Failure is Now an Option

According to Nature, the science journal Restoration Ecology is dedicating one section to publishing articles that do not confirm expected hypothesis or that do not meet standard levels of statistical significance (HT). Obviously this is a problem in the social sciences as well and it would be great if some of the top journals would follow this example.

Arts and Economics

One of my good friends did a double major in arts and economics. People thought it was an odd pairing but I always figured it kind of made sense. Perhaps I've been around too many economists who doodle when they're bored. Anyway, this post at my slice of pizza caught my eye:

Here is an evening. You hear Mort talk. He is a pioneer of electronic music from 60's, an early contributor to CalArts, and an incessant musical experimenter. You hear him say that if he'd do it all again, he would be an Economics major. Not because as an artist (or a scientist even) you need to know how to manage your image and make money, but because, in order to understand the world as it is, the people as they are, you have to understand Commerce. This has been true through the times, commerce has moulded Arts. Now with barrier to Arts low (many can shoot films and upload, far too many can write and publish, and far, far too many can mix music and dj) and attention splintered into niches, commerce seems everywhere in Arts. This is not a bad thing.

Is Google the next Goldman Sachs?

GS is known for having the smartest brains and being the most successful in finance. They also produce many of the top officials in the federal government and have always enjoyed close ties to the authorities in Washington (surely a conspiracy theorists dream if ever there was one). With the other top investment banks closing, this tight integration is bound to continue and will likely increase.

In the tech industry, by contrast, there has been much less integration between Silicon Valley and Washington (yes, I know about Vannevar Bush and how close the ties were between the Route 128 giants and Washington). This isn't a function solely of distance, many top tech companies are located just a few miles away in VA's Internet Alley (think AOL for example) - more broadly it represents the way the networks are designed out west. I'm sure there are a few Microsoft alumni running around DC, but the integration at the top has never been as strong.

In fact, Microsoft, for much of its history had little presence in Washington. It was only with the antitrust cases that they set up their own public policy group. Google, though far younger, already has a policy shop in town. This is smart since there is increasing talk that they will be more heavily regulated. What I find interesting is that Google is already building close ties with Washington. Witness the recent appointments to various positions in the administration of people with ties to Google. I'm not suggesting the Obama administration will go easy on the search giant. On the contrary, it seems that despite close ties between Schmidt and Obama, the DoJ's antitrust division very quickly decided that Google deserved closer antitrust scrutiny.

But, like Goldman's, Google is known for having the smartest brains and being the best in its field. Given that it will be more difficult to hire "subject experts" from lobbying groups, will this make it more likely that government turns to successful firms like Google for its talent?

Signaling and Human Behavior

Robin Hanson on signaling theory in economics (Overcoming Bias):

There are literally hundreds of papers out there showing how signaling can or does explain various details of human behavior. In fact, fifteen years ago my Ph.D. thesis advisor told me not to write such papers, because there were already so many of them that they weren’t very interesting.

Yet people keep complaining everytime I mention a signaling explanation of something, that I’m too free with such explanations. So I’m stuck between an academic discipline that considers such explanations too obvious to be worth publishing, and an audience that finds them too implausible to believe, even when backed by such publications. [emphasis added]

Small Business Lending

As part of the stimulus bill the Small Business Administration will disburse funds in mid-June as part of "America's Recovery Capital" program. Apparently many potential lenders are nervous about the program and are not racing to support the plan, despite assurances from the SBA that details are coming soon (The SBA has released a fact sheet for lenders). Hopefully the details are clear and banks support the plan because, green shoots aside, small businesses are not yet out of the woods (USAT):

Nearly half of small-business owners say economic conditions for their firms will worsen in the next six months — and 49% said temporary cash-flow issues over the past 90 days already have caused them to hold off on paying bills. The findings, released today, are in a survey this month of 750 small-business owners by credit card issuer Discover Financial Services. [emphasis added]

The percentage reporting cash-flow issues is at the highest level since August 2006, when Discover launched the Discover Small Business Watch monthly survey of entrepreneurs who have fewer than five employees.

