The ramblings of an Eternal Student of Life     
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Sunday, May 31, 2009
Economics/Business ... Public Policy ...

Many conservative commentators are upset with President Obama for his expansive economic policies, which have or soon will extend federal control into a wide variety of businesses in the auto, finance and health care sectors. About 2 weeks ago there was an article in the Wall Street Journal by John Steele Gordon outlining why government can’t and shouldn’t run industry. (Judge Richard Posner has expressed similar reservations). Here’s the summarizing paragraph from Gordon’s article:

The Obama administration is bent on becoming a major player in – if not taking over entirely — America’s health-care, automobile and banking industries. Before that happens, it might be a good idea to look at the government’s track record in running economic enterprises. It is terrible.

Mr. Gordon’s first “case in point” regards a factory built by the federal government during WW1, to produce steel for battle ships. Quote from Mr. Gordon:

In 1913, for instance, thinking it was being overcharged by the steel companies for armor plate for warships, the federal government decided to build its own plant. It estimated that a plant with a 10,000-ton annual capacity could produce armor plate for only 70% of what the steel companies charged.

When the plant was finally finished, however — three years after World War I had ended — it was millions over budget and able to produce armor plate only at twice what the steel companies charged. It produced one batch and then shut down, never to reopen . . .

I was having a slow day at work, so I decided to get on Google and find out what Mr. Gordon was talking about. It turns out that he was referring to the South Charleston, WV Naval Ordinance Plant. The plant was authorized by Congress in 1916 and the north unit, meant for shell production, was completed and in service in 1918. The armor production plant, which was a fully integrated steel mill, was operable in 1921, after the war was over. Mr. Gordon implies that private enterprise could have built the mill faster. I’m no expert, but five years to get a fully integrated steel mill planned and built, i.e. a factory that takes in coal and iron ore at one end and outputs cut-and-finished steel products at the other, isn’t bad. I rather doubt if US Steel or Bethlehem could have done better, then or now.

The federal government decided to mothball both plants in the 1920s, and had considered selling them in the 30s. However, by 1937 it was becoming apparent that military production capacity would be needed again as Germany and Japan started their campaigns of expansion and genocide. By 1940, the government contracted with two private industrial corporations to re-open the Charleston plants, the north plant for gun and rocket production, and the south plant for armor. By 1940, Carnegie-Illinois Steel had the south plant mill in operation. After WW2 the plants were mothballed again, and the properties were finally sold in 1961.

Oh, I found this out from an article about the factory on a West Virginia historical society site, and another article about President F.D. Roosevelt’s visit to the factory in 1940.

In the end, the armor plant and its adjacent ordinance facility turned out NOT to have been a boondoggle; its available capacity came in handy as Nazi and Japanese expansionism threatened our nation. The plant was operated as a public-private partnership during WW2. This was not the first or last time that would happen.

Mr. Gordon seems to cast government-versus-private operation of industry as an all-or-nothing question. In fact, the truth during the 20th Century was much more complex. One example that comes to mind involves the aluminum industry. During WW2, the federal government needed a lot of aluminum for all of the bomber and fighter planes being used over Europe and the Pacific, so the feds built a couple of big aluminum processing factories. I recall seeing the one in Cressona, PA, out in coal mining country. After WW2 was over, these plants were sold to Kaiser, Reynolds and Alcoa (which ran and eventually bought the Cressona plant), and thus helped to kick-start the post-war aluminum industry for consumer products (lawn chairs, cooking foil, house siding, window frames, etc.).

The feds also semi-nationalized the railroads during WW1. Speaking of railroads, the government owned Conrail from 1976 thru about 1985, as to avoid collapse of the bankrupt eastern RR’s during the oil shock recession of the mid-1970s. After the rail lines to NY, Boston and Philadelphia were rebuilt and industry started using them again, they were sold to private interests, and are now vital components of the two major private rail companies in the eastern USA (i.e., CSX and Norfolk Southern).

