Greg Mankiw (or someone good enough to spoof an originating address from inside the Executive Office of the President's class-C network: 198.137.240.x) emails: "Since I know you aim for honest, unbiased commentary on your blog, I know you will be interested in this new study from factcheck.org": Kerry's Dubious Economics : He says new jobs are paying $9,000 less than the old ones. That's not a fact. In his acceptance speech at the Democratic National Convention July 29 Kerry repeated a claim that the economy is creating jobs that pay $9,000 a year less than those they replace. He bases that on disputed analysis from a liberal think tank. In fact, economists disagree.... Even some Democratic economists say the economic numbers are simply too rough and contradictory.... And when Kerry said the "middle class is shrinking," he was referring to what happened in the recession of 2001 and the initially slow recovery of 2002. But the economy has picked up considerably in the 19 months since, so what was true then may be untrue when phrased in present tense.... Kerry bases his claim on an analysis of Bureau of Labor Statistics data by the Economic Policy Institute. But the EPI figures don't support what Kerry said, because they...

Greg Ip of the Wall Street Journal reports that American productivity growth in the second quarter was still 2.9% per year: WSJ.com - Worker Productivity Rate Slows But Remains Robust: Productivity growth in the U.S. slowed... but continued at a relatively robust clip... rose at a 2.9% annual rate in the second quarter in the business sector outside agriculture.... At the same time, rapid compensation growth pushed up the cost, in wages and benefits, of producing each unit of output by 1.9% at an annual rate, the fastest in two years. Rising unit-labor costs are one reason the U.S. Federal Reserve has been anxious to raise interest rates from current low levels, although weak job growth may weaken its case a bit.... Productivity grew at just 1.5% a year from 1973 to 1995, then sped up to 2.6% between 1996 and 2000, an acceleration many observers attributed to the spread of information technology. It then accelerated even further to 4% from 2001 to 2004. That astonishing performance seemed the result of firms trying especially hard to meet growing sales without adding to payrolls, and most economists expected it to slow sharply once businesses became confident enough to hire again.... However,...

WSJ.com - Free-Trade Worriers: By DOUGLAS A. IRWIN August 9, 2004; Page A12 If there is one truth about the public debate over trade policy, it is that free trade is always under fire.... But recent free trade critics* are content to beat up on the idea of free trade and stop there, seemingly afraid to go the next step and embrace protectionism. Messrs. Schumer and Roberts state that "old-fashioned protectionist measures are not the answer," and Mr. Cassidy concedes that "economists are right when they say that protectionism isn't the answer to outsourcing."... So why are the recent critics so hostile to free trade while ruling out protectionist solutions? To hide the fact that they have no solutions to offer. The poverty of free-trade critics is that they fail to bring anything constructive to the table.... Many of the free-trade critics raise legitimate and important issues about wages and job creation in the United States. One would think the debate would focus on strengthening the economy or empowering workers in a difficult labor market. Workers can be empowered by allowing them to have portable retirement accounts rather than pensions tied to a particular employer. The portability of health-care benefits should be examined,...

Abiola Lapite is somewhat nonplussed to find himself agreeing with John Quiggin: Foreign Dispatches: Something on Which We Agree: I rarely agree with John Quiggin on political matters, so when such an instance does arise, it's worth commenting on. Today he makes an excellent case against the Australia-USA "Free Trade" Agreement, which turns out to be little more than an excuse for America to foist harsh intellectual property laws on the Australians. I know that “Trade agreement said harmful to small faraway country” is the stereotype of a boring newspaper story, but this one is really important to Americans as well as Australians, and to anyone interested in health policy. If you ever hope to see affordable health care in the US, you’d better hope that (against all the odds) this agreement falls at the final hurdle. Although it’s called a Free Trade Agreement, it’s nothing of the kind. Australia has hardly any trade barriers to speak of, and the US has given very little ground on its barriers and subsidies. The important bits of the agreement are those relating to intellectual property and (closely related) pharmaceuticals. In both areas, the Americans have pushed Australia to adopt the strong IP...

An exchange: R****** M********-B****: Indeed; that's sort of the point that the person who said that was driving at. But you can't agree that without also tacitly admitting that TV does have a power to affect culture. And from there it doesn't seem a major leap in logic to admit that a diet of overwhelmingly american telly is going to overlay "american values" onto the viewing culture.... I'd dispute that it's as simple as people choosing or even allowing themselves to be influenced by something like that. It's surely more subtle than that? I suspect (completely without any supporting evidence) that a lot of cultural change comes from children/teenagers who are more susceptible to that sort of thing. Whilst I'd personally agree that people are entitled to watch what they want, that doesn't redress the imbalance that I'm talking about. Thanks to the economies of scale and their position at the top of the food chain, US TV providers are in a position to dump massive amounts of programming at a cost of practically zero into other countries TV schedules. For example, Bangladesh, apparently, pays around $25k per episode of the Simpsons. That's a program that costs c.$1m dollars per...

From Laurence H. Meyer (2004), A Term at the Fed: An Insider's View (New York: Harper Business: 0060542705): pp. 20-21: After the meeting [with President Clinton], I returned to Laura Tyson's office to say goodbye.... She suggested that I... sit... for a while... and see what the day would bring.... Throughout the several hours of waiting, I was on the phone to my family. The [White House] staff... [brought] me two full lunches.... I recall a conversation with my son Ken in the midafternoon. 'I've been surfing the Web,' Ken told me. 'It looks like the press conference is set for 4 PM. Did you know that Alice Rivlin is the other nominee and she will be the Vice Chair?' Wow, I said, you're way ahead of me. Ken responded: 'Dad, I don't like to give you advice, but when they come to let you know that you are being nominated today, act surprised.' p. 166: As we raised interest rates from mid-1999 through mid-2000, I was frequently singled out as the chief instigator.... "the most feared governor, Laurence 'the Rate Hammer' Meyer." I had been aiming at MVP, not the most feared, but I've always wanted a snappy nickname.......

The employment-to-population ratio: At least the labor market situation is no longer deteriorating. That's good news. It is hard to stress enough the extraordinary contrast in this business cycle between the (lousy) labor market situation and the (good) output growth situation and the (fantastic) productivity growth situation....

