Growthology

Today's Readings Relevant to Entrepreneurship

The intersection between tight labor markets, housing costs, and the opportunity cost of entrepreneurship: Free Exchange. The work by Fairlie and Chatterji that Ryan cites here is terrifically important and has not gotten nearly enough attention.

Why is carried interest taxed as it is? Observational Epidemiology. 

What the studies say about private equity. Dealbook (via Marginal Revolution). Tyler sums it up: "'Some positives, lots of uncertainty' would be a good description of the available evidence."

Brad Feld on the intra-metropolitan geography of entrepreneurship. We probably need some new mapping tools. Feld Thoughts.

As an aside, I completely agree with Brad that "entrepreneurial density" is a good measure of a region's culture of entrepreneurship, but I don't know if we can yet measure it precisely. For one thing, we need to agree on a common definition of entrepreneurship. Then we need to figure out how to count it--government data are not entirely helpful here. Then we need to figure out what it means. One of our research assistants has been looking over Business Dynamics Statistics data on employment in young firms as a share of total employment in each state over the past three decades. We will post some charts and findings soon, but as the data relate, so far, to existing literature, I am reminded of The Princess Bride:

Vizzini: "He didn't fall? INCONCEIVABLE!"

Inigo Montoya: "You keep using that word. I do not think it means what you think it means."

(h/t to PK for the reminder of this pricelessly fungible line the other day)

Videos from the 3rd annual Kauffman Economics Bloggers Forum

Yesterday, I was privileged to host the 3rd annual Kauffman Economics Bloggers Forum at the Kauffman Foundation's conference center in Kansas City.  Thanks to the quick work of Matt Long and his team, eleven of the talks are available for viewing online here.  These includes 10-15 minutes presentations by

Tyler Cowen
Virginia Postrel
Bryan Caplan
Steve Waldman
Megan McArdle
Arnold Kling
Dean Baker
Felix Salmon
Ben Wildavsky
Micky Kaus

There were technical glitches with two of the presentations by Lynne Kiesling and Robert X. Cringely, both involving external video feeds.  If those are resolved, I will post accordingly. 

Thanks to all the bloggers who attended and participated, particularly to Mickey Kaus who agreed after much pleading by yours truly to talk to the group as a late and much-welcomed bonus speaker.  We at Kauffman believe the advent of blogging is a critical innovation in human society, and, as Steve Waldman mentioned, decision-making in a deomcracy. 

Here is Tyler's talk ... hopefully this works as an embed: 

A New Growthologist

Hi, I'm Brink Lindsey, and back in September I joined the Kauffman Foundation as a senior scholar in research and policy. After a few months of getting my bearings, I figure it's time to hop back on the blogging horse.

Let me start off with just a little background. Before coming to Kauffman, I was affiliated for many years with the Cato Institute -- as director of regulatory studies, adjunct scholar, director of the Center for Trade Policy Studies, and most recently vice president for research.  Although my work ranged broadly at Cato, the subject that has always been at the center of my intellectual interests is economic growth -- including both its underlying causes and its broader social consequences. So it makes sense that, even though I'm still new here, working at Kauffman and writing for a blog called Growthology feel like coming home.

Substantive posting to follow shortly.

On CNBC, talking Bloggers Survey

Here is a link to CNBC Erin Burnett's interview this afternoon http://www.cnbc.com/id/15840232?video=1624672802&play=1 discussing the latest Kauffman Foundation economics bloggers survey (PDF link).

Honestly, I think this one is the most interesting one yet (Q4 is the fourth we have ever published), mainly due to very interesting topical questions submitted by bloggers. 

However, the debate on CNBC was about whether bloggers are good or bad for the economy.  Obviously, I am a huge fan of the transformative power of the blogosphere, and I hope I represented them well.  While emphasizing the diversity and depth of opinion, I neglected to mention how ENTREPRENEURIAL the technology is.  That's worth remembering.

