Tuesday, August 25, 2009



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David Foster Wallace may have understood the modern American better than any writer of our time. His suicide in September of 2008 stunned his friends and fans. Wallace was a master at capturing the way we think, feel and live, and his books and essays conveyed an intimacy that made a lot of people feel like Wallace was a friend they'd never met. In this hour of To the Best of Our Knowledge we celebrate the life and work of the late David Foster Wallace.


Salon book critic Laura Miller explains why David Foster Wallace was the most important writer of his generation. Wallace became a literary rock star in his thirties for the novel "Infinite Jest." Time Magazine later included it on its list of "All Time 100 Greatest Novels." When Wallace committed suicide in September 2008 his fans grieved, wrote tributes, and began to speculate about rumors of an unfinished novel. Journalist DT Max tells Steve Paulson about the novel's discovery, Wallace's creative struggles with "The Pale King," and the novel's subject - boredom. Also, an interview with David Foster Wallace with Steve Paulson from 2004, just after the publication of his short story collection "Oblivion."


Time magazine's book critic Lev Grossman remembers David Foster Wallace, and we present another interview with Wallace in 1996, right after "Infinite Jest" was published. Rolling Stone contributing editor David Lipsky spent a week with Wallace after "Infinite Jest" came out, and was later assigned to cover the writer's life and death. He tells Jim Fleming that Wallace's emotional struggles began again after graduate school. Michael Pietsch was Wallace's editor at Little, Brown starting in the 90s and is currently at work editing the unfinished novel "The Pale King." Pietsch has given us exclusive rights to a passage from the novel, which is read by Chicago actress Carrie Coon.


One of David Foster Wallace's most popular essays is "A Supposedly Fun Thing I'll Never Do Again," which ran originally in Harper's Magazine. In 1997 he read a bit of the article for us, and talked with Steve Paulson about it. Wallace's Sister Amy Wallace-Havens describes her brother as immensely bright, funny and courageous. She tells Anne Strainchamps about growing up with him, and about life without him. Also we have an excerpt from the commencement speech David Foster Wallace gave at Kenyon College in 2005. It was eventually published under the title "This is Water," but it has never before been broadcast.

CD copies are available at 1-800-747-7444. Ask for program number 09-05-24-A.


Books & CDs:

David Foster Wallace, Infinite Jest (Little Brown)

David Foster Wallace, A Supposedly Fun Thing I'll Never Do Again (Back Bay Books)

David Foster Wallace, Consider the Lobster: and Other Essays (Back Bay Books)

Audio Extras:



  • -Everywhere You Turn/ The Bad Plus/ "These are the Vistas"/ Sony
  • -Comfortably Numb/ The Bad Plus/ "For All I Care"/ Head's Up
  • -Reciting the Airships/ Eluvium/ "Copia"/ Temporary Resistance
  • -The Pacifist/ DJ Vadim/" USSR"/ Ninja Tune
  • -Souvenirs; Danced All Night; The Pall Bearers/ "Circus Songs"/ The Tiger Lilies/ Misery Guts Music
  • -Five String Serenade/ Mazzy Star/ So Tonight That I Might See/ Capitol Records
  • -Edge of the World/ Josh Ritter/ "The Historical Conquests of Josh Ritter"/ Sony BMG
  • - The Long Road/Eddie Vedder/ Sony Entertainment
  • -Dirty Blonde/ The Bad Plus/ "Give"/ Sony Music



Listen To Podcast

You're driving along a dark road when you're distracted by what appears to be a flight of arrows. You crash into a ravine and suffer horrible burns over most of your body. In this hour of To the Best of Our Knowledge, we'll talk to Andrew Davidson abouthis debut novel "The Gargoyle," It's been described as an "Inferno" for our time. Also, the delightfully disturbing tales of Kelly Link.


A clip from a commercial for "Dawn of the Dead" sets us up for an examination of the horror genre. Andrew Davidson is the author of "The Gargoyle." It's his debut novel and has been described as "an Inferno for our time." Davidson reads from the book and talks about it with Steve Paulson.


Richard Hand is the author of "Terror on the Air!: Horror Radio in America, 1931 - 1952." Hand describes several of the programs that made that period the Golden Age of radio and we hear excerpts from classics like "Lights Out." Also, Glenn Kay is the author of "Zombie Movies: The Ultimate Guide." Kay talks with Jim Fleming about his book and some of the over 300 zombie films he reviews and rates. And we hear clips, of course.


Kelly Link has published her third collection of short fiction. It's called "Pretty Monsters" and is aimed at Young Adult readers. Link talks with Anne Strainchamps about the challenges of writing for teenagers, and reads excerpts from a few of her stories.

CD copies are available at 1-800-747-7444. Ask for program number 08-09-28-B.


Books & CDs:

Andrew Davidson, The Gargoyle (Doubleday)

Richard Hand, Terror on the Air!: Horror Radio in America, 1931 - 1952 (McFarland)

Glenn Kay, Zombie Movies: The Ultimate Guide (Chicago Review Press/An A Cappella Book)

Kelly Link, Pretty Monsters: Stories (Viking)




India renews its tryst with destiny


Imagining India by Nandan Nilekani

Reviewed by Dinesh Sharma

Nandan Nilekani represents an Indian entrepreneurial class that is spearheading a quiet revolution. He claims the forces of information technology, economic liberalization and globalization have created a resurgence in India that resembles the heady days of the founding of the nation.

In the words of his friend and confidant, Thomas L Friedman, who has written the foreword to the book, India's economic rise could potentially level the playing field for more than one billion people. Weaned off of a half-century of dependency on quasi-socialist ideologies, India's forays into the information technology sector have demonstrated its readiness to take on the challenges of the free-market economy and become the largest and the fastest growing democracy on the planet.

Nilekani's rediscovery of India through entrepreneurship tells the story of an ancient civilization entering the information age - an antique land with one of the world's fastest growing cell phone penetration rates. India today stands at a crossroads, facing a major demographic transition and bustling with the spirit of technological innovation. It can either embrace this, take the arduous path less traveled and reshape the country for the 21st century, or due to a lack of political resolve forego an economic tidal wave that could improve the living standards for its hungry masses.

As a co-founder of Infosys, Nilekani stumbled upon the idea of a technology start-up in the early 1980s. He describes himself as "an accidental entrepreneur" trying to renew India's outlook.

"[A]s an IT company, Infosys always faced challenges different from the rest of the Indian industry. Shortages in infrastructure did not affect us, as our markets were international, and all we needed to do business was a wire and some computers. We experienced little of the labor problems and strikes that plagued India's traditional industries" (p 3).

Nilekani concludes that India's recent victories in economic reforms have been gained "despite the state", an idea encapsulated in the underlying theme of the book: "India's weaknesses are all within, in the ongoing struggle to define the direction of our future ideas and policies for the future" (p 5). Like a piece of software code or an Indian classical raga (melody), this theme plays throughout the book in different variations, tempos and pitch.

