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Hard Landing by Thomas Petzinger, Thomas Petzinger Jr.
airline deregulation, centralized clearinghouse, collective bargaining, cross-subsidies, desegregation, Donald Trump, feminist movement, index card, low cost carrier, low skilled workers, Marshall McLuhan, means of production, mutually assured destruction, Network effects, offshore financial centre, oil shock, Ponzi scheme, postindustrial economy, price stability, profit motive, Ralph Nader, Ronald Reagan, Silicon Valley, strikebreaker, the medium is the message, The Predators' Ball, Thomas L Friedman, union organizing, yield management, zero-sum game
He immediately struck Bakes as uncomfortable in the presence of Ted Kennedy, his avowed rival. Kennedy, who was nothing if not gracious when the situation demanded, immediately called attention to the significance of this day. “Mr. President, I want you to meet Phil Bakes,” Kennedy said. “He and Mary Schuman are the people responsible for this.” Carter’s lips grew tighter as the group exited. But by the time he signed the Airline Deregulation Act of 1978, Carter was beaming with pride. Flanking him were Kennedy and Cannon, Monte Lazarus from United, Alfred Kahn, and even the former CAB chief, John Robson. “For the first time in decades,” Carter said, “we have deregulated a major industry.” A mile to the north, as Carter spoke, a line had already begun forming outside CAB headquarters. Once the bill was law, more than 2,000 dormant airline routes would be instantly up for grabs.
“hardest to destroy”: From “Essay on Bureaucracy,” by Max Weber, in Rourke, Bureaucratic Power in National Politics, page 58. 45. only sensible course: Robson 1/7/93 interview. 46. furiously lobbied: Cohen 2/16/93 interview. 47. writing a dissent: Ibid. 48. visibly startled: Brown, The Politics of Airline Deregulation, page 113. 49. “mesmerized by computer models”: U.S. Senate, Hearings Before the Subcommittee on Aviation, Apr. 1, 1977. 50. “fucking academic eggheads”: Bakes 5/11/93 interview. Crandall does not recall the comment but does not deny making it. 51. In contemplating candidates: Ibid. 52. “free-fire zone”: “CAB Proposes 50% Fare Cut Zone,” Aviation Week, Apr. 10, 1978. 53. “get big quick”: Ferris 5/28/93 interview. 54. death of the senior senator: “Washington Update,” National Journal, Dec. 3, 1977. 55. “help raising some money”: Bakes 5/12/93 interview. Mineta’s staff, though confirming Kennedy’s appearance at a fundraiser, said it was unrelated to his stance on deregulation. 56. a $433,000 tax reimbursement: Bakes 5/11/93 interview.
As the White House and subcommittee staffers began working more closely together, Schuman would even begin dating one of Bakes’s colleagues on the Kennedy staff, a Yale lawyer named David Boies, who was preparing to push the deregulation campaign to the trucking industry. Before long, Boies and Schuman would be married. Within a month of her appointment, Schuman and a few associates wrote a paper for Carter on airline deregulation. Airlines, the paper said, were “naturally competitive.” Regulation was “inappropriate.” The policies of the CAB had brought about “inflated fares” and “half-empty planes.” Airlines were “heading the way of the railroads,” the memo said. Ted Kennedy, looming as a potential Carter rival in the next presidential election, was out in front on the issue. There were five bills for airline deregulation already pending in Congress, Schuman told the president. But Carter, the memo added, might be able to turn all the action in Congress to his own political advantage. “Existing Congressional support,” she wrote, “makes this issue one on which you may be able to score a relatively ‘quick hit.’ ” A quick hit.
Skygods: The Fall of Pan Am by Robert Gandt
Airbus A320, airline deregulation, Ayatollah Khomeini, Berlin Wall, collective bargaining, hiring and firing, invisible hand, Maui Hawaii, RAND corporation, Tenerife airport disaster, yield management, Yogi Berra, Yom Kippur War
He restructured TI’s debt, slashed fares, and managed to resuscitate the company. “The airline was on its deathbed,” said Bob Garrett, Lorenzo’s financial adviser. “Yet Frank managed to pull all the various sides together. He kept working and working after everyone else had stopped.” This was all before deregulation. Then came 1978, the year of the Airline Deregulation Act. It was a unique moment in airline history— a time just made for someone like Frank Lorenzo. Who the hell is Frank Lorenzo? That was what they wanted know at National’s Miami headquarters on July 9, 1978, the day Lorenzo informed the CAB that he had bought 9 percent of National Airlines’ stock. He had also informed the board that he, by the way, intended to buy up to 15 percent, or as much as it took to have controlling interest. In the process, Lorenzo had not bothered to consult National’s chairman, Bud Maytag.
Kahn was familiar with Pan Am’s history, and he didn’t like the Trippe legacy any more than his predecessors had. “Pan Am can go to hell,” he snapped to the press one day after he’d heard enough about Pan Am’s problems. Later, when he’d had time to cool down, Kahn thought about what he’d said. Actually, he told a reporter, for Pan Am “that would be an interesting new route.” In the fall of 1978, the rules changed. The long-simmering Airline Deregulation Act was finally signed into law. What it meant, in effect, was that anyone could fly anywhere, at least within the United States. Deregulation was a trendy idea whose time had come during the inflation-ravaged 1970s. The traveling public— and its elected congressmen—were fed up with runaway airline fares and the inability of the bureaucratic CAB to regulate anything.
And then, three hours before the proxy material was supposed to go out to the stockholders, another player jumped into the game: astronaut Frank Borman, down from outer space and now the chairman of Eastern, was offering $50 a share. The game was on again. Regardless of who made the most outrageous offer for National Airlines, any such merger still required the approval of aviation’s most plodding bureaucratic agency. Even though the Airline Deregulation Act of 1978 imposed a death sentence on the Civil Aeronautics Board, the CAB was still around in the summer of 1979. The five-member board would have to study the matter and make its recommendation. The President, Jimmy Carter, would render a final decision. While the CAB deliberated—the CAB always deliberated—the fight for National became a prime topic for the business press. Everyone, it seemed, in and out of the industry, felt obliged to express an opinion.
It normally falls off in periods of turbulence and then bounces back quickly. Boeing estimates that air travel worldwide has tripled since 1980. Boeing and Airbus are both forecasting 5 percent annual growth in airline travel over the next twenty years.1 The woes of America’s airlines were largely self-inflicted, decades in the making, and are worsening. Much of what has gone wrong can be traced to 1978, when the Airline Deregulation Act was adopted. It liberated the airlines by allowing them, instead of a government agency, to decide which routes they could fly and at what cost to the passenger. Government supervision of what had been judged a public utility gave way to free market economics. Predictably, the industry’s irrational tendencies took over, and it quickly outgrew itself. By the late 1980s, the legacy carriers—the half-dozen major carriers that have been around longer than most of the others and operate both nationally and internationally—had embarked on a feeding frenzy, adding new airplanes to their fleets without retiring older ones.
By the late 1980s, the legacy carriers—the half-dozen major carriers that have been around longer than most of the others and operate both nationally and internationally—had embarked on a feeding frenzy, adding new airplanes to their fleets without retiring older ones. (These are hardy, long-lived vehicles.) Credit wasn’t a problem—there was a great deal of money chasing airplanes; airlines were borrowing 120 percent of the net purchase of their new aircraft. And they were busily expanding their hub airports. Airline deregulation, a useful step in principle, was never about building a strong industry; it was about lowering ticket prices by creating competition. And it did give rise to a commodity marketplace, hence competition. But most airlines either didn’t favor deregulation or, like Delta Airlines, openly opposed it. United Airlines, the nation’s largest carrier at the time, was the only strenuous advocate. The other big airlines had been reluctant to give up a regulated environment, which had offered an unstable industry protection against its prodigal tendencies.
“Frank did things in a new way,” says Stanley Little, who for many years was vice president for industrial and public relations. “It was a new style, more cautious. Things would be on hold. And lots of questions were asked about why we were doing what we were doing instead of having us just doing it. Things got proceduralized.”13 Some operations became more proceduralized, probably because they had to be. Schrontz and Thornton had to start coping with the effects of airline deregulation that were beginning to take hold. The regulated environment had been easier on all parties, except for the air traveler. An airframe maker knew that a portion of his costs could be passed on to the airline, which in turn could pass on its higher costs to the passenger, provided the Civil Aeronautics Board approved the increase in price of a given fare. The industry model was changing. At some point not far off, the airlines would have considerably less money to spend on acquiring new equipment.
Fly by Wire: The Geese, the Glide, the Miracle on the Hudson by William Langewiesche
If you had to pick the most desirable trait for airline pilots, it would probably be placidity. But safety aside, no pilot of whatever mental capacity enters the profession expecting to see his income cut, particularly when airline executives continue to increase their own compensation, as they have. This is what Sullenberger was legitimately complaining about to Congress. Ever since airline deregulation in the United States in 1978, which did away with route monopolies and noncompetitive pricing, and especially since the terrorist attacks of September 2001, which had all sorts of profound effects on the industry, most major American airlines have been miserable places to work. Two days after the Hudson River landing, accident investigators interviewed the pilots in New York’s Marriott Downtown hotel, near the site of the former World Trade Center.
But the real veteran of the crew was Doreen Welsh, now fifty-eight, who had joined US Airways when it was called Allegheny and she was twenty years old, in the dim and distant past of 1970. For reference, in 1970 Richard Nixon was in his first term in office, the war in Vietnam was raging, U.S. forces invaded Cambodia, protesters were shot dead in Ohio at Kent State University, Jimi Hendrix died young, and Barack Obama was nine years old. Furthermore, airline deregulation was still eight years ahead. However understandable Sullenberger’s laments may be about the loss of flight crews’ income, it must be said that he—like Skiles, Dent, and Dail—joined the airlines after the deregulation of the industry, when it was obvious that the unions would eventually be undermined by market forces, and that the unnaturally high salaries at the time simply could not be sustained.
Lockheed had just abandoned the commercial aircraft business, McDonnell Douglas was struggling to get by, and Boeing was the dominant manufacturer worldwide, with little incentive to rethink airplanes and retool its factories based on a still-immature technology. Furthermore, Boeing’s constituents among airline pilots were very clear in their disdain. The pilots were having a tough enough time already. Between the turmoil caused by airline deregulation and the coming of automation, which was reducing crew sizes from three to two, the glamour of airline jobs was visibly fading, and the profession was becoming less fun, less prestigious, and less well paid with every passing year. This was the start of the trend that Sullenberger complained about to Congress after his water landing twenty-four years later. What he did not express to Congress is a paradox that has been operative all the while: even as the working conditions grew worse and salaries were cut, plenty of new people lined up for the jobs, and the safety record kept getting better.
accounting loophole / creative accounting, airline deregulation, Andrei Shleifer, asset allocation, Bretton Woods, buy low sell high, capital asset pricing model, commodity trading advisor, corporate governance, discounted cash flows, diversification, diversified portfolio, fixed income, frictionless, high net worth, index fund, inflation targeting, invisible hand, John Meriwether, law of one price, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, market bubble, merger arbitrage, money market fund, new economy, passive investing, Paul Samuelson, price mechanism, purchasing power parity, risk tolerance, risk-adjusted returns, risk/return, Ronald Reagan, selection bias, shareholder value, Sharpe ratio, short selling, statistical arbitrage, survivorship bias, the market place, transaction costs, Y2K, yield curve, zero-sum game
A classic example of an inelastic industry was the airline industry before it was deregulated in 1978. Largely due to government restrictions, airlines were unable to easily expand their supply when there was increased demand. As a consequence, when more people wanted to travel, ticket prices rose. For inelastic industries, profitability and share prices primarily reflect changes in demand. Generally, forecasting changes in the level of economic activity or economic conditions to predict aggregate demand is critically important to the cyclical investor. A close look at the airline industry’s experience demonstrates this point. 208 Supply Curve P1 Price Changes P0 Shift in Demand Quantity Q Figure 11.1 Inelastic industry: price changes in response to a shift in demand. Deregulation, as per the U.S. Airline Deregulation Act of 1978, changed the shape of the airline industry’s supply curve.
See elasticity survivor bias, 228 swing assets, 290n systematic risk, 3, 19-20, 113 T T-bills fixed-income cycles, 48-52 performance of, 16-17, 42 T-bonds CEM (capitalized earnings model) and, 90-94 fixed-income cycles, 48-52 optimal mix with equity stocks, 25-26, 37-39, 119 performance of, 16-18, 42-43 tax-rate changes and, 73 tactical asset allocation (TAA), xx, 18, 60, 101, 254 target return, 257 tax increase, equivalence to supply shift, 217-218 tax rates CEM (capitalized earnings model) modifications and, 95-96 elasticity and, 211 inflation and, 88-90 location effect and, 202 314 monetary policy and, 88-90 style cycles and, 56 Tax Reform Act of 1986, 73, 211 tax-rate changes, corporate behavior and, 68-70 capital gains, 76-79 debt financing, 73-76 incentive structure effects, 70-73, 80-84 taxes, elasticity and, 187-189 terrorism, stock market performance and, 202 top-performing asset classes, selecting, 8-11 Treasury bills. See T-bills Treasury bonds. See T-bonds 12 percent T-bill, 230 U-V U.S. Airline Deregulation Act of 1978, 209 valuation. See market valuation value stocks, 5 annual returns, 19 growth stocks versus, 272-273 optimal mix with growth stocks, 22-23, 26-30, 121 performance of, 16-17, 42 risk measurement, 20 style cycles, 55-57 tax-rate changes and, 75 value-timing asset allocation, 137-142 value-timing strategy cyclical asset allocation (CAA) as, 243-250 market-timing strategy versus, 276-277 variance, Sharpe ratio, 2 variance–covariance matrix, 21, 46 volatility, 2-3.