Green Government

Noblis (formerly MitreTek), a nonprofit science, technology and strategy organization recently released a new issue of Sigma, one of their main publications. The current issue focuses on the Green Federal Enterprise. The full contents are here and the issue is freely available as a pdf. There are a couple of book reviews and a number of good articles, including a good piece on the importance of green analytics (pdf):

Without green analytics to provide benchmarking, forecasting, data manipulation, and reporting and graphing, the potential of energy efficiency measures and emerging green technologies, such as smart meters, will not be fully realized. Green analytics provides the tools to enable decision making within the enterprise. The capability to see when and where energy is consumed allows facility managers and policymakers alike to better manage equipment, energy load, and the effect of energy-related improvements.

Slumdog Entrepreneurs

Ed Glaeser's column today in Economix (NYT) focuses on the dense concentration of self-employed entrepreneurs in Mumbai's slums. Glaeser cites one survey that found that around 43% of urban Indians in Mumbai were self-employed. There is no comparable comparison in the U.S. - not even close. I think he correctly analyses the important reasons for this high level of "push entrepreneurship" when he writes: "I suspect that it reflects both good things about the country, like energy and intelligence, and bad things, like a maze of regulations that make it difficult to build large firms that follow the rules."

You can certainly see the regulatory problems reflected in the World Bank's Doing Business Survey. Overall the headline indicator("Ease of Doing Business") ranks India 122 out of 181. Among the lower middle income countries in the sample India is only 35 out of 57, with Bosnia and Herzegovina above, and Lesotho right below. Among the subsets in the survey there are some bright spots, such as Getting Credit (28) and Protecting Investors (38), but other categories reflect India's institutional weaknesses. For Starting a Business, India ranks 121, for Registering Property (105) and Dealing with Construction Permits (136). Finally, in some categories India's performance is flat out horrendous: Closing a Business (140), Paying Taxes (169), and Enforcing Contracts (180). Glaeser captures the impact of these regulatory burdens with this excellent paragraph:

Fifty years ago, John Kenneth Galbraith described America as a place of private affluence and public poverty. India is a nation where private citizens, both rich and poor, do amazing things despite tremendous failures of the public sector.

Resurgence

Come the census of 2010, Philadelphia might post its first population gain in 60 years. My what a difference an immigrant wave can make.

From an excellent and readable article at Cleveland.com, via Richard Florida. The article offers a profile of a new non-profit, the Welcoming Center for New Pennsylvanians, founded by Anne O'Callaghan, an Irish immigrant. And this:

Not long ago, demographers packaged Philadelphia with Cleveland as a "former
gateway" on a downhill slide. Then, in November, they spied a surprising trend. Immigrants were coming, bringing a culture of entrepreneurship and high-tech skills. The Brookings Institution declared that Philadelphia was poised to re-emerge as a destination city. [emphasis added]

New Hong Kongs

Apparently this is Paul Romer's latest idea, via Unsettling Economics:

Paul Romer proposes that developing countries could invite instant Hong Kongs—new cities in new locations run by experienced governments such as Canada or Finland. They would enrich the country where they are built as special economic zones while also rewarding the distant government that makes the investment of building the new city state and installing a set of fair and productive rules. Over time, as with Hong Kong, the new city is turned over to the host country.

HT Mark Thoma. I don't really know what to say. Dr. Thoma didn't offer any comments either. Just off the cuff, my first take is mostly disappointment. This is yet another top-down approach that does nothing to build institutional capacity in the host country and offers little in the way of fostering entrepreneurship. But perhaps I am missing something.

Trust and Innovation

Karen Stephenson spoke last March at NESTA on the topic: "What is trust and why is it important for innovation?" It is an interesting topic and her remarks were thoughtful. She also spoke at a second session on: "Forms of trust and the power of social networks." They are both worth checking out (NESTA).

