Eight years ago, Paul Romer was quoted:

The Soviet Union had very strong science in some fields, but it wasn't coupled with strong institutions in the market. The upshot was that the benefits of discovery were very limited for people living there. The wonder of the United States is that we've created institutions of science and institutions of the market [emphasis mine]. They're very different, but together they've generated fantastic benefits.

The Centre for Innovation Studies is an economic think tank in Western Canada that appears to operate in the gap between operational business issues and Romer's theories.

As a teenager and an economics undergraduate, I always had an uneasy feeling about the right-wing nature of economics and business. We would study how the growth of a cookie company could create jobs and make the GDP larger, but it seemed so pointless to me; can't people just bake cookies, or buy dates? If, instead of a cookie company, we were analyzing a company that threw computers off a cliff because there was a paying audience for such an activity, would this be an example of economic growth?

I think it's simplistic to equate all profitable business activity with economic growth; or to equate non-business activity with the opposite (economic cost). Health care is a good example; in Canada, depending on your ideology, you could view health care as a cost to society, and cookies as an example of society's productive output. But this framing is illusory; healthcare is a major fraction of Canada's GDP (10% -- retrieved today).

But much more valuable than either the cost frame or the GDP frame is to analyze the innovation within the healthcare system. How much science takes place? How much learning-by-doing? How much of this is distributed across the system, making the entire system more efficient? This is quite apart from both the utility of healthcare -- that of maintaining an able workforce -- and even further removed from the moral essence of a healthcare system.

But consider a GDP-specific examination of the computer sector that ignores any change in transistor speeds: factories are built to make computers; engineers are employed to design computers; logistics and marketing/merchandising professionals are engaged to bring the computers to market, etc. Clearly, all of this misses the point that a single, $200 computer today is more productive by a factor of millions than its 1980s counterpart; that virtually all other economic activity on Earth can exploit this improvement to become itself more productive.

Look at the centre for innovation studies; they link Moore's Law, so-named by the technology sector, with "creep capacity", so named by the chemical sector. Are the underlying mechanics of these phenomena the same or similar? Consider their "Sailing Ship" anecdote; after the invention of steam-powered ships, sailing innovation radically accelerated.

Studying innovation is kind of meta-meta. But I remember that Arthur Lydiard didn't actually earn much of a living from turning kids from his block in New Zealand into Olympic champions; he earned a living by teaching coaches.

Paul Romer is an economist who is at the vanguard of the most exciting school in the science today: New Growth Theory. Some history: until the 1960s, economists believed that economic growth resulted from two things:

1. investing today's surplus (mostly profits) in more equipment, like factories and/or more civil infrastructure, like highways and canals
2. adding more workers through social policy -- immigration, the baby bonus, etc. -- to accomplish more economic activity at lower cost

In the 1950s, Robert Solow amended that formula by adding technology to the mix. In Solow's view, most economic growth results from technological change -- discovery -- while some still results from the things mentioned above. As an economist, Solow didn't seek to understand why technological change occurred, but he could measure it and this came to be called the Solow Residual. The Solow Residual measures the pace of discovery: things like more viscous motor oils, more durable highway pavement, more efficient light bulbs. Imagine for a moment that in World War II you were asked by your government to build a computer with eight billion vacuum tubes; in fact, winning the war would be easier than building such a device, though today you can buy 8.56 billion transistors at Wal Mart for $10 in a 2 gig flash key.

In Solow's view, this technological change occurs exogenously -- outside of the economic system. Perhaps discoveries happen in universities, or in government labs.

Romer's contribution in the 1980s, as a young economist moving between Chicago, MIT and, for a year, Queen's University in Kingston, was to place technological change within the economy. For Romer, transistors don't become smaller because the government makes this a priority, but because every man woman and child in North America may have bought 1000 transistors in 1985 annually, via their TV remote controls, Walkmans and home computers. Today, we perhaps buy 25 billion transistors annually -- all the while directing investment to transistor development and research, while innocently playing X-box or using a remote control or answering a cell phone.