Chapter 3 Thinking in Cycles 49 50 Table 3.2 Relative performance of various asset classes.* UNDERSTANDING ASSET ALLOCATION Equity versus Bonds Rank 1 2 1 2 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 L 37.2 B 9.2 L 23.8 B 16.8 B –0.7 L –7.2 L 6.6 B –1.2 L 18.4 B –1.2 L 32.4 B 4 B 1.9 L –4.9 B 40.4 L 21.4 L 22.5 B 0.7 B 15.4 L 6.3 L 32.2 B 31 B 24.4 L 18.5 L 5.2 B –2.7 L 16.8 B 9.7 L 31.5 B 18.1 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 B 6.2 L –3.2 L 30.6 B 19.3 B 8.1 L 7.7 B 18.2 L 10 L 1.3 B –7.8 L 37.4 B 31.7 L 23.1 B –0.9 L 33.4 B 15.9 L 28.6 B 13.1 L 21 B –9 B 21.3 L –9.9 B 6.9 L –13.1 B 14.1 L –23.7 L 28.7 B 1.3 L 10.7 B 9.3 1978 1980 1981 1982 1983 1984 Domestic versus International 1 2 1975 1976 1977 L 37.2 ROW 26.9 L 23.8 ROW –0.6 ROW 12.6 L –7.2 ROW 27.6 L 6.6 1992 1979 1985 1986 1987 1988 L 32.4 ROW 19.8 L –4.9 ROW –6.5 L 21.4 ROW –4.2 L 22.5 ROW 21 L 6.3 ROW 0.6 ROW 47.7 L 32.2 ROW 62.7 L 18.5 ROW 22.8 L 5.2 ROW 25.8 L 16.8 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 ROW 30.1 L 10 ROW 5.8 L 1.3 L 37.4 ROW 9.6 L 23.1 ROW 5.2 L 33.4 ROW 0.7 L 28.6 ROW 17 ROW 26.2 L 21 L –9.9 ROW –14.4 L –13.1 ROW –22.6 ROW –17.4 L –23.7 ROW 36.2 L 28.7 ROW 17.8 L 10.7 L 18.4 ROW 6.3 1989 1990 1991 1 L 31.5 L –3.2 2 ROW 9.8 ROW –24.4 L 30.6 ROW 10.1 L 7.7 ROW –14 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 S 52.8 L 37.2 S 57.4 L 23.8 S 25.4 L –7.2 S 23.5 L 6.6 S 43.5 L 18.4 S 39.9 L 32.4 S 13.9 L –4.9 S 28 L 21.4 S 39.7 L 22.5 L 6.3 S –6.7 L 32.2 S 24.7 L 18.5 S 6.9 L 5.2 S –9.3 S 22.9 L 16.8 L 31.5 S 10.2 L –3.2 S –21.6 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 S 44.6 L 30.6 S 23.4 L 7.7 S 3.1 L 1.3 L 37.4 S 34.5 L 23.1 S 17.6 L 33.4 S 22.8 L 28.6 S –7.3 S 29.8 L 21 S –3.6 L –9.9 S 2.5 L –13.1 S –15.3 L –23.7 S 38.8 L 28.7 S 22.5 L 10.7 Large versus Small 1 2 1 2 S 21 L 10 Value versus Growth 1 2 1 2 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 V 43.4 G 31.7 V 34.9 G 13.8 V –2.6 G –11.8 G 6.8 V 6.2 V 21.2 G 15.7 G 39.4 V 23.6 V 0 G –9.8 G 22 V 21 V 28.9 G 16.2 V 10.5 G 2.3 G 33.3 V 29.7 V 21.7 G 14.5 G 6.5 V 3.7 V 21.7 G 11.9 1989 1990 1991 G 36.4 V 26.1 G 0.2 V –6.8 G 38.4 V 22.6 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 V 10.5 G 5.1 V 18.6 G 1.7 G 3.1 V –0.9 G 38.1 V 37 G 24 V 22 G 36.5 V 30 G 42.2 V 14.7 G 28.2 V 12.6 V –9.6 G –17 V –13 G –13.2 V –22.5 G –24.5 V 31.8 G 25.7 V 15.5 G 5.978 Bills versus Bonds 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 B 9.2 TB 5.8 B 16.8 TB 5.1 TB 5.1 B –0.7 TB 7.2 B –1.2 TB 10.4 B –1.2 TB 11.2 B –4 TB 14.7 B 1.9 B 40.4 TB 10.5 TB 8.8 B 0.7 B 15.4 TB 9.9 B 31 TB 7.7 B 24.4 TB 6.2 TB 5.5 B –2.7 B 9.7 TB 6.4 B 18.1 TB 8.4 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 TB 7.8 B 6.2 B 19.3 TB 5.6 B 8.1 TB 3.5 B 18.2 TB 2.9 TB 3.9 B –7.8 B 31.7 TB 5.6 TB 5.2 B –0.9 B 15.9 TB 5.3 B 13.1 TB 4.9 TB 4.7 B –9 B 21.3 TB 5.9 B 6.9 TB 3.4 B 14.1 TB 1.7 B 1.3 TB 1.2 B 9.3 TB 1.2 1 2 1 Chapter 3 Thinking in Cycles 2 Key S–Small V–Value L–Large G–Growth R–Rest of the world B–T-Bonds TB–T-Bills * The figures included in this table are percentages. 51 Table 3.3 shows $1 invested in T-bills in 1975 grew to $5.98 by the end of 2004, while $1 invested in T-bonds fetched $15.48.
1960s counterculture, affirmative action, airline deregulation, anti-communist, Ayatollah Khomeini, barriers to entry, Berlin Wall, blue-collar work, Bretton Woods, capital controls, centre right, collective bargaining, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, deindustrialization, desegregation, energy security, Fall of the Berlin Wall, falling living standards, feminist movement, financial deregulation, floating exchange rates, full employment, Gunnar Myrdal, income inequality, income per capita, intermodal, invisible hand, knowledge worker, laissez-faire capitalism, liberal capitalism, Long Term Capital Management, manufacturing employment, market bubble, Martin Wolf, new economy, oil shale / tar sands, oil shock, open economy, Paul Samuelson, payday loans, post-industrial society, post-oil, price mechanism, price stability, Ralph Nader, RAND corporation, reserve currency, Robert Gordon, Ronald Reagan, Simon Kuznets, strikebreaker, trade liberalization, union organizing, urban planning, urban renewal, War on Poverty, Washington Consensus, working poor, Yom Kippur War
Today, some historians view the National Industrial Recovery Act (NIRA) of 1933 as a leftist critique of capitalism.125 Kahn saw fascism, forestalled only by the New Deal shift from NIRA to competition in 1935. He admitted that the analogy was a little hysterical, but he passionately opposed what he believed was the alliance between business and strong unions. Kahn reminded the president that the alliance had fought trucking and airline deregulation. Now the culprits were the auto and steel industries and their unions. Kahn preferred an Economic Revitalization Board composed of people like Archibald Cox, distinguished but without industrial experience. For his economist he named Robert Solow or Gardner Ackley, both Keynesians who were neoclassical when it came to the microeconomy.126 Ralph Nader opposed the Economic Revitalization Board for similar reasons.
Mariani, “Republican Gains in the House in the 1994 Elections: Class Polarization in American Politics,” Political Science Quarterly, 115 (Spring 2000), 103–5. 80. Paul J. Quirk and William Cunion, “Clinton’s Domestic Policy: The Lessons of a ‘New Democrat,’” in The Clinton Legacy, ed. Colin Campbell and Bert A Rockman (New York: Chatham House, 2000), 220. 81. But the deregulation of the Carter, Reagan, and Bush years did not improve productivity. Airline deregulation evolved into the hub and spoke system, which allowed carriers to raise prices and respond ruthlessly when new carriers attempted to compete. The banking deregulation of the 1980s led to the savings and loan disasters. The deregulation of electricity raised rates. 82. Congressional Quarterly Weekly Report, 55 (Oct. 4, 1997), 2390–92. 83. New York Times, Aug. 31, 1995, D17. 84. New York Times, Feb. 16, 1991, A1. 85.
Schultze, “Memorandum for President,” Dec. 27, 1977, file 12/28/77 , box 63, Staff Secretary papers, Jimmy Carter Library and Museum, Atlanta, Ga. 71. Landon Butler, “Memorandum for Hamilton Jordan,” Jan. 6, 1978, file Economic Tax package thru 4/78 [O/A 6148], Eizenstat papers, Jimmy Carter library and Museum, Atlanta, Ga. 72. New York Times, Apr. 2, 1978, E2. 73. New York Times, Apr. 21, 1978, 17. 74. W. Michael Blumenthal, “Memorandum for President,” Apr. 22, 1978, file Anti-Inflation [CF O/A 413], box 39, Jordan papers, Jimmy Carter Library and Museum, Atlanta, Ga. 75. Schultze, “Memorandum for President,” Mar. 13, 1978, BE4–2, WHCF, box BE-16, Jimmy Carter Library and Museum, Atlanta, Ga. 76. New York Times, Apr. 26, 1978, NJ 21. 77. New York Times, Apr. 23, 1978, F21. 78. New York Times, May 13, 1978, 5. 79. Schultze, “Memorandum for President,” June 27, 1978, file 6/28/78 , box 93, Staff Secretary papers, Jimmy Carter Library and Museum, Atlanta, Ga. 80.
Economics Rules: The Rights and Wrongs of the Dismal Science by Dani Rodrik
airline deregulation, Albert Einstein, bank run, barriers to entry, Bretton Woods, butterfly effect, capital controls, Carmen Reinhart, central bank independence, collective bargaining, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Donald Davies, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, Everything should be made as simple as possible, Fellow of the Royal Society, financial deregulation, financial innovation, floating exchange rates, fudge factor, full employment, George Akerlof, Gini coefficient, Growth in a Time of Debt, income inequality, inflation targeting, informal economy, information asymmetry, invisible hand, Jean Tirole, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, labor-force participation, liquidity trap, loss aversion, low skilled workers, market design, market fundamentalism, minimum wage unemployment, oil shock, open economy, Pareto efficiency, Paul Samuelson, price stability, prisoner's dilemma, profit maximization, quantitative easing, randomized controlled trial, rent control, rent-seeking, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, school vouchers, South Sea Bubble, spectrum auction, The Market for Lemons, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, trade liberalization, trade route, ultimatum game, University of East Anglia, unorthodox policies, Vilfredo Pareto, Washington Consensus, white flight
The economists whose voices are heard have either strong convictions, or a willingness to overlook the fine print on policy recommendations. Or both. It is these advocates, with a clear position on the issues, who have a natural advantage in the media, think tanks, and government corridors. Often they are successful “policy entrepreneurs” who make a difference for the better. Auctions of wireless spectrum rights and airline deregulation were both ideas that committed economists convinced politicians to adopt.14 In other cases, as we’ve seen, the ideas being trumpeted may be more doubtful, and the advocates’ pronouncements may be looked upon with skepticism, or even scorn, by the rest of the profession. But few economist critics will be troubled to challenge them publicly. At the height of the Washington Consensus craze, I wrote a paper with a graduate student criticizing the unconditional advocacy of freer trade as a growth engine for developing countries.15 We pointed out that the relationship between trade policy and growth was model- and country-specific.
., “Will It Hurt? Macroeconomic Effects of Fiscal Consolidation,” in World Economic Outlook (Washington, DC: International Monetary Fund, 2010), 93–124, http://www.imf.org/external/pubs/ft/weo/2010/02/pdf/c3.pdf. 5. Ariel Rubinstein, “Dilemmas of an Economic Theorist,” Econometrica 74, no. 4 (July 2006): 881. 6. Allan Gibbard and Hal R. Varian, “Economic Models,” Journal of Philosophy 75, no. 11 (November 1978): 666. 7. Nancy Cartwright, “Models: Fables v. Parables,” Insights (Durham Institute of Advanced Study) 1, no. 11 (2008). 8. The Colombia study I’m referring to is the well-known paper by Joshua Angrist, Eric Bettinger, and Michael Kremer: “Long-Term Educational Consequences of Secondary School Vouchers: Evidence from Administrative Records in Colombia,” American Economic Review 96, no. 3 (2006): 847–62. 9.
