Don't Panic

I think this sums up how most people feel about the influenza virus formerly known as the swine flu (NYT):

“They tell you not to get hysterical, but what they put out there evokes fear and hysteria,” said Romelle Moore, 33, the mother of an eighth grader. “It’s all a lot of double-talk.”

We all overestimate the probability of low probability events, but right now it's probably better if we're all a little over-cautious.

A State of Perpetual Creativity

The newest portrait in the Smithsonian's National Portrait Gallery is of Duke Ellington, in honor of his 110th birthday. The portrait was painted by his longtime friend, Tony Bennett. Mr. Bennett told the gathered crowd that it was Mr. Ellington who encouraged him to take up painting (Fox):

"Be good at two things," Bennett said, quoting the advice he got from Duke Ellington.

The legendary crooner told the crowd he would sometimes get burned out on singing, "... and, after a while, when I painted a lot, I'd get burned out on painting. [So], I'd get back to the music.... it created a state of perpetual creativity. I have no need to ever go on a vacation or to retire. Because I'm in this creative zone that [Ellington] instructed me to do."

How to Design a Federal "Social Innovation Fund"?

Andrew Wolk is seeking comments on the design of the Social Innovation Fund called for in the Serve America Act recently signed by President Obama. He's going to be leading a discussion on this topic at this coming Monday's Accelerating Social Entrepreneurship conference organized by the Phoenix Project and the Corporation for National and Community Service. Here's the question:

In the paper I wrote with the Aspen Institute, I proposed one possible approach: to draw from among the best practices of two existing models. The first is one that the federal Small Business Administration has used. It’s the Small Business Investment Company, which matches privately raised funds two to one with public funds to spur private-sector innovation. The other is venture philanthropy and social venture capital, which use the principles of venture capital to invest in and support nonprofit and for-profit social-entrepreneurial organizations, respectively.

What are your ideas? If you comment here by Monday I will bring them to the discussion…

Here's what I had to say about this:

The correct structure of the newly created Social Innovation Fund will follow from its function. Are funds primarily intended to achieve scale? To prove a concept? Or to subsidize provision of a good or service that creates social value, but for which markets do not exist or are undeveloped?

If to achieve scale, the growth of the venture may be most effectively achieved by funding the venture's most promising projects, as in the case of Commerce Department's Advanced Technology Program (now the Technology Innovation Program). ATP awards were highly competitive and substantial—typically in the range $1-$5 million—and were critical to the development of a number of high-impact technology companies.

If to prove a concept, then, again, it may be better to help the company grow by providing staged grant support at the project level. Here the model is the Small Business Innovation Research (SBIR) program. (Ref. study completed last year by the National Academy of Sciences of the SBIR program: http://www7.nationalacademies.org/sbir/ ). SBIR Phase I awards are $100K. Successful completion of Phase I permits firms to compete for Phase II awards of $750K.

If to provide a good or service that creates social value, but for which markets do not exist or are undeveloped, then it is possible that the SBIC model makes sense. The history and documented impact of that program are worth a careful look. What looks good on paper doesn't always work out so well in practice.

"Venture funding" without both an equity stake and mentoring/support is a grant. From a marketing standpoint it may make sense to call an entity that provides grants a "venture fund." But calling it so doesn’t make it so. It is critical to keep in mind that such “venture funding” without an equity stake and real expertise or networks to offer support to entrepreneurs is not in any meaningful way analogous to "venture capital" or angel investments.

One venture fund focused on social innovation that seems will merit that name is the one launched at the Skoll World Forum last month by the Aspen Network of Development Entrepreneurs (ANDE). Like Lemelson, Acumen, and Endeavor Global (who are members) ANDE will focus on mid-sized firms with potential for high growth. Ref. http://bit.ly/Qu03

Can the government develop and implement an ANDE-like fund? Or should the Social Innovation Fund, more like the SBIR program, support promising projects in companies to get them to the stage where they can be supported in the next stage by private social investment funds (an approach to public-private that focuses on staged complementarity rather than simultaneous co-investment).

"End the University as We Know It" ... or not

The New York Times has an overheated op-ed today by Mark Taylor titled "End the University as We Know It" that ignores much that is understood about the sociology of knowledge creation. (See e.g. the many contributions of Ron Burt. Short version: End academic departments? Old & bad idea. Bridge disciplines? Old & good idea. Innovation comes from integrated diversity.) Nonetheless the piece offers a sensible thoughts on ways forward with graduate education. Best proposal is:

Create problem-focused programs. These constantly evolving programs would have sunset clauses, and every seven years each one should be evaluated and either abolished, continued or significantly changed... Consider, for example, a Water program. In the coming decades, water will become a more pressing problem than oil, and the quantity, quality and distribution of water will pose significant scientific, technological and ecological difficulties as well as serious political and economic challenges.

(By the way, when John Holdren, Iqbal Quadir and I started Innovations three years ago, the idea was to create a similarly problem-focused, or really, solution-focused, academic journal. We saw this as one small step toward increasing the fraction of the effort in universities directed toward developing solutions to global challenges.)