More recently (last Friday) NESTA held a conference on open innovation and intellectual property. The videos are available here. There are a number of other great videos featuring excellent scholars like Eric Von Hippel and Howard Rheingold. It is a good reference so check it out.

Q&A on the Economy and Entrepreneurs

Tim Kane took questions today at the Post about the economy and small businesses. This question and answer was interesting (WP):

Washington, D.C.: A new Kauffman study (pdf) says immigrants are becoming entrepreneurs at a higher rate than natives. Why do you think that is and what are the characteristics imigrants have that may be fueling this trend?

Tim Kane: Hi D.C. Yes, my colleague Bob Litan and I have written another paper advancing what we call "knowledge economy immigration" so I have a strong opinion here. Immigrants have probably always been more entrepreneurial than the native born, just by the nature of their efforts and personality in migrating. But Vivek Wadhwa has identified some key facts that bear attention by Congress. We've sponsored some of his research which you can find at kauffman.org, but I recommend his BizWeek columns highly also.

Bottom line: migrants not only create more companies on average, but they crate more jobs, too. It's a win-win for the U.S. to have high skill migrants here, and Congress should be working on an "entrepreneurs visa."

On the down side, though Tim offered, no one asked any questions about the new Star Trek movie. So Tim, is it still true that Vulcans never smile?

Shaping the Smart Grid

Cisco today announced details for its plan to enter the emerging smart grid market that it estimates will grow to many multiples of the size of the internet and generate some $20 billion in revenue per year.

Meanwhile, Energy Secretary Steven Chu and Commerce Secretary Gary Locke spoke about the need to establish interoperability standards for the devices that will connect to the grid. Of particular concern is the resilience and robustness of the system. Their press conference was taped by C-SPAN and is available here.

The Energy Dept. also announced that "the $10 million it received to support the development of interoperability standards under the American Recovery and Reinvestment Act has been provided to NIST to help accelerate their efforts to coordinate these critical standards." NIST is holding a second workshop on standards development May 19-20.

The federal government is not alone in working on the creation of new standards. The IEEE, along with Intel will be holding a conference in June to work on these issues. The standards that utilities and regulators adopt will affect which companies succeed and the subsequent lock-in and path dependence that result will affect our energy policy for decades to come. Consider that our current system emerged from the War of Currents in the 1880s.

Finally, for some excellent background reading about the smart grid you can do no better than to see Lynne Kiesling's excellent posts at Knowledge Problem (start here for a five-part series). Note that much is at stake and large companies and aspiring startups will pursue a multi-pronged approach to get their standards and products adopted. Along these lines Google has already filed comments with DOE and they are not alone (Google).

NFIB Small Business Survey

Still catching up, but from last week there was some good news on the small business front. From NFIB's press release:

WASHINGTON, May 12, 2009 –The National Federation of Independent Business Index of Small Business Optimism rebounded 5.8 points in April to 86.8 (1986=100), led higher by eight of the 10 Index components.

“This is good news for GDP growth and a rescue of the job market,” said NFIB Chief Economist William Dunkelberg. “However, the report indicated no immediate turnabout as the improved numbers were still very low.”

The month’s real bounce was the soft indicators, the “feel good” portion of the survey. The outlook for general business conditions moved sharply higher, jumping by 24 points and leaving a majority judging that conditions would improve over the next three to six months. Expectations for gains in real sales increased 20 points, rising to a net-negative 11 percent expecting improvements—still negative but a solid move up from the March record low.