Shall I get away from heavy metal, into the modern digital economy? Well, recall that the Internet grew from ARPANET, a 1980s government effort to promote the sharing of defense-related research. The initial infrastructure for the net was put down by the government; private industry took it from there and made it consumer-friendly.

I wrote to my friend Edward Furey, a history grad from Cornell (one of the few Ivy Leaguers I know), whether he had more examples of government involvement in industry during wartime. Being a WW2 specialist, it was not surprising that Ed had a big list. Here’s what came to Mr. Furey’s mind:

Many of the warships that won WWII were built in the Brooklyn Navy Yard and other facilities like the Philadelphia Navy Yard. The Brooklyn Yard, by the way, had been around for a while. They built the Monitor, going from Ericsson’s design to fighting the Merrimac in around 100 days, so the yard was pretty efficient. Rifles and ammo were produced at the Springfield Arsenal. The atomic bomb was designed, developed and tested at government-run facilities, and depended to some extent on the excess electricity made possible by the TVA and New Deal dams on the Columbia River, near Hanford. So the government not only built the weapons, but also supplied the electric power to the plants.

Also, in some cases comparative advantage doesn’t pay off, as when the U.S. government noticed that the best military optics were being made in Germany and Japan. So the Bureau of Standards got into the optics business, making optics for things like periscopes and instruments. For some time it was the only game in town for sophisticated optics, there being no commercial interest in the business.

Finally, the government provided the capital for outfits like Grumman, who were producing 600 Hellcats a month in 1944 in plants almost entirely owned by the Navy.

So, the government can build and sometimes run the facilities needed to win a war. But can they make products and services that can compete in the globalized consumer market of today? Admittedly, that’s a tougher question. Experience from the socialist economies of Europe during the 20th Century suggest that it ain’t gonna work. Here in the USA, we don’t buy cars these days from Renault, Fiat or British Leyland – all nationalized auto companies. We buy them from Honda and Toyota, which are not. BUT, Honda and Toyota aren’t exactly free from government involvement either. The Japanese government was certainly involved in supporting the growth of these firms, especially in the area of finance.

So, it’s not exactly novel or inappropriate for the federal government to become heavily involved in certain critical American industries. Government can take a broader and longer-term view
than the markets can. But the politicians and bureaucrats also have to remember their limits. Government must cooperate with market-driven participants in order to avoid the worst of what John Steele Gordon rightfully identifies regarding the sins of public administration (inefficiency, poor quality, no sense of what customers really want). They have to remember to get out as quickly as possible after they get involved in an industry. Hopefully, President Obama and his team will look to what actually took place in South Charleston, in Cressona, along the eastern railways, and along the information highway, as an interesting set of lessons regarding “industrial policy”.

We obviously need more “industrial history”, and more accurate history, in the current debate about the Obama Administration’s long-term economic plans.

◊   posted by Jim G @ 11:10 am       Read Comments (2) / Leave a Comment
 
 
Friday, May 29, 2009
Psychology ... Science ... Society ...

Here’s my candidate for the most interesting article of the week: “Loves Me, Loves Me Not (Do the Math)” By Steven Strogatz, in the Wild Side blog on the NY Times.

Dr. Strogatz, a mathematician noted for his work in chaos theory and the dynamics of complex, non-linear systems, wrote about how certain math equations and concepts help to describe what he had experienced as a young man in love. Well, there’s a lot of overlap between love and chaos,and if any scientists are ever going to have anything to say about romantic love, it’s going to be the chaos experts. The psychologists have been trying for years, but without much luck; only the math people who search for (and find) hidden patterns within the crazy swirls of reality (e.g. stock prices, political campaigns, virus infections, insect colonies, etc.) can even get close to what courtship and romantic love involve.