Talk of change in university education is not new. However, there are significant drivers of change today that did not exist in the past--even a decade ago. A number of these are wonderfully summarized in the "Did You Know?" video that has been making the rounds.

Henry Kelly, President of the Federation of American Scientists, has a very compelling vision for a technologically-enriched future of undergraduate education, offered in an essay recently published in Innovations:

Pressures for change [in undergraduate education] are mounting, as administrators struggle to find ways to meet ... new demands in the face of constrained public funding and growing public concern over increasing tuition prices..

By applying new technologies and re-engineering methods, significant improvements have been demonstrated in higher educational settings. National Center for Academic Transformation (NCAT) has worked with 30 two- and four-year colleges to demonstrate that a course redesign methodology could achieve significant improvements in quality while reducing costs in higher education. Large-enrollment introductory courses were redesigned and supported with online tutorials and course management; automated assessment of exercises, quizzes, and tests; continuous computer-based assessment and feedback; course delivery via the Internet; and the replacement of duplicative lectures, homework, and tests with collaboratively developed online material.

The NCAT approaches reduced the time faculty and instructional personnel spent on non-academic tasks. According to NCAT, 25 of 30 course redesign projects showed significant increases in student learning while the other five showed learning outcomes equivalent to traditional formats. Among the 30 institutions, costs were reduced by 37 percent on average, with cost savings ranging from 20 percent to 70 percent.

Arbitrage and Entrepreneurship

Or Kirznerian Entrepreneurship, if you prefer (NYT):

Harry leaves an even bigger mark on the city [Châteauroux, France]. In the 1960s a local entrepreneur, Paul Picard, the owner of a baked goods business, was impressed by the strange square white bread that the American servicemen ate. Like other Frenchmen accustomed to long, crusty baguettes, Mr. Picard had never seen anything like it, yet he thought it offered possibilities.

So he visited bakeries in the United States to learn how it was baked, then returned to France where he essentially re-engineered Wonder Bread. To give it an American flair, he called it Harry’s American Bread and decorated the packaging with the stars and stripes of the American flag. No one can say who Harry was, probably just a name that sounded American.

Though the base closed too soon for Mr. Picard to sell his bread there, it soon became a hit with the French. Now Harry’s huge baking plant outside Châteauroux bakes about 130 million loaves of white bread and other bakery products a year. That is about one-third of what Harry’s produces at other plants scattered across France. Its six bakeries spread across France make it the largest producer of packaged baked goods in the country.

Colleges Obsolete by 2020?

There was lots of education news in the past week or so. David Wiley, a BYU professor, told a group of professor and administrators last fall that their universities would be irrelevant by 2020. He was interviewed last Monday in the Deseret News. There's further discussion in the Christian Science Monitor's Horizons Blog. One interesting bit:

Most of today’s classes follow “the traditional industrial model, where you go into a classroom, and you sit at a desk, and someone lectures to you for an hour or so, and then maybe a few questions. But the reality is that most kids today are very technology-savvy and multitaskers. And so they actually live in one world, and then we ask them to forget about that digital interactive world and go into a classroom using the industrial model.”

I recently read a good point that we conduct all of our assessment and evaluation of students on an individual basis but that students learn through group work, facilitated by technology - all those thousands of text messages, for example. It will be interesting to see how our current crop of students redefines education policy when they grow up and get their chance at reform.

President Obama gave a speech on education that emphasized tougher standards and benchmarking, creativity and entrepreneurship (transcript):

And I'm calling on our nation's governors and state education chiefs to develop standards and assessments that don't simply measure whether students can fill in a bubble on a test, but whether they possess 21st century skills like problem-solving and critical thinking and entrepreneurship and creativity.

Mr. Friedman weighed in as well with a column about a new study from McKinsey (NYT), which includes this well known finding: "But our high school kids really lag, which means that 'the longer American children are in school, the worse they perform compared to their international peers,' said McKinsey. " This result comes from the Program for International Student Assessment (PISA). Specifically, these tests find that US students perform very well in fourth grade but perform worse as they move through the education system.

While our primary and high school education systems may not get the bang for the buck we should expect, our system of higher education continues to be the global gold standard. In the newest issue of The American Interest, Itamar Rabinovich, the former President of Tel Aviv University (and UCLA alumni!) examines the supremacy of U.S. higher education:

The leading American universities, drawing on large endowments and high tuition fees, attract a vast number of faculty scientists and scholars from around the world, particularly in cutting-edge fields. Countries like Great Britain, Canada, France, Germany, Israel and India feel that this particular brand of “brain drain” sets them back in the competition in such areas as computer engineering and bio-medicine. National elites in many of these countries resent the primacy of U.S. universities and the loss of seniority once held by schools like Oxford and Cambridge, the Sorbonne and Heidelberg.

This was perhaps a disjointed post, but it reflects the range of discussions from just this past week, discussions that are just getting started.

Legal Reform, Mexican Style

In what experts say is nothing short of a revolution, Mexico is gradually abandoning its centuries-old Napoleonic system of closed-door, written inquisitions — largely a legacy of Spanish colonial rule — that had long been criticized as rife with corruption, opaque decisions, abuse of defendants and red tape that bogged down cases for years.