While small business owners think future prospects are brighter, the daily realities show deep problems remain. Employment, capital outlays, inventories, sales and earnings languish at historically low levels. [emphasis in original]

And some commentary from the survey itself (NFIB):

Most commentators compare our current situation to our experience in the 1980-82 period. There are similarities in the behavior of owner optimism, although the problems facing the economy were quite different (15 percent inflation, 21 percent prime rate, 17 percent mortgage rates, 10 percent unemployment rate). The Optimism Index peaked in 1976:2 at 103.2 and fell to the record low reading of 80.1 in 1980:2. This was a decline of 23 points in 16 quarters. Optimism peaked in the current expansion at 105.8 in 2004:3 (although virtually identical readings occurred in the prior two quarters) and fell 22 points to 84.1 in January this year. Both declines were about 20 percent in magnitude and over roughly the same period of time. In 13 quarters, the Index rebounded 28 points to 107.7 in 1983:3, signaling the start of the 1980s expansion. The April Index reading rebounded 5.8 points from March and is up 2.7 points from January. Perhaps this is the beginning of the end of the recession.

Freedom From Want

The subtitle is: The Remarkable Success Story of BRAC, the Global Grassroots Organization That's Winning the Fight Against Poverty. I just started reading but already would recommend this book to anyone interested in development and social entrepreneurship. I was hooked from the first paragraph in the preface:

In 1972, shortly after the Liberation War, I was sent by CARE to Bangladesh -- "a thumbprint of a country in a vast continent," as Tahmina Anam has so eloquently described it. I was to work on a self-help housing cooperative project. We provided plans, material, and technical assistance to help people build their own low-cost, cyclone-resistant houses. We imported thousands of tons of cement and enough corrugated tin sheets to cover a dozen football fields. The project was massive, but failed. The houses were constructed, but the cooperatives -- which were arguably the most important component, because they aimed to generate funds for longer-term agricultural development and employment -- failed miserably. We had a large office in Dhaka (then known as Dacca), lots of jeeps and trucks and speedboats, and many international staff with energy and commitment to spare. Our only problem was that we had almost no idea what we were doing.

While I was in Dhaka ordering freighters full of cement from Thailand, a tiny organization was forming on the other side of town and in the rural areas of faraway Sylhet to the north. I recall meeting Fazle Hasan Abed at least once in 1972 or 1973, and I remember people speaking about BRAC with a kind of awe. Their attitude did not flow from anything remarkable BRAC was doing at the time, everything was remarkable in those terrible postwar years. What caugh people's attention was the fact that BRAC was a Bangladeshi development organization -- something few outsiders had ever heard of, much less conceived.

In two paragraphs Smillie basically sums up Easterly's two great books and moves onto new ground. This is not just a criticism of foreign aid and of "planners," in Easterly's terminology, it is the positive story of how "searchers" or more accurately, social entrepreneurs, can improve conditions on the ground with local knowledge and the proper incentives. Phil sums it up best: "Think Muhammad Yunus & Grameen are something? Wait til you read about Fazle Abed & BRAC." The book is available through Amazon, but while you're waiting for it you can read this piece by Fazle Abed in Innovations.

Here is the author, Ian Smillie, discussing his work:

Update on Mason's QEP

For those that have been following this, the votes are in and the Mason community has announced its plans for its Quality Enhancement Plan:

George Mason University’s Quality Enhancement Plan (QEP) will help Mason foster a culture of scholarship and creativity among students and faculty by engaging departments across the institution in disciplinary, interdisciplinary, and co-curricular inquiry, exploration, and activity. This culture of scholarship and creativity shall include opportunities for students and faculty to explore global issues, to author original research projects and creative works, and to apply imaginative thinking to today’s pressing questions and social concerns. The QEP Planning Committee believes there is considerable energy throughout the university for the ideas embedded in this vision, along with a number of opportunities to develop and build on existing programs and activities.

Engaging students with faculty in a culture of scholarship and creative activity will enhance Mason’s competitive position among the most prestigious research universities in the country; will foster innovative breakthroughs and initiatives that further disciplinary and interdisciplinary knowledge and understanding; and will be a catalyst for creating leaders with the knowledge, experience, and competencies needed to meet the challenges of the 21st century.

