are no "big-picture" anthropologists. But that's not true. For example, the late Karl Polanyi was a big-picture kind of guy.
"Everybody knows that the beauty of Diamond is that it's simple," said Patricia A. McAnany, an archaeologist at Boston University who organized the meeting with her colleague Norman Yoffee of the University of Michigan. "It's accessible intellectually without having to really turn the wattage up too much."
There are real problems with any assertion that begins with "everybody knows."
Dr. Diamond's many admirers would disagree. "Guns, Germs and Steel" won a Pulitzer Prize, and Dr. Diamond, a professor of geography at the University of California, Los Angeles, has received, among many honors, a National Medal of Science. It is his ability as a synthesizer and storyteller that makes his work so compelling.
For an hour I had listened as he, or rather his narrator, described how the inhabitants of Easter Island had precipitated their own demise by cutting down all the palm trees -- for, among other purposes, transporting those giant statues -- and how the Anasazi of Chaco Canyon and the Maya might have committed similar "ecocide."
By the time I approached the turnoff for Amerind's boulder-strewn campus, Dr. Diamond had moved on to the Vikings' fate. But for the moment my mind was in the grip of "The Thing."
Detouring past the conference center, I parked in front of the old tourist trap, paid the $1 admission and followed a path of stenciled yellow footprints to a building out back. Inside a cinder-block coffin lay the subject of my quest, what appeared to be the mummified remains of a woman holding a mummified child.
"The Thing" looked human, or maybe like pieces of human dolled up with papier-mâché. Either way, it seemed like a fitting symbol for the complaints I'd been hearing about Dr. Diamond: that through the wide-angle lenses of his books, people appear not as thinking agents motivated by dreams and desires, ideas and ideologies, but as pawns of their environment. As things.
It's pretty clear in "Guns, Germs, and Steel" that people -- or at least groups of us -- are strivers. This sets up competition among societies. The geographic environment plays a crucial role in limiting and shaping the results of the competition. Diamond's emphasis is on the latter, of course, but that's because people are so unpredictable. After all, having so many "dreams and desires, ideas and ideologies" makes our actions pretty hard to predict.
In "Collapse," on the other hand, "dreams and desires, ideas and ideologies" can play a major role in causing collapse. See, for example, the material about the Vikings in Greenland.
The backlash had been brewing since a symposium last year, "Exploring Scholarly and Best-Selling Accounts of Social Collapse and Colonial Encounters," at a meeting of the American Anthropological Association in San Jose, Calif. Although "Guns, Germs and Steel" has been celebrated as an antidote to racism -- Western civilization prevails not because of inherent superiority, but geographical luck -- some anthropologists saw it as excusing the excesses of the conquerors. If it wasn't their genes that made them do it, it was their geography.
Is there any serious scholar who believes that Europeans are made evil by their genetics? This seems a total straw-man argument.
"Diamond in effect argues that no one is to blame," said Deborah B. Gewertz, an anthropologist at Amherst College. "The haves are not to be blamed for the condition of the have-nots."
She here falls for the excessively-common error of confusing an explanation of an historical event with an excuse for it. Just because the victory of the Nazis over Poland can be explained easily does not mean that it was somehow justified. Similarly, just because the Europeans conquered most of the world does not mean that it was justified.
Dr. Diamond anticipated this kind of reaction. In the epilogue to "Guns, Germs and Steel," he acknowledged that human will was an important pivot in the turning of history, as were freak accidents and chaotic "butterfly effects," in which tiny perturbations are amplified into cataclysms. But the accidents of geography -- the availability of raw materials and crops, a hospitable climate, accessible trade routes and even the cartographical shapes of continents -- step forth as prime movers.
They're not "movers" as much as "shapers." In Diamond's theory, geographical creates barriers, which limit the movement of people, diseases, technology, etc.
While "Guns, Germs, and Steel" explored the factors contributing to a society's rise, "Collapse" tried to account for the downfalls. Here, human agency played a more prominent role. In case after case, Dr. Diamond described how a confluence of factors -- fragile ecosystems, climatic change, hostile neighbors and, ultimately, bad decision making -- cornered a society into inadvertently damaging or even destroying itself.
The main contrast (in terms of approach) between the two books is that "Collapse" does not really have a unifying theory. It's more of a matter of applying a laundry list of possible factors to ask questions about why different societies collapsed. It's more of an empiricist (inductive) exercise, while GGS seems a more balanced mixture of theory (deduction) and empirical research (induction).
The two books don't mesh with each other well at all. The anthropologists that this author describes should be much happier with the method of "Collapse" than with that of GGS. That, of course, does not mean that they automatically agree about the facts.
In his haunting chapter about Easter Island, he weighed the data -- radiocarbon dating, charcoal and pollen analysis and botanical and archaeological surveys -- and concluded that the inhabitants had mined the forests to extinction, setting off a cataclysm. What, Dr. Diamond wondered in an often cited passage, was going through the mind of the Easter Islander who cut the last tree?
But what was intended as a cautionary tale was taken by some readers as blaming the victims. Terry Hunt, an archaeologist at the University of Hawaii, came to the Amerind conference with a different story. Deforestation, he said, was caused not by people, but by predatory Polynesian rats, with the human population remaining stable until the introduction of European diseases.
Dr. Diamond, he said, "shifts all of the burden to people and their stupidity rather than to a complex ecosystem where these things interact."
Good! A fact-based critique. That's what's needed. By the way, the role of European diseases fits well with the theory put forth in the GGS book.
Taken together, the two books struck Frederick K. Errington, an anthropologist at Trinity College in Hartford, as a "one-two punch." The haves prosper because of happenstance beyond their control, while the have-nots are responsible for their own demise.
I think it's a mistake to read a moral argument into GGS. On the other hand, "Collapse" is inherently a moral book, since it's asking what we can do to avoid Collapse, i.e., what are the best things to do?
In addition, as noted, the two books do not really form a whole. They deal with different issues in different ways. One could easily agree with one of Diamond's "punches" while rejecting the other. To my mind, the main thing that unifies them is the identity of their author, not their content.
Dr. Errington and Dr. Gewertz, who are husband and wife, work in Papua New Guinea, a treasure trove of ethnic groups speaking more than 700 languages. Dr. Diamond has also spent time on the island, where he first went to study birds.
Dr. Gewertz still bristles as she recalls picking up "Guns, Germs, and Steel" and seeing that it had been framed around what was called "Yali's question."
Yali was a political leader and a member of a "cargo cult" that sprung up after World War II. By building ritualistic landing strips and control towers and wearing hand-carved wooden headsets, islanders hoped to summon the return of the packaged food, weapons, medicine, clothing and other gifts from the heavens that had been airdropped to troops fighting Japan.
One day Yali asked Dr. Diamond, "Why is it that you white people developed so much cargo and brought it to New Guinea, but we black people had little cargo of our own?"
Thus began Dr. Diamond's tale about the combination of geographical factors that led to Europeans' colonizing Papua New Guinea rather than Papua New Guineans' colonizing Europe. "We think he gets Yali's question wrong," Dr. Gewertz said. "Yali was not asking about nifty Western stuff."
That's hard to tell from what Diamond quotes or from the emphasis of cargo cults on "cargo."
With more of the cargo their European visitors so clearly coveted, the islanders would have been able to trade with them as equals. Instead, they were subjugated.
What Yali was really asking, she suggested, was why Europeans had never treated them like fellow human beings. The responsibility and struggle of anthropology, Dr. Gewertz said, is to see the world through others' eyes.
Diamond's GGS book seems to assume that no-one is inherently better at treating other ethnic groups like fellow human beings. If we accept that assumption, Gewertz's interpretation of Yali's question has already been answered. If the Papuans had colonized Europe, in this view, they would not have treated the Europeans well.
Was it really the "colonists" that cargo cults were responding to? In my understanding, they were responding to the commodities that were dumped on them as part of World War II, which were part of the effort by the US to feed its troops and -- and as a side-benefit, to legitimate its side of the war with the locals. Sure, the US is a (neo)colonizing power, but it was different from the Dutch or the Japanese. And WW2 was not about US neo-colonialism as much as inter-imperialist rivalry. Until the US started supporting France in Indochina, the major U.S. strategy in the Pacific region was anti-colonialism, at least on the surface.
In "Collapse," Dr. Diamond proposed that a precipitating factor in the Rwanda genocide of 1994, in which hundreds of thousands of Tutsis were slaughtered by Hutu compatriots, was Malthusian. The country had let its population outstrip its food supply.
