A Look at the Self-Employed

The IRS just released the summer edition of its Statistics of Income Bulletin (pdf) and it includes one article on the self-employed, along with a couple of data tables. From a summary of the article:

For Tax Year 2007, there were about 23.1 million individual income tax returns that reported nonfarm sole proprietorship activity, a 4.7-percent increase since Tax Year 2006. Reported profits for these sole proprietorships were $280.6 billion in 2007, representing a decrease of 1.8 percent (in constant dollars) since 2006. Profits also decreased 0.4 percent (in constant dollars) between Tax Years 2005 and 2006. This was the first time that profits (in constant dollars) have decreased for 2 consecutive years since before 1988.

Professional, scientific, and technical services had the largest profits of any sector in 2007, at $71.6 billion, representing 25.5 percent of total sole proprietorship profits. The largest sole proprietorship industrial sector, based on business receipts, was construction, which accounted for 17.4 percent of receipts and reported a 2.4-percent decrease in 2007. Finance and insurance showed the largest percentage increase in both receipts and deductions, reporting a 14.1-percent increase in receipts and a 17.3-percent increase in deductions. Real estate and rental and leasing, which reported the largest decline in profits in 2006, at 18.5 percent, reported a 17.7-percent decline in profits in 2007.

Interested readers may also find the article on S Corps (2006 data) interesting as well.

Unchain the Office Computers!

As someone used to using Firefox, I was really disapointed when I found out I would have to use IE6 on my work computer. Have you ever gotten used to something (tabbed browsing in this case) and then had that removed? It's painful and breeds resentment, let me tell you. Our staff were also admonished for spending too much time on the Washington Post website. That's the equivalent of telling an academic they can't use JSTOR. Anyway, on to Farhad Manjoo's excellent article (Slate):

Computers, like airplanes, can be dangerous things—they can breed viruses and other malware, they can consume enormous resources meant for other tasks, and they're portals to great expanses of procrastination. So why not lock down workplace computers?

Here's why: The restrictions infantilize workers—they foster resentment, reduce morale, lock people into inefficient routines, and, worst of all, they kill our incentives to work productively. In the information age, most companies' success depends entirely on the creativity and drive of their workers. IT restrictions are corrosive to that creativity—they keep everyone under the thumb of people who have no idea which tools we need to do our jobs but who are charged with deciding anyway.

[...] Indeed, there's no empirical evidence that unfettered access to the Internet turns people into slackers at work. The research shows just the opposite. Brent Corker, a professor of marketing at the University of Melbourne, recently tested how two sets of workers—one group that was blocked from using the Web and another that had free access—perform various tasks. Corker found that those who could use the Web were 9 percent more productive than those who couldn't. Why? Because we aren't robots; people with Web access took short breaks to look online while doing their work, and the distractions kept them sharper than the folks who had no choice but to keep on task.

Social Entrepreneurship: Water Edition

From yesterday's Fresh, Inc.:

From social networking to social giving. When we caught up with Michael Birch last year, he and his wife had just made a handsome little profit selling their social networking site Bebo to AOL for $850 million. In the interview, Birch told us that he was looking to dedicate more time to social entrepreneurship. Turns out over the last six months, Birch and two others have been building CharityWater.org, the website for the popular non-profit charity:water, TechCrunch reports. Since its launch yesterday, the site has raised more than $7,000.

Incidentally, I really liked this short update from Steve Case: So cool to be walking through "Water" exhibit at Field Museum and see @PlayPumps featured! http://bit.ly/2aUo9 http://playpumps.org

Social Entrepreneurs in the Aftermath of Hurricane Katrina

The 2009 issue of Local Knowledge, published by the Mercatus Center at George Mason University, looks at the role played by social entrepreneurs and nonprofits in rebuilding New Orleans. Last year Local Knowledge looked at the role of the commercial sector in the rebuilding efforts (2008 issue).

After disasters, how do social entrepreneurs and nonprofit groups affect rebuilding efforts?

That's the question the Mercatus Center at George Mason University asked four years ago, when we began a five-year project to learn from the rebuilding of the Gulf Coast after Hurricane Katrina.

