David Gerard

Author: David Gerard

The World Schumpeter Made, or the World That Made Schumpeter?

SCHUMPETERFEST, OCTOBER 22, 2010

Warch Campus Center

Saturday, October 22,  4:30 p.m.

David A. Hounshell

Roderick Professor of Technology & Social Change

Carnegie Mellon University

I present a brief overview of Joseph A. Schumpeter’s fundamental theory of innovation and the entrepreneurial function in capitalism.  I further demonstrate how Schumpeter realized that the principal locus of innovation had changed between the time he first launched his ideas in Theory of Economic Development (1911) and 1942, when Capitalism, Socialism, and Democracy first appeared.  The shift in locus had profound repercussions for Schumpeter’s thinking about capitalism, which I discuss.  I also demonstrate that just as there was an intermediate position between the Schumpeter of 1911 (often called “Schumpeter, Mark 1”) and the Schumpeter of 1942 (“Schumpeter, Mark 2”), what I call “Schumpeter, Mark 1.5.”  Drawing from my research on the history of industrial R&D in the United States, I historicize these three versions of Schumpeterian theory about the entrepreneurial function in capitalism.  I go further, however, to channel Schumpeter’s thoughts about the entrepreneur and the locus of innovation in American capitalism over the last sixty-one years since his death—what I am calling “Schumpeter, Mark 3” (ca. 1965) and “Schumpeter 4.0” (ca. 2011, to express it in the lexicon we use today).  Looking into the future, I complete the Schumpeterian arc of capitalism by concluding with thoughts about the locus of innovation in 2050, the centennial year of Schumpeter’s death, when the principal locus of innovation might well be where Schumpeter believed it was in 1911, under what he called Competitive Capitalism.

About the Speaker: David Hounshell was originally trained as an electrical engineer (BSEE, Southern Methodist University, 1972) before he saw the bright light of history of science, technology, business, and public policy (Ph.D., History, University of Delaware, 1978).   His early publications include work on inventors in electrical and communications technologies of the 19th-century, for which he received the Browder J. Thompson Prize of the IEEE in 1978.  His first book, From the American System to Mass Production, 1800-1932 (Johns Hopkins University Press, 1984) remains in print today; the Society for the History of Technology (SHOT) awarded it the Dexter Prize in 1987.  Science and Corporate Strategy:  DuPont R&D, 1902-1980 (Cambridge University Press, 1988), co-authored with John Kenly Smith, Jr.,  received the Newcomen Prize in 1991.  He is the recipient of the Business History Conference’s Williamson Medal (1992) and the Society for the History of Technology’s Leonardo DaVinci Medal (2007).  He served as President of SHOT in 2002 and 2003.  He has published on Cold War science and technology, the history of industrial research and development, and technology-forcing regulation in post-World War II United States.

Coming Saturday: “The World Schumpeter Made”

Historian David Hounshell from Carnegie Mellon University will be on campus this weekend to deliver a talk, “The World Schumpeter Made: Innovation, Entrepreneurship, and the New Economy.”  Professor Hounshell has deep knowledge of the U.S. innovation system, and the talk will touch on who funds R&D and why it matters. If you would like to see him in action, here is a talk he gave at the Kaufman Foundation last year: “Innovation and the Growth of the American Economy.”

Professor Hounshell is a pretty good source for this type of insight. He literally wrote the book on the  genesis and evolution of the U.S. industrial system with From the American System to Mass Production, 1800-1932.  Murray Rothbard himself had this to say about Hounshell’s influence:

Until recent years, the history of technology used to be written, and taught, for its own sake and almost completely isolated from economic and social history…

This tiresome tradition came to a sudden end with the arrival of the fascinating and crucially important work of David A. Hounshell, From the American System to Mass Production, 1800-1932, which created a new paradigm dominating the field of American technological history.  Hounshell’s achievement was to integrate technological with economic and social history, and bring us, for the first time, a genuine history of the development of mass production.  Thus, for example, in his pioneering history of the bicycle industry of the 1890s, Hounshell showed that the bicycle was, in two ways, a critical prelude to the invention and development of the automobile because, (1) the bicycle taught consumers the possibility and the joy of individual mobile transportation (in contrast to the mass transportation between fixed points essential to the railroad; and (2) it taught bicycle makers the technology of the wheel, the tire, and the axle. It is no accident that the first automobiles were made in bicycle shops.*

In addition to the opus on mass production, Professor Hounshell is also steeped in studying industrial research and development, including a definitive piece on DuPont:  Science and Corporate Strategy: Dupont R&D, 1902-1980.  This work chronicles corporate strategy and innovation, and has been described as “one of the most comprehensive business history books ever written.”