In fact, the Soviets developed the system of centralized discovery; that regime was an impressive force in science and technology, but this was never linked to the market system and so advances never went beyond the moon -- which in fact is not a good thing. The Soviet model could not benefit from compounding returns from discovery, from the X-box market funding the development of faster computers that design better transistors to make faster computers. Romer boldly projects increasing returns for humanity in perpetuity.

Richard Florida and Jane Jacobs comprise the Yin and Yang of urban theory. Jacobs prized diversity and density as necessities for a thriving city; Florida looks for thriving cities to find pools spawning the ideas that are changing the world. Famously, Florida uses a "gay index" to rate cities; though predominance of overt homosexuality in a city is unlikely to cause genius, it tends to be correlated with tolerance and openness to new ideas; while Pride Week doesn't spawn transistor development in any direct way, Florida believes that a city that can handle Pride Week is more likely to discover new things. To Florida, this diversity is exogenous; Jacobs situates it in an urban planning policy that, thankfully, Toronto has to a large degree adopted. So has New York and many other leading cities.

So, to this point in my post you have Jane Jacobs telling us how to arrange cities, Richard Florida telling us how good cities produce discovery, and Paul Romer telling us that discovery matters more than anything else when describing economic growth.

But take this interesting article by a U.S. academic, Vivek Wadhwa. Titled, America's Perilous Anti-Immigrant Protectionism, Wadhwa delves into recession-fueled Xenophobia in America -- blaming foreigners for taking "American jobs"; Wadhwa claims he himself is not excepted, receiving hate mail and threats for pointing out roughly what I have just written -- that America's immigrants are not taking "commodity jobs"; rather, they are growing the U.S. economy through discovery linked with the uniquely pervasive American market system. In simple terms, non-white people are inventing things and then employing lots of white people, all the while keeping America at the leading edge of economic growth and technology.

Wadhwa astutely notes that these immigrants, facing hate and anti-immigrant policies, may be taking their ideas elsewhere; just as many smart Jewish Germans did in the mid to late 1930s, in large part enabling the U.S. and not German to invent the atom bomb.

Much has been written about global neoliberalism and the "race to the bottom" of corporate tax rates -- certainly, states like Ireland have benefited by agreeing to charge multinationals much less tax. Horrible poverty has been wiped out in a generation by this.

But what about the race to attract the next Sergey Brin, the next Vivek Wadhwa, the next Albert Einstein? A cleavage is occurring in employment between the highly skilled and those who can only sell their labour as a commodity; the market is global for both, creating horrible pain for the unskilled and incredible opportunity for the skilled.

Growth in the global economy is from knowledge. People who are smart enough to contribute to that are smart enough, open enough to migrate globally. India and China must produce smart kids at the same rate as the U.S., or Britain -- just look at the competition in our universities at a point when the majority of people in these countries do not have access to proper education or opportunities to showcase their inheritance. In time, the cities with the right planning -- structural change -- and the states with the right policies to attract these people will quickly become better than the other ones.

[Note: this post was called Xenophobia, discovery, and economic growth; Richard Florida linked to it under the current title, which I thought was a good one, so I changed it.]

Interesting comic comparing the two: http://img40.imageshack.us/img40/1736/200905amusingourselvest.png

But why is it always, "they are trying to control us;" if the comic correctly shows Huxley's nightmare as our reality, it's not a result of a mid-century plan to control the population. This media universe arose within a free market system where mid-managers were incented to make slightly more appealing content, ads and media to capture market share. The net net after 50 years may very well be Huxley, but as a side effect, not an end.

Neat video: http://web.mit.edu/newsoffice/2009/traffic-0609.html

No doubt they form passively and no individual in them has an incentive to take action to un-form them, but I think this article misses a key factor. Driver training would have a huge effect on preventing traffic jams.

Though drivers usually seek to undertake trips in the least time possible, a driver can take many kinds of action; I'd group these as: irrational; short-sighted; far-sighted; and, altruistic.

An irrational act would be tailgating to prevent a driver on an on-ramp from merging in front of one's car. Short-sighted would be driving to the very end of an on-ramp to obtain a slightly better position in the lane of traffic. Far-sighted would be changing lanes well in advance of an on-ramp because one can foresee congestion. Altruistic would be allowing a large gap to form in front of one's car when traffic is merging into one's lane.

