More Reassurance

Speaking of reassurance, perhaps you’ll find this article by Joel Kotkin at The Daily Beast reassuring:

Increasingly, American technology is dominated by a handful of companies allied to a small but powerful group of investors and serial entrepreneurs. These firms and individuals certainly compete but largely only with other members of their elite club. And while top executives and investors move from one firm to another, the big companies have constrained competition for those below the executive tier with gentleman’s agreements not to recruit each other’s top employees.

At the top of the American keiretsu system stands a remarkably small group whose fortunes depend in part on monetizing invasions of privacy to use the Internet as a vehicle for advertising. These are not warm and cuddly competitors. Both Google and Microsoft have been accused of using anti-competitive practices to keep out rivals, in part by refusing to license technology acquiring of potential competitors.

“Tech is something like the new Wall Street,” notes economist Umair Haque, “Mostly white mostly dudes getting rich by making stuff of limited social purpose and impact.”

A few things to keep in mind:

  • Big companies employ a lot fewer people per dollar of earnings than small companies do.
  • Big companies influence the legislative process in ways of which small companies can only dream.
  • Intellectual property law protects big companies against upstarts not the other way around.
  • Companies with revenues of $100 billion or over are rare. Innovative companies with revenues of $100 billion are even rarer.
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Reassurance

At The Diplomat Minxin Pei attempts to reassure me that the PLA (Chinese military) remains under the firm control of the CCP (civilian leadership):

While the PLA may not have decisive influence over major policy, it does have enormous operational freedom. If we analyze recent incidents that contributed to tensions between China, its neighbors, and the United States, these could be characterized, mostly, as dangerous tactical moves. Here, again, we first need to resist the temptation to exonerate the civilian leadership completely.

It is reasonable to assume that the PLA personnel were acting under general and vague directives approved by the civilian leadership. For example, it is no secret that the Chinese government has long viewed American surveillance activities along its coasts with anger. One can thus surmise that the civilian leaders have approved, in principle, that the PLA take counter-measures. However, the PLA has enormous discretion in terms of setting operational parameters.

Although there is the possibility that the PLA, as an organization, may not have well-developed procedures to set operational freedom for its front-line officers, the more likely culprit behind recent incidents is a mindset prevalent among Chinese military officers. In Chinese, this mindset is called ninzuo wuyou, or “rather left than right.” In plain English, the essence of this mindset is that officials throughout the chain of command (or officials in the entire bureaucratic system of the Chinese state) have a proclivity to interpret—and implement—generally vague top-level policy directives in a more aggressive (usually more conservative than liberal) direction. In domestic affairs, this mindset has resulted in excessive repression. In foreign policy, the same mindset leads to disproportional response or overly risky actions.

Unfortunately, based on past record, it seems that officials who have committed more “leftist” acts have either done well or avoided punishment. For example, one PLA general who threatened to “nuke” the United States a few years ago has not only retained his job, but has remained one of the most visible official spokesmen on security issues. So far, no PLA official responsible for any of the incidents that damaged Chinese ties with its neighbors or the U.S. is known to have been disciplined.

or, said another way, the Chinese military has exploited its operational freedom aggressively and the civilian leadership has done nothing about it. Are you reassured now?

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When You Close a Practice

You know, I’ve been mulling over the phenomenon of physicians’ “closing their practices”, i.e. not taking new patients, and I think it has some interesting implications. Doesn’t the practice mean that

  1. Either physicians
    1. Don’t care to seek efficiencies in how they deliver care or
    2. Are convinced that greater efficiencies in how they deliver care while preserving the standard of care are impossible and
  2. Physicians who’ve closed their practices either
    1. Don’t expect their pay to increase or
    2. Expect to increase their pay by raising their rates.

I suppose an elderly physician, foreseeing his or her retirement, might conscientiously limit her or his practice but my anecdotal experience suggests that’s pretty rare. I’d be interested in other explanations.