Christopher C. Taylor, an anthropologist at the University of Alabama at Birmingham, saw the tragedy through the other end of the telescope. One afternoon, he sat in the living room of Amerind's old mission-style lodge, which looks out onto the desolate beauty of the Little Dragoon mountains, calmly describing how he and his Tutsi fiancée had fled Rwanda just as the massacres began. Safely back in the United States, he studied the country's popular political cartoons, sensing that for many Rwandans, politics was tangled in a web of legends involving sacred kingship and fertility rites. The king, and by implication the president, was the conduit for imaana, a spiritual current symbolized by liquids like rain, rivers, milk, honey, semen and blood.
In times of droughts, floods, crop failures, infant mortality or other misfortunes, he might have to be sacrificed to spill his imaana back into the soil. "In order to understand the motives of the Rwandans, you have to understand the local symbolism and the local cosmology," Dr. Taylor said. "Because, after all, what Diamond is doing is imposing his own cosmology, his own symbolic system."
It seems that both Taylor and Diamond can be right on the explanation of the slaughter: demographic forces may have caused the starvation, which was then see in the terms that Taylor describes.
It's so typical of academics to set up the competitions among theories, asserting that their theory is better, while ignoring the possibility of synthesis. I guess academics have to strive to attain tenure, promotion, prestige, etc.
By the time I left Amerind, I realized that what I had witnessed was a clash of world views. Central to the "cosmology" of Dr. Diamond's tribe is a principle celebrated throughout the physical and biological sciences -- to understand is to simplify and seek patterns.
In an e-mail message, he said that progress in any field depends on syntheses and individual studies. "In both chemistry and physics, the need for both approaches has been recognized for a long time," he wrote. "One no longer finds specialists on molybdenum decrying the periodic table's sweeping superficiality, nor advocates of the periodic table scorning mere descriptive studies of individual elements."
This is right: we need to have a dialog between "big think" and "small think" rather than having another silly academic war. Theory and empirical research should work together, not clash.
For the anthropologists, the exceptions were more important than the rules. Instead of seeking overarching laws, the call was to "contextualize," "complexify," "relativize," "particularize" and even "problematize," a word that in their dialect was given an oddly positive spin. At some moments, the seminar seemed less like a scientific meeting than a session of the Modern Language Association.
But the anthropologists had a point. As Einstein put it, explanations should be as simple as possible -- but no simpler. Is it realistic to hope, as Dr. Diamond did at the end of "Guns, Germs and Steel," that "historical studies of human societies can be pursued as scientifically as studies of dinosaurs"?
Probably not. But it's good to have some understanding of what went on, rather than rejecting theory altogether. The complaining anthropologists should develop an alternative theory. In my experience, the only way to beat a theory is with a better one.
One afternoon I drove out to Casa Grande Ruins National Monument, about 130 miles northwest of Dragoon. Turning off North Arizona Boulevard near a Blockbuster Video store and KFC/Taco Bell, I saw the Great House, four stories high, loom into view. Abandoned over half a millennium ago by the Hohokam people, the earthen ruins have been incongruously protected from the elements by a steel roof on stilts designed in 1928 by Frederick Law Olmsted Jr.
One suspects that the Hohokam were content to let the place melt. Depending on which eyeglasses you are wearing, Casa Grande is a story of environmental collapse or of adaptation and resilience. When conditions no longer favored centralization the people moved on, re-emerging as the O'odham tribes and a thriving casino industry.
Abandonment as a strategy. Driving back on Interstate 10, past an umbilical cord of eastbound railroad container cars owned by Hanjin Shipping and the latest crests of urban sprawl, I tried to imagine the good people of Tucson or Phoenix bowing out with such grace.
At the seminar, Dr. McAnany suggested that the very idea of societal collapse might be in the eye of the beholder. She was thinking of the Maya, whose stone ruins have become the Yucatan's roadside attractions. But the descendants of the Maya live on. She recalled a field trip by local children to a site she was excavating in Belize: "This little girl looks up at me, and she has this beautiful little Maya face, and asks, 'What happened to all the Maya? Why did they all die out?'"
No one visits Stonehenge, she noted, and asks whatever happened to the English.
Sounds like a good line. But was it the English who built Stonehenge? A simple web-search says that "Theories about who built it have included the Druids, Greeks, Phoenicians..." And since it happened so long ago, there were no "English" at the time. The English had nothing to do with Stonehenge, so the question is silly. Even if it were valid, no-one would ask it, since the English gave us the language that's dominating the world (and passed the imperial sceptre to the U.S.
Copyright 2007 The New York Times Company
January 1, 2008 / When Societies Fail (3 Letters to the NYT)
To the Editor:
Re "A Question of Blame When Societies Fall" (Dec. 25): The conference designed to discredit Jared Diamond highlights the worst of what goes on in contemporary academia. The organizers' failure to invite Mr. Diamond might be attributed to elementary rudeness were it not for a more damning explanation: they were afraid he would give the lie to their glib accusation that because his work is widely read, it must be oversimplified. These anthropologists' beef with Mr. Diamond clearly has less to do with the content of his thesis than with the fact that he tries to understand why things happen rather than writing a morality play conforming to their lefter-than-thou politics. -- Steven Pinker / Cambridge, Mass.
Diamond should have been invited (though we can't trust Pinker as a source saying that he wasn't). And I don't see why the folks at this conference were any more "left" than Diamond.
To the Editor:
What an odd, convoluted perspective displayed by those anthropologists who attack Jared Diamond's "Guns, Germs, and Steel" for "excusing the excesses of the conquerors." The book attempts to account for why, after around 3000 B.C., western Eurasian societies became comparatively more economically, militarily and technologically advanced. It does not claim that they were also more ethically or morally advanced. Moreover, to take just one famous example, the Aztecs were engaging in "excesses" as conquerors before any European sails appeared on the horizon. -- Russ Weiss / Princeton, N.J.
right
To the Editor:
The words of the historians Will and Ariel Durant might offer consolation to Jared Diamond and the anthropologists who disagree with his theories. In "The Lessons of History," the Durants write: "History is so indifferently rich that a case for almost any conclusion from it can be made by a selection of instances." -- Brad Bradford / Upper Arlington, Ohio
yes, but some theses do die. It's hard to argue that aliens helped the ancient Egyptians build those pyramids.
----
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante.
Wednesday, January 2, 2008
Greg Mankiw on the Losses From Trade Protection: Is Government Spending Worthless?
Did Greg Mankiw simply slip up with the following passage?
Most economists would recognize the consumer surplus loss as a reduction in economic welfare. The difference between what domestic producers gain and what consumers lose is this “producer surplus” loss so no disagreement there either. Consumer losses also include the extra funds that go into tariff revenues but most economists see government spending as having at least some value. So to include all of the tariff revenue as part of the reduction in economic welfare is either sloppy analysis or just a minor slip up on the part of Dr. Mankiw. But then his quiz on the effects of a Chinese export tariff included this question:
Chapter 9 of my favorite textbook presents the standard analysis of a tariff (a tax on imports) and shows that it reduces economic welfare as measured by the sum of producer surplus, consumer surplus, and tax revenue. Even though the tariff makes domestic producers better off and raises some revenue for the government, these gains are more than offset by losses to consumers, leading to a deadweight loss.
Most economists would recognize the consumer surplus loss as a reduction in economic welfare. The difference between what domestic producers gain and what consumers lose is this “producer surplus” loss so no disagreement there either. Consumer losses also include the extra funds that go into tariff revenues but most economists see government spending as having at least some value. So to include all of the tariff revenue as part of the reduction in economic welfare is either sloppy analysis or just a minor slip up on the part of Dr. Mankiw. But then his quiz on the effects of a Chinese export tariff included this question:
What happens to total welfare in China, as measured by the sum of consumer surplus, producer surplus, and tax revenue?
Tuesday, January 1, 2008
Alfred Chandler and the ghostwriters' unappreciated contribution
A while ago, I posted some material regarding how well-placed academics rely on low-paid researchers to do their work for them, leading them to produce shoddy and sometimes plagiarized work.
An interesting counter example is the ghostwriter, John McDonald, who wrote Alfred P. Sloan's My Years with General Motors. In this case, the ghostwriter was superior to the purported author.
The book was not published for years, until McDonald sued the company to allow the manuscript to be published. McDonald's wrote a very interesting book about his role and the reason for General Motors's fears about its publication:
McDonald, John. 2002. A Ghost's Memoir: The Making of Alfred P. Sloan's "My Years with General Motors." (Cambridge and London: The MIT Press).
1: On March 4, 1959 Sloan called McDonald to say that General Motors did not want the book published because its lawyers feared it would "destroy the company."
75-6: "Hugh Cox, who was chief trial counsel for the Du Ponts during the many years of the government suit against Du Pont/General Motors .... was pleased with the book as American history, and could not see what Cravath had against it, except possibly one line in the Product Policy of 1921: "A monopoly is not planned."
