Andy Carnegie and Bill Gates

My recent post about the two faces of Bill Gates brought some comparison with Carnegie. There is an interesting difference between the two. Gates is a recent convert to philanthropy. Carnegie, however, began at an early age. He decided that he would make a fortune and use it to contribute to a better world.

Carnegie came from a family of radical Chartists. Philanthropy was his way of being radical. So, he felt justified in screwing anybody -- even sanctioning the bloody battle of Homestead to promote his philanthropy.

209: "... 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."




Carnegie, Andrew. 1895. "The Best Use of Wealth." in Miscellaneous Writings of Andrew Carnegie, 2 vols. Burton J. Hendrick, ed. (Garden City, NY: Doubleday, Doran & Company, 1933): pp. 203-18.

Bushist Ideology Runs Rampant Over Any Sense Whatsoever

The front page of the Washington Post today reports that the current US Transportation Secretary, Susan Peters, has thrown up impossible barriers to allowing the US government to provide $900 million out of an estimated $5 billion to extend a metro line from Washington through now-unserved Tyson's Corner to the area's main airport, Dulles International, far west of town. This project has been in the planning for 40 years, is supported by local politicians in all jurisdictions of both parties, plus local business people, would help the environment, reduce congestion, and end the absurdity of Washington being the only major capital city in the world from which an international traveler cannot get to downtown from its main airport by public transport. As it is, there is a monopoly on transport for the Washington Flyer, and one hears announcements over the loudspeakers asking people to report to the police anybody daring to offer one a cab or other kind of ride out of Dulles not from Washington Flyer, the only "approved" transport from the airport.

This decision is totally and utterly ideological, with Peters being an advocate of paid toll roads, automobile uber alles. Those involved in the negotiations have complained of "goal posts constantly being moved" with the various local governments having jumped through endless hoops to satisfy the DOT. This is one more sign of how much damage Bush can still do to US society and economy in the year he still has to remain in office as president, and given his appointments to the Supreme Court, for decades to come. (I am not against congestion tolls as are in place in London and Singapore, but those places provide good metro transport from their airports as well)

The Two Faces of Bill Gates

Gates just gave a speech advocating a kindler, gentler capitalism, posing a good brother to the poor. At the same time, Microsoft is embarking on the most far reaching monitoring of workers ever contrived in which wireless sensors could read “heart rate, galvanic skin response, EMG, brain signals, respiration rate, body temperature, movement facial movements, facial expressions and blood pressure”, the application states. The system could also “automatically detect frustration or stress in the user” and "offer and provide assistance accordingly".

Guth, Robert A. 2008. "Bill Gates Issues Call for Kinder Capitalism: Famously Competitive, Billionaire Now Urges Business to Aid the Poor." Wall Street Journal (24 January): p. A 1.

"In a speech at the World Economic Forum in Davos, Switzerland, the software tycoon plans to call for a "creative capitalism" that uses market forces to address poor-country needs that he feels are being ignored. "We have to find a way to make the aspects of capitalism that serve wealthier people serve poorer people as well," Mr. Gates will tell world leaders at the forum, according to a copy of the speech seen by The Wall Street Journal. Mr. Gates isn't abandoning his belief in capitalism as the best economic system. But in an interview with the Journal last week at his Microsoft office in Redmond, Wash., Mr. Gates said that he has grown impatient with the shortcomings of capitalism"."

Mostrous, Alexi and David Brown. 2008. "Microsoft Seeks Patent for Office 'Spy' Software." The Times (London) (16 January).

http://technology.timesonline.co.uk/tol/news/tech_and_web/article3193480.ece

"Microsoft is developing Big Brother-style software capable of remotely monitoring a worker’s productivity, physical wellbeing and competence. The Times has seen a patent application filed by the company for a computer system that links workers to their computers via wireless sensors that measure their metabolism. The system would allow managers to monitor employees’ performance by measuring their heart rate, body temperature, movement, facial expression and blood pressure. Unions said they fear that employees could be dismissed on the basis of a computer’s assessment of their physiological state."