This is a book driven by ideas, both large and small. In part one, the book examines ideas that have arrived and where attitudes in the Indian population have changed. For example, the English language was once seen as a vestige of the Raj but with the onset of outsourcing, it has become the language of choice and a ticket to globalization. Not long ago, India's large population was seen as a burden but now it forms the human capital reserves needed to meet the challenges of affordable labor. Prior to liberalization, global brands were driven out of India; yet, today no one raises an eyebrow when another KFC or McDonalds opens in a local town or city.

The second part of the book examines new ideas that have not yet been fully adopted. For example, the idea of universal literacy. Similarly, the idea that the "real India" is to be found in its villages has been central to the romantic notion of India, but lately this has given way to the need to build modern cities.

The third part of the book examines controversial ideas the role of government in private education, the reform of labor laws and the building of integrated financial markets. In the concluding section of the book, Nilekani challenges readers to create innovative Indian solutions to uniquely Indian problems, rather than simply importing ideas from other countries. India's economy, population and energy challenges demand Indian solutions not necessarily pre-configured in Western ideas about development.

For a man of technology, inclined to measure progress in nanoseconds, Nilekani has a long view of Indian history: "The problem was that the curve of India's history and its ideas had been an extremely discontinuous one - a foreign occupation had long divorced the region from its pre-British ideas and economic and social structures ... What we saw in its place instead was strange grafting of the Indian identity with an entirely new culture. The British brought with them the English language and Western education, and with such education came the ideas of modern nationalism, self-determination and democracy. However, these ideas only reached a small elite - the British consensus was that, on the whole, Indians were best left alone" (p 10).

Nilekani states that fissures created by the British have endured; India has remained divided between the elite civil service class and the mass of humanity which is predominantly feudal and rural. The chasm between the old India, "the village India", and elite India, "the babu-sahib [term for British colonials] culture", saddled the post-independence India through the stagnant years of growth, leading up to the economic liberalization of the 1990s.

India was unified in the two decades after independence due to the national goodwill created by the transformational leaders like Mahatma Gandhi and Jawaharlal Nehru. There were also brief moments of unity during the 1962 war with China and wars with Pakistan in 1947-1948, 1965 and 1971. Otherwise, India has been divided along traditional lines of rural-urban region, religion, caste, social class and gender hierarchy. Economic liberalization was the singular event that marked the beginning of the great Indian middle class, which approximates the population of the United States.

Partly due to his global vision, Nilekani breaks through with clear insights. He recognizes that India at the time of its independence and shortly thereafter was a unified nation under the shadow of its founding fathers. This was a short-lived moment, however, and India has not been unified ever since; post-independence India has been splintering from within and without. Former prime minister Indira Gandhi tried to create a national identity driven by genealogy, personality, and an iron-fisted rule. But after her demise this led to the rise of the nationalist Bharatiya Janata Party, a fragmentation of multiple communal parties and the weakening of the traditional center.

Today, Nilekani regretfully admits, "Our politics are broadly organized along the lines of caste, religion, region and class. These form the basis of our loyalties and, often, of our development policies." He adds that hope is not lost, however, as "our divisions were overcome once, in the heady days after independence, and this may happen again" (p 15) as demonstrated by the consensus formed in the recent elections in favor of the Congress Party.

Nilekani is boldly envisioning a second Indian renaissance. Is he an overly optimistic dreamer, buoyed by success and confidence in the private sector, wishing that all of India will soon possess laptops, flat-screen monitors and manicured lawns like the Infosys campus? Or, is he a cautious realist who knows that structural changes will require a paradigmatic shift in the social and moral order, which may have been jump-started by the growth in the information technology sector but still has a long way to go?

Nilekani represents a combination of both of these attitudes; parts of the book are inspirational, yet other parts are weighed down by serious policy analysis. As someone who has examined India from the perspective of social and marketing sciences, I found Nilekani's vision a much-needed antidote to outdated social and cultural theories as well as to the recent hype and hopes about India. This book will certainly go a long way towards correcting the romantic view of India as the land of snake charmers and levitating yogis.

The top-heavy policy analysis lays out a systematic argument for why India is poised to make a significant contribution to the world economy and how the next century might be the Asian century.

"India has gained dramatically from similar, massive changes in our attitudes towards our population, entrepreneurs, the English language, globalization and democracy. It has made India a country that right now has a unique cadence, where all our major strengths have come together and matured at the same time" (p 32).

Nilekani discusses how India was once considered the basket-case of the world, an overpopulated and unsustainable country of a billion hungry stomachs, but is no longer seen in these Malthusian terms. In light of the information technology boom, India is the preferred destination due to its untapped pool of talent and affordable labor.

Comparing different government policies, India and China stand at the opposite ends of the demographic and political continuum; India's destiny is tied with democracy and the demographic boom, while China's growth is the byproduct of autocracy and the one-child policy.

Nilekani of course believes that history favors the Indian model of development to reap what he calls "the demographic dividend", while China may have already peaked in terms of population growth as the typical family structure now consists of four grandparents, two parents and only one child. This has led to irreversible levels of fertility and a shortage of labor supply. Thus, India appears green and young demographically, while China is already graying, not unlike the baby boomer generation in the developed economies.

Nilekani suggests that India in fact has "a camel" in its demographic graph, consisting of a double hump or a bimodal distribution, representing a different population rate for its advanced southern region versus the backward northern states. While the southern hump has already peaked and led to irreversible birth rates in states like Tamil Nadu and Kerala, the northern hump, consisting of Uttar Pradesh and Bihar, will peak sometime near 2020.

According to many demographic models, the majority of India's population will remain younger till 2050 in comparison to the rest of the developing and the developed world. Thus, the benefits of democracy coupled with the demographics of a younger population support the Indian model of development over the long haul. The challenge is that the Indian government and the populace at large must have its own house in order to fully take advantage of these demographic trends.

Having been colonized by the East India Company, Indians have always had an uneasy alliance with the profit motive and the world of private enterprise; even ancient Hindu scriptures warn against the profit motive as maya or illusory. Thus, the founding fathers when confronted with the challenges of governing an independent India opted to not give much weight or responsibility to the private sector. This led India down a socialist path in its development of industry, with the government the majority stake owner. While this fostered strong local businesses, India remained parochial, closed-off and uncompetitive vis-a-vis the rest of the world.

As the path of last resort, when India faced bankruptcy and was forced to adopt economic liberalization in the early 1990s, Nilekani along with nine other entrepreneurs received a call from Montek Singh and the current Prime Minister Manmohan Singh to attend a meeting of American and Indian business leaders for a conference with the president of the United States. The agenda of course was how to jump start the Indian economy. This in essence began India's American revival with technological innovation, which in the two decades since has doubled if not tripled its growth rate.