48: Their specific objection was the detailing of the 1921 Product Policy drafted by Sloan. Even though the policy specified, "a monopoly is not planned," the lawyers feared the government would still interpret the document as monopolistic since Sloan wanted GM to "cover the market for all grades of automobiles."
Later, I found that the story became more interesting. McDonald, a writer for Fortune, had already published a very popular book on game theory. I had seen the book around for years, but never opened it and never associated it with Sloan's book.
It turns out that it was McDonald who infused Sloan's book with its highly praised explanation of corporate strategy. In addition, McDonald hired a young research assistant, Alfred Chandler. According to the article cited below, McDonald was instrumental in setting Chandler on a course of appreciating the importance of strategy. Although Chandler won extensive accolades for this work, until recently, McDonald's role had gone unnoticed.
Here are some extracts from the article. I hope you enjoyed this much as I did.
Mckenna, Christopher D. 2006. "Writing the Ghost-Writer Back In: Alfred Sloan, Alfred Chandler, John McDonald and the Intellectual Origins Of Corporate Strategy." Management & Organizational History, 2: 1, pp. 107-26.
109-10: "For historians of management thought, there are few books that can surpass the influence of Chandler's classic Strategy and Structure or Sloan's epic My Years with General Motors. Both books, published in the early 1960s, achieved iconic stature within a short period of their publication, and both books still remain in print more than 40 years later. In 2002, however, John McDonald's book A Ghost's Memoir shattered most academics' unexamined presumption that Alfred Sloan himself had written (with perhaps a bit of editorial help) the management classic My Years with General Motors. Indeed, as journalist Dan Seligman explained in his foreword to John McDonald's memoir, even the publishers of Sloan's book had forgotten McDonald's involvement, despite McDonald's equal share of the royalties, when Currency/Doubleday decided to release a new edition of My Years with General Motors in 1990. Upset by the largely contrived history that Peter Drucker wrote for a new introduction to the book, John McDonald decided to set the record straight by writing his own, firsthand account of the `making' of Sloan's famous book. McDonald's account would blow the lid off the hidden history, exposing in the process just why the various accounts of General Motors' historical evolution, written by multiple people in the 1950s and 1960s, appeared to fit together so precisely."
113: "it seems likely that Chandler was also strongly influenced by McDonald's views on strategy given that he had, according to Sloan's preface to My Years with General Motors, `given his [Chandler's] good mind to reviewing successive drafts of the manuscript'." (Sloan, My Years with General Motors, xiv).
114: "... it was John McDonald's particular interest in `strategy', reconfigured by Alfred Chandler's historical perspective, which would come to dominate the terminology of the emerging discipline of corporate strategy."
114: "we should also consider what Alfred Chandler wrote in the second sentence of his acknowledgements in Strategy and Structure: `First of all, I want to thank John McDonald and Catharine Stevens, with whom I started to learn about the workings of big business and to think about the historical development of corporate structure and strategy.'" Chandler, Strategy and Structure, i.
114: "Thus it is only with our subsequent knowledge of John McDonald's ongoing struggle with General Motors' lawyers to release My Years with General Motors that the following disclaimer in Chandler's preface to Strategy and Structure from 1962 becomes intelligible: `[T]he General Motors story ultimately came to be based on information and materials which had been in the public domain before the summer of 1956. Yet I am confident that should information not yet in the public domain become available, it would not substantially alter the history presented here." In other words, having done substantial research in the archives of General Motors, which had subsequently been suppressed by the corporate lawyers from Cravath, Swaine, and Moore, who were working for the automotive giant." Chandler, Strategy and Structure, ii
115: "Alfred Chandler had no doubt learned a painful lesson while working for Sloan and McDonald -- it was best to stay away from the issue of antitrust in the shaping of corporate strategy during the 1950s or risk losing years of academic research to lawsuits and shuttered corporate archives."
116: "Yet it could be argued that Chandler's own historical analysis of both General Motors and DuPont was also circular because both of the corporate case studies were eventually supported by scholarly biographies of Alfred Sloan and Pierre du Pont that were researched and written by Chandler himself. This is not the only instance where Chandler's `predictions' and subsequent `outcomes' have become intertwined, for Chandler's expectation that the multidivisional form would continue to spread would be predicated on the support that Chandler's account offered to the management consultants from McKinsey & Company who used Strategy and Structure to sell the novel organizational form to their international clients. In retrospect, it was almost impossible for scholars to separate Chandler's theoretical analysis from his historical evidence because he was so active in the collection, production and distribution of both the archival input and the theoretical output."
An interesting counter example is the ghostwriter, John McDonald, who wrote Alfred P. Sloan's My Years with General Motors. In this case, the ghostwriter was superior to the purported author.
The book was not published for years, until McDonald sued the company to allow the manuscript to be published. McDonald's wrote a very interesting book about his role and the reason for General Motors's fears about its publication:
McDonald, John. 2002. A Ghost's Memoir: The Making of Alfred P. Sloan's "My Years with General Motors." (Cambridge and London: The MIT Press).
1: On March 4, 1959 Sloan called McDonald to say that General Motors did not want the book published because its lawyers feared it would "destroy the company."
75-6: "Hugh Cox, who was chief trial counsel for the Du Ponts during the many years of the government suit against Du Pont/General Motors .... was pleased with the book as American history, and could not see what Cravath had against it, except possibly one line in the Product Policy of 1921: "A monopoly is not planned."
48: Their specific objection was the detailing of the 1921 Product Policy drafted by Sloan. Even though the policy specified, "a monopoly is not planned," the lawyers feared the government would still interpret the document as monopolistic since Sloan wanted GM to "cover the market for all grades of automobiles."
Later, I found that the story became more interesting. McDonald, a writer for Fortune, had already published a very popular book on game theory. I had seen the book around for years, but never opened it and never associated it with Sloan's book.
It turns out that it was McDonald who infused Sloan's book with its highly praised explanation of corporate strategy. In addition, McDonald hired a young research assistant, Alfred Chandler. According to the article cited below, McDonald was instrumental in setting Chandler on a course of appreciating the importance of strategy. Although Chandler won extensive accolades for this work, until recently, McDonald's role had gone unnoticed.
Here are some extracts from the article. I hope you enjoyed this much as I did.
Mckenna, Christopher D. 2006. "Writing the Ghost-Writer Back In: Alfred Sloan, Alfred Chandler, John McDonald and the Intellectual Origins Of Corporate Strategy." Management & Organizational History, 2: 1, pp. 107-26.
109-10: "For historians of management thought, there are few books that can surpass the influence of Chandler's classic Strategy and Structure or Sloan's epic My Years with General Motors. Both books, published in the early 1960s, achieved iconic stature within a short period of their publication, and both books still remain in print more than 40 years later. In 2002, however, John McDonald's book A Ghost's Memoir shattered most academics' unexamined presumption that Alfred Sloan himself had written (with perhaps a bit of editorial help) the management classic My Years with General Motors. Indeed, as journalist Dan Seligman explained in his foreword to John McDonald's memoir, even the publishers of Sloan's book had forgotten McDonald's involvement, despite McDonald's equal share of the royalties, when Currency/Doubleday decided to release a new edition of My Years with General Motors in 1990. Upset by the largely contrived history that Peter Drucker wrote for a new introduction to the book, John McDonald decided to set the record straight by writing his own, firsthand account of the `making' of Sloan's famous book. McDonald's account would blow the lid off the hidden history, exposing in the process just why the various accounts of General Motors' historical evolution, written by multiple people in the 1950s and 1960s, appeared to fit together so precisely."
113: "it seems likely that Chandler was also strongly influenced by McDonald's views on strategy given that he had, according to Sloan's preface to My Years with General Motors, `given his [Chandler's] good mind to reviewing successive drafts of the manuscript'." (Sloan, My Years with General Motors, xiv).
114: "... it was John McDonald's particular interest in `strategy', reconfigured by Alfred Chandler's historical perspective, which would come to dominate the terminology of the emerging discipline of corporate strategy."
114: "we should also consider what Alfred Chandler wrote in the second sentence of his acknowledgements in Strategy and Structure: `First of all, I want to thank John McDonald and Catharine Stevens, with whom I started to learn about the workings of big business and to think about the historical development of corporate structure and strategy.'" Chandler, Strategy and Structure, i.
