Editor's Note

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JG, our ever-curious correspondent from Passadumkeag, Maine, wonders why California grows more rice than Louisiana if the Golden State is really so short on water. Good question (as usual), JG.

Some curmudgeons claim it’s because farmers pay pennies on the dollar for the water since they called dibs on the stuff – and because they’ve never met a legislature that couldn’t be persuaded to honor the water grab. I prefer to think of it as a case of the good ol’ fashioned American can-do spirit in action. It isn’t easy, after all, to grow a tropical monsoon crop in the desert. And besides, if they didn’t grow rice in California, we’d have to import it from India, Thailand, Vietnam, Pakistan, Brazil, Cambodia, Uruguay or Guyana. And then where would we be?

But don’t bend your brain over this one, JG. Check out our truly terrific lineup in this quarter’s issue.

Speaking of water, Larry Fisher, a former New York Times business reporter, examines California’s flirtation with desalination, a technology long dismissed as somewhere between “iffy and Hail Mary,” he writes. “There’s no question that desalination plants are costly and have some impact on the environment, but that has been true of every water supply project since the Roman aqueducts.”

The overriding objective, he suggests, should be a redesign of California’s water supply to manage large and growing risks of drought: “While it’s tempting to look to a tech fix like reverse-osmosis desalination as the answer, the real solution is a broad portfolio that includes conservation, reuse and smarter use.”

Melissa Stevens, executive director of the Institute’s Center for Strategic Philanthropy, outlines a plan for leveraging philanthropic dollars to manage risk in the development of life-saving drugs. “The FasterCures Ventures model brings together investor classes with different interests and aligns disparate risk-reward ratios for each to achieve both competitive private returns and high social returns,” she explains. “The idea is to mix and match three types of investors – market investors, pharmaceutical companies and venture philanthropists – all of which are stakeholders in developing new treatments.”

Ken Button, an economist at George Mason University, explains that the task of airline deregulation is not yet finished. “On one hand,” he notes, “the giant legacy carriers that stumbled through the first decades of deregulation are finally covering their operating costs and apparently are better positioned to confront future economic storms. On the other, the consolidation that has made this possible is opening the door to anticompetitive behavior that could undermine consumers’ gains.

“That’s where the removal of the last glaring vestige of economic regulation of airlines – the denial of ‘cabotage’ rights to foreign carriers that want to compete directly in the U.S. domestic airline market – fits in.” 

Sutirtha Bagchi (Villanova) and Jan Svej-nar (Columbia) ask whether the extraordinary rise in extreme wealth in recent decades stimulates or undermines economic growth. “Billionaires who make their money through hard work, innovation (or, for that matter, luck) don’t have much impact on average productivity,” they conclude. “But those who make their money through political connections tend to reduce productivity because they typically prosper by virtue of monopoly power that distorts resource allocation,” and perhaps more important, “[because] they have a strong interest in using their influence to retard innovation by potential competitors.” 

Bob Looney, an economist at the Naval Postgraduate School in California, takes a hard look at Ethiopia’s ballyhooed economic miracle. “Ethiopia’s government credits its impressive growth to the adoption of the ‘developmental state’ model of the East Asian tigers,” he writes. “This, on its face, is suspect, since development economists have long been skeptical that an East Asian strategy could be sustained in the teeth of ethnic heterogeneity, widespread corruption and rent-seeking, and woefully deficient governance.”

Gene Steuerle, an economist at the Urban Institute in Washington, explains how long-dead policymakers haunt the federal budget. “Ever less is invested in our future, even as programs designed decades ago balloon in size and lose focus on the problems they were intended to solve,” he writes. “It has significantly weakened recent presidents and Congresses, and it will completely hobble future ones unless we confront the fiscal legacy that locks us into decline.”

Eren Inci, an economist at Sabanci University in Istanbul, examines the consequences of free street parking on the quality of urban life. Free is not free, he points out: “One way or another, someone always pays, often indirectly, in the form of higher prices for something else. Moreover, the enormous amounts of land or structures needed for parking
almost guarantee that mispricing parking spaces will have substantial consequences on economic efficiency and societal welfare.”

Wait! Don’t touch that dial. This issue also includes an excerpt from Robert Gordon’s new book, The Rise and Fall of American Growth, as well as demographer Bill Frey’s analysis of Asian migration to the United States and a surprising glimpse at global savings patterns by yours truly.

— peter passell