If most drivers acted with more foresight or altruism, highways would go faster and all drivers would benefit. However, people are irrational and, perhaps, when a small number of drivers are altruistic, a number at least equal to that can take advantage of them and believe they are benefiting personally, while also causing the entire system to be less efficient.

For this reason, I think a culture shift would have a large effect on the entire system's efficiency.

Pedestrians rarely walk with pure selfishness; they commonly smile and engage others as people, make room on the sidewalk, hold the door, stand on the right side of the escalator, let people of the subway before entering, etc. Not everyone does this, but the majority do and it's part of the culture to do these things. People have been pedestrians for millennia, and it seems obvious that norms would exist governing something as common as walking in public.

Such norms were never brought about formally for drivers.

I think a more intensive driver training focused on shifting drivers to have more foresight and to adopt some of the norms of pedestrian life (seeing others as people not vehicles) would achieve a lot. Perhaps it begins with new drivers and the benefits would gradually take hold.

"In finance, 'there is a huge network and agglomeration effect,'" Richard Florida quotes former assistant U.S. Treasury secretary Edwin Truman in Florida's recent Atlantic article "How the crash will re-shape America.

The network effect concept -- best illustrated by how much more useful fax machines become when you're not the only person in the world who owns one -- is closely related to positive feedback loops, an idea I have written about before. Agglomeration is studied in geography, and is the essence of both cities and Richard Florida's take on their vital role in society.

Like Jane Jacobs, Florida is passionate about urban diversity. Jacobs would view a diverse neighbourhood as one with several uses, so that it has foot traffic at almost all hours: commuters in the early morning, stroller-moms during the day, yuppie diners in the evening and clubbers in the late night -- all of them, agglomerated, provide themselves and the neighbourhood with security, reducing crime and making it more livable.

But can Florida reasonable extend this idea to the agglomeration of financial centres, as his Atlantic article does? Certainly the historic role of financial centres -- that of connected custodians of capital working in close quarter to distribute society's surplus toward what is hoped to be the most productive purpose -- demanded a Manhattan or Amsterdam or "The City" in London.

Today, however, these distributions are made with computers and telephones, so why New York? Why anything? Why cannot the agglomerated financial core of the world be geographically distributed, linked with electronic access at a premium.

Perhaps people still do deals in restaurants and golf courses. Perhaps, also, the people who do this business will generally only live in a few places on Earth -- London and New York being among them. This is Florida's thesis from earlier writings.

Urban theory is interesting, but far more powerful than either urban theory or even the core of capitalism itself is the destabilization effect of digital communication technologies, which are wiping out entire industries as knowledge and content become instant and free.

New York has a big harbour, so it's not all about red suspenders. But will it still be a city of red suspenders, or are the dock hands waiting to rule?

I think that women will probably soon be competing head to head with men in the marathon and in Ironman Triathlons. It's about as complicated and unscientific to explain as "the right way to catch fish," but the trends seem to show this, and Brits Paula Radcliff in the 26 miler and Chrissie Wellington in the 140.6 miler are both breaking through the glass pack (sorry).

Radcliff was a bit of an idol to me -- a guy -- when I got into running in 2002. Female athletics is interesting because the Michael-Jordan esq success is more definite. We don't  know how fast the men's marathoner could potentially run, or at the time we didn't know the limit of MJ's brilliance, but we can measure exactly the fewer and fewer men who are better than Radcliff and Wellington.

This has nothing to do with the following. 

I got into the summer Olympics sometime in the late 1990s or so and I noticed there was an area of sport called "athletics." This seemed odd, because the entire Olympic movement seems to have a lot to do with athleticism, and all of the competitors are called athletes. Why call some sports athletics and not call others athletics?

Well, English is weird. But this term "athletics" is reserved for a more narrow definition of Olympic sport: track, field and marathon. It's arbitrary, but I think it works.

Athletics is a weird term. And so is "intellectual."