There are other fascinating connections between America, the first democracy, and India, the largest democracy in the world. When George Washington's armies finally trounced Charles Cornwallis in Yorktown in 1781, Cornwallis was sent packing to Bengal as the governor general of India who first pushed the English language on the subcontinent. Anyone who has driven along the East Coast on highway US-1, can easily trace the names of towns back to the old world and then connect the dots to Calcutta or West Bengal across the Indian Ocean. Even today the English language remains the common thread across time and space; it is the lingua franca of commerce and trade, except now it is transmitted through high-speed fiber optic lines.

India's feelings over the English language have blown hot and cold over the centuries; however, post-liberalization Indian companies have won software contracts on the back of English becoming the principal language of commerce, and this has indelibly shaped the Indian mind. Nilekani provides a fascinating exposition of how the rise, the fall and the eventual rise of English as the language of IT and Business Process Outsourcing services has put India at a distinct advantage in the global economy.

Because language is the often the medium of cultural exchange, India's reaction to the English language has reflected in its attitudes towards the West. Like any human relationship, this has included a range of emotional and intellectual postures ranging from outright resistance to unspoken admiration and everything in between. Resistance and admiration of the West has ebbed and flowed depending on the mood and tenor of the country. However, what seems to have swept in after the liberal reforms of the 1990s is a reversal of a staunchly inward-looking stance.

As Indian businesses have succeeded in the global marketplace, the internal fissures that held India back have resurfaced, shedding new light on the real stumbling blocks towards progress. Nilekani observes, "But even as the world is acknowledging India's new promise, the opportunity of the global economy has highlighted our internal differences - between the educated and the illiterate, the public and private sectors, between the well and poorly governed, and between those who have access and those who do not. In this sense, even as we Indians define ourselves in the context of our home and the world, we face incredible contradictions" (p 139).

India's founding fathers, while they chose a quasi-socialist economic policy, put their faith squarely in the democratic ideals of a civil society, free press and human rights. The Indian populace could not have known it at the time, but this was an immeasurable gift. The million little mutinies that have come and gone could not consume the nation state because the democratic ideals among Indians had become resilient and strong. Except for a few glitches, for example, during the emergency in 1970s, Indians have stayed on the path of democratic rule, even though it has neither come easily nor naturally.

Today as India faces a multiparty system, democratic governance has led to greater regional voices participating in the electoral process; thus, an institutional framework that was once considered "essentially foreign" has now simply become essential to the Indian experiment (p 163), again as demonstrated by the outcome of the recent elections which has voted in the architects of the economic reforms.

"The ideas that the country has become more optimistic over the last sixty years - demographics, entrepreneurship, the English language, the role of IT, globalization and democracy - have been the foundation for an expanding economy. They have also led to a kind of catharsis - it now finally looks like India has escaped from its sense of persecution and the limitations of its history" (p 271). Yet, for all its strengths and optimism India's quantum leap forward has potential pitfalls that cannot simply be shrugged off. India suffers from significant challenges in terms of building its human capital, literacy, educational system, urban infrastructure and an integrated market to name just a few of the urgently needed social projects.

The challenge that India faces now is how to sustain the economic reforms and to continue on its growth trajectory. This is where the narrative becomes fuzzy and the path appears less certain: "In this we confront the paradox of a nation that is blessed with the most talented and diverse entrepreneurs but which still does not trust the market to deliver on broad-based development. We are struggling with constrictive labor laws even as the economy is rapidly creating more jobs and markets worldwide are eager to recruit India's young people.

We are battling growing shortages in higher education as we face a crunch in skilled workers. And our battles for better ideas here require us to vanquish a monster with many heads - of old ideology, deep-rooted caste groups and the many temptations of short-term populism" (p 273). Here, Nilekani finds parallels with Latin America, particularly, with the recent Brazilian experience, where a socialist government has also adopted liberal economic policies.

Yet, his well structured arguments are at their best when he compares India's past with its present. "At the time of independence, India's leaders were clearly ahead of the people. The creation of new, secular democracy with universal suffrage, anchored by the Indian constitution, was a leap of faith the government took with an uncompromising yet trusting country. Sixty years on, however, it seems the roles have reversed" (p 297). Now, the Indian people have taken the lead on reforming the country, while the leaders are lagging behind.

Nilekani claims that India is in the midst of a bottom-up economic revolution against the backdrop of globalization. Freed from the socialist government controls, Indian people have been motivated by creativity and entrepreneurship. While India has proven its metal in the service economy, it has yet to gain the same success in the traditional manufacturing sector. Top-down planning was not able to achieve what the people have been able to unleash in the last two decades as the Indian growth story is beginning to cut across the traditional sectors and industries. Clamorous debates in the media reflect the engaging mood of the country. Rural populations and everyday folks from small towns are coming forward and taking big risks in the private sector.

The growth of the Indian middle class, concentrated in the cities, is supporting all of these trends. "We are closest today than we have ever been to a truly effective "deliberative democracy" where individuals and groups across the country are chipping away at the once absolute power of the state" (p 456). Political leadership has been put on notice with a high anti-incumbency rate.

Entrenched skepticism against economic reforms will be overcome with real results; as the economic reforms spread to wider segments of the Indian population and improve people's lives, the changes will gain a solid footing. If the returns of globalization do not reach the masses the reforms might be stalled or even worse fail miserably. As in business, implementation is the key to success.

As the recent elections made clear, political leadership may have to be steered to follow the will of the people to ensure future growth; and because the demographic window of opportunity is limited, Indian people must keep moving ahead and must not linger. According to Nilekani, the growth model has to be owned, underwritten and managed by the private sector and cannot be left simply in the hands of government officials.

The entrepreneurial as well as the philanthropic class must contribute the ideas and the capital to push the reforms forward; the reawakened India cannot afford to pass up its renewed tryst with destiny.
Imagining India: The Idea of a Renewed Nation by Nandan Nilekani. Penguin Press HC, (March 19, 2009). ISBN-10: 1594202044. Price US$29.95, 528 pages.

Dinesh Sharma is a marketing science consultant with a doctorate in psychology from Harvard. He is the author/editor of the following books: Human Technogenesis: Cultural Pathways through the Information Age (2004); Childhood, Family and Sociocultural Change in India (2003); Socioemotional Development Across Cultures (1998).

The Competition Cure

A better idea to make health insurance affordable everywhere.


"Competition" has become a watchword of Team Obama's push for its health-care bill. Specifically, the Administration has defended its public insurance option as a necessary competitive goad to the private health insurance industry.

Health and Human Services Secretary Kathleen Sebelius routinely calls for more choice and competition in health care. In his weekly address this past weekend, President Obama raised the issue directly: "The source of a lot of these fears about government-run health care is confusion over what's called the public option. This is one idea among many to provide more competition and choice, especially in the many places around the country where just one insurer thoroughly dominates the marketplace." We take it this refers to a state in which one insurer holds most of the business.