Adam Penenberg asks a very good question: Wired News: Searching for The New York Times: By Adam L. Penenberg | Story location: http://www.wired.com/news/culture/0,1284,64110,00.html | 02:00 AM Jul. 14, 2004 PT How can the mighty New York Times, which considers itself America's paper of record, be the paper of record in cyberspace when its articles barely show up on Google? This has to be more than just a slight irritation to the Times, because search engines play a key role: They collate information, and on the Internet there's a whole lot of that, often too much. (Hence the term data smog.) In essence, they act as informational portals. So if you're trying to get the dope on your favorite author, hip-hop MC or representative, or learn more about an important issue dominating the news, your first stop may very well be Google. But recently, when I googled the terms "Iraq torture prison Abu Ghraib" -- certainly one of the most intensively covered news stories of the year -- the first New York Times article was the 295th search result, trailing the New Yorker, Guardian, ABC and CBS News, New York Post, MSNBC, Slate, CNN, Sydney Morning Herald, Denver Post, USA Today,...

David Sifry conquers the web for the idea of real-time transclusion, and in the process gets a thorough education in the idea of scaling. Enormous kudos to him, and everybody else who keeps Technorati shambling along. Wow: "The median time from when someone posts something to their weblog to when it is indexed and available for searches on Technorati is 7 minutes." 275,000 posts a day--that means that 140,000 weblog posts are being detected in 7 minutes or less: Technorati sees... all... knows... all... its eye pierces forest, stone, cloud, air, and... flesh: Sifry's Alerts: Technorati tracks 3 million blogs: At 6:38PM PST on July 6, 2004, Technorati tracked its 3 millionth weblog. The growth of the service has been pretty remarkable - here's some stats: We're currently seeing anywhere from 8,000-17,000 new weblogs created every single day. On an average weekday, we're seeing over 15,000 new weblogs created per day. That means that a new weblog is created somewhere in the world every 5.8 seconds. Of course, not all weblogs that are created are actively updated. Even though abandonment rates are high - our analyses show that about 45% of the weblogs we track have not had a post...

The Wall Street Journal's Dan Bilefsky reports on the shifting international division of labor from Timosoara, in Transylvania. A very nice article. Companies seeking lower costs head east (while trying to stay on the right side of the moving socio-economic frontier where property rights are respected and productive efficiency is attainable) while people with skills seeking better lives head west (while trying not to become desperately lonely and alienated). Romanians--speaking a Latin language--may well have an easier time heading west than many Poles or Czechs or Hungarians: WSJ.com - European City Wins Jobs -- and Looks Over Its Shoulder: Timisoara, Romania, Struggles To Keep Outsourcing Boom; Engineers Seek Higher Pay Joining EU Could Blunt Edge by DAN BILEFSKY, Staff Reporter of THE WALL STREET JOURNAL, July 8, 2004; Page A1 TIMISOARA, Romania.... dozens of young software engineers sit hunched over computers in a neighborhood still pocked with bullet holes... beneficiaries of this city's decade-long drive to transform itself into a high-tech center. But Mircea Stoinescu, a 22-year-old software-engineering student... would trade in Timisoara's war-scarred offices for Silicon Valley in an instant. "Why would I want to wait around here 20 years for wages to rise when I can get what I want tomorrow?"...

Nicholas Weaver writes: The price for Google's raw storage... for those who are curious: Via EPIA-M Motherboard: $130; Small cube case + PSU: $ 70; Memory: $ 50; 4x 200 GB OEM drives (7.2k RPM) $114 x 4--for a total system cost of $700 for 800 GB of disk, with the CPU and network to take advantage of it.  I'm not including the cost of the switch itself, but with 48 port 100 Mbps switches in the $1000 range, internal network cost is almost 0. Now google has some price advantage here, but not THAT much.  But for the sake of argument, lets assume Google is also at $1/GB for the raw disk and compute, rather than $.50/GB.  Amortized over a 3 year lifespan, thats $.33/GB/year in hardware cost. The power budget is also low: assume 50W for the CPU/memory and 25W for each disk gives a total power budget of 150W/node.  At $.20/KWH (power + cooling costs) thats $262/node/year, or again $.33/GB/year in operating power. Thus, it really DOES cost Google less than $1/GB/year for disk.  But the cost for anyone who wants just lots of disk could be the same. So what's Google's secret? Their secret is the...

Tyler Cowen muses on the future of cheap mass storage. The first lesson is to never underestimate the bandwidth of a railroad car filled with DVDs: Marginal Revolution: Data storage is becoming cheaper at rapid rates. This is one reason why I don't ever expect a totally converged information superhighway, supplying our television, computer, music listening, etc., all in one service. Why obsess over your piping when you can have milk delivered cheaply at your doorstep? Netflix and Google's Gmail, rather than Verizon, may represent our cultural future. Data storage and delivery also tend to be less regulated than centralized piping, plus they limit natural monopoly problems. Under this alternative model, I might receive "cultural disks" in the mail, every month or week, and decide what on those disks I am willing to pay for. Yes there will be hackers but we will be rich, the discs will be cheap and convenient, and they will offer ancillary services of organization and presentation. I can hardly wait, except now I remember I don't even have time for the current menu of cultural offerings. The second lesson is that time and attention are now the scarce resources. It is true that we...

Abiola Lapite and Ian Montgomerie both agree that mass-storage costs are falling even faster than microprocessor costs--or bandwidth costs: Tech Notes: On the Economics of GMail: A commenter by the name Ian Montgomerie says some very insightful things on Brad DeLong's Webjournal: On another note, though, don't underestimate the cheapness of Google's storage. It's obviously very cheap relative to the competition, but in absolute terms they still can't afford to give everyone a gigabyte of email storage now. They know darn well that most people will use maybe 10% of that any time soon, and mostly in text (they would be stupid not to be compressing that text in the background down to a level where the typical GMail user's 100 megs or less of email are 10 megs or less of actual hard disc space, so a typical modern hard disc could serve 10,000 users). EVENTUALLY people will accumulate enough email, especially with attachments, so that many are actually using the bulk of their space. But that will take years by which time hard discs will be much cheaper. Google can reliably bet that from this point onward, hard disc prices will probably drop at least as fast as...