What exactly is an intellectual. Are corporate CEOs not very smart? And doctors and lawyers? What about world class musicians, or engineers? Or very smart high school teachers. All of these professions attract mostly smart people; why not call these people intellectuals?

Well, the word appears to be reserved for one of two things. Broadly, you could call anythone who thinks creatively and expresses this verbally or in writing as an intellectual; certainly a world-class architect or say Albert Einstein would fit this. More narrowly, an intellectual (or, perhaps a social-sciences or public intellectual) may be someone who speaks or writes intelligently about important public issues. David Frum or Christopher Hitchens -- who don't appear to do anything but engage in a life-long dialectic -- may be under this narrow definition. They undertake no experiments and produce virtually zero original evidence. This isn't physics. They simply talk or write about society. 

So, I wondered for a long time why have a word to describe these people who don't do anything but write or talk to each other? Why not call them writers?

Here's my point. One day -- I think it was the summer of 2004 -- I thought of an idea I called the Simple Moral Imperative. If I wrote down a definition, I cannot find it, but as I recall it goes like this: when tackling an issue, focus only on the indisputable moral issues and achieve understanding and agreement there. Avoid unending debate by converting the unresolvable argument into one of certainties. So, if you're arguing a political issue, start with asking if genocide is occurring. If it is, you don't really need to argue any more. (Maybe you need to send guys with guns.)

So, what are David Frum and Christopher Hitchens? Perhaps they undertake a version of this. Perhaps theirs is a large, public, contribution to a centuries-old conversation in which difficult and "messy" issues are attacked by first identifying the Simple Moral Imperatives associated with each, thus converting a social science debate into a scientific one; converting messy issues of opinion into ones of unambiguous and universal morality. At least in this way they would be advancing intellectual knowledge and not chatting with big words.

Paul Romer is just about the only economist whose ideas seem to be accepted by the "academy", and certainly can be accepted as common sense. In my view, all business/economics can be expressed as a form of New Growth Theory; you're either engaging in creative destruction, like RIM, Amazon or Wal-Mart's supply chain, or you are running a superior business that follows in the wake of creative destruction, such as Tim Hortons or Esso.

Romer doesn't write much pop science, but read this Reason interview. Some quotes:

New Growth Theory shows that economic growth doesn't arise just from adding more labor to more capital, but from new and better ideas expressed as technological progress. Along the way, it transforms economics from a "dismal science" that describes a world of scarcity and diminishing returns into a discipline that reveals a path toward constant improvement and unlimited potential. Ideas, in Romer's formulation, really do have consequences. Big ones.

And for the Marxists ...

One extremely important insight is that the process of technological discovery is supported by a unique set of institutions. Those are most productive when they're tightly coupled with the institutions of the market. The Soviet Union had very strong science in some fields, but it wasn't coupled with strong institutions in the market. The upshot was that the benefits of discovery were very limited for people living there. The wonder of the United States is that we've created institutions of science and institutions of the market. They're very different, but together they've generated fantastic benefits.

Remember when irony died following 9/11?

Whether you call it compensatory consumption, Veblen goods or just maintaining pace with Mr. and Mrs. Jones, I wonder if Pierre Luigi Sacco's insights will apply after the contraction.

The hallmark of a post-industrial economy is that basically people think in terms of identity when they make their choices. What they actually do is think in terms of, 'if I buy this, how will other people perceive me?' or 'if I buy this, what kind of person I am for buying this?' Why this is becoming so relevant? Well, before answering to that, let's just look at how people in the marketing departments actually address you when they try to sell you those goods. Well, they address you exactly in this respect.

The product itself is somewhat disappearing from the centre stage. What's just coming up is the kind of person who buys this kind of goods or the symbolic representation of the good, rather than the good itself, to the point that actually, they don't even make promises about what exactly that product delivers. What they promise is how you'll feel about the good, which is totally different.

The economics of identity is a tricky field because it's entirely new. We don't know anything about it. Why should these problems be threatening? Well, consider this, if scarcity is the hallmark of the economics of survival, what does it mean thinking in terms of scarcity in the economics of identity? Basically, what becomes scarce in this context is not the availability of goods, there are plenty of them, is a sort of invasion, we simply can't just protect ourselves by this attack of goods I mean popping up everywhere.

