Perry with Charts on Creative Destruction

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From the Article

1. US corporations in the S&P500 in 1958 remained in the index for an average of 61 years.  By 1980, the average tenure of an S&P500 firm was 25 years, and by 2011 that average shortened to 18 years based on seven year rolling averages. In other words, the churn rate of companies in the S&P500 has been accelerating over time (see top chart above, and examples of the S&P500 churn in the bottom chart).

2. On average, an S&P 500 company is now being replaced about once every two weeks.

3. At the current churn rate, 75% of the S&P 500 firms in 2011 will be replaced by new firms entering the S&P500 in 2027.

4. In 2011, a total of 23 companies were removed from the S&P500, either due to declines in market value (for instance, Radio Shack’s stock no longer qualified as of June) or through an acquisition (for instance, National Semiconductor was bought by Texas Instruments in September).

Source: Mark Perry, Creative Destruction in the S&P 500," carpediem. com/AEIdeas, January 24, 2014

Caplin on Immigration vs Political Activism

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From the article:

When critics of immigration urge desperately poor people to stay home and fix their political systems, they're doubly obtuse.  Not only are they urging people to neglect their basic responsibilities in favor of the luxury of political activism.  They're urging people who know virtually nothing about policy or politics to "get involved" - and quite possibly make their countries even worse.  


Source:  Brian Caplan, "I'm Too Busy Fighting Tyranny to Feed My Family," econlog.com, January 30, 2014

Minimum Wage Stimulates Automation

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From the article:

Microsoft co-founder Bill Gates made the connection in a recent interview on MSNBC. Asked if he supported a higher minimum wage, Mr. Gates urged caution and said the policy would create an incentive for employers to "buy machines and automate things."

Mr. Gates is right, but the transition toward self-service began long before tabletop computers were a viable option. Self-service soda machines, available at fast-food restaurants since at least the late 1970s, were a labor-saving device. Even coffee carafes left on the table for customers to serve themselves allowed restaurants to reduce the staff needed to fill cups. More recently, major restaurant chains such as Bob Evans and Chili's have updated their service model to eliminate bus boys, relying on servers to clear tables themselves.

Source: Michael Saltsman, "The Employee of the Month Has a Battery," The Wall Street Journal, January 29, 2014

Boudreaux on Wealth As Dough

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From the article:

In fact, relatively rich people do not have their wealth stored as large globs of homogenous dough-wealth.  Their wealth, instead, is invested mostly in the risky creation and maintenance of capital goods and services – that is, it is invested in specific capital goods and services – and it is, therefore, quite unable to be transferred from its current forms into consumer goods for poorer people without both reducing its value and reducing the economy’s prospects for growth.

Source:  Don Boudreaux, "Wealth Is Not a Glob of Homogeneous Dough," cafehayek.com, January 28, 2013

Sowell on the Inequality Bogeyman

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From the Article:

What increased the wealth of society was Rockefeller's cheap kerosene that added hundreds of hours of light to people's lives annually.

Edison, Ford, the Wright brothers, and innumerable others also created unprecedented expansions of the lives of ordinary people. The individual fortunes represented a fraction of the wealth created.
Even those of us who create goods and services in more mundane ways receive income that may be very important to us, but it is what we create for others, with our widely varying capabilities, that is the real wealth of nations.

Intellectuals' obsession with income statistics -- calling envy "social justice" -- ignores vast differences in productivity that are far more fundamental to everyone's well-being. Killing the goose that lays the golden egg has ruined many economies.

Source, Thomas Sowell, "The Inequality Bogeyman," realclearpolitics.com, January 28, 2014

Boudreaux on McCloskey on Oxfam and Inequality

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From the article:

The Oxfam report early in 2014 [noted] that 85 super rich people own as much as the entire bottom half of the world population. . . . But if the $1.5 trillion was seized and distributed to the bottom 3.5 billion people in the world it would amount to only $428 per person.  That appears at first thought a nice, 10 percent supplement to the average yearly income per person of the bottom half of something like $4,000 a year (about 8 percent of U.S. real income per person). But of course, on second thought, if distributed this way the expropriation would give nothing at all next year and the next and the next.  Expropriation of wealth can happen only once, unless we arrange somehow to make Carlos Slim into a slave who keeps slowly re-accumulating his $73 billion, to have it taken in a while again.  On the other hand, if the $1.5 trillion expropriation was invested at, say, 5 percent it would be a perpetual gain of $21.40 a year to each person in the poor half.  Good, and prudent.  But wait: it is a gain of only about half of 1 percent per year of the $4000 of present-day annual income per person, and less and less as the poor countries grow towards the blade of the hockey stick.  We can’t make the poor much better off by taking wealth or income from the rich.  We need the economies in which they work to be vastly more productive—which is what happened 1800 to the present.

Source: Don Boudreaux, "Deirdre McCloskey on Oxfam’s Calculation of World Wealth ‘Distribution,’" cafehayek.com, January 27, 2014

Perry on the Value in an I-Phone

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From the article:

When you consider that an iPhone can fit in your pocket and has many apps and features that were either not available in 1991 (GPS, text messaging, Internet access, mobile access to movies, more than 900,000 apps, iCloud access, etc.) or not listed in the 1991 Radio Shack ad (camera, photo-editing), it’s amazing how much progress we’ve made in just several decades, and how affordable electronic productions have become.