Update

Here’s what the AMA has to say about the ethics of the issue:

There are two bases for physicians’ prerogative to choose whom to treat. The first is a general privilege held by all members of society that accords individuals a right to choose with whom to associate. Physicians do not give up their freedom of association merely by becoming professionals. But they do assume certain obligations that place limits on their choices in the context of serving patients. The second aspect of the physicians’ prerogative stems from the notion of professionalism. Physicians are granted enormous autonomy within the context of the patient-physician relationship and this autonomy includes the freedom to choose whether to undertake the treatment of a particular patient. However, this autonomy is not designed to further physicians’ self-interests. Rather it is a necessary element of assuring patients the best possible care. Since medical professionals are trained in a complex body of knowledge, and non-professionals are not able to judge how that knowledge should be applied in particular cases, physicians are often accorded the freedom to make medical decisions on their own—or autonomously. The purpose of the exercise of autonomy in this context is not the furtherance of the physician’s interests, but those of the patient.There are two bases for physicians’ prerogative to choose whom to treat. The first is a general privilege held by all members of society that accords individuals a right to choose with whom to associate. Physicians do not give up their freedom of association merely by becoming professionals. But they do assume certain obligations that place limits on their choices in the context of serving patients. The second aspect of the physicians’ prerogative stems from the notion of professionalism. Physicians are granted enormous autonomy within the context of the patient-physician relationship and this autonomy includes the freedom to choose whether to undertake the treatment of a particular patient. However, this autonomy is not designed to further physicians’ self-interests. Rather it is a necessary element of assuring patients the best possible care. Since medical professionals are trained in a complex body of knowledge, and non-professionals are not able to judge how that knowledge should be applied in particular cases, physicians are often accorded the freedom to make medical decisions on their own—or autonomously. The purpose of the exercise of autonomy in this context is not the furtherance of the physician’s interests, but those of the patient.

On what grounds can the prerogative to choose be curtailed? First, it may be limited by factors such as legal requirements not to discriminate, or requirements for emergency care. Second, the autonomy generally granted to the physician should be limited to the extent that it may only be exercised in patients’ interests and, therefore, there are cases where a physician should decline to take on the care of a patient. limited by factors such as legal requirements not to discriminate, or requirements for emergency care. Second, the autonomy generally granted to the physician should be limited to the extent that it may only be exercised in patients’ interests and, therefore, there are cases where a physician should decline to take on the care of a patient.

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The Strategy

Following the naming of Microsoft insider Satya Nadella as Microsoft’s CEO, there’s been an absolute deluge of suggestions as to what he should do. Here’s an article that’s typical of the genre—it recommends that Microsoft adopt Android as its operating system platform for smartphones and, presumably, phablets:

I’ve just had an interesting idea (which is pretty rare at the end of a long, hard week). What if Microsoft’s new CEO, Satya Nadella, drops Windows Phone in favor of Android? This might seem crazy, given the amount of time and money that Microsoft has put into Windows Phone — but desperate times call for desperate measures, right? Adding credence to this idea is the Nokia X (codenamed Normandy) — a Lumia-style phone that runs Android. This mid-range phone, despite Microsoft’s acquisition of Nokia, still looks like it’s going to come to market this spring. Is it possible that Microsoft is waiting to see how the Nokia X does, before making a decision on the continuation of Windows Phone?

What most of these pieces ignore and the one cited above is a prime offender is Microsoft’s fundamental business strategy.

During the California Gold Rush of 1849 those made the most money weren’t the miners but the merchants who sold equipment, food, and so on to miners. Similarly, there’s a lot more money to be made selling tools to software developers. Microsoft’s strategy for more than 30 years has been to control all computer software development and IMO Windows 8 must be viewed in that light. If Microsoft loses control of the software development environment on smartphones, tablets, and so on and most future software development is done for smartphones, tablets, and so on, Microsoft loses control of software development.

So, don’t expect a Microsoft insider to propose abandoning Microsoft’s core strategy of the last several decades. You can’t maintain a $78 billion software company on office productivity software.

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The Way Forward For Canada (and for us?)

I need to mull over Canadian Conrad Black’s op-ed in the National Post. In particular, I think this advice is worthy of consideration, not just for Canada but for the United States:

Primary industry (resource extraction) will require more jobs, secondary industry (manufacturing) will grow only marginally in employment terms, and if we must expand the service sector, and we will have to, let us just pay the proverbial hamburger-flippers and pizza delivery people better; at least they add value, unlike many office workers. (They all dress the same now anyway.) As a society, we have egotistically rejected value-adding work. The way to address wealth disparity, and it is indeed an issue, is to tax the velocity of money and distribute unstigmatizing income supplements to lower-income, employed people.

Discouraging primary and secondary industry while subsidizing work that adds little or no value doesn’t sound like a prudent policy to me but that’s what we’ve been doing.

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Once Again: What Austerity?

Kevin Drum laments a policy of “austerity”:

This is the price of austerity. If public sector employment had been growing normally during this period, we’d have about a million more jobs than we do now and the unemployment rate would probably be below 6 percent.

echoing a theme that writers more eminent than he including Paul Krugman, Joseph Stiglitz, and Dean Baker have sounded from time to time over the last several years.