In four years, we have interviewed over 450 people from Louisiana and Mississippi about the rebuilding process, learning what works in the nonprofit, commercial, and public sectors.

We are pleased to present Caring Communities: The Role of Nonprofits in Rebuilding the Gulf Coast which brings together scholarly analyses of work on the ground, journalists' overviews of trends in the nonprofit world, and inspiring accounts from people rebuilding their communities. Because this year's issue is available exclusively online, you can listen to these entrepreneurs tell their story in their own words through video interviews.

Some Links

1. BusinessWeek's Small Business Blog offers up a slideshow of 20 entrepreneurship writers you should follow on twitter.
2. The TaxProfBlog on donating and deducting gift cards to charity
3. James Hamilton has a fascinating new paper looking at the Taylor Rule. In his blog post about the paper he finishes by looking at Fed policy before and after 2000 (Econbrowser):
   

   We document two important changes in the perceived policy rule over time. After 2000, the market believed that the Fed would eventually have a stronger response to inflation than it had prior to 2000, but also that the Fed would take longer to implement those changes, responding to news more sluggishly than it had before 2000.
   
   We study the consequences of these changes using a simple new-Keynesian model. We find that the first change (a stronger long-run response to inflation) would be something that would have made output less variable, whereas the second change (a smaller immediate response) would have made output more variable. According to these simulations, increased Fed inertia undid some of the benefits it could have otherwise obtained with its anti-inflation policies.
   
   Our conclusion is that the measured pace at which Greenspan increased interest rates over 2004-2005 may have been counterproductive, and that economic performance might have been improved if the Fed instead had raised interest rates more quickly to the higher warranted levels.

Empowering Women

Nicholas Kristof and Sheryl WuDunn write (NYT):

In general, aid appears to work best when it is focused on health, education and microfinance (although microfinance has been somewhat less successful in Africa than in Asia). And in each case, crucially, aid has often been most effective when aimed at women and girls; when policy wonks do the math, they often find that these investments have a net economic return. Only a small proportion of aid specifically targets women or girls, but increasingly donors are recognizing that that is where they often get the most bang for the buck.

The authors are promoting their new book, Half the Sky: Turning Oppression into Opportunity for Women Worldwide, due out September 8th. It includes generous coverage of Bill Drayton and Ashoka, and of the importance of microfinance. It should instantly become a must read.

What to do About Systemically Important Institutions

Apparently someone at the Cleveland Fed's been reading Dan Roam's The Back of the Napkin. For more see the site the Cleveland Fed has set up to document its ideas on this matter. Via the Browser.

Social Entrepreneurship Class

The syllabus (pdf) for Zoltan Acs' course, Social Entrepreneurship and Public Policy, was posted a couple of days ago. I took the same class with Phil last year. Because the class is aimed at both MPP (master's) and PhD students it is not just a reading/writing course, but also involves a practical component. Check it out, there are lots of good readings, if you are interested in this field.

The Standardization of English in European Higher Education

A new NBER working paper, The Americanization of European Higher Education and Research, is very interesting. The abstract:

Over the past two decades there has been a substantial increase in the mobility of students in Europe, while also research has become much more internationally oriented. In this paper we document changes in the structure of research and higher education in Europe and investigate potential explanations for the strong increase in its international orientation. While higher education started to grow substantially around 1960, only a few decades later, research and higher education transformed gradually to the American standard. Decreased communication costs are likely causes for this trend. This transformation is most clearly revealed in the change of language used in research from the national language, Latin, German and French to English. Smaller language areas made this transformation earlier while there are also clear timing differences between research fields. Sciences and medicine tend to switch to English first, followed by economics and social sciences, while for law and arts only the first signs of such a transformation are currently observed. This suggests that returns to scale and the transferability of research results are important influences in the decision to adopt the international standard.

It's gated, but here's a working paper version. It is part of a forthcoming book, American Universities in a Global Market. Chapter drafts are currently freely available, so be sure to check it out if you don't normally have access to NBER papers.