Two and a half weeks ago, Jon Udell tossed off an observation of the absurd situations many of us find ourselves in as we simply try to find stuff we have recently seen: Jon Udell: Questions about Longhorn, part 1: WinFS: Those of us who sometimes blog things just so we'll be assured of finding them later have a special appreciation of the absurdity of the current situation. Unless we use an add-on to Windows such as X1, we can often find things on the Internet more easily and more reliably than we can find things on our own hard disks. I noted this, but since I did not post it to my weblog, I then had a hell of a time finding it again when I wanted it. It's worth writing down a few speculations about just why it is that people like me and John Udell post things on our weblogs as a way of finding them later: We get to use all of Google's computers to search that subpart of their full-text database of the web that is in our websites--and that's a big plus. We get the free addition of keywords to files on our websites....

Hmmm... I seem to have committed a mindo, and left out a key step in my thoughts... My view: open-source software will only flourish as long as there are at least some deep pockets--think IBM--willing to fund it in the sense of paying people for spending serious amounts of their time on it. For that to be the case, open-source software has to help IBM sell consulting services, which means that users must be comfortable with it, which means that users must anticipate that the open-source software will continue to be developed and improved, and that the implicit contract the open-source-writing community has with non-programmer users includes provisions for warning, notice, graceful shutdown, and migration assistance. That set of social expectations is clearly not held by everyone. And I think that such clashing expectations post a danger to the long-run health of the open-source movement....

Joel Spolsky writes about how finally--after a full decade--Microsoft Windows is becoming a large collection of insufficiently debugged device drivers: Joel on Software: ...I'm not sure how I managed to get this far without mentioning the Web. Every developer has a choice to make when they plan a new software application: they can build it for the web or they can build a "rich client" application that runs on PCs. The basic pros and cons are simple: Web applications are easier to deploy, while rich clients offer faster response time enabling much more interesting user interfaces. Web Applications are easier to deploy because there's no installation involved. Installing a web application means typing a URL in the address bar. Today I installed Google's new email application by typing Alt+D, gmail, Ctrl+Enter. There are far fewer compatibility problems and problems coexisting with other software. Every user of your product is using the same version so you never have to support a mix of old versions. You can use any programming environment you want because you only have to get it up and running on your own server. Your application is automatically available at virtually every reasonable computer on the planet. Your...

Over the past decade, Matt Neuberg has spent more time thinking about gaining control over his information flow (and experimenting with programs that claim to manage it seamlessly) than ten mortal humans could in ten lifetimes. Here is a link to extended reviews he has published in the Engsts' indispensable TidBITS of fourteen different programs: http://db.tidbits.com/getbits.acgi?tbser=1196 I should write to him and ask what he's currently using, and how it is working......

The thing that may ultimately drag the open-source movement down into oblivion is a simple problem of social engineering: wildly divergent expectations of what obligations in fact are. When Dave Winer finds that a server move gets sticky, messy, and difficult (and when there appears to be no possible rollback plan), his response is to pull the plug on websites hosted in the weblogs.com domain--hey, it's a free service, a free gift that he gave, and he has no obligation to provide notice or warning or anything beforehand before discontinuing it. But people using weblogs.com--and people using other free and open-source internet services--may have different expectations about persistence and warning and notice and graceful shutdown, expectations that may well be very naive. But without those expectations of persistence and warning and notice and graceful shutdown, it's hard to see how anyone can justify building a system around free and open-source components. An internet in which open-source and free software are routinely used as building blocks is one in which expectations of persistence and warning and notice and graceful shutdown have to be validated. An internet in which you can expect persistence, et cetera only if you pay for it is...

I want to rend Verizon's software limb from limb and scatter its broken bits across a spacelike interval of twelve light-hours. Phone messages my wife leaves for me on Wednesday should *not* first show up in my inbox the following Monday. That is all....

Blessing of the non-anti-commons, or something like that. MIT's Technology Review reports: Technology Review: MIT's Magazine of Innovation: Web Inventor Rewarded At Last posted by Erika Jonietz @ 6/14/2004 9:25:48 AM: Fifteen years on, Web inventor Tim Berners-Lee has finally gotten the sort of reward many tech pioneers of the ’90s chased after—a financial one. Tuesday he will become the first recipient of the world’s largest technology prize, the $1.2 million Millennium Technology Prize from the Finnish Technology Award Foundation, reports the International Herald Tribune. Rather than patenting his idea for the World Wide Web, Berners-Lee and colleague Robert Cailliau, working at CERN (the European Particle Physics Laboratory in Geneva), insisted on a license-free technology. If they hadn’t, Berners-Lee says, the Web wouldn’t be the interoperable linkup that it is. “There would have been a CERN Web, a Microsoft one, there would have been a Digital one, Apple’s HyperCard would have started reaching out Internet roots,“ he said. “And all of these things would have been incompatible.“ Three cheers for the spirit of creativity that Berners-Lee has fostered and still believes in! As Madeleine Kahn would say, "It's twue! It's twue!" I remember 1993-1995, when AOL was busily trying to get...

Draft: For Nightly Business Report, to be broadcast Monday June 21, 2004 We do live in amazing times. Since the first quarter of 1995, the real productivity--nonfarm business--of America's workers has risen by 30.1%. The average American worker in the first quarter of 2004 produced 30.1% more goods and services per hour than his or her counterpart in the first quarter of 1995. At that pace of growth, America's real economic productivity would double in only 26.4 years: each generation would live twice as well as its parents. But the bright silver clouds conceal a dark lining. Since the first quarter of 2001--the last business cycle peak--the productivity of America's workers has risen by 14.1%. But real GDP has risen by only 8.4%. And workers' real wages and salaries have risen by only 0.5%. Real wage and salary income per capita has, so far, fallen by 3.5% over the Bush administration. This is a remarkable disconnect between the extraordinary rapid growth of the productive potential of the American economy and the loss of income on the part of the bulk of Americans--who are wage and salary workers, not coupon clippers. The tide is rising: the productivity tide is rising at...

The Washington Post's Jonathan Krim writes about the bizarre story of the Santa Cruz Operation and Linux: a modern version of the holdup, one might say: washingtonpost.com: Showdown With The Linux Gang: How can a tiny, struggling software company based here at the foot of the Wasatch Mountains afford to pursue a legal donnybrook with some of the biggest names in corporate America? SCO Group Inc. is suing companies such as International Business Machines Corp., Novell Inc., DaimlerChrysler and AutoZone Inc. -- and threatening government agencies and more than 1,500 other firms -- over their use of software called Linux. Many big companies and organizations have embraced Linux in recent years because of its chief virtue: It's free. Developed and maintained by a loose confederation of engineers, Linux is available to anyone and can be modified by users, challenging the traditional model of software controlled and licensed to others by a single entity such as Microsoft Corp. SCO claims that pieces of code from another operating system that it owns found its way into Linux, and the company is demanding a licensing fee of $700 for every computer server running the software. In the process, SCO has become one of...