During the next year and a half, a QEP Planning Committee will be developing a plan for implementation to make this vision a reality. We sincerely appreciate the input and involvement of the more than two thousand students, faculty, and university administrators who shaped our thinking during the past year by participating in community forums, departmental and college-based discussions, the QEP Café, and the recently concluded on-line survey. The resulting QEP project represents a collaborative synthesis of ideas from many sectors of the university.

For more about this initiative see the Executive Summary (pdf). Here is a short excerpt:

To develop leaders who can address the complex challenges of the 21st century, Mason students must develop critical skills in acquiring, analyzing, evaluating, integrating and applying knowledge to generate and develop new ideas and tools. This QEP proposal focuses on creating and nurturing a culture of scholarship, creativity, and research that stretches beyond disciplinary boundaries and permeates Mason. Mason has a strong emphasis on faculty-driven research and creative activity, but a culture of student scholarship remains to be created across the university. In this context, student scholarship is taken to mean research and creative activities that require active student participation to generate new knowledge or create new works. Examples of such activities might include creative discovery and expression in one’s discipline, one-on-one research with a faculty member, or group projects where students work with faculty and community members to address local problems or bring arts and sciences to a wider audience. The goal of this initiative is to create a pervasive culture of student scholarship, beginning in the first year and continuing through graduation. This will make it evident to all members of the Mason community that students are actively engaged in scholarship and will invigorate and excite faculty and students, leading to deeper engagement in research and creative activity institution-wide.

Here is a longer white paper. While we were hopeful the social entrepreneurship proposal would be adopted, the results should not be seen as a setback for social entrepreneurship at GMU. Professors Auerswald and Rogers and the rest of the motivated students and faculty have already made great strides at promoting a relatively new field through their involvement with the Ashoka Changemakers Program and other initiatives. The faculty, but especially the students, deserve credit for showing how far an idea can progress and, especially, how quickly progress can be made. A few years ago Social Entrepreneurship was not on the university's radar, now it is one of its major selling points. For the students, I hope they see how close they came to getting their proposal adopted.

Science and Technology Policy in Rwanda

As part of the Compton Lectures at MIT, Rwanda's President Paul Kagame spoke about the "Imperative of Science and Technology in Accelerating African and Rwandan Development" (MIT):

“Our continent is no longer all about violence and disease and human disasters that scarred many African countries in recent decades,” says Kagame. “We are now becoming a continent of opportunities.”

There are those who doubted Rwanda could “constitute a viable state,” says Kagame, but 14 years after bloody genocide and civil war, his country has managed an astonishing revival -- enough “stability and resilience to allow the economy to grow at an average 7% annually in the past several years.” Other African nations have been expanding at the same pace; oil producers are zooming along at even faster clips. Kagame attributes this recovery to such factors as the “leapfrogging power of mobile technology,” where hundreds of millions of new cell phone users, even in remote areas without electricity, drive the growth of new business. And the number of internet subscribers in Africa is growing more than three times as fast as the
rest of the world, says Kagame.

Cell phones and the internet allow Rwandan and other micro entrepreneurs to develop business networks. Kagame describes how technology helped a Kigali bakery expand beyond its neighborhood to reach more customers and suppliers, enabling workers to move into larger homes. In Kenya, Kagame recounts, a new agricultural commodity exchange “has reduced barriers between farmers, traders and consumers,” with the internet and cell phone text messages providing timely market information. This network has improved the incomes of farm families by 25%, leading to better healthcare and education. Rwanda’s power utility is also reaping the benefits of technology, keeping track of customers and accounts more efficiently, and no longer relying on government handouts.

HT. Also see this recent piece in the Christian Science Monitor about a young Rwandan mobile phone entrepreneur. The article describes Rwanda as the "Singapore of Africa." This bit from a student captures their spirit of enterprise:

"When you start a business, you have to take a risk," says Mr. Ntwale. "Sometimes you fail, but you have to keep going. Our president [Paul Kagame] says you have to create your own business, not wait for someone to hire you. People used to just graduate and expect a job, but if I don't start my own business today, I won't do business in the future."