Instead, for the first time, defendants will be presumed innocent until proved guilty, instead of the other way around, as they are now. The police will use more forensics and meticulous fact-gathering. Plea bargains, mediation and probation, never tried before in Mexico, will become standard.

And, in what many consider one of the biggest leaps, courtroom doors will be thrown open to the public for oral trials before a trio of judges where victims and the accused can confront one another and evidence will be laid out in the open.

NYT. Previous installments on Mexico's regulatory reforms here, here and here. Note that so far these reforms have been adopted in only four states: Chihuahua, Oaxaca, Nuevo León and Baja California. (HT)

Global Giving US Open Access Challenge

Social Edge has the following news:

You are invited to refer or list a project and raise funds in the US Open Access Challenge, which runs from June 8 - 30. Through the Challenge, projects have the opportunity to earn a permanent spot on the GlobalGiving website if they can mobilize supporters to raise $4,000 from at least 50 unique donors during this time period. Projects meeting these thresholds can also compete for additional funding: the three projects receiving the most funding will receive additional awards of $3,000, $2,000, and $1,000, respectively; the project receiving the most number of donations will receive an additional $3,000.

This is a great opportunity for a non-profit to raise awareness for their efforts and to gain access to a global network of donors.

Mobility and The Frontier Spirit

In an earlier post I wrote that this recession is different from others in part because few regions have escaped the problems in the housing and credit markets. In the past people could move to a different city or state to find work. This would reallocate labor to regions that could productively utilize new workers (see here and here for more). Now with most areas of the country reeling, this is less of an option. This is reflected in the mobility data the Census Bureau just released. From the NYT:

The bureau found that the number of people who changed residences declined to 35.2 million from March 2007 to March 2008, the lowest number since 1962, when the nation had 120 million fewer people.

Experts said the lack of mobility was of concern on two fronts. It suggests that Americans were unable or unwilling to follow any job opportunities that may have existed around the country, as they have in the past. And the lack of movement itself, they said, could have an impact on the economy, reducing the economic activity generated by moves.

Also see Mark Thoma's post from March, which highlights some research by Chris Nekarda, a recent PhD grad from UCSD, on the cyclicality of mobility. In short, the post argues that more people move when times are bad, not when they are good, relative to trend. While the implications for our current downturn are important, it is perhaps a more useful exercise to think about the recent structural shifts in our economy that are driving these trends and what they mean for our future.

Looking ahead, what effect with the current crisis have on America's much lauded "Frontier Spirit?" I use this term because our good friend David Miller is doing research on Frederick Jackson Turner's thesis about the Frontier Spirit. In a fairly recent post David wonders whether our current troubles could mark the closing of the frontier. Thoughts?

Entrepreneurship is Our Comparative Advantage

Via Phil's excellent Twitter feed @auerswald, an inspiring story of youth entrepreneurship prepared by the National Foundation for Teaching Entrepreneurship (NFTE):

Tanyas Story Youth Entrepreneurship In America NFTE Presentation 4 20 09

View more presentations from Julie Kantor.

Change Begets Change

George Mason is one of four Ashoka Changemaker Campuses, along with the University of Maryland, Johns Hopkins, and Cornell. GMU is now considering making social entrepreneurship part of the school's 5 year accreditation plan — the Quality Enhancement Plan (QEP).

You can read the full plan here, the title is: “Social Innovators and Social Entrepreneurs: 21st Century Leaders of Change.” Here is a bit of info:

“Social Innovators and Social Entrepreneurs: 21st Century Leaders of Change” emphasizes the people, ideas, organizations, and movements that lead to measurable and lasting social gains, and the innovative application of scholarly knowledge in the arts and sciences to the world’s pressing problems. We envision scholars, administrators, and faculty across the Mason community identifying entrepreneurial leaders in their fields and finding ways to engage students with the methodologies and practices of these innovators and communities through curriculum, service-learning, independent study, co-curricular activities, study abroad, internships, and research opportunities. This QEP further aims to include a larger segment of the university population in Mason’s entrepreneurial mission. We also hope to further Mason’s goal of “raising our profile as a nationally-ranked research university” through the creation of additional research opportunities for students that will increase faculty-student interaction and students’ civic engagement.

If you would like to see this become a part of the University's mission, please vote at the Mason QEP site. Please vote now, you only have a few days. Note that you do not need to be a student, just have an interest in our future.

Here is a good video introducing Ashoka's Changemaker Program:

Entrepreneurship Amid Decline

With the economy in a severe economic downturn, there have been lots of comparisons to earlier recessions and depressions. Aside from the obvious macroeconomic comparisons, we frequently hear stories about firms that were formed during recessions (Genentech, Microsoft, Google, Southwest Airlines...). One report from Kauffman looks at how such firms do and whether it matters that they were started during weak economic times. Kauffman Senior Fellow Paul Kedrosky writes:

Across all years, the results show that it is slightly more likely a post-1975 IPO came from a non-recessionary period. That group’s productivity was eighty-three companies per year, while the recession subset’s productivity was seventy companies per year that went public. If, however, we remove the Great Depression and WWII, both of which introduce some unrepresentativeness, we end up with 138 companies/year from expansion periods, and 140 from recession periods. In other words, these data suggest that the likelihood of a company being part of the public IPO set post-1975 is unrelated to whether it came from a recessionary or non-recessionary period.

