Carnival of the Capitalists #8:
Giving You the Business One Brilliant Blog Entry at a Time
Lots of good stuff this week - I'm not clever enough to come up with a theme and there's a 15-month-old boy who wants my attention, so I'll post things in the order they came in and let you pick and choose. I excerpt and hyperlink, you decide...
The next Carnival of the Capitalists will be hosted by A Penny For... To submit your writing for the next CotC, send the link via email to capitalists -at elhide.com, and it will automatically be sent to the next host. It would be helpful to put COTC in the subject line. Post guidelines can be found here. And now... onto our 21 economics and business posts this week...
Aunty Goob reflects on the Medicare prescription drug benefit and says we're "waltzing into socialism":
Every attempt by our government to impose someone's ideals of social change through legislation is another stab at freedom financed by taxpayer wallets. Our elected officials bluster and bumfuzzle us about their wonderful job protecting us from ourselves while they pass these extortionist measures.
Link may be bloggered - it was posted Sunday Nov. 23. Oh, and scroll down for Goob's Nov. 12 posting, "On to Tax Absurdity!," in which Goob comments sarcastically that senators opposed to the extension of the federal ban on states levying Internet access taxes on the grounds that it will cost states tax revenue, ought to take the "obvious next step" and "pass legislation forbidding discount sales or clearance sales and the like. After all, selling something cheaper means less sales tax collected when the item sells."
examines "The Prisoner's Dilemma & The Folk Theorem," and explains why that facet of game theory is relevant to the economics of politics. Put on your thinking beanie and stick around awhile at one of my favorite blogs.
Dr. Jeff Cornwall
runs one of my favorite new blogs about business and economics, called The Entrepreneurial Mind
. And I don't say that solely because, as part of my day job, I helped him set it up. It's a must-read blog if you are interested in the cycle of entrepreneurship that powers the American economy. This week, Cornwall examines the myth that entrepreneurs are "gamblers," and correctly fingers the primary cause of the myth as being a misunderstanding of risk. There's risk, too, in not
taking entrepreneurial advantage of an opportunity.
If entrepreneurs view their role as one of being a steward of the resources at their disposal, they begin to take a much more careful and thoughtful approach to business formation. The true act of entrepreneurial courage from this perspective is not blindly forging into a new venture, but rather become one of a willingness to only move ahead when "Sinking the Boat" risk is minimized.Cornwall
, a professor of business at the Jack C. Massey Graduate School of Business at Belmont University in Nashville, writes and teaches about entrepeneurship from experience. He was one - and a rather successful one at that. Be sure to check out Jeff's blog.
shreds a Washington Times
commentary by Paul Craig Roberts, who fretted about the loss of manufacturing jobs and worried the U.S. was expending its wealth en route to Third World status. Nonsense, says Prather:
As economists have noted ad nauseum, our progress has been built on temporary unemployment and dynamic labor markets that reallocate that labor to more productive pursuits. Manufacturing output is increasing - see first link above - and has been for decades through productivity increases. Employment in manufacturing has fluctuated between 10 and 20 million for the past seventy years - second link - while decreasing as a percentage of the labor force. It's useful to go back to agriculture as an example of how economies evolve.
Don't miss it.
Ryan Tasty Manatees
blog fisks something written by someone called "Aunty Pinko," who I've never heard of and chances are neither have you unless you frequent Democratic Underground.
Auntie Pinko urges those seeking to determine the state of the economy to ask, “If I need information, is there a public library to help?” Clearly, the existence or non-existence of a nearby library has absolutely nothing to do with the state of the economy. No matter how desirable a library is, a local government can make a rational decision to forgo taxing the public and providing one, regardless of how astounding the economic upturn is. Auntie’s similar questions on other things, such as the environment, suffer the same defect.
says "it's not always about the money," when people leave one job for another.
I've left jobs where management could have offered me twice as much money to stay and it still wouldn't have been worth the hassle. One of the things managers must do to keep turnover as low as possible is to ferret out the little sources of unhappiness for their employees. Sometimes all it takes to keep your employees happy is something as simple as saying "Good morning" or asking about their kids.
You think Little A secretly hopes his boss reads this?
weighs in on the California supermarket workers' strike, and spins it into a riff on the labor market and why some jobs "deserve" better pay and benefits than others.
What we absolutely do not owe anybody is the pretense that increasingly valueless labor is worth more than it really is. In fact, I would say that we have a positive moral duty in the opposite direction: our priority should be to discourage young people (for example, through low wages) from becoming lifelong grocery baggers in the first place, since that profession is about to die and their labor is urgently needed elsewhere in the economy. Where would "elsewhere" be? I'm not sure (although I'd start with "plumber" and "housecleaner" and the other manual trades where wage and price increases signal obvious shortages). But it is extremely unlikely, after several centuries in which nearly every profession has been repeatedly destroyed and replaced with something more valuable and higher-paying, and unemployment has decreased to within single digits of zero even while the labor pool has increased dramatically, that the death of the supermarket grocery bagger marks some kind of special tipping-point.