"Microsoft submitted a patent application in the US for a “unique monitoring system” that could link workers to their computers. Wireless sensors could read “heart rate, galvanic skin response, EMG, brain signals, respiration rate, body temperature, movement facial movements, facial expressions and blood pressure”, the application states. The system could also “automatically detect frustration or stress in the user” and "offer and provide assistance accordingly". Physical changes to an employee would be matched to an individual psychological profile based on a worker’s weight, age and health. If the system picked up an increase in heart rate or facial expressions suggestive of stress or frustration, it would tell management that he needed help."

Why to Tax the Rich: How the Rich Get Richer

The Ken Griffin interview got me to think about some earlier contributions about his thinking.

A Pennsylvania businessman wrote a book with a revealing title.

Farquhar, A. B. in collaboration with Samuel Crowther. 1922. The First Million is the Hardest: An Autobiography (Garden City, NJ: Doubleday): p. 19.

Andrew Carnegie's rumination throws light on this subject:

2 & 15: "wealth has been produced as if by magic, and fallen largely to the captains of industry, greatly to their own surprise ....The community created the millionaire's wealth. While he slept it grew as fast as when he was awake."

Carnegie, Andrew. 1906. "Wealth." in Problems of To-day: Wealth, Labor, Socialism (Garden City, NY: Doubleday, Doran, 1933): pp. 1-39.

The Latest Recommendation from the Washingtoon Ethnic Dining Guide

Anybody interested in a spoof on Tyler Cowen and his Ethnic Dining Guide of Washington, link to: The Latest Recommendation from the Washingtoon Ethnic Dining Guide (.pdf)

Barkley

Fiscal Stimulus: Little Bang for the Buck

CNN reports on the politics of fiscal stimulus:

A one-time tax rebate is at the heart of an economic stimulus package being negotiated by House leaders and Treasury Secretary Henry Paulson on Wednesday … The tax rebate would be similar to the $300 to $600 checks that were sent out in the summer of 2001.While there is bipartisan agreement that a stimulus package should be moved quickly, Democrats and Republicans still disagree on who should receive the rebates.

As the politicians iron out their differences, let’s think about this from an economic perspective.




Those who preach the Life Cycle Model (LCM) would tell us that that one-time rebates will be mostly saved with very little aggregate demand stimulus. In other words, a big impact on the current deficit but little impact on consumption demand just when we likely need it.

There is a possible rebuttal to this LCM view that goes like this. Lower income households are likely liquidity constrained so a tax rebate is sort of like the loan they could not get from the bank. So if we target this temporary tax relief to lower income types, then maybe we will get a strong bang for the buck.

But back to the politics where it has been standard operating procedure for the GOP to shift taxes onto the young by giving most of the tax breaks to rich older dudes. And these rich older dudes are not likely to be so liquidity constrained, which means the LCM view likely is valid if we let the GOP have its way. But isn’t this the real problem with the use of fiscal policy – partisan agendas tend to trump what most reasonable economists would consider the most effective means of handling our economic issues.

Bush and Crew Lied 953 Times About Iraq

This is probably old news to most, but it is very precise and documented. At http://juancole.com today one can find a report on the Center for Public Integrity that documents 953 specific cases of outright lies by Bush, Cheney, Rumsfeld, and Rice about Iraq during the two years following 9/11/01. Some of these lies are simply outrageous and clearly fully conscious that they are lies by those uttering them when they did. Let the record stand.

Intelligent Design

In the Times today, the mathematician John Allan Paulos' new book Irreligion is reviewed. It is another critique of theism, a la Hitchens , Dawkins, Harris. While I'm on his side, here is an argument against ID I wish he hadn't used - although I've used it myself. He says, according to the reviewer, that the idea that we can infer a designer from a design is refuted by Darwinian natural selection and "free market economics" (e.a) It's the last clause I take issue with.