On CNBC, talking Bloggers Survey

Here is a link to CNBC Erin Burnett's interbiew this afternoon http://www.cnbc.com/id/15840232?video=1624672802&play=1 discussing the latest Kauffman Foundation economics bloggers survey (PDF link).

Honestly, I think this one is the most interesting one yet (Q4 is the fourth we have ever published), mainly due to very interesting topical questions submitted by bloggers. 

However, the debate on CNBC was about whether bloggers are good or bad for the economy.  Obviously, I am a huge fan of the transformative power of the blogosphere, and I hope I represented them well.  While emphasizing the diversity and depth of opinion, I neglected to mention how ENTREPRENEURIAL the technology is.  That's worth remembering.

Blogger questions from the KEO Q2

Five bloggers submitted their own questions to this quarter's Kauffman Economic Outlook, which I think turned out very well and will want to continue.  Here are the results, and I'll withhold comment for now.  Others are welcome to copy and repost individual charts. 

 
  
 
  

Kauffman Economic Outlook Q2

Read the Kauffman Economic Outlook Q2 2010: A Quarterly Survey of Leading Economics Bloggers (PDF)  

Here are the first few charts:

 
  

Policy Options, KEO part 2

The second set of questions from the Kauffman Economic Outlook Q1 2010 focus on policy options for the U.S. economy.  The summary text from the report itself is copied here:

Despite being a balanced panel in terms of political alignment (16 percent Republican, 19 percent Democratic, 47 percent independent, and roughly 18 percent libertarian/other), there is a strong consensus around many policy recommendations. Seventy-one percent of economics bloggers think the U.S. government is “too involved in the economy,” with only 17 percent calling for greater involvement. When asked what the government should be doing, the only policies with more than 50 percent support are: 1) to increase high-skill immigration (63 percent), and 2) to increase legal immigration at all skill levels (57 percent). Two policies stood out sharply with nearunanimous opposition: increasing business regulation (9 percent) and increasing tariffs (4 percent).

On taxation, the panel was widely in favor of lowering taxes on payrolls (74 percent) and income, both corporate (64 percent) and individual (62 percent). Likewise, there was strong support for higher taxes on gasoline/carbon (68 percent and 57 percent, respectively), and consumption (54 percent). A common battleground for tax policy is progressivity, but 47 percent of bloggers are calling for flatter taxes compared to 26 percent in favor of increased progressivity (i.e., even higher tax rates on higher incomes relative to lower incomes).

According to economics bloggers, the top three variables that policymakers should emphasize in a model of economic growth are human capital, innovation, and economic freedom. In a related question, bloggers were asked to rate the beneficial importance of numerous key players in the U.S. economy. One hundred percent of the panel rate entrepreneurs as “important” or “very important,” and innovation also had unanimous support. Only slightly less important are free trade and education, with nearly all respondents rating them as “important” or “very important.” In contrast, only 30 percent of economics bloggers think labor unions are important, and nearly 70 percent rate them as “unimportant” (numbers may not add to 100 due to non-responses and rounding). Opinion is decidedly mixed on manufacturing, while there is mild support for the importance of big business.

And here are the individual charts (in .gif format) from this section:

 
  

 

As a few observors have pointed out, not all of these policy recommendations might be as popular with a random sample survey of the American public. For example, increasing immigration is arguably a political non-starter. But that has been a top priority here at Kauffman as a boost to economic growth. I was pleased to see this had broad support from the econ bloggers panel, which again I would emphasize is politically balanced. 

Is it biased?  Naturally, a reader of the survey should wonder if this survey is biased. There is a big difference between an ideological bias versus an experiential bias. Indeed, the question of bias goes to heart of survey research. There are random sample surveys (like Gallup) that try to capture public opinion, and most econometric research aspires to the standard of an unbiased sample of observations. The KEO is not of the variety. The Kauffman Economic Outlook is a lot more like a co-authored research paper, with scores of co-authors.  Although some might characterize it as "expert" opinion, that seems to me like a diversionary label and conversation. 