114: "Thus it is only with our subsequent knowledge of John McDonald's ongoing struggle with General Motors' lawyers to release My Years with General Motors that the following disclaimer in Chandler's preface to Strategy and Structure from 1962 becomes intelligible: `[T]he General Motors story ultimately came to be based on information and materials which had been in the public domain before the summer of 1956. Yet I am confident that should information not yet in the public domain become available, it would not substantially alter the history presented here." In other words, having done substantial research in the archives of General Motors, which had subsequently been suppressed by the corporate lawyers from Cravath, Swaine, and Moore, who were working for the automotive giant." Chandler, Strategy and Structure, ii
115: "Alfred Chandler had no doubt learned a painful lesson while working for Sloan and McDonald -- it was best to stay away from the issue of antitrust in the shaping of corporate strategy during the 1950s or risk losing years of academic research to lawsuits and shuttered corporate archives."
116: "Yet it could be argued that Chandler's own historical analysis of both General Motors and DuPont was also circular because both of the corporate case studies were eventually supported by scholarly biographies of Alfred Sloan and Pierre du Pont that were researched and written by Chandler himself. This is not the only instance where Chandler's `predictions' and subsequent `outcomes' have become intertwined, for Chandler's expectation that the multidivisional form would continue to spread would be predicated on the support that Chandler's account offered to the management consultants from McKinsey & Company who used Strategy and Structure to sell the novel organizational form to their international clients. In retrospect, it was almost impossible for scholars to separate Chandler's theoretical analysis from his historical evidence because he was so active in the collection, production and distribution of both the archival input and the theoretical output."
Monday, December 31, 2007
More Health Care Outrages
As if the health care situation were not bad enough, Business Week has an very good report showing how medical providers are signing unwitting patients up to transfer their bills onto credit cards that charge unconscionable rates. How much further can this crap go?
36: "... hospitals and clinics are bringing in more sophisticated help. They are transferring patient accounts wholesale to finance experts, banks, credit-card companies, and even private equity firms. Many of these third parties use credit scores and risk-analysis software to price the debt and impose interest rates as high as 27% on past-due bills."
36: "A host of nimble firms like CompleteCare in North Little Rock, Ark., began exploring this terrain years ago. Bigger players have jumped in more recently, although the market remains fragmented and reliable market share information isn't available. U.S. Bank, a U.S. Bancorp unit, finances about $2 million in patient debt per month through a medical-benefit firm, charging most customers annual interest of 13.5%, and as much as 24% on late bills. General Electric's powerful financial arm markets its CareCredit card to dentists, plastic surgeons, and some hospitals, with loan volume expected to hit $5 billion this year, up 40% from 2006. Citigroup and Capital One now offer similar cards. "Everybody is saying [medical finance] is the next horizon -- whether it is lines of credit or credit cards," says June St. John, a senior vice-president at Wachovia, which is exploring the business. Whetting all these appetites is the $250 billion consumers pay in medical expenses out of their pockets, an amount that doesn't include insurance premiums. That's an estimate for 2005 from the consulting firm McKinsey & Co. The figure could hit $420 billion by 2015."
36: "Many patients say they don't realize their debts are being shifted to such interest-charging middlemen as GE Money Bank, the unit that issues the CareCredit card."
39: "CompleteCare, the small Arkansas firm ... says it works with 40 hospitals and more than 400 physician practices across the country. Addressing potential health-industry clients, the company boasts on its Web site that it "pioneered the concept that patients become consumers the minute they walk out of your facility"."
39: Patients can sign an admission-consent forms that include a small-print section authorizing the hospital to turn over her account.
Grow, Brian and Robert Berner. 2007. "Fresh Pain for the Uninsured." Business Week (3 December): pp. 34-41.
http://www.businessweek.com/magazine/content/07_49/b4061001.htm
36: "... hospitals and clinics are bringing in more sophisticated help. They are transferring patient accounts wholesale to finance experts, banks, credit-card companies, and even private equity firms. Many of these third parties use credit scores and risk-analysis software to price the debt and impose interest rates as high as 27% on past-due bills."
36: "A host of nimble firms like CompleteCare in North Little Rock, Ark., began exploring this terrain years ago. Bigger players have jumped in more recently, although the market remains fragmented and reliable market share information isn't available. U.S. Bank, a U.S. Bancorp unit, finances about $2 million in patient debt per month through a medical-benefit firm, charging most customers annual interest of 13.5%, and as much as 24% on late bills. General Electric's powerful financial arm markets its CareCredit card to dentists, plastic surgeons, and some hospitals, with loan volume expected to hit $5 billion this year, up 40% from 2006. Citigroup and Capital One now offer similar cards. "Everybody is saying [medical finance] is the next horizon -- whether it is lines of credit or credit cards," says June St. John, a senior vice-president at Wachovia, which is exploring the business. Whetting all these appetites is the $250 billion consumers pay in medical expenses out of their pockets, an amount that doesn't include insurance premiums. That's an estimate for 2005 from the consulting firm McKinsey & Co. The figure could hit $420 billion by 2015."
36: "Many patients say they don't realize their debts are being shifted to such interest-charging middlemen as GE Money Bank, the unit that issues the CareCredit card."
39: "CompleteCare, the small Arkansas firm ... says it works with 40 hospitals and more than 400 physician practices across the country. Addressing potential health-industry clients, the company boasts on its Web site that it "pioneered the concept that patients become consumers the minute they walk out of your facility"."
39: Patients can sign an admission-consent forms that include a small-print section authorizing the hospital to turn over her account.
Grow, Brian and Robert Berner. 2007. "Fresh Pain for the Uninsured." Business Week (3 December): pp. 34-41.
http://www.businessweek.com/magazine/content/07_49/b4061001.htm
Leon Walras and the Nobel Peace Prize
Kissinger's nauseating Nobel Peace Prize award might deflate some of the interest in beyond Leon Walras's nomination. Walras wrote his own nomination and had some colleagues submit it.
The basis of his nomination was his work in mathematical economics. Although he wrote almost about free trade, his claim was that his work had produced a scientific basis for free trade and free trade would be certain to establish a regime world peace. Unfortunately, the nomination went to the great advocate of peace, Theodore Roosevelt.
See Sandmo, Agnar. 2007. "Retrospectives: Léon Walras and the Nobel Peace Prize." Journal of Economic Perspectives, Vol. 21, No. 4 (Fall): pp. 217-28.
The basis of his nomination was his work in mathematical economics. Although he wrote almost about free trade, his claim was that his work had produced a scientific basis for free trade and free trade would be certain to establish a regime world peace. Unfortunately, the nomination went to the great advocate of peace, Theodore Roosevelt.
See Sandmo, Agnar. 2007. "Retrospectives: Léon Walras and the Nobel Peace Prize." Journal of Economic Perspectives, Vol. 21, No. 4 (Fall): pp. 217-28.
Holiday Reading
I am currently reading Charles Taylor's A Secular Age. It is making me crazy. I love Taylor - his Sources of the Self was hugely important to my intellectual odyssey (I understand this is not any kind of recommendation!). The theism that was not explicit in Sources is in full force in this new book. What I first learned from Taylor is the what I'll call the autonomy of the normative and the inadequacy, as a a consequence, of naturalistic explanation in the social sciences. Norms have "authority" and part of the explanation of a person's action in accordance with a norm is, I think, the correctness of the norm - just as the explanation of a person's holding a belief is often the truth of that belief - often, not always. I think we can't make sense of science itself without a notion of objective norms (Cf, inter alia, Jean Hampton's The Authority of Reason). But anyway, does a commitment to the autonomy of the normative commit me to theism, as Taylor's later work more and more seems to imply?! Because then I have a major dilemma on my hands, given my long-standing atheism.
Oh well, Happy New Year, everyone!
Oh well, Happy New Year, everyone!
Economists for Edwards
Sometime today in Iowa the Edwards campaign will release its official list of Economists for Edwards. The leader of the group is James K.Galbraith, and I announce here that I am among the 30 on the list that he has assembled.
I think he is the most consistently progressive among the leading Dem candidates. I also think he is the most electable, with polls suggesting he is the only one of the top three who is solidly ahead of all four of the top GOP contenders in the electoral college. I am concerned that at one point he went after Hillary briefly over social security, but it is not in his platform, and she has promised to appoint a commission. Obama seems more clearly down on social security and also has a health plan that will not cover all Americans. On this important issue, Edwards seems to have the best plan. I also note that while Edwards voted for the Iraq war resolution (he was on the Senate Intelligence Committee at the time, giving him more foreign policy experience than many know he has), he has been strongly against it and a war in Iran since, and probably gave the best followup on the Bhutto assassination of any candidate, actually calling Musharraf up on the phone. I disagree with him on the idea of renegotiating NAFTA, but then all the Dem candidates want to do that. I conclude by noting that it is rate that one gets to support someone who is both the most progressive and the most electable, a winning combo, I say.