Finally, for more on the role of mobile phones in development, be sure to read the interesting dialogue between Iqbal Quadir and Nicholas Negroponte, "Phone vs Laptop: Which is a More Effective Tool for Development?" Innovations Journal. It is also available in Good.

When Do Macroeconomic Policies Matter?

A nice natural experiment from the latest NBER bulletin:

Economists have long believed that there is a correlation between institutions and economic performance. Rich countries, they argue, have laws that provide incentives to engage in productive economic activity. Investors rely on secure property rights, facilitating investment in human and physical capital. Government power is balanced and restricted by an independent judiciary. Contracts are enforced effectively, supporting private economic transactions. Yet these institutional factors are not the only determinants of economic growth, even over horizons of several decades.

Barbados and Jamaica provide a striking counter-example to the institution-focused long-run view of income determination. In Institutions vs. Policies: a Tale of Two Islands (NBER Working Paper No. 14604), authors Peter Blair Henry and Conrad Miller remind us that both countries inherited property rights and legal institutions from their English colonial masters, yet experienced starkly different growth trajectories in the aftermath of independence. From 1960 to 2002, Barbados' GDP per capita grew roughly three times as fast as Jamaica's. Consequently, the income gap between Barbados and Jamaica is now almost five times larger than at the time of independence. Since their property rights and legal systems are virtually identical, recent theories of development cannot explain the divergence between Barbados and Jamaica. The authors show that differences in macroeconomic policy choices, not differences in institutions, account for the differing growth experiences of these
two Caribbean nations.

Here is an ungated working paper.

The Social Innovation Fund

Last night we got more details on the proposed Social Innovation Fund from Michelle Obama (WP):

President Obama's budget for next year will include $50 million to help expand nonprofit programs across the country to promote national service, first lady Michelle Obama announced tonight at an event in New York.

The White House initiative, known as the Social Innovation Fund, is a component of the new Serve America Act. Mrs. Obama said that it would provide capital to support innovative nonprofit organizations and to help social entrepreneurs expand "their successful approaches to tackling our most pressing national challenges."

[...] Mrs. Obama added, "By focusing on high-impact, results-oriented nonprofits, we will ensure that government dollars are spent in a way that is effective, accountable and worthy of the public trust."

Via @auerswald, @vppartners and @socialcitizen. More details at the Chronicle of Philanthropy's Conference Notebook.

GMU Wins Governor's Award

From the Mason Gazette:

Mason Receives Award for Social Entrepreneurship Project
May 5, 2009
By Dave Andrews

There’s more to Northern Virginia and Washington, D.C., than politics and defense intelligence. Another main regional focus – recently given added emphasis from the Obama administration – is social change involving not-for-profit organizations and international development.

Mason was recently awarded a Governor's Volunteerism and Community Service Award by Gov. Tim Kaine as part of the university's partnership with the Phoenix Project, a Virginia-initiated project to develop and implement effective social media tools to create high-quality student service learning.

The award highlights the “efforts of outstanding citizens of the Commonwealth who seek to enhance the lives of others in their communities. The awards are presented to groups, individuals and families whose efforts exemplify extraordinary volunteer service,” according to a press release from the governor's office.

“I offer sincere congratulations to the volunteers who made a difference in the lives of others this year,” Kaine said during the awards ceremony. “When we serve our community as volunteers, our unique skills, perspectives and experience make us a stronger Commonwealth.”

Philip Auerswald, an assistant professor of public policy who directed Mason’s involvement with the Phoenix Project, says this recognition positions Mason well to launch future social entrepreneurship initiatives.