It is trendy these days to hint that economists as a class of thinkers have been discredited for not forecasting the recession. That was the topic of a few panels at the recent American Economic Association conference in Atlanta, where a handful of economists were on hand who expressly had warned of the stock market bubble, the housing bubble, the financial dangers of leverage, various deficits, etc. Indeed, the much-maligned Alan Greenspan mentioned the dangers of Fannie and Freddie more times in Congressional testimony than most Congressman can count. Even if the vast majority of economists and economic commentators warn of the dangers of unsustainable budget deficits, we can never know the exact month when the U.S. will lose credibility and the dollar will fall, but that surely isn't proof of ignorance or failure of the discipline.

The point is that the KEO economics bloggers survey includes numerous voices who warned either of the coming recession or of pitfalls, or both. Even now, the sample includes a balance of opinions that differ on a range of issues.  Thus, finding areas of consensus, especially strong consensus, is a very interesting result.

Specifically, on the issue of taxes, this survey found a consensus for taxing consumption more. That would be unpopular, true. But the finding is not in isolation. Bloggers also overwhelmingly support lower taxes on work (payrolls) and income. The consensus to shift the tax burden should not be couched as a public-versus-expert paradox at all (as the public would probably favor such a change as well). Rather, the finding offers some common ground for policymakers in the years ahead.
 

What I Meant to Say . . .

Some timely humor, courtesy of here:

And I totally wish I'd had this poster in hand for yesterday's post:

If Only the Public Listened to Economists!!!

Most readers have seen the results of the Kauffman Economic Outlook, a survey of scores of economics bloggers from across the Internet. Kudos to Tim for pulling it together.

Not to sound crankish, but I just wanted to highlight a couple of surprising (to me, at least) reactions the survey results provoked from bloggers:

"Less tax on income, and more on consumption, particularly of energy and emissions. Sadly, the public doesn't seem too keen on the concept."

"In particular, I think we understand better than the typical citizen the role that government health programs play in the outlook for the deficit. And I think we understand better than others that private-sector labor unions are no longer significant."

At the risk of oversimplifying or reading too much into brief remarks, these reactions can perhaps be summarized as: the public is idiotic, economists (and especially economic bloggers) are smarter than the public, so the public should listen more to economists (especially economic bloggers). Such inescapable logic--on the heels of a severe recession that many of these economists swore wouldn't happen just before it actually did--would elicit derisive scoffs from the non-economist-don't-know-what's-good-for-them average members of the public that it seems to be my misfortune to hang around with.

Inaugural Kauffman Economic Outlook: survey of leading economics bloggers

Here is the first edition of the quarterly Kauffman Economic Outlook: survey of leading economics bloggers:

Download Kauffman Economic Outlook Q1 2010

It is very light on text, heavy on charts.  We offer a brief summary, but hope the collective opinions of the economics bloggers speak for themselves.

UPDATE: Here is a link to a public version of the survey with the exact questions and structure.  It is open to the public and we welcome your participation.  It will be interesting to see if readers of growthology have different opinions than the experts. 

Econ bloggers give DC mixed marks (a.k.a. Congress gets an F)

The question is "How do you grade the performance of the following organizations and institutions? (A = best, F = )"

Average answers (i.e. Grade Point Average) from 85 leading economics bloggers:

2.3    CBO, GAO, and other watchdogs
2.2    U.S. business community
2.0    European Central Bank
1.7    U.S. Federal Reserve
1.6    World Bank / IMF
1.2    Wall Street firms
0.7    U.S. Congress

Here is the chart:

 
What's this all about?  Tomorrow morning, the Kauffman Foundation will be releasing the results of an exciting new survey project that we have been working on for many months.  It is a survey of leading economics bloggers.  All of the questions were generated by and rank ordered by a blogger advisory board.  Today, we are releasing a teaser e-alert with results from one of the questions, a "report card" for major economic institutions.  It is fortunate that the teaser coincides with the major budget discussion because the best grade point average goes to the CBO as part of the Washington watchdog community.  Without the CBO, GAO, and similar watchdogs, Washington would probably be even more dysfunctional.