Call for Papers

I don't normally list these, but this is for a special issue of the International Journal of Entrepreneurial Venturing on "Research on Global Entrepreneurship Monitor Data." The GEM data is an important look at entrepreneurship across countries and Zoltan has played an important role in its development, writing or coathoring several important papers since its inception. Due note that the deadline is Sept 15.

You can find the CFP here, and more about GEM data through the consortium website. I assume that if you are working in this area you already know that the consortium does not like to make the latest data available online, but it's available elsewhere.

50 Most Important Economic Ideas

Donald Marron is preparing a list of the 50 most important economic ideas of the past century for a book publisher. He currently has over 60 ideas, but some are older (Marxism?) and the list is not complete. A few commenters have offered suggestions, but you should check it out and see if you have any ideas for improvement.

Perhaps he is missing something about economic sociology, or economic imperialism if you prefer? By this I mean the Becker, Murphy, Freakonomics style work that applies economic principles to every other social science, starting with Becker's work on marriage. Economic sociology is broader than that of course, but perhaps that would be one place to start.

What about science, technology and information economics? How well are those covered by his list? Thoughts?

All told though, he's done a great job. It's a great study guide for anyone looking for the major ideas of the discipline.

Forum on Biofuels and Green Energy

Put on by the Milken Institute, Aug 26, 2009. Details here. A bit from their advert:

From 2008 to 2018, biofuel revenue is predicted to leap from $34.8 billion to $105.4 billion annually. Major market players have begun to invest significant capital in the sector. Exxon, for example, is investing $600 million in Craig Venter's Synthetic Genomics, a company focused on developing biofuel from algae. Additionally, Boeing successfully tested several bio-jet-fuel blends in late 2008 and early 2009.

This Forum brings together a panel of biofuel experts to talk about the growth of this sector and its potential for creating a greener economy. They will discuss current energy trends, scientific advances, environmental impacts, regulatory constraints and the challenges and opportunities for investors and businesses.

If you don't happen to be in Santa Monica there will be a webcast and the event will be online afterwards, in case you miss it.

Bubble in Microfinance?

From the WSJ:

Today in India, some poor neighborhoods are being "carpet-bombed" with loans, says Rajalaxmi Kamath, a researcher at the Indian Institute of Management Bangalore who studies the issue. In India, microloans outstanding grew 72% in the year ended March 31, 2008, totaling $1.24 billion, according to Sa-Dhan, an industry association in New Delhi.

"We fear a bubble," says Jacques Grivel of the Luxembourg-based Finethic, a $100 million investment fund that focuses on Latin America, Eastern Europe and Asia, though it has no exposure to India. "Too much money is chasing too few good candidates."

Ex post, many people blame the Fed for not popping the housing bubble. Should the Reserve Bank of India raise interest rates to protect the poor from incoming funding or should they focus more directly on controlling inflation and worrying about the broader state of the economy? To the degree that this extends beyond India's borders, should we look for some global coordination to try to smooth out lending? Who would be the global organization best suited for the purpose? Should we beware of money flowing into microfinance that is not from private philanthropists and the government (i.e. stable donations)? Private equity has been known to move quickly from one lucrative deal to another, in some cases creating currency crises and the like. I have many more questions but no good answers. Thoughts, or additional questions?

Social Entrepreneurship Blogs

The top 50, according to Evan Carmichael. Via Campus Entrepreneurship.

Alternative Governance Structures

1. Paul Romer's Ted talk on Charter Cities is now online.
2. Alex Tabarrok suggests Romer's idea is very similar to Patri Friedman's idea of seasteading.
3. Robin Hanson writes about Futarchy for the BBC. Here is an earlier version of his ideas.
   

Sam Savage's Short History of the World

This is my own adaptation from his book, but i've stayed pretty true to his words:

1. Humans learn to read and write and can transmit information between generations.
2. Humans invent machines and we get the industrial revolution. Primacy of math and physics. This is followed by the rise of engineering. Finally we get the field of industrial design, which gives everything handles and switches to make them operational (like your light switch).
3. Machines learn to read and write during WWII. The birth of computer science and the start of the informational revolution. Unlike physics, which ultimately we grasp with our hands, information is understood through our mind. The equivalent of the industrial engineer is the informational designer.

