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“Emerging Markets as Partners, Not Rivals,” a fine commentary in The New York Times on Sunday by N. Gregory Mankiw of Harvard prompted me to take a vacation from the dreariness of health policy to visit one of the economic profession’s intellectual triumphs: the theory that every country gains by unfettered international trade.

That theory is less popular among noneconomists, especially politicians and unions. They wring their hands at what is called offshoring of jobs and often have no problem obstructing free trade with such barriers as tariffs or import quotas, which they deem in the national interest. (Two blogs recently offered examples of this posture.)

Economists assert that over the longer run, the owners of businesses that lose their markets in international competition and their employees will shift into new economic endeavors in which they can function more competitively. Skeptics, of course, often respond with the retort of John Maynard Keynes: “In the long run, we’re all dead.”

But, to the surprise of the West, that steel mill grew out to be POSCO, the world's third-largest and Asia's most profitable steel maker.

South Korea's developmental state, which relied on active government investment in R&D and crucial support for capital-intensive sectors in the form of start-up subsidies and infant industry protection, transformed the country into the richest on the Asian continent (with the exception of Singapore and Hong Kong). LG and Hyundai are similar legacies of Korea's spectacular industrial policy success.

Even though they were not trained as economists, the economic officials of East Asia knew some economics. However, especially until the 1970s, the economics they knew was mostly not of the free-market variety. The economics they happened to know was the economics of Karl Marx, Friedrich List, Joseph Schumpeter, Nicholas Kaldor and Albert Hirschman. Of course, these economists lived in different times, contended with different problems and had radically differing political views (ranging from the very right-wing List to the very left-wing Marx). However, there was a commonality between their economics. It was the recognition that capitalism develops through long-term investments and technological innovations that transform the productive structure, and not merely an expansion of existing structures, like inflating a balloon.

most of the worries about income inequality are bogus, but some are probably better grounded and even more serious than even many of their heralds realize.

In terms of immediate political stability, there is less to the income inequality issue than meets the eye. Most analyses of income inequality neglect two major points. First, the inequality of personal well-being is sharply down over the past hundred years and perhaps over the past twenty years as well. Bill Gates is much, much richer than I am, yet it is not obvious that he is much happier if, indeed, he is happier at all. I have access to penicillin, air travel, good cheap food, the Internet and virtually all of the technical innovations that Gates does. Like the vast majority of Americans, I have access to some important new pharmaceuticals, such as statins to protect against heart disease. To be sure, Gates receives the very best care from the world’s top doctors, but our health outcomes are in the same ballpark. I don’t have a private jet or take luxury vacations, and—I think it is fair to say—my house is much smaller than his. I can’t meet with the world’s elite on demand. Still, by broad historical standards, what I share with Bill Gates is far more significant than what I don’t share with him.

when average people read about or see income inequality, they don’t feel the moral outrage that radiates from the more passionate egalitarian quarters of society. Instead, they think their lives are pretty good and that they either earned through hard work or lucked into a healthy share of the American dream.

As an author, I’ve seen how the sales histories of textbooks work. Typically they have a big spike of sales for the first 1-2 years after they are introduced, and that’s when most the new copies are sold and most of the publisher’s money is made. But by year 3  (and sometimes sooner), the sales plunge and within another year or two, the sales are miniscule. The publishers have only a few options in a situation like this. One option: they can price the book so that the first two years’ worth of sales will pay their costs back before the used copies wipe out their market, which is the major reason new copies cost so much. Another option (especially with high-volume introductory textbooks) is to revise it within 2-3 years after the previous edition, so the new edition will drive all the used copies off the shelves for another two years or so. This is also a common strategy. For my most popular books, the publisher expected me to be working on a new edition almost as soon as the previous edition came out, and 2-3 years later, the new edition (with a distinctive new cover, and sometimes with significant new content as well) starts the sales curve cycle all over again. One of my books is in its eighth edition, but there are introductory textbooks that are in the 15th or 20th edition.