Maybe it's worth noting that the CBO has a blog?  (And no ... they did not participate in this survey!)

Remember When Twitter Overthrew a Religious-Military Dictatorship? Neither do I.

At the height of the post-election protests in Iran last summer, American media were abuzz with glee at the prospect that the paragon of utopian social media--Twitter--might actually play a key role in liberating Iranians from tyranny. We discussed this hyperbole-free topic a few times here at Growthology, but it seems that we now have actual evidence (as opposed to fact-free speculation) as to the role Twitter played. And? Quite small:

"[The study shows that such a tiny proportion of Iranians are on Twitter that any stories about a new movement based on the social network are meaningless."

Oh well.

 

Economics Bloggers Video

Here's a video of the Kauffman Econ Bloggers Forum:

Thanks to Matt Pozel and Matt Long for an awesome production effort.

TypePadding update

So, I'm getting a sense that the TypePad email function doesn't handle hyperlinks, spacing, paragraphs, bullets or indents based on the wordblob that was my last post.And it was credited to our administrator, Keith Mays, who may be secretly trying to take over.  I keep hearing Keith mutter, "Today growthology, tomorrow the Foundation!"  (Do people mutter exclamations?)

Anyway, here's the post as intended:

So TypePad just surprised us with the third new user interface in the last year (okay, maybe it has been 14 months ...).  At least they don't charge us for the forced upgrade, like MicroSoft The Abuser. Still, it will take some time for me to be impressed, and I am honestly shocked it took so long to walk back from the second version. Any time you make users change the nature of a saved file in one corner of the screen while putting the actual "save" button in an opposite corner, you have a problem with an idiot UI architect.

 

This is really a test of the new "post by email" function.  I am using my secret email address to make this post.  If it goes live, I'll be impressed.

 

Speaking of UI design, check out the WIRED article on craigslist.org.  A number of alternative designs are presented, and in my opinion not a one of them is superior to the bare bones of the current version. Websites today pepper you with options: left column, right column, menu bar, box, pop-up. Who isn't ready for a boycott of the sites using pop-up surveys? They might as well say, "WE WANT YOUR OPINION ... AND TO HINDER YOUR BROWSING!  :)"

 

Here's a my quick assessment of the WIRED alternative designs. Keep in mind that my uber dominant criterion for good UI is efficiency, and that means making the core functions painfully obvious. For craigslist, those functions are (1) search and (2) post to classifieds (PTC).  In the baseline design, both functions are top left. PTC is the very top link under the header.

• Web App. This kills the left column and replaces it with a complicated menu ribbon. Fracking ribbon. Search is very clear, but it the rest is a mess. PTC is on the left side of the new right column, in the second row. And this design has one of those detestable box within a box things. And naturally, it ends the subtle lower-case of craigslist with a capital C. Why?
• Khoi Vinh & Team. Starts by capping the brand as well.  Search is relegated down four, five columns below the header. It is highlighted sure, but there are layers of business. Typical tendency to use multiple ways of highlighting stuff. Some gets a colorized background, others a bold, others a new font, others a box. Seems like the same design motif as above, but honestly, WIRED does a crappy job of distinguishing one design from another in an article on design!
• SimpleScott. The best of the bunch, but PTC gets lost.  It is moved to a top right link that is small and light gray, next to the My Account | Help links ... stuff rarely used and now almost invisible. This is in contrast to the eight high contrast black bars telling your eyes what is important. Search is great here, but is it overbearing?
• Matt Willey. Great idea, poor execution.  Getting photos into the main listings is almost zen-like in contrast to the current functionality, which any user knows involves way too much clicking. eBay gets this right.
• Luke Hayman. A text image of Craig? Cute, but stupid.

Bottom line: craigslist is a success because they never sold out. Not to ads, not to fads. At the end of any business idea is the question: will the dogs eat the dogfood? For craigslist, consumers are in love with the current design. Maybe there's a lesson in there for TypePad.