Paul Kedrosky writes about the future of email: Infectious Greed: The Future of the Future of Spam (& Email): You wouldn’t know that, of course, from all the current hand-wringing over spam... but it is much closer to being manageable than to being a continuing business opportunity.... A combination of innovative filters and rules, plus emerging industry standards (like Yahoo’s DomainKeys and Microsoft’s Sender ID) are going to cut the number of bulk email in half – at least -- over the next twenty-four months. But once the tide of spam recedes we will see what all that watery communication was hiding: a lot of rocks in our email. Go look in your email inbox and check how many read and unread messages there are. My own count varies, depending on how diligent I am being, but there are rarely less than 100 messages in my inbox. Granted, some of those emails are months old, but they are piled up nevertheless. Why do I keep so many inbox messages? Partly because I use emails to remind me of tasks I have to do, partly because I’m still mulling how and whether to respond to some of these people, and partly...

Ben Hyde is also somewhat puzzled by the continued survival of Apple: Ascription is an anathema to any enthusiasm: Apple: Brad DeLong inquires about why he was wrong about Apple: A decade ago it was very clear [to me] what was going to happen. Over time, more and more interesting applications would show up first on Windows and only later (or not at all) on MacOS, as Windows's superior market share attracted more software development brainpower. Eventually Microsoft's deep pockets would create a clear quality-and-usefulness edge between Windows and MacOS. And everyone left would--with a sigh--drop the Mac and get Windows machines. My first bemused thought was "How has France survived?" But actually this is a question that does deserve more careful consideration. It's a fascinating question. It does deserve a more sober analysis than it usually gets. One answer is that Apple and Microsoft reached a treaty that exchanged all of Apple's patent portfolio for access to key part's of Microsoft's network; i.e. Microsoft promised to do five releases of the Office Suite. It should be noted that agreement did not include access to Microsoft's exchange server and calendaring network around castle outlook. One answer is that the Apple...

The highly intelligent and thoughtful Greg Goelzhauser has some very well-put comments on the law and economics of predatory pricing: Greg Goelzhauser: Professor DeLong's point is one that has led to the virtual nullification of predatory pricing post Matsushita and Brooke. Relying on neoclassical microeconomics, the Chicago School led the charge against predatory pricing. Their suggestion was that successful predatory pricing would be most improbable and that therefore it bordered on irrational for firms to attempt to carry through such a strategy. Many of the arguments put forth by Chicago School theorists were advanced by John McGee in his seminal article examining the alleged predatory practices of Standard Oil: Predatory Price Cutting: The Standard Oil (N.J.) Case, 1 Journal of Law & Economics 137 (1958). In that article, McGee suggested that there was little evidence pointing to predatory pricing by Standard Oil. He also suggested that such practices would be irrational in the sense that Standard Oil--being a much larger firm than its competitiors--would have to lower prices over a very large market share. Realizing that a predatory pricing scheme could not be enforced ad infinitum, smaller firms were not likely to exit the market. "Ah," you say, "but the...

Tonight's mail brought a big envelope from the New York Review of Books, filled with stuff, asking us to subscribe at your standard concessionary rate. There were two problems with this envelope: We already subscribe to the New York Review of Books. The envelope was addressed to "Brad Marie". It is true that I have once been seriously called "Brad Marie"--by Josephine Foehrenbach, who once said, "Who's coming? We have Jean Marie, Ann Marie, and Brad Marie..." But the name "Brad Marie" is in the New York Review of Books's database because once, long ago, my mother gave us a gift subscription and some harried data entry clerk settled on "Brad Marie". Our current NYRB subscription is under another, more normal name. Are there no Perl hackers? Are there no databases to which the NYRB has access that would reveal that our address is a single-family house? Is there no concern with cleaning out the database? Is nobody willing to guess that a single-family house probably does not contain two households, especially if one of them is supposed to be named "Brad Marie"?...

Me at Nieman Watchdog I: Nieman Watchdog > Ask This > Missing the Story of Structural Change: jbdelong@uclink.berkeley.edu Q. In what businesses are people working much harder than they did five years ago, and what’s making them work so much harder? Q. In what businesses are people working much smarter than they did five years ago, and what’s letting them work so much smarter? Q. In what businesses are productivity gains due primarily to people figuring out how to use all the computers they bought in the late 1990s, and how are people using computers and related gear to boost worker productivity? Q. As the price of information technology capital continues to fall, are there any signs of another boom in information technology investments that will greatly boost the productivity of IT-using industries yet further? Q. What new jobs or industries are being created because of the falling price of information technology? The press needs to be asking questions about the underlying structural changes in the economy under George W. Bush. By structural, we mean the things that change over the long-term: labor, capital and technology. These are the things that ultimately determine America’s standard of living (as opposed to...

I'm worried about Gmail. It's only June 1, and I've already used up 10% of my 1 gigabyte Gmail disk quota. Perhaps dumping whole six-month periods of outgoing mail (including multiple copies of attachments) onto its servers wasn't the smartest thing to do. But now I find I cannot delete things without deleting entire threads ("conversations"). Gmail needs: Faster response times--to do more things locally. A way to merge threads that are really the same. A way to divide threads that are really not the same. The ability to search for "next message (in time) containing X." In fact, Google-style and Google-quality advanced search capabilities. But Gmail is very nice now, and I'm confident it will become much nicer in the future. It may well capture me as a permanent client....

Will Wonkette or Gawker link to this?...