Of course, he continues to keep busy, and his talk Saturday will incorporate some of his current work on the evolution of industrial innovation.  I am looking forward to hearing what he has to say.

Professor Hounshell’s talk is at 4:30 in the Warsh Campus Cinema.  We hope to see you there.

Third Annual Predict the Economics Nobel Contest… Wait, what?

Falling off the Cliffs?

Well, I didn’t manage to get the contest running this year and, lo!, the Nobel Prize in Economics committee met anyway and made its awards.

I’m no macro guy (who is these days?), but the Nobel Committee saw fit to award this year’s prize to Thomas Sargent and Christopher Sims for their work in empirical macroeconomics.  As per usual, Tyler Cowen at Marginal Revolution is all over it.

Sims here and Sargent here.

Though I disavow any knowledge of it now, I had Sargent for my macro texts back in grad school — known as  black Sargent and red Sargent because one was black and one was red (I forget which was which).  For some of us, the mathematics was on the challenging side, and we had to spend a lot of time solving those spectral analysis problems.  I remember this like it was yesterday, one of my classmates asked if there was a “Cliffs Notes” version of black Sargent.

The professor replied, “Black Sargent is the Cliffs Notes.”

UPDATE: Tim Taylor has a very readable, conversable even, commentary at his new blog.

Sentry Insurance on Campus Tuesday

Colin Watkins ’11 of Sentry Insurance will be on campus Tuesday, October 11 at 5:30 in the Kraemer Room – WCC.

Sentry has internships in Actuary Science, investments, marketing, finance, and information technology.  Mr. Watkins can also talk to you about the application process for the full-time Leadership Development Program.

Sentry website.

Economics for the 21st Century

David Warsh has an Economic Principals piece on the direction of the economics profession for the next decade.   Warsh points to a compilation of 55 papers, Ten Years & Beyond: Economists Answer NSF’s Call for Long-Term Research Agendas, posted at the Social Science Research Network.  Charles Schultze from Brookings provides some perspective in the title piece:

The National Science Foundation’s Directorate for the Social, Behavioral and Economic Sciences (NSF/SBE) for challenging economists and other relevant research communities “to step outside of present demands and to think boldly about future promises.” Specifically, NSF/SBE invited groups and individuals in August 2010 to write white papers that describe grand challenge questions in their sciences that transcend near-term funding cycles and are “likely to drive next generation research in the social, behavioral, and economic sciences.” NSF/SBE planned to use these white papers “to frame innovative research for the year 2020 and beyond that enhances fundamental knowledge and benefits society in many ways… We are disseminating the white papers of interest to economists independent of the NSF because these papers offer a number of exciting and at times provocative ideas about future research agendas in economics that are worth further consideration by economists.

There are many titles that look promising, including Deidre McCloskey’s “Language and Interest in the Economy,” which argues that economists should pay more attention to the role of persuasion. A number of us have been plowing through McCloskey’s Bourgeois Dignity, so we certainly welcome a succinct case.

Some other provocative titles include Nicholas Bloom’s “Key Outstanding Questions in Social Sciences,” David Autor and Lawrence Katz’s “Grand Challenges in the Study of Employment and Technological Change,” Randall Krozner’s “Implications of the Financial Crisis,” and Kenneth Rogoff’s “Three Challenges Facing Modern Macroeconomics.”

These are short, generally readable pieces from some of the biggest names in the profession.  This seems like a good place to poke around.

Less than Peak Perfomance

Following an earlier post on Daniel Yergin’s piece in the Wall Street Journal (promoting his new book), I came across James Hamilton‘s response to Yergin’s basic argument.  I use Hamilton as a primary source for teaching the resources piece of my Environmental Economics class, and he is an important player in the public debate.