Another vein of this research looks at what impact economic downturns have on an individual's decision to start a business. Frank Knight set up the basic framework for thinking about the effects of recessions on entrepreneurship. According to Knight, individuals can be in one of three states of the world, either as an employee for a firm, self-employed, or unemployed. We can imagine a stable equilibrium and then introduce a shock - such a shock is certainly easy to imagine currently. This causes a change in the relative prices of each activity. As the number of unemployed workers increases, we want to know, at the margin, what effect this will have on entrepreneurship, as defined simply as self-employed.

There are two main hypotheses. First, increased unemployment may "push" people into starting their own business. Such "forced entrepreneurship" occurs because it becomes more difficult to find work during a downturn, for obvious reasons, and because there is a broader pool of unemployed talent that can be productively utilized. According to a survey from CareerBuilder: "A highly competitive job market is motivating some workers to be their own boss. One-in-four workers who have not found jobs are considering starting their own business" (for further discussion see this USA Today story.)

There is also a pull effect from a booming economy. The clearest and most recent example of this was the recent tech boom and bust. Plenty of bright young college students dropped out in the 90s to start their own firms. The decision was simple. With a booming economy their odds of cashing in were high and the downside was relatively low (going back to school.) A recent paper by Roy Thurik, Martin A. Carree, André van Stel, and David B. Audretsch examines these two competing theories:

This paper investigates the dynamic relationship between self-employment and unemployment rates. On the one hand, high unemployment rates may lead to start-up activity of self-employed individuals (the “refugee” effect). On the other hand, higher rates of self-employment may indicate increased entrepreneurial activity reducing unemployment in subsequent periods (the “entrepreneurial” effect). This paper introduces a new two-equation vector autoregression model capable of reconciling these ambiguities and estimates it for data from 23 OECD countries between 1974 and 2002. The empirical results confirm the existence of two distinct relationships between unemployment and self-employment: the “refugee” and “entrepreneurial” effects. We also find that the “entrepreneurial” effects are considerably stronger than the “refugee” effects.

Source.

Create Your Own Economy

I'm usually good about keeping up with Marginal Revolution, Tyler Cowen and Alex Tabarrok's economics blog, but in recent days they've made some changes and I notice that Tyler is now linking to his new book, Create Your Own Economy. Here is info from the publisher, and here is the Amazon page, which says it is shipping in July. Have I missed any announcements of it? I searched through the archives but there does not seem to be any other news about it. Such suspense!

Incidentally, when is the best time to start marketing your book? At a little over two months away, is it too early now? Is the book cover on his site just a teaser to gain interest - apparently that has worked - with more details to come? After all the case studies and all the courses, what do we really know about marketing?

Update: Jason Kottke picked up on this as well (ahem, a day later) so I imagine we'll get a few more details out of Tyler, who is a loyal and regular reader of Kottke.org.

Defining Prosperity

A half a year into the greatest economic crisis since the Great Depression (see prior post on that comparison) the time apparently has come to ask what we've learned.

Today's New York Times Week in Review leads with a story titled "Redefining Capitalism After the Fall." The article keys off of President Obama's address on the economy last week at Georgetown University. And--most signficantly of all, of course--The American Interest just today posted the text of the essay Zoltan Acs and I have written on the very topic of the future of American capitalism. The title is "Defining Prosperity." (We originally proposed "The End of Growth;" that phrase now appears on the cover linked to our piece.) Here's how we start:

In a classic essay published exactly twenty years ago, Francis Fukuyama wrote that the triumph of the West was evident in the total exhaustion of viable systemic alternatives to Western liberalism. The end of the 20th century witnessed not just the conclusion of the Cold War, but indeed “the end of history”, a phrase Fukuyama intended to signify not the long-predicted convergence between capitalism and socialism, but rather “the end point of mankind’s ideological evolution and the universalization of Western liberal democracy as the final form of human government.”

Over the past twenty years, a rather large number of observers have misunderstood, often to the point of bowdlerization, what Fukuyama said. Some did understand but disagreed. Now, however, the size and nature of the current economic crisis is causing some who have both understood and agreed to wonder whether the “end of history” has been replaced by “the end of growth”, the return of Malthus, or some other such phrase whose real meaning is plain: the replacement of liberalism’s inevitable universalization with its more likely decline or even demise.

Is such dramatic speculation warranted? Are we really in a systemic crisis, one in which an old order of political economy has been shown to be both unsustainable and immoral—to be, indeed, fundamentally misaligned with 21st-century realities? Many see evidence that a dangerous imbalance in the relationship between business and government grew gradually over the past thirty years. They insist, as a consequence, that government must take a much more assertive role in ensuring that public good is not sacrificed to private greed.² If our leaders assume, as James Galbraith recently stated, that “we are going to have to reorganize and restructure many things, including the financial system, which has been poisoned by the abuses and negligence of the past few years”, then we are in for major structural change—for better or worse.