Paul Pfleiderer, “Chameleons: The Misuse of Theoretical Models in Finance and Economics” (unpublished paper, Stanford University, 2014). 12. See Gibbard and Varian, “Economic Models,” 671. 13. Nancy Cartwright, Hunting Causes and Using Them: Approaches in Philosophy and Economics (Cambridge: Cambridge University Press, 2007), 217. 14. Thomas C. Schelling, The Strategy of Conflict (Cambridge, MA: Harvard University Press, 1960); Schelling, Micromotives and Macrobehavior (New York: W. W. Norton, 1978). 15. Diego Gambetta, “‘Claro!’ An Essay on Discursive Machismo,” in Deliberative Democracy, ed. Jon Elster (Cambridge: Cambridge University Press, 1998), 24. 16. Marialaura Pesce, “The Veto Mechanism in Atomic Differential Information Economies,” Journal of Mathematical Economics 53 (2014): 33–45. 17. Jon Elster, Explaining Social Behavior: More Nuts and Bolts for the Social Sciences (Cambridge: Cambridge University Press, 2007), 461. 18.
airline deregulation, carbon footprint, East Village, en.wikipedia.org, full employment, Gini coefficient, income inequality, New Urbanism, principal–agent problem, race to the bottom, selection bias, urban planning, young professional
Among them, 60 percent of the financing for the games came from the private sector, and of the 40 percent of financing that came from public money, only 5 percent came from the city of Barcelona. Of the thirty-seven venues used during the games, twenty-seven preexisted and five more were already under construction. Fully 83 percent of the total cost was connected to nonsports facilities. Barcelona's location, climate, architecture, and culture, as well as its entry into the European Common Market, regional airline deregulation, and intelligent marketing, were also key elements. However, just as monopolists won't surrender power voluntarily and will be inclined toward minimalist, cosmetic reform, city and country politicians will be concerned with not alienating their donors and the most powerful elements in their constituencies. They will be inclined, absent political reform, to shill for the interests of the construction, insurance, finance, and hotel industries.
This way the take from business advertising expenditures could be maximized by not having to stretch corporate promotional budgets to cover two large competitions in the same year.39 Henceforth the games would alternate every two years, commencing with the Winter Games in Lillehammer in 1994. The Olympics were ascendant again, and aspiring host cities were springing up around the globe. The number of applicants went from one in the case of Los Angeles (to which the games were awarded in May 1978) and two in the case of Seoul (awarded in September 1981) to six in the case of Barcelona (awarded in October 1986), six in Atlanta (awarded in September 1990), eight in Sydney (awarded in September 1993), and eleven in Athens (awarded in September 1997).40 Thus, everything was turning up roses for the IOC—perhaps too many roses. All the media and corporate money and all the competition among bidding cities led to temptation.
ABC paid the IOC $225 million for U.S. rights, and managed to turn a nifty profit of more than $400 million. The U.S. ratings soared, and ABC was able to charge $250,000 for a thirty-second advertising spot. Meanwhile, Peter Ueberroth thanked the thousands of volunteers and paid himself a modest bonus of $475,000. 37. There was actually a crack in the armor of amateurism under Lord Killanin. In 1978, Rule 26 of the Olympic Charter was modified so that athletes were allowed openly to earn money from endorsements if the money went to their national sports federation or their country's Olympic Committee. The receiving organization was then permitted to pay the athlete's expenses in connection with the games, including “pocket money.” “Broken-time” payments for time away from the athlete's regular job were also authorized if the athlete had a regular job.
The Making of Global Capitalism by Leo Panitch, Sam Gindin
accounting loophole / creative accounting, active measures, airline deregulation, anti-communist, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Basel III, Big bang: deregulation of the City of London, bilateral investment treaty, Branko Milanovic, Bretton Woods, BRICs, British Empire, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collective bargaining, continuous integration, corporate governance, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, dark matter, Deng Xiaoping, disintermediation, ending welfare as we know it, eurozone crisis, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, full employment, Gini coefficient, global value chain, guest worker program, Hyman Minsky, imperial preference, income inequality, inflation targeting, interchangeable parts, interest rate swap, Kenneth Rogoff, land reform, late capitalism, liberal capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, manufacturing employment, market bubble, market fundamentalism, Martin Wolf, means of production, money market fund, money: store of value / unit of account / medium of exchange, Monroe Doctrine, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, new economy, non-tariff barriers, Northern Rock, oil shock, precariat, price stability, quantitative easing, Ralph Nader, RAND corporation, regulatory arbitrage, reserve currency, risk tolerance, Ronald Reagan, seigniorage, shareholder value, short selling, Silicon Valley, sovereign wealth fund, special drawing rights, special economic zone, structural adjustment programs, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, very high income, Washington Consensus, Works Progress Administration, zero-coupon bond, zero-sum game
Once the Democrats were in office, however, the extensive capitalist mobilizations against the consumer protection and labor law reforms on the legislative agenda led to “a massive outpouring of ‘grassroots’ opposition by state and local interests.”14 In fact, the rise of a new populism on the right (most prominently expressed in the Proposition 13 tax revolt in California), combined with Democratic pledges to restrain deficits, put not only organized labor but also the broader social movements on the defensive.15 Labor suffered another major defeat with the passage of the Airline Deregulation Act in October 1978, which it correctly saw would have the effect of driving down airline workers’ wages and benefits through the removal of price controls, as well as leading to the concentration of the industry once price competition had driven out small carriers. The Act’s leading sponsor in the Senate was Edward Kennedy, and in fact Carter himself had put deregulation of the transportation industries near the top of his legislative agenda.
Index Abdelal, Rawi, 417n80 Acheson, Dean, 68–9, 79, 94–5, 363n9, 373n24 accounting standards, 278, 285–6, 290, 428n35 advertising, 50, 101, 137, 163 Africa, 18, 218–20, 244, 276, 373n24; see also individual countries agriculture, 26–31, 33, 42, 54, 98, 101, 147, 156, 332, 392n103 Agriculture, Department of, 359n.49, 408, n.87 Albo, Greg, 445n22 Akard, Patrick, 394n7 Aldrich Committee, 372n15 Allende, Salvador, 133, 216 AIG, 306, 315, 439.48 Airline Deregulation Act (1978), 166 Akyuz, Yilmaz, 429n46, 434n6 Alternative Economic Strategy (UK), 143, 158 American Bankers Association, 79, 169, 324 American decline (thesis of), 1, 13, 16, 183, 188–9, 201, 331, 400n94 American Dream, 173, 192, 270, 307, 340 American Enterprise Institute, 230 American Federation of Labor (AFL), 34, 49, 61, 83, 98, 164–5, 170, 271 Americanization, 31, 118, 199–203 “An American Proposal”, 67–8, 244, 337, 362n1, 362n3 Anderson, Benedict, 105 Anderson, Perry, 25–6, 100, 375n50 Andrews, David, 123, 381n36.
Unsurprisingly, the Humphrey-Hawkins Bill’s ambitious proposal for “nationally coordinated economic planning to bring about full employment” was countered by those “entrenched interests that opposed planning—interests that were aggressively re-organized in the 1970s.”17 By the time the bill was passed, in October 1978, as the Full Employment and Balanced Growth Act, the promise of access to work for all was gone, and it was stipulated that for fiscal deficit reasons no new job-creation programs could be started before the end of 1980. This reflected a pragmatic accommodation to the developing “supply-side” consensus in Washington policy circles, which lay behind cuts in the top capital gains tax rate by over 40 percent and the reduction of corporate tax rates, while social security taxes were increased. Amid this consensus the Democrats’ Keynesianism increasingly looked threadbare and confused.18 The federal deficit as a share of GDP fell from 4.2 percent in 1976 under Ford to 2.7 percent under Carter in both 1977 and 1978, and 1.6 percent in 1979. Yet since US growth rates in this period nevertheless exceeded those of most of the other advanced capitalist countries, thereby widening US trade deficits, the Carter administration’s lingering Keynesian commitments were increasingly focused on using the new G7 architecture to launch a joint “locomotive” strategy for economic expansion.
The Age of Turbulence: Adventures in a New World (Hardback) - Common by Alan Greenspan
air freight, airline deregulation, Albert Einstein, asset-backed security, bank run, Berlin Wall, Bretton Woods, business process, call centre, capital controls, central bank independence, collateralized debt obligation, collective bargaining, conceptual framework, Corn Laws, corporate governance, corporate raider, correlation coefficient, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, cuban missile crisis, currency peg, Deng Xiaoping, Dissolution of the Soviet Union, Doha Development Round, double entry bookkeeping, equity premium, everywhere but in the productivity statistics, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, full employment, Gini coefficient, Hernando de Soto, income inequality, income per capita, invisible hand, Joseph Schumpeter, labor-force participation, labour market flexibility, laissez-faire capitalism, land reform, Long Term Capital Management, Mahatma Gandhi, manufacturing employment, market bubble, means of production, Mikhail Gorbachev, moral hazard, mortgage debt, Myron Scholes, new economy, North Sea oil, oil shock, open economy, Pearl River Delta, pets.com, Potemkin village, price mechanism, price stability, Productivity paradox, profit maximization, purchasing power parity, random walk, reserve currency, Right to Buy, risk tolerance, Ronald Reagan, shareholder value, short selling, Silicon Valley, special economic zone, the payments system, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, total factor productivity, trade liberalization, trade route, transaction costs, transcontinental railway, urban renewal, working-age population, Y2K, zero-sum game
Airlines, trucking, railroads, buses, pipelines, telephones, television, stockbrokers, financial markets, savings banks, utilities—all operated under heavy regulation. Operations were monitored down to the tiniest detail. My favorite description of this was by Alfred Kahn, a wisecracking economist from Cornell University whom Jimmy Carter made head of the Civil Aeronautics Board and who became known as the Father of Airline Deregulation. Speaking in 1978 on the need for change, Fred couldn't resist riffing on the thousands of picayune decisions he and the board were called upon to make: "May an air taxi acquire a fifty-seat plane? May a supplemental carrier carry horses from Florida to somewhere in the Northeast? Should 71 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright.
Many of the moves that the administration and Congress made were the very ones I'd have pushed for, had I been there. 81 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright. T H E AGE OF T U R B U L E N C E Most important, the Carter administration carried on the deregulation initiative that had begun under Jerry Ford. The airline-deregulation bill, promoted by Teddy Kennedy, passed in 1978. (Kennedy's right-hand man on this project was Stephen Breyer, who was on leave from Harvard Law School and who later became a justice of the Supreme Court and a good friend.) After that, Congress moved methodically to deregulate telecommunications and a half dozen other industries. Deregulation had a lasting effect not just on the economy but also on the Democratic Party, ending its domination by labor and opening it to business.
Except in North Korea and Cuba, it was dropped from the world's economic agenda. Not only did the economies of the former Soviet bloc, after some chaos, embrace the ways of market capitalism, but so did most of what we previously called the third world—countries that had been neutral in the cold war but had practiced central planning or had been so heavily regulated that it amounted to the same thing. Communist China, which had edged toward market capitalism as early as 1978, accelerated the movement of its vast, tightly regulated, then more-than-500-million-person workforce toward the Free Trade Zones of the Pearl River delta. China's shift in protecting the property rights of foreigners, while subtle, was substantial enough to induce a veritable explosion in foreign direct investment (FDI) into China following 1991. From a level of $57 million 12 More ebooks visit: http://www.ccebook.cn ccebook-orginal english ebooks This file was collected by ccebook.cn form the internet, the author keeps the copyright.
Machine, Platform, Crowd: Harnessing Our Digital Future by Andrew McAfee, Erik Brynjolfsson
3D printing, additive manufacturing, AI winter, Airbnb, airline deregulation, airport security, Albert Einstein, Amazon Mechanical Turk, Amazon Web Services, artificial general intelligence, augmented reality, autonomous vehicles, backtesting, barriers to entry, bitcoin, blockchain, book scanning, British Empire, business process, carbon footprint, Cass Sunstein, centralized clearinghouse, Chris Urmson, cloud computing, cognitive bias, commoditize, complexity theory, computer age, creative destruction, crony capitalism, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, Dean Kamen, discovery of DNA, disintermediation, distributed ledger, double helix, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, ethereum blockchain, everywhere but in the productivity statistics, family office, fiat currency, financial innovation, George Akerlof, global supply chain, Hernando de Soto, hive mind, information asymmetry, Internet of things, inventory management, iterative process, Jean Tirole, Jeff Bezos, jimmy wales, John Markoff, joint-stock company, Joseph Schumpeter, Kickstarter, law of one price, Lyft, Machine translation of "The spirit is willing, but the flesh is weak." to Russian and back, Marc Andreessen, Mark Zuckerberg, meta analysis, meta-analysis, moral hazard, multi-sided market, Myron Scholes, natural language processing, Network effects, new economy, Norbert Wiener, Oculus Rift, PageRank, pattern recognition, peer-to-peer lending, performance metric, Plutocrats, plutocrats, precision agriculture, prediction markets, pre–internet, price stability, principal–agent problem, Ray Kurzweil, Renaissance Technologies, Richard Stallman, ride hailing / ride sharing, risk tolerance, Ronald Coase, Satoshi Nakamoto, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, slashdot, smart contracts, Snapchat, speech recognition, statistical model, Steve Ballmer, Steve Jobs, Steven Pinker, supply-chain management, TaskRabbit, Ted Nelson, The Market for Lemons, The Nature of the Firm, Thomas L Friedman, too big to fail, transaction costs, transportation-network company, traveling salesman, two-sided market, Uber and Lyft, Uber for X, Watson beat the top human players on Jeopardy!, winner-take-all economy, yield management, zero day
Mark Prigg, “Now You Can Track Your Gym Sessions Too: Peloton Teams Up with Strava App to Monitor Spin Classes—and Says It Is Also Working on Oculus Rift VR Workouts,” DailyMail.com, February 18, 2016, http://www.dailymail.co.uk/sciencetech/article-3452996/Now-track-gym-sessions-Peleton-teams-Strava-app-monitor-spin-classes-says-working-Oculus-Rift-VR-workouts.html. † The US Civil Aeronautics Board was established in 1938 to regulate the airline industry. The board essentially ensured that fares stayed artificially high for decades. The passing of the Airline Deregulation Act in 1978 removed governmental control and allowed airlines to freely set prices. It also saw the entrance of low-cost players into the market, such as the ill-fated People Express. The new airline initially grew rapidly; within five years it was flying a million customers a month and was the fifth biggest in the United States (Markus Salge and Peter M. Milling, “The Pace or the Path? Resource Accumulation Strategies in the U.S.