It is no secret that this page is all for competition in the marketplace. If indeed that's the goal, allow us to suggest a path to it that will be a lot easier than erecting the impossible dream of a public option: Let insurance companies sell health-care policies across state lines.

This excellent idea has been before Congress since at least 2005, when Rep. John Shadegg of Arizona proposed it. It came up again recently in an exchange between Chris Wallace of Fox News Sunday and John Rother, executive vice president of AARP.

Mr. Wallace: "If you really want competition why not remove the restriction which now says that if I live in Washington, D.C. I've got to buy a D.C. health plan, and instead create a national market for health insurance, so that if there's a cheaper plan in Pennsylvania, I could buy in Pennsylvania?"

Mr. Rother: "There are states and localities where health care is much less expensive than others, and if we allow people to buy all their insurance from those places, it will raise the rates there. And it's called risk selection. It's a real problem, given the fact that health care costs can vary substantially from one place to another. So I think while the idea sounds appealing, the consequence would be it would make health care more expensive for those people who live in those low-cost areas."

How did Mr. Rother arrive at this conclusion?

His claim assumes that what makes insurance expensive in places like New Jersey—where the annual cost of an individual plan for a 25-year-old male in 2006 was $5,880—is merely the higher cost of medical services in the Garden State. He sounds an alarm in the rest of the country by suggesting that an individual living in, say, Kentucky—where an annual plan for a 25-year-old male cost less than $1,000 in 2006—would be asked to subsidize plan members living in high-priced states.

That's not how interstate insurance would work. Devon Herrick, a senior fellow with the National Center for Policy Analysis who has written extensively on this subject, notes that insurance companies operating nationally would compete nationally. The reason a Kentucky plan written for an individual from New Jersey would save the New Jerseyan money is that New Jersey is highly regulated, with costly mandated benefits and guaranteed access to insurance.

Affordability would improve if consumers could escape states where each policy is loaded with mandates. "If consumers do not want expensive 'Cadillac' health plans that pay for acupuncture, fertility treatments or hairpieces, they could buy from insurers in a state that does not mandate such benefits," Mr. Herrick has written.

A 2008 publication "Consumer Response to a National Marketplace in Individual Insurance," (Parente et al., University of Minnesota) estimated that if individuals in New Jersey could buy health insurance in a national market, 49% more New Jerseyans in the individual and small-group market would have coverage. Competition among states would produce a more rational regulatory environment in all states.

This doesn't mean sick people who have kept up their coverage but are more difficult to insure would be left out. Congressman Shadegg advocates government funding for high-risk pools, noting that their numbers are tiny. The big benefit would come from a market supply of affordable insurance.

Mr. Rother also said "risk selection" is a problem. But the coverage mandates cause that. As more healthy people opt out of health insurance because it is too expensive relative to what they consume, the pool transforms into a group of older, sicker people. Prices go higher still and more healthy people flee. High-mandate states are in what experts call an "adverse selection death spiral."

Interstate competition made the U.S. one of the world's most efficient, consumer driven markets. But health insurance is a glaring exception. When the competition caucus in Team Obama has to look for Plan B, this is it.

Tuesday, August 18, 2009

A Green Thumb on an Invisible Hand: Can Markets Improve the Environment?

Many think of the market as a mighty, erratic beast capable of transporting continents upon its back when domesticated by the adroit hands of statesmen but if left untamed would raze the defenseless into microscopic particles. This conception of networks of voluntary exchange is a dire mistake on a host of issues none more considerable than the environment. Too much trust is yielded to regulation and oversight while industries holding much ecological promise such as Solid Waste Disposal, Agribusiness and Nuclear Power fall victim to misinformed zealots who end up undermining their cause.

landfillThe last place one expects to discover eco-centered innovation are smelly eyesores yet within the past thirty years dumps have handily outpaced expectations. Because these rolling hills of refuse are such easy targets a piece of legislation entitled the Resource Conservation and Recovery Act (RCRA) was passed by Congress in 1976 regulating waste materials. Later tighter restrictions on landfills were added through Subtitle D in 1991. After the passage of Subtitle D a measurable decline in Solid Waste Management facilities lead to more privatization and larger sites. By conventional wisdom this paradigm shift should have resulted in catastrophe. What actually occurred was remarkable.

Despite a steady flow of solid waste, landfill capacity actually increased with time. Between 1986-1991 13 states reported their dumps contained under 5 years of capacity. Presently, no states report landfills below 5 years of capacity, and the numbers for national facilities are even more heartening. These sites retained 11 years of capacity in the late-'80s, jumped to 14 years through the mid-'90s and currently maintain around 16 years of capacity. (source) Considering the rate of waste in the U.S. remains relatively constant per capita but swells in relation to population, these statistics become quite astounding. Even though more garbage enter landfills the lifespan of these sites increases. Incineration, improved recycling rates and inter-state capacity sharing assist in controlling landfill volume nationwide. (source)

Even the deleterious consequences of dumps have either been tapered or commuted. The strategic placement of landfills away from densely populated residential areas and waterways largely mitigates ground water contamination. Porous, subterranean fabrics called geotextiles filter hazardous pollutants inhibiting dangerous leakage. Methane gas emissions from decomposing trash can now be harnessed as an energy source. Carpet manufacturer, Interface Inc., decreased natural gas consumption by 20% since implementing this new technique in 2003. (source) Breakthroughs keep refining these technologies year after year ensuring improved safety and performance.

agribusinessFurther up the chain of production Agribusiness continually boasts more efficient ways of cultivating crops with clever weather-resistant features. How any conscious, purportedly compassionate person could daunt this agricultural explosion falls beyond censure. The genetic strides engineered by private companies allow third world farmers greater growing flexibility and output, and the simple fact is because of these graciously unnatural modifications more food is generated globally with less land than ever before. Taking the numbers for the U.S. alone, corn harvests have increased by an additional 36%, soybeans by 12% and cotton by 31% thanks to biotechnology. (source) Farmers now use wireless equipment to measure how much water and fertilizer crops require to reduce waste and lower costs. Researchers augmented the plants themselves so they recover more quickly during droughts and floods -- an answered prayer to poor, Asiatic nations; require less tilling decreasing the overall amount of erosion and runoff; rely on 70% less water with equal or greater yields and repel pests diminishing the application of pesticides. Genetically modified seeds currently inaccessible to farmers are projected to be brought to market as soon as 2012.