Most people are still pretty cynical as to whether math and science can really tell us anything about love and relationships. And ultimately they’re right; love is ultimately an experiential thing. The realm of science, as broad and powerful as it is, stops just short of being able to fully explain an experience. This reality is at the heart of the “consciousness problem” in the field of “philosophy of mind”. You can look up the comments that were sent in response to Dr. Strogatz’s article, and more than half of them are rather dismissive about what the professor seems to be attempting. Many of these commentors try to pass him off with a bit of humor (the good doctor himself seemed to end the article on a tongue-in-cheek note). Emily Bobrow on The Economist’s “More Intelligent Life” blog does about the same.

As with the mind, science can only go so far in talking about love. But that still might be much fartherer than most people think. A few years ago, a book came out called “The Mathematics of Marriage”, based on a long-term study done of married couples led by Dr. John M. Gottman. Dr. Gottman and his team came up with a mathematical system to describe marital dynamics, based on chaos theory (and more specifically, “catastrophe theory”), and applied these equations across a sample of married couples over time. These couples were recorded talking to each other on video, and were then analyzed and classified based on the types of emotional responses being exchanged by man and wife during their conversations. The bottom line: if Dr. Gottman analyzed an hour of a husband and wife talking, he predicted with 95% accuracy whether a couple would be married 15 years later. And if he watched a couple for just 15 minutes, his success rate only dropped to 90%. Hmm, not bad if true (I didn’t read the book or the study, so I can’t really judge it).

SO, perhaps science will never tell us exactly why we exist in this universe as feeling beings. But it already can tell us a lot about how we obtain those feelings and what we do in response to them. And in the future it will be able to do this better and better (although it will never be able to predict any one individual’s course of actions in detail for long periods of time; there’s too much “chaos” and not enough information practically available about complex human relationships, just as the chaos in the atmosphere and limitations on weather data collection prevent us from accurately predicting the weather too far in advance). As with any scientific tool, it will be up to us whether we use this for good or for evil. As with most significant scientific tools from the past two or three centuries, the potential goodness will be VERY good, and the potential evil will be VERY evil.

PS, here’s another blog comment on the Strogatz column by Rick Nelson, a fellow engineering guy.

And here’s an article from 2003 in Slate about Dr. Gottman’s study and his book:
Love by the Numbers; Can a few differential equations describe the course of a marriage? by Jordan Ellenber.

PPS, On a different but familiar topic, i.e. General Motors; my favorite quote for the week is from Judge Richard Posner’s blog on The Atlantic web site: “We should be concerned lest GM become a kind of economic Vietnam”.

PPPS: I see that Obama is going to appoint a “Ciber Czar”, after recently appointing an “Auto Czar” (Ed Montgomery). OK, we know what a “czar” is (a.k.a. “tsar”, a Russian dictator from the 16th thru early 20th Century), but where did that word originate? In ancient Rome, of course; czar is just a Russian corruption of “Caesar”, reflecting the old Russian myth that it had inherited the legacy of the Roman Empire when Russia converted to Eastern Christianity (around 1000 AD), followed by the fall of the Byzantine Empire to the Turks (pretty much done by 1350, but with Constantinople holding out until 1453). Hopefully, President Obama is not going to appoint himself “Casear of the Czars”.

◊   posted by Jim G @ 9:48 pm       Read Comments (2) / Leave a Comment
 
 
Tuesday, May 26, 2009
Photo ...

I haven’t done much hiking lately, but I finally got myself back out onto a local trail yesterday for about 2 hours. Here are two scenes; a bit of a tree tunnel, and a pine grove (too bad computers can’t convey that subtle but wonderful smell of a pine grove). Enjoy!

◊   posted by Jim G @ 5:51 pm       Read Comments (4) / Leave a Comment
 
 
Monday, May 25, 2009
Brain / Mind ... Society ...

I just started reading another book on the mysteries of the brain and mind: “How Brains Make Up Their Minds” by Walter J. Freeman (not to be confused with Walter Freeman the lobotomy doctor). I’m only about 20 pages into it, but I already came across two lines that seem too good not to share. In chapter 2, Dr. Freeman discusses the meaning of meaningfulness (that’s about the best way to sum it up!). The first quote doesn’t sound all that interesting, but when you mix it with the second quote, you get something worth pondering — sort of like nitric acid and glycerin combining to make nitroglycerin. So here we go with quote 1:

“Meaning is closed from the outside by virtue of its very uniqueness and complexity. In this sense, it resembles the immunological incompatibility of tissues . . . “

I.e., what “means something” to you won’t necessarily take root in my mind; just as my body would likely reject transplanted tissue from your body.