My cousin Tom Kalil, who used to hold the Technology Desk at the Clinton-era National Economic Council, wants everyone to know that Google is an outgrowth of the programs that he shepherded. He's right: Google: Lessons for America's Innovation Policy - Center for American Progress: What is not widely known is the contribution that federal research funding played in creating Google. Google was founded by Larry Page and Sergei Brin – two computer science graduate students at Stanford University. Stanford was one of a number of universities that received funding under the "Digital Libraries Initiative" – supported by the National Science Foundation, NASA, and the Defense Advanced Research Projects Agency. (DARPA is the agency that funded the ARPANET in the late 1960's, the computer network that led to today's Internet). The goal of the initiative, launched in 1994, was to "dramatically advance the means to collect, store, and organize information in digital forms, and make it available for searching, retrieval, and processing via communication networks - all in user-friendly ways." Larry Page was funded under the DLI as a graduate student researcher, and Sergei Brin was supported with an NSF graduate student fellowship.... Google was also prototyped on equipment paid...

My father is jolted by his new issue of Reason: IPcentral Weblog: The latest issue of Reason magazine arrived in the mail, and the cover causes a jolt. It is an aerial photo of my neighborhood, with my house circled and the legend underneath: "James DeLong: They Know Where You Are!" But then he calms down: The accompanying story has a rather different spin, though. Written by Declan McCullagh, chief political correspondent for News.com and keeper of the well-known politech email list, it is entitled "Database Nation: The upside of 'zero privacy.'" The theme is that the increasing availability of data is excellent news for all of us in many ways, primarily because of the increases in efficiency and choice in the provision of goods and services that are enabled by information. After all, if you think that a counterparty's possessing too much information about you is not to your benefit, you can always hide your identity in some way--undertake a transaction through intermediaries, establish cover identities via forgery and using them to set up PayPal accounts and anonymized email addresses, make sure to only use public-access computers out of the range of spycams, et cetera. And he concludes: As...

Paul Markille writes that E-Commerce and the E-conomy are here after all: A Perfect Market: ...So e-commerce is already very big, and it is going to get much bigger. But the actual value of transactions currently concluded online is dwarfed by the extraordinary influence the internet is exerting over purchases carried out in the offline world. That influence is becoming an integral part of e-commerce. To start with, the internet is profoundly changing consumer behaviour. One in five customers walking into a Sears department store in America to buy an electrical appliance will have researched their purchase online—and most will know down to a dime what they intend to pay. More surprisingly, three out of four Americans start shopping for new cars online, even though most end up buying them from traditional dealers. The difference is that these customers come to the showroom armed with information about the car and the best available deals. Sometimes they even have computer print-outs identifying the particular vehicle from the dealer's stock that they want to buy. Half of the 60m consumers in Europe who have an internet connection bought products offline after having investigated prices and details online, according to a study by...

Outsourcing continues: Google steps into Bangalore: The Hindu | Friday, May 07, 2004 | Google to open R&D centre in Bangalore BANGALORE, MAY 6. The popular web search engine maker Google Inc's first research and development centre outside the U.S. has been approved by the Software Technology Parks of India (STPI), officials said. The centre, Google Online, is registered as a unit with the STPI, which provides satellite-linked datacom services to IT firms. The new centre "was given approval towards the end of April,'' said Ramali R, an official with the new registrations division of the STPI. Google has taken space on two floors in one of the commercial buildings in the central business area of Bangalore, which would be ready `soon,' engineers on site said. In time, the centre is expected to house some 100 engineers. It will be headed by a three-member team, including Krishna Bharat, Google's principal scientist, and Antoine Colaco, a manager from the company headquarters at Mountain View, California in the U.S. The engineers at the Bangalore centre would work on data mining, data warehousing, business intelligence and knowledge management. "We just want more really great engineers,'' senior Google executive, Wayne Rosing, had told...

From Paul Bergin, Reuven Glick, and Alan Taylor (2004), "Productivity, Tradability, and The Great Divergence" (Davis: U.C. Davis xerox). The strength of the relationship between high levels of GDP per capita on the one hand and appreciated real exchange rates on the other. Alan's main point is that the relationship was much weaker back before the 1960s--and shows signs of growing weaker once again. This may be important: the fact that poor countries have relatively depreciated exchange rates--and thus that a large chunk of national output is needed to purchase a relatively small quantity of imports from the industrial core--has been a powerful obstacle to development over the past generation and a half....

With his first breath after his receipt of tenure, the always-interesting Edward Castronova howls into the ether: Terra Nova: Free: ...this job also marks my entry into tenured status. That means intellectual freedom and job security, two things that remain scarce despite the onward march of technology and civilization. Here's what I would like to say with my first breath of free air: MATH IS BORING AND STUPID AND HAS ONLY A LIMITED PLACE IN THE DISCUSSION OF HUMAN AFFAIRS. PEOPLE ARE NOT NEUTRONS. HUMAN RATIONALITY IS AN EVOLUTIONARY AFTERTHOUGHT, SOMETHING THAT DOES LITTLE MORE THAN OCCASIONALLY MODIFY BEHAVIORS THAT STEM FROM UNCONSCIOUS AND ALOGICAL IMPULSES. THE TIME I SPENT LEARNING ALL THOSE MATHEMATICAL/ECONOMIC MODELS OF HUMAN BEHAVIOR HAS HAD SUCH A LOW PAYOFF IN TERMS OF GENERAL UNDERSTANDING THAT, WELL, UNTIL I GET A REFUND, I AM GOING TO REMAIN PISSED OFF. Whew! That felt great. I've been wanting to say that since the second day of grad school, back in August 1986. OK, look, I'm into games and human behavior; I thought economics was cool because it offered these simple abstractions that aided communication of ideas. But that's basically Economics and Game Theory 101; the cathedral of weirdness...

As expected, a good GDP growth number: Gross Domestic Product News Release: Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 4.2 percent in the first quarter of 2004, according to advance estimates released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 4.1 percent. The Bureau emphasized that the first-quarter "advance" estimates are based on source data that are incomplete or subject to further revision by the source agency (see the box on page 4). The first-quarter "preliminary" estimates, based on more comprehensive data, will be released on May 27, 2004. The major contributors to the increase in real GDP in the first quarter were personal consumption expenditures (PCE), equipment and software, government spending, exports, and private inventory investment. Imports, which are a subtraction in the calculation of GDP, increased. That the U.S. economy's output can grow at 4.2% per year without providing any upward pressure on the employment-to-population ratio is remarkable, a result of the amazing underlying productivity growth of our economy....

