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Does The Kindle Show The Decline Of American Innovation?
Tweet Share on Facebook August 18, 2009 Comment (4)That's the interesting suggestion of a new paper from Harvard Business professors Gary Pisano and Willy Shih. They argue that the willingness of American companies to outsource the manufacturing of consumer electronics to other countries—especially those in Asia—has led to an innovation problem:
What those companies have been ceding is the country’s industrial commons—that is, the collective operational capabilities that underpin new product and process development in the U.S. industrial sector. As a result, America has lost not only the ability to develop and manufacture high-tech products like televisions, memory chips, and laptops but also the expertise to produce emerging hot products like the Kindle e-reader, high-end servers, solar panels, and the batteries that will power the next generation of automobiles.
I find the example of the Kindle strange. The Kindle may not be manufactured in the U.S. But it certainly was designed here—by Lab126 in Silicon Valley. That would seem to suggest that outsourcing manufacturing while insourcing the intellectual know-how go hand-in-hand. American companies like Amazon or Lab126 don't need to physically manufacture the Kindle to reap benefits.
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The Anti-Greenspan
Tweet Share on Facebook August 14, 2009 Comment (1)I've recently been thinking out loud: If Greenspan couldn't run the Fed without making critical mistakes, who could? Yesterday at Real Clear Markets, Dani Rodrik of Harvard provided at least some answer. He says the next Fed chairman must not be like Greenspan and believe that "what is good for Wall Street is good for Main Street." Here's an example of the kind of belief he thinks the next chairman must reject:
Financial innovation is a great engine of productivity growth and economic well-being. Again, no. Imagine that we had asked five years ago for examples of really useful kinds of financial innovation. We would have heard about a long list of mortgage-related instruments, which supposedly made financing available to home buyers who would not have been able to purchase homes otherwise. We now know where that led us. The truth lies closer to Paul Volcker's view that for most people the automated teller machine (ATM) has brought bigger benefits than any financially-engineered bond.
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The Struggles Of American Manufacturing To Adapt
Tweet Share on Facebook August 13, 2009 Comment (3)As the Big Three contract and drive many of their suppliers into bankruptcy, businesses in Michigan and elsewhere aren't giving up—they're trying to adapt. I've linked to stories about entrepreneurs doing just that. The Washington Post today has a good story today about how one company has found adaptation to be quite difficult. Read the whole thing, but here's an excerpt from the story about this Michigan company, Dowding Industries, that is shifting from making auto parts for the Big Three to making wind turbines.
But they're finding that nothing takes the wind out of a new idea like the worst recession in decades. Deals with several banks and venture capitalists have not worked out.
"We're grateful to have something to run at all," Skip said. "The wind stuff is pretty dead. We'd prefer to have the wind stuff, but we'll take what we can get."
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Do We Need Obamacare To Cover The Uninsured?
Tweet Share on Facebook August 12, 2009 Comment (4)Amidst the emotions and furor in these town hall meetings on healthcare, might there actually be some worthwhile, substantive discussions about how to reform the system? I haven't found any, but I can extrapolate from this moment in Obama's town-hall meeting in New Hampshire. The Journal reports:
...Mr. Obama tried to emphasize one issue, a prohibition in the legislation on insurance companies denying coverage to Americans with pre-existing medical conditions. He was introduced by Lori Hitchcock, a 52-year-old single mother who has been unable to purchase health insurance since she was diagnosed in 2003 with the Hepatitis C virus, which can give rise to the same disease that took the life of her husband.
"I am the face of the uninsured. I am uninsurable. I have a pre-existing condition," an emotional Ms. Hitchcock said.
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Immigration Reform On The Backburner
Tweet Share on Facebook August 11, 2009 Comment (7)The big political news today is that the president won't be doing anything with immigration reform until early next year at the earliest.
It's interesting that immigration is the issue that can wait, while the administration has sold infrastructure spending, auto company bailouts, healthcare reform, and many other issues as emergencies where action is needed either immediately or close to immediate, lest the economy tank.
Not to dismiss any of those issues, but immigration seems to be highly underrated as a tool for dealing with economic misery. Many economists believe that immigration is the best anti-poverty program governments have ever devised. And we know that immigrants disproportionately start businesses that create new jobs.
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Why Obama Will Have To Break Promises
Tweet Share on Facebook August 10, 2009 Comment (3)Clive Crook writes in the FT today about why, despite campaign promises to the contrary, Obama will have to raise taxes on the middle-class at some point:
So the administration’s options are limited. The fiscal gap is so big that closing it will be literally impossible without either broadening the extremely narrow base of the current income tax, or raising other taxes on the middle class, or both.