I think he is the most consistently progressive among the leading Dem candidates. I also think he is the most electable, with polls suggesting he is the only one of the top three who is solidly ahead of all four of the top GOP contenders in the electoral college. I am concerned that at one point he went after Hillary briefly over social security, but it is not in his platform, and she has promised to appoint a commission. Obama seems more clearly down on social security and also has a health plan that will not cover all Americans. On this important issue, Edwards seems to have the best plan. I also note that while Edwards voted for the Iraq war resolution (he was on the Senate Intelligence Committee at the time, giving him more foreign policy experience than many know he has), he has been strongly against it and a war in Iran since, and probably gave the best followup on the Bhutto assassination of any candidate, actually calling Musharraf up on the phone. I disagree with him on the idea of renegotiating NAFTA, but then all the Dem candidates want to do that. I conclude by noting that it is rate that one gets to support someone who is both the most progressive and the most electable, a winning combo, I say.
Sunday, December 30, 2007
Away with Sarbanes Oxley?
Whatever happened to the rabid calls for eliminating Sarbanes Oxley? Does anybody even Enron, Tyco, Worldcom, etc? After calls for strong regulation to prevent such things from happening again, Congress gave us the weak Sarbanes Oxley. Not long after, the business press was squealing about the excessive requirements of Sarbanes Oxley.
Now that the subprime mortgage scam is imploding, Sarbanes Oxley has fallen from notice.
Any thoughts?
Now that the subprime mortgage scam is imploding, Sarbanes Oxley has fallen from notice.
Any thoughts?
Running on empty....
Fasten your seatbelts, it's going to be a bumpy night!
Los Angeles TIMES
New cars that are fully loaded -- with debt Americans are rolling over loans, often ending up owing more for the vehicle than it's worth.
By Ken Bensinger / Staff Writer
December 30, 2007
When Jennifer and Bobby Post traded in their 2001 Chevy Suburban last year for a shiny new Ford F-350 turbo diesel with an extended cab, it seemed like a great deal. Even though they still owed $9,500 on their SUV after the trade-in value, they didn't have to put a penny down.
The dealership, near the Posts' home in Victorville [California], made it easy; it just added the old debt to the price of the new truck and gave the couple a seven-year, $44,276 loan.
The Posts were a little worried about taking on such a long obligation, but they couldn't pass up a monthly payment under $700. Now they're having regrets.
"I didn't realize how much debt was in it," said Jennifer Post, who has since moved with her family to Iowa. Now, she'd like to get rid of the truck but can't, because there's so much debt that she'd literally have to pay someone to take it off her hands.
"We have no options," she said.
Americans haven't just been taking out risky mortgages for homes in the last few years; they've also been signing larger automobile loans for significantly longer terms than they used to.
As a result, people are slipping into a perpetual cycle of automobile debt that experts think could lead to a new credit crunch extending from dealerships to driveways and all the way to Wall Street.
Aren't you glad that they've tightened consumer bankruptcy laws, making this "perpetual cycle" more like good old-fashioned debt peonage?
Gone are the days of the three-year car loan. The length of the average automobile loan hit five years, four months in October, up more than six months from 2002, according to the Federal Reserve. And nearly 45% of loans written today are for longer than six years. Even some staid lenders owned by the carmakers, such as Toyota Financial Services and Ford Credit, are offering seven-year financing. And a few credit unions, particularly in the West, are tinkering with the eight-year note.
Credit unions, alas, are acting more and more like commercial banks. They used to be more responsible to their members.
At the same time, the amount of money drivers owe on their cars is soaring. In October, the average amount financed hit $30,738, up $3,500 in just a year and nearly 40% in the last decade, according to the Fed. More troubling, today's average car owner owes $4,221 more than the vehicle is worth at the time it's sold -- up from $3,529 in 2002, according to industry analyst Edmunds.
it's an understatement to say that that's much too much!
... It's not just individual consumers who are at financial risk. Nationwide, an estimated $575 billion in new and used auto loans are written every year by auto manufacturers, banks, credit unions and other lenders. About 30% of the loans that are originated by banks, and 100% of those issued by automaker financiers, are, like mortgages, repackaged and sold as securities, according to the Consumer Bankers Assn.
Aha! more securitization, in which spreading the risk around so that people can't perceive it anymore is treated as if it were abolishing risk.
Analysts warn that just as investors didn't comprehend the risk inherent in some of the more exotic home mortgages in recent years, they aren't considering how risky these car loans are. If longer loan terms allow debt on the loans to grow too large, many drivers may simply default, leading to expensive repossessions.
And even those who keep paying their bills may reach a point, like Gerhardt, where they simply can't afford another car. That could send vehicle sales down the drain, a nightmare scenario for an industry that has already taken a hit this year from slower consumer spending and higher gas prices.
It could also lead to serious losses among financial institutions that have invested in car debt. Among securitized auto loans, two-thirds have terms longer than 60 months, a fact that Standard & Poor's, which rates auto debt for sale on the secondary market, calls a "credit concern."
This month, S&P reviewed its ratings on $113.5 billion in auto loan securities it rated in the last two years out of concerns over growing losses. It didn't make any downgrades but predicted that "rising losses will continue into 2008 across all segments of the auto loan market."
S&P has found that delinquencies of more than 60 days on car loans issued this year to borrowers with the best credit are up 20% compared to those issued last year, while delinquencies on loans issued this year to subprime borrowers increased by 16%. Delinquency rates on car loans are still far lower than on mortgages, but there is growing concern in the financial services industry. Indeed, Tom Webb, chief economist of used-auto analyst Manheim Consulting, said he expects the tally for 2007 repossessions to be up by 10%.
Sounds like it's time to crank up that old Emilio Estevez movie, REPO MAN.
Mark Pregmon, executive vice president for consumer lending at SunTrust Bank, is among the concerned. "Any time you extend the maturity of the loan, you take on more risk. The question is whether there's enough assessment of that extra risk," he said. "Obviously, it's a problem. It's a house of cards."
You took that cliché right out of my mouth!
In the 1970s and '80s, car loans hovered between 36 and 48 months, and drivers typically kept their cars longer than the life of the loan. A number of factors changed that.
One key was interest rates, which fell from a high of 17.8% in the early 1980s to lower than 5% today, according to the Federal Reserve. Another was affordability. According to an index tracked by Comerica Bank, cars have steadily gotten more affordable -- as compared to median family income -- since the late 1990s.
With cheap money at hand for more-affordable cars, the temptation to keep buying became huge. Today, according to Pregmon, financed cars are typically turned over in 24 to 36 months.
At the same time they were extending loan maturities, lenders, competing with one another, began offering more money and requiring smaller down payments.
Today, most lenders offer financing on 100% or even 125% of the sticker price, and some offer the most credit-worthy buyers loans for twice the value of the vehicle they're purchasing. Last year, the average amount financed for new cars reached 99%, according to the Consumer Bankers Assn., up from 95% in 2005.
Lenders are beginning to brace themselves; many have said they intend to tighten standards and require larger down payments.
Despite warnings from S&P, the Consumer Bankers Assn., Lehman Bros. and others, there is little sign that the automobile industry is willing -- or, with consumers demanding low payments, even able -- to reduce the lengths of the loans they issue.
"For banks, it's a matter of meeting consumer demand: no money down and extend the term," said SunTrust's Pregmon. "But as a lender, you've got a moral obligation as well. Are we putting the clients in loans they can't afford?"
Here's another reason to have the government standardize loan agreements and then have the financial sector compete over interest rates.
ken.bensinger@latimes.com
Copyright 2007 Los Angeles Times
--
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante.
Los Angeles TIMES
New cars that are fully loaded -- with debt Americans are rolling over loans, often ending up owing more for the vehicle than it's worth.
By Ken Bensinger / Staff Writer
December 30, 2007
When Jennifer and Bobby Post traded in their 2001 Chevy Suburban last year for a shiny new Ford F-350 turbo diesel with an extended cab, it seemed like a great deal. Even though they still owed $9,500 on their SUV after the trade-in value, they didn't have to put a penny down.
The dealership, near the Posts' home in Victorville [California], made it easy; it just added the old debt to the price of the new truck and gave the couple a seven-year, $44,276 loan.
The Posts were a little worried about taking on such a long obligation, but they couldn't pass up a monthly payment under $700. Now they're having regrets.
"I didn't realize how much debt was in it," said Jennifer Post, who has since moved with her family to Iowa. Now, she'd like to get rid of the truck but can't, because there's so much debt that she'd literally have to pay someone to take it off her hands.
"We have no options," she said.
Americans haven't just been taking out risky mortgages for homes in the last few years; they've also been signing larger automobile loans for significantly longer terms than they used to.