Read the whole thing.
Jeremy C. Wright
blogs about a "fantastic example of the power of open source in business." Says Wright:
The simple concept of opening the core of your business up for the world to see is fantastically strong and yet considered fantastically weak by those in power. After all, knowledge is still considered power, even after the information-sharing 90's, and sharing of knowledge is often seen as a weakening of the higher echelon's power base.Rob Sama
says George W. Bush is Richard M. Nixon, and predicts Bush's capitulation on domestic spending issues could lead to his downfall in the upcoming election.
Dean will come out and say that while he's aware that some of the protesters are against war per se, he is not. He will point out that he publicly supported the first Gulf War, and he will give further reassurance that he will not pull out of Iraq prematurely, now that we're already in there. But he will say that going into Iraq was a distraction against the real war on terror, which needs to be fought, and taken directly to Iran and Saudi Arabia. And this is where Bush will find himself vulnerable. What happens in the minds of the Republican voter, when he looks at the disaster that one party rule has wrought, knowing that "compassionate conservative" means complete spendthriftedness and capitulation on every major domestic issue save taxes? What happens when conservatives are openly pining for the good old days of gridlock, with a Democrat president and a Republican congress?
With quotes from Cal Thomas, Bruce Bartlett and Rush Limbaugh.
explains why he believes "the whole negative focus on outsourcing is a bit extreme."
If the anti-outsourcing crowd really wants to do something, they can try to fill the domestic jobs we do have that can't be filled. There is a shortage of nurses - estimated at nearly half a million by 2007 - and these high-paying jobs can't be outsourced to India.
Trenchant commentary on a timely issue. There's more on outsourcing below from Sean Hackbarth.
D. Gordon Smith
, a University of Wisconsin law professor and author of the new Venturepreneur
blog, sent a link to an older post, called "The Fiduciary Duty of Good Faith," examining an important new doctrine in Delaware corporate law that developed in litigation over Michael Ovitz's short tenure and lucrative departure from Disney. Smith says it's not really a new legal doctrine - "just old wine in a new bottle."
The new formulation of the fiduciary duty of good faith is nothing new at all, but simply a reinvigoration of substantive due care. I say "reinvigoration" because substantive due care has long been considered a moribund doctrine, but this new duty of good faith could have legs. At a minimum, we see a dramatic change in the tone of the Court of Chancery, which had until this case treated the fiduciary duty of good faith with some disdain.
Smith also posts a link
to a response to his essay, by Steve Bainbridge, which he calls "brilliant."
offers a Thanksgiving Day post about Google and marketing - and why you should not take the advice of one of his regular readers, who said it's a waste of time to try to increase your Google rankings.
I've been thinking about this advice for the last few days, and I've come to the conclusion that it's incredibly bad advice. I don't know if GoogleGuy is intentionally trying to deceive people (for the benefit of his employer), or if he actually believes that all you have to do is come up with a great website and then it will automatically get foundSean Hackbarth
looks at outsourcing from an entrepreneurial perspective:
Experimentation like this is one way the free market better satisfies the desires of consumers (customer feedback that's really listened too is also extremely important). The possibility to err is vital in channeling resources to their most beneficial ends.
says the dividend is your friend, and makes some long-term market predictions:
Classical finance theory holds that dividends are irrelevant - lower dividends mean that the firm is investing more into lucrative internal growth opportunities which will grow future earnings. Sadly this relationship doesn't seem to hold.
Hey, don't look to me for a comment - I'm still waiting for the Big Beanie Baby Rebound.*
examines what The Matrix: Revolutions
has to say about entrepreneurs.
The message here is a simple implicit assumption in science -- all things have causes. In entrepreneurship, we try to project what we can cause to result in the outcome we want (money, fame, enlightenment, whatever). We are fallible in discerning cause, but when we fail we look back to find what cause we had not factored. Over time, our experience makes us better and better at guarding against the normal garden variety things that we ought to have known in the first place. In business, there are many standard practices such as checking references and so on, to double check on whether someone is talking through their hat or is genuine. Whether you learn them from tradition or try it your own way, you will discover it is worth doing. Causality.
I haven't seen any of the Matrix movies, but I've re-read Philip's essay three times...
, mentioned above in the Gordon Smith entry, explores the trend of regulation by litigation.
We see it in the regulatory arena, where courts increasingly make both economic and social policy via lawsuits brought by greedy/activist lawyers. The tobacco litigation was merely the opening shell. As many of us predicted at that time (pre-blogging for me), the plaintiffs' bar would soon move on to food and, especially, alcohol. We were right.