“Our mission in partnering with the Phoenix Project was not simply to increase volunteerism among Mason students this year,” says Auerswald, “but rather to build a social networking infrastructure that would draw students to engage and collaborate on service activities at a level not previously attained.”

Mason was selected to partner with the Phoenix Project because of its expertise in technology and ability to evaluate the program to provide the tools necessary that enable university students to engage in community service.

Mason has also been heralded for its publication of Innovations, one of just two major journals in the country focusing on social entrepreneurship. It is published jointly by Mason, the Harvard Kennedy School of Government and the Massachusetts Institute of Technology. The editors of Innovations have produced special editions for each of the previous two World Economic Forum annual meetings.

This year of social entrepreneurship at Mason got off to a strong start when Mason was chosen by Ashoka – a global organization supporting entrepreneurship – as one of four universities to participate in the pilot year of its “Changemaker Campus” initiative. The year-long program partnered student and faculty teams at Cornell University, Johns Hopkins University, the University of Maryland and Mason to “use an entrepreneurial approach to develop high-impact programs for social entrepreneurship on their respective campuses.”

The momentum of these activities, Auerswald notes, was reinforced last month when students involved in the Changemaker Campus initiative developed a proposal for Mason's Quality Enhancement Plan. The proposal, “Social Innovators and Social Entrepreneurs: 21st -Century Leaders of Change” has been selected as one of three finalists for adoption.

Philanthropy as Taxation

Arnold Kling pulls the following section from a post by Scott Sumner:

[BTW, Bill Gates essentially taxed middle class consumers all over the developed world, and is giving almost all of the money to the disadvantged in poor countries. That's something governments don't do, and yet for his "monopoly profits" he is despised by many on the left. Nor does this fact show up in the so-called "income distribution" data that is taken seriously even by economists who should know better.]

The paragraph is in parentheses because it is one small part of a larger article about efficient markets and luck. The paragraph is really about a larger question on the social value of Microsoft and of the role of philanthropy in a capitalist system. Robert Barro stirred up debate about Microsoft's social value in a WSJ op-ed and accompanying analysis, and one of my fellow grad students has an excellent working paper, coauthored with two faculty members, comparing the Grameen Bank with Microsoft (is there a published version of this yet?). The punch line from these inquiries is that Microsoft, despite its appearance as a nasty monopolist, does provide considerable social value.

More broadly, Sumner's paragraph is a perfect example of the role of philanthropy in creating new opportunities. As Phil and Zoltan put it in their American Interest piece:

When wealth is reconstituted through giving to create new opportunities, a virtuous cycle ensues: Opportunity creates entrepreneurship; entrepreneurship creates wealth; and wealth, in turn, creates opportunity. This is the inner dynamic of American capitalism and the source of its prosperity.

Masonomics

Arnold Kling discusses Alex Tabarrok and Tyler Cowen's new Macroeconomics textbook and finishes his review with a summary of Masonomics:

So, here are some thoughts on Masonomics in general.

1. Incentives matter. That is central to economics. It also is important for political economy--Masonomics uses public choice, which says that government officials, rather than acting as benevolent omniscient stewards, respond to incentives.

2. Signaling matters. It matters in education, health care, finance, politics, marketing, and personal relationships. I would suggest that if there is to be a Masonomics perspective on macro, then signaling should be central.

3. Institutions matter. Formal and informal rules shape economic behavior, for better or worse. For example, differences across countries in the standard of living are determined largely by institutions.

4. Evolution matters. When others see a lack of planning or central direction as chaos, Masonomists see Hayek's spontaneous order. A system of decentralized trial-and-error decisions works better than many people realize. Central regulation works less well than many people expect.

I've had a few courses in the econ dept but the bulk of my experience is with the School of Public Policy (SPP). In general SPP represents a wider range of views across a range of disciplines (economics, sociology, political science, engineering...), but the two main items I'd add to this list are that regions are the most useful unit of analysis, and that it is not possible to talk about domestic policy without talking about international policy; there are few domestic policies that are not affected and influenced by internalional institutions and politics. In general there is considerable overlap between the economics department and SPP, and both departments share a focus on rigorous and multidisciplinary methods (econometrics, social network analysis, GIS...).