As a result, people are slipping into a perpetual cycle of automobile debt that experts think could lead to a new credit crunch extending from dealerships to driveways and all the way to Wall Street.
Aren't you glad that they've tightened consumer bankruptcy laws, making this "perpetual cycle" more like good old-fashioned debt peonage?
Gone are the days of the three-year car loan. The length of the average automobile loan hit five years, four months in October, up more than six months from 2002, according to the Federal Reserve. And nearly 45% of loans written today are for longer than six years. Even some staid lenders owned by the carmakers, such as Toyota Financial Services and Ford Credit, are offering seven-year financing. And a few credit unions, particularly in the West, are tinkering with the eight-year note.
Credit unions, alas, are acting more and more like commercial banks. They used to be more responsible to their members.
At the same time, the amount of money drivers owe on their cars is soaring. In October, the average amount financed hit $30,738, up $3,500 in just a year and nearly 40% in the last decade, according to the Fed. More troubling, today's average car owner owes $4,221 more than the vehicle is worth at the time it's sold -- up from $3,529 in 2002, according to industry analyst Edmunds.
it's an understatement to say that that's much too much!
... It's not just individual consumers who are at financial risk. Nationwide, an estimated $575 billion in new and used auto loans are written every year by auto manufacturers, banks, credit unions and other lenders. About 30% of the loans that are originated by banks, and 100% of those issued by automaker financiers, are, like mortgages, repackaged and sold as securities, according to the Consumer Bankers Assn.
Aha! more securitization, in which spreading the risk around so that people can't perceive it anymore is treated as if it were abolishing risk.
Analysts warn that just as investors didn't comprehend the risk inherent in some of the more exotic home mortgages in recent years, they aren't considering how risky these car loans are. If longer loan terms allow debt on the loans to grow too large, many drivers may simply default, leading to expensive repossessions.
And even those who keep paying their bills may reach a point, like Gerhardt, where they simply can't afford another car. That could send vehicle sales down the drain, a nightmare scenario for an industry that has already taken a hit this year from slower consumer spending and higher gas prices.
It could also lead to serious losses among financial institutions that have invested in car debt. Among securitized auto loans, two-thirds have terms longer than 60 months, a fact that Standard & Poor's, which rates auto debt for sale on the secondary market, calls a "credit concern."
This month, S&P reviewed its ratings on $113.5 billion in auto loan securities it rated in the last two years out of concerns over growing losses. It didn't make any downgrades but predicted that "rising losses will continue into 2008 across all segments of the auto loan market."
S&P has found that delinquencies of more than 60 days on car loans issued this year to borrowers with the best credit are up 20% compared to those issued last year, while delinquencies on loans issued this year to subprime borrowers increased by 16%. Delinquency rates on car loans are still far lower than on mortgages, but there is growing concern in the financial services industry. Indeed, Tom Webb, chief economist of used-auto analyst Manheim Consulting, said he expects the tally for 2007 repossessions to be up by 10%.
Sounds like it's time to crank up that old Emilio Estevez movie, REPO MAN.
Mark Pregmon, executive vice president for consumer lending at SunTrust Bank, is among the concerned. "Any time you extend the maturity of the loan, you take on more risk. The question is whether there's enough assessment of that extra risk," he said. "Obviously, it's a problem. It's a house of cards."
You took that cliché right out of my mouth!
In the 1970s and '80s, car loans hovered between 36 and 48 months, and drivers typically kept their cars longer than the life of the loan. A number of factors changed that.
One key was interest rates, which fell from a high of 17.8% in the early 1980s to lower than 5% today, according to the Federal Reserve. Another was affordability. According to an index tracked by Comerica Bank, cars have steadily gotten more affordable -- as compared to median family income -- since the late 1990s.
With cheap money at hand for more-affordable cars, the temptation to keep buying became huge. Today, according to Pregmon, financed cars are typically turned over in 24 to 36 months.
At the same time they were extending loan maturities, lenders, competing with one another, began offering more money and requiring smaller down payments.
Today, most lenders offer financing on 100% or even 125% of the sticker price, and some offer the most credit-worthy buyers loans for twice the value of the vehicle they're purchasing. Last year, the average amount financed for new cars reached 99%, according to the Consumer Bankers Assn., up from 95% in 2005.
Lenders are beginning to brace themselves; many have said they intend to tighten standards and require larger down payments.
Despite warnings from S&P, the Consumer Bankers Assn., Lehman Bros. and others, there is little sign that the automobile industry is willing -- or, with consumers demanding low payments, even able -- to reduce the lengths of the loans they issue.
"For banks, it's a matter of meeting consumer demand: no money down and extend the term," said SunTrust's Pregmon. "But as a lender, you've got a moral obligation as well. Are we putting the clients in loans they can't afford?"
Here's another reason to have the government standardize loan agreements and then have the financial sector compete over interest rates.
ken.bensinger@latimes.com
Copyright 2007 Los Angeles Times
--
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante.
Saturday, December 29, 2007
The Airport Security Scam
This is exactly right. We are sheep to accept it. The economic cost in terms of direct resources squandered and lost time is massive. The policy doesn’t stop terrorism, it expresses our condition of being terrorized.
Friday, December 28, 2007
Andrew Carnegie
I have just finished an interesting new book: Nasaw, David. 2007. Andrew Carnegie (New York: Penguin), which caused me a bit of embarrassment.
In Railroading Economics, I emphasized Andrew Carnegie's role in paying careful attention to the production process of steel in contrast to they banker-like perspective of the Morgan crew, which took over Carnegie Steel. This Nasaw's story is not entirely different, but the emphasis certainly is. Nasaw totally explains that Carnegie ignored any concern with the minutia of the production process, but merely demanded reductions in cost.
The most important cost for Carnegie was labor. He plowed back about 75% of the company's earnings into reinvestment, often in labor saving technologies. But even more important was the crushing of labor, especially the Homestead strike, which allowed him to increase the working day to 12 hours. This victory probably also greased the skids for the acceptance of new technology.
The book is a magnificent production. Nasaw had access to material that nobody else did.
Nasaw shows how important influence was in accumulating for Carnegie fortune. Carnegie reminds me of Balzac, who wrote:
"At the bottom of every great fortune... , there's always some crime -- a crime overlooked because it's been carried out respectably."
In the case of Carnegie, no great crime seems to have been responsible. Instead, Carnegie left a trail of innumerable crimes. Homestead was the most notable, but it had a number of less bloody precedents in his own company. In his earlier career as a bond salesman, Carnegie engaged in an almost habitual dishonesty along with continual shady dealings, such as kickbacks.
Carnegie was a master of accumulating political influence in the US and in Britain.
The most fascinating part of the book was Carnegie's philosophy. An early age, he anticipated the basic idea of Herbert Spencer, who later became his idol. He decided he would accumulate great wealth, then rather than hoarding it, he would distribute it for noble causes.
Smashing the workers at Homestead was a moral act for him. The workers would not know what to do with any extra money they earned. He wrote:
"... there are higher uses for surplus wealth than adding petty sums to the earnings of the masses. Trifling sums given to each every week or month -- and the sums would be trifling indeed -- would be frittered away, nine times out of 10, in things which pertain to the body and not to the spirit; upon richer food and drink, better clothing, more extravagant living, which are beneficial neither too rich or poor."
Libraries, museums, and concert halls would contribute more to human welfare -- especially for people working 12 hours a day.
In Railroading Economics, I emphasized Andrew Carnegie's role in paying careful attention to the production process of steel in contrast to they banker-like perspective of the Morgan crew, which took over Carnegie Steel. This Nasaw's story is not entirely different, but the emphasis certainly is. Nasaw totally explains that Carnegie ignored any concern with the minutia of the production process, but merely demanded reductions in cost.
The most important cost for Carnegie was labor. He plowed back about 75% of the company's earnings into reinvestment, often in labor saving technologies. But even more important was the crushing of labor, especially the Homestead strike, which allowed him to increase the working day to 12 hours. This victory probably also greased the skids for the acceptance of new technology.
The book is a magnificent production. Nasaw had access to material that nobody else did.
Nasaw shows how important influence was in accumulating for Carnegie fortune. Carnegie reminds me of Balzac, who wrote:
"At the bottom of every great fortune... , there's always some crime -- a crime overlooked because it's been carried out respectably."
In the case of Carnegie, no great crime seems to have been responsible. Instead, Carnegie left a trail of innumerable crimes. Homestead was the most notable, but it had a number of less bloody precedents in his own company. In his earlier career as a bond salesman, Carnegie engaged in an almost habitual dishonesty along with continual shady dealings, such as kickbacks.
Carnegie was a master of accumulating political influence in the US and in Britain.
