Andy Grove Essay Commentary by Tyler Cowen

http://www.marginalrevolution.com/marginalrevolution/2010/07/the-andy-grove-essay.html

by mhb • 16 years ago

34 20 16 years ago

jacoblyles3• 16 years ago

The down-swing in a business cycle is the time for everyone to resurrect their pet anti-trade theories.

cangrande2• 16 years ago

Precisely, there has been a habit amongst commentators during period's of recession to trot out the need for protectionism. During the 1980s Japan was the biggest threat, leading to all sorts of political pronouncements and movements, and now it's China.

jeremytliles• 16 years ago

And the replacement of our manufacturing base by Japan and then China is not an issue?

SkyMarshal5• 16 years ago

Defationary collapse of a massive debt bubble != down-swing of the business cycle.

Also, a quick look at just about every economic empire in history shows their decline was always associated with a massive negative trade balance. The theorists seem to ignore this though. If it's not codified in a dazzling formula, it's irrelevant.

Not that I'm for protectionism or anti-globalization, but it's certainly not beyond questioning, reconsidering, and/or re-engineering.

hugh3• 16 years ago

Defationary collapse of a massive debt bubble != down-swing of the business cycle

They look pretty much the same from the perspective of July 2010. What's the big difference?

Estragon2• 16 years ago

The real problem with Grove's suggestions is that he ignores the issues which led to this economic downturn in the first place: rampant avarice, ignorance and corruption. There can be no meaningful improvement to US fortunes until those issues are substantially corrected.

jacoblyles3• 16 years ago

You talk as if rampant avarice, ignorance and corruption were invented in 2005 and weren't with us during last 150 years of dazzling increases in prosperity.

Estragon2• 16 years ago

They weren't operating on the current scale.

SkyMarshal5• 16 years ago

Throw in systematic deregulation of all financial safeguards, massive speculation leading to a debt bubble, and then it's obviously a problem.

glhaynes• 16 years ago

Seems like the world's run on avarice, ignorance, and corruption for a long time.

bretpiatt• 16 years ago

The list of 9 over simplified points is not what I'd expect from somebody with Dr. Cowen's background. When I first read the blog I thought, "Really, is some 20 something programmer questioning Grove, cute."

I don't agree with everything Grove has to say either but to dismiss things without analysis is not justified either.

I'll pick on point #3 about "scale, scale, scale". Cowen states that Germany does not have the scale of the USA and is a big exporting success. Germany does have scale in the luxury auto market. See: http://blog.polk.com/blog/new-vehicle-sales/0/0/audi-outpace... Germany also has scale in many other industries it chooses to compete in.

I'd like to have a more in depth discussion with him on Grove's essay. He should at least give it the same amount of analysis and thought that Grove did. This blog post does not do it justice.

gojomo2• 16 years ago

A bullet list of reactions/avenues-for-consideration is often Cowen's style. I appreciate the conciseness.

Grove has given this subject more words, not more analysis and thought. And Grove's words are the same as from economic debates of decades ago. That's the real reason that Cowen is parsimonious with his response. Cowen concludes with:

Grove is writing from a time warp in which these debates never happened or never were settled or never something -- I don't know what.

SkyMarshal5• 16 years ago

1. Decades is not a long enough time period to know anything in Econ with certainty.

2. Even if it were, the global economy is a highly complex system, subject to change. What was right decades ago may not be today.

3. Economics has a pretty dismal recent record. Most of the theorists coughKrugmancough completely missed the buildup to the biggest economic event in recent history, the financial crisis.

Rather it was the historians like Rogoff & Reinhardt, crisis-experts like Roubini, and shrewd business people and money managers (who make their living putting their money where there mouth is) who foresaw it. Not the theorists.

There are a host of problems with the field of economics, from physics envy to sociology of science, that critics like Taleb and Wilmott have exposing. The field's understanding and credibility is highly suspect.

Grove knows what works, and has proven that his way actually does create jobs. And his point about scale enabling additional innovation beyond the original concept is exactly right. What has Cowen done but get good grades and write about it?

SkyMarshal5• 16 years ago

Agreed, that was something I'd expect to see from a Glen Beck-ish type pundit.

Another problem is that the econ profession is too informed by and reliant on theory. We know from past history that Grove's prescription (everything but the tarriffs part at least) works.

The jury is still out on the economic theories that have guided the nation's industrial policy for the past ~20 years.

They may have given us lots of cheap stuff faster than we would otherwise have gotten to these price points, but at the cost of a hollowed manufacturing sector and a massive cash outflow.

It is far from clear yet whether those tradeoffs were worth it, yet the Econ profession acts as if the question is settled. It isn't.

lkrubner• 16 years ago

Isn't it strange that such a wide gap exists between business people and economists? Possibly the economists get lost in theory. For a business person, the reality of China under valuing its currency is the most important fact to consider when thinking about doing business in Asia. And yet, for an economist like Cowen, its as if the issue doesn't really exist. I also find it odd that Cowen, in different posts on his blog, will sometimes claim that America has a robust economy because its economy is free-market, but then in other posts he complains about the heaviness of government intrusion into the market. This strikes me as inconsistent - either the government is heavy-handed, or the economy is free-market. If he really believes that America is both free market and yet it has an intrusive government, then it seems to me his theories need to allow for the possibility that the economy has a robustness due to some of the intrusions that the government makes. That would be the argument I would make, regarding some of the investments in R&D that the government has made over the decades - not free-market, but good for the economy.

Andy Grove Essay Commentary by Tyler Cowen

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