For over 20 years now, I’ve heard all sorts of prophets saying that paper textbooks are dead, and predicting that all textbooks would be electronic within a few years. Year after year, I  hear this prediction—and paper textbooks continue to sell just fine, thank you.  Certainly, electronic editions of mass market best-sellers, novels and mysteries (usually cheaply produced with few illustrations) seem to do fine as Kindle editions or eBooks, and that market is well established. But electronic textbooks have never taken off, at least in science textbooks, despite numerous attempts to make them work. Watching students study, I have a few thoughts as to why this is: Students seem to feel that they haven’t “studied” unless they’ve covered their textbook with yellow highlighter markings. Although there are electronic equivalents of the highlighter marker pen, most of today’s students seem to prefer physically marking on a real paper book. Textbooks (especially science books) are heavy with color photographs and other images that don’t often look good on a tiny screen, don’t print out on ordinary paper well, but raise the price of the book. Even an eBook is going to be a lot more expensive with lots of images compared to a mass-market book with no art whatsoever. I’ve watched my students study, and they like the flexibility of being able to use their book just about anywhere—in bright light outdoors away from a power supply especially. Although eBooks are getting better, most still have screens that are hard to read in bright light, and eventually their battery will run out, whether you’re near a power supply or not. Finally, if  you drop your eBook or get it wet, you have a disaster. A textbook won’t even be dented by hard usage, and unless it’s totally soaked and cannot be dried, it does a lot better when wet than any electronic book.

A recent study found that digital textbooks were no panacea after all. Only one-third of the students said they were comfortable reading e-textbooks, and three-fourths preferred a paper textbook to an e-textbook if the costs were equal. And the costs have hidden jokers in the deck: e-textbooks may seem cheaper, but they tend to have built-in expiration dates and cannot be resold, so they may be priced below paper textbooks but end up costing about the same. E-textbooks are not that much cheaper for publishers, either, since the writing, editing, art manuscript, promotion, etc., all cost the publisher the same whether the final book is in paper or electronic. The only cost difference is printing and binding and shipping and storage vs. creating the electronic version.

It is both misguided and dangerous to push unobserved risks further into the statistical tails of the probability distribution of outcomes and allow these high-impact, low-probability "tail risks" to disappear from policymakers' fields of observation.

Such environments eventually experience massive blowups, catching everyone off-guard and undoing years of stability or, in some cases, ending up far worse than they were in their initial volatile state. Indeed, the longer it takes for the blowup to occur, the worse the resulting harm in both economic and political systems.

Seeking to restrict variability seems to be good policy (who does not prefer stability to chaos?), so it is with very good intentions that policymakers unwittingly increase the risk of major blowups. And it is the same misperception of the properties of natural systems that led to both the economic crisis of 2007-8 and the current turmoil in the Arab world. The policy implications are identical: to make systems robust, all risks must be visible and out in the open -- fluctuat nec mergitur (it fluctuates but does not sink) goes the Latin saying.

Peer to peer file sharing (P2P) has made media distribution free and has become the bane of media monopolies. P2P file sharing means digital files can be copied and distributed at no cost. CD's, DVD's, and other older forms of holding media are no longer necessary, nor is the cost involved in making them or distributing them along a traditional logistical supply chain. Disc burners, however, allow users the ability to create their own physical copies at a fraction of the cost of buying the media from the stores. Supply and demand is turned on its head as the more popular a certain file becomes via demand, the more of it that is available for sharing, and the easier it is to obtain. Supply and demand increase in tandem towards a lower "price" of obtaining the said file.Consumers demand more as price decreases. Producersnaturally want to produce more of something as priceincreases. Somewhere in between consumers and producers meet at the market price or "marketequilibrium."P2P technology eliminates material scarcity, thus the more afile is in demand, the more people end up downloading it, andthe easier it is for others to find it and download it. Considerthe implications this would have if technology made physicalobjects as easy to "share" as information is now.

In the end, it is not government regulations, legal contrivances, or licenses that govern information, but rather the free market mechanism commonly referred to as Adam Smith's self regulating "Invisible Hand of the Market." In other words, people selfishly seeking accurate information for their own benefit encourage producers to provide the best possible information to meet their demand. While this is not possible in a monopoly, particularly the corporate media monopoly of the "left/right paradigm" of false choice, it is inevitable in the field of real competition that now exists online due to information technology.

