Showing posts with label industry. Show all posts
Showing posts with label industry. Show all posts

Monday, January 28, 2013

Problems With Outsourcing

Boeing's vaunted new Dreamliner aircraft have all been grounded, with no prospects for flying again until its battery problems are solved.

Just an unforeseeable problem? Not according to New Yorker's James Surowiecky.

In a recent article, Surowiecky lays the problem at the feet of Boeing's bean counters.

This sort of thing has happened before in American industry. When General Motors was taken over by accountants instead of engineers, this started a long decline in quality which eventually drove the company to bankruptcy.

W. Edwards Deming, whose management techniques were adopted by Japanese auto manufacturers in the 1950's, had no problem with outsourcing. But he did have a problem with outsourcing based price. He especially did not like short term contracts with multiple suppliers, a particularly favorite of bean counters.

We have outsourced government functions, prisons, military operations, etc. all under the illusion that this will save money.

In Boeing's case, it demonstrably cost money. And reduced quality.

The whole approach needs another look at all levels of government and industry.

Wednesday, December 12, 2012

Can Government Ever Do Things Better And Cheaper? Yes

Los Angeles Times business reporter Michael Hiltzik addresses the question of whether government can ever do things better than private enterprise. His answer: Yes.

"Here's a rule of thumb to consider," Hiltzik writes,  "for when government should take a role in providing a service: When it's cheaper." He means, cheaper for the country as a whole.

He examines in particular the consequences of raising the age of eligibility for Medicare. It would save 5.7 billion in the federal budget this year alone. "Of course," he points out, "it does horrors for the budgets of everyone else."

Hiltzik summarizes: "Put it all together, as health economist Austin Frakt did, and you find that saving that $5.7 billion on the federal books would cost society as a whole $11.4 billion. To paraphrase Jerry Seinfeld, this is how you save money in the Bizarro world. It does nothing to improve Medicare. It does nothing to hold down healthcare costs. It does nothing to improve the health of the target population."

And "by the way, the higher costs would hit middle-class seniors especially hard."

As we used to say in the Pentagon: "that's dumb - let's do it!"

Speaking of the Pentagon, if the trend in recent decades of outsourcing military functions to private industry is cheaper and better than having the military do it, those results aren't apparent.

Hiltzik provides many examples of good, efficient government programs.

Worth reading.

Saturday, December 8, 2012

Robots And Jobs

Paul Krugman has finally figured out that computerization and robotization (if there is such a word) might create a problem for jobs.

I'm glad he has decided this is a problem that merits study. I suggested this in a comment a couple of years ago to one of his blog posts. This is the first time he seems to take the idea seriously.

I'm not sure that at the present time fiscal efforts to expand the economy won't work. It also seems worthwhile to encourage manufacturing to return from foreign exile. The fact that Apple intends to bring some manufacturing back to these shores may be a harbinger  of good tidings. But not all that good, since most associated manufacturing is highly automated.

Jobs may consist largely of servicing robots. I mentioned this a couple of years ago, and suggested this may no longer be just a theme for science fiction.

Thursday, October 4, 2012

Patents - Good For Innovation?

A couple of months ago I posted some thoughts about the recent Microsoft win in a "look and feel" patent case.  It reminded me of some earlier cases that I thought were questionable. But I did express support for the idea of protecting intellectual property by patents.

Now I'm not so sure.

I just skimmed through an interesting working paper by two authors from the research division of the Federal Reserve Bank of St. Louis. The authors, Michele Boldrin and David K. Levine have written "The Case Against Patents," challenging the idea that patants encourage innovation. Instead, they claim that patents stifle innovation.

Economist Mark Thoma provides a link to the paper here on his blog, "Economists View."

Incidentally, I am writing this on a computer using the Linux operating system (free) and open source software (free) that is more stable and reliable than Microsoft's proprietary products and in most ways more powerful.

Boldrin and Levine make a good case.

I still like copyrights, but I think our copyright law has gone overboard, as well.

Wednesday, September 12, 2012

Aleksei Grogorievich Stakhanov - Hero of Socialist Labor

In August, 1935 Soviet newspapers reported that a twenty-nine year old miner, Aleksei Grigorievich Stakhanov (Алексе́й Григо́рьевич Стаха́нов) in the Donbass region mined 102 tonnes of coal in five hours, forty-five minutes. The output was fourteen times his quota. Less than a month later, he mined 227 tons in a single shift.

These heroic accomplishments were held up as a model for others to follow. Workers who exceeded their quotas were known as "Stakhanovites." The movement inspired others to follow suit. The government's goal was to exhort individuals to ever greater efforts at productivity.

Several curious things about the Stakhanovite movement.
1. The Soviet Union had just completed a bloody collectivization campaign, collectivizing every industrial and agricultural activity, yet Stakhanov's accomplishment was to exceed a personal, piece-work goal;
2. Central planners also established output goals for enterprises, but managers apparently saw no way to achieve those goals except to prod individual workers;
3. Central planners were heavily engaged at the time in mechanization of production, but management methods followed pre-revolutionary hierarchical and authoritarian models of management;
4. Management focus was on gross output, not quality;
5. Exhortation was a major instrument of motivation - this instrument almost never works well;
6. Seeds of later failure of the Soviet economic model were sown in the late twenties and early thirties.

My main conclusion: Soviet economic shortcomings resulted from poor management methods - methods handed down from at least the time of Peter the Great.

The failure of the Soviet Union as a political system, however, stemmed from the difficulty of incorporating more than 120 nationalities, with as many languages and at least that many cultures.

It was a pretty impossible task. The breakup of the Soviet Union has not completely played out to this day.

Though the experiment failed, it accomplished some amazing things.