Before I react to that, let me provide a few definitions. By “employment” I mean the total number of full-time and part-time employees. By “payroll” I mean the total wages paid to employees. Now let’s go back to the graph of total government employment in Kevin’s post.

The graph shows steady increases in private sector employment, a spike in government employment in 2010 coincident with the bulk of the spending in the ARRA, the stimulus package, and a slight decline since then. There are several interesting things about that. First, there’s no sign of technological unemployment in that chart. Second, there’s no spike in private employment associated with the stimulus package. There’s the cyclical decrease in private sector employment associated with the recession and an increase associated with the recovery but the private sector effects of the stimulus if any were indirect. That’s consistent with some criticisms that have been leveled against the ARRA: that most of it went to bolster public sector employment and payroll and too little filtered into the private sector economy.

My best efforts have suggested to me that public sector payrolls (see here) after the recession have either held steady or increased slightly. How do you reconcile declining employment with constant or increasing payrolls? I would suggest that in state and local governments in particular revenues have not increased but labor contracts stipulating pay increases have left state and local governments with no alternative but to cut the number of employees. In the absence either of more revenue or wage flexibility what alternative do state and local governments have?

For the federal government the situation is slightly different. Wages have risen slightly while employment, other than the spike associated with the stimulus package and the temporary increase due to the census, has remained pretty constant.

None of the foregoing takes into account total public employee compensation, the bulk of which is in the form of healthcare and education benefits both of which have increased sharply over the last several years but which are very hard to nail down, or whatever public sector employment has been offset by private sector “contractors”.

Consequently, it would seem to me that Kevin’s actual complaints are that public employee pay has risen unrealistically when compared with revenues and state and local governments don’t have enough flexibility in employee compensation to adjust to changing times and instead trim the number of employees, aggravating an already difficult situation.

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Ancient Linen Hemp Fabric Found

I’m sort of a Çatalhöyük buff so this is interesting to me. Archaeologists working at the site have found a piece of very ancient woven fabric:

Excavations works that have been continuing in the earliest settlement of Çatalhöyük in the central Anatolian province of Konya have revealed a 9,000-year-old piece of linen fabric. The world’s first hemp-weaved fabric has been found in the ground of a burned house.

The report about the new findings includes the process between June 15 and Aug. 15. More than 120 people from 22 countries worked for the excavations in this process. The most striking thing on the report is this fabric, which was wrapped around a baby skeleton.

The cloth is very finely woven and it’s the earliest piece of linen woven with a combination of flax and hemp to be discovered to date.

Linen fabrics are believed to have been produced for millennia, possibly for as long as 30,000 years. The Çatalhöyük find is roughly contemporary with the ancient linen fabric discovered by Robert Braidwood twenty years ago at Çayönü, more than 600 km. distant, so the technology was apparently fairly widespread around the region by that time.

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You Can’t Get There From Here

You may have heard it said that 80% of Americans live in metropolitan areas rather than in small towns or the country as was once the case. That’s true but it doesn’t really tell the whole story.

You can find the list of metropolitan areas here. About 20% of Americans live in one of the ten largest metropolitan areas. Something like a third of Americans live in one of the twenty largest metropolitan areas.

There are several problems with thinking about the United States this way. First, some of these metropolitan areas are very large. For example, the Chicago metropolitan area includes Naperville, Elgin, and parts of Indiana and Wisconsin. There’s quite a bit of difference between living in Chicago and living in Kenosha. Or living in Northbrook and living in Kenosha for that matter.

Second, the travel time from one point to other points within the same metropolitan area can be quite daunting. Getting from Crown Point, Indiana to Kenosha, Wisconsin will take you several hours, probably two or more depending on weather, traffic, and so on. Getting there, conducting your business, and return can take the better part of a day. Not something you’d want to do on a regular basis.

Finally, there’s a tremendous difference between living in the New York metropolitan area, the largest in the country in terms of population, and the 91st, Des Moines, Iowa.

All this by way of preamble to the problems being encountered by a young friend of mine. This particular young friend recently moved from one of the ten largest metropolitan areas to another metropolitan area, the new one not in the top 50 metropolitan areas. My young friend is having an enormous problem finding an internist—every practice my friend has identified is closed. This presents a problem in coping with an ongoing health problem this friend has. My friend can’t establish a relationship with an internist because the practices are closed but the hospitals won’t deal with my friend (who does have insurance) unless my friend has established a relationship with a primary care physician. It’s Catch 22.