Given that, here’s a second quote to ponder:

“Much of the effort and energy of our lifetimes is spent in trying to understand the meanings of others and to induce others to understand our own.”

 »  continue reading …

◊   posted by Jim G @ 9:51 am       Read Comments (2) / Leave a Comment
 
 
Friday, May 22, 2009
Economics/Business ... Society ...

It’s starting to look as though our nation’s economy is bottoming out; the big drop in economic activity is abating. Things are bumping along the bottom right now. Perhaps by mid autumn there will be sure signs of renewed economic growth; unfortunately, those first signs will not include higher wages and increased employment. That trend won’t start until sometime in 2010.

We’ve just gone through the biggest economic drop relative since the 1930s. It wasn’t expected, it came on suddenly, and has done a lot of damage that will take much time and many resources to fix.

The big lesson, I think, is that real estate bubbles are nasty things; and maybe that’s because real estate ownership itself can be a nasty thing, despite all the myths about how good it is for average Americans to own real estate. America got into a serious real estate bubble sometime around 2002 (although there had been smaller bubbles in the 1980s due to Baby Boom demand), not long after the internet bubble burst. When the internet bubble burst in 2000, it didn’t do all that much damage; the big stock market run-up from 1995 came to an end, but unemployment hardly rose and Americans continued their vigorous consumer spending.

By contrast, the breaking of the real estate bubble has been vicious. Many major financial institutions collapsed or required massive taxpayer bailouts; banks stopped lending; unemployment rose; consumers stopped consuming; two thirds of the American auto industry collapsed; unemployment shot up, and the government has borrowed billions of dollars (on top of the trillions it already owes), which will weigh down the economy for at least a decade. And the whole situation reverberated internationally, amplifying the whole thing. Our government economic leaders (Bernacke, Paulson, Geitner, etc.) reacted quickly and hopefully stopped the bleeding in time. But the patient is still weak, and recovery is going to take a long time. That’s about where we are right now.

So what is the difference between real estate speculation and other kinds of speculation (such as the internet company craze of the 1990s, or the tulip craze of the 1630s)? That is a key question for economists and policy makers of the future. I believe that the key difference is that most other bubbles, especially technology bubbles, leave something behind that continues to help the economy. E.g., better technology. Even the tulip bubble left the world with something good – more tulips!

By contrast, a real estate bubble, along with all the crazy financial machinations that prop it up (currently known as “toxic assets” and “default swaps”), don’t leave you with much. There’s only so much usable land on the planet, even less in the places that economically count the most (i.e., the American suburbs). There have been some expansions of usable real estate over the past 5 or 6 years as roads and infrastructure were built to open up formerly unused lands, e.g. in the Arizona desert or the Florida swamps or the foothills of eastern Pennsylvania. But opening up new property takes time, and bubbles usually don’t give the economy enough time to significantly expand its usable land inventory. For the most part, bubble money is simply chasing what is already in place. And when it blows, much of the new stuff that was built deteriorates quickly (e.g., foreclosed properties deteriorate quickly and are subject to fires). And since the new lands that were opened were done quickly (by “fast-money” developers), they will probably have negative ecological consequences in coming years.

Personally, I’ve always had mixed feelings about real estate, even though the nation as a whole seems to have a love affair with it. I never owned any real estate, and hope not to. It can bring out the best in people (e.g., homeowners who put a lot of sweat and communal effort into maintaining a livable neighborhood), but it also brings out the worst (e.g., NIMBY activism, ethnic divisions about who is or isn’t welcome in the neighborhood, etc.). Nonetheless, real estate ownership is a key component of “the American Dream”; it has gained mythical status. To be considered a successful, responsible American, you have to own real estate; this line of thinking goes all the way back to the “Founding Fathers”. Thus, a huge industry has built up around real estate, which has been further inflated with all kinds of government subsides (e.g. tax deductions for mortgage interest, special government-sponsored institutions to facilitate mortgage credit such as Freddie and Fannie, etc.).