What if this diagnosis du jour is wrong? What if, as some believe, the crisis, both in the United States and worldwide, is really the consequence of a half dozen or so contingent decisions that, had they been made differently, would have validated the basic system we had—before the bailouts and before the “stimulus”?³ What if, despite the lurid display of corporate malfeasance we have witnessed over the past year, the only thing we have to fear about liberalism is the fear itself that something is deeply the matter with it?

Before we get locked into a bipartisan “recrimination bubble” as we debate this central question, it is worth considering, calmly and carefully, an even more fundamental issue: What exactly are we asking of our institutions? In particular, how did we come to care about economic growth in the first place, and why do we almost universally now lament its absence? It turns out that the real question we need to ask before all the others is not, “At what level does our political economy require change to ensure economic growth?” or “Has growth come to an end?” but “What is the end of growth? What is its purpose?”

Dancing with the Elephant

I co-edited a book a while ago that included a chapter titled "Raising Mice in the Elephants Cage." It was written by a longtime IBM exec, Jim McGroddy, and it described the challenges of being a technology "intrapreneur" within a large corporation. The title sort of says it all, but the paper is still worth reading.

From what I have been able to figure, making entrepreneurship happen on a college campus is also a lot like raising mice in the elephant's cage. The elephants, of course, have a tendency to worry about the mice. And the mice--to be specific here, student entrepreneurs and the programs that support them--have a tendency to feel fundamentally unwelcome under the feet of Disciplines and Departments; as a consequence they may quite naturally come to the conclusion that their best approach is either to lurk in corners, drawing as little attention to themselves as possible, or to leave the cage altogether.

Motivated by our participation in Ashoka's Changemaker Campus program a few of us at George Mason University (inspired and led here by Paul Rogers, an English Professor, and Alex Gudich-Yulle, a senior at Mason) are giving a go at dancing with the elephant... "wrestling" being not an option. Working with the university leadership--relatively nimble Proboscidea in this case, fortunately--we have put together what we are under the impression is a first-in-the-nation plan to make social entrepreneurship and social enterprise a core part of the college experience at a major university. (Are we wrong? Others? We want to know.) The proposal, titled "Social Entrepreneur and Social Innovators: 21st Century Leaders of Change" is one step away from being adopted by Mason's leadership as the core of the quality enhancement plan (QEP) that will guide undergraduate education for the next 5 years.

What is interesting about the QEP is that the plan ultimately adopted will be linked directly to the university's accreditation process. That means (1) it consists of binding commitments and (2) it is supported with real funds, and (3) it cuts across all activities related to undergraduate education.

The QEP committee has invited input from inside and outside the Mason community via the topic selection survey at http://qep.gmu.edu . If you think that it would be interesting to see a 30,000 student university situated within 30 minutes of the White House focused on social entrepreneurship for a half decade, then this would be a good opportunity to share that view with Babar ...

Lawyers are People Too

Apparently yesterday was "Be Kind to Lawyers Day." Who knew? They even have a page on "cool lawyer facts." It's not as cool as Chuck Norris Facts, but of course nothing is. The site was started by a non-lawyer.

Technology Lags

On twitter today one writer noted that Gran Torino was just now coming to Japan. More broadly there is a lag for most technologies between the time they are introduced and when they are widely adopted. This happens both within and between countries. A paper by Diego Comin, Bart Hobijn, and Emilie Rovito in the Journal of Economic Growth looks at this phenomenon for ten goods. The paper is available here. The abstract:

We present evidence on the differences in the intensity with which ten major technologies are used in 185 countries across the world. We do so by calculating how many years ago these technologies were used in the U.S. with the same intensity as they are used in the countries in our sample. We denote these time lags as technology usage lags and compare them with lags in real GDP per capita. We find that (i) technology usage lags are large, often comparable to lags in real GDP per capita, (ii) usage lags are highly correlated with lags in per-capita income, and (iii) usage lags are highly correlated across technologies. The productivity differentials between the state-of-the-art technologies that we consider and the ones they replace, combined with the usage lags that we document, lead us to infer that differences in the intensity of usage of technologies might account for a large part of cross-country TFP differentials.

New Issue of Innovations Journal

The Winter 2009 issue was released today. It is focused on "Mobilizing Markets." You'll find it here, and several articles are online for free.

