Quotulatiousness

January 6, 2014

Why patents were invented

Filed under: Law, Technology — Tags: , , , — Nicholas @ 08:57

In The Register, Tim Worstall explains why the notion of patents was introduced to the law and why we need to fix it now:

Having decided that the patent problem is an attempt to solve a public goods problem, as we did in part 1, let’s have a look at the specific ways that we put our oar into those perfect and competitive free markets.

It’s worth just noting that patents and copyright are not, absolutely not, the product of some fevered free market dreams. Rather, they’re an admission that “all markets all the time” does not solve all problems. That exactly why we create the patents.

Given that people find it very difficult to make money from the production of public goods, we think that we probably get too few of them. Innovation, the invention of new things for us to enjoy, is one of those public goods. It’s a hell of a lot easier to copy something you know can already be done than it is to come up with an invention yourself. So, if new inventions can be copied easily then we think that too few people will invent new things. We’re not OK with this idea. Thus we create a property right in that new invention. The inventor can now make money out of the invention and thus we get more new things.

And if it were only that simple, then of course we’d all be for patenting everything for ever. However it isn’t that simple. For not only do we want people to invent new things, we also want people to be able to adapt, extend, play with, improve those new things. Or apply them to areas the original inventor had no thought about. In the jargon, we want not just new inventions but also derivative ones. So we want to balance the ability of inventors to protect with the ability of others to do the deriving. And that’s probably what is actually wrong with our patent system today.

Have a look at Tabarrok’s curve:

Tabarrok's curve (after Laffer's curve), where economist Alex Tabarrok posits that, beyond a certain value, increased protection for intellectual property causes less innovation.

Tabarrok’s curve (after Laffer’s curve), where economist Alex Tabarrok posits that, beyond a certain value, increased protection for intellectual property causes less innovation.

If we have no protection of originality, then we get too little innovation. But if we have too strong a protection, then we get too little of the derivative stuff. There’s a sweet spot and the argument is that we’re not at it at present and are thus missing out on some goodies as a result. Perhaps some tweaks to the system would help?

January 3, 2014

Virginia Postrel on “first world problems”

Filed under: Business, Economics, Technology — Tags: , , , — Nicholas @ 15:53

I’ve heard the term many, many times (and used it more than a few times as well), but as Virginia Postrel points out, it didn’t just happen by chance that there are “first world problems” we can mock-sympathize over:

Third world conditions are defined not merely by economic misery but by unreliable services. “At the age of fourteen I had experienced a miracle,” writes Suketu Mehta in Maximum City, his critically acclaimed 2009 book on Mumbai. “I turned on a tap, and clean water came gushing out. This was in the kitchen of my father’s studio apartment in Jackson Heights [New York]. It had never happened to me before. In Bombay, the tap, when it worked, was always the first step of a process” taking at least 24 hours to produce drinkable water. Mehta’s family lived an affluent life but with third world problems.

By contrast, in a developed country, barring a major natural disaster, you can count on uninterrupted electricity, hot and cold running water, sewage disposal, garbage pickup, heat (and in hot climates, air conditioning), telephone service, Internet access and television. The roads and bridges will be in decent repair; the elevators will work; the ATMs will have cash; and you’ll be able to find a decent public toilet when you need one.

These things aren’t necessarily free, but they’re cheap enough for pretty much everyone to enjoy them. Most significantly, they’re ubiquitous and reliable. Even when natural disasters strike, we can expect heroic efforts to get things back to normal. Under normal circumstances, we can depend on these services to be there consistently and to work as promised. We can make plans accordingly. That’s a first world privilege.

[…]

It took years of sustained efforts by online retailers and delivery services to make overnight orders realistic. It also took dissatisfaction: insanely demanding companies working to please insanely demanding customers — or, in some cases, to offer customers services they hadn’t even thought to ask for — as each improvement revealed new sources of discontent.

“Form follows failure,” is what Henry Petroski, the civil engineering professor and prolific popular writer, calls the process. Every step forward begins with a complaint about what already exists. “This principle governs all invention, innovation, and ingenuity; it is what drives all inventors, innovators, and engineers,” he writes. “And there follows a corollary: Since nothing is perfect, and, indeed, since even our ideas of perfection are not static, everything is subject to change over time.”

Rising expectations aren’t a sign of immature “entitlement.” They’re a sign of progress — and the wellspring of future advances. The same ridiculous discontent that says Starbucks ought to offer vegan pumpkin lattes created Starbucks in the first place. Two centuries of refusing to be satisfied produced the long series of innovations that turned hunger from a near-universal human condition into a “third world problem.”