The most fascinating part of the book was Carnegie's philosophy. An early age, he anticipated the basic idea of Herbert Spencer, who later became his idol. He decided he would accumulate great wealth, then rather than hoarding it, he would distribute it for noble causes.
Smashing the workers at Homestead was a moral act for him. The workers would not know what to do with any extra money they earned. He wrote:
"... there are higher uses for surplus wealth than adding petty sums to the earnings of the masses. Trifling sums given to each every week or month -- and the sums would be trifling indeed -- would be frittered away, nine times out of 10, in things which pertain to the body and not to the spirit; upon richer food and drink, better clothing, more extravagant living, which are beneficial neither too rich or poor."
Libraries, museums, and concert halls would contribute more to human welfare -- especially for people working 12 hours a day.
Thursday, December 27, 2007
RIP --- Benazir Bhutto
Her two periods of serving as Prime Minister of Pakistan were deeply marred by corruption, and in many ways she was a far from progressive figure. However, her assassination today is a terrible tragedy that bodes horrifying possible outcomes in Pakistan and throughout much of the world, given as I think she may have been the only serious alternative to an eventual fanatical takeover there, a country that actually does have nuclear weapons, in contrast with the fantasies of the Bush administration about Iraq and Iran. She was also personally a courageous and intelligent person. This is a deeply tragic event, and I, for one, shall mourn her loss.
Wednesday, December 26, 2007
An Earful on the Science and Policy of Risk
The New York Times reports that Europe is gradually approaching the point of decision on whether to allow genetically modified corn. Because of WTO rules on such things, the EU is required to base its policy on “science” if it want to keep out mutant corn from the US. This reflects a deep, deep misunderstanding of what science can contribute to policy.
Let’s start with the basics. There are two sorts of error we can make in this uncertain world, Type I (the risk of believing something to be the case when it is not) and Type II (the risk of not believing something to be the case when it is). Science is, among other things, a human enterprise organized around the systematic minimization of Type I error. Experimental protocols are about this, and so are the conventions we follow in determining statistical significance. This obsession comes at the cost of permitting greater Type II error, but that’s OK. Science operates on the basis of a vast division of labor, where each scientist’s work depends on the reliability of the methods and results carried over from what others have done. One false conclusion, if not noticed in time, could invalidate the efforts of an entire research community. This is why a serious Type I error is a potential career ender, whereas an avoidable Type II glitch simply diminishes a researcher’s list of accomplishments.
This single-minded insistence on avoiding Type I error is the reason why science is the one truly progressive human activity. Today’s science is better than yesterday’s, and tomorrow’s will be better than today. You can’t say this about poetry or politics.
(It is also, in the end, why economics is not a “real” science: it is no big deal for an economist to claim something to be true and to later discover that it isn’t.)
Policy, on the other hand, has to take Type II error as seriously as Type I. Take the Bt corn case before the EU, for example. It is a problem if regulators falsely think Bt corn is dangerous and ban it, but it is also a problem if they falsely think it is not dangerous and allow it to be used. A reasonable first cut is the standard cost-benefit approach: value each sort of error in terms of its cost function. Thus the cost of banning Bt corn is the probability of Type I error (falsely believing it to be harmful) times the economic cost of not taking advantage of this technology, whereas the cost of not banning it is the probability of Type II error times the cost of the damage it would do in that case. You go for the lowest cost option.
(There is an even better approach, as I argued here, based on the fullest possible utilization of information.)
The difference should be obvious. Science is radically asymmetric in the way it treats uncertainty: avoiding a false positive is everything. Policy is more balanced: failure to see is potentially as harmful as seeing what isn’t there. If you happen to be the sort of person, as I am, who thinks environmental risks are particularly important to avoid, you might tilt the policy calculus on issues like Bt corn toward less Type II error, even at the expense of more Type I.
Science has one job to do. Policy has another. They follow different rules.
Let’s start with the basics. There are two sorts of error we can make in this uncertain world, Type I (the risk of believing something to be the case when it is not) and Type II (the risk of not believing something to be the case when it is). Science is, among other things, a human enterprise organized around the systematic minimization of Type I error. Experimental protocols are about this, and so are the conventions we follow in determining statistical significance. This obsession comes at the cost of permitting greater Type II error, but that’s OK. Science operates on the basis of a vast division of labor, where each scientist’s work depends on the reliability of the methods and results carried over from what others have done. One false conclusion, if not noticed in time, could invalidate the efforts of an entire research community. This is why a serious Type I error is a potential career ender, whereas an avoidable Type II glitch simply diminishes a researcher’s list of accomplishments.
This single-minded insistence on avoiding Type I error is the reason why science is the one truly progressive human activity. Today’s science is better than yesterday’s, and tomorrow’s will be better than today. You can’t say this about poetry or politics.
(It is also, in the end, why economics is not a “real” science: it is no big deal for an economist to claim something to be true and to later discover that it isn’t.)
Policy, on the other hand, has to take Type II error as seriously as Type I. Take the Bt corn case before the EU, for example. It is a problem if regulators falsely think Bt corn is dangerous and ban it, but it is also a problem if they falsely think it is not dangerous and allow it to be used. A reasonable first cut is the standard cost-benefit approach: value each sort of error in terms of its cost function. Thus the cost of banning Bt corn is the probability of Type I error (falsely believing it to be harmful) times the economic cost of not taking advantage of this technology, whereas the cost of not banning it is the probability of Type II error times the cost of the damage it would do in that case. You go for the lowest cost option.
(There is an even better approach, as I argued here, based on the fullest possible utilization of information.)
The difference should be obvious. Science is radically asymmetric in the way it treats uncertainty: avoiding a false positive is everything. Policy is more balanced: failure to see is potentially as harmful as seeing what isn’t there. If you happen to be the sort of person, as I am, who thinks environmental risks are particularly important to avoid, you might tilt the policy calculus on issues like Bt corn toward less Type II error, even at the expense of more Type I.
Science has one job to do. Policy has another. They follow different rules.
Tuesday, December 25, 2007
Taxes & the Bible
In my revised standard approach, my comments are in bold, while the original is in italics.
The New York TIMES / December 25, 2007
Professor Cites Bible in Faulting Tax Policies
By DAVID CAY JOHNSTON
At a time when some voters are asking how the religious views of candidates will shape their policies, a professor's discovery of how little tax the biggest landowners in her state paid to finance the government has prompted some other legal scholars to scour religious texts to explore the moral basis of tax and spending policies.
The professor, Susan Pace Hamill, is an expert at tax avoidance for small businesses and teaches at the University of Alabama Law School. She also holds a degree in divinity from a conservative evangelical seminary, where her master's thesis explored how Alabama's tax-and-spend policies comport with the Bible.
Professor Hamill says that since Judeo-Christian ethics "is the moral compass chosen by most Americans" it is vital that these policies be compared with the texts on which they are based. Another professor says she is the first to address this head on, inspiring work by others.
Her findings, embraced by some believers and denounced by others, has also stirred research everywhere from Arizona State to New York University into the connection between religious teachings and government fiscal practices.
Her latest effort is a book, "As Certain as Death" (Carolina Academic Press, 2007), that seeks to document how the 50 states, in contravention of her view of biblical injunctions, do more to burden the poor and relieve the rich than vice versa.
In lectures and papers, Professor Hamill has expanded on her theme, drawing objections from some critics who say that the religious obligation to care for the poor is a matter of personal morality, not public policy.
Professor Hamill asserted that 18 states seriously violate biblical principles in the way they tax and spend. She calls Alabama, Florida, Louisiana, Nevada, South Dakota, Texas "the sinful six" because they require the poor to pay a much larger share of their income than the rich while doing little to help the poor improve their lot.
Alabama, Florida, Louisiana, & Texas are usually thought of as links in the "Bible Belt." You'd think that they'd be more obedient to Biblical Principles, all else equal. Nevada, on the other hand, is the official Sin State. Isn't it strange that it finds itself in the same league as the rest. (I don't know what's happening with S. Dakota. Whatever happened to prairie populism?
The worst violator, in her view, is her own state of Alabama, which taxes its poor more than twice as heavily as its rich, while holding a tight rein on education spending.
The poorest fifth of Alabama families, with incomes under $13,000, pay state and local taxes that take almost 11 cents out of each dollar. The richest 1 percent, who make $229,000 or more, pay less than 4 cents out of each dollar they earn, according to Citizens for Tax Justice, an advocacy group whose numbers are generally considered
trustworthy even by many of its opponents.
In Alabama's defense, shouldn't we also look at the benefits that the poor receive?
Professor Hamill said what first drew her to the issue of fiscal policy and biblical principles was learning that Alabama timber companies, which own more than two-thirds of the land in the state, pay an annual property tax of only about 75 cents an acre.