John Quiggin writes that Google is (a) an enormous engine creative mammoth consumer surplus (b) for which most of those who benefit from it do not pay a cent, and hence he (c) cannot imagine how it could have a fair market value of $20 billion: Crooked Timber: How much is Google worth? : According to this report, the widely-predicted Google IPO is likely to value the equity in Google at more than $20 billion - others suggest $25 billion. I immediately wondered whether Google was really worth $25 billion. I started on a standard financial analysis. Although, as a private company, Google doesn’t have to publish annual reports, it’s been estimated that Google has annual revenues of $500 million and profits of $125 million so that the return on equity is about 0.5 per cent. We can expect that to grow reasonably fast in the next few years, but the scope for expansion in Google’s core business is far from limitless. Most people in the developed world are already online and most of the heavy users already use Google (Eszter might have more to say on this). Moreover, there’s no strong reason to suppose that Google will be around...

Remind me what their business models are again: Online Books, Poems, Short Stories - Read Print: A warm welcome to Read Print, your free online library. Our website offers thousands of free books for students, teachers, and the classic enthusiast. To find the book you desire to read, start by looking through the author index. If you need help with something, feel free to drop us a line. Bookmark us for future reference. We're certain you'll keep coming back for more! Bartleby.com: Great Books Online -- Encyclopedia, Dictionary, Thesaurus and hundreds more: The preeminent internet publisher of literature, reference, and verse providing students, researcher, and the intellectually curious with unlimited access to books and information on the web, free of charge. Very nice services to have, but how to sustain them?...

Virginia Postrel writes about Eric Brynjolffson's finding that the internet is more important as an improvement in consumer choice than as a reduction in consumer cost: The New York Times Economic Scene: Choice Trumps Price on the Internet: But when [Brynjolffson] thought about how people actually shop online, and what they find valuable, he realized that low prices are not the big story. Selection is. The Internet offers variety that is simply impossible in traditional stores.... Online shoppers are not just buying the same stuff for less money. They are buying different stuff. And they are much more likely to be getting exactly what they want than are off-line shoppers. Wal-Mart has low prices, but Walmart.com carries six times as many items as the largest Wal-Mart store, the article says. "Amazon's slogan is world's biggest selection, not world's cheapest prices," said Professor Brynjolfsson, who has done pioneering research on information technology and productivity....You are not only more likely to find what you are looking for online. You are more likely to discover something you like that you did not already know about, Professor Brynjolfsson said.... "In effect, the emergence of online retailers places a specialty store and a personalized shopping...

Is this going to be the next really big thing? I don't know, but I do know that if I were Google I'd have already bought Furl (and Technorati too): John Battelle's Searchblog: Grokking Furl: Storage, Search, and the PersonalWeb: Today I finally got to talk with Mike Giles, the fellow behind Furl. He's based near Amherst, Mass, but used to work out in California, most recently at Vitria, a businessprocessenterpriseapplicationsoftware (ie, BigBoringButImportant) company. He started there when it had 20 employees, rode it out as it went to 1200 and went public, then bailed (it's now at about 300 or so). Before Vitria he founded a startup, then, closed it. In other words, he's one of us - he's been through the roller coaster, and he's wiser for it. Something tells me he's pretty happy in his current gig. He's the only full time employee, but works with a small cadre of contractors and friends. He's got between 5-10K users since announcing the beta in January. Mike started Furl about a year ago to solve a problem he - and a lot of us - had with bookmarks. Namely, bookmarking is a lame, half-assed, unsearchable, flat, linkrotten approach to...

Richard Berner of Morgan Stanley believes that America's productivity boom is overwhelmingly real economic fact rather than measurement error fiction: Morgan Stanley: The spectacular surge in labor productivity over the past two years may now be slowing as job growth improves.  That 4.8% annualized upswing in output per hour was the largest since 1962.  Was it too good to be true?  The answer matters, and not just for economic historians:  If the data have prompted investors and policymakers to overestimate long-term productivity growth and correspondingly to underestimate the trend in unit labor costs, then a booming economy may be narrowing margins of economic slack and promoting inflation more quickly than previously thought. In my view, recent productivity data do substantially overstate the trend, but not because the data are seriously flawed.  Rather, I believe that much of the productivity improvement in the past two years was cyclical.... I think that trend productivity growth is 2½-3%...[which] implies that up to 4% real growth and low inflation can coexist over time.... At first blush, the recent productivity acceleration seems to defy logic... increased security costs post 9/11 would stymie productivity... [t]he swing in the regulatory pendulum following the corporate governance scandals...

A Phone Message:Hello, Brad. This is ____ ____. Like you, Verizon deposits messages left on my cellphone in my mailbox some random time between 1 hour and 1 week after the message is left. Since you didn't tell me when you were calling, I don't know whether the message I have just gotten is (a) a current message I need to respond to, (b) a message from before our last meeting that is now obsolete, or (c) a message from the meeting before our last meeting that is now very obsolete. If (a), please give me a call. Otherwise, feel free to ignore this message.My take? Short Verizon. Short Verizon bigtime. What is the likely future of a company that cannot deliver phone messages in a timely fashion? And don't get me started on my persistent inability to log into T-mobile's wireless network at airports......

Let me, for one, be among the first to welcome our new Synergetic Google Overlords: Delivered-To: dfarber+@ux13.sp.cs.cmu.edu Date: Tue, 06 Apr 2004 13:56:09 +0530 From: Suresh Ramasubramanian Subject: Interesting speculation on the tech behind gmail To: Dave Farber http://blog.topix.net/archives/000016.htmlApril 04, 2004: The Secret Source of Google's Power Much is being written about Gmail, Google's new free webmail system. There's something deeper to learn about Google from this product than the initial reaction to the product features, however. Ignore for a moment the observations about Google leapfrogging their competitors with more user value and a new feature or two. Or Google diversifying away from search into other applications; they've been doing that for a while. Or the privacy red herring.No, the story is about seemingly incremental features that are actually massively expensive for others to match, and the platform that Google is building which makes it cheaper and easier for them to develop and run web-scale applications than anyone else.I've written before about Google's snippet service, which required that they store the entire web in RAM. All so they could generate a slightly better page excerpt than other search engines.Google has taken the last 10 years of systems software research out...