November 15, 2013

Misunderstanding the purpose of health insurance

Filed under: Business, Economics, Health — Tags: , , , , — Nicholas @ 00:01

One of the big problems facing everyone in the US is the cost of healthcare: it’s expensive and getting more so. Obamacare is supposed to be an attempt to lower the overall cost of healthcare, but by approaching it from the “insurance” angle, it’s likely to make the situation worse rather than better. The Anti-Gnostic reposted an extended comment from Steve Sailer’s blog explaining why misunderstanding the purpose of insurance is a big problem:

1) Most people lose money on insurance, because most of the time insurance doesn’t pay out more than it takes in.

2) Thus, a “good” policy is a catastrophic-coverage-only, high-deductible policy, where most payments are out of pocket. This is a policy that protects you against the downside risk, but where you lose a lot less on average.

3) This is because the purpose of insurance is to protect yourself from *catastrophe*, not to make routine purchases.

4) For example, if you went to Best Buy and whipped out your home insurance card to get a new flat screen TV, everyone would look at you as a crazy man. “Don’t you know that home insurance is only for fires and floods, and not for routine purchases?”

5) And so it should be with health insurance, because you’ll actually — *provably* — pay less with a high deductible plan for all but catastrophic conditions.

6) Indeed, the most innovative and technologically advanced areas of medicine are ambulatory areas in which people feel that markets are “ok”. These are paradoxically the most trivial areas: lasik, plastic surgery, dermatology, dentistry, even veterinary medicine.

7) Why are these areas so advanced? Because people pay cash money, because they choose based on quality, and because they are *able* to choose — i.e. they aren’t being wheeled up to the hospital in a gurney in a no choice scenario.

8) Moreover, with every technology ever, from cars to cell phones to air travel to computers, things that start out expensive become cheaper when enough people demand them. With medicine it seems to bite more that money means differences in care. But at the end of the day doctors, patients, nurses, drugs, ambulances…all that stuff means real resources, and a refusal to do explicit computations just results in massive waste as costs are shunted to a place where no one looks at them.

At the Independent Institute blog, John Graham points out that — in the few places that government allows free markets to operate — prices tend to drop over time even while services or features improve:

It has taken a long time, but the price of hearing aids is in the process of falling dramatically. How has this happened? Technological innovation, of course, but there is more. There’s no shortage of technological innovation in U.S. health care. However, because third-party payers, that is, health insurers and governments, determine prices, there is no mechanism for customers to signal value to providers.

This is not the case for hearing aids: Although some states have mandated insurance coverage for hearing aids, this is usually limited to disabled children. The big market for hearing aids is seniors, and Medicare does not cover hearing aids.

This is another case of a phenomenon observed elsewhere by Devon Herrick of the National Center for Policy Analysis [PDF]: Where patients pay directly for medical care, prices fall like they do in every other market.

Seniors who want highly personalized service from an audiologist in his own practice can get it, and they will pay for it. Those who want to order online can save money by doing that. Those who want to get their old hearing aids repaired can make that choice. And the most adventurous seniors, who don’t mind running an earpiece into an iPhone, can get a functional hearing aid almost for free.

We are on the verge of enjoying universal access to hearing aids — but only because the government restrained itself from interfering, and let the market operate.

October 18, 2013

QotD: The hidden problem with regulating prescription drug prices

Filed under: Cancon, Economics, Government, Health, Quotations — Tags: , , , , , — Nicholas @ 00:01

[W]hen negotiating with other governments, pharmaceutical companies operate at a severe disadvantage, not because the governments’ buying power is so vast (the national health-care systems of Canada and many European countries cover fewer people than Aetna), but because the people you’re negotiating with can change the rules under which your product gets sold. At any point they can say, like Lord Vader, “I am altering the deal. Pray that I do not alter it any further.”

But if Canada started paying more, that wouldn’t mean we’d pay less. Drug companies are charging what they think we will pay. The result of Canadians and Europeans paying less is not that we pay more for drugs; it’s that fewer drugs get developed. To the extent that they are harming us, it is in hindering the development of cures or better treatments that we are missing, and don’t even know about.

Unfortunately, this is a classic case of Bastiat’s dilemma. It is easy for each country’s government to see the high prices that people are paying and intervene to lower them. It is hard for each country’s government, much less its citizens, to envision the new medical treatments that they might get if they paid more for drugs. So their incentives are heavily skewed toward controlling the price here and now, even if that means losing future cures.