Acton, Brian, 140 additive manufacturing, 107; See also 3D printing Adore Me, 62 adults, language learning by, 68–69 advertising content platforms and, 139 data-driven decision making for, 48, 50–51 Facebook and, 8–9 radio airplay as, 148 advertising agencies, 48 advertising revenue Android as means of increasing, 166 Craigslist’s effect on, 139 free apps and, 162 print media and, 130, 132, 139 African Americans identifying gifted students, 40 and search engine bias, 51–52 aggregators, 139–40 AGI (artificial general intelligence), 71 agriculture automated milking systems, 101 drones and, 99–100 “food computers,” 272 machine learning and, 79–80 robotics and, 101–2 Airbnb future of, 319–20 hotel experience vs., 222–23 lack of assets owned by, 6–7 limits to effects on hotel industry, 221–23 network effects, 193 as O2O platform, 186 peer reviews, 209–10 rapid growth of, 9 as two-sided network, 214 value proposition compared to Uber, 222 Airline Deregulation Act, 181n airlines, revenue management by, 181–82 air travel, virtualization in, 89 Akerlof, George, 207, 210 albums, recorded music, 145 algorithms; See also data-driven decision making bias in systems, 51–53 and Cambrian Explosion of robotics, 95–96 comparing human decisions to, 56 O2O platforms and, 193 Quantopian and, 267–70 superiority to System 1 reasoning, 38–41 “algo traders,” 268; See also automated investing Alibaba, 6–8 Alipay, 174 AlphaGo, 4–6, 14, 74, 80 Alter, Lloyd, 90 Amazon automatic price changes, 47 bar code reader app, 162 data-driven product recommendations, 47 development of Web Services, 142–43 Mechanical Turk, 260 as stack, 295 warehouse robotics, 103 Amazon EC2, 143 Amazon Go, 90–91 Amazon S3, 143 Amazon Web Services (AWS), 75, 142–43 American Airlines (AA), 182 amino acid creation, 271–72 analog copies, digital copies vs., 136 “Anatomy of a Large-Scale Hypertextual Web Search Engine, The” (Page and Brin), 233 Anderson, Chris, 98–100 Anderson, Tim, 94 Andreessen, Marc on crowdfunding, 262–63 and Netscape, 34 as self-described “solutionist,” 297 on Teespring, 263–64 Android Blackberry vs., 168 contribution to Google revenue/profits, 204 iOS vs., 166–67 Angry Birds, 159–61 anonymity, digital currency and, 279–80 Antikythera mechanism, 66 APIs (application programming interfaces), 79 apophenia, 44n apparel, 186–88 Apple; See also iPhone acquiring innovation by acquiring companies, 265 and industrywide smartphone profits, 204 leveraging of platforms by, 331 Postmates and, 173, 185 profitability (2015), 204 revenue from paid apps, 164 “Rip, Mix, Burn” slogan, 144n as stack, 295 application programming interfaces (APIs), 79 AppNexus, 139 apps; See also platforms for banking, 89–90 demand curve and, 157–61 iPhone, 151–53 App Store, 158 Apter, Zach, 183 Aral, Sinan, 33 Archilochus, 60–61 architecture, computer-designed, 118 Aristophanes, 200 Arnaout, Ramy, 253 Arthur, Brian, 47–48 artificial general intelligence (AGI), 71 artificial hands, 272–75 artificial intelligence; See also machine learning current state of, 74–76 defined, 67 early attempts, 67–74 implications for future, 329–30 rule-based, 69–72 statistical pattern recognition and, 72–74 Art of Thinking Clearly, The (Dobelli), 43 arts, digital creativity in, 117–18 Ashenfelter, Orley, 38–39 ASICs (application-specific integrated circuits), 287 assets and incentives, 316 leveraging with O2O platforms, 196–97 replacement by platforms, 6–10 asymmetries of information, 206–10 asymptoting, 96 Atkeson, Andrew, 21 ATMs, 89 AT&T, 96, 130 August (smart door lock), 163 Austin, Texas, 223 Australia, 100 Authorize.Net, 171 Autodesk, 114–16, 119, 120 automated investing, 266–70 automation, effect on employment/wages, 332–33 automobiles, See cars Autor, David, 72, 101 background checks, 208, 209 back-office work, 82–83 BackRub, 233 Baidu, 192 Bakos, Yannis, 147n Bakunin, Mikhail, 278 Ballmer, Steve, 151–52 bandwagon effect, 217 banking, virtualization and, 89–90, 92 Bank of England, 280n bank tellers, 92 Barksdale, Jim, 145–46 barriers to entry, 96, 220 Bass, Carl, 106–7, 119–20 B2B (business-to-business) services, 188–90 Beastmode 2.0 Royale Chukkah, 290 Behance, 261 behavioral economics, 35, 43 Bell, Kristen, 261, 262 Benioff, Mark, 84–85 Benjamin, Robert, 311 Benson, Buster, 43–44 Berlin, Isiah, 60n Berners-Lee, Tim, 33, 34n, 138, 233 Bernstein, Michael, 260 Bertsimas, Dimitris, 39 Bezos, Jeff, 132, 142 bias of Airbnb hosts, 209–10 in algorithmic systems, 51–53 digital design’s freedom from, 116 management’s need to acknowledge, 323–24 and second-machine-age companies, 325 big data and Cambrian Explosion of robotics, 95 and credit scores, 46 and machine learning, 75–76 biology, computational, 116–17 Bird, Andrew, 121 Bitcoin, 279–88 China’s dominance of mining, 306–7 failure mode of, 317 fluctuation of value, 288 ledger for, 280–87 as model for larger economy, 296–97 recent troubles with, 305–7 and solutionism, 297 “Bitcoin: A Peer-to-Peer Electronic Cash System” (Nakamoto), 279 BlaBlaCar, 190–91, 197, 208 BlackBerry, 168, 203 Blitstein, Ryan, 117 blockchain as challenge to stacks, 298 and contracts, 291–95 development and deployment, 283–87 failure of, 317 and solutionism, 297 value as ledger beyond Bitcoin, 288–91 Blockchain Revolution (Tapscott and Tapscott), 298 Bloomberg Markets, 267 BMO Capital Markets, 204n Bobadilla-Suarez, Sebastian, 58n–59n Bock, Laszlo, 56–58 bonds, 131, 134 bonuses, credit card, 216 Bordeaux wines, 38–39 Boudreau, Kevin, 252–54 Bowie, David, 131, 134, 148 Bowie bonds, 131, 134 brand building, 210–11 Brat, Ilan, 12 Bredeche, Jean, 267 Brin, Sergey, 233 Broward County, Florida, 40 Brown, Joshua, 81–82 Brusson, Nicolas, 190 Burr, Donald, 177 Bush, Vannevar, 33 business conference venues, 189 Business Insider, 179 business processes, robotics and, 88–89 business process reengineering, 32–35 business travelers, lodging needs of, 222–23 Busque, Leah, 265 Buterin, Vitalik, 304–5 Byrne, Patrick, 290 Cairncross, Francis, 137 California, 208; See also specific cities Calo, Ryan, 52 Cambrian Explosion, 94–98 Cameron, Oliver, 324 Camp, Garrett, 200 capacity, perishing inventory and, 181 Card, David, 40 Care.com, 261 cars automated race car design, 114–16 autonomous, 17, 81–82 decline in ownership of, 197 cash, Bitcoin as equivalent to, 279 Casio QV-10 digital camera, 131 Caves, Richard, 23 Caviar, 186 CDs (compact discs), 145 cell phones, 129–30, 134–35; See also iPhone; smartphones Census Bureau, US, 42 central bankers, 305 centrally planned economies, 235–37 Chabris, Chris, 3 Chambers, Ephraim, 246 Champy, James, 32, 34–35, 37, 59 Chandler, Alfred, 309n Chase, 162 Chase Paymentech, 171 check-deposit app, 162 children, language learning by, 67–69 China Alibaba in, 7–8 concentration of Bitcoin wealth in, 306–7 and failure mode of Bitcoin, 317 mobile O2O platforms, 191–92 online payment service problems, 172 robotics in restaurants, 93 Shanghai Tower design, 118 Xiaomi, 203 Chipotle, 185 Choudary, Sangeet, 148 Christensen, Clay, 22, 264 Churchill, Winston, 301 Civil Aeronautics Board, US, 181n Civis Analytics, 50–51 Clash of Clans, 218 classified advertising revenue, 130, 132, 139 ClassPass, 205, 210 and economics of perishing inventory, 180–81 future of, 319–20 and problems with Unlimited offerings, 178–80, 184 and revenue management, 181–84 user experience, 211 ClassPass Unlimited, 178–79 Clear Channel, 135 clinical prediction, 41 Clinton, Hillary, 51 clothing, 186–88 cloud computing AI research, 75 APIs and, 79 Cambrian Explosion of robotics, 96–97 platform business, 195–96 coaches, 122–23, 334 Coase, Ronald, 309–13 cognitive biases, 43–46; See also bias Cohen, Steven, 270 Coles, John, 273–74 Collison, John, 171 Collison, Patrick, 171–74 Colton, Simon, 117 Columbia Record Club, 131 commoditization, 220–21 common sense, 54–55, 71, 81 companies continued dominance of, 311–12 continued relevance of, 301–27 DAO as alternative to, 301–5 decreasing life spans of, 330 economics of, 309–12 future of, 319–26 leading past the standard partnership, 323–26 management’s importance in, 320–23 markets vs., 310–11 as response to inherent incompleteness of contracts, 314–17 solutionism’s alternatives to, 297–99 TCE and, 312–15 and technologies of disruption, 307–9 Compass Fund, 267 complements (complementary goods) defined, 156 effect on supply/demand curves, 157–60 free, perfect, instant, 160–63 as key to successful platforms, 169 and open platforms, 164 platforms and, 151–68 and revenue management, 183–84 Stripe and, 173 complexity theory, 237 Composite Fund (D.
End This Depression Now! by Paul Krugman
airline deregulation, Asian financial crisis, asset-backed security, bank run, banking crisis, Bretton Woods, capital asset pricing model, Carmen Reinhart, centre right, correlation does not imply causation, credit crunch, Credit Default Swap, currency manipulation / currency intervention, debt deflation, Eugene Fama: efficient market hypothesis, financial deregulation, financial innovation, Financial Instability Hypothesis, full employment, German hyperinflation, Gordon Gekko, Hyman Minsky, income inequality, inflation targeting, invisible hand, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, low skilled workers, Mark Zuckerberg, money market fund, moral hazard, mortgage debt, negative equity, paradox of thrift, Paul Samuelson, price stability, quantitative easing, rent-seeking, Robert Gordon, Ronald Reagan, Upton Sinclair, We are the 99%, working poor, Works Progress Administration
ACKNOWLEDGMENTS This book reflects the contributions of all the economists who have struggled to get through with the message that this depression can and should be quickly cured. In writing the manuscript, I relied, as always, on the insights of my wife, Robin Wells, and much help from Drake McFeely at Norton. INDEX Page numbers in italics refer to figures. academic sociology, 92, 96, 103 AIG, 55 airlines, deregulation of, 61 Alesina, Alberto, 196–99 American Airlines, 127 American Recovery and Reinvestment Act (ARRA): cost of, 121 inadequacy of, 108, 109–10, 116–19, 122–26, 130–31, 212, 213 Angle, Sharron, 6 anti-Keynesians, 26, 93–96, 102–3, 106–8, 110–11, 192 Ardagna, Silvia, 197–99 Argentina, 171 Arizona, housing bubble in, 111 Asian financial crisis of 1997–98, 91 asset-backed securities, 54, 55 auction rate securities, 63 Austerians, 188–207 creditors’ interests favored by, 206–7 supposed empirical evidence of, 196–99 austerity programs: alarmists and, 191–95, 224 arguments for, 191–99 economic contraction and, 237–38 in European debt crisis, 46, 144, 185, 186, 188 as ineffective in depressions, xi, 213 state and local governments and, 213–14, 220 unemployment and, xi, 189, 203–4, 207, 237–38 Austrian economics, 150 automobile sales, 47 babysitting co-op, 26–28, 29–30, 32–33, 34 Bakija, Jon, 78 balance of trade, 28 Ball, Laurence, 218 Bank for International Settlements (BIS), 190, 191 Bank of England, 59 Bank of Japan, 216, 218 bankruptcies, personal, 84 bankruptcy, 126–27 Chapter 11, 127 banks, banking industry: capital ratios in, 58–59 complacency in, 55 definition of, 62 deregulation of, see deregulation, financial European, bailouts of, 176 government debt and, 45 “haircuts” in, 114–15 incomes in, 79–80 lending by, 30 money supply and, 32 moral hazard in, 60, 68 1930s failures in, 56 origins of, 56–57 panics in, 4, 59 political influence of, 63 receivership in, 116 regulation of, 55–56, 59–60, 100 repo in, 62 reserves in, 151, 155, 156 revolving door in, 86, 87–88 risk taking in, see risk taking runs on, 57–58, 59, 60, 114–15, 155 separation of commercial and investment banks in, 60, 62, 63 shadow, 63, 111, 114–15 unregulated innovations in, 54–55, 62–63, 83 Barro, Robert, 106–7 Bebchuck, Lucian, 81 Being There (film), 3 Bernanke, Ben, 5, 10–11, 32, 76, 104, 106, 151, 157, 159–60, 210 recovery and, 216–19 on 2008–09 crisis, 3–4 “Bernanke Must End Era of Ultra-low Rates” (Rajan), 203–4 Black, Duncan, 190 Blanchard, Olivier, 161–63 Bloomberg, Michael, 64 BNP Paribas, 113 Boehner, John, 28 bond markets: interest rates in, 132–41, 133 investor confidence and, 132, 213 bonds, high-yield (junk bonds), 115, 115 bond vigilantes, 125, 132–34, 138, 139, 140 Bowles, Erskine, 192–93 Brazil, 171 breach of trust, 80 Bretton Woods, N.H., 41 Broder, David, 201 Brüning, Heinrich, 19 Buckley, William F., 93 Bureau of Labor Statistics, U.S.
