Economics & Finance

Leaving a Trillion on the Table

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(I originally posted this in 2006. With the current push toward top-down micromanagement of virtually all aspects of the economy, it seems worth posting again. I should also note that a trillion is probably way too small a number to use for an estimate of the economic value of this technology)

The invention of the transistor was an event of tremendous economic importance. Although there was already a substantial electronics industry, based on the vacuum tube, the transistor gave the field a powerful shot of adrenaline and brought about the creation of vast amounts of new wealth.

As almost everyone knows, the transistor was invented by John Bardeen, Walter Brattain, and William Shockley, all researchers at Bell Laboratories, in 1946. But a recent article in Spectrum suggests that the true history of the transistor is more complex…and interesting not only from the standpoint of the history of technology, but also from the standpoint of economic policy.

The story begins in Germany, during World War II. Owing to short-sighted decisions by the Nazi leadership, Germany’s position in radar technology had fallen behind the capabilities of Britain and of the United States. (Reacting the the prospect of airborne radar, Herman Goering had said “My pilots do not need a cinema on board!”)

But by 1943, even the dullest Nazi could see the advantages that the Allies were obtaining from radar. In February of that year, Goering ordered an intensification of radar research efforts. One of the scientists assigned to radar research was Herbert Matare, who had been an electronics experimenter as a teenager and had gone on the earn a doctorate.

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Trade War 2009?

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From the Telegraph:

The EU trade commissioner vowed to fight back after the bill passed in the House of Representatives late on Wednesday included a ban on most purchases of foreign steel and iron used in infrastructure projects.

The Senate’s version of the legislation, which will be debated early next week, goes even further, requiring that any projects related to the stimulus use only American-made equipment and goods.

The inclusion of protectionist measures has quickly raised hackles in Europe.

Catherine Ashton, the EU trade commissioner, said: “We are looking at the situation. The one thing we can be absolutely certain about, is if a bill is passed which prohibits the sale or purchase of European goods on American territory, that is something we will not stand idly by and ignore.”

Back in the USA, Bill Lane, who is the government affairs director for Caterpillar, is very concerned about the implications of protectionist legislation:

“We are the first to recognise that if the US embraces Buy American then the whole notion of buying national will mestastasize and limit our ability to take part in overseas projects. We are students of history. A major reason a very deep recession turned into the Great Depression was the fact that countries turned inward.”

and

“We would be a primary beneficiary of any type of infrastructure project in the US, but at the same time we are one of the country’s largest exporters”

Caterpillar is of course not the only company for which exports are extremely important. At firms ranging from Boeing (airliners) and GE (locomotives, power turbines, medical equipment) to small manufacturing enterprises, there are millions of jobs which are dependent on the willingness of other countries to buy American products. Too often, politicians portray international trade as something we do almost as a favor to other countries, ignoring the very real benefits that Americans derive from trade.

I believe that manufacturing is very important to this country, and would support rational policy initiatives to help make American manufacturing more competitive. Starting a trade war, though, is not the answer to the problems either of American manufacturing or of the American economy as a whole.

(via PowerLine)

California Confiscates Tax Refunds

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I would wager that those who withheld more than they owed on their State of California taxes didn’t think that they would be making a zero interest loan to the state.   I would be absolutely furious.   I am thinking that many will never see their refund, as California  appears to be  on the precipice.  

California has had no money in its general fund for the past 17 months, and has been paying its bills by borrowing from Wall Street and special internal funds.

If the state’s legislators and governor do not reach a budget agreement that brings immediate funds into the state’s coffers, the state’s borrowed funds will be entirely exhausted at the end of February, according to the controller’s office.

I would also wager that workers will be making a lot of changes to their withholding so as not to be owed any refund at the end of next year.   Fool me once, shame on you, fool me twice…

Then again, the feds could come to the rescue and print some money for Cali.   Good luck with your bond rating, California municipalities and (insert project here) districts.

Some muni bonds are actually paying very good rates right now.   As I was sitting across the table from a financial advisor we discussed the rates that some municipalities and state agencies in California were paying and then we both laughed out loud and moved on to looking at munis from more stable cities and states.   I am thinking that this conversation has been played out millions of times at brokerage desks across the nation.

Who Creates the Value of Labor?

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Mickey  Kaus, writing on the  intransigence  of UAW president Ron  Gettlefinger [h/t Instapundit], observes:

It doesn’t mean Gettlefinger’s workers have a right to $28/hour  if at that wage their employers can’t stay in business without an ongoing multi-billion dollar subsidy. I’m sorry if this seems obvious. It’s apparently not obvious enough.

It’s not obvious to most on the Left. One of the basic tenets of Marxism is that labor has intrinsic value that  precedes  and is  separate  from the value of  management  and investing. Most leftists, even those who are not Marxist, have absorbed this concept of the value of labor.  

In reality, the circumstances are the exact opposite. It is the skill and judgment  of managers and investors that creates the value of labor. If you don’t own your own company or freelance, you rely on someone else to choose what work you do and how you do it. Their  decisions  create the value of the products and services you make.    When they make mistakes, the value of your labor decreases and you should charge less for it.  

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Change We Can Believe In (More of the Same)

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This is brutal:

As Weiss wrote, “The chances of Schapiro shaking things up in the securities industry — instituting real, meaningful, desperately desired change — are about the same as the chances you can make a black bear curtsy and serve tea. This is a terribly disappointing selection.”
 
This is not a pick that most people really care about and the media didn’t raise hell over it. 90% of voters still probably have no idea who she is, or what FINRA is. But the fact that the Senate rubber stamped such a dubious pick so quickly and without dissent could be a sign of much worse things to come.
 
Convicted felon Sam Antar, who was the CFO of the Crazy Eddie fraud and now speaks out against white collar crime told me that “If I was still the criminal CFO of Crazy Eddie, Mary Schapiro is not someone I would be afraid of.”

It is going to be a long four years (or 8) indeed.