Now America is seeing that perhaps real estate is NOT so innocent, after all; perhaps it should not be up there with motherhood and apple pie. Lots of “dippy urban-planner types” had been complaining for many years about the environmental evils of “suburban sprawl”. They cried, mostly unheard, about the consequences of replacing natural forests and meadows with low-density exurban developments where everyone has to drive for miles just to buy bread and milk and get the kids to school, and where most of that driving is done with gas-guzzling SUV’s needed to get through the snowy winter weather. These dippy sprawl-opponents were ignored over the past 20 years by Republican politicians and well-intended families seeking their stake in “the dream”.

But now, it almost appears that Mother Nature has struck back, perhaps disguised by declining property values, collateralized debt obligations, subprime mortgages, and spiking gasoline prices. The “dippy urban planners” complaining about sprawl were right that something bad would eventually happen, but wrong in concentrating on declining water tables and vanishing bird species. Too bad that they didn’t foresee the consequences of real estate greed poisoning the human spirit; and the concomitant effects of greed and over-taxed earthly resources on the human economy. The real-estate based American dream has thus become a nightmare.

Our economy is going to recover, albeit slowly. So this was a warning, a serious warning. Let’s hope that our nation will learn to become a bit more circumspect in its love affair with real estate. Warnings like this usually mean that the next offense could be a game-changer, a game-ender for America as we know it.

◊   posted by Jim G @ 4:46 pm       Read Comments (2) / Leave a Comment
 
 
Sunday, May 17, 2009
Current Affairs ... Politics ...

OK, just two minor points for today.

1.) I must admit that I’m generally impressed with Barack Obama thus far. I don’t agree with 100% of his policies and actions to date, but it’s becoming clear that he is quite intelligent AND politically skilled. A smart guy who knows how to use it. I believe that he is inspired by the fearful responsibility that he was given, and will generally try to do what is best for the nation; I think he is becoming what you could call a “patriot”, and not just another scheming, posturing politician e.g. Pelosi and Specter.

I do wonder, though, about Obama’s relative youth. I wonder if he is overestimating the power of his position and of the system that he is there to direct. He is moving to take on all of the big problems at once; global warming, education, economic recovery, the financial system, the auto industry, health insurance, energy supply, terrorism, Iraq, Iran, Pakistan, Afghanistan, North Korea, Russia, etc. And he’s right that everything is inter-related; you really can’t separate out any of these situations. Still, I wonder what Harry Truman might say if he could be in the White House today. I suspect it might be something like this: “there’s a lot for us to do, and we can’t ignore any part of it, like the previous Administration was doing. But by the same token, we can’t solve it all at once; we’re gonna have to set some priorities as to how and when we tackle these situations”. Yea, a bit of Missouri plain talk might be refreshing right about now.

2.) I haven’t seen the new Star Trek movie yet, but it’s heartening for an old guy like me to know that young people today are getting interested in the Trek concept once more, just as the geeks within my generation did about 40 years ago.  »  continue reading …

◊   posted by Jim G @ 12:04 pm       Read Comments (2) / Leave a Comment
 
 
Thursday, May 14, 2009
Brain / Mind ...

Memory experiment: I had a slow day at work recently, so I Googled around for a while and eventually found a video for an interesting old TV show from 1966. The show is called “The Nowhere Affair”, an episode from NBC’s “Man From U.N.C.L.E.” series, which I saw as a kid and vaguely remembered many years later because of the philosophical implications of its closing scene. (Man From UNCLE was part of the spy show craze that followed the first 007 movies in the mid-60s).