Like taxes, spending in modern economies varies with the state of the economy, in ways that can produce spurious correlations; for example, U.S. spending on unemployment benefits has soared in recent years, even as the economy weakened, but the causation runs from unemployment to spending rather than the other way around. Assessing the effects of austerity therefore requires painstaking examination of the actual legislation used to implement that austerity. Fortunately, researchers at the International Monetary Fund have done the legwork, identifying no fewer than 173 cases of fiscal austerity in advanced countries over the period between 1978 and 2009. And what they found was that austerity policies were followed by economic contraction and higher unemployment. There’s much, much more, but I hope this brief overview gives you a sense of what we know and how we know it. I hope in particular that when you read me, or Joseph Stiglitz, or Christina Romer, saying that cutting spending in the face of this depression will make it worse, and that temporary increases in spending could help us recover, you won’t think, “Well, that’s just his/her opinion.”
An Extraordinary Time: The End of the Postwar Boom and the Return of the Ordinary Economy by Marc Levinson
affirmative action, airline deregulation, banking crisis, Big bang: deregulation of the City of London, Boycotts of Israel, Bretton Woods, Capital in the Twenty-First Century by Thomas Piketty, car-free, Carmen Reinhart, central bank independence, centre right, clean water, deindustrialization, endogenous growth, falling living standards, financial deregulation, floating exchange rates, full employment, George Gilder, Gini coefficient, global supply chain, income inequality, income per capita, indoor plumbing, informal economy, intermodal, invisible hand, Kenneth Rogoff, knowledge economy, late capitalism, linear programming, lump of labour, manufacturing employment, new economy, Nixon shock, North Sea oil, oil shock, Paul Samuelson, pension reform, price stability, purchasing power parity, refrigerator car, Right to Buy, rising living standards, Robert Gordon, rolodex, Ronald Coase, Ronald Reagan, Simon Kuznets, statistical model, strikebreaker, structural adjustment programs, Thomas Malthus, total factor productivity, unorthodox policies, upwardly mobile, War on Poverty, Washington Consensus, Winter of Discontent, Wolfgang Streeck, women in the workforce, working-age population, yield curve, Yom Kippur War, zero-sum game
Freight Transportation, 1976–1998,” Enterprise and Society 10 (2009): 178–215; “Airlines Urge Simon to Impose Price Curbs on Jet Aviation Fuel,” Wall Street Journal, January 9, 1974. 20. On Kahn, see Thomas K. McCraw, Prophets of Regulation: Charles Frances Adams, Louis D. Brandeis, James M. Landis, Alfred E. Kahn (Cambridge, MA: Harvard University Press, 1986). The laws included the Railway Revitalization and Regulatory Reform Act of 1976 (P.L. 94–201), the Air Cargo Deregulation Act of 1977 (P.L. 95–163), the Airline Deregulation Act of 1978 (P.L. 95–504), the Motor Carrier Regulatory Reform and Modernization Act of 1980 (P.L. 92–296), the Staggers Rail Act of 1980 (P.L. 96–448), the Household Goods Transportation Act of 1980 (P.L. 96–454), the Bus Regulatory Reform Act of 1982 (P.L. 97–261), and the Shipping Act of 1984 (P.L. 98–237). 21. On US interest rate deregulation, enacted in the Depository Institutions Deregulation and Monetary Control Act of 1980, see Greta R.
There were grants to supplement the wages of workers whose hours were reduced. If employers in certain industries agreed to retrain workers over age forty-five, the government paid them one-fourth of a year’s wage. Yet while MITI could seem omnipotent to foreign observers, it had considerable difficulty working its will. After orders for Japan’s shipbuilders fell 90 percent between 1973 and 1978, it was obvious that the industry needed to shrink. But no community wanted to lose its local shipyard, and no company wanted to close its docks. Only in 1978, five years after the shipbuilding crisis began, did the Diet, Japan’s parliament, authorize the creation of a scrapping association funded by national and local governments, banks, trading companies, and shipbuilders. By the end of 1980, this cartel had bought and shut down fifty of Japan’s 138 shipbuilding docks, eliminating 119,000 jobs but leaving the rest of the industry on a much more solid footing.13 A similar story played out in many other industries.
When it was his turn to speak, Callaghan asked the miners to accept wage restraint “for the sake of the country—and miners are part of the whole national family.” It was a difficult sell.20 In the summer of 1978, the Labour government announced that workers’ pay should rise no more than 5 percent over the coming year. This looked like it would be barely half the rate of inflation. Union leaders, wary of workplace militants calling for unauthorized strikes, rejected the government’s guideline out of hand and demanded a return to normal wage bargaining. “We’d had three years of pay restraint, and people had got fed up of it,” recalled a trucker in the desolate Yorkshire city of Hull. When Callaghan refused to retreat, autoworkers, lorry drivers, railway workers, nurses, even gravediggers walked off the job. Hospitals turned away patients, and chickens died for lack of feed. The dark, snowy winter of 1978–79 would go down in history as the Winter of Discontent, the winter when Londoners’ trash was piled in Leicester Square because the dustmen refused to cart it away.
Aerotropolis by John D. Kasarda, Greg Lindsay
3D printing, air freight, airline deregulation, airport security, Akira Okazaki, Asian financial crisis, back-to-the-land, barriers to entry, Berlin Wall, big-box store, blood diamonds, borderless world, British Empire, call centre, carbon footprint, Cesare Marchetti: Marchetti’s constant, Clayton Christensen, cleantech, cognitive dissonance, commoditize, conceptual framework, credit crunch, David Brooks, David Ricardo: comparative advantage, Deng Xiaoping, deskilling, digital map, edge city, Edward Glaeser, failed state, food miles, Ford paid five dollars a day, Frank Gehry, fudge factor, full employment, future of work, Geoffrey West, Santa Fe Institute, George Gilder, global supply chain, global village, gravity well, Haber-Bosch Process, Hernando de Soto, hive mind, if you build it, they will come, illegal immigration, inflight wifi, intangible asset, interchangeable parts, Intergovernmental Panel on Climate Change (IPCC), intermodal, invention of the telephone, inventory management, invisible hand, Jane Jacobs, Jeff Bezos, Kangaroo Route, knowledge worker, kremlinology, labour mobility, Marchetti’s constant, Marshall McLuhan, Masdar, mass immigration, McMansion, megacity, Menlo Park, microcredit, Network effects, New Economic Geography, new economy, New Urbanism, oil shale / tar sands, oil shock, peak oil, Pearl River Delta, Peter Thiel, pets.com, pink-collar, pre–internet, RFID, Richard Florida, Ronald Coase, Ronald Reagan, Rubik’s Cube, savings glut, Seaside, Florida, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Skype, smart cities, smart grid, South China Sea, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, spinning jenny, stem cell, Steve Jobs, supply-chain management, sustainable-tourism, telepresence, the built environment, The Chicago School, The Death and Life of Great American Cities, The Nature of the Firm, thinkpad, Thomas L Friedman, Thomas Malthus, Tony Hsieh, trade route, transcontinental railway, transit-oriented development, traveling salesman, trickle-down economics, upwardly mobile, urban planning, urban renewal, urban sprawl, walkable city, white flight, white picket fence, Yogi Berra, zero-sum game
For the first fifty years of commercial flight and the first decade of the Jet Age, anyone could board packing anything they liked, and many came heavily armed. Between 1969 and 1978, there were more than four hundred international hijackings involving seventy-five thousand passengers as hostages. In the United States alone, there were 154 attempted hijackings to Cuba in a four-year stretch. (As one hijacker explained, it was the easiest way to get there.) The solution was X-ray machines and magnetometers, leading to the choke points we all know and despise. DFW’s in-and-out, “park-and-fly” concept never got off the ground. What they could not have foreseen was President Jimmy Carter signing the Airline Deregulation Act into law on October 24, 1978. The airlines’ business model changed overnight. The government would no longer set fares or assign routes, and had removed all legal barriers to competition.
., 195–96, 198 Africa: Chinese construction of cities and airports in, 360, 399; Chinese living in, 399; Chinese trade with, 319–20, 360, 398–400; commercialized agriculture as future for, 235–36; farming footprint in, 232; farmland available in, 235; floral industry in, 212, 216, 221, 222–24, 317, 319, 407; food imports to, 235; foreign land acquisition in, 348, 427; globalization of, 319–20, 324; SAM shipments introduced to, 318; shipment of goods to, 317–25 agriculture, sustainable, 234 Air Asia, 252 Airborne Express, 87 Airbus, 27, 173, 347; in China, 402, 406 air cargo: as cost effective, 361–62; growth of, 337–38; shipping costs in, 243, 338; value of, 17 Air China, 403 Air Deccan, 279 Air India, 280 Airline Deregulation Act, 94–95, 123 airline loyalty programs, 102 airlines, airline industry: adapting to fuel prices, 340–41; bankruptcy filed by, 331; expansion of, 276; Eyjafjallajökull interruption of, 17–18; globalization and, 17–18; as increasingly green, 21–22, 345–49; Kyoto exemption for, 346; lip service to climate change paid by, 346; share of GDP, 347 airports: adaptability problems with, 16, 35, 96, 372; aerotropoli as distinct from, 173–74; along Pacific Rim, 29; carbon neutral goal of, 351; early plans for, 26; improving sustainability of, 350; instant cities near, 358; jobs created by, 30, 87, 114, 174, 190; layovers in, 96–98; municipal neglect of, 26, 32, 352; noise pollution around, 28–29, 86; politization of, 26, 46–47, 48–49, 170, 188, 256, 281; poorly planned, 350; public perception of, 32–33, 349; residential areas around, 22–24, 28–29, 40, 45, 46, 64, 86–90, 146–47, 197; as shopping malls, 96, 422; space overcome by, 26; as trade and connectivity incubators, 26, 174, 350; train links to, 155–56, 351–52; Western U.S. dependency on, 33 air traffic control systems, 352–53 air transport: as central to globalization, 17; interruption of, 17–18 air travel: by business travelers, 6–7, 18; carbon footprint of, 15, 21–22, 330, 333–38; as central to globalization, 17–18, 165, 413; cost of delays in, 352; deregulation and, 94–95, 123; EU made possible by, 18; fuel needs and costs, 331, 342; greenhouse gases from, 335–37, 345; growth of, 22, 98–99, 340; increased with high-speed rail, 352; Jevons Paradox in, 328–29; as key to Pacific Rim economic development, 244; links to oil prices, 21; peak oil and, 329–33; post-peak oil, 332–33; profitability of, 331; and rise of multinationals, 165; social stigma against, 335; tourism connections made by, 265 Airworld, 97–108; business conducted within, 107–12 Akamatsu, Kaname, 391 Al Badia Hillside Village, 289, 290 Al Burj, 291 algae, oil from, 348, 350 Ali, Mwanje, 319–20 Alibaba.com, 367 Al Maktoum, Mohammed bin Rashid, 290–91, 292, 294, 295 Al Maktoum, Rashid bin Saeed, 294–95 Al Nahyan, Khalifa bin Zayed, 292 Amazon, 75–77; business expansion of, 72; shipping costs at, 70, 75–76; Zappos bought by, 69 Amazon Prime, 75–76, 422 Ambani, Anil, 283 Amelio, Bill, 125 American Airlines, 27, 48, 102; hubbing created by, 92, 95–96 American Axle, 201 America Online, 41–42 Amsterdam: as aerotropolis by design, 20; Detroit delegation in, 180–81, 183–84, 189–92, 425; floral industry in, 24, 209–25, 407; Zuidas business district in, 191 Amsterdam Airport Area, 190 Amyris, 348 Andersen, Kurt, 386 Andolino, Rosemarie, 50–51 Annan, Kofi, 264 Apple, 371, 396–97 Applebaum, Anne, 18 Asia: Detroit’s air links to, 182; FedEx hubs in, 171, 372–73, 384, 433; investment in aviation across, 244–45; as largest aviation market, 402 Asian financial crisis, 353–54 Asian Tigers, 244, 391–92, 394 assembly line production, Ford’s creation of, 68, 179, 180, 185, 186 Association of Southeast Asian Nations (ASEAN), 400–401, 402–403 ASUSTeK, 370–71 Atlantic, The, 204, 361 Australia, 400 automotive industry: in China, 200, 203–207, 337,342, 409; Chinese acquisition and investment in U.S., 205–207; cities as shaped by, 11; in Detroit, 179–80, 184–87; economic impact of, 425–26; engineering within, 201–202; growth markets for, 200, 203–207; outsourcing in, 202–203; as part of GDP, 186; railroad decline hastened by, 243; results of globalization of, 269; in South Korea, 203–205; supply chains of, 199; U.S. market for, 186–87, 200, 201, 337 aviation and aerospace industry: in California, 26, 27–29; carbon footprint of, 430–31; during Cold War, 27,28; economic impact of, 28; first flight in, 349; Ford’s operations in, 179–80; military links to, 27–28; speed of technology change in, 341; in World War II, 27 Aviation Department, Chicago, 48 babassu palms, 347 Baca, Tony, 33–34 baht, 248–49 Baiyun International, 372 Bali, Vishal, 275 Ballard, J.