Of course the idea is that the spontaneous order exhibited by a laissez-faire economy is an instance of design without a designer. The trouble is that I can't think of any spontaneously ordered economies for which intelligent design (and I don't mean the Deity!) isn't implicated to some degree in the order achieved. A judicial system able to underpin a complex economy doesn't come into existence spontaneously. The Bretton-Woods system had intelligent designers - and so on and so on. The "market" is not a natural fact. It is embedded in institutions and to the extent that it functions with any kind of order, the intelligent designers of these institutions deserve some of the credit. We saw the fallacy of the belief in the spontaneous ordering of the market as a natural fact in the tremendous disorder following 1989 in Russia.

Just sayin'!

COMIC RELIEF

by the Sandwichman,

This doofus, Ben Stein, assures his readers that recessions aren't all bad. With the random clarity of an infinite number of monkeys typing at an infinite number of keyboards, he manages to come pretty close to accidentally explaining the collective behavioral cause of recessions in prescribing his individualistic "cure" for them.

"There is some good news in here."

"Even in a recession, more than 90 percent of workers who want to work will be employed. Even in a recession, most businesses will make a profit. Even in a recession in this era, more than 10 million men and women will need cars and trucks. Many millions will need new homes. Tens of millions will need retirement investment products and life insurance. In the United States, even in a recession, there are plenty of people with money to spend.

"Those who tend to their work, who get to the office or showroom or shop early, stay late, work hard, stay on the phones dialing for deals (as my pal, Barron Thomas, puts it), will make money. Those who stay sharp and make a point of befriending their clients will make money. Yes, some extra effort will be needed, but it'll pay off. There's still money to be made, even when the economy itself has slowed down.

"It's the guy or gal who puts in extra effort who stays ahead and even prospers when the economy is in a slowdown. The easygoing, laid-back time-servers get tossed overboard.

"Stay Hungry (Not Literally)

"There's another key truth about recessions: They always end, and the economy always goes on to a new plateau. It may take a while, but the stock market always moves on to a new high.

"So stay hungry. Work harder. Dig deeper. Keep investing in broad indexes. You'll come out all right on the other side."

That's right, sucker, run faster on your hamster wheel and you'll get to where you're going sooner.

The Market Panic in Perspective

Does anyone else see the irony in the ongoing panic in global asset markets? Last week we feared global imbalances; this week we fear they may dissipate.

Don’t get me wrong — the last thing I want to see is global rebalancing by way of a massive US recession. But why are investors from Hong Kong to Frankfurt getting spooked? They are signaling that they don’t think their economies are decoupled from ours, and that a US downturn means the global buyer of last resort is putting away his credit cards. The US will cease to be the bottomless export market, and sellers everywhere will stumble.

Maybe so, but drastically curtailing the US import habit is a necessary part of rebalancing; it is not possible for US exports alone to do the job. So the contagion we’re seeing demonstrates that the current imbalances have become addictive on all sides. (OK, rebalancing via recession lacks a terms of trade sweetener, but is that what the markets are freaking about?)

Why We Should Not Tax the Rich

Here is John Edwards' "employer" on taxes. The last line, as they say, is "priceless." Griffin is an exception, since he is not interested in money, but in creating wealth for the community and the sheer joy of working. Also, he would work less if faced with high taxes, but only as a matter of principle (or is it principal?).

"Kenneth C. Griffin, who received more than $1 billion last year as chairman of a hedge fund, the Citadel Investment Group, declared: "The money is a byproduct of a passionate endeavor." Mr. Griffin, 38, argued that those who focus on the money -- and there is always a get-rich crowd -- "soon discover that wealth is not a particularly satisfying outcome." His own team at Citadel, he said, "loves the problems they work on and the challenges inherent to their business." Mr. Griffin maintained that he has created wealth not just for himself but for many others. "We have helped to create real social value in the U.S. economy," he said. "We have invested money in countless companies over the years and they have helped countless people"."