What stuck in my memory about “Nowhere Affair” was the repartee during the closing scenes between UNCLE agent Napoleon Solo (Robert Vaughn) and a woman who was somehow involved in a recent battle between UNCLE and the evil forces of THRUSH. I recalled that the plot involved a desolate town in Nevada called “Nowhere”, the site of an underground THRUSH complex . This site became a “former site” by episode’s end; Solo and his partner, agent Ilya Kuriaken (David McCallum), had of course managed to take down the place. I couldn’t remember exactly how this was done or what the woman’s role was in the process, but I did recall that she had lost her memory. (Ah! How appropriate to this test of my own memory!). I only remember seeing this episode once, when it aired during prime time in 1966; perhaps I might have seen a re-run of it in 1967, but after that I am quite sure that I never saw it again. Until now.

According to my 42 year old memory regarding this UNCLE episode, Solo and Kuryakin were sitting together somewhere after accomplishing their mission of taking THRUSH out of “Nowhere”.  »  continue reading …

◊   posted by Jim G @ 8:41 pm       Read Comments (2) / Leave a Comment
 
 
Sunday, May 10, 2009
Photo ...

PHOTO TIME: Time once again to replace my usual thousand words with one picture. Here’s a shot taken last night, a warm Saturday night in May, at the Eagle Rock Park / 9-11 Memorial in Montclair, NJ. That would be mid-town Manhattan in the distance. I’m tempted to ramble on about the meta-themes that intermix in this shot. But for now, I’ll just let the picture do the talking.

◊   posted by Jim G @ 10:35 am       Read Comments (2) / Leave a Comment
 
 
Saturday, May 9, 2009
Politics ... Public Policy ...

The blog world (and now the Twitter world) seems to value brevity. Obviously, I don’t. But today I will offer a brief thought, perhaps out of laziness. My brief thought for today is a follow up from my blog a few days ago regarding George McGovern’s semi-conservative reboot. As an older guy, McGovern has come to question whether big government is always a good thing. His life experiences following the demise of his political career during the Reagan Revolution taught him to question the doctrinaire liberalism that he so ardently fought for in the Senate and as a Presidential candidate in 1972. I.e., that government is always good and more government is better; and that big government control of the economy is the sine qua non of a just and humane society.

Now McGovern is saying that big government, even American constitutional big government, actually does have its downsides. Thus, perhaps we have to trade off some injustice and inhumanity so as to preserve and foster the long-term benefits of a free society. Conservatives say that big government can’t enforce humane-ness and justice; in doing so, government itself can become inhumane and unjust (this has happened a bit too often during the history of civilization). They believe that the only path to a just society is via the underlying VALUES of a society. You can’t force people to have the right values using big government; you can only hope that they somehow adopt the right ones through societal traditions, e.g. via religious institutions and property ownership. Conservatives (well, the more intelligent ones, anyway; not that Bush crowd) say that the founders of our nation assumed this, and they actually have a good point there. As Madison said, “To suppose that any form of government will secure liberty or happiness without any virtue in the people, is a chimerical idea.”

Well, I myself don’t see this as a complete “either / or” situation. In a just society  »  continue reading …

◊   posted by Jim G @ 6:53 pm       No Comments Yet / Leave a Comment
 
 
Thursday, May 7, 2009
Politics ... Public Policy ...

It’s always refreshing to read about a man who reconsiders and challenges some of his own political views as he matures, in search of a greater truth. The world is not a simple place; politics tries to over-simplify the world in order to gain a certain end. Too often, political ends are served by means of twisting the truth. George McGovern, perhaps the most liberal presidential candidate of the past 80 years or so (lost to Nixon in a landslide in 1972), is trying to revive some of the greater truths. He has recently published three articles in the Wall Street Journal (of all places), which challenge doctrinaire liberal views (just when those views have come back into vogue thanks to Barack Obama).

Obviously the WSJ published these articles because they support its pro-business agenda. Has McGovern become a reactionary fascist in his old age?  »  continue reading …

◊   posted by Jim G @ 8:57 pm       Read Comments (2) / Leave a Comment
 
 
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