Drug development is essentially a giant international collective-action problem. The U.S. has kept it from being a total disaster because we don’t have good centralized control of our insurance market, and our political system is pretty disorganized and easy to lobby. If that changes — and maybe we just changed it! — we’ll knock down the prices of drugs to near the marginal cost using government fiat, and I expect that innovation in this sector will grind to a halt. Stuff will still be coming out of academic labs, but no one is going to take those promising targets and turn them into actual drugs.

Megan McArdle, “U.S. Consumers Foot the Bill for Cheap Drugs in Europe and Canada”, Bloomberg, 2013-10-14

September 13, 2013

The fatal challenge facing Apple and Samsung – boredom

Filed under: Business, Technology — Tags: , , , , — Nicholas @ 09:01

The Register‘s Andrew Orlowski speculates that we’ve hit PEAK SMARTPHONE:

Apple’s keynotes seem to command more mainstream front-page press attention than ever before — but each time, there’s less and less to report. Is the modern smartphone era limping to a close?

Apple’s announcements on Tuesday about the iPhone 5S and 5C were wearily predictable. Cupertino just doesn’t seem to be where the action is any more.

It is almost as if Apple and its arch-rival Samsung have exhausted themselves by suing each other around the world — and now look like two very knackered boxers agreeing to shuffle their way through the remaining rounds to the bell, rather than risk throwing big punches.

[…]

But the warning signs are there. Samsung reportedly held “crisis talks” this after sales of the Galaxy S4 failed to meet its expectations, Apple iPhone sales have declined for the past three quarters, and, well, “Peak Apple“.

Samsung piled on gimmicky and slightly creepy features like eyeball tracking, simply because it could. Apple’s user-facing innovation (the A7 64-bit chip is the real star of the show) entails building in a fingerprint scanner — a commodity laptop part for the past 10 years. Indeed, the only “radical” moves by Apple are adding colours to a slightly cheaper (but certainly not cheap) iPhone and rejecting NFC (or “Not F*cking Connecting”, as it’s known around here), which is a technology flop. Not so radical, then.

The stark truth is that smartphones, like computers, were only ever a means to an end — and once the services and apps markets matured, the smartphone itself became less … important. It didn’t really matter what access device you were carrying. The PC reached a point where the devices became beige boxes competing on price, and the smartphone era is drawing to the point where it doesn’t really matter what black rectangle you’re carrying — provided it accesses the services and apps you want. Fetishising the access devices is as strange as thanking LG or Panasonic for creating BBC2. No wonder both Samsung and Apple are looking at new higher-margin peripherals such as watches.

August 20, 2013

Everything Is A Remix

Filed under: Business, Law, Liberty, Media, Technology — Tags: , , , — Nicholas @ 10:09

Remixing is a folk art but the techniques are the same ones used at any level of creation: copy, transform, and combine. You could even say that everything is a remix.

H/T to American Digest for the link.

August 13, 2013

Apple – dead fruit walking, says Larry Ellison

Filed under: Business, Technology — Tags: , , — Nicholas @ 10:27

At The Register, Jasper Hamill reports on the latest oracular pronunciamento from Larry Ellison:

Oracle supremo Larry Ellison has told Apple that it doesn’t stand a chance of success without Steve Jobs at the helm.

In an interview with CBS, the multibillionaire performed a bizarre dance routine meant to illustrate what chance Apple has in the post-Jobs era. Just like the oracles of old, Ellison’s predictions take a bit of interpretation.

The Oracle was asked what he thought of Jobs, to which he replied: “He was brilliant, he was our Edison, he was our Picasso. He was an incredible inventor.”

But then came a question about how the fruity firm is likely to fare without their godhead on the throne.

“Well, we already know,” Ellison said, before embarking upon a simple piece of interpretive dance to illustrate his thoughts.

August 10, 2013

3D printing using durable materials

Filed under: Technology — Tags: , , — Nicholas @ 09:32

At TechHive, Kevin Lee reports on a different kind of 3D printing effort:

I sat on a 3D-printed bench.

“Durability” and “strength” are about the last words I would ever associate with 3D printing. But I’m not talking about the small, plastic trinkets you would print out with your MakerBot. This is Emerging Objects, a small fabrication studio in Oakland, CA that’s researching how to 3D-print using materials like wood, ceramic, newspaper, concrete, and salt.

Some 3D-printed art pieces made from newspaper, salt, and maple wood.

Some 3D-printed art pieces made from newspaper, salt, and maple wood.