Compounding the establishment's troubles are cheaper cameras and cheaper, more capable software for 3D graphics, editing, mixing, and other post production tasks, allowing for the creation of an alternative publishing, audio and video industry. "Underground" counter-corporate music and film has been around for a long time but through the combination of technology and the zealous corporate lawyers disenfranchising a whole new generation that now seeks an alternative, it is truly coming of age.

Some have argued that piracy is rampant in those countries where the online Android Market is not yet available. But a recent KeyesLabs research project suggests that may not be true. KeyesLabs created a rough methodology to track total downloads of its apps, determine which ones were pirated, and the location of the end users. The results were posted in August, along with a “heat map” showing pirate activity. 

In July 2010, Google announced the Google Licensing Service, available via Android Market. Applications can include the new License Verification Library (LVL). “At run time, with the inclusion of a set of libraries provided by us, your application can query the Android Market licensing server to determine the license status of your users,” according to a blog post by Android engineer Eric Chu. “It returns information on whether your users are authorized to use the app based on stored sales records.”

Justin Case, at the Android Police Web site, dissected the LVL. “A minor patch to an application employing this official, Google-recommended protection system will render it completely worthless,” he concluded.

The question that the audience member asked — and one that we tried to touch on a bit in the panel itself — was who has access to this raw data. Twitter doesn’t comment on who has full access to its firehose, but to Weil’s credit he was at least forthcoming with some of the names, including stalwarts like Microsoft, Google and Yahoo — plus a number of smaller companies.

In the case of Twitter, the company offers free access to its API for developers. The API can provide access and insight into information about tweets, replies and keyword searches, but as developers who work with Twitter — or any large scale social network — know, that data isn’t always 100% reliable. Unreliable data is a problem when talking about measurements and analytics, where the data is helping to influence decisions related to social media marketing strategies and allocations of resources.

One of the companies that has access to Twitter’s data firehose is Gnip. As we discussed in November, Twitter has entered into a partnership with Gnip that allows the social data provider to resell access to the Twitter firehose.This is great on one level, because it means that businesses and services can access the data. The problem, as noted by panelist Raj Kadam, the CEO of Viralheat, is that Gnip’s access can be prohibitively expensive.

lot of Android applications are being pirated. The openness of the platform has made it easy for people to steal applications without paying for them.

growing popularity of the OS with enterprise users and developers is creating greater urgency, as pirated code robs developers of revenue and the incentive to remain committed Android. (See Android Set to Rule Over Apple and RIM Operating Systems.)

Network World's Android Angle blogger, Mark Murphy, bluntly noted a year ago that “Right now, it is very straightforward — if you publish on Android Market, your application will be made available for free download outside of the Market.” He added, “This is part and parcel of having an open environment like Android.” The then-current Android Market copy protection mechanisms “have been demonstrated to be ineffective.”

A recent editorial in the New York Times by Nicholas Wade raises some interesting points about the nature of basic science research – primarily that its’ risky.

As I have pointed out about the medical literature, researcher John Ioaniddis has explained why most published studies turn out in retrospect to be wrong. The same is true of most basic science research – and the underlying reason is the same. The world is complex, and most of our guesses about how it might work turn out to be either flat-out wrong, incomplete, or superficial. And so most of our probing and prodding of the natural world, looking for the path to the actual answer, turn out to miss the target.

research costs considerable resources of time, space, money, opportunity, and people-hours. There may also be some risk involved (such as to subjects in the clinical trial). Further, negative studies are actually valuable (more so than terrible pictures). They still teach us something about the world – they teach us what is not true. At the very least this narrows the field of possibilities. But the analogy holds in so far as the goal of scientific research is to improve our understanding of the world and to provide practical applications that make our lives better. Wade writes mostly about how we fund research, and this relates to our objectives. Most of the corporate research money is interested in the latter – practical (and profitable) applications. If this is your goal, than basic science research is a bad bet. Most investments will be losers, and for most companies this will not be offset by the big payoffs of the rare winners. So many companies will allow others to do the basic science (government, universities, start up companies) then raid the winners by using their resources to buy them out, and then bring them the final steps to a marketable application. There is nothing wrong or unethical about this. It’s a good business model.