Bainbridge, a corporate law professor at UCLA, offers four suggestions for reform but admits that, "being a pessimistic fellow, I don't think any of this is going to happen."
considers the heavy hand of regulators on small business in Russia, and says, "In summary, the legacy of communism is a government at all levels that is unfriendly to free market business." Well, yeah
Since the fall of the Berlin Wall and the collapse of the Soviet Union a mere decade ago, the new Russia has struggled with instilling democracy and free market philosophy into the government and population. The transition continues with understandable difficulty. Seventy plus years of communist rule bequeathed the country with local and regional bureaucratic institutions that were and continue to be overbearing, intrusive and corrupt. And nowhere have the regulations, inspections, permits, fees, and so on, been as burdensome than on small businesses. Of note is that, as of January 1, 2003, there were about 800,000 small businesses in Russia being overseen by 1.5 million federal bureaucrats. That's two regulators for every entrepreneur.
Read the whole thing.
Rob the BusinessPundit
ruminates on the business of pornography and wonders "why do they make so much money?" Answer: "Because it's a stigmatized product."
Normally when an industry has high profits competitors come in and force prices down, but that hasn't happened with porn.
Moving right along...
is writing about the economics of porn, too.
Smut peddlers cleaned up their acts in response to corporate interest. Such a development provides little consolation to those who want to take down the $10 billion industry in its entirety. Actually, some may even be more dismayed than before. By "selling out," adult entertainment has made itself more acceptable to a broader audience, thus ensuring its perpetuation. Here's my question: Could some form of regulation have achieved similar success in changing pornographers' behavior for "the better" (I'm aware that this term is loaded, but please bear with me)? Clearly, the market has prompted them to change their business in a way that is arguably more socially responsible than before. Could we notch this one up for limited government?
Yes, this entry really did come right after the one above.
also has some thoughts on business, technology and the open source movement, like Jeremy C. Wright above. He also asks for stats on how many people are reading Carnival of the Capitalists. I'll give what stats I can later on in the week - as an update at the end of this post - though they'll be for my entire blog and not just this entry.
Barry L. Ritholtz
brings this week's CotC to a happy close with a light look at the corporate death penalty. Heh.
The only reason Merrill Lynch was allowed to survive was that it employed so many people in the NY area. I suspect Spitzer didn't want to be responsible for putting all those people out of work; It was economics, not politics, because you just KNOW those Merrill employees ain't voting for him anyway. Killing Merrill would have been a devastating blow to the NY and NYC economies. That's right, Spitzer has the power to whack the entire NY economy. Such is the nature of the vacuum left by the S.E.C., which the NYAG is more than amply filling.
Think happy thoughts... Think happy thoughts... Think happy thoughts...
And there you have it. The 21 posts that make up Carnival of the Capitalists #8
. Hope you enjoy it as much as I did.
The next CotC will be hosted by A Penny For...
To submit something for consideration, send the link via email to capitalists -at elhide.com, and it will automatically be sent to the next host. Put COTC in the subject line, please. Post guidelines can be found here
UPDATE: LATE ADDITION: This entry got lost in the email. Jonathan Wilde
over at Catallarchy.net has a very good follow-up to his post about the blogosphere as a free-market anarchy, noting how such blogosphere creations as Technorati and Truth Laid Bear's Blog Ecosystem are giving structure to the blogosphere.
One of the biggest obstacles to overcome in convincing authoritarians about the benefits of a free society is their inability to accept the fact that order can can be an emergent property of individual action. For them, all facets of life have to have some sort of grand blueprint implemented by expert soverigns. The cannot conceive of the economy, culture, infrastructure, morality, or society itself as a bottom-up result of billions of autonomous individual actions. Yet, the blogosphere is a vivid example of how wrong they are.
Don't miss it.
UPDATE MONDAY Dec. 1: I've posted
four five six
nine economics items today. This one
is the most important of the nine - and I've already submitted it for inclusion next week in Carnival of the Capitalists #9. For the rest of my economics posts today, scroll up, or hit the "Home" link and scroll down. Thanks for dropping by.
UDPATE TUESDAY Dec. 2: This blog, which normally gets 500-600 unique visitors a day Mondays through Fridays, got 2,787 yesterday, thanks to links from a variety of blogs to the Carnival of the Capitalists, and a link from Instapundit to this
non-COTC, but economics-related, post of mine.
UPDATE: THURSDAY, Dec. 4: CotC-driven traffic seems to have subsided. This blog receieved visits from 1,091 unique visitors on Tuesday, down from 2,787 on the first day of CotC #8, and 583 unique visitors yesterday - which is about HobbsOnline's normal average weekday unique visitor count. By my calculations and rough guestimating, I feel safe in saying CotC attracted about 2,000 unique visitors over a two-day span. Not bad!