The Table of Contents: Mobilizing Markets

Lead Essays

• Prerequisite to Prosperity: Why Africa's Future Depends on Better Governance, by Mohamed (Mo) Ibrahim

• Harnessing the Mobile Revolution, by Thomas Kalil

• Phone vs. Laptop: Which Is a More Effective Tool for Development?, by Iqbal Quadir and Nicholas Negroponte

Cases Authored by Innovators

• Connecting a Nation: Roshan Brings Communications Services to Afghanistan, by Karim Khoja
  

• From Operations to Applications: Advancing Innovation in Mobile Services (Innovations Case Discussion: Roshan), by Al Hammond, Loretta Michaels

• CellBazaar: A Market in Your Pocket, by Kamal Quadir, Naeem Mohaiemen

• Can CellBazaar Survive without an Urban Market—and Fulfill Its Development Potential? (Innovations Case Discussion: CellBazaar), by Kim Wilson

Analysis

• Mobilizing Money through Enabling Regulation, by David Porteous

• Blurring Livelihoods and Lives: The Social Uses of Mobile Phones and Socioeconomic Development, by Jonathan Donner

• The Case for mHealth in Developing Countries, by Patricia N. Mechael

Perspectives on Policy

• A Doctor in Your Pocket: Health Hotlines in Developing Countries, by Gautam Ivatury, Jesse Moore, Alison Bloch

• Large Companies, ICTs, and Economic Opportunity, by William J. Kramer, Beth Jenkins, Rob Katz

What's Next?

"In choosing careers, young people look for signals from society, and Wall Street will no longer pull the talent that it did for so many years," said Richard Freeman, director of the labor studies program at the National Bureau of Economic Research. "We have a great experiment before us."

What will the new map of talent flow look like? It’s early, but based on graduate school applications this spring, enrollment in undergraduate courses, preliminary job-placement results at schools, and the anecdotal accounts of students and professors, a new pattern of occupational choice seems to be emerging. Public service, government, the sciences and even teaching look to be winners, while fewer shiny, young minds are embarking on careers in finance and business consulting.

From the NYT. So what will the BLS Occupational Handbook look like after its next revision? In the 2008-09 edition, "Personal Financial Advisor" was projected as the 6th fastest growing occupation, in terms of percentage growth. "Financial Analyst" took the 12th spot. Will policy or budget analyst for the U.S. Government supplant either of these in the next edition?

Standing in the Dirt

On the train last night I overheard a fellow passenger use this term. Apparently one of his friends was so intent on finishing a story he was telling that he didn't notice, or didn't care, that the dirt he was standing in was actually a tomato garden and he was crushing all the tomatoes. He was so singularly focused on his story that he missed what was going on around him. There are plenty of sayings that capture this idea but I liked the story.

It's worth bearing in mind as Congress now turns its attention to climate change and major reforms in the areas of tax, immigration, and health care. Then there's the ongoing credit crunch and the regulations that will inevitably follow. We haven't started talking about foreign policy but the point should be clear.

We are going to be making dramatic changes to our current policy environment. That's great, but we should not rush through changes that may last for decades. Beware of anyone who argues that there's no time for alternative proposals.

Festschrift for Jane Jacobs

Sanford (Sandy) Ikeda is writing a short paper for a forthcoming Festschrift for Jane Jacobs. The following is the first paragraph of an extended abstract:

A city is not a man-made thing. Rather, it emerges from the actions of its inhabitants, who interact in unpredictable yet orderly ways. Under the right conditions – the right “rules of the game” – what arises is vital,creative, radically unpredictable, and profitable: the living city.

Source. Sandy wrote a nice remembrence for Jacobs in 2006 you can find here. I'll add info when we find out more about the forthcoming book.

Sachs on Aid for Agriculture

Following the G-20 summit President Obama called on Congress to double agriculture aid to developing countries. Jeffrey Sachs likes the proposal but is concerned with how the the aid will be used and disbursed (NYT):

A crucial factor in determining the program’s success will be how Washington delivers aid to the farmers. The traditional approach, and the wrong one in this case, would be for Washington to try to decide what’s best for each country, and then spend considerable time and money on report-writing, site visits and professional advice. When aid programs are operated this way, they can end up spending half or more of their funds on United States-based travel, personnel and administration, and take years to get off the ground. The benefits for poor countries are then much too little and too late.

Sachs offers a solution:

Rather than have Washington decide the kind of aid each country will receive, the recipient countries should be invited to prepare plans and budgets that would be reviewed by independent experts. These plans would describe the inputs needed by the farmers, the expected increase in production, how the strategy would be put into place and how much money would be required. Such plans, if described with care, could then be closely monitored by the United States and other donors to gauge results and avoid corruption.

So if I understand his proposal properly he does not believe that top down planning from rich Westerners will do much good and will in fact result in much of the money being squandered on research, but instead believes that top down planning from recipient governments is the answer? Okay, I'm being cynical, but are governments, based in large, populated cities, really the best to recommend (force?) to farmers what inputs should be used for production? I do not understand the appeal of replacing one group of planners with another group of planners.

I do like the approach of using aid as a prize, but couldn't the money go directly to local farmers, i.e. the people who know what they need to do but are capital constrained? At best the research on government to government foreign aid shows that it only helps governments that are already pursuing sound economic policies. Can't we use innovative tools - perhaps business plan competitions - to get money directly to entrepreneurs?