Do We Really Need Daily Doses of News?

There must be an ongoing tally somewhere of the number of stories in newspapers about the future of newspapers. In the grand scheme of things, the number is no doubt tiny, but there is an aura of self-pity (inflated by self-importance) about it.

I don't mean to suggest newspapers aren't important or interesting; compared to my peers, I might be characterized as a dinosaur for still having--what?!--print subscriptions. But the demise of news in general (many individual newspapers will survive) might actually be a good thing for us in terms of perspective. Let's start, first, with the present and future of newspapers: media aren't going away, but everyone seems to have a singular concern about newspapers. Why? The usual course of things is that if an industry can't give people what they want (and the desperation move by many mid-size city newspapers to have lots of short stories with three-inch headlines is pretty ridiculous), it will either adapt or die. 

Such a fate is unthinkable to many regarding newspapers, however, because newspapers--we're told--have a special place in democratic self-rule. It's the Fourth Estate, after all. This would indeed be the overarching concern if it were the case that the government itself was shutting down newspapers. It has before, and newspapers quite literally died. But not this time. This time it's the market. And yet it's also not the case that the demise of newspapers means the demise of news and information. Quite the contrary--it's sufficient to say here that the future of news and information is quite bright. 

OK, fine--most blog readers will agree up to this point, but note that I haven't adequately addressed the question of newspapers and democracy--aren't we losing an essential piece of democratic self-rule? Is the ruthless market destroying democracy? Not really. The nature of daily news is probably more corrosive of democracy than it is supportive. I'm not suggesting that daily news coverage is totally corrosive and totally non-supportive of democracy, simply that it's probably a little more of the former. 

How can I say this? What about Watergate? The Pentagon Papers? What about the ties that bind us together as democratic citizens? The main reason daily news, as manifested by newspapers but also by other sources, might corrode democracy is that it telescopes our gaze almost completely on the here and now. The media has long been obsessed with exploring the present-centered weltanschauung of modern life--a state of affairs that the media, including newspapers, largely helped create. If newspapers are to be believed, each day is simply worse than the day before. Daily helpings of news distort one's perspective because they focus your eyes and brain on the moment, largely composed of detritus that will in time wash away and mean nothing to your life or to history writ large.

There is little room for reflection in the daily news, notwithstanding the superficial weekly attempt in the Sunday editions to reflect on the prior week's event and what they might mean for the future. The daily news is, by and large, superficial. This doesn't mean journalists are superficial--it's the nature of the subject matter, not the interlocutors. And there are exceptions, of course: in-depth stories, long features, etc, are all more helpful and more interesting than the daily news.

A democracy doesn't depend on constant, up-to-the-minute news any more than it depends on 100 percent voter participation. But don't we need newspapers to hold our elected officials accountable? If that's the primary raison d'etre of newspapers, then it's (a) a thin reed, and (b) they've done a pretty poor job of it during the Bush and Obama (so far) administrations. But what would we talk about at cocktail parties and conferences if not for newspapers? Maybe the demise of newspapers will prevent people from thinking they're smart simply because they read that day's Times or Journal. In fact, they might be smarter for having ignored them. And look, if something really big happens, you'll find about it.

Oddly, for all these reasons, blogging might offer a much better epistemology in terms of the flow and digestion of news. (I'm speaking generally here, about blogs qua genre--not all individual blogs will fall into these generalizations.) Bloggers often take the daily or weekly news and piece it all together in a larger narrative that is much more informative and useful than newspaper coverage. Because blogs can focus solely on a niche, they can offer much deeper analysis, which is the true stuff of democracy, not the story itself. Again, I'm speaking generally here, and a quick glance at my Google Reader demonstrates innumberable items that passionately dissect the minutiae of what Speaker Pelosi or Rep. Boehner said this morning. Still, on a possibly frivolous level, I have little doubt that sites like Fangraphs and Baseball Analysts are far more helpful for baseball fans than SportsCenter or the daily sports page. The same principle applies for more serious news.