Next up, we have a Michael Gilberson post that provides an overview of the issues and going through Hamilton’s critique of Yergin.  I find his response particularly useful because he gets at why peak oil might be an issue worth worrying about, and also has a section devoted to “supply and demand: boring and relevant.”  He prefaces his supply and demand discussion with this:

Hamilton draws attention to the slow rate of the supply response relative to demand growth. He is right, this is where the action is with respect to understanding recent oil market developments … and nothing about what he said depends upon whether the peak in world oil production did happen in 2005 or 2007, or will happen in 2011, or won’t happen until 2100 … and framing remarks as about peak oil distracts attention from the real issues.

Indeed.  For those of you who attended the LSB session on petroleum last year certainly know that people with money in the energy industry pay very close attention to supply and demand fundamentals.

Sustainable Energy without the Hot Air

Sustainable Energy - without the hot airEsteemed alumnus Thomas Baer has been making the rounds on campus, visiting the I&E class and delivering a nice Science Hall Colloquium earlier today (here’s his bio).  Dr. Baer gave a rundown of his perspective on renewable energy technologies, particularly solar energy, and even more particularly solar energy made with silicon.

I’ll spare you the details of the role of photonics (since I didn’t quite understand those details), but I will second his recommendation of David MacKay’s excellent Sustainable Energy Without the Hot Air. I bought several copies of this and generally loan them out to anyone interested in energy policy.  Indeed, I was working with another colleague on developing a course around the book prior to moving to Lawrence a couple of years back.

If you haven’t borrowed my book already, you can download a copy here.

September Newsletter, Report from the Chair

The Economics Department Newsletter is up and ready for action.   Though I am not the Chair, I am privy to his Report.

Here’s the teaser:

Report from the Chair

Marty Finkler imageMarty Finkler, professor of economics and John R. Kimberly Distinguished Professor in the American Economic System
Like a shark, the Economics department has to move forward in order to survive. The department has added new personnel, helped launch the Lawrence Scholars in Business program, and is introducing a new Innovation & Entrepreneurship emphasis to its curriculum. Department Chair Marty Finkler runs down these activities and invites your input.
Read more…

Calculus Review

For those of you who need a little refresher, tell them the good people on Briggs 2nd sent you.

CTL math tutors will be holding several calculus review sessions designed for students who want to “brush up” on critical skills used in classes including: Calculus II and III as well as various chemistry and physics courses.  Workshops will cover the basics of integrals or derivatives and will be held in Briggs 420 at the following dates/times.  If you have questions, please contact Julie Haurykiewicz, CTL Director.  Thanks!

Derivative Reviews:

Wednesday, September 28 at 9 p.m.

Monday, October 3, at 8:30 p.m.  The integraDerivatives

Integral Reviews:

Thursday, September 29 at 8:00pm
Tuesday, October 4 at 7:00pm

The Piece I’ve Been Expecting about Robert Lucas

The Wall Street Journal has a short profile of Robert Lucas,  one of the most influential macroeconomists of at least the past 20 years (when I picked up my first grad macro text).  Lucas is probably best known for integrating “rational expectations” into macro models (he convinced his wife, at least).  He is also the namesake of the “Lucas Critique”  of using past behavior to predict the future.   Here’s a nice summary of his contributions.

Lucas might sound like someone affiliated with the Chicago School, and indeed, that is the case.  Someone you should know.

Tax them Back to the Stone Age!

Click to Enlarge

Do you think we should increase taxes on the rich?  Most of us do, to the tune of about a 70-30 split in favor of bumping up those taxes.  But what does that mean, exactly?

Reason Online takes up this question by asking people how high someone’s income has to be before they are rich.  Not surprisingly,  the answer depends on who you ask.  If you ask someone with an income less than $50,000, the median response is that $200,000 a year is rich, but even $100,000 seems rich to a significant fraction of that cohort.  On the other hand, if you ask someone who earns between $100,000 and $200,000, the response is that it takes $300,000 before you are rich.

A better survey question might be, should we raise taxes on people with incomes over $200,000?  My guess is you might still get majority support, with substantial defection from those at and round $200,000 a year.

DS-391 On the Road with Hayek, Reminder

Those of you interested in signing up for the group read of The Road to Serfdom need to turn in your registration forms and get your schedules to Professor Galambos or me so we can coordinate a meeting time.  We will likely have our first meeting during the first week in October and cover the first 50 or 60 pages of the book at that time.

If you have any questions, stop by Briggs 2nd for some answers.

Here is our previous post on the group, including some auxiliary and supplementary materials.