Zappos’ competitive edge isn’t its website, but the twelve minutes it takes for one of Kiva’s robots to pick, pack, and have your order waiting on the shipping dock. Malcolm Gladwell made a similar point during the original dot-com madness by dropping in on the warehouse of Lands’ End. The catalog merchant was then the world’s largest e-tailer. Gladwell found that the Internet revolution, as far as it had progressed, hadn’t transformed its business. But it was one of three fundamental shifts. “The first was the introduction of an 800 number, in 1978,” he wrote. “The second was express delivery, in 1994; and the third was the introduction of a Web site, in 1995. The first two innovations cut the average transaction time—the time between the moment of ordering and the moment the goods are received—from three weeks to four days. The third innovation has cut the transaction time from four days to, well, four days.” “E-commerce is express mail,” Gladwell concluded.
The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz
affirmative action, Affordable Care Act / Obamacare, airline deregulation, Andrei Shleifer, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collapse of Lehman Brothers, collective bargaining, colonial rule, corporate governance, Credit Default Swap, Daniel Kahneman / Amos Tversky, Dava Sobel, declining real wages, deskilling, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, framing effect, full employment, George Akerlof, Gini coefficient, income inequality, income per capita, indoor plumbing, inflation targeting, information asymmetry, invisible hand, jobless men, John Harrison: Longitude, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, labour market flexibility, London Interbank Offered Rate, lone genius, low skilled workers, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, mass incarceration, medical bankruptcy, microcredit, moral hazard, mortgage tax deduction, negative equity, obamacare, offshore financial centre, paper trading, Pareto efficiency, patent troll, Paul Samuelson, payday loans, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, shareholder value, short selling, Silicon Valley, Simon Kuznets, spectrum auction, Steve Jobs, technology bubble, The Chicago School, The Fortune at the Bottom of the Pyramid, The Myth of the Rational Market, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, trickle-down economics, ultimatum game, uranium enrichment, very high income, We are the 99%, wealth creators, women in the workforce, zero-sum game
But it should be understood that many at that great university are not devotees of this school of thought, and that there are many devotees in other universities around the world. The term has, however, become a commonly used shorthand. 32. One group even went so far as to argue that markets will behave competitively even if there is only one firm, so long as there is potential competition. This argument played an important role in airline deregulation, where it was contended that even if there was only one airline on a given route, it would be disciplined from charging monopoly prices by the threat of entry. Both theory and experience have shown that this argument is wrong, so long as there are sunk costs (costs that won’t be recovered if a firm enters and subsequently leaves), no matter how small those costs. See Joseph Farrell, “How Effective Is Potential Competition?
INDEX Abed, Fazle Hasan, 196 Acacia Research Corporation, 203 Accenture, 360 advertising, 147, 335, 348, 354 see also marketing affirmative action, 282 Afghanistan, 143, 176, 209, 211, 218 Africa, 23, 40 African Americans: discrimination against, 68, 69, 70, 71, 129, 303, 305, 308, 328, 367, 369 disenfranchisement of, 345, 349 wealth of, 13, 70, 71, 329, 384 agriculture: government subsidies in, 51, 64, 179, 180, 320, 326, 379 in Great Depression, 56–57, 231, 233 AIG, 35, 49, 67, 180, 253, 369 airlines, deregulation of, 317 air traffic controllers, 65 Alien Torts Statute, 59 Ally, 374 Alperovitz, Gar, 78 alternative minimum tax, 394 American Airlines, 318 American Tobacco Company, 317 Andreessen, Marc, 318 Angelides, Phil, 372 antiglobalization movement, xiii, 277 Apple, 203, 360 Arab Spring, ix–xi, xiv, 287 Archer Daniels Midland (ADM), 51, 320 Arnall, Roland, 333 Asia, 64, 157 financial crisis in, 61, 231, 352, 353 AT&T, 44, 203, 317 Atkinson, Anthony B., xxiii auction theory, 50 austerity, 207, 220, 221, 230–36 Australia, 5, 14, 18, 22, 135, 286 autoworkers, 67 balanced-budget multiplier, 217–18, 379 Bangladesh, microcredit schemes in, 196, 197 bankers: bonuses for, x, xiv, xv, 21, 79, 141, 169, 245, 247, 270, 319, 333, 363 criminal prosecution of, xvi, 70, 119, 199, 205–6, 372, 373 economic influence of, xxii–xxiii, 79–80, 240 private incentives of, 33, 34, 87, 90, 96, 109–10 risky behavior by, xi, xxiii, 37, 90, 101, 109, 171, 198, 239–40, 246, 247, 269, 270, 336, 387 see also corporations; financial markets; financial sector Bank of America, 70, 374 bankruptcy: corporate, 313 derivatives claims in, 49, 271 government regulation of, 30 personal, 10, 275, 301 reform of, 58 student debt in, 58, 94, 195, 196, 265, 271, 323, 371 see also Chapter 11; foreclosures bankruptcy law, 193–97, 201, 202, 270, 271, 284 Bardeen, John, 41 Bartel, Larry, xxiv Basov, Nikolay, 315 Bear Stearns, 388 Belgium, 19, 22, 286 Berlusconi, Silvio, 349 Bernanke, Ben, 247, 248, 252, 257, 389 Berners-Lee, Tim, 41, 315 Bhutan, 122, 312 Bilmes, Linda, 176 Bipartisan Policy Center, 207 Bischoff, Kendra, 75 BlackBerry, 203 Blankfein, Lloyd, 124 Bloomberg, Michael, xiv bondholders, 168, 240, 261 bonds, municipal, 212, 378 Bowles, Erskine, 207 Bowles-Simpson Deficit Reduction Commission, 207, 221, 379, 380 Brattain, Walter, 41 Brazil, 5, 51, 249 economic growth in, 139, 298, 353 Bridgestone/Firestone, 104 British Petroleum (BP), xviii, 99, 189, 190, 367, 374 “Buffett rule,” 395 Buffett, Warren, 77, 180, 269, 333, 395, 396 Burnham, Walter Dean, 130 Bush, George W., 71, 73, 86, 87, 97, 101, 114, 169, 177, 208, 212, 221, 228, 330, 360, 383 Bush administration, xiv, 167, 168, 171, 178 business: anticompetitive behavior in, 44–46, 317, 318 corruption in, 176 government partnerships with, 174 government regulation of, 47 innovations in, 35, 46, 41, 78, 96, 178–79, 314, 315 political power of, 47, 50, 51, 62, 95, 99, 101, 111, 131–32, 135, 136, 285, 286, 319, 325, 350 teamwork in, 113, 343 trust in, 121–22 see also corporations; financial sector business, small, 61, 167, 225, 226, 241, 245, 395 California, electricity market liberalization in, 177–78 campaign finance, 37, 47, 131–32, 135, 136, 162, 196, 200, 206, 285–86, 319, 325, 350, 373, 397 Canada, 5, 18, 19 capital, 59, 323 social, 122–23, 125, 135 capital controls, 60, 181, 182, 277, 353 capital gains, 71–72, 87, 88, 115, 211, 274, 297, 298, 315, 330, 361, 378, 395 Cardoso, Enrique, 5 Carter, Jimmy, 71 Cayman Islands, 270 cell phones, 98, 203, 274 Census Bureau, U.S., 27, 305 Central Intelligence Agency (CIA), 209 Chait, Jonathan, 19, 116–17 Chapter 11, 284, 313, 363 see also bankruptcy Chavez, Hugo, 40 Cheney, Richard, 101 Chicago school, 44–45, 47, 256, 317, 391 child care, 10, 301 Chile, 141, 258 China, 19, 54, 64, 249, 280 economic strength of, 144, 175 inflation in, 259–60 Citibank, 204–5, 369, 387 cities, community segregation in, 75–76 Citizens United v.
The discussion here draws upon my reflections on that essay: “Toward a General Theory of Consumerism: Reflections on Keynes’ Economic Possibilities for Our Grandchildren,” in Revisiting Keynes: Economic Possibilities for Our Grandchildren, ed. G. Piga and L. Pecchi (Cambridge: MIT Press, 2008), pp. 41–87. See also the other essays in that volume. 51. Adam Smith, Lectures on Jurisprudence, ed. Ronald L. Meek, D. D. Raphael, and Peter Stein (New York: Clarendon Press, 1978), (A) vi.54. The citation and analysis are in Daniel Luban, “Adam Smith on Vanity, Domination, and History,” Modern Intellectual History, forthcoming. 52. For the long-run survival of the planet, there’s something else wrong with America’s answer: excessive consumption of material goods leads to global warming and puts the earth in peril. 53. Though incentives are at the core of the conservative justification for inequality, they also appeal to “fairness.”
Inviting Disaster by James R. Chiles
Airbus A320, airline deregulation, crew resource management, cuban missile crisis, Exxon Valdez, Maui Hawaii, Milgram experiment, North Sea oil, Piper Alpha, Richard Feynman, Richard Feynman, Richard Feynman: Challenger O-ring, risk tolerance
A pilot himself, Little stood up in his boat for a better view of what was happening a mile to the east. There was no smoke or flame. Tipped on its right side, the airplane hit the water and raised a mighty plume of mud, vegetation, and shattered limestone. Little’s cell-phone call was the first visual confirmation that ValuJet Flight 592 had gone down. ValuJet was the fast-growing product of federal airline deregulation. ValuJet grew from a two-airplane fleet to fifty-two airplanes in less than three years. ValuJet had started flying DC-9s in 1993. Meanwhile it was adding a new model of airplane, the McDonnell Douglas MD-80 series. ValuJet bought three of them from McDonnell Douglas Finance Corporation in early 1996 and had the airplanes ferried to SabreTech Corporation in Miami, one of its three heavy-maintenance contractors.
Deaths: officially estimated at 26,000, possibly much higher. Information first revealed in 1995 Human Rights Watch report. Citicorp Center (skyscraper): discovery of structural problem New York, New York, United States 1978 Post-construction analysis by building’s engineering consultant indicated that this 914-foot-tall structure was vulnerable to falling over in case of extreme but foreseeable hurricane-force winds coming from diagonal directions. Engineer notified owner, triggering urgent reinforcement of structure before fall hurricane season. Hartford Civic Center Coliseum: collapse of space-frame roof during snowstorm Hartford, Connecticut, United States January 18, 1978 During construction of arena, workers reported that metal structure supporting 300-by-360-foot roof was deflecting 50 percent more than planned and some panels would not fit as designed.
One of the late-coming enthusiasts was a holding company called General Public Utilities (GPU), which owned three big utilities, including Metropolitan Edison in Pennsylvania. GPU started its push by requesting permission to build a single nuclear power plant on Three Mile Island, the name referring to the length of the gravelly bar in the wide Susquehanna River, ten miles down from the state capital of Harrisburg. Unit 1 was completed in 1974. Then GPU wanted another plant. Unit 2, completed in March 1978 and the one headed for infamy, had two cooling towers, a building for fuel storage, a two-hundred-foot-high containment dome to confine leaks from the reactor vessel inside, and two large rectangular buildings for turbines and auxiliary equipment. The cooling towers were one very visible sign that, well before the 1979 crisis, the trends in favor of nuclear power just ten years before were shifting fast.
