Short Term Thinking in a Long Term World

Eduardo Porter, business columnist for the NY Times (and always worth reading) tells us the deferred gratification discipline that made modern capitalism such a force is falling apart.

… talk to a scientist in a research lab almost anywhere and you are likely to hear that the edifice of American innovation rests on an increasingly rickety foundation.

Investment in research and development has flatlined over the last several years as a share of the economy, stabilizing at about 2.9 percent of the nation’s gross domestic product in 2012, according to the National Science Foundation.
That may not be far from the overall peak. But other countries are now leaving the United States behind.

And even more critically, investment in basic research — the fundamental building block for innovation and economic advancement — steadily shrank as a share of the economy in the decade to 2012, the last year for which there are comprehensive statistics.

The trend poses two big challenges. The first concerns government budgets for basic research, the biggest source of financing for scientific inquiry. It fell in 2013 to substantially below its level 10 years earlier and, as one of the most politically vulnerable elements in an increasingly straitened federal budget, looks likely to shrink further.

Of course this would have been made clearer by removing the passive voice.  It didn’t just fall.  It was deliberately and consciously cut by a  determined sector of congress, almost entirely Republicans…”

The second, equally important, challenge regards the future of corporate research. Evidence suggests that American corporations, constantly pressured to increase the next quarter’s profits in the face of powerful foreign competition, are walking away from basic science, too.

And again pressured by whom? Actual pressure, or imputed pressure?  The following is more specific:

Corporate executives, their compensation tied overwhelmingly to short-term gains in the market value of their companies, may be responding accordingly.

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Participatory Surveillance

One of George Orwell’s great insights and fears was not, as in 1984, a draconian dictatorship imposed on the populace but of a participatory one. For the proper benefits (even if only perceived) men will join most anything.  We can see this in many ways in the modern world, accelerating with social media of all kinds.  Well here comes another chance:

Surveil Me!  Surveil Me!

An increasing number of the nation’s auto insurance companies have a new proposition: Let them track every second of your driving in exchange for an annual discount that can reach into the hundreds of dollars if you behave yourself on the road.

In theory, everyone wins here. Progressive, Allstate and State Farm — among the most aggressive of the larger companies that are pursuing this strategy — attract better drivers who crash less often. Customers who sign up for the optional programs can pay premiums based more on how they drive and less on their age, gender or credit history.

At the moment, State Farm and Progressive are not raising rates on people who sign up for monitoring and prove to be terrible drivers. Participation is voluntary, and Progressive, the early adopter in usage-based insurance, says that close to 15 percent of its customers are already enrolled.

Still, as more people sign up, the standard rate will start to feel like a penalty for those who decline to participate…

NYTimes Lieber

Of course somewhere in the big data every purchase I make is being tracked, my preferences, locations, size of purchase…  But we all better start wondering where the line is to be drawn

Economic Myths About Climate Change

From The Upshot, a business series in the NY Times

Each new climate-change study seems more pessimistic than the last. This May and June, for example, were the hottest ones on record for the planet. Storms and droughts occur with increasing frequency. Glaciers are rapidly retreating, portending rising seas that could eventually displace hundreds of millions of people.

Effective countermeasures now could actually ward off many of these threats at relatively modest cost. Yet despite a robust scientific consensus that greenhouse gas emissions are at the root of the problem, legislation to curb them has gone nowhere in Congress. In response, President Obama has proposed stricter regulations on electric utilities, which some scientists warn may be too little, too late.

Why aren’t we demanding more forceful action? One reason may be the frequent incantation of a motley collection of myths, each one rooted in bad economics:

Myth 1: The enormous uncertainty of climate science argues for a wait-and-see strategy.

See the other myths and why they are myths, not reality…

The Book Wars: What to Do?

It has been clear for some time that the more book buyers (you and me) depend on Amazon the greater the destruction of bookstores.  It is becoming more apparent that publishers are also threatened. Amazon, the biggest distributor, wants a bigger share of e-book prices which it sells.  Hachette, no small business itself, is refusing.  Amazon is delaying  or making hard to order, Hachette books.  What to do?

In the US

The confrontation between Amazon and Hachette is growing louder and meaner, as the combatants drop all pretense that this is a reasonable dispute among reasonable people.

Amazon has proposed giving Hachette’s authors all the revenue from their e-book sales on Amazon as the parties continue to negotiate a new contract. Hachette’s response on Tuesday was to suggest that the retailer was trying to make it commit suicide

…  For more than six months, Amazon has been trying to wring better e-book terms out of Hachette. The publisher, which is the fourth largest in the United States and whose imprints include Little Brown and Grand Central Publishing, is energetically resisting.

Amazon has responded by delaying shipments of Hachette books and making it harder for customers to order them. Hachette authors have responded by publicly excoriating Amazon.

…  One author,, Ms. Robinson, whose books are not published by Hachette, said that “what writers want is a long-term healthy publishing ecosystem, not a temporary windfall.”

That applies to both parties, she added. “From our publishers we want a fairer share of e-book revenues; from Amazon we want an end to predatory practices that unfairly threaten their competitors, as well as the continued existence of the printed book.”

NY Times: Streitfield

In France

France, meanwhile, has just unanimously passed a so-called anti-Amazon law, which says online sellers can’t offer free shipping on discounted books. (“It will be either cheese or dessert, not both at once,” a French commentator explained.) The new measure is part of France’s effort to promote “biblio-diversity” and help independent bookstores compete. Here, there’s no big bookseller with the power to suddenly turn off the spigot.