"The Bible commands that the law promote justice because human beings are not good enough to promote justice individually on their own," she said. "To assume that voluntary charity will raise enough revenues to meet this standard is to deny the sin of greed."
Richard Teather, who teaches tax at Bournemouth University in Britain and has written on the moral dimensions of tax evasion, said that governments have publicly raised the issue of morals and taxes.
"The tax authorities say you have a moral duty to pay your taxes, but you cannot look at that in isolation," Mr. Teather said. "Over here in Britain we have a lot of tax breaks for the very wealthy, which are not generally available to most people, and quite high level taxes for the middle and upper-middle classes, so this doesn't look like a moral system."
Professor Hamill, by her reading of the New Testament, concludes that at least a mildly progressive tax system is required so that the rich make some sacrifice for the poor. She cites the statement by Jesus that "unto whomsoever much is given, of him shall be much required, and to whom men have committed much, of him they will ask the more."
Some of her critics, however, say that the tithes described in the Old Testament show that a flat tax, in which everyone pays the same share of their income to government, should be seen as the biblical standard.
doesn't it also say something about what to do about widows, i.e., stone them?
Gary Palmer, president of the Alabama Policy Institute, agreed that taxes on the poor were much too high in the state, but said that the solution was not to raise taxes on the wealthy, but to lower them on the poor. He characterized Alabama's sales taxes on food and medicine as immoral.
Some of Professor Hamill's critics, in letters and e-mail to her and others, argue that she just wants to soak the rich, wrapping what they called her socialistic views in biblical cloth.
hey, wasn't JC a "socialist" of some sort?
Until Professor Hamill focused on fiscal policies in light of Judeo-Christian moral principles, most scholarly work on religion and taxes was largely devoted to the issue of tax evasion. That was prompted, in part, by a 1992 updating of the Catholic catechism that listed tax evasion as a sin and by enforcement actions aimed at pacifists who refused to pay war taxes.
Professor Hamill said her research found that just one state, Minnesota, came within reach of the principles she identified, because its tax system is only slightly regressive and it spends heavily on helping the poor, especially through public education.
Copyright 2007 The New York Times Company
--
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante.
The New York TIMES / December 25, 2007
Professor Cites Bible in Faulting Tax Policies
By DAVID CAY JOHNSTON
At a time when some voters are asking how the religious views of candidates will shape their policies, a professor's discovery of how little tax the biggest landowners in her state paid to finance the government has prompted some other legal scholars to scour religious texts to explore the moral basis of tax and spending policies.
The professor, Susan Pace Hamill, is an expert at tax avoidance for small businesses and teaches at the University of Alabama Law School. She also holds a degree in divinity from a conservative evangelical seminary, where her master's thesis explored how Alabama's tax-and-spend policies comport with the Bible.
Professor Hamill says that since Judeo-Christian ethics "is the moral compass chosen by most Americans" it is vital that these policies be compared with the texts on which they are based. Another professor says she is the first to address this head on, inspiring work by others.
Her findings, embraced by some believers and denounced by others, has also stirred research everywhere from Arizona State to New York University into the connection between religious teachings and government fiscal practices.
Her latest effort is a book, "As Certain as Death" (Carolina Academic Press, 2007), that seeks to document how the 50 states, in contravention of her view of biblical injunctions, do more to burden the poor and relieve the rich than vice versa.
In lectures and papers, Professor Hamill has expanded on her theme, drawing objections from some critics who say that the religious obligation to care for the poor is a matter of personal morality, not public policy.
Professor Hamill asserted that 18 states seriously violate biblical principles in the way they tax and spend. She calls Alabama, Florida, Louisiana, Nevada, South Dakota, Texas "the sinful six" because they require the poor to pay a much larger share of their income than the rich while doing little to help the poor improve their lot.
Alabama, Florida, Louisiana, & Texas are usually thought of as links in the "Bible Belt." You'd think that they'd be more obedient to Biblical Principles, all else equal. Nevada, on the other hand, is the official Sin State. Isn't it strange that it finds itself in the same league as the rest. (I don't know what's happening with S. Dakota. Whatever happened to prairie populism?
The worst violator, in her view, is her own state of Alabama, which taxes its poor more than twice as heavily as its rich, while holding a tight rein on education spending.
The poorest fifth of Alabama families, with incomes under $13,000, pay state and local taxes that take almost 11 cents out of each dollar. The richest 1 percent, who make $229,000 or more, pay less than 4 cents out of each dollar they earn, according to Citizens for Tax Justice, an advocacy group whose numbers are generally considered
trustworthy even by many of its opponents.
In Alabama's defense, shouldn't we also look at the benefits that the poor receive?
Professor Hamill said what first drew her to the issue of fiscal policy and biblical principles was learning that Alabama timber companies, which own more than two-thirds of the land in the state, pay an annual property tax of only about 75 cents an acre.
"The Bible commands that the law promote justice because human beings are not good enough to promote justice individually on their own," she said. "To assume that voluntary charity will raise enough revenues to meet this standard is to deny the sin of greed."
Richard Teather, who teaches tax at Bournemouth University in Britain and has written on the moral dimensions of tax evasion, said that governments have publicly raised the issue of morals and taxes.
"The tax authorities say you have a moral duty to pay your taxes, but you cannot look at that in isolation," Mr. Teather said. "Over here in Britain we have a lot of tax breaks for the very wealthy, which are not generally available to most people, and quite high level taxes for the middle and upper-middle classes, so this doesn't look like a moral system."
Professor Hamill, by her reading of the New Testament, concludes that at least a mildly progressive tax system is required so that the rich make some sacrifice for the poor. She cites the statement by Jesus that "unto whomsoever much is given, of him shall be much required, and to whom men have committed much, of him they will ask the more."
Some of her critics, however, say that the tithes described in the Old Testament show that a flat tax, in which everyone pays the same share of their income to government, should be seen as the biblical standard.
doesn't it also say something about what to do about widows, i.e., stone them?
Gary Palmer, president of the Alabama Policy Institute, agreed that taxes on the poor were much too high in the state, but said that the solution was not to raise taxes on the wealthy, but to lower them on the poor. He characterized Alabama's sales taxes on food and medicine as immoral.
Some of Professor Hamill's critics, in letters and e-mail to her and others, argue that she just wants to soak the rich, wrapping what they called her socialistic views in biblical cloth.
hey, wasn't JC a "socialist" of some sort?
Until Professor Hamill focused on fiscal policies in light of Judeo-Christian moral principles, most scholarly work on religion and taxes was largely devoted to the issue of tax evasion. That was prompted, in part, by a 1992 updating of the Catholic catechism that listed tax evasion as a sin and by enforcement actions aimed at pacifists who refused to pay war taxes.
Professor Hamill said her research found that just one state, Minnesota, came within reach of the principles she identified, because its tax system is only slightly regressive and it spends heavily on helping the poor, especially through public education.
Copyright 2007 The New York Times Company
--
Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante.
Sunday, December 23, 2007
Could the Spread of Tropical Diseases Make Global Warming Have More Urgency?
Upton Sinclair's Jungle was intended to draw attention to the dirty and repressive conditions in the meat packing industry.
Reflecting on the storm over The Jungle, Upton Sinclair wrote that he was primarily moved by the condition of the workers, not the meat: "I aimed at the public's heart, and by accident I hit it in the stomach."
Upton Sinclair. 1952. American Outpost: A Book of Reminiscences (NY): p. 175.
Similarly, chikungunya, a relative of dengue fever normally found in the Indian Ocean region, has migrated to Italy.
Rosenthal, Elisabeth. 2007. "As Earth Warms Up, Tropical Virus Moves to Italy." New York Times (23 December).
http://www.nytimes.com/2007/12/23/World/Europe/23virus.Html?Ex=1199077200&En=6f19acc84e28278a&Ei=5070&Emc=Eta1
Maybe this is the only way people will become serious.
Reflecting on the storm over The Jungle, Upton Sinclair wrote that he was primarily moved by the condition of the workers, not the meat: "I aimed at the public's heart, and by accident I hit it in the stomach."
Upton Sinclair. 1952. American Outpost: A Book of Reminiscences (NY): p. 175.
Similarly, chikungunya, a relative of dengue fever normally found in the Indian Ocean region, has migrated to Italy.
Rosenthal, Elisabeth. 2007. "As Earth Warms Up, Tropical Virus Moves to Italy." New York Times (23 December).
http://www.nytimes.com/2007/12/23/World/Europe/23virus.Html?Ex=1199077200&En=6f19acc84e28278a&Ei=5070&Emc=Eta1
Maybe this is the only way people will become serious.
Subscribe to:
Comments (Atom)