Not all intellectuals are on the "left."

But in their case, the curve is shifted and skewed to the political left.

By intellectuals, I do not mean all people of intelligence or of a certain level of education, but those who, in their vocation, deal with ideas as expressed in words, shaping the word flow others receive. These wordsmiths include poets, novelists, literary critics, newspaper and magazine journalists, and many professors. It does not include those who primarily produce and transmit quantitatively or mathematically formulated information (the numbersmiths) or those working in visual media, painters, sculptors, cameramen. Unlike the wordsmiths, people in these occupations do not disproportionately oppose capitalism. The wordsmiths are concentrated in certain occupational sites: academia, the media, government bureaucracy.

For a long time, American politics has been defined by a Left/Right dynamic. It was Liberals versus Conservatives on a variety of issues. Pro-Life versus Pro-Choice, Tax Cuts vs. More Spending, Pro-War vs Peaceniks, Environmental Protections vs. Economic Growth, Pro-Union vs. Union-Free, Gay Marriage vs. Family Values, School Choice vs. Public Schools, Regulation vs. Free Markets.

The new dynamic, however, has moved past the old Left Right paradigm. We now live in an era defined by increasing Corporate influence and authority over the individual. These two “interest groups” – I can barely suppress snorting derisively over that phrase – have been on a headlong collision course for decades, which came to a head with the financial collapse and bailouts. Where there is massive concentrations of wealth and influence, there will be abuse of power.  The Individual has been supplanted in the political process nearly entirely by corporate money, legislative influence, campaign contributions, even free speech rights.

It is now an Individual vs. Corporate debate – and the Humans are losing. Consider: • Many of the regulations that govern energy and banking sector were written by Corporations; • The biggest influence on legislative votes is often Corporate Lobbying; • Corporate ability to extend copyright far beyond what original protections amounts to a taking of public works for private corporate usage; • PAC and campaign finance by Corporations has supplanted individual donations to elections; • The individuals’ right to seek redress in court has been under attack for decades, limiting their options. • DRM and content protection undercuts the individual’s ability to use purchased content as they see fit; • Patent protections are continually weakened. Deep pocketed corporations can usurp inventions almost at will; • The Supreme Court has ruled that Corporations have Free Speech rights equivalent to people; (So much for original intent!) None of these are Democrat/Republican conflicts, but rather, are corporate vs. individual issues.

We were starting to feel very bad for him and his family, when we noticed the TV and other high-tech gadgets. Why had he bought all these things if he felt the family did not have enough to eat? He laughed, and said, "Oh, but television is more important than food!"

For many in the West, poverty is almost synonymous with hunger. Indeed, the announcement by the United Nations Food and Agriculture Organization in 2009 that more than 1 billion people are suffering from hunger grabbed headlines in a way that any number of World Bank estimates of how many poor people live on less than a dollar a day never did. COMMENTS (7) SHARE: Twitter   Reddit   Buzz   More... But is it really true? Are there really more than a billion people going to bed hungry each night?

unfortunately, this is not always the world as the experts view it. All too many of them still promote sweeping, ideological solutions to problems that defy one-size-fits-all answers, arguing over foreign aid, for example, while the facts on the ground bear little resemblance to the fierce policy battles they wage.

Most people think of the term in the context of production of goods and services: more efficient means more valuable output is wrung from a given bundle of real resources (which is good) or that fewer real resources are burned up to produce a given output (which is also good).

In economics, efficiency is also used to evaluate alternative distributions of an available set of goods and services among members of society. In this context, I distinguished in last week’s post between changes in public policies (reallocations of economic welfare) that make some people feel better off and none feel worse off and those that make some people feel better off but others feel worse off.

consider whether economists should ever become advocates for a revaluation of China’s currency, the renminbi — or, alternatively, for imposing higher tariffs on Chinese imports. Such a policy would tend to improve the lot of shareholders and employees of manufacturers competing with Chinese imports. Yet it would make American consumers of Chinese goods worse off. If the renminbi were significantly and artificially undervalued against the United States dollar, relative to a free-market exchange rate without government intervention, that would be tantamount to China running a giant, perennial sale on Chinese goods sold to the United States. If you’re an American consumer, what’s not to like about that? So why are so many economists advocating an end to this sale?