I recognize that’s anecdotal but I also suspect that it’s normal (in the technical sense).

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The Devil Is In the Details

Mickey Kaus points out some of the issues in the PPACA that are becoming apparent as the program actually gets off the ground:

We know what happens when people who claim subsidies on the Obamacare exchanges underestimate their income–the IRS will grab the unwarranted part of the subsidy back at tax time. And we know what happens if they overestimate their income–they’ll be refunded the subsidy to which their lower income entitled them.

But the poorest Americans don’t qualify for subsidies on the exchanges. If they make less than the poverty line –about $20,000 for a family of three–they’re steered to Medicaid. (In states with expanded programs, they’re apparently sent to Medicaid if they make less than 138% of poverty, according to the Kaiser subsidy calculator). So what if someone is near the income boundary between the two programs–and what if this person overestimates their income, and thinks they qualify for a subsidized policy on the exchange–but it turns out they didn’t make what they thought they’d make. Maybe they didn’t get some work they usually got in the past, or their wages got cut, or they got laid off. According to the income they actually earned, they should have been sent to Medicaid. They didn’t just get too much or too little subsidy. They used the wrong program.

And then there are the impossibility for many people of knowing what their income will actually be, the incentives for cheating, and so on. I don’t think it’s just a case of the problems that occur when any major program is rolled out. I think it’s a problem of when a program is prepared in haste and implemented by people who aren’t particularly detail-oriented, don’t really know very much about the healthcare system as it exists in practice, and are predisposed to make terribly bad decisions based on a flawed notion of human nature. Not to mention that they might be motivated to make their decisions based on the politics of the situation rather than its pragmatics.

All of this points to the preferability of doing something like the PPACA on a state-by-state basis so that at the very least the problems that inevitably emerge won’t be happening everywhere at once and the damage can be controlled. There are, after all, real people with real problems and real lives that are at stake.

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It’s Not Our Salami

Following up on my brief brief post on China yesterday, here’s an item from Robert Haddick of War on the Rocks you might find interesting. In the post Mr. Haddick outlines China’s recent actions, described as “salami-slicing”:

John Mearsheimer recently argued that China is pursuing in Asia what the United States has in Latin America: regional hegemony. In pursuit of that goal, China keeps trying to take territory, bit by bit, in the East and South China Seas. And the United States doesn’t know what to do about it.

This practice, known as salami-slicing, involves the slow accumulation of small changes, none of which in isolation amounts to a casus belli, but which add up over time to a substantial change in the strategic picture. By using salami-slicing tactics in the East and South China Seas, China does not have to choose between trade with the rest of the world and the achievement of an expanded security perimeter in the Western Pacific at the expense of China’s neighbors. Given enough time, and continued confusion by the United States and its allies on how to respond, China is on course to eventually achieve both.

China’s salami-slicing has accelerated over the past few years. In 2012, China established “Sansha City” on Woody Island, an island in the Paracel chain that China seized by force from South Vietnam in 1974 (Vietnam refuses to recognize China’s seizure). China declared that Sansha City would be the administrative center of all of its claims in the South China Sea, including those in the Spratly Island group. Small Chinese military and paramilitary garrisons on Woody Island reinforce the image of sovereign legitimacy China is trying to establish—an image that neighbors such as Vietnam and the Philippines lack the resources to replicate. Just last month, China permanently based a 5,000-ton paramilitary patrol vessel at Woody Island.

That’s not just provocation as some have suggested. It’s military activity. Mr. Haddick sees these actions as posing a problem for the United States.

As I see it the problem is that, while irredentist Chinese nationalists may believe it’s their salami they’re slicing, it most emphatically is not our salami. It might be Japan’s salami or India’s salami or South Korea’s or Taiwan’s or the Philippines’s but it’s not ours and our interests are not synonymous with theirs.

Now I think the solution to the problem of these East Asian countries is pretty obvious and alluded to by Mr. Haddick:

U.S. officials may have another unspoken reason for their forbearance policy: what might be termed a “rope-a-dope” gambit. China’s assertions are clearly sparking a region-wide security backlash. Security cooperation is rapidly developing, from India through Southeast Asia and Australia, and up to Japan, aimed at balancing China’s military power. Non-Chinese military spending and procurement in the region is similarly expected to leap over the next five years. U.S. officials may conclude that the more such activity occurs, the lighter will be America’s security burden in the region.

There will be a temptation in the United States to infantilize our allies (and prospective allies) in East Asia as has been our policy with respect to Europe in the mistaken view that weak allies somehow make us stronger. The temptation should be resisted.

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