The French secret is deeply un-American: fixed book prices. Its 1981 “Lang law,” named after former Culture Minister Jack Lang, says that no seller can offer more than 5 percent off the cover price of new books. That means a book costs more or less the same wherever you buy it in France, even online. The Lang law was designed to make sure France continues to have lots of different books, publishers and booksellers.

Fixing book prices may sound shocking to Americans, but it’s common around the world, for the same reason. In Germany, retailers aren’t allowed to discount most books at all. Six of the world’s 10 biggest book-selling countries — Germany, Japan, France, Italy, Spain and South Korea — have versions of fixed book prices.

NY Times: Druckerman

Climate Catastrophe: Can It Be Stopped?

From Eduardo Porter’s on-going series in the NY Times business section, on climate change.

Here’s what your future will look like if we are to have a shot at preventing devastating climate change.

Within about 15 years every new car sold in the United States will be electric. In fact, by midcentury more than half of the American economy will run on electricity. Up to 60 percent of power might come from nuclear sources. And coal’s footprint will shrink drastically, perhaps even disappear from the power supply.

This course, created by a team of energy experts, was unveiled on Tuesday in a report for the United Nations that explores the technological paths available for the world’s 15 main economies to both maintain reasonable rates of growth and cut their carbon emissions enough by 2050 to prevent climatic havoc.

“This will require a heroic cooperative effort,” said Jeffrey D. Sachs, the Columbia University economist who directs the Sustainable Development Solutions Network at the United Nations, which convened the multinational teams.

…  The decarbonization paths rely on aggressive assumptions about our ability to deploy new technologies on a commercial scale economically. For instance, carbon capture and storage is supposed to be available starting in about 10 years. Second-generation biofuels are assumed to come into play by 2020. Hydrogen fuel cells and power storage technology are deployed starting around 2030.

… Big challenges remain. Any 40-year forecast must be taken with some skepticism. Technologies that seem feasible and economic today might turn out not to be. And it bears repeating that though the teams contend they can get to 1.6 tons per person, they have not yet.

But these technologies all exist today and seem reasonably scalable. The teams did not rely on more speculative technologies, like cold fusion, to make their numbers.

*

The Report: Pathways to Deep Decarbonization (pdf)

Our moment of truth has arrived. Twenty-two years ago at the Rio Earth Summit, the world’s
governments recognized that humanity was changing the climate system profoundly, posing risks for
human wellbeing and sustainable development prospects. They adopted the United Nations Framework  Convention on Climate Change (UNFCCC) two years later, and resolved to protect the planet and promote sustainable development by stabilizing “GHG concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.”

Yet, more than two decades later, GHG emissions are still far from stabilizing.

Ω

The economic, social, and environmental risks of unabated climate change are immense. They
threaten to roll back the fruits of decades of growth and development, undermine prosperity, and
jeopardize countries’ ability to achieve even the most basic socio-economic development goals in the
future, including the eradication of poverty and continued economic growth. These risks affect all
developed and developing countries alike.

Ω

Despite the 2°C commitment reiterated at every COP since Cancun, global GHG emissions have
continued to rise sharply. The climate science is clear and unequivocal: without a dramatic reversal of
the GHG emissions trajectory—one that leads to a significant decline in GHG emissions by mid-century
and to net zero emissions during the second half of the century—the world will not only overshoot the
2°C limit, but will do so dramatically

AND, by the way, Germany is well on its way:

Thanks to favorable weather and record production from solar and wind power, renewable energy accounted for approximately 31 percent of Germany’s electricity generation in the first half of 2014.

Elizabeth Warren Has Wall Street Worried

When “Business Insider” headlines Elizabeth Warren Wants To Take This Goldman Sachs Aluminum Story And Run Right Over Wall Street With It, you know the new Senator from Massachusetts has got the attention of the watch dogs of the Street.

“Today the Senate Banking Committee met to discuss Wall Street’s role in the global commodities business, and as you can imagine Senator Elizabeth Warren (D-MA) was quite outspoken about the fact that she wants it majorly diminished….”

Read the story and be glad you donated to get the lady elected….

Regulation: Do it Now! Do it More!

My response to those who don’t like regulation is: Act Right.  Don’t do things that create the need for regulations.  Don’t send 8 year old children into coal mines, for example, or to pick cotton.  Don’t keep a patient unwashed and in dirty sheets for weeks at a time. Don’t send automobiles out on the road, known to blow up from a slight rear-ender. Don’t give loans to those who, induced with exuberant promises, accept them and then can’t pay them back; those who can’t follow the flipping cards.

Frankly, it’s appalling that we have need of most of the regulations we have — all brought on by stupid, greedy, contemptible behavior.

Today, on the front page of the NY Times we are treated to the spectacle of “weevils floating in vials of heparin.  Morphine cartridges that contain up to twice the labeled dose.  Manufacturing plants with rusty tools, mold in its production areas and — in one memorable case– a barrel of urine. And these are NOT the loosely regulated compounding pharmacies, one of which, produced the fungus loaded spinal solution which has caused meningitis deaths across the country.

And it gets worse.  The licensing of all such firms should be enough to cover the cost of their regulation; no grovelling to state and feds to pay for it, and complaints about GOP budget cutters.  Heck, put in a clause that as complaints and findings go down, so will regulatory visits.  Self-reporting gets an additional benefit.  The point is to deliver products not contaminated by short-cuts, skimming and profit-taking.