Stephen Cohen and I have a first rough cut on what we think about outsourcing... Our Outsourced FutureStephen S. Cohen and J. Bradford DeLong Draft 1.3 Politically, today's fears about job losses and international trade got their start last summer; they will heat up during the campaign and cool off in a year or so. Economically, they are just starting, and are likely to develop over the next years into serious questions of economic theory and policy. In 2001, 2002, and 2003 the Bush administration used concerns about recession and stagnant employment to fuel its successful effort to pass tax cuts that did little to cure the recession or stimulate employment. The big and, critically, permanent tax cuts for the $300,000+ a year crowd, the cut in dividend taxes--these were things that powerful factions within the Bush administration wanted but that would do next to nothing to cure a sick macroeconomy. The Bush administration placed a bet. It believed that it was very likely that the labor market would strengthen and employment would grow on its own. So why bother with a real employment stimulus package? They gambled, and the rest of us--America--lost.So come the summer of 2003 the Bush...

The Wall Street Journal's David Wessel has a very nice article about outsourcing this morning: WSJ.com - The Future of Jobs: New Ones Arise, Wage Gap Widens: ...two different kinds of jobs are likely to flourish amid outsourcing and computerization. One sort requires physical contact -- nursing-home aides, janitors, gardeners, dentists. Foreign-born workers may do them, but they'll have to move to the U.S. A 2000 survey found that the average starting salary of graduates of community-college dental-hygiene programs was $41,900. A hot program at many community colleges these days is massage therapy. Springfield Technical Community College in western Massachusetts gets nearly 50 applications each year for the 20 slots in its six-year-old program, nearly all of them from women. Graduates earn an associate's degree and haven't had any trouble finding work, says Bernadette Della Bitta Nicholson, who runs the program. About a third go to work for local spas, which give therapists half of the $80-an-hour charge for a massage. Another third find work at local health-care facilities and the remainder go into business for themselves. The other sort of jobs destined to remain here are high-end jobs. Some require exchanging information in ways that e-mail and teleconferencing don't...

Jared Bernstein has a good and thought-provoking piece on "Outsourcing," from The American Prospect: ... The topic was the role of education in a "knowledge economy." Greenspan's testimony offered eloquent, if conventional, wisdom leading to this punch line: "As history clearly shows, our economy is best served by full and vigorous engagement in the global economy. Consequently, we need to increase our efforts to ensure that as many of our citizens as possible have the opportunity to capture the benefits that flow from that engagement… one critical element in creating that opportunity is the provision of rigorous education and ongoing training to all members of our society." True. Education is surely critical. It's just not the only policy solution to our short- and long-term challenges -- and sometimes not even a particularly useful one. First, the collapse of job creation in this recovery cannot plausibly be blamed on the supposed educational or skills shortcomings of our workforce. The problem isn't the lack of skilled workers; it's the lack of jobs. Don't blame the supply side for the failure of the demand side. Our most highly educated workers are having a historically tough time in the current job market. In fact,...

Paul Kedrosky asks: Infectious Greed: Does anyone reading this column -- many using a browser -- really think they have been damaged by not having paid separately for the browser they are using?And I raise my hand, and shout, "I do! I do!" I certainly think that I have been harmed by Microsoft's bundling Internet Explorer with its Windows operating system. Remember the days when there was not one single dominant browser that came preinstalled on 95% of PCs sold? Back then there was ferocious competition in the browser market, as first a number of competitors and then Netscape and Microsoft worked furiously to upgrade their browsers and add new features to them. Most of these new features turned out to be idiotic. Some turned out to be very useful. Progress in making better browsers was rapid, because browser-makers wanted to make a better product and any new idea about what a browser should be was rapidly deployed to a large enough user base to make it worthwhile for web designers to try to use the new feature. And now? There is no progress in browsers at all. Why should anyone (besides crazed open sourcies) write a new browser? Why...

The Economist tells us that we are surrounded by robots: Economist.com | Technology: The dream of a future in which robotic helpers would banish drudgery emerged in the mid-20th century and has persisted ever since (see article). After a recent surge in sales of robot vacuum cleaners, optimism has been growing that the long-awaited market for domestic robots might be about to take off. Yet domestic robots are in fact already widespread, from dishwashers to washing machines to coffee-makers. Such devices are not regarded as robots, however, since they fail to conform to the general-purpose humanoid format originally predicted by robot visionaries. But with two robots exploring Mars, growing sales of industrial robots and a military robot race about to start in the Mojave desert, it is clear that the technology is doing well—just not in the way the visionaries imagined. Something similar is going on in the field of nanotechnology. The first products based on novel, atomic-level manufacturing techniques are now heading towards the market. But they do not conform to the original vision of tiny self-replicating machines, familiar from science-fiction films and novels, that was sketched out by the most famous nanotech guru, Eric Drexler. Just because it...

My notes from my Berkeley Economic Growth Lunch talk about the very strange Bush administration employment and productivity forecast....

David Pink of Wired has a truly excellent article on the Indian software industry: Wired 12.02: The New Face of the Silicon Age: ...Now meet the cause of all this fear and loathing: Aparna Jairam of Mumbai. She's 33 years old. Her long black hair is clasped with a barrette. Her dark eyes are deep-set and unusually calm. She has the air of the smartest girl in class - not the one always raising her hand and shouting out answers, but the one who sits in back, taking it all in and responding only when called upon, yet delivering answers that make the whole class turn around and listen. In 1992, Jairam graduated from India's University of Pune with a degree in engineering. She has since worked in a variety of jobs in the software industry and is now a project manager at Hexaware Technologies in Mumbai, the city formerly known as Bombay. Jairam specializes in embedded systems software for handheld devices. She leaves her two children with a babysitter each morning, commutes an hour to the office, and spends her days attending meetings, perfecting her team's code, and emailing her main client, a utility company in the western US....

With the assumptions about the changing share of nonfarm business as a share of total output and with the assumption (as reported) that the administration labor productivity growth in 2004 will be 1.4% per year and with a jumping-off point for the forecast of last October's labor market data, I can almost get to the 132.7 million projection of average nonfarm payrolls for 2004: I'm at 132.3 million. So assuming that 1.4% is the administration's forecast of labor productivity growth in 2004 (rising to 2.3% over 1996-1999), I took this forecast to the Berkeley economic growth lunch and asked how one might arrive at it. I reached three conclusions: You can get the 2.3% labor productivity forecast for 2006-2009 if you throw out the 2001-2003 period as anomalous, use a production function approach calibrated to the late 1990s, and assume that investment as a share of GDP never again reaches its bubble levels. [But won't continuing falls in computer prices continue to raise the real investment share substantially? Even if nominal investment doesn't exceed bubble-period shares, real investment will.] To get down from 2.3% to 1.4% over the next year or two for your projection of labor productivity growth, you...