Unstandard Oil

Because it's there?

Many of you have probably heard of “peak oil,” the idea that world oil production either has peaked or will soon peak, and it’s all downhill from there.  The implications of this could be that the world economy is crippled by high prices and short supply, or the world economy is not crippled by high prices and short supply.  In either case, most folks I talk with seem to believe we will soon be facing resource constraints.

Well, Daniel Yergin, author of the cinder-block-sized epic The Prize (now in documentary form) is back with his take on peak oil.  The condensed version of his argument — puh-leeze.

In his piece, Yergin goes over the basic storyline of so-called “cornucopian”  economists, such as the late Julian Simon, who claim that human ingenuity is likely to overcome any “natural” resource constraints.  Here’s Yergin on the premiere peak oiler, M. King Hubbert:

Hubbert insisted that price didn’t matter. Economics—the forces of supply and demand—were, he maintained, irrelevant to the finite physical cache of oil in the earth. But why would price—with all the messages that it sends to people about allocating resources and developing new technologies—apply in so many other realms but not in oil and gas production? Activity goes up when prices go up; activity goes down when prices go down. Higher prices stimulate innovation and encourage people to figure out ingenious new ways to increase supply.

Indeed.

New technologies and approaches continue to unlock new resources. Ghana is on its way to significant oil production, and just a few days ago, a major new discovery was announced off the coast of French Guiana, north of Brazil.

As proof for peak oil, its advocates argue that the discovery rate for new oil fields is declining. But this obscures a crucial point: Most of the world’s supply is the result not of discoveries but of additions and extensions in existing fields.

In addition to the WSJ piece, Yergin is back in print with The Quest: Energy, Security and the Remaking of the Modern World. If you are interested in third-party opinions, Steven Hayward has a column in the WSJ, and Steven Levine reviews the book for Foreign Policy.

Talk Like a Pirate Day

It’s Talk Like a Pirate Day over at The Mudd, and elsewhere.

As I told you last year, Peter Leeson has an excellent series of papers on piratical organization, including The Invisible Hook, an economic analysis of piratical organization.  You can also check out the JPE piece it was based on or simply get a flavor from one of its many favorable reviews.

Here’s the gist:

The idea of the invisible hook is that pirates, though they’re criminals, are still driven by their self-interest. So they were driven to build systems of government and social structures that allowed them to better pursue their criminal ends.

Certainly the big eye opener is that classic pirates had democratic governance structures.  I would guess that most organized crime we think of today — including modern-day pirates is more conventionally hierarchical.  Watch for this in Econ 450.

The Appletown Coffee Experience

Sports Illustrated‘s Peter King gives a big thumbs up to downtown Appleton:

What a good coffee town Appleton, Wisc., is. In a two-block stretch of downtown on College Avenue (I once had night-before-the-game dinner with Bears linebacker Ron Rivera in an Italian place on this street), there are local espresso places — the trendy and modern Copper Rock, the homey and filled-with-locals Brewed Awakenings — and if those aren’t good enough for you, there’s a Starbucks on the corner. I can’t imagine there’s a better downtown coffee experience in a medium-sized, middle America city.

No mention of Gerardo’s stash on Briggs 2nd.

HT to our wonderful alumni network.

The Center for Teaching and Learning Workshops

Here it comes, our tri-annual message on CTL Workshops:

If you think a Cartesian coordinate is a what you wear to go with your favorite sweater, it might be time for you to bone up on your quantitative skills.  And, right on cue, the CTL if offering a series of quantitative workshops — 90 minutes to a better, more quantitatively adept you.   The topics are basic algebra, graphs, and word problems, and there are two chances for each.

Workshops are in Briggs 420 and run 60 minutes.

Algebra

8:00 PM on Tuesday, September 20th and 6:00 PM on Monday, September 26th

The algebra workshop will cover the following topics:

  • Basic algebraic operations and the law of exponents
  • Binomial multiplication and factorization
  • Important algebraic identities
  • Techniques for solving quadratic and fractional systems of linear equations
  • Basic concepts and identities of trigonometry

Graphs

8:00 PM on Friday, September 23rd and 5:00 PM on Tuesday, September 27th

The graphing workshop will cover the following topics:

  • Graphs of linear equations, quadratic equations, exponential functions, trigonometric functions and more…
  • Significance of slope in various applications
  • Displacement of graphs