Strictly "organic" farmers experience none of these benefits and leave behind a larger environmental footprint than Agribusiness. Because local farms deliver to a legion of individual retailers without a primary distribution center or encourage customers to pick-up their goods directly more fossil fuel gets dumped into the atmosphere while Agribusiness ships in bulk to fewer locations and imports their product from all over the world from regions specifically chosen to maximize efficiency for any given commodity. (source) The result is cheaper prices, better quality and less greenhouse gasses.

smiley-nuclearAs demonized as Agribusiness and genetically modified foods, or "Frankenfoods," are at present no other industry proves to be a scarier boogieman for nebbish environmentalists than Nuclear Power. Three Mile Island and Chernobyl cast long shadows over the legacy of this safe, clean wonder-fuel. To set the record straight, no one died at Three Mile Island and, although tragic, the 56 dead at Chernobyl is dwarfed by the countless dead due to ash coughed up by coal factories annually not to mention the human cost of resource wars launched in the name of oil. When the death tolls are placed side by side the hysteria orbiting Nuclear Power seems rather nitwitted.

Economically, Nuclear Power Plants make sense. They receive fewer subsidies than coal, oil, solar or wind power even though coal and oil are far bigger polluters, and by the most recent estimates solar and wind power at their peak could only satisfy 20% of demand while Nuclear Power could assure 90% of all energy needs. Nuclear power also outperforms the status quo. For instance, a single enriched uranium pellet equals "17,000 cubic feet of natural gas, 1,780 pounds of coal [and] 149 gallons of oil." (source) Despite a deficit in funding, Nuclear Plants cover the total cost of externalities and the decommissioning of outdated facilities. (source) No other clean power source produces more for less.

But can it be labeled clean or safe? When measuring the output of hazardous material nuclear power barely charts next to coal. The American coal industry unleashes more physical waste every few hours than Nuclear Power's entire history. This distressing quantity factors into the question of radioactivity. Not many people realize coal ash is radioactive although Uranium has greater intensity the disparity in the waste ratio between coal and nuclear power crowns coal ash the more worrisome environmental threat. Because of the diminutive amount of waste Nuclear Plants leave behind it can be altered into a watertight material, locked into steel-reinforced containers and buried well away from any underground water sources. (source)

As for the matter of safety, Chernobyl-style facilities have long since been decomissioned. In newer models, ceramic pellets encase pieces of uranium stored inside zirconium alloy tubes forming rods confined behind 30-centimeter thick walls which in turn are housed within a 1-meter thick barrier. During the burning process safety features slow efficiency if the water becomes too warm and several models of power plants depend upon physical forces such as gravity to halt the process altogether instead of mechanized components, and system redundancies double check the internal operations. (source) To further illustrate the safety of Nuclear Power Plants, during the Cold War neither the United States nor the Soviet Union aimed warheads at these complexes because the damage would have been negligible at best.

The collapse of Soviet Russia left an ecological moonscape as public proprietorship typically disintegrates into ruin. By contrast, thousands of largely private, collaborative hands shed elbow grease to manufacture sustainable technology inconceivable to any dark breed of central planner. The alacrity, plasticity and innovatory brawn behind markets can be overwhelming but this stupefying creature functions best when left unyoked.

Profit: Not Just a Motive

By Steven Horwitz


One of the more common complaints of critics of the market is that “the profit motive” works at cross-purposes with people and firms doing “the right thing.” For example, Michael Moore’s film Sicko was motivated by his desire to take the profit motive out of health care because, in his view, the ways people seek profits do not lead them to provide the level and kind of care he thinks patients should have.

Leaving aside for a moment whether the health-care industry is really dominated by the profit motive (given that almost half of U.S. health-care expenditures are paid for by the federal government, it is not clear which motives dominate) and whether Moore knows better than millions of individuals what their health-care needs are, the claim that a “motive” is a root cause of social pathologies is worthy of some critical reflection. The critics seem to suggest that if people and firms were motivated by something besides profit, they would be better able to provide the things that patients really need.

The overarching problem with blaming a “motive” is that it ignores the distinction between intentions and results. That is, it ignores the possibility of unintended consequences, both beneficial and harmful. Since Adam Smith, economists have understood that the self-interest of producers (of which the profit motive is just one example) can lead to social benefits. As Smith famously put it, it is not the “benevolence” of the baker, butcher, and brewer that leads them to provide us with our dinner but their “self-love.” Smith’s insight, which was a core idea of the broader Scottish Enlightenment of which he was a part, puts the focus on the consequences of human action, not their motivation.

What we care about is whether the goods get delivered, not the motives of those who provide them. Smith led economists to think about why it is that, or under what circumstances, self-interest leads to beneficial unintended consequences. It is perhaps human nature to assume that intentions equal results, or that self-interest means an absence of social benefit, as was often the case in the small, simple societies in which humanity evolved. However, in the more complex, anonymous world of what Hayek called “the Great Society,” the simple equation of intentions and results does not hold.

As Smith recognized, what determines whether the profit motive leads to good results are the institutions through which human action is mediated. Institutions, laws, and policies affect which activities are profitable and which are not. A good economic system is one in which those institutions, laws, and policies are such that the self-interested behavior of producers leads to socially beneficial outcomes. In mixed economies like that of the United States, the institutional framework often rewards profit-seeking behavior that does not produce social benefit or, conversely, prevents profit-seeking behavior that could produce such benefits. For example, if agricultural policy pays farmers not to grow, then the profit motive will lead to lower food supplies. If environmental policy confiscates land with endangered species on it, owners of such land who are driven by the profit motive will “shoot, shovel, and shut up” (that is, kill off and bury any endangered species they find on their land).

The same issues can be raised in the health-care industry. Before blaming the profit motive for the problems in the industry, critics might want to look at the ways in which existing government programs like Medicare and Medicaid, the interpretation of tort laws, and regulations such as those that limit who can practice what sorts of medicine might lead firms and professionals to engage in behavior that is profitable but unbeneficial to consumers. Labeling the profit motive as the source of the problem enables the critics to ignore the really difficult questions about how institutions, policies, and laws affect the profit-seeking incentives of producers and how that profit-seeking behavior translates into outcomes. Placing the blame on the profit motive without qualification simply overlooks the Smithian question of whether better institutions would enable the profit motive to generate better results and whether current policies or regulations are the source of the problem because they guide the profit motive in ways that produce the very problems the critics identify.

For example, high medical costs may well be a result of profit-seeking providers’ recognizing that government programs are notoriously bad at pricing services accurately and keeping good track of their expenditures. Ignoring the way institutions might affect what is profitable is often due to a more general blind spot about the possibility of self-interested behavior generating unintended beneficial consequences. Before we attempt to banish the profit motive, shouldn’t we see whether we can make it work better?