“Everyone is focusing on machines, and we’re interested in what machines can make,” Emerging Objects co-founder Ronald Rael explained to TechHive. “We saw a limitation in what a machine can make because of the medium, and so we wondered if we could reformulate that media to suit our own architectural agendas to print big.”

As with the report last week about the chap 3D-printing his own Aston Martin replica, the small size of the individual printed units is a bottleneck for producing larger objects. Using a 3D printer to produce key components while using ordinary production methods for larger pieces is the economical way to work right now. That is bound to change as the technology improves, but practical limits on size and cost will continue at the “consumer” end of the 3D printer market.

According to Rael, powder-based 3D printing was one of the very first 3D printing technologies to come into being. It hasn’t really caught on, however, because the machines are so much more expensive than other types of 3D printers. On the other hand, the fused deposition modeling (FDM) method, which lays down thin layers of hot extruded plastic to create objects, has become popular among makers thanks to its accessibility and relative affordability.

All that said, Rael still sees a promising future for powder-based 3D printing.

“We have a [powder] printing technology that I think is very open-ended in terms of the kind of materials that can be in it. Then we have [a FDM] one that’s very closed and that’s the much more popular version,” he explained. “While I like those kinds of printers, […] I think the big future is in store for powder printing.”

August 8, 2013

A home-made Gauss gun

Filed under: Technology, Weapons — Tags: , , — Nicholas @ 08:14

It may not be the most functional weapon in the world, but it does show that there might be a niche for this kind of development:

While it may only be able to shoot a few cans right now, we certainly wouldn’t want to be in front of [Jason]‘s fully automatic Gauss gun capable of firing 15 steel bolts from its magazine in less than two seconds.

The bolts are fired from the gun with a linear motor. [Jason] is using eight coils along the length of his barrel, each one controlled by an IGBT. These are powered by two 22 Volt 3600mAh LiPo battery packs.

As for the mechanical portion of the build, the bolts fired from this gun are actually 6.5mm nails, cut off and sharpened. These are chambered from a spring-loaded magazine, with each new bolt put into the breech with a small solenoid retracting for an instant.

August 4, 2013

The Day The Universe Changed – “The Way We Are”

Filed under: Education, History, Media, Science — Tags: , , — Nicholas @ 00:01

Episode 1 of James Burke’s ground-breaking series “The Day The Universe Changed” which explores the evolution of Western Scientific thought starting from the fall of Rome.

July 10, 2013

Next up on our agenda of things to panic about is “peak water”

Filed under: Economics, Environment, Technology — Tags: , , , , — Nicholas @ 00:02

sp!ked editor Rob Lyons explains that “peak water” just isn’t something to worry too much about:

Disappointed by the failure of the peak-oil disaster to come to fruition, our doom-mongering, Malthusian friends have alighted on other scary narratives to confirm their suspicions of humanity as a rapacious blight on the planet. Their latest is ‘peak water’.

On the face of it, peak water is a boneheaded concept on a planet where two thirds of the surface is covered in, er, water. According to the US Geological Survey, there are 332 million cubic miles of water on Earth. What we tend to need, however, is not sea water but fresh water, of which there is much less: nearer 2.5 million cubic miles. And much of that is too deep underground to be accessed. Surface water in rivers and lakes is a small fraction of overall fresh water: 22,339 cubic miles. Handily, though, natural processes cause sea water to evaporate and form clouds, which then dump their contents on to land — so in most populated parts of the world there is currently sufficient water to supply our needs in an endlessly renewable way. As for the future, it is clear there is no shortage of H2O on the planet. What we really have is a shortage of cheap energy and the necessary technology to take advantage of the salinated stuff.

The ‘peak water’ theorists focus on groundwater supplies that are either being used faster than they are replenished, or supplies that are not replenished at all: so-called ‘fossil water’. According to leading environmentalist Lester Brown, writing in the Guardian last weekend, the rapid exhaustion of these supplies in some parts of the world is leading to the decline of food production. And at a time of fast-growing populations, this apparently promises disaster for these countries.

But often, the problem is a political rather than a practical one. [. . .]

In reality, all of the fixes that apply to peak oil also apply to peak water. New technology may make water desalination far cheaper than it is now, a claim being made for new water filtration methods based on nanotechnology. Better use of water in irrigation, through careful management of when and how water is applied to crops, could cut usage dramatically — something that is already happening in dry countries such as Israel and Australia and in parts of the US. Current uses of water, like flush toilets, may be superseded in places where water is in high demand. Through civil engineering projects, water can be shifted from places where it is plentiful to places where it is needed most, something societies have been doing for thousands of years.