Anyway, I probably sound pretty curmudgeonly here, and I'm certainly not the first one to make these points. Nassim Taleb reserves a special place in his diatribes for newspapers. The point is that life will go on even when newspapers as we know them are gone. And life and democracy would still go on if the daily news disappeared or was greatly reduced in size. (But keep the op-ed pages--they're the best part.)

Random Links

Someone's been reading Growthology. OK, I'm probably not the only one saying stuff like this.

Obama's electoral victory was, statistically speaking, pretty standard and to be expected.

A great line: "Congress, which usually does only two things well — overreact and nothing — can actually pull itself together and write remarkable legislation that will deal with issues."

Another reason why straight-up comparisons between life expectancy and health spending don't mean anything.

What assorted links am I reading?

One of the things I like best about the web is the ability to keep track of what my friends and fellow bloggers are reading. That's why I've been a big fan of goodreads.com, and also why I have been keeping tabs on the reading habits of Publius, a loyal growthology reader.  Publius, oddly enough, is a person whose identity is unkown to me, but I know of his(her?) books and reviews!

Another feature I like is the "What I'm Reading" posts by Tyler Cowen and Paul Kedrosky. Actually, I think it is the "Assorted Links" type of post that I am most fascinated by. So pithy. Actually, I was having this talk with new blogger Donald Marron a couple weeks ago, and he also wants to learn how to semi-automate the links post. I tried to write a few by hand / the old fashioned way / copy&paste&youknowthedrill a few times, but it was quite slow.  Is there some kind of software add-on these bloggers are using to generate those posts?

It could easily be the case that Paul and Tyler are just hyper-productive.

The Mark Thoma / Kauffman Blogger Forum Interview

 

Mark Thoma, Professor, University of Oregon and author of the blog Economist's View

The Information Economy, Huh?

Automation at factories means that there are simply fewer and fewer manufacturing jobs. And this is a good thing. Machinery does most of the work growing the food we eat, and producing the goods we use (durable and nondurable). What's left is information, hence the moniker "The Information Age."

But if this is the great era of data, then what's with the demise of so many information companies? Newspapers, Record Labels, Encyclopedias, all heading south.

The now-familiar struggles of the newspaper industry is in the news again with the brinksmanship in labor negotiations at the Boston Globe, as well-told by David Warsh in this week's economicprincipals.com essay. David is more optimistic than I about the business of newspapering, but I'd like to think I'm more optimistic about the future of journalism. He concludes,

Never mind Warren Buffett’s admonition over the weekend that there is no price at which he would consider a newspaper an attractive investment (he still has positions in two, the Buffalo News and the Washington Post). Repair work has never been his passion. With a little luck, the best regional papers – The Boston Globe, the Chicago Tribune, the Baltimore Sun, the Los Angeles Times – will wind up back in the hands of people who know how to run them.  If so, the newspaper industry will return to a scaled-down semblance of its former self – a profitable and stable group of companies in the first-draft-of-history business. But then, I am a congenital optimist. I have sometimes been wrong.

Yet I find the story of Encarta even more interesting.  Encarta, as you may recall, was the revolutionary Microsoft product that put an encyclopedia on a CD-ROM in 1993 which was the creatively destructive force that assaulted Encyclopedia Brittanica, first published around 1768. Now it is Encarta that will be shuttering -- this year, even refunding existing users rather than continue into 2010 -- signaling the acceleration of technology cycles in the new century. In this NYT piece, Randall Stross describes how the destroyer became the destroyee:

It’s hard to look at the end of the Encarta experiment without the free and much larger Wikipedia springing immediately to mind. But Encarta arguably would have failed even without that competition. The Google-indexed Web forms a virtual encyclopedia that Encarta never had a chance of competing against.

Encarta was conceived pre-Web and had a long gestation. In 1985, Bill Gates envisioned a CD-ROM encyclopedia as a “high-price, high-demand” product with the potential of becoming as profitable to Microsoft as Word or Excel.