Placing blame for social problems on the profit motive is also easy if critics offer no alternative. What should be the basis for determining how resources are allocated if not in terms of profit-seeking behavior under the right set of institutions? How should people be motivated if not by profit? Often this question is just ignored, as critics are merely interested in casting blame. When it is not ignored, the answers can vary, but they mostly invoke a significant role for government. The interesting aspect of such answers is that critics do not suggest that we somehow convince producers to act on the basis of something other than profit, but that instead we replace them with presumably other-motivated bureaucrats or have those bureaucrats severely limit the choices open to producers. The implicit assumption, of course, is that the government personnel will not be motivated by profits or self-interest in the same way as the private-sector producers are.

How realistic this assumption is remains highly questionable. Why should we assume that government officials are any less self-interested than private individuals, especially when the door between the two sectors is constantly revolving? And if government officials do act in their self-interest and are motivated by the political analogs of profits (for example, votes, power, budgets), will they produce results that are any better than the private sector’s? If blaming the profit motive entails giving government a bigger role in solving problems, what assurance can critics of the profit motive provide that political officials will be any less self-interested and that their self-interest will produce any better results?

One will look in vain in Sicko, for example, for any analysis of the failures of state-sponsored health care in Cuba, Canada, Great Britain, or anywhere else. To blame the profit motive without asking whether an alternative will better solve the problems supposedly caused by the profit motive is to bias the case against the private sector.

How Will They Know?

Even this argument, however, does not go far enough. We are still, after all, focused on intentions and motivation. What critics of the profit motive almost never ask is how, in the absence of prices, profits, and other market institutions, producers will be able to know what to produce and how to produce it. The profit motive is a crucial part of a broader system that enables producers and consumers to share knowledge in ways that other systems do not.

Suppose for a moment that we try to take the profit motive out of health care by going to a system in which government pays for and/or directly provides the services. Suppose further that we could, somehow, ensure that the political officials would not be self-interested. For many critics of the profit motive, the problem is solved because public-spirited politicians and bureaucrats have replaced profit-seeking firms.

Well, not so fast. By what method exactly will the officials know how to allocate resources? By what method will they know how much of what kind of health care people want? And more important, by what method will they know how to produce that health care without wasting resources? It’s one thing to say that every adult should, for example, have a checkup every year, but should it be provided by an MD, an LPN, or an RN? What kind of equipment should be used? How thorough should it be? And most crucially, how will political decision-makers know if they’ve answered these questions correctly?

In markets with good institutions, profit-seeking producers can get answers to these questions by observing prices and their own profits and losses in order to determine which uses of resources are more or less valuable to consumers. Rather than having one solution imposed on all producers, based on the best guesses of political officials, an industry populated by profit seekers can try out alternative solutions and learn which ones work most effectively. Competition for profit is a process of learning and discovery. For all the profit-critics’ concern—especially but not only in health care—that allocating resources by profits leads to waste, few if any understand how profits and prices signal the efficiency (or lack thereof) of resource use and allow producers to learn from those signals. The most profound waste of resources in the U.S. health-care industry stems from the incentives and market distortions created by government programs such as Medicare and Medicaid.

Thus the real problem with focusing on the profit motive is that it assumes that the primary role of profits is to motivate (or in contemporary language “incentivize”) producers. If one takes that view, it might seem relatively easy to find other ways to motivate them or to design a new system where production is taken over by the state. However, if the more important role of profits is to communicate knowledge about the efficiency of resource use and enable producers to learn what they are doing well or poorly, the argument becomes much more complicated. Now the critics must explain what in the absence of profits will tell producers what they should and should not do. Eliminating profit-seeking from an industry doesn’t just require that a new incentive be found but that a new way of learning be developed as well. Profit is not just a motive; it is also integral to the irreplaceable social learning process of the market. Critics may consider eliminating the profit motive the equivalent of giving the Tin Man from Oz a heart; in fact it’s much more like Oedipus’ gouging out his own eyes.

What Makes “Psycho Killers” Tick?

Monday, August 17, 2009

Is it just me or...

...is the size, ornateness and majesty of any given architecture proportional to the sheer brutality of the institution it represents?

Thursday, August 13, 2009

Friday Flashback: Dr. Octagon - "Blue Flowers"

The Terror of Nuclear Power

Nuclear Power
Artwork: Nathan Bebb


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Let's have a seat at Homer Simpson's control panel, chow down on some donuts, and nap away into oblivion while blinking lights and buzzers warn of impending doom and that glowing green bar of uranium that fell into our trousers. Today we're going to examine the popular notions about nuclear power. Specifically, if xenophobia had not killed nuclear power in the United States in the late 1970's, there's a good chance that we'd have all been driving electric cars for the past 20 years; and uncounted billions of tons of carbon dioxide would never been sucked out of the ground, burned in power plants, and exhausted into our atmosphere.

So let's state the obvious. The immediate reaction to that statement is "OK, that may be true, but look at all the new problems we'd have created with Chernobyl-type disasters and lethal nuclear waste." Fair enough, and important questions, to be sure. Let's start with a quick primer on the various types of nuclear reactors.

So-called Generation I reactors were the early prototypes developed by many nations, and actually placed into production in a few cases. Generation I reactors were characterized by fundamentally unsafe designs, and kludged layers of afterthought safety systems. When most nuclear nations began deploying commercial reactors, they were usually of Generation II design. Generation II reactors were significantly improved, but these changes were primarily evolutionary. Most of the commercial plants in operation in the United States are Generation II designs. A little over ten years ago, Generation III designs began appearing in some of the world's most advanced nuclear nations. Generation III reactors incorporate not only evolutionary improvements, but also revolutionary changes such as fuel cycles that result in much less nuclear waste; reduced capacity for the creation of weapons-grade plutonium; and passive safety designs wherein the reaction cannot be sustained in the event of a problem and the system effectively shuts itself down, by virtue of its basic design. The newest plants being designed for commercial use are called Generation III+, which incorporate all the newest knowledge from operating Generation III designs. If a new reactor was approved and built in the United States today, it would be a Generation III+ design. Even if every plant employee keeled over with a heart attack, neither a Chernobyl nor a Three Mile Island type accident would be possible; the systems are fundamentally redesigned so that the reaction cannot be sustained if things go outside the parameters.

The Idaho National Laboratory is the United States' primary advanced reactor research facility, and they've outlined six new reactor types to be developed for Generation IV. The designs take everything to a new level: Lower cost, safer designs, near-total elimination of nuclear waste, and reduced risk of nuclear weapons proliferation. There are also Generation V reactors in the ether, but these are primarily the domain of late-night rumination sessions at the lab, fueled by tequila and pot.

Then there's fusion power, which is everyone's ultimate goal. Fusion reactors have the profound advantages of using simple tritium or deuterium for fuel, producing no significant waste, and absolute safety since if anything goes even slightly off-kilter, the plasma disappears and you have no reaction. It's the ultimate in cheap, clean, safe, renewable energy, despite gross misunderstandings of the technology expressed by Greenpeace and other factions. The first operational tokamak fusion reactor for research is being built by the international ITER consortium in France and is expected to come online in 2016.