Word Problems

6:00 PM on Thursday, September 22nd and 8:00 PM on Wednesday, September 28th

The word problem workshop will cover the following topics:

  • Problem solving strategies useful in working with quantitative concepts
  • How to extract useful information from a problem and how to relate similar problems
  • Hands-on experience working on interesting and challenging word problems

Some Friendly Advice

Foreign policy guru Walter Russell Mead reprints an essay full of advice for those returning students, including some thoughts on a liberal education.  Here’s the bullet points:

  1. The real world does not work like school.
  2. Most of your elders (including parents and teachers) know very little about the world into which you are headed.
  3. You are going to have to work much, much harder than you probably expect.
  4. Choosing the right courses is more important than choosing the right college.
  5. Get a traditional liberal education; it is the only thing that will do you any good.
  6. Character counts; so do good habits.

I suggest you take a look at what he has to say, and in particular the discussion of the importance of a liberal education.

Following this advice will be hard; a liberal education is no easy thing to get, and not everybody wants you to have one.  However, in times of rapid change, it is paradoxically more useful to immerse yourself in the basics and the classics than to try to keep up with the latest developments and hottest trends.  You can be almost 100% sure that the hot theories making waves in academia today will be forgotten or superseded in twenty years — but fifty years from now people will still be reading and thinking about the classic texts that have shaped our world.  Use your college years to ground yourself in the basic great books and key ideas and values that will last.

For the same reason, don’t worry too much about getting specific skills at this stage.  You are going to keep learning new skills all your life and you are going to find many of your skills obsolete as time goes on (when I was a kid I was very good at operating something called a mimeograph machine).  What you want to do now is to develop your ability to learn.

He then lays out the elements of what it means to be liberally educated, concluding with this:

[U]nless you are following up on an interest that is already a deep and passionate one, try to take courses taught by great teachers.  The main purpose of an undergraduate education isn’t to polish up your knowledge and finish your learning.  It is to launch you on a lifetime quest for wisdom and understanding.  You want professors who can help you fall in love with new subjects, new ideas, new ways of investigating the world.  The courses that end up mattering the most to you will be the ones that start you on a lifetime of reading and reflection.

That should get you through registration.

The Fall of the Econ Department

Here is our fall schedule, complete with links to brief course descriptions.  We will also be sponsoring a group read this term.

For those of you new to the department, we are offering Econ 100 this term and in the winter, and Econ 120 in the spring.  For the complete Winter and Spring schedules, click here.

Fall 2011

ECON 100  INTRODUCTORY MICROECONOMICS 1:50-03:00 MWF BRIG 223 ● Mr. Galambos

ECON 170  FINANCIAL ACCOUNTING 2:30-04:20 TR BRIG 223 ● Mr. Vaughan

ECON 205 TOPICS-INTERNATIONAL ECONOMICS (G) 3:10-04:20 MWF BRIG 224 ● Ms. Karagyozova

ECON 206 FIELD EXPERIENCE-SIERRA LEONE (G) Arranged ● Ms. Skran, Ms. Karagyozova

ECON 209  WATER, POLITICS, ECON DEVLPMNT (G) 12:30-02:20 TR BRIG 223 ● Mr. Finkler, Mr. Brozek

ECON 211  IN PURSUIT OF INNOVATION (S) 11:10-12:20 MWF BRIG 223 ● Mr. Galambos, Mr. Brandenberger

ECON 300 MICROECONOMIC THEORY 9:50-11:00 MWRF BRIG 223 09:50-11:00 R BRIG 223 ● Mr. Gerard

ECON 420 MONEY AND MONETARY POLICY 9:00-10:50 TR BRIG 217 ● Mr. Finkler

ECON 460 INTERNATIONAL ECONOMICS (G,Q) 9:50-11:00 MWF BRIG 217 ● Ms. Karagyozova

Hurricane Coverage, Better Late than Never

John Whitehead from the Environmental Economics blog lives in North Carolina and has been keeping us up to speed on all sorts of hurricane-related curiosities, from the opportunity costs of evacuation preparation to a supply & demand example to potential stimulative effects (umm) to predictions of hurricane damages (short version: the predictions are wrong).

As a bonus, here’s Professor Michael Munger — also a Carolina denizen —  griping about subsidizing building in hurricane zones.

(And justifiably so, I might add).