Bill Drayton: Shifting the Tax Burden from Goods (Employment) to Bads (Carbon)

In Spring 2006 the President's Science Adviser, John Holdren (then at the Kennedy School), published an essay for Innovations titled "The Energy Innovation Imperative: Addressing Oil Dependence, Climate Change, and Other 21^st Century Energy Challenges:" Bill Drayton subsequently wrote a letter in response, published in the Fall 2006 issue of Innovations, arguing for the eminently sensible policy of shifting the tax burden from goods (employment) to bads (carbon)--see also Tom Friedman in yesterday's Times. Here is the full text of Drayton's letter:

I strongly agree with, and share, John Holdren’s intuition that accelerating the incentive for innovation is the most powerful and also politically feasible strategic avenue open [for addressing energy challenges].

That there is little investment in public research may not be altogether such a bad thing. The data I have seen about the efficacy of government research in either the environment or the energy area is quite discouraging—and not in the least bit surprising given the incentive structure prevailing in government laboratories.

You mentioned the leverage of emissions trading in a final sentence of your discussion of innovation. When we were working to create this system in the Carter years and before, in fact it was precisely this end that was my chief motivation and argument. If one can get every plant manager and engineer to have a powerful interest in innovation and in pollution abatement—especially in those elements where results are relatively low cost—one has achieved the best possible result. Once emissions trading is going full blast, every plant manager will have the same incentive (profit maximization) to innovate for the public environmental good as she or he does to increase the production of goods. (A July-August 1981 Harvard Business Review article I authored, titled “Thinking Ahead: Getting Smarter about Regulations,” outlines what we had then built. As you’ll see if you review the article, the basics today are what they were then!)

In contrast, the existing system gives managers a powerful incentive not to innovate lest that innovation becomes the new “best available technology.” Equipment manufacturers, most notably, sell to customers who very definitely do not want them innovating to raise the bar.

Strong incentives to reduce emissions help energy conservation; but, I believe, we need incentive tools that are aimed directly at energy as well.

In this regard, I would draw to Holdren’s attention a working paper [titled “Job Creation Tax Options”] that Get America Working [an organization of which I am the founder and chair] published several years ago. It outlines 20 natural resource taxes to demonstrate how easy it would be entirely to replace the country’s enormously destructive payroll taxes. The energy inefficiency tax, in particular, is politically low cost and would give managers a most powerful incentive continuously to seek out new energy technology “S-curves.”

Bill Drayton
Founder & CEO, Ashoka: Innovators for the Public
Founder & Chair, Get America Working

Editors’ note: Drayton was Assistant Administrator at the U.S. Environmental Protection Agency from 1977-1981, during which time he led the implementation of the first emissions trading system and the introduction of other mechanisms to sharpen incentives to comply with environmental regulations. Drayton and Holdren are both members of the advisory board of Innovations.

It's Mass Hysteria!

Dane Stangler at Kauffman's Growthology blog captures the feeling of our historic times:

But what does it feel like to live through a historically significant structural change? Well, it turns out that it feels pretty historic. There are headlines we probably never thought we'd see ("Detroit's Fate Sealed in West Wing"). There are government deficits the size of which few probably ever bothered to even consider ($1 trillion!). And while we may not yet be at the point of a Ghostbusters-style apocalypse ("Human sacrifice, dogs and cats living together... mass hysteria!"), some things seem downright batty. What were the Vegas odds eight months ago on Paul Krugman turning against Obama

What state of the world are we in when Bill Murray becomes the voice of reason and sanity?

Another Great Depression?

Today's New York Times carries a story about a symposium at the Council on Foreign Relations taking a "second look" at the Great Depression.

O.K., well for starters this is probably more like a two-hundredth look at the Great Depression. That aside, the question of the actual impact of the New Deal on the nation's recovery from the Depression is an interesting one requiring serious consideration. Amity Shlaes's book on the topic really is a must read--particularly if you are predisposed to discount her conclusion that the New Deal was at best a mixed-bag of policies that did as much to slow as to accelerate recovery.

But there is another issue that can be resolved much more easily. That is the extent to which the nation's current economic predicament compares to the Great Depression.

Here's the answer: There is no comparison between the Great Depression and today's economic crisis.

Put differently: There is NO COMPARISON between the Great Depression and today's economic crisis. To compare the two is actually to insult the memories of our parents, grandparents, or great-grandparents, as the case may be, who endured that era of hardship and struggle.

I'm not even going to get into the macro statistics--the fact that the unemployment rate today is 8.5%--about the same as the average in Western Europe for most of the last 50 years--while employment in the Great Depression peaked at 25%. Those numbers are already circulating in the public debate.

No, I'm talking about the daily existence of average Americans. It may not come as much of a surprise that fewer than 15% of households in 1934 had a telephone or an automobile. But it is also a fact that 31% of U.S. households in 1934 had no running water, 39% had no shower or bathtub, and 32% had no indoor plumbing. Yes, 1/3 of Americans had no toilet.

Now, how bad would this crisis have to get before 1/3 of Americans today ended up without a toilet, and 85% gave up their car and their phones?