But, what becomes scarce is 'who can you pretend to be'? 

I read this a month ago, so if America changed in some way in the meantime, forgive me.

What is America?

This is not a book about the present, per se. It's not a discussion of Nixon going to China or Obama rising from Chicago. It begins in 1492 and neatly describes the relationship between the Americas and the rise of Europe.

In 1492, I recall from a Lonely Planet book, Isabella and her husband completed the reconquest of Spain. Oh, and Columbus landed at a Breezes resort.

Ronald Wright makes an original argument that begins as follows:

• Incan and Mayan societies were among the most advanced on Earth at 1492.
• They compared well with China. Europe was a backwater.
• Columbus' Spanish followers were inferior warriors, technologically speaking, to New World societies, and had they not indelicately sneezed while losing battle after battle, we would not get Telemundo today.
• Yes, a few European airborne diseases all but wiped out several civilizations.

Much of that is well known by high school students. But where Wright gets pioneering is his two-fold argument that:

1. Europeans did not establish societies in the Americas so much as they inherited some of the world's most advanced cities from civilizations that had accidentally fallen to plagues. Key among this was the U.S.; the image of nomadic tribes being attacked by Kevin Costner bears little relationship to the large cities built along the east. There is no Machu Picchu because Atlanta ended up on top of it.
2. Newly enriched New Worlders shipped their wealth all mercantile-like back to Europe, which went on a 500-year nouveau-bling shopping spree and took over Earth. But Europe's rise at a time when Arab North Africa was more technologically advanced was a result of New World wealth, not larger foreheads or something.

Very easy read. Very mind-changing.

As a writer, most of career has been made up of discrete projects with fixed deadlines. Even when managing a lot of projects at once, I have to set deadlines and allot a set amount of time to each one ... or else i. will. go. mad!

But as another deadline flies by, I noticed something about project-work (at least writing project-work). When I have written a "pretty much done" piece, and I'd be just about happy showing it around internally, I've usually invested about half the hours I ultimately do. In other words, when I'm 90 per cent finished, I've done 50 per cent of the work.

There are a lot of good explanations for this. Writing, like programming, has bugs. If you call concepts by different names through your document, you have to streamline that before submitting the work. Streamlining can ruin your flow, because maybe a sentence required that three-syllable word, or a certain rhyme or rhythm to sound great, and now that sentence has to be re-written. Sometimes paragraphs repeat themselves, or worse, almost repeat themselves. Again, these must be re-written. And when they are re-written, you've likely fudged your segues.

Every first draft has at least two motifs, one of which must be killed. Which one? How will it flow when the dropped ones are replaced?

I can't say I've ever thought all this through before, but I know shit writing from good writing, and trying to never submit the former, I think I follow a process much like this; a process that means a 90 per cent finished work is half way there.

An analytical blind spot.

Man, I wish a took a psych 101 course. I think people recognize what Freud labelled "narcissism of small differences" -- a Hindu and a Christian may live in absolute peace as neighbours, but don't dare seat an Irish reform Catholic next to an Irish conservative Catholic at a dinner party. Couples exaggerate differences to retain identity. Maybe it plays a role in ethnic conflict (which combines power and identity).

Take that David Suzuki!

Actually, I love David Suzuki, and I could really care less that he consults to Wal Mart. But I'm studying Paul Romer and new growth theorists and these guys have really got the economy figured out. Innovation and knowledge (also admired by Florida and Roger Martin at Rotman, U of T) drive all economic growth. You don't need more plants. You don't need more roads. Okay, you sort of do, but that gets you to Canada in 1950. Innovation, unlike matter or energy, cannot be destroyed. You can't unthink what you thunk. And all thinking is based on the sum of all previous thinking (ie. knowledge).

So if you want to make a plant, it's about as difficult as the last time you made a plant. Take a chess board and put a penny on the first square. Then two on the second, four on the third, 16 on the fourth and so on = more pennies than matter on Earth. Now, instead of cash, think knowledge.

Take that entropy.