July 8, 2013

New diesel engine technology to erase the memory of Oldsmobile diesels

Filed under: Technology — Tags: , — Nicholas @ 09:30

The Economist has a glowing overview of new diesel engines for cars:

NOT to belittle the success Tesla Motors has had with its Model S luxury electric car — outselling its petrol-powered equivalents since being launched last year — the prospects for battery-powered vehicles generally may never shine quite as bright again. Babbage believes their day in the sun is about to be eclipsed by, wait for it, the diesel engine.

Surely not that dirty, noisy, smelly, lumbering lump of a motor that was difficult to start in the winter? Certainly not. A whole new generation of sprightly diesels — developed over the past few years — bear no resemblance to your father’s clattering, oil-burner of an Oldsmobile. It is no exaggeration to say that, with its reputation for unreliability and anaemic performance, the Olds 4.3-litre diesel from the late 1970s single-handedly destroyed the reputation of diesel engines in America for decades to come. Quite possibly, it also contributed to Oldsmobile’s own demise.

Later this year, Americans will get their first chance to experience what a really advanced diesel is like — and why Europeans opt for diesels over hybrids, plug-in electrics and even petrol-powered cars. The leader of the new pack is the Mazda 6, completely redesigned for 2014, with the choice of either a 2.5-litre four-cylinder petrol engine or a 2.2-litre turbo-charged diesel. The diesel has 30% better fuel economy and provides oodles more pulling power. Good as the petrol version is, motorists who choose it over the diesel will miss out on a lot.

[. . .]

With its old 1.4-litre diesel engine, the Volkswagen Polo still holds the record for being the most frugal non-electric car in Britain and the rest of Europe — with a fuel economy on the combined cycle of just 3.8 litres/100km (equivalent to 61.9 miles per US gallon). The Toyota Prius hybrid? A lowly twentieth on the league table of the most economical fuel-sippers, with 4.2 litres/100km, along with higher emissions of carbon dioxide. The 19 cars having better fuel economy than the Prius hybrid are all clean diesels.

Babbage fully expects the new generation of clean, low-compression diesels to raise the fuel-economy bar by a further 20% or more. That will put diesels on much the same footing — on an equivalent miles-per-gallon basis — as many of the electric vehicles available today. Their big advantage will be that they will come with none of the range anxiety and recharging difficulties to worry about. Roll on the day.

July 4, 2013

Virtual reality hardware coming to your local big box electronics store

Filed under: Media, Technology — Tags: , , — Nicholas @ 10:31

In The New Yorker, Joel Johnson talks about the Oculus Rift, which may be available in retail stores by the end of the year:

Luckey’s garage creation, which soon was named the “Oculus Rift,” is not far from a smartphone with a headband. An L.C.D. screen spans across a plastic mask, sitting about an inch away from a user’s eyes; a barrier divides the display in two, effectively creating one screen for each eye. Motion sensors track the position of the wearer’s head, then feed this data across an umbilical cord to a computer, typically a gaming P.C. Instead of rendering one 3-D world to a single monitor, as in a typical first-person video game, such as Call of Duty, the computer renders the same 3-D world twice, from slightly different angles. It sends those two perspectives, side by side, to the Rift, creating the illusion of depth. Motion is controlled by the direction in which the wearer is looking; instead of using a mouse or a controller to direct your gaze in the 3-D world, a person simply needs to turn his head.

The Oculus Rift uses optical tricks to create the realistic sensation, like slightly warping the edges of the view in the computer, which is corrected by plastic lenses in the goggles. The pixels are more tightly packed directly in front of the eye, giving the perspective a roundness that feels more like human vision. It works. The Oculus Rift rivals — and will possibly exceed, when it hits the shelves sometime in late 2013 or mid-2014 — the best virtual-reality hardware available, military-grade or otherwise.

[. . .]

I’ve been testing the Oculus Rift for a month, and in it, virtual reality feels a lot like scuba diving. First, there is the mask. Then there is the strange disconnect between where your body actually is and where your mind, confused by the mask, is telling you that your body is located. This sensation of discombobulation is doubled in virtual reality, since the current version of the Oculus Rift doesn’t track your body or hands, only your head.

Still, more than any of its antecedents, the Oculus Rift is convincingly engrossing. Most of the several dozen people who have tried my Rift put the goggles on as skeptics, but removed them as believers that virtual reality, as a practical phenomenon, now exists.