Crook goes on to say, however, that Obama probably won't make any big changes before reelection. Expect him to look for "smaller, less conspicuous ways" to get more revenue in the interim. One of those ways might be forcing businesses to switch to FIFO accounting. I wrote a longer post on that issue here.
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Media Bailout Idea Gaining Momentum
Tweet Share on Facebook August 7, 2009 Comment (1)I've been thinking a lot recently about the subject of a media bailout. It's something that has been discussed for a little while now, but support for the idea seems to be building all the time. Ezra Klein recently came right out and wrote that newspapers should get public funding. He points to the BBC and NPR as examples that a government that supports the media doesn't necessarily mean a media that supports the government.
Many people wouldn't find too comforting the examples of the BBC and NPR as the paragons of government-supported media. Far from being obvious signs that public media is unbiased, these are two of the most controversial sources out there. Conservatives have long demonized NPR as an echo chamber for latte-sipping liberals. The BBC gets beat up on both sides--Thatcherites complained it campaigned against their PM, and left-wing British politician George Galloway called it the Bush & Blair Corporation. Now anti-EU activists call it the Brussels Broadcasting Corporation.
The point is not to argue about whether or not these accusations of bias are correct. The point is it seems to go against our ideas of free expression to force taxpayers to support viewpoints with which they often strongly disagree. In fact, I think the BBC and NPR are no more biased than countless other mainstream news sources. Bias is inevitable. But that's all the more reason why we should be careful before we give that bias the public stamp of approval.
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Would Universal Healthcare Promote Business Growth?
Tweet Share on Facebook August 7, 2009 Comment (5)We know that many small-business owners struggle with rising healthcare costs. One way to relieve this burden is to shift the responsibility of health insurance away from employers to another party—such as the government. Jeff Cornwall makes the point, however, that such a move would create new costs for businesses:
...there is no such thing as free healthcare. Socialized healthcare is going to cost money. We will need to raise this money as a country through either increasing taxes or borrowing more money. If we increase taxes that will decrease your income as an entrepreneur. If we run up the federal deficit even further to pay for healthcare, we will at some point very soon stoke the flames of inflation. That will squeeze your operating profits as a small business owner. Entrepreneurs get hit hardest during inflation due to their lack of market power -- their costs go up faster than they can increase prices.
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Obama In Indiana: Pork-Free At Last?
Tweet Share on Facebook August 6, 2009 Comment (3)Here's Obama on his stimulus plan in his speech yesterday in Wakarusa, Indiana:
But before we can rebuild our economy for tomorrow, we have to rescue it today. Now, that's why we passed a Recovery Act less than one month after I took office –- and we did so without any of the earmarks or pork-barrel spending that's so common in Washington, D.C.
Then, a little later in his speech, he unveils his plan for $2.4 billion in grants to develop electric cars. Where will that money go? Surely not to the pork recipients he ignored with the stimulus, right?
Indiana is the second largest recipient of grant funding, and it's a perfect example of what this will mean. You've got Purdue University, Notre Dame, Indiana University, and Ivy Tech, and they're all going to be receiving grant funding to develop degree and training programs for electric vehicles. That's number one. (Applause.) We've got EnerDel, a small business in Indianapolis that will develop batteries for hybrid and electric vehicles. You've got Allison Transmission in Indianapolis, Delphi in Kokomo, Remy in Pendleton, and Magna located in Muncie, all who will help develop electric-drive components for commercial and passenger vehicles.
And right here in Elkhart County, Navistar –- which has taken over two Monaco Coach manufacturing facilities -– will receive a $39 million grant to build 400 advanced battery electric trucks -- (applause) -- with a range of a hundred miles, like the trucks here today. (Applause.)
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Pethokoukis: 'Ron Paul's Dumb Plan'
Tweet Share on Facebook August 3, 2009 Comment (51)Since I've given Ron Paul a platform to speak the merits of auditing the Fed, I think it's only fair for me to link to former Cap Com blogger Jimmy P's article on why he thinks Paul's bill could damage the economy. Here's one of the key points:
Even if the result of the Fed bill is only more aggressive congressional questioning and criticism, financial markets might well fear the bank would start taking congressional wishes into account when making policy.
“If the markets and foreign investors perceive it that way,” says economist Michael Feroli of JPMorgan, “it could immediately push up borrowing costs even if the audits are only a symbolic increasing of congressional oversight of monetary policy.”
I'm going to stay agnostic on the issue of whether or not Paul's bill is a good idea. But here's my question to opponents of the bill like Jimmy P: Almost everyone recognizes that the Fed was a major contributor to the current financial crisis, because, as Jim writes, it kept interest rates down for too long. So without taking an anti-Fed approach a la Ron Paul, how could similar Fed mistakes be prevented in the future? If Greenspan could make such big mistakes, is there anyone who could possibly be "better"?