Of course, to get back to 1930s living standards, we'd also have to do away with antibiotics and all the rest of medicine. (I didn't say "modern medicine" because medicine in the 1930s was closer to the days of Hippocrates than it was to medicine today). We'd have no Social Security, no Federal Deposit Insurance, no unemployment benefits. We'd have no Gmail, iPods, or American Idol. Etc.

Are we collectively ready to take all of this advancement in well-being for granted? That would be unfortunate, since most people in the world do not have access to the amenities that we citizens of the World's Largest Country Club have the privilege to take for granted. Indeed, perhaps the most promising change occurring in this country and elsewhere in the "developed" world today is the subtle awakening to the reality that all people--notably including Indian slum-dwellers who win Academy Awards and sons of Kenya & Kansas who happen to become President of the United States--are actual human beings whose existence and experience as matters. The Gates Foundation's slogan "All Lives Have Equal Value" states an apparently obvious truth that in reality is the single most deeply transformative idea of our era.

"Poor" in the world today doesn't mean that your 401K just lost 60% of its value. "Poor" means that your children have a far better chance of dying of diarrhea than they do of going to college. Whatever difficulties most Americans may be facing at the moment, they in no way compare with the hardships faced either by our ancestors during the Great Depression, or by the majority of people elsewhere in the world today whose daily wages amount to less than the price of a latte.

At home, the putting greens may be closed and our golf clubs may have been repossessed, but we still have a pot to piss in. Let's be thankful and start to build the Next America, rather than wasting our time lamenting the demise of the last.

Fostering A New Generation of Social Entrepreneurs

Bill Drayton, founder and CEO of Ashoka, spoke on a panel at the Skoll World Forum recently (Social Enterprise):

Drayton said that if a 15-year-old was not showing the signs of being a ‘change maker' they were not going to be spurred into action by the time they were 30.

‘The 15-year-old will be out of the game if he or she is not mastering these skills now,' he said. 'We have to give children and young people opportunities to learn. If we give them these skills, they will go for it, but we're not at the moment.'

Drayton said the key time to inspire the social entrepreneurs of tomorrow was between the ages of 12 and 20 and that this type of education could have an impact on today's ‘youth cultures', which he said made young people anti-social.

Phil was on the same panel and explained why, in a world of increasing virtual learning opportunities, universities are still relevant in this process (make good):

The value of universities is as clusters of mentors, geographically concentrated, in the role of not just teaching, but day-to-day mentoring. This activity by its very nature requires proximity and touch. These are capabilities that should reside in universities—this is a key to their ongoing relevancy in a changing world.

Leaving Michigan

Detroit's problems are well documented and what is playing out at the city level is occurring throughout the state as a whole (HT).

The state's net loss to outmigration -- the number of people leaving the state minus those moving in from other states -- has skyrocketed since 2001. Although the Census Bureau does not report totals moving in and out each year, Internal Revenue Service records show that the population decline is a result of two disturbing trends: The number of Michigan residents leaving the state rose 25 percent between 2001 and 2007, while the number of new residents moving in plummeted by nearly one-third.

Since 2001, migration has cost Michigan 465,000 people, the equivalent of the combined populations of Grand Rapids, Warren and Sterling Heights -- the state's second-, third- and fourth-largest cities.

Population loss of that magnitude is so rare that its impact has never been studied. But The News' analysis discovered some sobering trends:

• Those leaving Michigan are the people the state most needs to keep -- young and college-educated. The state suffered a net loss to migration of 18,000 adults with a bachelor's degree or higher in 2007 alone -- the equivalent of half the staff of the University of Michigan crossing the state line.

Source. This is obviously bad news for the state. U-Haul provides one glimpse of where people are headed. A few days ago they released their annual report on the 50 U.S. Destination Cities. No surprise that Detroit is not on that list.

Another way to have fun with U-Haul is to compare the rates to and from select cities. Detroit has long had more demand for outbound travel than for inbound. Here is one list from 2006 that looks at the rates for renting a U-Haul for a one way trip out of Detroit to a handful of different cities. The list also looks at the reverse trip. It is generally much more expensive to leave Detroit than to migrate to the Rock City.

I just looked up the rates for a couple of cities and the trend seems to be about the same. For example, renting a 26 foot U-Haul for the trip from Detroit to Atlanta costs $1006. The same truck from Atlanta to Detroit costs $$693. It's the same for the Detroit to Sacramento route: $3,548 to Sacramento and $2,296 to Detroit. For some reason it is cheaper to move from Chicago to Detroit. I'm not sure what to make of that. In general though you can see the strong demand to leave.

Booming Demand for Economics Major

From Mark Perry:

Like many liberal-arts institutions, Middlebury College, where I teach, has a problem: Too many students want to be economics majors. Economics enrollments keep growing, and adding more faculty members to the department seems to only increase the demand. The rumor on the campus is that if the college actually provided enough professors to meet the demand for economics courses, it would have to change its name to the Middlebury School of Economics.

President Lincoln Invented the Emoticon

NPR's Wait Wait... Don't Tell Me focused on technology and innovation on today's show (it is a quiz show, if you are not a regular listener.) Today's episode had some interesting trivia and it's good to keep on in the background.