So you can probably guess that Three Mile Island was probably not the newest and safest design, and you'd be right. It was a Generation II design. It was the first and only significant nuclear accident in American history. A broken valve caused coolant to leak into a containment facility designed for that purpose, raising the temperature of the core and causing a partial meltdown. Despite significant confusion on the part of the operators (this being their first experience with an accident), and a somewhat lengthy chain of errors and misunderstandings, everything eventually worked out just as it should. There were no deaths or injuries, and despite 25,000 people living within five miles of the plant, nobody was exposed to any radiation worse than a single chest x-ray. All the studies predict zero cases of future cancer, despite ongoing lawsuits that the courts continue to find to be without merit. With proper perspective, Three Mile Island can (and should) be characterized as a shining example of how well the safety systems work, even in the face of human error and old-fashioned reactor design.

But that's not the way it was perceived. By an unfortunate coincidence, Jane Fonda's movie The China Syndrome about a nuclear accident came out only twelve days before Three Mile Island. The Cold War with Brezhnev was in full force and the words "nuclear accident" were simply too much for a scientifically uninformed public. Three Mile Island became the first nail in the coffin of American nuclear power.

Seven years later in 1986, things got much worse. Chernobyl was suffering from inadequate funding. Much basic maintenance had never been performed. It had only a skeleton crew, nearly all of whom were untrained workers from the local coal mine. The only manager with nuclear plant experience had been a worker installing small reactors on board Soviet submarines. Some genius decided to run a risky test of a type that no experienced nuclear engineer would ever gamble on. The test was to shut down the water pumps, which must run constantly in that type of reactor; and then find out whether the turbines, spinning on their momentum alone, had enough energy to restart and run the pumps during the forty-second delay before the backup diesel generators would kick in. The test was so risky that one faction within the plant deliberately disconnected some backup systems, trying to make the test too dangerous to attempt. The test was run anyway. It didn't work, the pumps couldn't keep up, the graphite core caught fire, the coal miners couldn't find any shovels so they didn't know what to do, and the reactor exploded. If you think I'm exaggerating this, there are extensive resources both online and in print, if you really want the hairy truth. In this short space I'm probably not even giving you ten percent of what a travesty this was — I'm tempted to call it a joke but it's so not funny. For example, they scheduled this right in the middle of a shift change, and the new workers coming in didn't even know what was going on.

Two people died that day, and some 30 to 60 people were dead within three months. Predictions of eventual cancer deaths caused by the radiation run from 1,000 to 4,000. And, of course, the damage to the local environment is extensive and difficult to estimate. The terror of a radiation cloud blowing across Europe was the second nail in the coffin of American nuclear power.

Not only was Chernobyl a monumental failure of the human element, the plant was a Generation I design, specifically an RBMK reactor, which is generally regarded as the least safe reactor type ever built. One design flaw is that the core used combustible graphite, and this distinction is the main reason that Chernobyl-type disasters are not possible in most reactors around the world. Only a very few Generation I designs are still in use, all in the former Soviet Union, and all have been retrofitted with improvements intended to prevent this type of accident. Other nations have long been lobbying for the closure of these reactors, and rightfully so.

How do the dangers of nuclear energy compare to the dangers of fossil fuel energy? A report in the Journal of the American Medical Association found that some 50,000-100,000 Americans die each year from lung cancer caused by particulate air pollution, the biggest cause of which is coal-burning power plants in the midwest and east. Even taking the maximum predicted death toll from Chernobyl, we would need a Chernobyl-sized accident every three weeks to make nuclear power as deadly as coal and oil already is. Shall I repeat that? If the world was filled with Generation I reactors run by feuding coal miners, we would need a worst-case scenario every three weeks just to match the US death toll we've imposed upon ourselves by clinging to our current fossil fuel system. Next time you see a hippie cheering the defeat of nuclear power in the US, realize that a healthy environment and saving lives are clearly not their priorities.

Well, maybe to them it's more about the future of the planet than about saving lives today. Maybe they just don't want to see high-level nuclear waste created that's going to poison the planet for tens of thousands of years. I can see that. But here's the problem with that logic: The plants we're designing now produce less waste than ever. Some on the drawing board produce none at all. We've already created most of the waste that we ever will. It already exists. It's out there. Lobbying against future cleaner plants won't make the existing waste go away. It's out there now in temporary facilities in neighborhoods all across the country, way more vulnerable than it would be in proper permanent storage in Yucca Mountain.

Opponents say that Yucca Mountain is geologically unstable or otherwise too hazardous, so the waste might leak out. Well, trust me: The location of the Yucca Mountain site was one of the most lengthy and expensive decisions the government ever made. What do you think they were doing with all that time and money, picking their noses? Well, it was a government program, so a large part of the time and budget probably was spent on nose mining. Nevertheless, this was one of the most scrutinized decisions ever made. Environmentally speaking it's as good a site as we could hope for. If you're concerned about it, go to a neutral and reliable source and research it personally. From every scrap of reason I can muster, environmentalists should be Yucca Mountain's #1 fans. I can't imagine why they prefer to leave the waste out where it is now, unless they are driven more by ideology than by science. Who would have thought that?

There is a safe and clean solution to our energy crisis, gasoline prices, and global warming. It's the latest generation nuclear reactor.

You should follow me on twitter here.

5 Easy Ways to Save Money in a Recession

A Fate Worse Than Religion

danbury_mint_ten_commandments_no_box_P0000013277S0009T2Since the beginning of the year I've started using Facebook and through that social networking site and the magical powers swirling through the tubes of the internet I've been able to reconnect with quite a few people. Truth be told, I'm a pretty nosy guy. If you have me over for dinner I will rifle through your medicine cabinet and blog about its contents without remorse. So, upon my new discovery I am flooded with an irresistible impulse to look through all their pictures and read their profile top to bottom. What I found used to send me face-palming every time. Without fail these middle to late twenty-somethings always fill in their religion as either: Christian, Christ-lover, Child of the Son, Baptist, Methodist, Lutheran or, my personal favorite, Jesus Freak.

I'm always amazed at how deeply the disease of religion stays embedded in a person even as they age. It seemed to me that I brushed organized religion away as easily as dandruff but the escape velocity of superstition appears to be stronger for some and weaker for others.

As I kept reading and thinking the real disturbing personal category isn't religion -- it's politics. More often than not my former classmates and colleagues self-apply titles like "Conservative" or even "Maverick" (I shit you not) with the occasional "Liberal" or "Progressive" label rounding out the bunch. This, my friends, is so much scarier than you realize.