"The income distribution has to stand," Mr. Griffin said, adding that by trying to alter it with a more progressive income tax, "you end up in problematic circumstances. In the current world, there will be people who will move from one tax area to another. I am proud to be an American. But if the tax became too high, as a matter of principle I would not be working this hard."

Uchitelle, Louis. "The Richest of the Rich, Proud of a New Gilded Age." New York Times (15 July).

Frontiers of Cost-Benefit Calculations

A little more than a year ago, in response to a Wall Street Journal article on airline travelers' lost luggage, an insightful reader offered a more in depth analysis:

"Airlines lose luggage because there is no incentive to correct the problem. It would cost money to fix the broken systems, and there is no meaningful penalty on airlines that lose baggage because our government allows airlines to pay pennies on the dollar for what is lost. Even worse, the threat of lost luggage actually benefits the airlines by forcing passengers to avoid checking luggage."

Armstrong, Arthur O. 2007. "Perpetual Curse of Lost Luggage." Wall Street Journal (27 January): p. A 5.

I have not heard whether or not the paper ever hired this contributor.

The Efficiency of Publicly Owned Power Companies

Earlier, I mentioned are prolonged power outage. An invaluable article in our local weekly paper reports that our IOU -- the appropriate acronym for Investor Owned Utility -- PG&E suffered much more damage than the publicly owned utilities in the region. Apparently, PG&E has been relatively negligent in maintenance, leaving its infrastructure more vulnerable.

Because of aggressive tree trimming and replacement of ancient power poles, the publicly owned companies experienced virtually no outages.

Here is the link to the article:

http://www.newsreview.com/chico/Content?oid=613885

When Is Labor Exploited?

Earlier discussions of Joan Robinson on how it is better to be exploited than not to be exploited at all (unemployed) reminded me of the deeper issues involved. Was Marx right that it was working for private capitalists that led to exploitation? Is it a matter of what one is paid, either relative to some marginal product or some broader level? Is it a matter of self-management or being bossed? Were workers exploited in Soviet socialism, as the post-modern, Wolff and Resnick group argues, that the USSR was "state capitalism?" Is a society in which workers are not exploited possible?

In his _Socialism After Hayek_, Ted Burczak argues that such a society would be a decentralized market "socialism" of worker-owned cooperatives, funded through a wealth tax, with a generous social safety net oriented to "personal capacities" a la Nussbaum and Sen, with freedom and democracy. This supposedly avoids exploitation, as well as the sorts of flaws of information and incentives that Hayek found in command planned state socialism of the Soviet type. (I have commented on all this further in a paper on my website at http://cob.jmu.edu/rosserjb, entitled, "Has Burczak Shown How Socialism Can Survive Hayek?")

Iraqi oil production may be down again

There was much hullabalooing over a month ago when it was reported that November oil production in Iraq, about 2.4 million barrels per day (mbpd), had surpassed that of the end of the Saddam era of about 2.3 mbpd. Some Iraqi sources were claiming nearly 2.5 mbpd for December. Now, Ben Lando at Iraq Oil Report reports that Platt's estimates production fell back to 2.3 mbpd in December, even though apparently OPEC production overall rose in December. Most of the increase in recent months in Iraq has been out of Kirkuk, whose long run status remains disputed between the Kurds and the rest of Iraq. There also remains no oil law in Iraq, although majors like Shell are now negotiating with the central government on developing the Akkas field, and a slew of minors from places like Canada and Norway are cutting deals with the Kurds, who have their own oil law.

BTW, the recent reports of a new reconciliation law with the ex-Baathists, much trumpeted by Bill Kristol and other war hawks, is baloney according to Juan Cole. Baath allies voted against the law, and apparently it will make it easier to fire ex-Baathists from government jobs and keep them out for good. While there may be fewer US deaths in recent months, there remains no success at all on any of the items that the Surge was supposed to achieve by the end of this past year.