On YouTube, WoodenPotatoes recently posted a video where he tried out his new Oculus Rift unit with the original Guild Wars Prophecies by ArenaNet. As he points out in the video, the game is in no way optimized for use with the Rift, but is still an interesting experiment:

July 2, 2013

Better batteries through soy

Filed under: Technology — Tags: , , , — Nicholas @ 10:07

The Economist on a promising new development in battery technology:

LITHIUM-ION batteries are hot stuff. Affordable, relatively lightweight and packing a lot of energy, they are the power source of choice for everything from mobile phones to electric cars. Unfortunately, the heat can be more than figurative. Occasionally, such batteries suffer malfunctions that lead to smoke, flames and even explosions. In gadgets, such meltdowns can be distressing and dangerous. In aircraft, they can be fatal. Earlier this year airlines grounded their entire fleet of Boeing’s next-generation 787 passenger jet after the lithium-ion batteries installed in two planes caught fire. Last month they have been permitted back in the air after being retrofitted with a protection system in the form of a tough steel box that vents directly outside in the event of a fire.

A more comforting solution, of course, would be to build a lithium-ion battery that could not burst into flames in the first place. Katie Zhong at Washington State University might have just such a device. For the last few years, she has been working on battery technology for flexible and bendable electronic gadgets. By blending a polymer called polyethylene oxide (PEO) with natural soy protein, she had made a solid electrolyte for lithium ion batteries that could be bent or stretched to twice its normal size without affecting its performance.

Like all batteries, lithium-ion rechargeables consist of two electrodes separated by an electrolyte. In a typical lithium-ion cell, the electrolyte is a solution of lithium salts and organic solvents. Charging drives lithium ions from the electrolyte into a graphite anode. On discharge, the reverse happens, with a balancing flow of electrons through the device being powered.

July 1, 2013

The rise and fall of economic powers

Filed under: China, Economics, History, Japan — Tags: , , , , , — Nicholas @ 10:30

Charles Hugh Smith has a guest post at Zero Hedge, talking about the theme of economic decline of great powers:

Our collective interest in the rise and fall of empires is not academic. The meteoric rise of China and the financialization rotting out global capitalism are just two developments that suggest we are entering an era where some great powers will collapse, others will remake themselves and others will gain ascendancy.

[. . .]

In 1987, pundits were predicting that Japan’s “5th generation” computing would soon dominate what was left of America’s technological edge. They were spectacularly wrong, as the 5th generation fizzled and Japan became an also-ran in web technology, a position it still holds despite its many global electronic corporations and vast university research system.

Japan’s modern economy was set up in the late 1940s and early 1950s to exploit the world of that time. Sixty years later, Japan is still a wealthy nation, but its relative wealth and power have declined for 20 years, as its political-financial power structure clings to a model that worked splendidly for 40 years but has not worked effectively for 20 years.

The decline is not just the result of debt and political sclerosis; Japan’s vaunted electronics industry has been superseded by rivals in the U.S. and Korea. It is astonishing that there are virtually no Japanese brand smart phones with global sales, and only marginal Japanese-brand sales in the PC/notebook/tablet markets.

The key dynamic here is once the low-hanging fruit have all been plucked, it becomes much more difficult to achieve high growth rates. That cycle is speeding up, it seems; western nations took 100 years to rapidly industrialize and then slip into failed models of stagnation; Japan took only 40 years to cycle through to stagnation, and now China has picked the low-hanging fruit and reverted to financialization, diminishing returns and rapidly rising debt after a mere 30 years of rapid growth.

There is certainly evidence that China’s leadership knows deep reform is necessary but the incentives to take that risk are low. Perhaps that is a key dynamic in this cycle of rapid growth leading to stagnation: the leadership, like everyone else, cannot quite believe the model no longer works. There are huge risks to reform, while staying the course seems to offer the hope of a renewal of past growth rates. But alas, the low hanging fruit have all been picked long ago, and as a result the leadership pursues the apparently lower-risk strategy that I call “doing more of what has failed spectacularly.”

Though none of the historians listed above mention it, there is another dangerous dynamic in any systemic reform: the very attempt to reform an unstable, diminishing-return system often precipitates its collapse. The leadership recognizes the need for systemic reform, but changing anything causes the house of cards to collapse in a heap. This seems to describe the endgame in the USSR, where Gorbachev’s relatively modest reforms unraveled the entire empire.

« Newer Posts — Older Posts »

Powered by WordPress