Think of all the different concepts you consider as "evil" floating through this world. It could be Corporate Greed, Unions, Religious Faith, Class Conflicts, Illegal Immigration, Gender Inequality, Racism, Tony Danza, etc... The state is like that only on steroids. In fact, the state can take that evil and amplify it beyond any natural level. For example, the corporation. These greedy motherfuckers want to turn a profit out of everything. They'd sell tickets to a puppy-stomping parade if they knew people would queue up, yet, in a free market they're unable to because of social sanctions, voluntary customer support, reputation and so on. If they aren't born with a high amount of altruism in their blood they at least need to fake it in order to be invited to the dance to begin with. Throw all that out the goddamn window when governments get involved. Politicians will just extract property from citizens and subsidize private enterprise willy-nilly. So much for the organic checks and balances that arise from free exchange.

The same can be said of religion. I'm sure you've heard about some tiff in the Middle East recently caused by Muslims. I'm not one to say there aren't demented little fuckers who want to annihilate everyone who won't praise their own fevered delusions, but let's have some perspective. American foreign policy made that wack-job fringe look a whole lot more attractive through years of painting the walls of their Mosques with the intestines of their children (See: Eisenhower Doctrine). Doesn't foster a lot of inter-cultural good will, does it? And why do you think Jesus-Camp Christians started getting political, because they're bored? Hell no! Governments give out goodies, it's as plain as that. It's hard to believe that people still take men like Christopher Hitchens seriously. A man who harangues against the soft target of religion until he pops but then enthusiastically signs the roster of supporters for the War on Terrorism which has killed a million Iraqis, displaced millions more, ethnically cleansed parts of the country and caused four million to become food insecure. --the fuck is wrong with this asshole?

At least with religion, if I can say anything nice about it at all, is that it provides communitarian support. A warm environment, somebody to take care of you when you're sick, a social safety net and a place where everybody knows your name. Let's see a government compete with that with its bloated, lumbering welfare system.

My point is Westernized Christians probably won't go out and kill over their religion except if they join the armed forces, and in today's world other extreme religious viewpoints would only be able to build up a fighting force based on their own moxy. Without the aggression of the state evil loses its backbone.

Free Market Science vs. The Free Rider Problem

11912hby Ryan Faulk

The free rider problem as it pertains to scientific research is as follows:

Company A spends $100K on developing a product, but company B can spend $10K and copy it, having the exact same product. Thus research and development is punished on a free market. That's the theory.

Edwin Mansfield, the late economist at the University of Pennsylvania came to the conclusion that in OECD countries, across all industry it costs $65 dollars to copy $100 worth of research. Or 65%. But that's just direct cost.

In order for a company to copy research, a great example is the drug industry, they have to have smart people. If I gave you a viagra pill, would you be able to reverse engineer that? No, a company needs to have smart people who can do that, with the equipment, on hand if they want to copy. So there are sunk costs involved if a company wants to copy research. This isn't just copying your neighbor's scantron answers.

Also it takes time to reverse engineer a product, and in that window the company that made the original product enjoys a monopoly. The more complex the innovation, the more difficult it tends to be to reverse engineer, and the longer that company enjoys a monopoly.

Given the advantage of the temporary monopoly of the originator plus the sunk costs needed for copiers to be able to copy, copying research and doing original research tend to come out as equally profitable strategies. Private firms in OECD spent about 3% of the budget on research.

That said, all firms engaged in research both copy and do original research themselves. Because in order to copy, you must have smart people doing original research in that field, you've got to have guys in the know, and when one company makes a breakthrough, everyone else rushes to copy.

The reason copying a product and originating a product tend to be equally profitable is basic economics. Products are only released by firms if it's revolutionary enough to earn a profit that makes up for the cost of development. And in order to make a profit, it must be difficult enough to provide a period of monopoly for those costs to be recuperated.

Products which are only slightly revolutionary aren't as expensive to develop as products which are extremely revolutionary, but also tend to be easier to reverse engineer, resulting in a shorter monopoly period. If you're interested in more detail, I would recommend Terence Kealey's book.

When the state funds scientific research, there is crowding out. For every $1 spent on research, $1.25 less is spent on research in private firms according to Kealey. I have an idea why this might be: government jobs are more secure and have shorter hours than private jobs, and so a government job of $100K a year is worth more than a free-market job of $100K a year. Or more discretely, a government job of $100K a year is worth about as much as a private job of $125K a year. That's just my guess as to why government funding crowds out private funding at more than a 1 to 1 ratio.

Also, government funding often goes to military research, which can lead to innovations there's no denying that, but it is not connected to what individuals choose to buy with their own money but what the military wants. And what the military wants isn't always tied to what's the best for waging war - for example the air force continues to fund the research of piloted aircraft because that provides jobs for pilots, whereas UAVs are clearly the wave of the future. The limiting factor of the F-22 wasn't the airframe, it was how many g's the pilot could take.

Francis Bacon, a torturer and an embezzler, in 1605 put forward the idea that science is a public good based on pure research. That yes it is applied science that leads to immediate discoveries, but that applied science can only come from a pure research background, which the short-sighted marketplace will not provide to appropriate degrees, and thus the state must fund pure research.

Now as it turns out, the best way for a firm to come up with some profitable breakthrough is to engage in pure research, because science is unpredictable and that which deals with the most fundamental and open-ended concepts - pure research, tends to result in the most novelty and thus breakthroughs.

And even companies whose sole goal is to merely keep up with the bigger companies and sell knock-offs of popular drugs have to employ scientists, and those scientists have to stay in the loop doing pure research. And so everyone is engaging in pure research constantly.

Francis Bacon's idea of state-funded science was implemented in France but not in Britain. Britain didn't implement any state science program until World War 1, and the United States didn't do very much at all until 1940.

Now one can always come up with many anecdotes about government funding of things causing that thing to come about, a great example that statist hack Noam Chomsky likes to bring up is the internet. As though connecting computers over long distances was something only state research could come up with. Sure, private research invents the airplane, automobile, about half of the computer, but connecting those computers together is a job for the state.

And on the airplane, at the time of the wright brothers, the Smithsonian was attempting to fly a heavier-than air craft as well. They were beat to it by the wright brothers.

Now just imagine if the Smithsonian had won, we wouldn't hear the end of it. "Oh, without the munificent foresight of state research planners, how would we have ever achieved heavier than air flight!" And the statists would make up arguments about the free market being unwilling to take such abstract risks or not being able to crash expensive airplanes repeatedly, and may even point and laugh at the wright brothers and say "look, there's your free market, two wacko brothers. Look at this clown show. What a failure! Maybe this crapshoot worked in 1000 AD, but look at how complex this things are now. Sure the free market worked then, but so did hunting with spears with spears. We're evolved, it's civilization. Enjoy your airplane, courtesy of the US government. Free market fundamentalist, you got pwned."

Anecdote. The state is not necessary to fund research and development, and from every angle of analysis, the state appears to pervert and distort the structure of production, in this case the production of scientific research.