A Game as Old as Empire: The Secret World of Economic Hit Men and the Web of Global Corruption by Steven Hiatt; John Perkins
airline deregulation, Andrei Shleifer, Asian financial crisis, Berlin Wall, big-box store, Bob Geldof, Bretton Woods, British Empire, capital controls, centre right, clean water, colonial rule, corporate governance, corporate personhood, deglobalization, deindustrialization, Doha Development Round, energy security, European colonialism, financial deregulation, financial independence, full employment, global village, high net worth, land reform, large denomination, liberal capitalism, Long Term Capital Management, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, moral hazard, Naomi Klein, new economy, North Sea oil, offshore financial centre, oil shock, Ponzi scheme, race to the bottom, reserve currency, Ronald Reagan, Scramble for Africa, statistical model, structural adjustment programs, too big to fail, trade liberalization, transatlantic slave trade, transfer pricing, union organizing, Washington Consensus, working-age population, Yom Kippur War
Funding was not hard to find, and the initiative quickly attracted twenty of America’s biggest companies as sponsors, including Bechtel, Chevron, Citibank, Boeing, Nestlé, and Philip Morris. The next step was to build political infrastructure on both sides of the newly parted Iron Curtain. To chair ITIC jointly, they selected John Robson and Lord Peter Walker. Robson, a lawyer who had been head of the Civil Aeronautics Board in the 1970s, was renowned for his toughness and his role as an architect of airline deregulation. Subsequently, he became a protégé of Donald Rumsfeld at the Searle pharmaceutical company before joining George Bush Sr.’s administration as deputy secretary of the treasury. Peter Walker also knew how to be tough. As energy secretary under Prime Minister Margaret Thatcher, he had taken on—and beaten—the National Union of Mineworkers. While Witt and McLure had both played key roles in the Reaganomics of privatization and low taxes, Walker’s confrontation with the miners union was the decisive struggle that allowed Thatcher to break the power of the British trade union movement.
Those Americans, like Americans everywhere, are just beginning to realize that their money is no longer being used to build the house next door. I used to sell their money for a living. I used to travel the world for a medium-sized Midwestern bank with $5 billion in assets. Along the way, I was engaged in some of the startling “business as usual” banking practices that have begun to plague the world financial system. • • • It is 1978. Thanks to the venal, repressive regime of President Ferdinand Marcos of the Philippines, I am safely and happily roosting in one of Manila’s best hotels, the Peninsula. I am about to set in motion a peculiar and idiosyncratic process that will result in a $10 million loan to a Philippine construction company, a bedfellow of the Marcos clan—a loan that will soon go sour. I am unaware that any of this is going to happen as I enter the lobby of the Peninsula on my way to dinner, still trying to digest the live octopus that a Taiwanese bank served me last night and attempting to remember exactly what it was they wanted and why they had gone to so much trouble.
Audit duties were divided between Ernst & Whinney and Price Waterhouse, which didn’t share information with each other. The Bank of England was charged with oversight for fifteen years, and it said that everything was just fine. By 1977, BCCI had 146 branches in forty-three countries. Its assets rose from $200 million to $2.2 billion. Bank of America smelled a rat because of the poor documentation of loans, and it bailed out in 1978—but without raising any alarms in the U.S. Warnings might have depressed the stock, which BofA sold at a profit, turning a $2.5 million investment into $34 million. Silence was indeed golden. By 1983, BCCI had 360 offices in sixty-eight countries: 91 in Europe; 52 in the Americas; 47 in the Far East, South Asia, and Southeast Asia; 90 in the Middle East; and 80 in Africa. By the mid-1980s, it was in seventy-three countries and had assets of $22 billion.
Airbus A320, airline deregulation, airport security, Atul Gawande, call centre, Captain Sullenberger Hudson, collective bargaining, inflight wifi, low cost carrier, Maui Hawaii, Mercator projection, New Urbanism, pattern recognition, race to the bottom, Skype, Tenerife airport disaster, US Airways Flight 1549, zero-sum game
To be impartial, I might mention the knee-breaking seat pitch and treacherous cuisine of EgyptAir and Royal Air Maroc, but exceptions like these are uncommon. How we got to such a shameful position is the subject of debate. Is it a fiscal thing? A cultural thing? A little of both? It has been a long, hard slide, and most folks agree that it began at or around the moment president Jimmy Carter attached his signature to the Airline Deregulation Act of 1979. From that moment on it was a race to the bottom, with competitive chaos inspiring a battle so fierce that, from the airlines’ perspectives, undercutting the competition became more important than pleasing customers. By 2001, the few remaining extravagances were curtailed in the battening-down that began after September 11. In my opinion, there’s something systemic at hand that transcends the bottom line.
Linked into the cockpit transponder, Traffic Collision Avoidance System (TCAS, pronounced Tea-Cass), gives pilots a graphic, on-screen representation of nearby aircraft. If certain thresholds of distance and altitudes are crossed, TCAS will issue progressively ominous oral and visual commands. If two aircraft continue flying toward each other, their units work together, vocalizing a loudly imperative “CLIMB!” instruction to one and “DESCEND!” to the other. In 1978, a Pacific Southwest Airlines 727 collided with a Cessna while preparing to land at San Diego. In 1986, an Aeromexico DC-9 plunged into a Los Angeles suburb after hitting a Piper that had strayed, sans permission, into restricted airspace. Ten years later, a Saudi Arabian 747 was struck by a Kazakh cargo jet over India. Tragedies all, but these accidents occurred when TCAS was not yet standard equipment and when ATC protocols were not as sharp as they are today.
Who Stole the American Dream? by Hedrick Smith
Affordable Care Act / Obamacare, Airbus A320, airline deregulation, anti-communist, asset allocation, banking crisis, Bonfire of the Vanities, British Empire, business process, clean water, cloud computing, collateralized debt obligation, collective bargaining, commoditize, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, David Brooks, Deng Xiaoping, desegregation, Double Irish / Dutch Sandwich, family office, full employment, global supply chain, Gordon Gekko, guest worker program, hiring and firing, housing crisis, Howard Zinn, income inequality, index fund, industrial cluster, informal economy, invisible hand, Joseph Schumpeter, Kenneth Rogoff, Kitchen Debate, knowledge economy, knowledge worker, laissez-faire capitalism, late fees, Long Term Capital Management, low cost carrier, manufacturing employment, market fundamentalism, Maui Hawaii, mega-rich, mortgage debt, negative equity, new economy, Occupy movement, Own Your Own Home, Paul Samuelson, Peter Thiel, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ponzi scheme, Powell Memorandum, Ralph Nader, RAND corporation, Renaissance Technologies, reshoring, rising living standards, Robert Bork, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, shareholder value, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Steve Jobs, The Chicago School, The Spirit Level, too big to fail, transaction costs, transcontinental railway, union organizing, Unsafe at Any Speed, Vanguard fund, We are the 99%, women in the workforce, working poor, Y2K
Bureau of Labor Statistics, “B-2: Average Hours and Earnings of Production and Nonsupervisory Workers on Private Nonfarm Payrolls by Major Industry Sector, 1964 to Date,” http://www.bls.gov/ces/#tables. 12 The first priority “Congress Clears Trucking Deregulation Bill,” CQ Almanac 1980 (Washington, DC: Congressional Quarterly, 1981); “Congress Clears Airline Deregulation Bill,” CQ Almanac 1978 (Washington, DC: Congressional Quarterly, 1979); “House, Senate Advance Bills to Curb FTC,” CQ Almanac 1979 (Washington, DC: Congressional Quarterly, 1980). 13 The first major bankruptcy reform Lynn M. LoPucki and William C. Whitford, “Corporate Governance in the Bankruptcy Reorganization of Large, Publicly Held Companies,” University of Pennsylvania Law Review 141, no. 3 (January 1993): 674–75, 688–92, 719; Robert Lawless, email, January 6, 2012. 14 Labor union contracts Lawless, email, December 21, 2011. 15 Banks got top priority “Congress Approves New Bankruptcy System,” CQ Almanac 1978 (Washington, DC: Congressional Quarterly, 1979), 179–82. 16 “A big part of the selling” Elizabeth Warren, interview, February 6, 2006. 17 Instead of tax increases “Congress Preparing Tax Lop-offs: Capital Gains, Retired Get Biggest Relief,” Associated Press, October 15, 1978; How Capital Gains Tax Rates Affect Revenues: The Historical Evidence (Washington, DC: Congressional Budget Office, March 1988), 34, http://www.cbo.gov. 18 “Business began to see” Arthur Levitt, interview, April 20, 1986.
CHAPTER 2: THE PIVOTAL CONGRESS 1 “Fifteen years ago, the businessman” “The Swarming Lobbyists: Washington’s New Billion-Dollar Game of Who Can Influence Whom,” Time, August 7, 1978, 14. 2 “Business’s new lobbying weapon” “A Potent New Business Lobby,” Business Week, May 22, 1978. 3 The decisive force “The Swarming Lobbyists.” 4 “Never seen such extensive lobbying” “Carter Dealt Major Defeat on Consumer Bill,” CQ Almanac 1978 (Washington, DC: Congressional Quarterly, 1979). 5 A disastrous defeat Hacker and Pierson, Winner-Take-All Politics, 126–27. 6 Council on Union-Free Environment “Council Is Formed by NAM for Union-Free Environment,” The Washington Post, December 2, 1977. 7 It passed the House “House Passes Bill Aiding Union Drives,” The New York Times, October 7, 1977. 8 “What the filibuster does” Ray Marshall, interview, June 14, 2011. 9 Douglas Fraser … resigned Jefferson Cowie, “ ‘A One-Sided Class War’: Rethinking Doug Fraser’s 1978 Resignation from the Labor-Management Group,” Labor History 44, no. 3 (2003): 307–14. 10 Some wins for labor “Carter Signs Minimum Wage Bill, Giving Raises of 45 Percent by ’81,” The New York Times, November 2, 1977. 11 Federal minimum wage fell U.S.
This wider gap has sharpened income inequality at the lower rungs of the economic ladder. The Pivotal Year—1978 But the corporate political rebellion was intent on more than blocking its opponents. Business was bent on gains of its own. In 1978, the corporate political machine went on the offensive and achieved a legislative agenda that would have profound and far-reaching impact. Over the next couple of decades, it would dramatically affect the standard of living of tens of millions of middle-class Americans and the American middle-class dream of winning a fair share of the prosperity generated by the nation’s economic growth. Virtually every economic bill that passed in 1978 had a policy tilt in favor of business and the wealthy, often at the expense of the middle class, even if that impact was not immediately apparent.
The Man Who Knew: The Life and Times of Alan Greenspan by Sebastian Mallaby
airline deregulation, airport security, Andrei Shleifer, anti-communist, Asian financial crisis, balance sheet recession, bank run, barriers to entry, Benoit Mandelbrot, Bretton Woods, central bank independence, centralized clearinghouse, collateralized debt obligation, conceptual framework, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, energy security, equity premium, fiat currency, financial deregulation, financial innovation, fixed income, Flash crash, forward guidance, full employment, Hyman Minsky, inflation targeting, information asymmetry, interest rate swap, inventory management, invisible hand, Kenneth Rogoff, Kitchen Debate, laissez-faire capitalism, Long Term Capital Management, low skilled workers, market bubble, market clearing, Martin Wolf, money market fund, moral hazard, mortgage debt, Myron Scholes, new economy, Nixon shock, Northern Rock, paper trading, paradox of thrift, Paul Samuelson, Plutocrats, plutocrats, popular capitalism, price stability, RAND corporation, rent-seeking, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, Saturday Night Live, savings glut, secular stagnation, short selling, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, unorthodox policies, upwardly mobile, WikiLeaks, women in the workforce, Y2K, yield curve, zero-sum game
Wilson had circulated inside the White House; it argued that the nation’s difficulties arose “not from government’s having neglected the interests of its citizens, but from its having attempted to serve them.”15 The Harris polling organization reported that no more than 13 percent of the public felt confident in government, and most seemed to regard public assistance programs as false friends—the extra taxes they implied would outweigh their benefits.16 Government regulation was losing favor, too. As an outside consultant, Greenspan had tried in vain to push the Nixon administration to embrace deregulation. But by 1975 some Democrats as well as Republicans were coming around to Greenspan’s point of view; in the Senate, it was a Kennedy, of all people, who led hearings that year on airline deregulation. Margaret Thatcher’s firm pronouncements demonstrated that Britain’s economic troubles had generated a libertarian reaction. It seemed possible that the United States might follow. Yet if Britain’s Conservative leader illustrated what might be, there were also darker visions of the future. “You have an end-to-Western-capitalism syndrome,” a business school dean worried; “businessmen see the big federal deficits, the capital shortage, world-wide inflation, the energy crisis . . . they see the continued encroachment of the bureaucrats.”17 Time magazine’s cover asked flatly, “Can Capitalism Survive?”