Efficiency is the seemingly value-free standard economists use when they make the case for particular policies — say, free trade, more liberal immigration policies, cap-and-trade policies on environmental pollution, the all-volunteer army or congestion tolls. The concept of efficiency is used to justify a reliance on free-market principles, rather than the government, to organize the health care sector, or to make recommendations on taxation, government spending and monetary policy. All of these public policies have one thing in common: They create winners and losers among members of society.

can it be said that a more efficient resource allocation is better than a less efficient one, given the changes in the distribution of welfare among members of society that these allocations imply?

Suppose a restructuring of the economy has the effect of increasing the growth of average gross domestic product per capita, but that the benefits of that growth accrue disproportionately disproportionately to a minority of citizens, while others are worse off as a result, as appears to have been the case in the United States in the last several decades. Can economists judge this to be a good thing?

Running a server is no more difficult than starting Windows on your desktop. That’s the message Dave Winer, forefather of blogging and creator of RSS, is trying to get across with his EC2 for Poets project.

Winer has put together an easy-to-follow tutorial so you too can set up a Windows-based server running in the cloud. Winer uses Amazon’s EC2 service. For a few dollars a month, Winer’s tutorial can have just about anyone up and running with their own server.

but education and empowerment aren’t Winer’s only goals. “I think it’s important to bust the mystique of servers,” says Winer, “it’s essential if we’re going to break free of the ‘corporate blogging silos.’”

The Templeton Foundation claims to be a friend of science. So why does it make so many researchers uneasy?

With a current endowment estimated at US$2.1 billion, the organization continues to pursue Templeton's goal of building bridges between science and religion. Each year, it doles out some $70 million in grants, more than $40 million of which goes to research in fields such as cosmology, evolutionary biology and psychology.

however, many scientists find it troubling — and some see it as a threat. Jerry Coyne, an evolutionary biologist at the University of Chicago, Illinois, calls the foundation "sneakier than the creationists". Through its grants to researchers, Coyne alleges, the foundation is trying to insinuate religious values into science. "It claims to be on the side of science, but wants to make faith a virtue," he says.

pharmaceutical company Merck, Sharp & Dohme paid Elsevier to produce a fake medical journal that, to any superficial examination, looked like a real medical journal but was in reality nothing more than advertising for Merck

As reported by The Scientist: Merck paid an undisclosed sum to Elsevier to produce several volumes of a publication that had the look of a peer-reviewed medical journal, but contained only reprinted or summarized articles--most of which presented data favorable to Merck products--that appeared to act solely as marketing tools with no disclosure of company sponsorship. "I've seen no shortage of creativity emanating from the marketing departments of drug companies," Peter Lurie, deputy director of the public health research group at the consumer advocacy nonprofit Public Citizen, said, after reviewing two issues of the publication obtained by The Scientist. "But even for someone as jaded as me, this is a new wrinkle." The Australasian Journal of Bone and Joint Medicine, which was published by Exerpta Medica, a division of scientific publishing juggernaut Elsevier, is not indexed in the MEDLINE database, and has no website (not even a defunct one). The Scientist obtained two issues of the journal: Volume 2, Issues 1 and 2, both dated 2003. The issues contained little in the way of advertisements apart from ads for Fosamax, a Merck drug for osteoporosis, and Vioxx.

there are numerous "throwaway" journals out there. "Throwaway" journals tend to be defined as journals that are provided free of charge, have a lot of advertising (a high "advertising-to-text" ratio, as it is often described), and contain no original investigations. Other relevant characteristics include: Supported virtually entirely by advertising revenue. Ads tend to be placed within article pages interrupting the articles, rather than between articles, as is the case with most medical journals that accept ads Virtually the entire content is reviews of existing content of variable (and often dubious) quality. Parasitic. Throwaways often summarize peer-reviewed research from real journals. Questionable (at best) peer review. Throwaways tend to cater to an uninvolved and uncritical readership. No original work.