Accelerating Social Entrepreneurship Conference

If, like me, you could not make it to the 2009 ASE conference, you can follow a discussion of the events via twitter. Keep refreshing for more new content. You can also follow @ASE_Conference. The program is on the ASE conference website.

Coase's Floor

Clay Shirky at the Smithsonian (HT).

Culture War Over Capitalism?

As far as I can tell Arthur Brooks deserves his reputation as one of the foremost thinkers among self-identified "conservatives." (Who Really Cares? and Gross National Happiness: Both serious and provocative books.) So I was more than a bit surprised to see Brooks' name at the top this depressing amalgamation of political platitudes, appearing on the opinion page of Thursday's Wall Street Journal. Take this gem of insight:

Despite President Barack Obama's early personal popularity, we can see the beginnings of [a culture war over capitalism" in the "tea parties" that have sprung up around the country. In these grass-roots protests, hundreds of thousands of ordinary Americans have joined together to make public their opposition to government deficits, unaccountable bureaucratic power, and a sense that the government is too willing to prop up those who engaged in corporate malfeasance and mortgage fraud.

To the detriment of serious debate, Dr. Brooks is (1) dressing up a pathetic marketing ploy as a "grass-roots" movement, and, (2) suggesting that "government deficits" and "unaccountable bureaucratic power" are somehow an invention of Barak Obama's, put into practice in the first 100 days of his Presidency.

Now, if Dr. Brooks wasn't one of the few people in this country in a position to arrest this our imminent decline into a one-party system, I really wouldn't mind seeing such stale ahistorical nonsense pop up in the WSJ op-ed page. After all, *t happens. But, in fact, Dr. Brooks is a person from whom we might otherwise have expected new thinking in place of hollow partisan blather.

"Unaccountable bureaucratic power"? I fully expect that Dr. Brooks is aware that it was Richard Nixon who in 1971 instituted economy-wide price controls for the U. S. of A.--price controls that, incidentally, were the real cause of the long-gas lines that accompanied the 1973 oil embargo, a hardship that most Americans still blame on malevolent foreigners. (See here for why that's a problem.)

"Government deficits"? I fully expect that Dr. Brooks is aware that under Ronald Reagan, in 1983 to be precise, federal spending was a greater share of GDP than in other other year since World War II. And as for George W. Bush...

Wait, do we really have to do this? Honestly, patronizing the general public--readers of the Wall Street Journal no less!--as if us little folks can't remember events from six months ago, is appalling. It plays right into the hands of the short of overheated partisan rhetoric from the other side of the aisle that has been popping up since the Specter defection, for example in today's NYT.

Yes, Dr. Brooks, we do remember that the bulk of the auto industry bailout was initiated under President George W. Bush. Ditto actions to "prop up those who engaged in corporate malfeasance and mortgage fraud." We read the newspaper (well, a few of us), we think, and we remember... In the unforgettable words of George W. Bush and The Who, "we don't get fooled again."

The challenges facing this country are not partisan. They are not even really political. But they are real and they are urgent. As my essay in the current issue of The American Interest, co-authored with Zoltan Acs, makes clear, I am in absolute agreement with Dr. Brooks on one point: the nation's political discourse benefits greatly from the advancement of "tangible, enterprise-oriented policy alternatives." I also agree that "intellectual organizations like [the American Enterprise Institute, of which Dr. Brooks in President] have a constructive role" to play in policy debates. But, if Thursday's WSJ editorial is any indication, the direction in which Dr. Brooks is heading the AEI isn't constructive. It's not even intellectual. It's just pitiful.

Bottom line: I'm mad as hell and I'm not going to take it any more. In fact, I'm so mad I might just... organize a tea party.