The Effect of Tax Changes on Government Spending,” Brookings Papers on Economic Activity, Spring 2009, 139–214. 23. “Nation: Economists Eye the Impact,” Time, June 26, 1978. 24. “A Difference of Opinion,” Fortune. 25. Congressional Budget Office, “Understanding Fiscal Policy,” April 1, 1978, 128. 26. Walter Heller, “The Kemp-Roth-Laffer Free Lunch,” Wall Street Journal, July 12, 1978. 27. Greenspan stipulated that “if we continue to have unrestrained expenditure growth on the one hand and sharp cuts in receipts on the other, we will have horrendous deficits.” Then, embracing the Prop 13 faith, he added: “That is clearly true but irrelevant.” 28. Alan Greenspan, “Economic Conditions and Outlook” (George S. Eccles Distinguished Lecture Series, Utah State University, October 23, 1978). 29. At the time of Greenspan’s speech, house prices were rising by more than 6 percent per year after adjusting for inflation. 30.
Then he made a stink that would be recalled years later. “I have here a study by the Joint Economic Committee,” said the chairman, brandishing a report that compared the forecasts of the Greenspan CEA with the economy’s subsequent growth. “[For] the three years 1976, 1977, 1978 the forecasts of the agency which you headed were wrong by the biggest margin of any in the eleven years 1976 to 1986.”47 When it came to forecasting inflation, Proxmire added, Greenspan’s CEA had broken all records for inaccuracy—his prediction for 1978 had been less than half the actual amount. “How do you answer to the facts that your forecasts were so far off?” the senator demanded. After the great financial crisis of 2008, Greenspan’s critics would remember Proxmire’s question as a sort of gotcha occasion—the moment when the maestro mask was torn away, revealing the sallow face of a mundane careerist.48 The senator was attacking the witness at his very core: Greenspan was the man who did not know, Proxmire was insinuating.
3D printing, Affordable Care Act / Obamacare, airline deregulation, airport security, Apple II, barriers to entry, big-box store, blue-collar work, Capital in the Twenty-First Century by Thomas Piketty, clean water, collective bargaining, computer age, creative destruction, deindustrialization, Detroit bankruptcy, discovery of penicillin, Donner party, Downton Abbey, Edward Glaeser, en.wikipedia.org, Erik Brynjolfsson, everywhere but in the productivity statistics, feminist movement, financial innovation, full employment, George Akerlof, germ theory of disease, glass ceiling, high net worth, housing crisis, immigration reform, impulse control, income inequality, income per capita, indoor plumbing, industrial robot, inflight wifi, interchangeable parts, invention of agriculture, invention of air conditioning, invention of the telegraph, invention of the telephone, inventory management, James Watt: steam engine, Jeff Bezos, jitney, job automation, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, labor-force participation, Loma Prieta earthquake, Louis Daguerre, Louis Pasteur, low skilled workers, manufacturing employment, Mark Zuckerberg, market fragmentation, Mason jar, mass immigration, mass incarceration, McMansion, Menlo Park, minimum wage unemployment, mortgage debt, mortgage tax deduction, new economy, Norbert Wiener, obamacare, occupational segregation, oil shale / tar sands, oil shock, payday loans, Peter Thiel, pink-collar, Productivity paradox, Ralph Nader, Ralph Waldo Emerson, refrigerator car, rent control, Robert X Cringely, Ronald Coase, school choice, Second Machine Age, secular stagnation, Skype, stem cell, Steve Jobs, Steve Wozniak, Steven Pinker, The Market for Lemons, Thomas Malthus, total factor productivity, transaction costs, transcontinental railway, traveling salesman, Triangle Shirtwaist Factory, Unsafe at Any Speed, Upton Sinclair, upwardly mobile, urban decay, urban planning, urban sprawl, washing machines reduced drudgery, Washington Consensus, Watson beat the top human players on Jeopardy!, We wanted flying cars, instead we got 140 characters, working poor, working-age population, Works Progress Administration, yellow journalism, yield management
The cause was determined to be pilot error, as the pilot’s aggressive use of the rudder caused the tail of the plane to snap off, and before the aircraft hit the ground, both engines had fallen off the wing. These three incidents with their very different causes—inadequate air traffic control, faulty maintenance, and pilot error—appear to have taught airlines and aircraft manufacturers many lessons. To quote the title of Ralph Nader’s famous book, air travel was initially “unsafe at any speed” but now is safer than walking across the street. AIRLINE PRICES AND THE INITIAL PROMISE OF AIRLINE DEREGULATION In the history of the U.S. airline industry since World War II, one theme stands out. Air travel rapidly made the transition from a travel mode that was relatively dangerous and expensive to one that opened the world as an affordable destination for millions of Americans. In the words of the epigraph that opens this chapter, air travel “lifted from the human race the curse of distance.” In the 1950s, travelers to Europe still mainly traveled on ships, but the jet plane within a few years caused regular transatlantic ship travel to cease.
College professors who are engaged in research and writing travel many times each year to annual meetings of the national association in their field, and they present and discuss papers at numerous conferences and at invited seminars at other universities. If the speed and comfort of jet travel have not changed since the 1960s, then what has changed? The most important event of the jet age for domestic U.S. air travel was the deregulation of the airline industry, achieved in 1978 after decades of controversy. Until 1978, airlines could not fly where they wanted to fly and could not choose the price they charged to passengers. To take the case of Chicago, only United and Northwest could take passengers from Chicago to Seattle, and only American and TWA could take passengers from Chicago to Phoenix. About 30 percent of U.S. air travel required passengers to make connections, and most of these connections required passengers to change airlines.
Even worse, new products typically experience a sharp decline in price in their early years as manufacturers ramp up production to achieve economies of scale, yet the official indexes have consistently been introduced many years after the new product was available for sale. For instance, the room air conditioner was first sold in 1951 but was not included in the official price index until 1967; the videocassette recorder (VCR) was first sold in 1978 but was not included in the price index until 1987. One of the most important product introductions was the Model T Ford, which went on sale in 1908 at an initial price of $950. Over the next fifteen years, Henry Ford’s introduction of the assembly-line method of manufacturing to the production of automobiles brought an astonishing reduction in price to $269 in 1923 (see table 5–2). The number of current dollars spent on Model T Fords represented more than three times the real GDP in 1923 as in 1908, a fact entirely missed in the GDP statistics, because there was no price index for cars at all until 1935.
J.K. Lasser's Your Income Tax by J K Lasser Institute
Affordable Care Act / Obamacare, airline deregulation, asset allocation, collective bargaining, distributed generation, employer provided health coverage, estate planning, Home mortgage interest deduction, intangible asset, medical malpractice, medical residency, money market fund, mortgage debt, mortgage tax deduction, passive income, Ponzi scheme, profit motive, rent control, Right to Buy, telemarketer, transaction costs, urban renewal, zero-coupon bond
Unemployment benefits from a private or union fund to which you voluntarily contribute dues are taxable as “other” income on Form 1040, but only to the extent the benefits exceed your contributions to the fund. Your contributions to the fund are not deductible. Workers’ compensation payments (2.13) are not taxable. Taxable unemployment benefits include federal trade readjustment allowances (1974 Trade Act), airline deregulation benefits (1978 Airline Deregulation Act), and disaster unemployment assistance (1974 Disaster Relief Act). Repaid supplemental unemployment benefits. If you had to repay supplemental unemployment benefits to receive trade readjustment allowances (1974 Trade Act), taxable unemployment benefits are reduced by repayments made in the same year. If you repay the benefits in a later year, the benefits are taxed in the year of receipt and a deduction may be claimed in the later year.
Index Numerics 0% rate on capital gains 2% AGI (adjusted gross income) floor deductions, effect of job expenses not subject to job expenses subject to miscellaneous itemized deduction subject to moving expenses not subject to 15% rate on capital gains 28% capital rate gains from sales 30% adjusted gross income ceiling 30-day disbursement rule on loan proceeds 50% ceiling on charitable contributions 65 in age and over, tax benefits for 183-day substantial presence test for resident aliens 401(k) plans corrective distributions from elective deferral limit hardship withdrawals from limit on salary reduction deferrals nondiscrimination rules one-person 401(k) plan ordinary income, taxed as partnership plans restrictions on withdrawals Roth 401(k) contributions SIMPLE IRA, contribution to both SIMPLE plans tax benefits of tax-favored retirement plan, key to withdrawals before age 59½ withholdings for retirement plans 403(b) plans, annuities for employees of tax-exempts and schools nonspousal beneficiaries rollover from employer plan to Roth IRA Roth contributions to 2010 healthcare reform legislation A Abandoned securities Abandonments of property Abode test for qualifying children as exemption Abstract of title fees Accelerated cost recovery system (ACRS) Accelerated death benefits Accountable reimbursement plan Accountants employer-provided material participation tests travel costs Accrual basis accounting for business income Accrual method of accounting Accumulated earnings and profits Acknowledgment, written, for charity contributions Acquisition debt Acquisition premium Active participation in employer plan Adequate accounting, importance of Adjusted basis for casualty losses how to find of sale of home Adjusted gross income (AGI) 2% AGI floor 7.5% AGI floor on itemized deductions for medical costs 10% AGI floor, on losses to personal-use property deductions allowed in figuring excess figuring hobby expenses lottery and sweepstakes winnings medical expenses no phaseout of itemized deductions for 2012 reporting child’s income on your return Roth IRA contributions Adopted children adoption credit benefit as fringe benefit expenses, employer-provided assistance, MAGI and medical expenses of not a U.S. citizen or resident, exemption for qualified adoption expenses relationship test for claiming an exemption scholarship for, not a support item Ad valorem tax Advance lean burn credits Advance payment accounting method for reporting business income health coverage credit song publishers to composers, amortizing song rights time limits for receiving Advances, against unearned commissions Airfares, subject to 2% AGI floor Airline deregulation benefits Airline employees free or low-cost flights provided to IRS meal allowance pilot Airplane company plane depreciate business property donated, substantiation rules for fuel-related credits Alaska, IRS meal allowance for travel in Aliens dual tax status expatriation tax in first year of residency in last year of residency leaving U.S. moving to U.S. verifying employment status Alimony annuity or endowment policy cash payments required child support not deductible as decree or agreement required IRA contributions and key to alimony and marital settlement issues legal fees of marital settlements minimum payment period for alimony pendente lite planning agreements recapture rules tax form to file tax rules for alimony payments voluntary payments in excess of required alimony Alternative depreciation system (ADS) Alternative fuels credit Alternative Minimum Tax (AMT) 150% rate election adjustments for attorney’s contingent fee paid from taxable award avoiding checklist of items subject to child’s dividends and interest, reporting child’s liability for computing on Form 6251 debts cancelled in bankruptcy depreciation and exemption for 2012 expatriation tax farmers, income averaging filing separately versus jointly general business credit and intangible drilling costs and ISO stock, selling to avoid adjustment key to rules net capital gains and qualified dividends personal tax credits, overview of recovered deductions and tax credit from regular tax tax credits allowed against tax-exempts and American Opportunity Credit American Red Cross, deductible contributions to American Samoa Amortization adjusted basis and of bond premium for business intangibles expenses in new business of goodwill and other intangibles method, for annuity schedule payments song rights Amount realized Amount recognized Annualized income installment method for estimated taxes Annuity(-ies)/annuity income commercial contracts employee endorsement of check for another annuity is taxable penalty on premature withdrawals from deferred annuities schedule payments of IRAs for surviving spouse tax-sheltered, distributions from variable Annulment decree Antarctic region, not meeting foreign residence Anti-churning rule Applicable federal rate (AFR), for seller-financed sales Appraisals of art objects for casualty losses for disaster relief fees, as miscellaneous expense of home penalty for substantial overvaluation of property written requirements Appreciated financial position, constructive sales of Appreciated securities, donating Appreciation in value Arbitrage bonds Arbitrage transactions of short sales of stock Archer MSA (Medical Savings Account) contribution deadline employer contribution limits employer contributions to, W-2 form and rollover to HSA tax-free distributions from Architects material participation tests travel costs Armed Forces, members of base amount for tax credit benefits, tax-free benefits and pay, taxable combat pay election for earned income credit combat zone death, tax forgiveness for combat zone duty Compensated Work Therapy Program (CWT) death benefits deductions for differential wages paid to workers joining disability pensions for disability retirement pay education at academies, additional tax exception for Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART) income taxes withheld on pay to missing status moving expenses permanent duty station of qualified reservist distribution reservists residence, suspending five-year ownership and use period retirement plans, penalty-free withdrawals from retroactive military disability determination, refund after Roth IRA contribution based on tax-free combat pay support test for exemptions and tax deadlines extended for personnel Armed Forces Health Professions Scholarship Program Artists Art objects Assessments of real estate Assigned contingent fee, tax on Athletes, professional alien, temporarily in U.S.
If the property is subject to a lease under which no income is to be received for years, the basis is the value of the property—not the equity. You might be given the right to buy the deceased person’s property under his or her will. This is not the same as inheriting that property. Your basis is what you pay—not what the property is worth on the date of the deceased’s death. If property was inherited from an individual who died after 1976 and before November 7, 1978, and the executor elected to apply a carryover basis to all estate property, your basis is figured with reference to the decedent’s basis. The executor must inform you of the basis of such property. Community property. Upon the death of a spouse in a community property state, one-half of the fair market value of the community property is generally included in the deceased spouse’s estate for estate tax purposes.