The comparison above is an example of the “invisible hand” at work, giving us more goods, better goods, and cheaper goods over time. And the poor and middle class benefit the most. While only the wealthy might have been able to afford the bundle of 13 electronic products costing $5,000 in 1991 (in today’s dollars), almost anybody today can afford an iPhone with features that far exceed the 13 products in 1991.

Source: Mark Perry, "1991 Radio Shack Ad: 13 Electronic Products for $5k (and 290 hrs. work) Can Now Be Replaced with a $200 iPhone (10 hrs.)," carpediem.com, January 25, 2014

Wilkinson on Inequality

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From the article:

The package of goods Ms Anderson and my colleague mentions—low-crime neighbourhoods, safe public parks, good roads and sidewalks, decent schools—has not evidently become more rare over the decades during which inequality has been on the rise. On the contrary, I would hazard that most, if not all, of these things were much worse for the poor 30 years ago in places such as New York City and Washington, DC, when income inequality was much lower there. If this mechanism were at work, one would expect economic mobility to decrease when inequality rises, the deteriorating conditions for the poor increasingly trapping them in poverty. However, according to an important new study, mobility has not changed in the last two decades. No doubt the situation varies from region to region (and Americans are still less economically mobile than people in Canada and much of Western Europe), but this does not seem to me a promising hypothesis about the problem of economic inequality. Indeed, it illustrates the danger of locating the problem of inequality in its putative effects. If inequality isn't problematic in itself, but is of concern primarily due to certain dire consequences thought to follow from it, then one had better be sure there is solid evidence that those consequences have come to pass before sounding the alarm about the dangers of rising inequality.

Source:  Will Wilkinson, "Why Poor Americans Aren't Up In Arms," The Economist, January 24, 2014

Will on Judicial Activism

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From the article:


Conservatives’ advocacy of judicial restraint serves liberalism by leaving government’s growth unrestrained. This leaves people such as Sandy Meadows at the mercy of government acting as protector of the strong.

Meadows was a Baton Rouge widow who had little education and no resources but was skillful at creating flower arrangements, which a grocery store hired her to do. Then Louisiana’s Horticulture Commission pounced.

It threatened to close the store as punishment for hiring an unlicensed flower arranger. Meadows failed to get a license, which required a written test and the making of four flower arrangements in four hours, arrangements judged by licensed florists functioning as gatekeepers to their own profession, restricting the entry of competitors. Meadows, denied reentry into the profession from which the government had expelled her, died in poverty, but Louisianans were protected by their government from the menace of unlicensed flower arrangers.


Source: George F. Will, “Judicial Activism Isn’t A Bad Thing,” The Washington Post, January 22, 2014

 

Munger on What Libertarians Are For

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From the article:

Libertarians can offer a positive, optimistic alternative vision of society.

When libertarians seem to be “against” everything, this is what we are worried about. If citizens ignored politics, things wouldn’t be so bad. But we are worried that our excessive focus on politics will cause us to ignore society and each other. If we fail to connect as social beings in complex reciprocal exchange relations, modern “democratic” life becomes anomic and mean, just as Tocqueville foresaw. 

 

That—that—is what we are for: voluntary associations, in all their richness and bewildering complexity. 

 

If you want to go out and persuade some people to work with you, and all voluntarily work for the benefit of each, then that is libertarian social change. If someone wants to opt out and form a different association, they are free to do so. And that’s a good thing, because you get diverse experimentation in problem solving.

   

Source:  Michael Munger, “What Are We For?” The Freeman, December 04, 2013

 

Boudreaux on the Fake Consumption Gap

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From the article:

Here’s a list – admittedly only off the top of my head – of ways that the consumption gap between the rich and the middle class has shrunk since, say, 1965.  I will use Howard Hughes (1905-1976) as my hypothetical super-rich person in 1965.

- In 1965, Howard Hughes could afford to have a package or letter delivered across the continent or ocean overnight.  No middle-class American in 1965 could afford such a service.  Today such speedy delivery options – both to send and to receive – are quite within the reach of ordinary Americans.

and

- In 1965, Howard Hughes could afford to talk on the phone for hours to someone hundreds or thousands of miles away.  Not true for ordinary Americans.  Today, even the poorest American pays no long-distance charges even when making a transcontinental telephone call.

- In 1965, Howard Hughes could afford to equip his house with a large screen, a state-of-the-art projector, an impressive sound system, and a film library filled with thousands of movies, documentaries, and television shows, so that he had a virtual movie theater in his home.  No ordinary American back then could do so.  Today, nearly every ordinary American can buy a large-screen hi-def television, a surround-sound speaker system, and a Netflix subscription so that, as a result, today’s ordinary American has an in-home theater experience very much like that which only the Howard Hugheses of 1965 could enjoy.

Source: Don Boudreaux, “Rest of Us,” cafehayek.com, January 21, 2014