One interesting thing is that most of corporate expenditure on "organizational capital" doesn't show up as investment in its accounts. Yet it is a huge chunk of what companies are doing to prepare for the future: New Economy: Technology and Worker Efficiency: ...Much of organization capital is expressed in terms of work practices - how things are done in a company. When blended with technology investments, certain work practices yield the biggest gains, said Erik Brynjolfsson, a professor at the Massachusetts Institute of Technology. The companies that perform best, he said, use teams more often than their rivals. They decentralize work that requires local knowledge and interpersonal skills like product design, sales and on-the-fly adjustments on the factory floor, and they centralize and computerize work that is easily quantified, like accounts payable systems and obtaining the lowest airline fares for routine travel. Investments in technology alone, Mr. Brynjolfsson said, bring little or no benefit. But he says that technology and organization capital are complements, reinforcing each other when used wisely together. "When you put organization capital into the model, it goes a long way to explaining the productivity surge we've seen," Mr. Brynjolfsson said. "It's not so much of a...

Kieran Healy writes about Doug Henwood's After the New Economy. (It's quite a good book: it's the best single new economy book to read; it's great as a debunking volume, it's not so good as a Roadmap to Utopia.) Healy promises that other contributors to Crooked Timber will also do so, but as is so often the case mere "moral incentives" prove insufficient to elicit sufficient effort. So let me do my part: I'll buy the first Crooked Timber poster to respond to Kieran Healy a book of their choice from amazon.com or powells.com (of up to $30 value) or three books by Andrei Shleifer (The Grabbing Hand, Inefficient Markets, and Without a Map), whichever they prefer. But as with all books that debunk, it in turn contains bunk and in its own turn needs to be debunked as we pursue the critique of critical criticism to its logical end. Kieran writes about how After the New Economy shows that: ...the rapid increase in measured productivity since the late 1990s... is largely explained by large changes within high-tech sector that are not reflected in other industries. He is also skeptical of the productivity numbers... [t]he appropriateness of the “hedonic pricing”...

On Friday, January 30, the Commerce Department's Bureau of Economic Analysis will release its first "advance" estimate of real GDP growth in the first quarter. We all expect that it will report that seasonally-adjusted real GDP grew in the 4th quarter of 2003 at roughly a 5% annual rate. We already know, roughly, what happened to hours worked in the fourth quarter. Seasonally-adjusted hours worked in the nonfarm-business sector grew at an annual rate of 2% in the fourth quarter. This means that productivity growth in the fourth quarter is likely to come in at something like a 3% annual growth rate pace. That's not as high as we have seen in the past three years. But it's still much higher than we had become used to in the Ford, the Carter, the Reagan, the Bush I, or the first two Clinton years. It's more evidence that the "new economy" is real--that the pace at which our economy's productive capacity is expanding is much faster than it was in the generation before 1995. [Posted with ecto]...

It's a really good time to be an American corporation. Look at the graph below, of inflation-adjusted after-tax corporate profits since 1990: If you were an investor riding or envying those who rode the high-tech stock-market bubble, you would have thought that the late-1990s were a great time to be a corporation. But real corporate profits peaked in 1997. The late 1990s were an asset-price bubble, an economic boom, a boom in employment and in rapidly-rising wages and salaries due to the tight labor market. But corporate profits were squeezed after 1997. But with the end of the recession in late 2001,* corporate profits jumped enormously. And they have continued to rise as the lousy labor market has dragged down wages and salaries while greatly-increased productivity has driven value added per worker way, way up. It is indeed an excellent time to be an American corporation. *No, I don't have any special insight into the tremendous jump in profits in the fourth--the October-December--quarter of 2001....

Well, no sooner do I complain about Technorati's staggering under its load than they get ready to roll out a brand new version.

Back in 2001 a bunch of people who ought to know told me that the Bush antitrust political appointees had essentially rolled over and played dead when confronted with Microsoft: that none of the provisions of the settlement that they claimed would increase competition would turn out to be more than a dead letter. Looks like they were right:

Financial Times: Microsoft has yet to fulfill a key part of the antitrust settlement that ended its fight with the US justice department in 2002, according to an official report released on Friday. However, the software company said it would soon introduce changes to deal with the complaints. The criticism was contained in the latest report on Microsoft's compliance with the 2002 deal. According to the Department of Justice and a number of states that led the antitrust case, the software company has yet to make it easy for rivals to connect software running on computer servers to PCs running the Windows operating system. This is an important element in the ability of other software companies to compete.

The settlement required Microsoft to license the communications protocols that it uses when connecting its own server software to Windows. Although companies can use other software for the same purpose, access to the Microsoft protocols was seen as important way to make sure the company did not discriminate against its rivals. According to Friday's report, although 11 companies have licensed the technology, they are using it only in "a relatively narrow set of products". As a result, this is "not likely to spur the emergence in the marketplace of broad competitors to the Windows desktop", it added. The report partly blamed complex licensing terms for the slow adoption.

In a response included in the status report, Microsoft said it was still making changes to the licensing arrangements to meet the objections, including issuing simpler terms. But it added that it could not ultimately influence the strategies of its competitors. "Microsoft has no ability to control the product development decisions of licensees," it said.

The Future of the Economy: The Next Year--and the Next Decade J. Bradford DeLong What will the future bring for the world economy? What will happen to production in the developing world, and in the rich industrial--no, we dare not call it that anymore: it is post-industrial, for the developing portions of the world have or will rapidly have as great a share of their population working in "industry"--core? Only fools, it is said, make a forecast in which they give both numbers and dates. So let me wave my hands in the air and talk mostly about things that I am reasonably sure will happen, but have no idea when they will happen. In the United States the fears of nine months ago that the U.S. economy might (never would) succumb to deflation have been dispelled. What remains is a sense of tremendous waste of opportunity. Since George W. Bush took office, American real GDP has grown at 2.3% per year--a pace of growth that would have been acclaimed as normal and as satisfactory for the American economy back when George W. Bush's father or Ronald Reagan was president. But it is clear that the American economy could have...

Why do I think Steve Antler is an idiot? It is a simple case of seeking truth from facts.