To get a sense of what an informational designer does, I'd recomend this set of slides from Zach Gemignani of Juice Analytics. I don't think it's a stretch to say that effective use of data through analytics is the key driving force in Google's success.

Echo Chambers

duketheuninteresting reviews a paper, How citation distortions create unfounded authority: analysis of a citation network, by Steven A Greenberg, a professor of neurology at Harvard Medical School. duke writes (scatterplot):

In short, Greenberg identifies several mechanisms that can impair the ability of the scientific process to reach an accurate result. “Citation Bias” is the preferential citation of supporting evidence (whatever supporting is in your case) and the discounting or ignoring of critical evidence. This is particularly the case with critical primary (i.e. using data) research. “Citation Diversion” is the citing of papers that say something relevant to your claim, but which do not say precisely what you imply or state they say. Note that this is not lying about what the citation supports but more akin to stretching it through interpretation. “Invention” relates to the use of citations to introduce new material. Often this is an over-statement of what is contained in the cited article. So, for example, the article says, “We hypothesize that x is related to y” while the citation of that article reads, “So and so demonstrated that x is related to y”. The newer, and much stronger, claim has essentially been invented. Finally, “amplification” emerges when articles that lack primary data (e.g. review articles) are cited as authoritative sources for demonstrating that some particular thing is true. In that these articles are effectively just recycling and collating earlier work, they provide a sort of echo chamber that lends additional legitimacy to a claim without lending it additional substantive support.

I found the whole discussion interesting, but Ryan's our resident expert on science and citations, so I'll turn to him for the last word.

It's Getting Better All the Time

Good news seems scarce these days, especially about a place like Africa, which is frequently portrayed as an entire continent of failed states, so it's refreshing to read Charles Kenny's article in Foreign Policy, Think Again: Africa's Crisis.

Kenny is working on a book on development, tentatively titled, The Success of Development: Innovation, Ideas and the Global Standard of Living. You can read a synopsis at his blog and find a link to a full draft of the manuscript. He initially planned to leave the book up through early August - it's still up now, but may not be for much longer.

Via @auerswald, @bill_easterly, and @FP_Magazine.

Small Business Employment

A new paper from CEPR (An International Comparison of Small Business Employment) is getting lots of attention. The basic thrust is that in the U.S. few people are self-employed because of the lack of free healthcare:

One plausible explanation for the consistently higher shares of self-employment and small-business employment in the rest of the world’s rich economies is that all have some form of universal access to health care. The high cost to self-employed workers and small businesses of the private, employer-based health-care system in place in the United States may act as a significant deterrent tosmall start-up companies, an experience not shared by entrepreneurs in countries with universal access to health care.

Via Paul Krugman, who adds a couple of quick points. Jeff Cornwall weighs in with two posts [1, 2]. Cornwall offers some pretty good advice for would-be entrepreneurs:

First, when I advise entrepreneurs I tell them that they need to build a business that takes care of their needs. This includes income needs, wealth needs and lifestyle needs. Income needs includes the cost of your total lifestyle. If your business model is unable to give you adequate income to cover your expenses -- including healthcare -- then the model is not right for you to pursue. And for goodness sake make sure you can cover these expenses until your business is profitable through other income and personal savings.

Finally, on the question of health care and job lock, see this good post by Tim Kane. Kauffman/Rand have done some interesting research into this area, and there are a few good academic papers, but I read the findings as mostly mixed. It's probably worth a seperate post so I'll write that up.

Charter Cities

Paul Romer recently spoke at Ted about his newest initiative, Charter Cities. You can find a summary of the talk here, and some twitter commentary summarized here. All worth a read. I've expressed skepticism, but will pay close attention to his efforts. David Warsh recently covered Romer's latest initiative with some good and important background information. You can keep up to date on all of this through the Charter Cities blog.